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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 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, 2006
 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
  6 7/8% Senior Notes due January 15, 2014
6 3/8% Senior Notes due December 15, 2015
  2,515,276 Class A Common Shares
65,000 Class G Preferred Shares
  o þ
  o þ
  þ o
  o o þ
  þ o
  o þ




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##### 



TABLE OF CONTENTS
 PageExplanatory Notes
    
    
    iIndustry And Market Data
    
    iiForward-Looking Statements
    
    iiiExchange Rate Information
    
    ivPART IItem 1  Identity Of Directors, Senior Management And Advisers
    
    
    5Item 2  Offer Statistics And Expected Timetable
    
    
    5Item 3  Key Information
    
    
    5Item 4  Information On The Company
    
    
    21Item 4A  Unresolved Staff Comments
    
    
    47Item 5  Operating and Financial Review and Prospects
    
    
    49Item 6  Directors, Senior Management And Employees
    
    
    62Item 7  Major Shareholders And Related Party Transactions
    
    
    70Item 8  Financial Information
    
    
    73Item 9  The Offer And Listing
    
    
    74Item 10  Additional Information
    
    
    75Item 11  Quantitative And Qualitative Disclosures About Market Risk
    
    
    92Item 12  Description Of Securities Other Than Equity Securities
    
    
    93PART IIItem 13  Defaults, Dividend Arrearages And Delinquencies
    
    
    94Item 14
 Material Modifications To The Rights Of Security Holders And Use Of Proceeds
    
   
    94Item 15  Controls And Procedures
    
    
    94Item 16  [Reserved]
    
    
    94Item 16A  Audit Committee Financial Expert
    
    
    94Item 16B  Code of Ethics
    
    
    94Item 16C  Principal Accountant Fees and Services
    
    
    95Item 16D  Exemptions from the Listing Standards for Audit Committees
    
    
    95Item 16E  Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    95PART IIIItem 17  Financial Statements
    
    
    95Item 18  Financial Statements
    
    
    96Item 19  Exhibits
    
    
    96Signature
    
    
    99Index to Consolidated Financial Statements
    
    F-1Articles of AmalgamationBy-laws of Videotron Ltd.Calculation of ration of earningSubsidiaries 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
     
    
    although depreciation and amortization are non-cash charges, 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.




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INDUSTRY AND MARKET DATA




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FORWARD-LOOKING STATEMENTS
  
    
    general economic, financial or market conditions;
    
    the intensity of competitive activity in the industries in which we operate,
including competition from alternative means of programs and content transmission;
    
    unanticipated higher capital spending required to address continued development of
competitive alternative technologies or the inability to obtain additional capital to
continue the development of our business;
    
    our ability to implement successfully our business and operating strategies and
manage our growth and expansion;
    
    our ability to continue to distribute a wide range of television programming and to attract large audiences;
    
    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.




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




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PART I
 
 ITEM 1  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2   OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3   KEY INFORMATION
 SELECTED FINANCIAL DATA
   Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(restated)(1)
    
    
    (restated)(1)
    
    
    (restated)(1)
    
    
    (restated)(1)(dollars in thousands)AMOUNTS UNDER CANADIAN GAAPConsolidated Statement of Operations Data:Operating revenues:Cable television
    
    $
    579,200
    
    
    $
    558,887
    
    
    $
    576,825
    
    
    $
    618,346
    
    
    $
    677,273Internet
    
    
    135,514
    
    
    
    183,268
    
    
    
    222,458
    
    
    
    270,791
    
    
    
    345,075Business solution
    
    
    62,063
    
    
    
    58,365
    
    
    
    66,117
    
    
    
    78,409
    
    
    
    74,352Telephony
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,088
    
    
    
    108,565Video stores
    
    
    35,344
    
    
    
    38,450
    
    
    
    48,058
    
    
    
    55,146
    
    
    
    55,585Other(2)
    
    
    30,982
    
    
    
    23,795
    
    
    
    24,274
    
    
    
    36,626
    
    
    
    48,745Total operating revenues
    
    
    843,103
    
    
    
    862,765
    
    
    
    937,732
    
    
    
    1,080,406
    
    
    
    1,309,595Direct cost(2)
    
    
    253,062
    
    
    
    244,971
    
    
    
    256,155
    
    
    
    293,057
    
    
    
    338,868Operating, general and administrative expenses(2)
    
    
    323,638
    
    
    
    325,511
    
    
    
    317,788
    
    
    
    373,736
    
    
    
    458,019Depreciation and amortization(2)
    
    
    155,769
    
    
    
    159,012
    
    
    
    163,862
    
    
    
    166,292
    
    
    
    185,115Financial expenses(3)
    
    
    96,724
    
    
    
    91,540
    
    
    
    203,916
    
    
    
    74,737
    
    
    
    79,586Dividend income from parent company(3)
    
    
    
    
    
    
    
    
    
    
    (111,055
    )
    
    
    
    
    
    
    Other items(4)
    
    
    30,103
    
    
    
    1,113
    
    
    
    1,930
    
    
    
    
    
    
    
    
 - 5 -




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Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(restated)(1)
    
    
    (restated)(1)
    
    
    (restated)(1)
    
    
    (restated)(1)(dollars in thousands)Income taxes (recovery) expense (2)
    
    
    13,497
    
    
    
    (5,777
    )
    
    
    (6,661
    )
    
    
    69,791
    
    
    
    64,230Non-controlling interest in a subsidiary
    
    
    188
    
    
    
    49
    
    
    
    100
    
    
    
    102
    
    
    
    86Net (loss) income(2)(5)
    
    $
    (29,878
    )
    
    $
    46,346
    
    
    $
    111,697
    
    
    $
    102,691
    
    
    $
    183,691Consolidated Balance Sheet Data (at period end):Cash and cash equivalents
    
    $
    47,398
    
    
    $
    29,724
    
    
    $
    32,411
    
    
    $
    26,699
    
    
    
    Total assets(2)(7)
    
    
    1,894,798
    
    
    
    1,838,539
    
    
    
    1,895,433
    
    
    
    1,977,610
    
    
    
    1,992,940Long-term debt, excluding QMI subordinated
loans(6)(7)(8)
    
    
    1,119,625
    
    
    
    961,175
    
    
    
    990,008
    
    
    
    971,697
    
    
    
    1,021,170QMI subordinated loans(7)
    
    
    
    
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000
    
    
    
    Common Shares(6)
    
    
    344,213
    
    
    
    572,448
    
    
    
    388,593
    
    
    
    342,940
    
    
    
    345,727Shareholders equity(6)
    
    $
    (311,392
    )
    
    $
    297,078
    
    
    $
    229,302
    
    
    $
    76,363
    
    
    $
    249,581
 Year Ended December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006(restated)(1)
    
    (restated)(1)
    
    (restated)(1)
    
    (restated)(1)(dollars in thousands, except ARPU and ratio)Other Financial DataOperating income (unaudited)(2)(9)
    
    $
    266,403
    
    
    $
    292,283
    
    
    $
    363,789
    
    
    $
    413,613
    
    
    $
    512,708Operating income margin (unaudited)(2)(9)
    
    
    31.6
    %
    
    
    33.9
    %
    
    
    38.8
    %
    
    
    38.3
    %
    
    
    39.2
    %Cash flows from operating activities
    
    
    246,363
    
    
    
    221,484
    
    
    
    329,433
    
    
    
    387,205
    
    
    
    440,619Cash flows used in investing activities
    
    
    (117,478
    )
    
    
    (291,903
    )
    
    
    (111,093
    )
    
    
    (274,977
    )
    
    
    (265,101
    )Cash flows from (used in) financing activities
    
    
    (159,741
    )
    
    
    52,745
    
    
    
    (215,652
    )
    
    
    (117,940
    )
    
    
    (220,687
    )Capital expenditures(10)
    
    $
    112,931
    
    
    $
    108,117
    
    
    $
    144,453
    
    
    $
    219,865
    
    
    $
    302,629Operating Data (unaudited):Homes passed(11)
    
    
    2,329,023
    
    
    
    2,351,344
    
    
    
    2,383,443
    
    
    
    2,419,335
    
    
    
    2,457,213Basic cable customers(12)(13)
    
    
    1,431,060
    
    
    
    1,424,144
    
    
    
    1,452,554
    
    
    
    1,506,113
    
    
    
    1,572,411Basic cable penetration(13)(14)
    
    
    61.4
    %
    
    
    60.6
    %
    
    
    60.9
    %
    
    
    62.3
    %
    
    
    64.0
    %Digital customers
    
    
    171,625
    
    
    
    240,863
    
    
    
    333,664
    
    
    
    474,629
    
    
    
    623,646Digital penetration(15)
    
    
    12.0
    %
    
    
    16.9
    %
    
    
    23.0
    %
    
    
    31.5
    %
    
    
    39.7
    %Cable Internet customers
    
    
    305,054
    
    
    
    406,277
    
    
    
    502,630
    
    
    
    637,971
    
    
    
    791,966Cable Internet penetration(14)
    
    
    13.1
    %
    
    
    17.3
    %
    
    
    21.1
    %
    
    
    26.4
    %
    
    
    32.2
    %Cable telephony customers
    
    
    
    
    
    
    
    
    
    
    2,135
    
    
    
    162,979
    
    
    
    397,860Cable telephony penetration(14)
    
    
    
    
    
    
    
    
    
    
    0.1
    %
    
    
    6.7
    %
    
    
    16.2
    %ARPU(13)(16)
    
    $
    40.70
    
    
    $
    43.68
    
    
    $
    46.50
    
    
    $
    51.86
    
    
    $
    61.43Ratio of earnings to fixed charges(17)
    
    
    0.8x
    
    
    
    1.4x
    
    
    
    2.6x
    
    
    
    3.8x
    
    
    
    3.9x
 Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(restated)(1)
    
    
    (restated)(1)
    
    
    (restated)(1)
    
    
    (restated) (1)(dollars in thousands)AMOUNTS UNDER U.S. GAAPConsolidated Statement of Operations Data:Operating revenues:Cable television
    
    $
    579,200
    
    
    $
    558,887
    
    
    $
    584,187
    
    
    $
    621,493
    
    
    $
    677,970Internet
    
    
    135,514
    
    
    
    183,268
    
    
    
    224,450
    
    
    
    272,926
    
    
    
    345,112Business solution
    
    
    62,063
    
    
    
    58,365
    
    
    
    66,117
    
    
    
    78,409
    
    
    
    74,352Telephony
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,983
    
    
    
    110,501Video stores
    
    
    35,344
    
    
    
    38,450
    
    
    
    48,058
    
    
    
    55,146
    
    
    
    55,585Other(2)
    
    
    30,982
    
    
    
    23,795
    
    
    
    24,274
    
    
    
    36,626
    
    
    
    48,745Total operating revenues
    
    
    843,103
    
    
    
    862,765
    
    
    
    947,086
    
    
    
    1,086,583
    
    
    
    1,312,265Direct cost(2)
    
    
    252,420
    
    
    
    244,971
    
    
    
    256,155
    
    
    
    293,057
    
    
    
    338,868Operating, general and administrative expenses(2)
    
    
    325,242
    
    
    
    322,531
    
    
    
    328,721
    
    
    
    381.741
    
    
    
    464,367Depreciation and amortization(2)
    
    
    173,195
    
    
    
    168,564
    
    
    
    175,743
    
    
    
    177,415
    
    
    
    196,335Financial expenses(3)
    
    
    93,386
    
    
    
    89,362
    
    
    
    191,383
    
    
    
    66,557
    
    
    
    78,603Dividend income from parent company(3)
    
    
    
    
    
    
    
    
    
    
    (111,055
    )
    
    
    
    
    
    
    Other items(4)
    
    
    5,709
    
    
    
    3,613
    
    
    
    1,930
    
    
    
    
    
    
    
    Income taxes (recovery) expenses(2)
    
    
    15,570
    
    
    
    (8,365
    )
    
    
    (1,208
    )
    
    
    63,209
    
    
    
    57,462
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Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(restated)(1)
    
    
    (restated)(1)
    
    
    (restated)(1)
    
    
    (restated) (1)(dollars in thousands)Non-controlling interest in a subsidiary
    
    
    188
    
    
    
    49
    
    
    
    100
    
    
    
    102
    
    
    
    86Impairment of goodwill(5)
    
    
    2,274,627
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)(2)(5)
    
    $
    (2,297,234
    )
    
    $
    42,040
    
    
    $
    105,317
    
    
    $
    104,502
    
    
    $
    176,544
 2002
    
    2003
    
    2004
    
    2005
    
    2006(restated)(1)
    
    (restated)(1)
    
    (restated)(1)
    
    (restated)(1)Balance Sheet Data (at period end):Cash and cash equivalents
    
    $
    47,398
    
    
    $
    29,724
    
    
    $
    32,411
    
    
    $
    26,699
    
    
    
    Total assets(2)
    
    
    4,280,091
    
    
    
    4,212,386
    
    
    
    4,162,179
    
    
    
    4,225,866
    
    
    
    4,222,810Long-term debt, excluding QMI subordinated
loans(6)(7)(8)
    
    
    1,119,625
    
    
    
    962,515
    
    
    
    985,282
    
    
    
    943,835
    
    
    
    983,791QMI subordinated loans(7)
    
    
    
    
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000
    
    
    
    Common Shares(6)
    
    
    344,213
    
    
    
    572,448
    
    
    
    388,593
    
    
    
    342,940
    
    
    
    345,727Shareholders equity(6)
    
    
    1,996,442
    
    
    
    2,599,150
    
    
    
    2,443,968
    
    
    
    2,285,390
    
    
    
    2,448,713
 Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(restated)(1)
    
    
    (restated)(1)
    
    
    (restated) (1)
    
    
    (restated)(1)(dollars in thousands, except ratio)Other Financial Data:Operating income (unaudited)(2)(9)
    
    $
    265,441
    
    
    $
    295,263
    
    
    $
    362,210
    
    
    $
    411,785
    
    
    $
    509,030Operating income margin (unaudited)(2)(9)
    
    
    31.5
    %
    
    
    34.2
    %
    
    
    38.2
    %
    
    
    37.9
    %
    
    
    38.8
    %Cash flows from operating activities
    
    
    238,578
    
    
    
    221,284
    
    
    
    327,854
    
    
    
    385,377
    
    
    
    437,841Cash flows used in investing activities
    
    
    (109,693
    )
    
    
    (291,703
    )
    
    
    (109,514
    )
    
    
    (273,149
    )
    
    
    (262,323
    )Cash flows from (used in) financing activities
    
    
    (159,741
    )
    
    
    52,745
    
    
    
    (215,652
    )
    
    
    (117,940
    )
    
    
    (220,687
    )Capital expenditures(10)
    
    
    112,304
    
    
    
    108,117
    
    
    
    144,453
    
    
    
    219,865
    
    
    
    302,629Ratio of earnings to fixed charges(17)
    
    
    
    
    
    
    1.3x
    
    
    
    3.0x
    
    
    
    4.1x
    
    
    
    3.8x
 
 (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.(2)
    
    During the fourth quarter ended December 31, 2003, we revised our accounting policies in
accordance with Canadian Institute of Chartered Accountants Handbook Section 1100, Generally
Accepted Accounting Principles. This new accounting policy requires, among other things, that
we expense, as they are incurred, the costs related to equipment subsidies granted to our
customers, as well as customer reconnection costs. This change in our accounting policies has
been applied retroactively, and the amounts presented for the prior periods have been restated
for this change. Because this new accounting policy with respect to equipment subsidies and
customer reconnection costs is consistent with the applicable existing accounting policy under
U.S. GAAP, the retroactive application of this change has not affected the amounts presented
for prior periods under U.S. GAAP.(3)
    
    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 and Financial Review and Prospects  Purchase of Shares
of Quebecor Media and Service of Subsidiary Subordinated Loan.(4)
    
    In 2002, in connection with the renegotiation of two of our collective bargaining agreements,
we put in place a second restructuring initiative resulting in a reduction of 300 employees,
and other items consisted primarily of severance costs relating to this restructuring. Because
the final severance costs relating to this restructuring were lower than estimated, the
difference between the final severance costs and the estimated severance costs was reversed in
2003 and increased our net income in 2003 by approximately $2.5 million.(5)
    
    Effective January 1, 2002, we implemented Canadian Institute of Chartered Accountants
Handbook Section 3062, Goodwill and Other Intangible Assetsand its US equivalent, FAS 142.
The new standards require that goodwill and intangible assets with indefinite lives no longer
be amortized, but instead be tested for impairment at least annually. At January 1, 2002, we
had unamortized goodwill in the amount of $432.3 million under Canadian GAAP and $4,666.9
million under U.S. GAAP, which is no longer being amortized.(6)
    
    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, - 7 -




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##### Table of Contents



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 and December 31, 2006.(7)
    
    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 our
subsidiary Vidéotron (1998) ltée, which was a guarantor of our 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 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. 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 a meaningful measure of
the amount of indebtedness we have from the perspective of a holder of the notes because the
QMI subordinated loans are subordinated in right of payment to the prior payment in full of
senior indebtedness, including the notes; all payments on the $150.0 million subordinated loan
are restricted payments, under the terms of the notes, treated in the same manner as dividends
on our common shares; and the proceeds of our $1.1 billion subordinated loan were invested in
retractable preferred shares of Quebecor Media as part of a back-to-back transaction to reduce
our income tax obligations. This back-to-back transaction was unwound on December 16, 2004.
Consequently, we use long-term debt, excluding QMI subordinated loans, in this annual report.
Long-term debt, excluding QMI subordinated loans, is not intended to be a measure that should
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 U.S. GAAP or Canadian GAAP. Long-term debt, excluding QMI subordinated loans, is
calculated from and reconciled to long-term debt as follows: Year Ended December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006(unaudited; dollars in millions)AMOUNTS UNDER CANADIAN GAAPLong-term debt
    
    $
    1,119.6
    
    
    $
    1,111.2
    
    
    $
    1,140.0
    
    
    $
    1,121.7
    
    
    $
    1,021.2QMI subordinated loans
    
    
    
    
    
    
    (150.0
    )
    
    
    (150.0
    )
    
    
    (150.0
    )
    
    
    Long-term debt, excluding
QMI subordinated loans, as
defined
    
    $
    1,119.6
    
    
    $
    961.2
    
    
    $
    990.0
    
    
    $
    971.7
    
    
    $
    1,021.2AMOUNTS UNDER U.S. GAAPLong-term debt
    
    $
    1,119.6
    
    
    $
    1,112.5
    
    
    $
    1135.2
    
    
    $
    1,093.8
    
    
    $
    983.8QMI subordinated loans
    
    
    
    
    
    
    (150.0
    )
    
    
    (150.0
    )
    
    
    (150.0
    )
    
    
    Long-term debt, excluding
QMI subordinated loans, as
defined
    
    $
    1,119.6
    
    
    $
    962.5
    
    
    $
    985.2
    
    
    $
    943.8
    
    
    $
    983.8
 
 (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, as reconciled
to net income under Canadian GAAP, as net income before depreciation and amortization,
financial expenses, dividend income from parent company, 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: - 8 -




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Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(restated)
    
    
    (restated)
    
    
    (restated)
    
    
    (restated)(dollars in millions)AMOUNTS UNDER CANADIAN GAAPNet (loss) income(1)(2)(5)
    
    $
    (29.9
    )
    
    $
    46.3
    
    
    $
    111.7
    
    
    $
    102.7
    
    
    $
    183.7Depreciation and amortization(2)
    
    
    155.8
    
    
    
    159.0
    
    
    
    163.9
    
    
    
    166.3
    
    
    
    185.1Financial expenses(3)
    
    
    96.7
    
    
    
    91.5
    
    
    
    203.9
    
    
    
    74.7
    
    
    
    79.6Dividend income from parent company(3)
    
    
    
    
    
    
    
    
    
    
    (111.0
    )
    
    
    
    
    
    
    Other items(4)
    
    
    30.1
    
    
    
    1.1
    
    
    
    1.9
    
    
    
    
    
    
    
    Income taxes (recovery) expense (2)
    
    
    13.5
    
    
    
    (5.8
    )
    
    
    (6.7
    )
    
    
    69.8
    
    
    
    64.2Non-controlling interest in a subsidiary
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Operating income as defined
    
    $
    266.4
    
    
    $
    292.3
    
    
    $
    363.8
    
    
    $
    413.6
    
    
    $
    512.7AMOUNTS UNDER U.S. GAAPNet income (loss)(1)(2)(5)
    
    $
    (2,297.2
    )
    
    $
    42.0
    
    
    $
    105.3
    
    
    $
    104.5
    
    
    $
    176.5Depreciation and amortization(2)
    
    
    173.2
    
    
    
    168.6
    
    
    
    175.7
    
    
    
    177.4
    
    
    
    196.3Financial expenses(3)
    
    
    93.4
    
    
    
    89.4
    
    
    
    191.4
    
    
    
    66.6
    
    
    
    78.6Dividend income from parent company(3)
    
    
    
    
    
    
    
    
    
    
    (111.0
    )
    
    
    
    
    
    
    Other items(4)
    
    
    5.7
    
    
    
    3.6
    
    
    
    1.9
    
    
    
    
    
    
    
    Income taxes(2)
    
    
    15.6
    
    
    
    (8.4
    )
    
    
    (1.2
    )
    
    
    63.2
    
    
    
    57.5Non-controlling interest in a subsidiary
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Goodwill amortization(5)
    
    
    2,274.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income as defined
    
    $
    265.5
    
    
    $
    295.3
    
    
    $
    362.2
    
    
    $
    411.8
    
    
    $
    509.0
 
 (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 numbers of basic customers for the years 2002 and 2003 were restated in order to permit
such numbers to be compared to the numbers of basic customers for the years 2004 to 2006,
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 identically titled measurements
reported by other companies. We calculate ARPU by dividing our combined cable television,
Internet access and cable 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. For the year ended December 31, 2002,
earnings, as calculated under both Canadian and U.S. GAAP, were inadequate to cover our fixed
charges, and the coverage deficiency was respectively $15.5 million and $1,980.0 million. CAPITALIZATION AND INDEBTEDNESS
  - 9 -




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REASONS FOR THE OFFER AND USE OF PROCEEDS
  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
67/8% Senior Notes due January 15, 2014
and our 63/8 Senior Notes due December 15, 2015, which we refer to as our Senior Notes. The
factors below should be considered in connection with any forward-looking statements in this
document and with the cautionary statements contained in Forward-Looking Statements at the
beginning of this document.
 The risks below are not the only ones that we face. Some risks may not yet be known to us and
some that we do not currently believe to be material could later turn out to be material. Any of
these risks could materially affect our business, financial condition and results of operations.
 We operate in highly competitive industries and our inability to effectively compete could have a
material adverse effect on our business.
      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.
  -10-




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We are regularly required to make capital expenditures to remain technologically and economically
competitive. We may not be able to obtain additional capital to continue the development of our
business.
  We may not successfully implement our business and operating strategies.
  Our financial performance could be materially adversely affected if we cannot continue to
distribute a wide range of television programming on reasonable terms.
   We provide our digital television, Internet access and telephony services through a single
clustered network, which may be more vulnerable to widespread disruption.
  -11-




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We depend on third-party suppliers and providers for services and other items critical to our
operations.
  We are dependent upon our information technology systems and those of certain third-parties and the
inability to enhance our systems or a security breach or disaster could have an adverse impact on
our financial results and operations.
  Malicious and abusive Internet practices could impair our cable data services.
  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.
  -12-




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We may be adversely affected by strikes and other labour protests.
   We depend on key personnel.
  Our substantial indebtedness and significant interest payment requirements could adversely affect
our financial condition and prevent us from fulfilling our obligations.
  
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flow from operations to
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.
  -13-




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Restrictive covenants in our outstanding debt instruments may reduce our operating and financial
flexibility, which may prevent us from capitalizing on certain business opportunities.
  
    
    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.
  We need a significant amount of cash to service our debt. Our ability to generate cash depends on
many factors beyond our control.
 3 8 7 8 3 8 7 8
 We depend, to a certain extent, on our subsidiaries for cash needed to service our debt
obligations.
  -14-




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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 fluctuations of exchange rates.
  We are subject to extensive government regulation. Changes in government regulation could adversely
affect our business, financial condition or results of operations.
  -15-




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Broadcasting Act Telecommunications Act Broadcasting Act Telecommunications Act Broadcasting Act Telecommunications Act Radiocommunication Act Competition Act
   Radiocommunication Act i.e. i.e. Radiocommunication Act
  -16-




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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.
  -17-




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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 environmental laws and regulations.
  If we fail to maintain proper and effective internal controls, our ability to produce accurate
financial statements could be impaired, which could adversely affect our ability to operate our
business, our financial results and investors view of us.
  -18-




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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
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
 Applicable statutes allow courts, under specific circumstances, to void the guarantees of the notes
provided by certain of our subsidiaries.
  -19-




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##### Table of Contents




    
    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.
  We are controlled by Quebecor Media
   -20-




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ITEM 4 -INFORMATION ON THE COMPANY
 HISTORY AND DEVELOPMENT OF THE COMPANY
 Companies Act Companies Act Companies Act
 http://www. ideotron.com
       -21-




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BUSINESS OVERVIEW
 Overview
      -22-




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##### Table of Contents



Strengths
 Leading Market Positions.
 Single, Highly Contiguous Cluster.
 
    
    a higher quality and more reliable network;
    
    reduced capital required to launch and deploy new products and services;
    
    a lower cost structure through reduced maintenance and technical support costs;
and
    
    more rapid and effective introduction of new products and services, enhancing
our ability to increase both customers and revenues.
 Differentiated, Bundled Service Offerings.
 -23-




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Advanced Broadband Network.
 Strong, Market-Focused Management Team.
 Broadcast Distribution Industry Overview
 Cable Television Industry Overview
  Twelve Months Ended August 31,2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    CAGR(1)(Homes passed and basic cable customers in millions; dollars in billions)CanadaIndustry Revenue
    
    $
    3.4
    
    
    $
    3.7
    
    
    $
    4.2
    
    
    $
    4.5
    
    
    $
    4.6
    
    
    
    7.6
    %Homes Passed(2)
    
    
    9.5
    
    
    
    9.7
    
    
    
    10.0
    
    
    
    10.2
    
    
    
    10.7
    
    
    
    3.0
    %Basic Cable Customers
    
    
    6.9
    
    
    
    6.7
    
    
    
    6.6
    
    
    
    6.6
    
    
    
    6.6
    
    
    
    (0.8
    )%Basic Penetration
    
    
    72.0
    %
    
    
    69.3
    %
    
    
    65.5
    %
    
    
    65.0
    %
    
    
    61.9
    %
 Twelve Months Ended August 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    CAGR(3)(Homes passed and basic cable customers in millions; US$ in billions)United StatesIndustry Revenue
    
    US$
    49.4
    
    
    US$
    51.3
    
    
    US$
    57.6
    
    
    US$
    62.3
    
    
    US$
    68.2
    
    
    
    6.7
    %Homes Passed(2)
    
    
    102.7
    
    
    
    102.9
    
    
    
    108.2
    
    
    
    110.8
    
    
    
    111.6
    
    
    
    1.7
    %Basic Cable Subscribers
    
    
    66.5
    
    
    
    66.0
    
    
    
    65.7
    
    
    
    65.3
    
    
    
    65.3
    
    
    
    (0.4
    )%Basic Penetration
    
    
    72.6
    %
    
    
    71.6
    %
    
    
    71.3
    %
    
    
    68.0
    %
    
    
    66.0
    %
 
 Source of Canadian data: CRTC. Source of U.S. data: NCTA, A.C. Nielsen Media Research and Kagan
Research LLC.(1)
    
    Compounded annual growth rate from 2001 through 2005.(2)
    
    Homes passed means the number of residential premises, such as single dwelling units or
multiple dwelling units, and commercial premises passed by the cable television distribution
network in a given cable system service area in which the programming services are offered.(3)
    
    Compounded annual growth rate from 2002 through 2006.  -24-




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Expansion of Digital Distribution and Programming
      Products and Services
    -25-




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Traditional Cable Television Services
   
    
    Basic Service.All of our customers receive a package of basic programming,
consisting of local broadcast television stations, the four U.S. commercial networks
and PBS, selected Canadian specialty programming services, and local and regional
community programming. Our basic service customers generally receive 27 channels on
basic cable.
    
    Extended Basic Service.This expanded programming level of services, which is
generally comprised of approximately 18 channels, includes a package of French- and
English-language specialty television programming and U.S. cable channels in addition
to the basic service channel line-up described above. Branded as Telemax, this
service was introduced in almost all of our markets largely to satisfy customer demand
for greater flexibility and choice.
 Advanced Products and Services
  
    
    Cable Internet Access.Leveraging our advanced cable infrastructure, we offer
cable Internet access to our residential customers primarily via cable modems attached
to personal computers. We provide this service at speeds of up to 360 times the speed of
a conventional telephone modem. As of December 31, 2006, we had 791,966 cable Internet
access customers, representing 50.4% of our basic customers and 32.2% of our total
homes passed. In addition, as of December 31, 2006, we had 13,426 dial-up Internet
access customers. Based on internal estimates, we are the largest provider of cable
Internet access services in the areas we serve with an estimated market share of 53.7%
as of December 31, 2006.
    
    Digital Television.As part of our network modernization program, we have
installed headend equipment capable of delivering digitally encoded transmissions to a
two-way digital-capable set-top box in the customers home. This digital connection
provides significant advantages. In particular, it increases channel capacity, which
allows us to increase both programming and service offerings while providing increased
flexibility in packaging our services. We launched our digital television service in
March 1999 with the introduction of digital video compression terminals
in the greater Montréal area. Since introducing our digital television service in
the greater Montréal area, we have also introduced the service in other major
markets. In September 2001, we launched a new digital service offering under the
illico
 -26-




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##### Table of Contents



brand. In addition to providing high quality sound and image quality,
illico offers our customers significant programming flexibility. Our basic digital
package includes 25 television channels, 45 audio services providing CD-quality
music, 18 AM/FM radio channels, an interactive programming guide as well as
television-based e-mail capability. Our extended digital basic television service,
branded as à la carte (i.e.  individual
channel selection), offers customers the ability to select more than 200
additional channels of their choice, including U.S. super-stations and other
special entertainment programs, allowing them to customize their choices. This
service also offers customers significant programming flexibility including the
option of French-language only, English-language only or a combination of French-
and English-language programming, as well as many foreign-language channels. We
also offer pre-packaged themed service tiers in the areas of news, sports and
discovery. Customers who purchase basic service and one customized package can also
purchase channels on an à la carte basis at a specified cost per
channel per month. As part of our digital service offering, customers can also
purchase near-video-on-demand services on a per-event basis. As of December 31,
2006, we had 623,646 customers for our digital television service, representing
39.7% of our basic customers and 25.4% of our total homes passed. Our customers
currently have the option to purchase or lease the digital set-top boxes required
for digital service. We believe that the sale of equipment to customers improves
customer retention, and, as of December 31, 2006, approximately 94% of our digital
television customers had purchased and 6% were leasing our digital set-top boxes.
    
    Cable Telephony. In January 2005, we launched our new cable telephony service
using VoIP technology in selected areas of the Province of Québec (South
Shore and North Shore of Montréal, the Island of Montréal, Laval and Quebec City). In
2006, we continued to launch this service progressively among our other residential
and commercial customers in the Province of Québec, which was available to 83.9% of
our basic cable customers as of December 31, 2006. Our new telephony service includes
both local and long-distance calling, and permits all of our telephony customers, both
residential and commercial, to access all service features mandated by CRTC Decision
97-8 and other regulatory decisions and orders, including: enhanced 911 Emergency
service; number portability from and to any local exchange carrier; a message relay
service allowing subscribers to communicate with the hearing impaired; and a variety
of personal privacy features including universal call tracing. We also offer free
basic listings in local telephone directories, as well as full operator assistance,
including: operator-assisted calls; collect and third-party calls; local, national and
international directory assistance; person-to-person
calls; and busy-line verification. Finally, we offer as part of our new telephony
service a host of convenient, optional features, including: name and number caller
ID; call waiting with long-distance distinctive ring and audible indicator tone;
name and number caller ID on call waiting; visual indicator of a full voice mail
box and audible message waiting indicators; automatic call forwarding; three-way
conference calling; automatic recalling; and last incoming call identification and
recall. VoIP allows us to deliver new cutting-edge features, such as
voice-mail to e-mail functionality launched in December 2005, which allows
customers to access their voice-mail via e-mail in the form of audio-file
attachments. In keeping with our competitive strength of providing differentiated,
bundled service offerings, we offer free installation of our new telephony service
to existing cable television and/or Internet customers and to new bundled
customers. We also offer discounts to our bundled customers, when compared to the
sum of the prices of the individual services provided to these customers. In
addition, we offer discounts for a second telephone line subscription. As of
December 31, 2006, we had 397,860 subscribers to our cable telephony service.
    
    Mobile Wireless Telephony Services. On August 10, 2006, we launched our mobile
wireless telephony services in the Quebec City area. Since then, the service has been
completely rolled out throughout the Province of Québec. Through our strategic
relationship with Rogers Wireless, the operator of Canadas largest integrated
wireless voice and data network, we offer Québec consumers a quadruple play of
television, broadband Internet, cable telephony and Vidéotron branded mobile wireless
telephony services. Our services include international roaming and
popular options such as voicemail, call waiting, call display, call forwarding, text messaging and conference calling.
We are responsible for acquiring and billing customers, as well as for providing
customer support under our own brand. We
 -27-




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##### Table of Contents



operate as a Mobile Virtual Network Operator,
or MVNO, utilizing wireless voice and data services provided by Rogers Wireless across
its GSM/GPRS network.
    
    Video-On-Demand.Video-on-demand service enables digital cable customers to rent
from a library of movies, documentaries and other programming through their digital
set-top box. Our digital cable customers are able to rent their video-on-demand
selections for a period of 24 hours, which they are then able to watch at their
convenience with full stop, rewind, fast forward, pause and replay functionality
during that period. Our video-on-demand service is available to 98% of the homes
passed by us. We also offer pay television channels on a subscription basis that
permit our customers to access and watch any of their video-on-demand selections at
any time at their convenience.
    
    Other Products and Services.To maintain and enhance our market position, we are
focused on increasing penetration of high-definition
television and personal video recorders, as well as other high-value products and
services.
  As of December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006Homes passed(1)
    
    
    2,329,023
    
    
    
    2,351,344
    
    
    
    2,383,443
    
    
    
    2,419,335
    
    
    
    2,457,213Basic analog cableBasic customers(2)
    
    
    1,431,060
    
    
    
    1,424,144
    
    
    
    1,452,554
    
    
    
    1,506,113
    
    
    
    1,572,411Penetration(3)
    
    
    61.4
    %
    
    
    60.6
    %
    
    
    60.9
    %
    
    
    62.3
    %
    
    
    64.0
    %Digital cableDigital customers
    
    
    171,625
    
    
    
    240,863
    
    
    
    333,664
    
    
    
    474,629
    
    
    
    623,646Penetration(4)
    
    
    12.0
    %
    
    
    16.9
    %
    
    
    23.0
    %
    
    
    31.5
    %
    
    
    39.7
    %Number of digital terminals
    
    
    182,010
    
    
    
    257,350
    
    
    
    362,053
    
    
    
    537,364
    
    
    
    738,530Dial-up Internet accessDial-up customers
    
    
    43,627
    
    
    
    28,821
    
    
    
    23,973
    
    
    
    18,034
    
    
    
    13,426Cable Internet accessCable modem customers
    
    
    305,054
    
    
    
    406,277
    
    
    
    502,630
    
    
    
    637,971
    
    
    
    791,966Penetration(3)
    
    
    13.1
    %
    
    
    17.3
    %
    
    
    21.1
    %
    
    
    26.4
    %
    
    
    32.2
    %Telephony servicesCable telephony customers
    
    
    
    
    
    
    
    
    
    
    2,135
    
    
    
    162,979
    
    
    
    397,860Penetration(3)
    
    
    
    
    
    
    

    
    
    
    0.1
    %
    
    
    6.7
    %
    
    
    16.2
    %Wireless telephony lines
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,826
 
 (1)
    
    Homes passed means the number of residential premises, such as single dwelling units or
multiple dwelling units, and commercial premises passed by the cable television distribution
network in a given cable system service area in which the programming services are offered.(2)
    
    Basic customers are customers who receive basic cable service in either the analog or digital
mode. The numbers of basic customers for the years 2002-2004, inclusive, were restated in
order to permit such numbers to be compared to the 2005 and 2006 numbers of basic customers.(3)
    
    Represents customers as a percentage of total homes passed.(4)
    
    Represents customers for the digital service as a percentage of basic customers.  -28-




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Business Telecommunications Services
  Video Stores
  Pricing of Our Products and Services
    Service
    
    Price RangeBasic analog cable(1)
    
    $15.07
     $28.88Extended basic analog cable(1)
    
    $27.50
     $41.19Basic digital cable(1)
    
    $13.98
     $15.98Extended basic digital cable(1)
    
    $26.98
     $75.98Pay-television
    
    $   3.99
     $29.99Pay-per-view (per movie or event)
    
    $  2.99
     $49.99Video-on-demand (per movie or event)
    
    $  0.99
     $14.99
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Service
    
    Price RangeDial-up Internet access
    
    $9.95
     $19.95Cable Internet access
    
    $26.95
     $89.95Cable telephony
    
    $15.95
     $22.95Mobile wireless telephony
    
    $22.65
     $78.10
 
 (1)
    
    These rates reflect price increases, effective March 15, 2007, of $0.69
on basic analog cable and extended basic analog cable, $1.00 on basic
digital cable and $1.00 on extended digital cable. Our Network Technology
   450 MHz
    
    480 to
    
    750 to
    
    Two-Wayand Under
    
    625 MHz
    
    860 MHz
    
    CapabilityDecember 31, 2002
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2003
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2004
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2005
    
    
    2
    %
    
    
    23
    %
    
    
    75
    %
    
    
    98
    %December 31, 2006
    
    
    2
    %
    
    
    23
    %
    
    
    75
    %
    
    
    98
    %
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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, Archambault Group Inc. 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 television programs such as Star Académie,
Occupation Doubleand other reality shows popular in Québec) in order to distribute
our cable, data transmission, cable telephony and mobile wireless telephony services
to our existing and future customers;
    
    introduce new value-added packages of products and services, which we believe
increases average revenue per user, or ARPU, and improves customer retention; and
    
    leverage our business market, using the 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.
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Programming
   Competition
  
    
    Over-the-air Television and Providers of Other Entertainment.Cable
television has long competed with broadcast television, which consists of television
signals that the viewer is able to receive without charge using an over-the air
antenna. The extent of such competition is dependent upon the quality and quantity of
broadcast signals available through over-the-air reception compared to the services
provided by the local cable system. Cable systems also face competition from
alternative methods of distributing and receiving television signals and from other
sources of entertainment such as live sporting events, movie 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
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systems ability to provide a greater variety of programming, superior technical
performance and superior customer service than are available over the air or through
competitive alternative delivery sources.
 
    
    Direct Broadcast Satellite.Direct broadcast satellite, or DBS, is a significant
competitor to cable systems. DBS delivers programming via signals sent directly to
receiving dishes from medium- and high-powered satellites, as opposed to cable
delivery transmissions. This form of distribution generally provides more channels
than some of our television systems and is fully digital. DBS service can be received
virtually anywhere in Canada through the installation of a small rooftop or
side-mounted antenna. Like digital cable distribution, DBS systems use video
compression technology to increase channel capacity and digital technology to improve
the quality of the signals transmitted to their customers.
    
    DSL.The deployment of digital subscriber line technology, known as DSL, provides
customers with Internet access at data transmission speeds greater than that which is
available over conventional telephone lines. DSL service is comparable to cable-modem
Internet access over cable systems. We also face competition from other providers of
DSL service.
    
    VDSL.The CRTC and Industry Canada have authorized video digital subscriber line,
or VDSL, services. VDSL technology increases the capacity of DSL lines available,
which permits the distribution of digital video. We expect that we will soon face
competition from incumbent local exchange carriers, which have been granted licenses
to launch video distribution services using this technology. ILECs are currently
installing this new technology, which operates over the copper lines in phone lines,
in our markets. This technology can achieve speeds as high as 52 Mbps upstream, but
VDSL can only operate over a short distance of about 4,000 feet (1,200 metres). As a
result, telephone companies are replacing many of their main feeds with fibre-optic
cable. By placing a VDSL transceiver, a VDSL gateway, in larger multiple dwelling
units, the distance limitation is overcome. Further, as a result of such improvements
in broadband speeds over DSL and the evolution of compression technology, incumbent
telephone carriers in our service areas may be in a position to enable delivery of
digital television over their cable Internet connections (IPTV) in the coming years.
Advanced trials are underway in Canada and in other countries. Tests in our service
markets are still being performed. If successful, IPTV may provide telecommunications
carriers with a way to offer services similar to those offered by cable operators in
the consumer market.
    
    Private Cable.Additional competition is posed by satellite master antenna
television systems known as SMATV systems serving multi-dwelling units, such as
condominiums, apartment complexes, and private residential communities.
    
    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).
 - 33 -




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
    
    Telephony Service.Our cable telephony service competes against other telephone
companies, including both the incumbent telephone service provider in Québec, which
controls a significant portion of the telephony market in Québec, as well as other
VoIP telephony service providers and cellular telephone service providers.
    
    Mobile wireless telephony services.Our new mobile wireless telephony service
competes against a mix of competitors, some of them being active in all the products
we offer, while others only offer mobile wireless telephony services in our market.
    
    Other Internet Service Providers.In the Internet access business, cable operators
compete against other Internet service providers offering residential and commercial
Internet access services. The CRTC requires the large Canadian incumbent cable
operators to offer access to their high speed Internet system to competitive Internet
service providers at mandated rates.
 REGULATION
 Foreign Ownership Restrictions Applicable under both the Telecom Act and the Broadcasting Act
   
    
    In the first phase, the Telecommunications Act should be amended to give the
federal Cabinet authority to waive the foreign ownership and control restrictions on
Canadian telecommunications common carriers when it deems a foreign investment or class of
investments to be in the public interest. During the first phase, there should be a
presumption that investments in any new start-up telecommunications investment or in any
telecommunications common carrier with less than 10 percent of the revenues in any
telecommunications service market are in the public interest. This presumption could be
rebutted by evidence related to a particular investor or investment. The presumption should
apply to all investments in fixed or mobile wireless telephony markets as well as to
investments in new entrants and smaller players (i.e. those below the 10-percent limit). To
encourage longer-term investment, foreign investors should remain exempt from the foreign
investment restrictions if they are successful in growing the market share of their
businesses beyond 10 percent.
    
    The second phase of liberalization should be undertaken after completion of the review
of broadcasting policy proposed by the Panel. At that time, there should be a broader
liberalization of the foreign
 - 34 -




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investment rules in a manner that treats all
telecommunications common carriers including the cable telecommunications industry in a
fair and competitively neutral manner. The proposed liberalization should apply to the
carriage business of BDUs, and new broadcasting policies should focus any necessary
Canadian ownership restrictions on broadcasting content businesses. The Cabinet should
retain the authority to screen significant investments in the Canadian telecommunications
carriage business to ensure that they are consistent with the public interest.
  Ownership and Control of Canadian Broadcast Undertakings
  Ineligibility of Non-Canadians
 Broadcasting Act
  - 35 -




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##### Table of Contents



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




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Broadcasting Act
 Canadian Broadcast Distribution (Cable Television)
 Licensing of Canadian Broadcasting Distribution Undertakings
       - 37 -




---



##### Table of Contents



Distribution of Canadian Content
 Broadcasting Distribution Regulations Broadcasting Act
   - 38 -




---



##### Table of Contents



1998 Broadcasting Distribution Regulations
  Competition and Carriage Rules.
 Signal Substitution.
 Canadian Programming and Community Expression Financing Rules
 Inside Wiring Rules.
  Rates
   - 39 -




---



##### Table of Contents



(1)
    
    30% or more of the households in the licensed service
area have access to the services of another broadcasting distribution
undertaking. The CRTC has advised that as of August 31, 1997, the 30%
availability criterion was satisfied for all licensed cable areas; and(2)
    
    the number of customers for basic cable service has
decreased by at least 5% since the date on which a competitor started
offering its basic cable service in the particular area.
     Winback Restrictions
  Copyright Board Proceedings
  - 40 -




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##### Table of Contents



Royalties for the Retransmission of Distant Signals
 Copyright
Act
 Copyright Act
  Royalties for the Transmission of Pay and Specialty Services
 Copyright Act
  Royalties for Pay Audio Services
  - 41 -




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Tariff in Respect of Internet Service Provider Activities
  Internet Service Provider Liability
 Copyright Act
 Canadian Telecommunications Services
 Jurisdiction
 Telecommunications Act Telecommunications Act
 - 42 -




---



##### Table of Contents



Telecommunications Act Telecommunications Act Telecommunications Act
  Overview of the Telecommunications Competition Framework
 Review of Regulatory Framework Local Competition
 Application of Canadian Telecommunications Regulation
 Telecommunications Act
 i.e.
   - 43 -




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- 44 -




---



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Winback Restrictions
   Right to Access to Telecommunications and Hydro-Electric Support Structures
 Telecommunications Act Telecommunications Act
  Access by Third Parties to Cable Networks
   - 45 -




---



##### Table of Contents



ORGANIZATIONAL STRUCTURE
 Caisse de dépôt et
placement du Québec
 
 PROPERTY, PLANTS AND EQUIPMENT
    -46-




---



##### Table of Contents



INTELLECTUAL PROPERTY
  ENVIRONMENT
  Ministère du développement durable, de lenvironnement et des parcs
 
 ITEM 4A  UNRESOLVED STAFF COMMENTS
  -47-




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##### Table of Contents



RECENT CANADIAN GAAP ACCOUNTING PRONOUNCEMENTS
 Financial Instruments  Recognition and Measurement Hedges Comprehensive Income
  Hedging Relationships Foreign Currency Translation
   RECENT U.S. GAAP ACCOUNTING PRONOUNCEMENTS
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
 Accounting for Uncertainty in Income
Taxes (FIN48)  an interpretation of FASB Statement No. 109 Accounting for Income Taxes
 Accounting Changes and Error Corrections
 Accounting for Conditional Asset
Retirement Obligations
 -48-




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##### Table of Contents



ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  GENERAL
      Overview
   -49-




---



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Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Revenues
   -50-




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Direct Costs and Operating, General and Administrative Expenses
   -51-




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##### Table of Contents



Operating Income
  Depreciation and Amortization
  Financial Expenses and Dividend Income
 3 8
 Income Taxes
  Net Income
  Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
 Revenues
    -52-




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Direct Costs and Operating, General and Administrative Expenses
   Operating Income
  -53-




---



##### Table of Contents



Depreciation and Amortization
  Financial Expenses and Dividend Income
 3 8
 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 service and repayment of our debt; and
    
    distributions to our shareholder.
 Capital Expenditures
 -54-




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##### Table of Contents



Fixed assets additions
    
    2006
    
    
    2005(in millions)Customer premises equipment
    
    $
    111.9
    
    
    $
    120.7Scaleable infrastructure
    
    
    68.2
    
    
    
    39.7Line extensions
    
    
    25.7
    
    
    
    16.6Upgrade/Rebuild
    
    
    50.3
    
    
    
    21.4Support Capital
    
    
    46.5
    
    
    
    21.5Total fixed assets additions
    
    $
    302.6
    
    
    $
    219.9
  Service and Repayment of Our Debt.
  1 8
   Distributions to our Shareholder
 -55-




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##### Table of Contents



Purchase of Shares of Quebecor Media and Service of Subsidiary Subordinated Loan
 3 4
  Contractual Obligations and Other Commercial Commitments.
 Payments Due by Periodas of December 31, 2006Total
    
    
    < 1 year
    
    
    2-3 years
    
    
    4-5 years
    
    
    > 5 years(in millions)Contractual obligations:6 7/8% Senior Notes due January 15, 2014
    
    $
    769.1
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    769.16 3/8% Senior Notes due December 15, 2015
    
    
    203.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203.1Cash Interest Expense(1)
    
    
    610.0
    
    
    
    76.9
    
    
    
    153.8
    
    
    
    153.8
    
    
    
    225.5Operating leases and other debt
    
    
    76.7
    
    
    
    33.5
    
    
    
    27.8
    
    
    
    8.7
    
    
    
    6.7Total contractual cash obligations
    
    $
    1,658.9
    
    
    $
    110.4
    
    
    $
    181.6
    
    
    $
    162.5
    
    
    $
    1,204.4
 
 (1)
    
    Estimate of interest to be paid on long-term debt based on the interest rates and foreign
exchange rate as at December 31, 2006.  -56-




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##### Table of Contents



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.
  Financing from Related Parties
 Credit Facilities
 7 8 3 8
 -57-




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SUMMARY OF CRITICAL ACCOUNTING ESTIMATES
  Long-Lived Assets
    Employee Future Benefits
 Pensions.
 Other Post-Retirement Benefits.
  OFF-BALANCE SHEET ARRANGEMENTS
 Operating Leases
  -58-




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Guarantees under Lease Agreements
  Guarantees Related to our Various Notes
 7 8 3 8 7 8 3 8
 RISKS AND UNCERTAINTIES
    7 8 3 8
  3 8
 -59-




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7 8
   Regulation
  Canadian and United States Accounting Policy Differences
     -60-




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As of October 23, 2000(in millions)Fixed assets
    
    $
    110.8Deferred charges
    
    
    (22.6
    )Goodwill
    
    
    4,631.1Change in assets
    
    
    4,719.3Accrued charges
    
    
    41.5Future income taxes
    
    
    24.4Change in liabilities
    
    
    65.9Change in contributed surplus
    
    $
    4,653.4
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ITEM 6- DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
  Name and Municipality of Residence
    
    Age
    
    PositionSerge Gouin
    
    63
    
    Director and Chairman of the BoardMontréal, QuébecJean La Couture, FCA(1)
    
    60
    
    Director and Chairman of the Audit CommitteeMontréal, QuébecAndré Delisle(1)
    
    60
    
    DirectorMontréal, QuébecA. Michel Lavigne, FCA(1)
    
    56
    
    DirectorBrossard, QuébecPierre Karl Péladeau
    
    45
    
    DirectorMontréal, QuébecRobert Dépatie
    
    48
    
    President and Chief Executive OfficerRosemère, QuébecYvan Gingras
    
    49
    
    Executive Vice President, Finance and Operations,Montréal, Québec
    
    
    
    and Chief Financial OfficerJean Novak
    
    43
    
    President, Videotron Business ServiceBeaconsfield, QuébecDonald Lizotte
    
    40
    
    President, Le SuperClub Vidéotron and Retail SalesKirkland, Québec
    
    
    
    VidéotronManon Brouillette
    
    38
    
    Senior Vice President, Marketing, ContentOutremont, Québec
    
    
    
    and New Product DevelopmentDaniel Proulx
    
    48
    
    Senior Vice President, EngineeringMontréal, QuébecAndré Gascon
    
    45
    
    Vice President, Information TechnologiesLongueuil, QuébecMarie-Josée Marsan
    
    44
    
    Vice President, ControlMontréal, QuébecNormand Vachon
    
    58
    
    Vice President, Human ResourcesRepentigny, QuébecLouis Morin
    
    49
    
    Vice PresidentKirkland, QuébecFrédéric Despars
    
    39
    
    Vice President, Legal AffairsCandiac, QuébecRoger Martel
    
    58
    
    Vice President, Internal AuditRepentigny, QuébecÉdouard G. Trépanier
    
    55
    
    Vice President, Regulatory AffairsBoucherville, QuébecJean-François Pruneau
    
    36
    
    TreasurerRepentigny, Québec
 -62-




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Name and Municipality of Residence
    
    Age
    
    PositionClaudine Tremblay
    
    53
    
    SecretaryNuns Island, QuébecChristian Marcoux
    
    32
    
    Assistant SecretaryLaval, Québec
 
 (1)
    
    Member of our Audit Committee. Serge Gouin
 Jean La Couture Regroupement des assureurs de personnes à charte du Québec
 André Delisle, Caisse de dépôt et placement du Québec Barreau du Québec
 A. Michel Lavigne Caisse de dépôt et placement du
Québec . Ordre des comptables agréés du Québec
 Pierre Karl Péladeau
 -63-




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##### Table of Contents



Robert Dépatie
 Yvan Gingras
 Jean Novak
 Donald Lizotte Université du Québec
 Manon Brouillette
 - 64 -




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##### Table of Contents



Daniel Proulx
 André Gascon
 Marie-Josée Marsan
 Normand Vachon ,
 Louis Morin
 Frédéric Despars
 Roger Martel
 Edouard G. Trépanier
 - 65 -




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Jean-François Pruneau
 Claudine Tremblay
 Christian Marcoux
 BOARD PRACTICES
    Audit Committee
   - 66 -




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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
   Quebecor Medias Stock Option Plan
  - 67 -




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Quebecor Inc.s Stock Option Plan
 1 3 2 3
 Pension Benefits
  Income Tax Act Income Tax Act
 Income Tax Act Income Tax Act
 - 68 -




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##### Table of Contents



Years of MembershipCompensation
    
    10
    
    15
    
    20
    
    25
    
    30$111,111 or more
    
    $
    22,222
    
    
    $
    33,333
    
    
    $
    44,444
    
    
    $
    55,556
    
    
    $
    66,667
 Supplemental Retirement Benefit Plan for Designated Executives
  Income Tax Act
  Income Tax Act
   Years of Credited ServiceCompensation
    
    10
    
    15
    
    20
    
    25
    
    30$200,000
    
    $
    17,778
    
    
    $
    26,667
    
    
    $
    35,556
    
    
    $
    44,445
    
    
    $
    53,333$300,000
    
    $
    37,778
    
    
    $
    56,667
    
    
    $
    75,556
    
    
    $
    94,445
    
    
    $
    113,333$400,000
    
    $
    57,778
    
    
    $
    86,667
    
    
    $
    115,556
    
    
    $
    144,445
    
    
    $
    173,333$500,000
    
    $
    77,778
    
    
    $
    116,667
    
    
    $
    155,556
    
    
    $
    194,445
    
    
    $
    233,333$600,000
    
    $
    97,778
    
    
    $
    146,667
    
    
    $
    195,556
    
    
    $
    244,445
    
    
    $
    293,333$800,000
    
    $
    137,778
    
    
    $
    206,667
    
    
    $
    275,556
    
    
    $
    344,445
    
    
    $
    413,333$1,000,000
    
    $
    177,778
    
    
    $
    266,667
    
    
    $
    355,556
    
    
    $
    444,445
    
    
    $
    533,333
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##### Table of Contents



Liability Insurance
  EMPLOYEES
  SHARE OWNERSHIP
  
 ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 MAJOR SHAREHOLDERS
  Caisse de dépôt et placement du
Québec
 RELATED PARTY TRANSACTIONS
  Video-on-Demand Services
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Call Center and Customer Support Agreement
   Management Services and Others
   Year Ended December 31,2005
    
    2006(dollars in millions)Revenues
    
    $
    28.8
    
    
    
    25.3Purchases
    
    
    57.5
    
    
    
    63.5Accounts payable
    
    
    43.1
    
    
    
    41.5
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##### Table of Contents



Income Tax Transactions
   Subsequent Events
  Quebecor World Outsourcing of Information Technology
  
    
    the initial purchase by Videotron of the information technology infrastructure
equipment of Quebecor World;
    
    the provision of consulting services by certain Quebecor World Inc. personnel to
Videotron for corporate information technology services; and
    
    the provision of information technology managed services by Videotron to Quebecor
World Inc. in Canada.
  INTERESTS OF EXPERTS AND COUNSEL
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ITEM 8   FINANCIAL INFORMATION
 CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
  LEGAL PROCEEDINGS
     DIVIDEND POLICY
   SIGNIFICANT CHANGES
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ITEM 9  THE OFFER AND LISTING
 OFFER AND LISTING DETAILS
  PLAN OF DISTRIBUTION
  MARKETS
 3 8 3 8 3 8
 7 8 7 8 7 8
  SELLING SHAREHOLDERS
  DILUTION
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EXPENSES OF THE ISSUER
  
 ITEM 10  ADDITIONAL INFORMATION
 SHARE CAPITAL
  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 (d) the
retirement or non-retirement of our directors under an age limit requirement or (e)
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
 - 75 -




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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:
  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.
  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
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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.
 (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
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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-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.(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.
 - 79 -




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(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 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.
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(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.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
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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.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.
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(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 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.
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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.
 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 Vidéotron ltée, the guarantors party
thereto and Wells Fargo Bank Minnesota, N.A. (now Wells Fargo Bank, National
Association) as trustee, as supplemented.On October 8, 2003, 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. The 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.
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(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 Vidéotron ltée, 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 Vidéotron ltée, 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 Videotron Group), guarantees of all the members of the Videotron
Group, pledges of the shares of Videotron and the members of the Videotron Group, and
other security.This amended and restated credit facility contains customary covenants that restrict
and limit the ability of Videotron and the members of the Videotron Group to, among
other things, enter into merger or amalgamation transactions, grant encumbrances, sell
assets, pay dividends or make other distributions, issue shares of capital stock,
incur indebtedness and enter into related party transactions. In addition, this
amended and restated credit facility contains customary financial covenants. It also
contains customary events of default including the non-payment of principal or
interest, the breach of any financial covenant, the failure to perform or observe any
other covenant, certain bankruptcy events relating to us and the members of the
Videotron Group, and the occurrence of a change of control.(d)
    
    Management Services Agreement, effective as of January 1, 2002, by and between
Quebecor Media Inc. and Vidéotron ltée.
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In 2002, we began paying an annual management fee to Quebecor Media for services
rendered to us pursuant to a five-year management services agreement. This agreement
has been renewed for 2007. These services include internal audit, legal and corporate,
financial planning and treasury, tax, real estate, human resources, risk management,
public relations and other services. The agreement provides for an annual
management fee of $23.4 million payable to Quebecor Media in respect of 2006 (2005 
$13.3 million; 2004  $8.4 million). In addition, Quebecor Media is entitled to the
reimbursement of out-of-pocket expenses incurred in connection with the services
provided under the agreement.(e)
    
    Back-to-back transaction agreement, effective as of January 3, 2007, by and
between Quebecor Media Inc. and Vidéotron ltée.On 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 23 to our consolidated financial statements under Item
17. Financial Statements of this annual report.
 EXCHANGE CONTROLS
  Investment Canada Act North American Free Trade
Agreement Implementation Act World Trade Organization (WTO) Agreement
Implementation Act
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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;
    
    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.
 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;
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
    
    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 Vidéotron ltée 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
   3 8 7 8 de minimis
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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
 7 8
 Sale, Exchange or Retirement of a Note
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
    
    the amount of cash and the fair market value of any property received (less any
portion allocable to the payment of accrued interest not previously included in income,
which amount will be taxable as ordinary interest income); and
    
    the U.S. Holders tax basis in the notes.
  Information Reporting and Backup Withholding
  
    
    fails to furnish a social security number or other taxpayer identification number
(TIN) certified under penalty of perjury within a reasonable time after the request
for the TIN;
    
    furnishes an incorrect TIN;
    
    is notified by the IRS that is has failed to report properly interest or dividends; or
    
    under certain circumstances, fails to provide a certified statement, signed under
penalties of perjury, that the TIN furnished is the correct number and that such holder
is not subject to backup withholding.
 provided provided
  Canadian Material Federal Income Tax Considerations for Non-Residents of Canada
 Income Tax Act
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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.
 DIVIDENDS AND PAYING AGENTS
  STATEMENT BY EXPERTS
  DOCUMENTS ON DISPLAY
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SUBSIDIARY INFORMATION
  
 ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Currency Risk
  Interest Rate Risk
 3 8 7 8
 Interest-Rate Swaps
 NotionalMaturity
    
    amount
    
    Pay/receive
    
    Fixed rate
    
    Floating rateSeptember 2007
    
    $
    5.0
    
    
    Pay fixed/receive floating
    
    
    3.75
    %
    
    Bankers acceptance
3 months
 Cross-Currency Interest Rate Swaps
 Exchange rate ofinterest 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
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Fair Value of Financial Instruments
  December 31, 2005
    
    December 31, 2006Carrying
    
    
    
    
    
    Carryingvalue
    
    Fair value
    
    value
    
    Fair value(in millions)Long-term debt
    
    $
    (1,121.7
    )
    
    $
    (1,117.4
    )
    
    
    (1,021.2
    )
    
    
    (1,010.6
    )Interest rate swaps
    
    
    (0.9
    )
    
    
    (0.9
    )
    
    
    0.0
    
    
    
    0.0Cross-currency interest rate swaps
    
    
    (73.8
    )
    
    
    (135.0
    )
    
    
    (71.8
    )
    
    
    (141.1
    )Foreign exchange forward contracts
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    2.1
 Material Limitations
  Principal Repayments
  Year ending December 31,
    
    (in thousands of dollars)2007
    
    $
    2008
    
    $
    2009
    
    $
    49,0002010
    
    $
    2011
    
    $
    2012 and thereafter
    
    $
    972,170
 
 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
   
 ITEM 16   [RESERVED]
 
 ITEM 16A   AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B  CODE OF ETHICS
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ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES
   Year Ended December 31,2005
    
    2006(in thousands)Audit Fees
    
    $
    543.8
    
    
    $
    544.5Audit-Related Fees(1)
    
    
    230.4
    
    
    
    46.4Tax Fees(2)
    
    
    
    
    
    
    All Other Fees(3)
    
    
    5.0
    
    
    
    Total
    
    $
    779.2
    
    
    $
    590.9
 
 (1)
    
    Audit-Related Fees include fees for the reviews of our employee pension plans and
assistance with the preparation of the private placement of our 63/8% Senior Notes due December
15, 2015, which was completed on September 16, 2005, and of the exchange offer of such notes,
which was completed on February 6, 2006.(2)
    
    Tax Fees include fees billed for tax compliance services, tax consultations and tax planning
services.(3)
    
    All Other Fees include fees billed for regulatory services. 
 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
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ITEM 18   FINANCIAL STATEMENTS
  
 ITEM 19   EXHIBITS
 EXHIBITS
  1.1
    
    Articles of Amalgamation of Videotron Ltd. as of July 1, 2006 (translation).1.2
    
    By-laws of Videotron Ltd. as of July 1, 2006.1.3
    
    Articles of Incorporation of Le SuperClub Vidéotron ltée (translation)
(incorporated by reference to Exhibit 3.7 of 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 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 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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##### Table of Contents



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 Vidéotron 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).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, as Second Amending Agreement dated
as of June 29, 2001, a Third Amending Agreement dated December 12, 2001 and
accepted by the Lenders as of December 21, 2001, a Fourth Amending
Agreement dated as of December 23, 2002, a Fifth Amending Agreement dated
as of March 24, 2003, a Sixth Amending Agreement dated as of October 8,
2003, 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 by 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).
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##### Table of Contents



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 by 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).4.9
    
    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, dated 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 2002.13.2
    
    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.
 - 98 -




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##### Table of Contents



SIGNATURE
  VIDEOTRON LTD.By:
    /s/ Yvan GingrasName:
    Yvan GingrasTitle:
    Executive Vice President, Finance and Operations, and
Chief Financial Officer 
 - 99 -




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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Videotron
Ltd.Annual Consolidated Financial Information as at December 31, 2005 and 2006 and for the Years
Ended December 31, 2004, 2005 and 2006Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Statements of Operations for the years ended December 31, 2004, 2005 and 2006
    
    F-3Consolidated Statements of Shareholders Equity (Deficiency in Assets) for the years ended
December 31, 2004, 2005 and 2006
    
    F-4Consolidated Balance Sheets as at December 31, 2005 and 2006
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2005 and 2006
    
    F-6Notes to Consolidated Financial Statements for the years ended December 31, 2004, 2005 and 2006
    
    F-8
 F-1




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##### Table of Contents



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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##### Table of Contents



VIDEOTRON LTD.
 
  
 2004
    
    
    2005
    
    
    2006(Restated -
    
    
    (Restated -note 2 (f))
    
    
    note 2 (f))Operating revenuesCable television
    
    $
    576,825
    
    
    $
    618,346
    
    
    $
    677,273Internet
    
    
    222,458
    
    
    
    270,791
    
    
    
    345,075Business solution
    
    
    66,117
    
    
    
    78,409
    
    
    
    74,352Telephony
    
    
    
    
    
    
    21,088
    
    
    
    108,565Video stores
    
    
    48,058
    
    
    
    55,146
    
    
    
    55,585Other
    
    
    24,274
    
    
    
    36,626
    
    
    
    48,745937,732
    
    
    
    1,080,406
    
    
    
    1,309,595Direct cost
    
    
    256,155
    
    
    
    293,057
    
    
    
    338,868Operating, general and administrative
expenses
    
    
    317,788
    
    
    
    373,736
    
    
    
    458,019Depreciation and amortization (note 4)
    
    
    163,862
    
    
    
    166,292
    
    
    
    185,115Financial expenses (note 5)
    
    
    203,916
    
    
    
    74,737
    
    
    
    79,586Dividend income from parent company
    
    
    (111,055
    )
    
    
    
    
    
    
    Other items
    
    
    1,930
    
    
    
    
    
    
    
    Income before income taxes and
non-controlling interest in a subsidiary
    
    
    105,136
    
    
    
    172,584
    
    
    
    248,007Income taxes (note 6):Current
    
    
    2,530
    
    
    
    2,911
    
    
    
    (439
    )Future
    
    
    (9,191
    )
    
    
    66,880
    
    
    
    64,669(6,661
    )
    
    
    69,791
    
    
    
    64,230111,797
    
    
    
    102,793
    
    
    
    183,777Non-controlling interest in a subsidiary
    
    
    100
    
    
    
    102
    
    
    
    86Net income
    
    $
    111,697
    
    
    $
    102,691
    
    
    $
    183,691
  F-3




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##### Table of Contents



VIDEOTRON LTD.
 
  
 TotalShare
    
    
    Contributed
    
    
    
    
    
    
    shareholderscapital
    
    
    surplus
    
    
    Deficit
    
    
    equityBalance as at December 31, 2003
(restated  note 2 (f))
    
    $
    572,448
    
    
    $
    366,345
    
    
    $
    (641,715
    )
    
    $
    297,078Transfer of tax deductions from a company
controlled by the ultimate parent company (note 6)
    
    
    
    
    
    
    (66
    )
    
    
    
    
    
    
    (66
    )Excess of the Series F preferred share retractable
value over the stated capital (note 14)
    
    
    
    
    
    
    
    
    
    
    (1,660
    )
    
    
    (1,660
    )Transfer of tax deductions from the parent
company (note 6)
    
    
    
    
    
    
    26,800
    
    
    
    
    
    
    
    26,800Reduction of paid-up capital credited to
contributed surplus
    
    
    (183,855
    )
    
    
    183,855
    
    
    
    
    
    
    
    Acquisition and wind-up of a company
under common control acquired in
March 2004
    
    
    
    
    
    
    
    
    
    
    686
    
    
    
    686Net income for the year
    
    
    
    
    
    
    
    
    
    
    111,697
    
    
    
    111,697Dividend
    
    
    
    
    
    
    
    
    
    
    (205,233
    )
    
    
    (205,233
    )Balance as at December 31, 2004
(restated  note 2 (f))
    
    
    388,593
    
    
    
    576,934
    
    
    
    (736,225
    )
    
    
    229,302Transfer of tax deductions from a company
controlled by the ultimate parent company (note 6)
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    23Reduction of paid-up capital (note 14)
    
    
    (45,653
    )
    
    
    
    
    
    
    
    
    
    
    (45,653
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    102,691
    
    
    
    102,691Dividend
    
    
    
    
    
    
    
    
    
    
    (210,000
    )
    
    
    (210,000
    )Balance as at December 31, 2005
(restated  note 2 (f))
    
    
    342,940
    
    
    
    576,957
    
    
    
    (843,534
    )
    
    
    76,363Transfer of tax deductions from a company
controlled by the ultimate parent company (note 6)
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22Issuance of shares (note 14)
    
    
    111,536
    
    
    
    
    
    
    
    
    
    
    
    111,536Reduction of paid-up capital (note 14)
    
    
    (108,749
    )
    
    
    
    
    
    
    
    
    
    
    (108,749
    )Excess of consideration paid over the carrying value
of debt transferred to the parent company (note 12)
    
    
    
    
    
    
    
    
    
    
    (3,282
    )
    
    
    (3,282
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    183,691
    
    
    
    183,691Dividend
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    (10,000
    )Balance as at December 31, 2006
    
    $
    345,727
    
    
    $
    576,979
    
    
    $
    (673,125
    )
    
    $
    249,581
  F-4




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##### Table of Contents



VIDEOTRON LTD.
 
  
 2005
    
    
    2006(Restated -note 2 (f))AssetsCurrent assets:Cash and cash equivalents
    
    $
    26,699
    
    
    $
    Temporary investments
    
    
    40,496
    
    
    
    987Accounts receivable (note 7)
    
    
    117,094
    
    
    
    139,585Amounts receivable from affiliated companies (note 19)
    
    
    8,332
    
    
    
    2,660Income taxes
    
    
    845
    
    
    
    310Inventories (note 8)
    
    
    29,365
    
    
    
    39,451Prepaid expenses
    
    
    7,110
    
    
    
    8,568Future income taxes (note 6)
    
    
    76,607
    
    
    
    24,728306,548
    
    
    
    216,289Fixed assets (note 9)
    
    
    1,151,818
    
    
    
    1,289,429Goodwill
    
    
    438,682
    
    
    
    438,582Other assets (note 10)
    
    
    43,849
    
    
    
    45,282Future income taxes (note 6)
    
    
    36,713
    
    
    
    3,358$
    1,977,610
    
    
    $
    1,992,940Liabilities and Shareholders EquityCurrent liabilities:Bank indebtedness and outstanding cheques
    
    $
    
    
    
    $
    18,470Accounts payable and accrued liabilities (note 11)
    
    
    227,908
    
    
    
    268,198Amounts payable to affiliated companies (note 19)
    
    
    43,134
    
    
    
    41,529Deferred revenue
    
    
    116,696
    
    
    
    135,335Income taxes
    
    
    882
    
    
    
    81Additional amount payable (note 12)
    
    
    111,540
    
    
    
    500,160
    
    
    
    463,613Deferred revenue
    
    
    22,033
    
    
    
    22,407Pension plan accrued liability
    
    
    7,090
    
    
    
    8,624Derivative financial instruments
    
    
    73,835
    
    
    
    71,828Future income taxes (note 6)
    
    
    175,748
    
    
    
    154,943Long-term debt (note 13)
    
    
    1,121,697
    
    
    
    1,021,170Non-controlling interest in subsidiaries
    
    
    684
    
    
    
    7741,901,247
    
    
    
    1,743,359Shareholders equity:Common shares (note 14)
    
    
    342,940
    
    
    
    345,727Contributed surplus
    
    
    576,957
    
    
    
    576,979Deficit
    
    
    (843,534
    )
    
    
    (673,125
    )76,363
    
    
    
    249,581$
    1,977,610
    
    
    $
    1,992,940
 
  F-5




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##### Table of Contents



VIDEOTRON LTD.
 
  
 2004
    
    
    2005
    
    
    2006(Restated -
    
    
    (Restated -note 2 (f))
    
    
    note 2 (f))Cash flows from operating activities:Net income
    
    $
    111,697
    
    
    $
    102,691
    
    
    $
    183,691Adjustments for the following items:Depreciation and amortization
(notes 4 and 5)
    
    
    170,490
    
    
    
    178,225
    
    
    
    203,420Future income taxes
    
    
    (9,191
    )
    
    
    66,880
    
    
    
    64,669Loss (gain) on disposal of fixed assets
    
    
    13,564
    
    
    
    (1,318
    )
    
    
    1,416Non-controlling interest in a subsidiary
    
    
    100
    
    
    
    102
    
    
    
    86Amortization of debt premium and discount
    
    
    (1,106
    )
    
    
    (2,188
    )
    
    
    (1,534
    )Loss (gain) on revaluation of additional
amount payable
    
    
    26,902
    
    
    
    10,140
    
    
    
    (3,286
    )Change in fair value of derivative financial
instruments (note 5)
    
    
    4,579
    
    
    
    (1,165
    )
    
    
    (19
    )Loss (gain) on repayment of long-term debt
    
    
    187
    
    
    
    (312
    )
    
    
    Loss on foreign currency translation
of long-term debt (note 5)
    
    
    1,298
    
    
    
    1,413
    
    
    
    Other
    
    
    341
    
    
    
    (765
    )
    
    
    755Cash flows from operations
    
    
    318,861
    
    
    
    353,703
    
    
    
    449,198Net change in non-cash operating items:Accounts receivable
    
    
    (20,258
    )
    
    
    (19,315
    )
    
    
    (22,187
    )Current income taxes
    
    
    (2,206
    )
    
    
    7,425
    
    
    
    154Amounts receivable from and payable to
affiliated companies
    
    
    (4,772
    )
    
    
    24,131
    
    
    
    3,606Inventories
    
    
    (4,505
    )
    
    
    4,286
    
    
    
    (10,225
    )Prepaid expenses
    
    
    693
    
    
    
    967
    
    
    
    (1,363
    )Accounts payable and accrued liabilities
    
    
    22,980
    
    
    
    16,189
    
    
    
    19,015Pension plan accrued liability
    
    
    1,538
    
    
    
    1,257
    
    
    
    2,310Deferred revenue
    
    
    31,277
    
    
    
    15,320
    
    
    
    19,013Other assets
    
    
    (14,175
    )
    
    
    (16,758
    )
    
    
    (18,902
    )10,572
    
    
    
    33,502
    
    
    
    (8,579
    )Cash flows from operating activities
    
    
    329,433
    
    
    
    387,205
    
    
    
    440,619Cash flows from investing activities:Acquisition of fixed assets
    
    
    (144,453
    )
    
    
    (219,865
    )
    
    
    (302,629
    )Net change in other assets
    
    
    (2,993
    )
    
    
    (1,970
    )
    
    
    (2,850
    )Proceeds from disposal of fixed assets and
investments
    
    
    2,990
    
    
    
    1,251
    
    
    
    641Acquisition of shares of parent company
    
    
    (1,100,000
    )
    
    
    
    
    
    
    Proceeds from disposal of shares of parent
company
    
    
    1,100,000
    
    
    
    
    
    
    
    Disposal (acquisition) of temporary investments
    
    
    40,535
    
    
    
    (19,246
    )
    
    
    39,509Net disposal (acquisition) of video store
assets (note 2 (a))
    
    
    (7,162
    )
    
    
    53
    
    
    
    228Acquisition of non-controlling interest
    
    
    (10
    )
    
    
    
    
    
    
    Payment of tax deductions to parent company
    
    
    
    
    
    
    (35,200
    )
    
    
    Cash flows used in investing activities
    
    
    (111,093
    )
    
    
    (274,977
    )
    
    
    (265,101
    )
 F-6




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##### Table of Contents



VIDEOTRON LTD.
 
 2004
    
    
    2005
    
    
    2006Cash flows from financing activities:Net change in bank credit facility (note 13)
    
    $
    
    
    
    $
    
    
    
    $
    49,000Repayment of long-term debt
    
    
    (355,630
    )
    
    
    (92,284
    )
    
    
    Settlement of derivative financial instruments
    
    
    
    
    
    
    (10,955
    )
    
    
    (938
    )Issuance of long-term debt, net of financing costs
    
    
    389,843
    
    
    
    200,185
    
    
    
    Increase in intercompany loan from
parent company
    
    
    1,100,000
    
    
    
    
    
    
    
    Issuance of shares
    
    
    
    
    
    
    
    
    
    
    111,536Transfer of additional amount payable to
parent company
    
    
    
    
    
    
    
    
    
    
    (111,536
    )Repayment of the subordinated loan to parent
company
    
    
    
    
    
    
    
    
    
    
    (150,000
    )Repayment of intercompany loan
from parent company
    
    
    (1,100,000
    )
    
    
    
    
    
    
    Advance to parent company
    
    
    (40,893
    )
    
    
    
    
    
    
    Reimbursement of advance to parent company
    
    
    
    
    
    
    40,893
    
    
    
    Redemption of shares
    
    
    (3,660
    )
    
    
    
    
    
    
    Dividends
    
    
    (205,233
    )
    
    
    (210,000
    )
    
    
    (10,000
    )Reduction in paid-up capital
    
    
    
    
    
    
    (45,653
    )
    
    
    (108,749
    )Other
    
    
    (79
    )
    
    
    (126
    )
    
    
    Cash flows used in financing activities
    
    
    (215,652
    )
    
    
    (117,940
    )
    
    
    (220,687
    )Net change in cash and cash equivalents
    
    
    2,688
    
    
    
    (5,712
    )
    
    
    (45,169
    )Cash and cash equivalents at beginning of year
    
    
    29,723
    
    
    
    32,411
    
    
    
    26,699Cash and cash equivalents at end of year
    
    $
    32,411
    
    
    $
    26,699
    
    
    $
    (18,470
    )Cash and cash equivalents are comprised of:Cash and cash equivalents
    
    $
    32,411
    
    
    $
    26,699
    
    
    $
    Bank indebtedness and outstanding cheques
    
    
    
    
    
    
    
    
    
    
    (18,470
    )$
    32,411
    
    
    $
    26,699
    
    
    $
    (18,470
    )
  F-7




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##### Table of Contents



VIDEOTRON LTD.
 
   1.
    
    Significant accounting policies:
 (a)
    
    Consolidated financial statements:The Company is a cable services 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 the largest chain
of video stores in Québec and a chain of video stores in Ontario and in the Atlantic
provinces.These consolidated financial statements, expressed in Canadian dollars, have been prepared
in accordance with Canadian generally accepted accounting principles and include the
consolidated financial statements of Videotron Ltd. and its subsidiaries, CF Cable TV Inc.,
Le SuperClub Vidéotron Ltée and SETTE inc. formerly Société dédition et de transcodage
T.E. ltée.(b)
    
    Temporary investments:Temporary investments consist primarily of commercial paper maturing in the short-term, and
are recorded at the lower of cost and market value.(c)
    
    Fixed assets:Fixed assets are recorded at cost, net of related government grants and income tax credits.
Costs include material, direct labour, overhead and interest expenses relating to the
projects to construct and connect receiving and distribution networks. Expenditures for
additions, improvements and replacements are capitalized, whereas expenses for maintenance
and repairs are charged to operating and administrative expenses as incurred.Depreciation is calculated using the following depreciation basis and periods or rates:
 Asset
    
    Basis
    
    Period/rateReceiving and distribution networks
    
    Straight-line
    
    3 years to 20 yearsFurniture and equipment
    
    Declining balance 
and straight-line
    
    20% to 33.3%
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-8




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##### Table of Contents



VIDEOTRON LTD.
   1.
    
    Significant accounting policies (continued):
 (c)
    
    Fixed assets (continued):Leasehold improvements are amortized over the term of the lease.The Company does not record an asset retirement obligation in connection with its cable
distribution networks. The Company expects to renew all of its agreements with utility
companies to access their support structures in the future, making the retirement date,
relating to these assets, undeterminable.(d)
    
    Impairment of long-lived assets:The Company reviews, when a triggering event occurs, the carrying values of its long-lived
assets by comparing the carrying amount of the asset or group of assets to the expected
future undiscounted cash flows to be generated by the asset or group of assets. An
impairment loss is recognized when the carrying amount of an asset or group of assets held
for use exceeds the sum of the undiscounted cash flows expected from its use and eventual
disposition. The impairment loss is measured as the amount by which the assets carrying
amount exceeds its fair value, based on quoted market prices, when available, or on the
estimated present value of future cash flows.(e)
    
    Asset retirement obligation:Asset retirement obligations are legal obligations associated with the retirement of a
tangible long-lived asset that result from acquisition, construction, development or normal
operations.Certain of our franchise agreements and leases contain provisions requiring us to restore
or remove equipment in the event that the franchise or lease agreement is not renewed. We
expect to continually renew our franchise agreements and have concluded that the related
franchise right is an indefinite-lived intangible asset. Accordingly, the possibility is
remote that we would be required to incur significant restoration or removal costs in the
foreseeable future. A liability must be recognized for an asset retirement obligation in
the period in which it is incurred if a reasonable estimate of fair value can be made. We
would record an estimated liability in the unlikely event a franchise agreement containing
such a provision is no longer expected to be renewed. We also expect to renew many of our
lease agreements related to the continued operations of our cable business in the franchise
areas. For our lease agreements, the liabilities related to the removal provisions, if
any, are either not estimable or are not material.
 F-9




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##### Table of Contents



VIDEOTRON LTD.
   1.
    
    Significant accounting policies (continued):
 (f)
    
    Revenue recognition:The Cable and wireless services are provided under arrangement with multiple deliverables
and are comprised of two separate accounting units: one for subscriber services (connecting
fees and operating services) and the other, for equipment sales to subscribers including
activation fees related to wireless phones.Cable connection fee revenues are deferred and recognized as revenue over a thirty-month
period, the estimated average period that subscribers are expected to remain connected to
the network. The incremental and direct costs related to cable connection fees, in an
amount not exceeding the revenue, are deferred and recognized as an operating expense over
the same thirty-month period. Operating revenues from cable television, business solution
and other services, such as Internet access, telephony and wireless, are recognized when
the services are rendered. Revenues from equipment sales to subscribers and their costs
are recognized when the equipment is delivered. Revenues from video rentals are recorded
as revenue when the services are provided. Promotional offers are accounted for as a
reduction of the related service revenue when customers take advantage of the offer.Operating revenues related to service contracts are recognized in income over the life of
the specific contracts on a straight-line basis representing the period over which the
services are provided.(g)
    
    Goodwill:Goodwill is not amortized. Goodwill is tested for impairment annually, or more frequently
if events or changes in circumstances indicate that the asset might be impaired. The
impairment test is carried out in two steps. In the first step, the carrying amount of the
reporting unit is compared with its fair value. When the fair value of a reporting unit
exceeds its carrying amount, goodwill of the reporting unit is considered not to be
impaired and the second step of the impairment test is not required. The second step is
carried out when the carrying amount of a reporting unit exceeds its fair value, in which
case the implied fair value of the reporting units goodwill is compared with its carrying
amount to measure the amount of the impairment loss, if any. When the carrying amount of
the reporting units goodwill exceeds the implied fair value of the goodwill, an impairment
loss is recognized in an amount equal to the excess and is presented as a separate line
item in the statement of operations before extraordinary items and discontinued operations.
 F-10




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##### Table of Contents



VIDEOTRON LTD.
   1.
    
    Significant accounting policies (continued):
 (h)
    
    Other assets:Deferred charges are recorded at cost and include long-term financing costs that are
amortized over the term of the debt using the straight-line method. Development costs
related to new specialty services and pre-operating expenditures are amortized when
commercial operations begin, using the straight-line method over a three-year period.
Video rental inventory, less residual value, is depreciated on a straight-line basis over a
period of six to twelve months. Depreciation of video rental inventory is charged to
direct costs.(i)
    
    Inventories:Inventories are recorded at the lower of cost, using the weighted average cost method, or
replacement value.(j)
    
    Foreign currency translation:Foreign currency transactions are translated into Canadian dollars at the exchange rate at
the date of the transaction. Monetary assets and liabilities are translated at the
year-end rate of exchange and non-monetary items are translated at historical exchange
rates. Translation gains and losses are recognized in the statement of operations.(k)
    
    Derivative financial instruments:The Company uses various derivative financial instruments to manage its exposure to
fluctuations in foreign currency exchange rates and interest rates. The Company does not
hold or issue derivative instruments for trading purposes. The Company documents all
relationships between derivatives and hedged items, its strategy for using hedges and its
risk-management objective. The Company assesses the effectiveness of derivatives when the
hedge is put in place and on an ongoing basis.The Company entered into cross-currency interest rate swap agreements to hedge the foreign
currency denominated debt and manage exchange rate exposures relating to certain debt
instruments denominated in foreign currency. These swaps are designated as hedges of firm
commitments to pay interest, and change the basis from LIBOR to Bankers Acceptance rates,
on the foreign currency denominated debt and the principal at maturity, which would
otherwise expose the Company to foreign currency risk. Translation gains and losses on the
related foreign currency denominated debt are offset by corresponding translation losses or
gains on the swap agreements.The Company also enters into forward exchange contracts to hedge the foreign exchange
fluctuations of their U.S. dollar purchases. Translation gains and losses associated with
the derivative instruments are deferred under other current assets or liabilities on the
balance sheet and recorded in earnings in the period in which the underlying hedged
transaction is recognized.
 F-11




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##### Table of Contents



VIDEOTRON LTD.
   1.
    
    Significant accounting policies (continued):
 (k)
    
    Derivative financial instruments (continued):The derivative financial instruments that have not been designated as hedge of foreign
currency risk and interest rate risk are marked to market with changes in fair value
recognized in the statement of operations.(l)
    
    Cash and cash equivalents:Cash and cash equivalents are comprised of cash and short-term liquid investments maturing
within three months from the date of acquisition, net of issued and outstanding cheques.(m)
    
    Income taxes:The Company follows the asset and liability method of accounting for income taxes. Under
the asset and liability method, future income tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax
bases. Future income tax assets and liabilities are measured using enacted or
substantively enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. The effect on future income tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes
the enacted or substantively enacted date. A valuation allowance is recorded if
realization is not considered more likely than not.(n)
    
    Employee future benefits:The Company and an affiliated company offer defined benefit career salary pension plan and
a last five years average salary pension plan for certain employees. The Company also
maintains defined contribution pension plans for other employees. Defined benefit pension
plan costs are determined using actuarial methods and are funded through contributions
determined in accordance with the projected benefit method pro-rated on service, which
incorporates managements best estimate of future salary levels, other cost escalations,
retirement ages of employees and other actuarial assumptions.
 F-12




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Significant accounting policies (continued):
 (n)
    
    Employee future benefits (continued):Pension plan expense is charged to operations and includes:
 
    
    The cost of pension plan benefits provided in exchange for employees
services rendered during the year;
    
    The amortization of 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;
    
    The interest cost of pension plan obligations, the expected return on pension
fund assets, and the amortization of cumulative unrecognized net actuarial gains and
losses in excess of 10% of the greater of the benefit obligation or fair value of plan
assets over the expected average remaining service life of the employee group covered
by the plans. For the purpose of calculating the expected return on plan assets,
those assets are valued at fair value.
  (o)
    
    Advertizing:Advertizing cost is expensed as incurred. The advertizing expenses for 2004, 2005 and 2006
amounted to $22.0 million, $24.3 million and $30.9 million, respectively.(p)
    
    Stock-based compensation:Stock-based awards are granted by the parent company to certain of the Companys employees.
Compensation costs attributable to stock-based awards to employees that call for
settlement in cash or other assets are recognized over the vesting period in operating
expenses. Changes in intrinsic value of the stock option awards between the grant date and
the measurement date result in a change in the measure of the compensation cost.(q)
    
    Use of estimates:The preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities and the reported amounts of revenues and expenses.
Significant areas requiring the use of management estimates relate to the determination of
provisions for income taxes, pension and other employee benefits, the useful life of assets
for depreciation and amortization and evaluation of expected future cash flows to
be generated from fixed assets, implied fair value of goodwill, and other assets. Actual
results could differ from those estimates.
 F-13




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##### Table of Contents



VIDEOTRON LTD.
  2.
    
    Business combinations and reorganization:
 (a)
    
    On May 20, 2004, a subsidiary of the Company acquired the assets of Jumbo
Entertainment Inc. for a total cash consideration of $7.2 million.This acquisition is summarized as follows:
 (in millions)Assets acquired:Inventories
    
    $
    1.1Fixed assets
    
    
    0.9Goodwill
    
    
    5.2Assets acquired at fair value
    
    $
    7.2
 (b)
    
    On January 16, 2004, Videotron (1998) Ltée, a subsidiary of the Company, contracted a
subordinated loan of $1.1 billion bearing interest at 10.75% from Quebecor Media Inc. On
the same day, Videotron (1998) Ltée invested the whole proceeds of $1.1 billion into
1,100,000 preferred shares, Series D of Quebecor Media Inc. Those shares, carry the
rights to receive an annual dividend of 11%. In December 2004, Videotron (1998) Ltée
reimbursed the loan and Quebecor Media Inc. redeemed the preferred shares for $1.1
billion.(c)
    
    On December 31, 2004, the subsidiary, Videotron (1998) ltée, was wound up into
Videotron Ltd. This transaction had no impact on the consolidated financial statements.(d)
    
    On January 1, 2005, the subsidiary, Vidéotron TVN Inc., was wound up into Vidéotron
Ltd. This transaction had no impact on the consolidated financial statements.(e)
    
    On January 1, 2006, the subsidiary, Vidéotron (Régional) Ltée, was wound up into CF
Cable Inc. This transaction had no impact on the consolidated financial statements.(f)
    
    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.
 F-14




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##### Table of Contents



VIDEOTRON LTD.
  2.
    
    Business combinations and reorganization (continued):
 (f)
    
    (continued):The following table summarizes the impacts of the two amalgamations on the Companys
comparative consolidated net income and consolidated balance sheet:
 Videotron
    
    
    9101-0827
    
    
    Eliminated on
    
    
    TotalVideotron Ltd.
    
    
    Telecom Ltd.
    
    
    Quebec Inc.
    
    
    consolidation
    
    
    restated(in thousands of Canadian dollars)Consolidated net
income (loss) for the
years ended
December 31:2004
    
    $
    147,372
    
    
    $
    (9,522
    )
    
    $
    (34,862
    )
    
    $
    8,709
    
    
    $
    111,6972005
    
    
    113,875
    
    
    
    (167
    )
    
    
    (15,730
    )
    
    
    4,713
    
    
    
    102,691Consolidated balance
sheet as at
December 31, 2005:Total assets
    
    
    1,719,265
    
    
    
    277,383
    
    
    
    104,514
    
    
    
    (123,552
    )
    
    
    1,977,610Total liabilities
    
    
    1,777,337
    
    
    
    33,518
    
    
    
    111,662
    
    
    
    (21,270
    )
    
    
    1,901,247Shareholders
equity
    
    
    (58,072
    )
    
    
    243,865
    
    
    
    (7,148
    )
    
    
    (102,282
    )
    
    
    76,363
 3.
    
    Employee future benefits:The Company and affiliated companies 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, 2003. The next actuarial valuations will be performed during fiscal year 2007 as
at December 31, 2006.The Company provides postretirement benefits to eligible employees. The costs of these
benefits, which are principally life insurance and health care, are accounted for during the
employees active service period.
 F-15




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##### Table of Contents



VIDEOTRON LTD.
  3.
    
    Employee future 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, 2005 and 2006, and a statement
of funded status as at these dates:
 2005
    
    
    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
    
    $
    52,556
    
    
    $
    5,488
    
    
    $
    58,044
    
    
    $
    78,434
    
    
    $
    7,755
    
    
    $
    86,189Service costs
    
    
    3,695
    
    
    
    247
    
    
    
    3,942
    
    
    
    5,876
    
    
    
    355
    
    
    
    6,231Plan participants
contributions
    
    
    3,436
    
    
    
    
    
    
    
    3,436
    
    
    
    4,115
    
    
    
    
    
    
    
    4,115Interest costs
    
    
    3,458
    
    
    
    342
    
    
    
    3,800
    
    
    
    4,265
    
    
    
    403
    
    
    
    4,668Actuarial loss (gain)
    
    
    18,072
    
    
    
    1,737
    
    
    
    19,809
    
    
    
    (1,220
    )
    
    
    1,309
    
    
    
    89Benefits and settlement
paid
    
    
    (2,783
    )
    
    
    (59
    )
    
    
    (2,842
    )
    
    
    (3,947
    )
    
    
    
    
    
    
    (3,947
    )Benefit obligations,
end of year
    
    $
    78,434
    
    
    $
    7,755
    
    
    $
    86,189
    
    
    $
    87,523
    
    
    $
    9,822
    
    
    $
    97,345
 2005
    
    
    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
    
    $
    59,328
    
    
    $
    
    
    
    $
    59,328
    
    
    $
    70,781
    
    
    $
    
    
    
    $
    70,781Plan participants
contributions
    
    
    3,436
    
    
    
    
    
    
    
    3,436
    
    
    
    4,115
    
    
    
    
    
    
    
    4,115Actual return on
plan assets
    
    
    9,271
    
    
    
    
    
    
    
    9,271
    
    
    
    13,616
    
    
    
    
    
    
    
    13,616Employer contributions
    
    
    1,529
    
    
    
    59
    
    
    
    1,588
    
    
    
    2,696
    
    
    
    62
    
    
    
    2,758Benefits and settlement
paid
    
    
    (2,783
    )
    
    
    (59
    )
    
    
    (2,842
    )
    
    
    (3,947
    )
    
    
    (62
    )
    
    
    (4,009
    )Fair value of plan assets,
end of year
    
    $
    70,781
    
    
    $
    
    
    
    $
    70,781
    
    
    $
    87,261
    
    
    $
    
    
    
    $
    87,261
 F-16




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##### Table of Contents



VIDEOTRON LTD.
  3.
    
    Employee future benefits (continued):The plan assets are comprised of:
 2005
    
    
    2006Equity securities
    
    
    72.2
    %
    
    
    68.1
    %Debt securities
    
    
    25.0
    %
    
    
    26.1
    %Real estate
    
    
    2.8
    %
    
    
    5.8
    %
  2005
    
    
    
    
    
    
    
    
    
    
    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
    
    $
    (7,653
    )
    
    $
    (7,755
    )
    
    $
    (15,408
    )
    
    $
    (262
    )
    
    $
    (9,822
    )
    
    $
    (10,084
    )Past service cost gain
    
    
    
    
    
    
    (1,099
    )
    
    
    (1,099
    )
    
    
    
    
    
    
    (1,032
    )
    
    
    (1,032
    )Unrecognized
actuarial loss
    
    
    10,823
    
    
    
    2,540
    
    
    
    13,363
    
    
    
    1,891
    
    
    
    3,714
    
    
    
    5,605Net amount recognized in
balance sheet
    
    $
    3,170
    
    
    $
    (6,314
    )
    
    $
    (3,144
    )
    
    $
    1,629
    
    
    $
    (7,140
    )
    
    $
    (5,511
    )
  2005
    
    
    
    
    
    
    
    
    
    
    2006Post-
    
    
    
    
    
    
    
    
    
    
    Post-Pension
    
    
    retirement
    
    
    
    
    
    
    Pension
    
    
    retirementbenefits
    
    
    benefits
    
    
    Total
    
    
    benefits
    
    
    benefits
    
    
    Total(in thousands of Canadian dollars)Deferred pension charges
    
    $
    3,946
    
    
    $
    
    
    
    $
    3,946
    
    
    $
    3,215
    
    
    $
    (102
    )
    
    $
    3,113Accrued benefit liability
    
    
    (776
    )
    
    
    (6,314
    )
    
    
    (7,090
    )
    
    
    (1,586
    )
    
    
    (7,038
    )
    
    
    (8,624
    )Net amount recognized
    
    $
    3,170
    
    
    $
    (6,314
    )
    
    $
    (3,144
    )
    
    $
    1,629
    
    
    $
    (7,140
    )
    
    $
    (5,511
    )
 F-17




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##### Table of Contents



VIDEOTRON LTD.
  3.
    
    Employee future benefits (continued):Components of the net benefit costs are as follows:
 2004(Restated - see note 2 (f))Post-Pension
    
    
    retirementbenefits
    
    
    benefits
    
    
    Total(in thousands of Canadian dollars)Service costs
    
    $
    2,717
    
    
    $
    2,119
    
    
    $
    4,836Interest costs
    
    
    2,984
    
    
    
    321
    
    
    
    3,305Actual return on plan assets
    
    
    (7,776
    )
    
    
    
    
    
    
    (7,776
    )Actuarial loss on accrued benefit obligation
    
    
    3,438
    
    
    
    59
    
    
    
    3,497Elements of net benefit cost adjustments to recognize the
long-term nature and valuation allowance
    
    
    1,363
    
    
    
    2,499
    
    
    
    3,862Difference between actual and expected return on plan assets
    
    
    3,771
    
    
    
    
    
    
    
    3,771Deferral of actuarial loss on accrued benefit obligation
    
    
    (3,383
    )
    
    
    (59
    )
    
    
    (3,442
    )Amortization of previously deferred actuarial loss
    
    
    
    
    
    
    21
    
    
    
    21Other
    
    
    
    
    
    
    (83
    )
    
    
    (83
    )Total adjustments to recognize the long-term nature of benefit costs
    
    
    388
    
    
    
    (121
    )
    
    
    267Defined contribution pension plan:Employers contribution during the period
    
    
    3,854
    
    
    
    
    
    
    
    3,854Net benefit costs
    
    $
    5,605
    
    
    $
    2,378
    
    
    $
    7,983
 F-18




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##### Table of Contents



VIDEOTRON LTD.
  3.
    
    Employee future benefits (continued):
 2005(Restated - see note 2 (f))Post-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
    )Actuarial loss on accrued benefit obligation
    
    
    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 actuarial loss on accrued benefit obligation
    
    
    (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
    )Defined contribution pension plan:Employers contribution during the period
    
    
    4,117
    
    
    
    
    
    
    
    4,117Net benefit costs
    
    $
    6,800
    
    
    $
    541
    
    
    $
    7,341
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##### Table of Contents



VIDEOTRON LTD.
  3.
    
    Employee future benefits (continued):
 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
    )Actuarial (gain) loss on accrued benefit obligation
    
    
    (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 actuarial loss on accrued benefit obligation
    
    
    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
    )
    
    
    7,691Defined contribution pension plan:Employers contribution during the period
    
    
    4,754
    
    
    
    
    
    
    
    4,754Net benefit costs
    
    $
    8,991
    
    
    $
    826
    
    
    $
    9,817
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##### Table of Contents



VIDEOTRON LTD.
  3.
    
    Employee future benefits (continued):The weighted average rates used in the measurement of the Companys benefit obligations as at
December 31, 2006, 2005 and 2004 and current periodic costs are as follows:
 2004
    
    
    2005
    
    
    2006Benefit obligations:Rates at end of year:Discount rate
    
    
    6.00
    %
    
    
    5.00
    %
    
    
    5.00
    %Expected return on plan assets
    
    
    7.50
    %
    
    
    7.50
    %
    
    
    7.25
    %Rate of compensation increase
    
    
    3.50
    %
    
    
    3.50
    %
    
    
    3.50
    %Current periodic costs:Rates at beginning of year:Discount rate
    
    
    6.25
    %
    
    
    6.00
    %
    
    
    5.00
    %Expected return on plan assets
    
    
    7.75
    %
    
    
    7.50
    %
    
    
    7.50
    %Rate of compensation increase
    
    
    3.50
    %
    
    
    3.50
    %
    
    
    3.50
    %
  Postretirement benefitsIncrease

    
    DecreaseSensitivity
analysis
    
    
    1
    %
    
    
    1
    %Effect on service and interest costs
    
    $
    1
    
    
    $
    (1
    )Effect on benefit obligations
    
    
    17
    
    
    
    (15
    )
 F-21




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##### Table of Contents



VIDEOTRON LTD.
  4.
    
    Depreciation and amortization:
 2004
    
    
    2005
    
    
    2006(in thousands of Canadian dollars)(Restated - note 2 (f))Fixed assets
    
    $
    162,348
    
    
    $
    164,684
    
    
    $
    183,619Other assets
    
    
    1,514
    
    
    
    1,608
    
    
    
    1,496$
    163,862
    
    
    $
    166,292
    
    
    $
    185,115
  5.
    
    Financial expenses:
 2004
    
    
    2005
    
    
    2006(in thousands of Canadian dollars)(Restated - note 2 (f))Third parties:Interest on long-term debt
    
    $
    56,923
    
    
    $
    61,207
    
    
    $
    81,316Amortization of deferred financing costs
    
    
    1,397
    
    
    
    1,836
    
    
    
    1,966Amortization of debt premium and discount
    
    
    (1,106
    )
    
    
    (2,188
    )
    
    
    (1,534
    )Loss (gain) on revaluation of additional
amount payable
    
    
    26,902
    
    
    
    10,140
    
    
    
    (3,286
    )Loss (gain) on repayment of long-term debt
    
    
    187
    
    
    
    (312
    )
    
    
    Change in fair value of derivative financial instruments
    
    
    4,579
    
    
    
    (1,165
    )
    
    
    (19
    )Loss on foreign currency translation oflong-term debt
    
    
    1,298
    
    
    
    1,413
    
    
    
    (Gain) loss on foreign currency translation of
short-term monetary items
    
    
    (907
    )
    
    
    (1,447
    )
    
    
    1,113Other
    
    
    1,706
    
    
    
    542
    
    
    
    7090,979
    
    
    
    70,026
    
    
    
    79,626Interest income
    
    
    (1,191
    )
    
    
    (1,271
    )
    
    
    (512
    )89,788
    
    
    
    68,755
    
    
    
    79,114Parent company:Interest expense (note 2 (b))
    
    
    114,707
    
    
    
    6,862
    
    
    
    472Interest income
    
    
    (579
    )
    
    
    (880
    )
    
    
    114,128
    
    
    
    5,982
    
    
    
    472$
    203,916
    
    
    $
    74,737
    
    
    $
    79,586
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##### Table of Contents



VIDEOTRON LTD.
  5.
    
    Financial expenses (continued):Interest paid to and interest received from third parties in 2004 amounted to $51.1 million and
$2.1 million (restated), respectively, $66.0 million and $3.2 million (restated) in 2005 and
$81.4 million and $0.9 million in 2006.Interest paid to and interest received from affiliated companies in 2004 amounted to $108.5
million and nil, respectively, nil and nil in 2005, and $18.0 and nil in 2006.
 6.
    
    Income taxes:The following schedule reconciles income taxes computed on income before income taxes and
non-controlling interest in a subsidiary based on the consolidated basic income tax rate and
the effective income tax rate:
 2004
    
    
    2005
    
    
    2006(in thousands of Canadian dollars)(Restated - note 2 (f))Income taxes based on statutory
tax rates of 31.02% in 2004, 31.02%
in 2005 and 32.02% in 2006
    
    $
    32,613
    
    
    $
    53,536
    
    
    $
    79,412Change due to the following items:Federal large corporations tax
    
    
    2,241
    
    
    
    2,156
    
    
    
    Non-taxable dividend from the parent
company
    
    
    (34,449
    )
    
    
    
    
    
    
    Settlement of notices of assessment
    
    
    (17,483
    )
    
    
    1,080
    
    
    
    Non-deductible charges and/or
loss deductible at a lower rate
or for which the tax benefit was
not recorded
    
    
    9,800
    
    
    
    3,245
    
    
    
    (1,001
    )(Reduction) increase in future enacted
tax rate
    
    
    
    
    
    
    10,661
    
    
    
    (14,914
    )Other
    
    
    617
    
    
    
    (887
    )
    
    
    733Income taxes based on the effective
income tax rate
    
    $
    (6,661
    )
    
    $
    69,791
    
    
    $
    64,230
  F-23




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##### Table of Contents



VIDEOTRON LTD.
  6.
    
    Income taxes (continued):The tax effects of significant items comprising the Companys net future tax liability are as
follows:
 2005
    
    
    2006(in thousands of Canadian dollars)(Restated -note 2 (f))Operating loss carryforwards
    
    $
    90,193
    
    
    $
    17,676Other provisions
    
    
    7,723
    
    
    
    8,384Fixed assets
    
    
    (149,004
    )
    
    
    (147,080
    )Other assets
    
    
    (11,340
    )
    
    
    (5,837
    )Net future income tax liability
    
    $
    (62,428
    )
    
    $
    (126,857
    )Presented as follows:Future income tax assets:Current
    
    $
    76,607
    
    
    $
    24,728Long-term
    
    
    36,713
    
    
    
    3,358113,320
    
    
    
    28,086Future income tax liability:Long-term
    
    
    (175,748
    )
    
    
    (154,943
    )Net future income tax liability
    
    $
    (62,428
    )
    
    $
    (126,857
    )
  F-24




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##### Table of Contents



VIDEOTRON LTD.
  6.
    
    Income taxes (continued):During the year ended December 31, 2004, the Company acquired from the parent company, income
tax assets of $62.0 million, of which $55.5 million was recorded as future income tax assets
and $6.5 million as income taxes receivable. The consideration payable to the parent company
amounted to $35.2 million. The difference of $26.8 million was credited to contributed
surplus.During the year ended December 31, 2005, the Company acquired from a company under common
control of the ultimate parent company income tax deductions of $0.7 million, of which $0.3
million is recorded as income taxes receivable and $0.4 million as future tax assets. The
consideration payable to this company under common control amounts to $0.7 million. This
transaction allowed the Company to realize a gain of $0.023 million which has been credited to
contributed surplus.During the year ended December 31, 2006, the Company acquired from a company under common
control of the ultimate parent company income tax deductions of $0.3 million, of which $0.2
million is recorded as income taxes receivable and $0.05 million as future income tax assets.
The consideration payable to this company under common control amounts to $0.3 million. This
transaction allowed the Company to realize a gain of $0.022 million which has been credited to
contributed surplus.As at December 31, 2006, the Company had net operating loss carryforwards for income tax
purposes available to reduce future federal and provincial taxable income of approximately
$52.9 million and $59.7 million which expire as follows:
 Federal
    
    
    Provincial(in thousands of Canadian dollars)2007
    
    $
    14,891
    
    
    $
    16,1432008
    
    
    
    
    
    
    2009
    
    
    
    
    
    
    2010
    
    
    560
    
    
    
    5602014
    
    
    36,248
    
    
    
    41,2732015
    
    
    290
    
    
    
    8042026
    
    
    952
    
    
    
    952$
    52,941
    
    
    $
    59,732
 F-25




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##### Table of Contents



VIDEOTRON LTD.
  7.
    
    Accounts receivable:
 2005
    
    
    2006(in thousands of Canadian dollars)(Restated -note 2 (f))Trade
    
    $
    121,770
    
    
    $
    145,518Interest receivable on swaps
    
    
    6,375
    
    
    
    4,908Allowance for doubtful accounts
    
    
    (11,051
    )
    
    
    (10,841
    )$
    117,094
    
    
    $
    139,585
  8.
    
    Inventories:
 2005
    
    
    2006(in thousands of Canadian dollars)(Restated -note 2 (f))Subscribers equipment
    
    $
    15,541
    
    
    $
    23,345Video store materials
    
    
    5,469
    
    
    
    5,524Other supplies and spare parts
    
    
    8,355
    
    
    
    10,582$
    29,365
    
    
    $
    39,451
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##### Table of Contents



VIDEOTRON LTD.
   9.
    
    Fixed assets:
 2005Accumulated
    
    
    Net bookCost
    
    
    depreciation
    
    
    value(in thousands of Canadian dollars)(Restated - note 2 (f))Receiving and distribution networks
    
    $
    2,041,121
    
    
    $
    1,055,707
    
    
    $
    985,414Furniture and equipment
    
    
    331,144
    
    
    
    245,540
    
    
    
    85,604Terminals and operating system
    
    
    128,161
    
    
    
    76,718
    
    
    
    51,443Buildings
    
    
    37,880
    
    
    
    14,391
    
    
    
    23,489Coding and transmission material
    
    
    7,647
    
    
    
    4,578
    
    
    
    3,069Land
    
    
    2,799
    
    
    
    
    
    
    
    2,799$
    2,548,752
    
    
    $
    1,396,934
    
    
    $
    1,151,818
 2006Accumulated
    
    
    Net bookCost
    
    
    depreciation
    
    
    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
    
    
    
    72,195Buildings
    
    
    45,342
    
    
    
    15,649
    
    
    
    29,693Coding and transmission material
    
    
    8,047
    
    
    
    2,695
    
    
    
    5,352Land
    
    
    2,840
    
    
    
    
    
    
    
    2,840$
    2,846,784
    
    
    $
    1,557,355
    
    
    $
    1,289,429
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##### Table of Contents



VIDEOTRON LTD.
   10.
    
    Other assets:
 2005
        
    2006(in thousands of Canadian dollars)(Restated -note 2 (f))Deferred financing costs (i)
    
    $
    16,630
    
    
    $
    14,499Employee future benefit costs (note 3)
    
    
    3,946
    
    
    
    3,113Development and pre-operating costs (ii)
    
    
    2,784
    
    
    
    4,227Deferred connection fees
    
    
    15,530
    
    
    
    18,201Video rental inventory
    
    
    3,371
    
    
    
    3,739Easements at cost (with indefinite life)
    
    
    994
    
    
    
    994Other
    
    
    594
    
    
    
    509$
    43,849
    
    
    $
    45,282
 (i)
    
    Net of accumulated amortization of $3.1 million in 2005 and $5.0 million in 2006.(ii)
    
    Net of accumulated amortization of $0.9 million in 2005 and $2.2 million in 2006.
 11.
    
    Accounts payable and accrued liabilities:
 2005
    
    
    2006(in thousands of Canadian dollars)(Restated -note 2 (f))Trade accounts payable and accruals
    
    $
    154,145
    
    
    $
    196,274Employees salaries and dues
    
    
    33,418
    
    
    
    37,884Government sales tax
    
    
    14,067
    
    
    
    9,084Interest
    
    
    26,278
    
    
    
    24,956$
    227,908
    
    
    $
    268,198
 12.
    
    Additional amount payable:The value of the additional amount payable resulting from the repurchase of redeemable
preferred shares in 2003, fluctuated based on the market value of the parent companys common
shares. Until the parent company is listed on a stock exchange, the value of the additional
amount payable is based on a formula established in the agreement. At the date of the
transaction, both parties had agreed to an initial value of $70.0 million. As at December 31,
2005, the additional amount payable was valued at $111.5 million. Change in the amount payable
is recorded as a financial expense in the statement of operations.
 F-28




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##### Table of Contents



VIDEOTRON LTD.
   12.
    
    Additional amount payable (continued):On June 30, 2006, the additional amount payable of $108.3 million was transferred to the parent
company in exchange of a cash consideration of $111.5 million. The excess of the consideration
paid in the amount of $3.3 million was charged to retained earnings.13.
    
    Long-term debt:
 2005
    
    
    2006(in thousands of Canadian dollars)Bank facility (a):Revolving credit
    
    $
    
    
    
    $
    49,000Senior Notes (b)
    
    
    971,697
    
    
    
    972,170Subordinated loan  Quebecor Media Inc. (c)
    
    
    150,000
    
    
    
    Long-term portion of the long-term debt
    
    $
    1,121,697
    
    
    $
    1,021,170
 (a)
    
    Bank facility:Bank credit facility, bearing interest at Bankers Acceptances and Canadian prime rates,
plus, in each case, a margin depending upon Videotron Ltd. leverage ratio, is secured by a
first ranking hypothec on the universality of all tangible and intangible assets, current
and future, of Videotron Ltd. and its subsidiaries.The credit facilities contain usual covenants such as maintaining certain financial ratios
and certain restrictions as to the payment of dividends and acquisitions and disposals of
assets. The unused amount under the revolving facility is $401.0 million as at December
31, 2006 and was $450.0 million as at December 31, 2005.On November 19, 2004, concurrently with the issuance of additional Senior Notes, the
term-loan C, having a balance of $318.1 million, was repaid in full and the revolving
credit facility was increased from $100.0 million to $450.0 million with an extended
maturity date to November 2009.(b)
    
    Senior Notes:
 (i)
    
    On October 8, 2003, the Company issued US$335.0 million of aggregate
principal amount of Senior Notes at a discount rate of 99.0806% for net proceeds of
US$331.9 million, before issuance fees of US$5.7 million.On November 19, 2004, the Company issued an additional US$315.0 million of aggregate
principal amount of Senior Notes at a premium of 5.0% for total proceeds of US$330.8
million, before issuance fees of US$4.1 million.
 F-29




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##### Table of Contents



VIDEOTRON LTD.
   
 13.
    
    Long-term debt (continued):
 (b)
    
    Senior Notes:
 (i)
    
    (continued):These Notes bear interest at a rate of 6.875% payable every six months on January 15
and July 15, and mature on January 15, 2014. These Notes contain certain restrictions
for Videotron Ltd., including limitations on its ability to incur additional
indebtedness, and are unsecured. The Company has fully hedged the foreign currency
risk associated with these Senior Notes by using cross-currency interest rate swaps
under which all payments were set in Canadian dollars. These Notes will be redeemable,
in whole or in part, at any time on or after January 15, 2009, with a premium
decreasing from 3.438% on January 15, 2009 to nil on January 15, 2012.(ii)
    
    On September 16, 2005, the Company issued US$175.0 million of aggregate
principal amount of Senior Notes at a discount rate of 99.5% for net proceeds of
US$174.1 million, before issuance fees of $3.7 million. These Notes bear interest at
a rate of 6.375% payable every six months on December 15 and June 15, and mature on
December 15, 2015. The Notes contain certain restrictions for Videotron Ltd.,
including limitations on its ability to incur additional indebtedness, and are
unsecured. The 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 will be redeemable, in whole or in part, at any
time on or after December 15, 2010, with a premium decreasing from 3.188% on December
15, 2010 to nil on December 15, 2013.
 (c)
    
    Subordinated loan  Quebecor Media Inc.: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.(d)
    
    Senior Secured First Priority Notes:On July 15, 2005, the Company repurchased the aggregate principal amount of the Senior
Secured First Priority Notes of US$75.6 million of its subsidiary, CF Cable TV Inc., which
bore interest at 9.125%. The gain on settlement of long-term debt included the write-off
of the unamortized premium of $0.8 million, net of deferred financing costs amounting to
$0.5 million. Also, an amount of $7.4 million was paid as settlement of the foreign
exchange forward contracts related to these Notes.
 F-30




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##### Table of Contents



VIDEOTRON LTD.
   13.
    
    Long-term debt (continued):
 (d)
    
    Senior Secured First Priority Notes (continued):
 Minimum principal payments on long-term debt in each of the next five years and thereafter are
as follows:
 (in thousands of Canadian dollars)2007
    
    $
    2008
    
    
    2009
    
    
    49,0002010
    
    
    2011 and thereafter
    
    
    972,170
 14.
    
    Share capital:Previously authorized:
 A limited number of preferred shares, without par value, ranking prior to the common shares
with regard to payment of dividends and repayment of capital, without voting rights,
issuable in Series. The following Series were designated:
 1,000 preferred shares, Series A, carrying the rights and restrictions attached to the
class as well as a fixed annual non-cumulative preferred dividend of 10% and redeemable
at the holders option1,000 preferred shares, Series B, carrying the rights and restrictions attached to the
class as well as a fixed annual non-cumulative preferred dividend of 9% and redeemable
at the holders option100 preferred shares, Series C, carrying the rights and restrictions attached to the
class as well as a fixed monthly non-cumulative preferred dividend at a rate equal to
the prime rate of the Companys lead banker less 0.75% and redeemable at the holders
option100 preferred shares, Series D, carrying the rights and restrictions attached to the
class as well as a fixed monthly non-cumulative preferred dividend of 1%, computed on
the redemption price of the preferred shares10 preferred shares, Series E, carrying the rights and restrictions attached to the
class as well as a fixed annual non-cumulative preferred cash dividend of 4%,
retractable at the holders option10 preferred shares, Series F, carrying the rights and restrictions attached to the
class as well as a fixed annual non-cumulative preferred cash dividend of 4%,
retractable at the holders option
 F-31




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##### Table of Contents



VIDEOTRON LTD.
   
 14.
    
    Share capital (continued):
 Previously authorized (continued):
 Unlimited preferred shares, Series G, carrying the rights and restrictions attached to the
class as well as a fixed annual cumulative preferred cash dividend of 11.25%, retractable
and redeemableAn unlimited number of common shares, without par value, voting and participating
 On January 1, 2006, following the amalgamation with Videotron Telecom Ltd. and on July 1, 2006,
following the amalgamation with 9101-0827 Québec Inc., the Company modified its articles as
follows:New authorized share capital:
 An unlimited number of common shares, without par value, voting and participatingAn unlimited number of preferred shares, Series B, Series C, Series D, Series E and Series
F, without par value, ranking prior to the common shares with regard to payment of
dividends and repayment of capital, non-voting, non-participating, a fixed monthly
non-cumulative dividend of 1%, retractable and redeemableAn unlimited number of preferred shares, Series G, ranking prior to all other shares with
regard to payment of dividends and repayment of capital, non-voting, non-participating
carrying the rights and restrictions attached to the class as well as a fixed annual
cumulative preferred dividend of 11.25%, retractable and redeemable
 2005
    
    
    2006Retractable
    
    
    
    
    
    
    RetractableCommon
    
    
    preferred
    
    
    Common
    
    
    preferredshares
    
    
    shares
    
    
    shares
    
    
    shares(Restated - see note 2(f))Issued and paid:2,515,276 common
shares, Series A
(2005 - 68,690,189) (i)
    
    $
    342,940
    
    
    $
    
    
    
    $
    345,727
    
    
    $
    Nil preferred shares,
Series B (2005 -
2 Class C shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,000 preferred
shares, Series G
(170,000 as of
December 31, 2005)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    342,940
    
    
    $
    
    
    
    $
    345,727
    
    
    $
    
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VIDEOTRON LTD.
   14.
    
    Share capital (continued):
 (i)
    
    The following table summarizes the impacts of the two amalgamations on the Companys
share capital as at December 31, 2005:
 Videotron
    
    
    9101-0827
    
    
    TotalVideotron Ltd.
    
    
    Telecom Ltd.
    
    
    Quebec inc.
    
    
    restatedNumber
Common shares
    
    
    11,174,813
    
    
    
    2,515,276
    
    
    
    55,000,100
    
    
    
    68,690,189$(in thousands of
Canadian dollars)
Common shares
    
    $
    173,236
    
    
    $
    160,357
    
    
    $
    9,347
    
    
    $
    342,940
 On January 16, 2004 and September 30, 2004, Videotron Ltd. issued 88,000 and 45,000
preferred shares Series G, respectively, to Groupe Divertissement SuperClub Inc., the
wholly-owned subsidiary of Le Superclub Videotron Ltée, for a total cash consideration of $88.0
million and $45.0 million, respectively. Series G shares are eliminated upon consolidation.On March 26, 2004, the Company redeemed the Series F preferred shares, for an amount of $3.7
million. The excess of the consideration paid over the preferred shares retractable value, in
the amount of $1.7 million, has been charged to deficit.On April 18, 2005, Videotron Ltd. issued 57,000 preferred shares, Series G, to Groupe de
Divertissement Superclub Inc., a wholly-owned subsidiary of Le Superclub Vidéotron Ltée, for a
total cash consideration of $57.0 million. On the same date, Videotron Ltd. redeemed 20,000
preferred shares, Series G, from Groupe de Divertissement Superclub Inc. for a total cash
consideration of $20.0 million. Series G shares are eliminated upon consolidation.On December 14, 2005, 9101-0827 Québec Inc. reduced the paid-up capital of its common shares by
$45.7 million.On January 1, 2006, 2,657,400,000 common shares were issued by 9101-0827 Québec Inc. to its
parent company in exchange of the investment of 11,174,813 common shares of Videotron Ltd.On January 1, 2006, as a result of the merger of Videotron Ltd. and Videotron Telecom Ltd., the
previously issued common shares were converted into 2,515,276 common shares of the new
authorized share capital; the 2 Class C shares of Videotron Telecom Ltd. previously issued were
converted into 2 preferred shares, Series B of the new authorized share capital; the 170,000
preferred shares, Series G of Videotron Ltd. were converted into 170,000 preferred shares,
Series G of the new authorized share capital.
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##### Table of Contents



VIDEOTRON LTD.
   14.
    
    Share capital (continued):On January 17, 2006, March 6, 2006, April 17, 2006 and May 15, 2006, the Company reduced the
paid-up capital of the common shares, Series A, by $83.7 million, $10.0 million, $10.0 million
and $5.0 million, respectively. Those amounts have been paid to the parent company.On June 30, 2006, Videotron Ltd. redeemed 105,000 preferred shares, Series G, from Groupe de
Divertissement SuperClub Inc. for a total cash consideration of $105.0 million.On June 30, 2006, 9101-0827 Québec inc. issued 103,274 common shares to its parent company for
a total consideration of $111.5 million.On July 1, 2006, as a result of the merger of Videotron Ltd. and 9101-0827 Québec Inc., the
previously issued common shares were converted into 2,515,276 common shares of the new
authorized share capital; the 2 preferred shares, Series B of Videotron Ltd. were cancelled;
the 65,000 preferred shares, Series G were converted into 65,000 preferred shares, Series G of
the new authorized share capital.The preferred shares, Series G are owned by Groupe de Divertissement SuperClub Inc., a
wholly-owned subsidiary of the Company, and are eliminated upon consolidation.
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##### Table of Contents



VIDEOTRON LTD.
   15.
    
    Stock option plan:Under a stock option plan established by the Company, 6,185,714 common shares of the parent
company were set aside for officers, senior employees, directors and other key employees of the
Company and its subsidiaries. Each option may be exercised within a maximum period of 10 years
following the date of grant at an exercise price not lower than, as the case may be, the fair
market value of the common shares of the parent company, at the date of grant, as determined by
the parent companys Board of Directors (if the common shares of the parent company are not
listed on a stock exchange at the time of the grant) or the five-day weighted average closing
price ending on the day preceding the date of grant of the common shares of the parent company
on the stock exchange where such shares are listed at the time of grant. Unless authorized by
the parent companys Compensation Committee in the context of a change of control, no options
may be exercised by an optionee if the shares of the parent company have not been listed on a
recognized stock exchange. Should the common shares of the parent company not be so listed on
March 1, 2008, optionees may exercise, from March 1 to March 30, from June 1 to June 29, from
September 1 to September 29 and from December 1 to December 30 of each year, starting March 1,
2008, their right to receive an amount in cash equal to the difference between the fair market
value, as determined by the parent companys Board of Directors, and the exercise price of
their vested options or, subject to certain stated conditions,common shares of the parent
company.Except under specific circumstances, and unless the Compensation Committee decides
otherwise, options vest over a five-year period in accordance with one of the following vesting
schedules as determined by the Compensation Committee at the time of grant: (i) equally over
five years with the first 20% vesting on the first anniversary of the date of the grant; (ii)
equally over four years with the first 25% vesting on the second anniversary of the date of
grant; and (iii) equally over three years with the first 33% vesting on the third anniversary
of the date of grant.
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##### Table of Contents



VIDEOTRON LTD.
   15.
    
    Stock option plan:The following table gives summary information on outstanding options granted by the parent
company to the employees of the Company as at December 31, 2005 and 2006:
 2005
    
    
    2006Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    averageexercise
    
    
    
    
    
    
    exerciseOptions
    
    
    price
    
    
    Options
    
    
    price(Restated - see note 2 (f))Balance at beginning of year
    
    
    562,067
    
    
    $
    18.69
    
    
    
    588,257
    
    
    $
    19.34Granted
    
    
    42,835
    
    
    
    28.08
    
    
    
    291,782
    
    
    
    31.97Exercised
    
    
    
    
    
    
    
    
    
    
    (8,887
    )
    
    
    29.48Transferred and cancelled
    
    
    (16,645
    )
    
    
    18.38
    
    
    
    (9,385
    )
    
    
    27.17Balance at end of year
    
    
    588,257
    
    
    $
    19.34
    
    
    
    861,767
    
    
    $
    23.43Vested options at end of year
    
    
    222,111
    
    
    $
    18.36
    
    
    
    378,451
    
    
    $
    18.69
 The following table gives summary information on outstanding options as at December 31, 2006:
 Outstanding options
    
    
    Vested optionsWeighted average
    
    
    
    
    
    
    Weighted averageExercise price
    
    Number
    
    
    years to maturity
    
    
    Number
    
    
    exercise price$15.19
    
    
    28,637
    
    
    6.41 years
    
    
    17,182
    
    
    $
    15.1916.17
    
    
    172,229
    
    
    5.27 years
    
    
    130,517
    
    
    
    16.1719.46
    
    
    240,749
    
    
    6.59 years
    
    
    160,037
    
    
    
    19.4621.42
    
    
    8,869
    
    
    6.92 years
    
    
    5,322
    
    
    
    21.4221.75
    
    
    17,470
    
    
    7.20 years
    
    
    6,988
    
    
    
    21.7521.77
    
    
    62,011
    
    
    5.23 years
    
    
    46,509
    
    
    
    21.7722.98
    
    
    11,752
    
    
    7.69 years
    
    
    4,701
    
    
    
    22.9827.86
    
    
    35,979
    
    
    8.12 years
    
    
    7,195
    
    
    
    27.8630.47
    
    
    63,579
    
    
    9.12 years
    
    
    
    
    
    
    31.92
    
    
    140,977
    
    
    9.59 years
    
    
    
    
    
    
    33.41
    
    
    79,515
    
    
    9.78 years
    
    
    
    
    
    
    $15.19 to $33.41
    
    
    861,767
    
    
    7.29 years
    
    
    378,451
    
    
    $
    18.69
 For the year ended December 31, 2006, a charge of $5.0 million related to the plan was
recorded in the statement of operations ($2.0 million (restated) for 2005).
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VIDEOTRON LTD.
   16.
    
    Financial instruments:
 (a)
    
    Fair value:The carrying amount of cash and cash equivalents, temporary investments, accounts
receivable, issued and outstanding cheques, 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.As at December 31, the estimated fair values of long-term debt and derivative financial
instruments are as follows:
 2005
    
    
    2006Book
    
    
    Fair
    
    
    Book
    
    
    Fairvalue
    
    
    value
    
    
    value
    
    
    value(in thousands of Canadian dollars)Liabilities:Financial liabilities:Long-term debt
    
    $
    1,121,697
    
    
    $
    1,117,398
    
    
    $
    1,021,170
    
    
    $
    1,010,601Derivative financial
instruments:Interest rate swaps
    
    
    (935
    )(i)
    
    
    (935
    )
    
    
    21
    
    
    
    29Assets (liabilities):Cross currency interest
rate swaps
    
    
    (73,835
    )
    
    
    (135,048
    )
    
    
    (71,828
    )
    
    
    (141,062
    )Forward exchange
    
    
    
    
    
    
    (158
    )
    
    
    
    
    
    
    2,083
 (i)
    
    Including an amount of $0.9 million in 2005 and nil in 2006 classified with
interest payable in the balance sheet.
 The fair value of the financial liabilities are estimated based on discounted cash flows
using year-end market yields or market value of similar instruments with the same maturity.
The fair value of the derivative financial instruments is estimated using year-end market
rates, and reflects the amount the Company would receive or pay if the instruments were
closed out at those dates.(b)
    
    Management of interest rate risk and foreign exchange risk:
 (i)
    
    Interest-rate swaps:The Company entered into interest rate swaps to manage its interest rate exposure and
has committed to exchange, at specific intervals, the difference between the fixed and
floating interest rates calculated by reference to the notional amounts.
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VIDEOTRON LTD.
   
 16.
    
    Financial instruments (continued):
 (b)
    
    Management of interest rate risk and foreign exchange risk (continued):
 (i)
    
    Interest-rate swaps (continued):The amounts of outstanding contracts as at December 31, 2006 by the Company are shown
in the table below:
 Notional
    
    
    
    Pay/
    
    
    Fixed
    
    FloatingMaturity
    
    amount
    
    
    
    receive
    
    
    rate
    
    rateSeptember 2007
    
    $
    5.0
    
    
    Pay fixed/receive floating
    
    
    3.75
    %
    
    Bankers
acceptance3 months
 (ii)
    
    Cross-currency interest rate swaps:
 Exchange rateAnnual
    
    Annual
    

    
    of interest andeffective

    
    nominal
    
    
    capital paymentsPeriod
    
    Notional

    interest
    
    interest
    
    
    per CA dollar forcovered
    
    amount

    rate
    
    rate
    
    
    one US dollarSenior 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
    
    
    
    
    
    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
    
    
    
    
    
    2005 to 2015
    
    
    US$175.0
    
    5.98
    %
    
    
    6.375
    %
    
    
    1.1781
 During the year ended December 31, 2006, the Company concluded forward exchange
contracts to hedge the foreign exchange fluctuations relating to its 2007 customers
equipment and other purchases by fixing the US dollar/Canadian dollar exchange rate at
1.1152 on an amount of $50.4 million.
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##### Table of Contents



VIDEOTRON LTD.
   
 16.
    
    Financial instruments (continued):
 (c)
    
    Other disclosures:
 (i)
    
    The credit risk of the financial instruments arises from the possibility that
the counterparties to the agreements or contracts may default on their obligations
under the agreements. In order to minimize this risk, the Companys general policy is
to deal only with counterparties with a Standard & Poors rating (or the equivalent)
of at least A -.(ii)
    
    The Company is exposed to a credit risk towards its customers. However,
credit risk concentration is minimized because of the large number of customers.
 17.
    
    Commitments and guarantees:
 (a)
    
    Under the terms of operating leases, the Company is committed to make the following
minimum annual lease payments over the next years:
 (in thousands of Canadian dollars)Minimum
    
    
    Leases
    
    
    Minimum netannual lease
    
    
    assumed by
    
    
    annual leasepayments
    
    
    franchisees (b)
    
    
    payments2007
    
    $
    35,244
    
    
    $
    1,763
    
    
    $
    33,4812008
    
    
    18,351
    
    
    
    1,540
    
    
    
    16,8112009
    
    
    12,331
    
    
    
    1,340
    
    
    
    10,9912010
    
    
    6,780
    
    
    
    1,027
    
    
    
    5,7532011
    
    
    3,503
    
    
    
    534
    
    
    
    2,9692012 and thereafter
    
    
    8,267
    
    
    
    1,535
    
    
    
    6,732
 The operating lease expense amounted to $16.8 million (restated) in 2004, $21.3 million
(restated) in 2005 and $21.0 million in 2006.(b)
    
    Management fee:In 2002, the Company began paying an annual management fee to Quebecor Media for services
rendered to the Company pursuant to a five-year management services agreement. These
services include 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 $8.4 million (restated) in 2004, $13.3 million (restated) in
2005 and $23.4 million in 2006. The agreement provides for an annual management fee to be
agreed upon for the year 2007. In addition, Quebecor Media is entitled to the
reimbursement of out-of-pocket expenses incurred in connection with the services provided
under the agreement.
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VIDEOTRON LTD.
   
 17.
    
    Commitments and guarantees (continued):
 (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, 2006, the maximum exposure
in respect of these guarantees is $5.7 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 2015. The Company must, under certain
conditions, compensate the lessor should the franchisee default. As at December 31, 2006,
the maximum exposure in respect of these guarantees is $7.7 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.Guarantees related to the Senior Notes:Under the terms of the indentures governing the 2014 and 2015 Senior Notes, the Company is
committed to pay any amount of withholding taxes that could eventually be levied by any
Canadian Taxing Authority on payments made to the lenders, so that the amounts the lenders
would receive are not less than amounts receivable if no taxes are levied. The amount of
such guarantee is not limited and it is not possible for the Company to establish a maximum
amount of the guarantee as it is dependent exclusively on future actions, if any, by the
Taxation Authorities. Although no recourse exists for such liability, the Company has the
right to redeem such long-term debt at their face value, if such taxes were levied by the
Canadian Taxing Authorities, thereby terminating the guarantee.
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##### Table of Contents



VIDEOTRON LTD.
   
 18.
    
    Supplemental cash flow information:
 2004
    
    
    2005
    
    
    2006(in thousands of Canadian dollars)(restated - note 2 (f))Non-cash financing and investing activities:(i) Purchase of fixed assets financed
by accounts payable and accrued
liabilities
    
    $
    9,574
    
    
    $
    16,569
    
    
    $
    20,976(ii) Deferred charge expenditures financed
by accounts payable and accrued
liabilities and by affiliated companies
    
    
    1,209
    
    
    
    
    
    
    
    
 19.
    
    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:
 2004
    
    
    2005
    
    
    2006(in thousands of Canadian dollars)(restated - note 2 (f))Parent company:Operating revenue
    
    $
    72
    
    
    $
    103
    
    
    $
    150Operating and administrative expenses
    
    
    3,053
    
    
    
    4,212
    
    
    
    4,110Operating and administrative expenses
recovered
    
    
    (159
    )
    
    
    (155
    )
    
    
    (23
    )Companies under common control:Operating revenue
    
    
    16,768
    
    
    
    28,673
    
    
    
    25,146Direct costs
    
    
    9,769
    
    
    
    12,181
    
    
    
    15,565Operating and administrative expenses
    
    
    28,241
    
    
    
    41,288
    
    
    
    43,819Acquisition of fixed assets
    
    
    3,268
    
    
    
    
    
    
    
    Directors of the parent company:Operating and administrative expenses
    
    
    502
    
    
    
    768
    
    
    
    682Acquisition of deferred financing costs
    
    
    91
    
    
    
    85
    
    
    
    
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##### Table of Contents



VIDEOTRON LTD.
   19.
    
    Related party transactions (continued):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.Under the affiliation agreement, the Company paid fees to Archambault of $3.7 million, $6.7
million and $9.0 million and received fees from Archambault of $0.5 million, $1.0 million and
$1.9 million for the years 2004, 2005 and 2006, 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.Under this seven-year information technology management services agreement, the Company is to
provide infrastructure services in support of hosting server-based applications and services
related to computer operations, production control, technical support, network support,
regional support, desktop support for certain sites, help-desk and corporate assistance,
firewall and security support, business continuity and disaster recovery and voice and video
support. The monthly revenues for such services are approximately $1.1 million, for an annual
total of approximately $12.8 million. The term of the agreement is through June 30, 2011.20.
    
    Contingencies:On March 13, 2002, a legal action was initiated by the shareholders of a cable company against
Videotron Ltd. They contend that Videotron Ltd. did not honor its commitment related to a
stock purchase agreement signed in August 2000. The plaintiffs are requesting compensations
totalling $26.0 million. Management of the Company claims that the suit is not justified and
intends to defend vigorously its case in Court.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, 2006 cannot be determined
with certainty, management believes that their outcome will not have a material adverse impact
on its operating results or financial position.
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##### Table of Contents



VIDEOTRON LTD.
   21.
    
    Comparative figures:Certain comparative figures have been reclassified from statements previously presented to
conform to the presentation adopted in the current period.22.
    
    Rates subject to CRTC regulations:The Companys operations are subject to rate regulations on certain services based on
geographical regions, mainly by the Broadcasting Act (Canada)and the Telecommunications Act
(Canada), both managed by the Canadian Radio-Television and Telecommunication Commissions
(CRTC). Accordingly, the Companys operating revenues could be affected by changes in
regulations or decisions made by this regulating body. The Company does not select accounting
policies that would differ from generally accepted accounting principles, even though the
Company is subject to these regulations.23.
    
    Subsequent event:On January 3, 2007, the Company contracted a subordinated loan of $1.0 billion 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 3, 2022. On the same day, the Company invested the whole
proceeds of $1.0 billion into 1,000,000 preferred shares, Series B, of 9101-0835 Québec Inc., a
subsidiary of Quebecor Média Inc. These shares carry the right to receive an annual dividend
of 10.85% payable semi-annually.24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States:The consolidated financial statements have been prepared in accordance with generally accepted
accounting principles (GAAP) in Canada which are different in some respects from those in the
United States (US), as described below. The following tables set forth the impact of
significant differences between Canadian GAAP and US GAAP on the Companys consolidated
financial statements, including disclosures, that are required under US GAAP.
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##### Table of Contents



VIDEOTRON LTD.
   24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States:Consolidated Statements of Operations (continued):
 2004
    
    
    2005
    
    
    2006(in thousands of Canadian dollars)(Restated - note 2 (f))Net income for the year based
on Canadian GAAP
    
    $
    111,697
    
    
    $
    102,691
    
    
    $
    183,691Adjustments:Push-down basis of accounting (i)
    
    
    (18,108
    )
    
    
    (7,096
    )
    
    
    (6,253
    )Development and pre-operating costs (iii)
    
    
    (721
    )
    
    
    (795
    )
    
    
    (1,454
    )Accounting for derivative instruments and
hedging activities (iv)
    
    
    12,266
    
    
    
    7,542
    
    
    
    983Share-based payment (viii)
    
    
    
    
    
    
    
    
    
    
    (900
    )Income taxes (v)
    
    
    183
    
    
    
    2,160
    
    
    
    477Net income for the year based
on US GAAP
    
    
    105,317
    
    
    
    104,502
    
    
    
    176,544Other comprehensive gain (loss) (vi):Pension and postretirement benefits (vii)
    
    
    835
    
    
    
    (61
    )
    
    
    153Accounting for derivative instruments
and hedging activities (iv)
    
    
    (14,473
    )
    
    
    (18,271
    )
    
    
    1,963Income taxes (v)
    
    
    
    
    
    
    10,882
    
    
    
    (1,704
    )Comprehensive income for the year
based on US GAAP
    
    $
    91,679
    
    
    $
    97,052
    
    
    $
    176,956Accumulated other comprehensive loss
at beginning of year
    
    $
    (1,770
    )
    
    $
    (15,408
    )
    
    $
    (22,858
    )Adjustments (vii)
    
    
    
    
    
    
    
    
    
    
    (3,160
    )Changes in the year
    
    
    (13,638
    )
    
    
    (7,450
    )
    
    
    412Accumulated other comprehensive loss at
end of year
    
    $
    (15,408
    )
    
    $
    (22,858
    )
    
    $
    (25,606
    )Pension and postretirement benefits (vii)
    
    $
    (92
    )
    
    $
    (153
    )
    
    $
    (4,493
    )Accounting for derivative instruments
and hedging activities (iv)
    
    
    (15,316
    )
    
    
    (33,587
    )
    
    
    (31,624
    )Income taxes (v)
    
    
    
    
    
    
    10,882
    
    
    
    10,511Accumulated other comprehensive loss at
end of year
    
    $
    (15,408
    )
    
    $
    (22,858
    )
    
    $
    (25,606
    )
 F-44




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##### Table of Contents



VIDEOTRON LTD.
   24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Shareholders Equity
 2005
    
    
    2006(in thousands of Canadian dollars)(Restated -note 2 (f))Shareholders equity (deficit) based on Canadian GAAP
    
    $
    76,363
    
    
    $
    249,581Cumulative adjustments:Push-down basis of accounting (i)
    
    
    4,499,157
    
    
    
    4,492,904Goodwill impairment (ii)
    
    
    (2,274,627
    )
    
    
    (2,274,627
    )Development and pre-operating costs (iii)
    
    
    (2,692
    )
    
    
    (4,146
    )Accounting for derivative instruments and
hedging activities (iv)
    
    
    (26,288
    )
    
    
    (23,342
    )Share-based payments (viii)
    
    
    
    
    
    
    (900
    )Income taxes (v)
    
    
    13,630
    
    
    
    13,736Pension and postretirement benefits (vii)
    
    
    (153
    )
    
    
    (4,493
    )Shareholders equity based on US GAAP
    
    $
    2,285,390
    
    
    $
    2,448,713
 (i)
    
    Push-down basis of accounting (restated  see note 2 (f)):The basis of accounting used in the preparation of this reconciliation of Canadian GAAP to
US 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;
 F-45




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##### Table of Contents



VIDEOTRON LTD.
   
 24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Shareholders Equity (continued)
 (i)
    
    Push-down basis of accounting (continued):
 (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 US GAAP purposes has been increased by $16.9 million.
 (ii)
    
    Goodwill impairment:The accounting requirements for goodwill under Canadian GAAP and US 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 US 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.(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 US GAAP, these costs are
expensed as incurred.
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##### Table of Contents



VIDEOTRON LTD.
   
 24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Shareholders Equity (continued)
 (iv)
    
    Accounting for derivative instruments and hedging activities:The Company adopted, at the beginning of 2001, Statement of Financial Accounting Standards
No. 133 Accounting for Derivative Instruments and Hedging Activities as amended (SFAS
133), which establishes accounting and reporting standards for derivative instruments and
hedging activities and requires that all derivatives be recorded as either assets or
liabilities in the balance sheet at fair value with changes in fair value recorded in the
statement of operations unless the instrument is effective and qualifies for hedge
accounting. Under Canadian GAAP, derivative financial instruments are accounted for on an
accrual basis. Realized and unrealized gains and losses are deferred and recognized in
income in the same period and in the same financial statement category as the income or
expense arising from the corresponding hedged position. Furthermore, under Canadian GAAP,
the change in foreign exchange rate on long-term foreign currency denominated instrument is
recorded either as an asset or liability when hedge accounting is used. Under US GAAP,
these changes are recorded in the statement of operations or other comprehensive income
based on whether a hedging relationship has been established which qualifies as a hedging
relationship under US GAAP.(v)
    
    Income taxes:This adjustment represents the tax impact of the US GAAP adjustments. Furthermore, under
Canadian GAAP, income taxes are measured using substantially enacted tax rates, while under
US GAAP measurement is based on enacted tax rates.(vi)
    
    Comprehensive income (loss):Comprehensive income is presented in accordance with FAS No. 130, Reporting Comprehensive
Income. This standard defines comprehensive income as all changes in equity other than
those resulting from investments by owners and distributions to owners. Other
comprehensive income consists of adjustments to shareholders equity related to the accrued
pension benefit liability, representing the excess of the accumulated pension benefit
obligation as compared to the fair value of plan assets and to changes in the derivative
fair values of contracts that are designated effective and qualify as cash flow hedges.
 F-47




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##### Table of Contents



VIDEOTRON LTD.
   
 24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Shareholders Equity (continued)
 (vii)
    
    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.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 under funded
positions or to recognize an additional minimum liability.(viii)
    
    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 asset 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.(ix)
    
    Operating income before the undernoted:US GAAP requires that depreciation and amortization and other items be included in the
determination of operating income and does not permit the disclosure of subtotals of the
amounts of operating income before these items. Canadian GAAP permits the subtotals of the
amounts of operating income before these items.
 F-48




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##### Table of Contents



VIDEOTRON LTD.
   
 24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Shareholders Equity (continued)
 (x)
    
    Consolidated statements of cash flows:The disclosure of a subtotal of the amount of funds provided by operations before changes
in non-cash operating working capital items in the consolidated statement of cash flows is
allowed by Canadian GAAP while it is not allowed by US GAAP.(xi)
    
    Guaranteed debt:The consolidated information below has been presented in accordance with the requirements
of the Securities and Exchange Commission for guarantor financial statements.The Companys Senior Notes due 2014 and 2015 described in note 13 (c) are guaranteed by
specific subsidiaries of the Company (the Subsidiary Guarantors). The accompanying
condensed consolidated financial information as at December 31, 2005 and 2006 and for the
years 2004, 2005 and 2006 has been prepared in accordance with US 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 is Société dÉdition et de Transcodage T.E. Ltée.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, Vidéotron (Régional) Ltée, a
wholly-owned subsidiary of CF Cable TV Inc., became also a guarantor of the senior notes of
Videotron Ltd.
 F-49




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##### Table of Contents



VIDEOTRON LTD.
   
 24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Statement of OperationsIn accordance with United States GAAPFor the year ended December 31, 2004
 Non-
    
    
    AdjustmentsVidéotron
    
    
    Subsidiary
    
    
    subsidiary
    
    
    andLtd.
    
    
    Guarantors
    
    

Guarantors
    
    

eliminations
    
    
    Consolidated(in thousands of Canadian dollars)(Restated - see note 2 (f))Revenues
    
    $
    505,577
    
    
    $
    282,872
    
    
    $
    168,315
    
    
    $
    (9,678
    )
    
    $
    947,086Direct cost
    
    
    168,180
    
    
    
    31,481
    
    
    
    56,755
    
    
    
    (261
    )
    
    
    256,155Operating and administrative
expenses
    
    
    161,201
    
    
    
    131,734
    
    
    
    45,203
    
    
    
    (9,417
    )
    
    
    328,721Depreciation and amortization
    
    
    118,315
    
    
    
    37,111
    
    
    
    20,317
    
    
    
    
    
    
    
    175,743Financial expenses
    
    
    12,074
    
    
    
    153,145
    
    
    
    27,364
    
    
    
    (1,200
    )
    
    
    191,383Dividend income from related
companies
    
    
    
    
    
    
    (121,824
    )
    
    
    (16,658
    )
    
    
    27,427
    
    
    
    (111,055
    )Other items
    
    
    1,930
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,930Income (loss) before the undernoted
    
    
    43,877
    
    
    
    51,225
    
    
    
    35,334
    
    
    
    (26,227
    )
    
    
    104,209Income taxes
    
    
    17,591
    
    
    
    (21,436
    )
    
    
    2,407
    
    
    
    230
    
    
    
    (1,208
    )26,286
    
    
    
    72,661
    
    
    
    32,927
    
    
    
    (26,457
    )
    
    
    105,417Share in the results of a company
subject to significant influence
    
    
    (10,628
    )
    
    
    
    
    
    
    (138
    )
    
    
    10,766
    
    
    
    Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    99
    
    
    
    100Net income (loss)
    
    $
    36,914
    
    
    $
    72,661
    
    
    $
    33,064
    
    
    $
    (37,322
    )
    
    $
    105,317
 F-50




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##### Table of Contents



VIDEOTRON LTD.
   24.
    
    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, 2004
 Non-
    
    
    AdjustmentsVidéotron
    
    
    Subsidiary
    
    
    subsidiary
    
    
    andLtd.
    
    
    Guarantors
    
    

Guarantors
    
    

eliminations
    
    
    Consolidated(in thousands of Canadian dollars)(Restated - see note 2 (f))Cash flows from operating activities:Net income (loss)
    
    $
    36,914
    
    
    $
    72,661
    
    
    $
    33,064
    
    
    $
    (37,322
    )
    
    $
    105,317Adjustments for the following items:Depreciation and amortization
    
    
    119,449
    
    
    
    40,451
    
    
    
    20,314
    
    
    
    
    
    
    
    180,214Future income taxes
    
    
    16,134
    
    
    
    (21,667
    )
    
    
    1,565
    
    
    
    230
    
    
    
    (3,738
    )Loss on disposal of fixed assets
    
    
    9,664
    
    
    
    439
    
    
    
    3,461
    
    
    
    
    
    
    
    13,564Loss on foreign currency translation
of long-term debt
    
    
    
    
    
    
    
    
    
    
    1,332
    
    
    
    (34
    )
    
    
    1,298Other
    
    
    (567
    )
    
    
    (83
    )
    
    
    1,415
    
    
    
    9,699
    
    
    
    10,464Net change in non-cash operating items
    
    
    (17,050
    )
    
    
    4,045
    
    
    
    33,740
    
    
    
    
    
    
    
    20,735164,544
    
    
    
    95,846
    
    
    
    94,891
    
    
    
    (27,427
    )
    
    
    327,854Cash flows from investing activities:Acquisition of fixed assets
    
    
    (92,265
    )
    
    
    (41,753
    )
    
    
    (24,098
    )
    
    
    13,663
    
    
    
    (144,453
    )Net change in other assets
    
    
    (1,002
    )
    
    
    (412
    )
    
    
    
    
    
    
    
    
    
    
    (1,414
    )Proceeds from disposal of fixed assets
    
    
    2,266
    
    
    
    13,829
    
    
    
    558
    
    
    
    (13,663
    )
    
    
    2,990Acquisition of video store assets
    
    
    
    
    
    
    (7,162
    )
    
    
    
    
    
    
    
    
    
    
    (7,162
    )Proceeds from disposal (acquisition)
of temporary investments
    
    
    40,755
    
    
    
    
    
    
    
    (220
    )
    
    
    
    
    
    
    40,535Acquisition of shares of affiliated
company
    
    
    
    
    
    
    (1,100,000
    )
    
    
    (165,000
    )
    
    
    165,000
    
    
    
    (1,100,000
    )Proceeds from disposal of shares
of affiliated company
    
    
    
    
    
    
    1,100,000
    
    
    
    165,000
    
    
    
    (165,000
    )
    
    
    1,100,000Other
    
    
    70,000
    
    
    
    
    
    
    
    (70,010
    )
    
    
    
    
    
    
    (10
    )19,754
    
    
    
    (35,498
    )
    
    
    (93,770
    )
    
    
    
    
    
    
    (109,514
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    (355,630
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (355,630
    )Issuance of long-term debt, net of
financing costs
    
    
    389,843
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389,843Increase in long-term intercompany
loan from affiliated company
    
    
    
    
    
    
    935,000
    
    
    
    165,000
    
    
    
    
    
    
    
    1,100,000Repayment of long-term intercompany
loan from affiliated company
    
    
    
    
    
    
    (935,000
    )
    
    
    (165,000
    )
    
    
    
    
    
    
    (1,100,000
    )Advance to parent company
    
    
    (40,893
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,893
    )Redemption of retractable preferred
shares
    
    
    (3,660
    )
    
    
    (165,000
    )
    
    
    
    
    
    
    165,000
    
    
    
    (3,660
    )Dividends
    
    
    (171,002
    )
    
    
    (61,658
    )
    
    
    
    
    
    
    27,427
    
    
    
    (205,233
    )Issuance of preferred shares
    
    
    
    
    
    
    165,000
    
    
    
    
    
    
    
    (165,000
    )
    
    
    Other
    
    
    311
    
    
    
    
    
    
    
    (390
    )
    
    
    
    
    
    
    (79
    )(181,031
    )
    
    
    (61,658
    )
    
    
    (390
    )
    
    
    27,427
    
    
    
    (215,652
    )Net increase (decrease) in cash
    
    
    3,267
    
    
    
    (1,310
    )
    
    
    731
    
    
    
    
    
    
    
    2,688Cash and cash equivalents, beginning
of year
    
    
    29,633
    
    
    
    (327
    )
    
    
    417
    
    
    
    
    
    
    
    29,723Cash and cash equivalents, end of year
    
    $
    32,900
    
    
    $
    (1,637
    )
    
    $
    1,148
    
    
    $
    
    
    
    $
    32,411
 F-51




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##### Table of Contents



VIDEOTRON LTD.
   24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada
and the United States (continued):Consolidated Statement of OperationsIn 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)(Restated - see note 2 (f))Revenues
    
    $
    855,709
    
    
    $
    227,393
    
    
    $
    4,886
    
    
    $
    (1,405
    )
    
    $
    1,086,583Direct cost
    
    
    216,431
    
    
    
    76,855
    
    
    
    
    
    
    
    (229
    )
    
    
    293,057Operating and administrative expenses
    
    
    305,125
    
    
    
    74,358
    
    
    
    3,432
    
    
    
    (1,174
    )
    
    
    381,741Depreciation and amortization
    
    
    154,333
    
    
    
    22,593
    
    
    
    587
    
    
    
    (98
    )
    
    
    177,415Financial expenses
    
    
    42,468
    
    
    
    25,490
    
    
    
    
    
    
    
    (1,401
    )
    
    
    66,557Dividend income from related companies
    
    
    
    
    
    
    (17,920
    )
    
    
    
    
    
    
    17,920
    
    
    
    Income (loss) before the undernoted
    
    
    137,352
    
    
    
    46,017
    
    
    
    867
    
    
    
    (16,423
    )
    
    
    167,813Income taxes
    
    
    52,955
    
    
    
    9,764
    
    
    
    221
    
    
    
    269
    
    
    
    63,20984,397
    
    
    
    36,253
    
    
    
    646
    
    
    
    (16,692
    )
    
    
    104,604Share in the results of a company
subject to significant influence
    
    
    (15,146
    )
    
    
    (142
    )
    
    
    
    
    
    
    15,288
    
    
    
    Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    102Net income (loss)
    
    $
    99,543
    
    
    $
    36,395
    
    
    $
    646
    
    
    $
    (32,082
    )
    
    $
    104,502
 F-52




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##### Table of Contents



VIDEOTRON LTD.
   24.
    
    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)(Restated - see note 2 (f))Cash flows from operating activities:Net income (loss)
    
    $
    99,543
    
    
    $
    36,395
    
    
    $
    646
    
    
    $
    (32,082
    )
    
    $
    104,502Adjustments for the following items:Depreciation and amortization
    
    
    161,215
    
    
    
    27,006
    
    
    
    587
    
    
    
    (98
    )
    
    
    188,710Future income taxes
    
    
    50,420
    
    
    
    9,454
    
    
    
    155
    
    
    
    269
    
    
    
    60,298Loss on foreign currency translation
of long-term debt
    
    
    80
    
    
    
    1,333
    
    
    
    
    
    
    
    
    
    
    
    1,413Other
    
    
    (51,589
    )
    
    
    581
    
    
    
    105
    
    
    
    13,990
    
    
    
    (36,913
    )Net change in non-cash operating
items
    
    
    102,821
    
    
    
    (34,640
    )
    
    
    (814
    )
    
    
    
    
    
    
    67,367362,490
    
    
    
    40,129
    
    
    
    679
    
    
    
    (17,921
    )
    
    
    385,377Cash flows from investing activities:Acquisition of fixed assets
    
    
    (189,647
    )
    
    
    (29,019
    )
    
    
    (1,199
    )
    
    
    
    
    
    
    (219,865
    )Net change in other assets
    
    
    (57
    )
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    (142
    )Proceeds from disposal of fixed assets
    
    
    947
    
    
    
    304
    
    
    
    
    
    
    
    
    
    
    
    1,251Payment of tax deductions to the
parent company
    
    
    (25,800
    )
    
    
    (9,400
    )
    
    
    
    
    
    
    
    
    
    
    (35,200
    )(Acquisition) disposal of
temporary investments
    
    
    (20,000
    )
    
    
    
    
    
    
    754
    
    
    
    
    
    
    
    (19,246
    )Dividends
    
    
    11,000
    
    
    
    (11,000
    )
    
    
    
    
    
    
    
    
    
    
    Cash transfer pursuant to the
liquidation of a subsidiary
    
    
    (533
    )
    
    
    533
    
    
    
    
    
    
    
    
    
    
    
    Acquisition of video store assets
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    53(224,090
    )
    
    
    (48,614
    )
    
    
    (445
    )
    
    
    
    
    
    
    (273,149
    )Cash flows from 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 (from) to 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 (decrease) increase in cash
    
    
    (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 year
    
    $
    25,545
    
    
    $
    478
    
    
    $
    676
    
    
    $
    
    
    
    $
    26,699
 F-53




---



##### Table of Contents



VIDEOTRON LTD.
   24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada
and the United States (continued):Consolidated Balance SheetAs at December 31, 2005
 Non-
    
    
    AdjustmentsVidéotron
    
    
    Subsidiary
    
    
    subsidiaries
    
    
    andLtd.
    
    
    Guarantors
    
    

Guarantors
    
    

eliminations
    
    
    Consolidated(in thousands of Canadian dollars)(Restated - see note 2 (f))AssetsCurrent assets:Cash and cash equivalents
    
    $
    25,545
    
    
    $
    478
    
    
    $
    676
    
    
    $
    
    
    
    $
    26,699Temporary investments
    
    
    40,000
    
    
    
    
    
    
    
    496
    
    
    
    
    
    
    
    40,496Accounts receivable
    
    
    108,385
    
    
    
    8,018
    
    
    
    691
    
    
    
    
    
    
    
    117,094Amounts receivable from affiliated
companies
    
    
    223,471
    
    
    
    249,256
    
    
    
    49
    
    
    
    (464,444
    )
    
    
    8,332Income taxes
    
    
    431
    
    
    
    301
    
    
    
    113
    
    
    
    
    
    
    
    845Inventories and prepaid expenses
    
    
    29,998
    
    
    
    6,304
    
    
    
    173
    
    
    
    
    
    
    
    36,475Future income taxes
    
    
    62,778
    
    
    
    13,829
    
    
    
    
    
    
    
    
    
    
    
    76,607490,608
    
    
    
    278,186
    
    
    
    2,198
    
    
    
    (464,444
    )
    
    
    306,548Fixed assets
    
    
    1,038,403
    
    
    
    233,167
    
    
    
    3,285
    
    
    
    (391
    )
    
    
    1,274,464Goodwill
    
    
    1,903,756
    
    
    
    445,040
    
    
    
    
    
    
    
    233,711
    
    
    
    2,582,507Other assets
    
    
    414,870
    
    
    
    178,264
    
    
    
    
    
    
    
    (567,500
    )
    
    
    25,634Future income taxes
    
    
    34,337
    
    
    
    2,376
    
    
    
    
    
    
    
    
    
    
    
    36,713$
    3,881,974
    
    
    $
    1,137,033
    
    
    $
    5,483
    
    
    $
    (798,624
    )
    
    $
    4,225,866Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued
liabilities
    
    $
    330,491
    
    
    $
    32,354
    
    
    $
    542
    
    
    $
    (142
    )
    
    $
    363,245Amounts payable to company under
common control
    
    
    42,744
    
    
    
    464,537
    
    
    
    155
    
    
    
    (464,302
    )
    
    
    43,134Deferred revenue and prepaid services
    
    
    94,874
    
    
    
    21,640
    
    
    
    182
    
    
    
    
    
    
    
    116,696Income taxes
    
    
    750
    
    
    
    132
    
    
    
    
    
    
    
    
    
    
    
    882Additional amount payable
    
    
    111,540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,540580,399
    
    
    
    518,663
    
    
    
    879
    
    
    
    (464,444
    )
    
    
    635,497Future income taxes
    
    
    151,702
    
    
    
    51,995
    
    
    
    261
    
    
    
    
    
    
    
    203,958Long-term deferred revenue
    
    
    4,821
    
    
    
    1,655
    
    
    
    26
    
    
    
    
    
    
    
    6,502Long-term debt
    
    
    1,093,835
    
    
    
    25,969
    
    
    
    
    
    
    
    (25,969
    )
    
    
    1,093,835Non-controlling interest in a subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    684
    
    
    
    6841,830,757
    
    
    
    598,282
    
    
    
    1,166
    
    
    
    (489,729
    )
    
    
    1,940,476Shareholders Equity:Share capital
    
    
    512,938
    
    
    
    165,001
    
    
    
    25
    
    
    
    (335,024
    )
    
    
    342,940Contributed surplus
    
    
    4,466,821
    
    
    
    708,538
    
    
    
    462
    
    
    
    (3,400
    )
    
    
    5,172,421(Deficit) retained earnings
    
    
    (2,905,837
    )
    
    
    (334,635
    )
    
    
    3,830
    
    
    
    29,529
    
    
    
    (3,207,113
    )Other comprehensive loss
    
    
    (22,705
    )
    
    
    (153
    )
    
    
    
    
    
    
    
    
    
    
    (22,858
    )2,051,217
    
    
    
    538,751
    
    
    
    4,317
    
    
    
    (308,895
    )
    
    
    2,285,390$
    3,881,974
    
    
    $
    1,137,033
    
    
    $
    5,483
    
    
    $
    (798,624
    )
    
    $
    4,225,866
 F-54




---



##### Table of Contents



VIDEOTRON LTD.
   24.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada
and the United States (continued):Consolidated Statement of OperationsIn accordance with United States GAAPFor the year ended December 31, 2006
 Non-
    
    
    AdjustmentsVidéotron
    
    
    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 cost
    
    
    254,087
    
    
    
    84,943
    
    
    
    
    
    
    
    (162
    )
    
    
    338,868Operating and administrative expenses
    
    
    377,143
    
    
    
    84,057
    
    
    
    4,163
    
    
    
    (996
    )
    
    
    464,367Depreciation and amortization
    
    
    170,246
    
    
    
    25,448
    
    
    
    674
    
    
    
    (33
    )
    
    
    196,335Financial expenses
    
    
    58,797
    
    
    
    19,806
    
    
    
    
    
    
    
    
    
    
    
    78,603Dividend income from related companies
    
    
    
    
    
    
    (13,170
    )
    
    
    
    
    
    
    13,170
    
    
    
    Income (loss) before the undernoted
    
    
    206,013
    
    
    
    40,443
    
    
    
    773
    
    
    
    (13,137
    )
    
    
    234,092Income taxes
    
    
    52,739
    
    
    
    4,492
    
    
    
    231
    
    
    
    
    
    
    
    57,462153,274
    
    
    
    35,951
    
    
    
    542
    
    
    
    (13,137
    )
    
    
    176,630Share in the results of a company
subject to significant influence
    
    
    (11,417
    )
    
    
    (119
    )
    
    
    
    
    
    
    11,536
    
    
    
    Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    86Net income (loss)
    
    $
    164,691
    
    
    $
    36,070
    
    
    $
    542
    
    
    $
    (24,759
    )
    
    $
    176,544
 F-55




---



##### Table of Contents



VIDEOTRON LTD.
   24.
    
    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-
    
    
    AdjustmentsVidéotron
    
    
    Subsidiary
    
    
    subsidiary
    
    
    andLtd.
    
    
    Guarantors
    
    

Guarantors
    
    

eliminations
    
    
    Consolidated(in thousands of Canadian dollars)Cash flows from operating activities:Net income (loss)
    
    $
    164,691
    
    
    $
    36,070
    
    
    $
    542
    
    
    $
    (24,759
    )
    
    $
    176,544Adjustments for the following items:Depreciation and amortization
    
    
    181,382
    
    
    
    32,617
    
    
    
    674
    
    
    
    (33
    )
    
    
    214,640Future income taxes
    
    
    53,386
    
    
    
    4,482
    
    
    
    33
    
    
    
    
    
    
    
    57,901Other
    
    
    (23,595
    )
    
    
    1,288
    
    
    
    549
    
    
    
    11,622
    
    
    
    (10,136
    )Net change in non-cash operating items
    
    
    (32,305
    )
    
    
    28,593
    
    
    
    95
    
    
    
    2,509
    
    
    
    (1,108
    )343,559
    
    
    
    103,050
    
    
    
    1,893
    
    
    
    (10,661
    )
    
    
    437,841Cash flows from investing activities:Acquisition of fixed assets
    
    
    (260,720
    )
    
    
    (37,665
    )
    
    
    (1,793
    )
    
    
    (2,451
    )
    
    
    (302,629
    )Net change in other assets
    
    
    (1
    )
    
    
    (71
    )
    
    
    
    
    
    
    
    
    
    
    (72
    )Proceeds from disposal of fixed assets
    
    
    515
    
    
    
    126
    
    
    
    
    
    
    
    
    
    
    
    641Disposal (acquisition) of temporary
investments
    
    
    40,000
    
    
    
    
    
    
    
    (491
    )
    
    
    
    
    
    
    39,509Dividend from subsidiary
    
    
    19,000
    
    
    
    (19,000
    )
    
    
    
    
    
    
    
    
    
    
    Acquisition of video store assets
    
    
    
    
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    228(201,206
    )
    
    
    (56,382
    )
    
    
    (2,284
    )
    
    
    (2,451
    )
    
    
    (262,323
    )Cash flows from financing activities:Net 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 to (from) an affiliated company
    
    
    47,094
    
    
    
    (47,036
    )
    
    
    
    
    
    
    (58
    )
    
    
    (186,763
    )
    
    
    (47,036
    )
    
    
    
    
    
    
    13,112
    
    
    
    (220,687
    )Net decrease in cash
    
    
    (44,410
    )
    
    
    (368
    )
    
    
    (391
    )
    
    
    
    
    
    
    (45,169
    )Cash and cash equivalents,
beginning of year
    
    
    25,545
    
    
    
    478
    
    
    
    676
    
    
    
    
    
    
    
    26,699Cash and cash equivalents, end of year
    
    $
    (18,865
    )
    
    $
    110
    
    
    $
    285
    
    
    $
    
    
    
    $
    (18,470
    )
 F-56




---



##### Table of Contents



VIDEOTRON LTD.
   24.
    
    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-
    
    
    AdjustmentsVidéotron
    
    
    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
    )
    
    
    1,399,531Goodwill
    
    
    1,903,756
    
    
    
    444,940
    
    
    
    
    
    
    
    233,711
    
    
    
    2,582,407Other assets
    
    
    404,639
    
    
    
    71,344
    
    
    
    
    
    
    
    (455,058
    )
    
    
    20,925Future income taxes
    
    
    
    
    
    
    3,358
    
    
    
    
    
    
    
    
    
    
    
    3,358$
    3,733,662
    
    
    $
    1,120,200
    
    
    $
    8,898
    
    
    $
    (639,950
    )
    
    $
    4,222,810Liabilities and Shareholders EquityCurrent liabilities:Bank indebtedness and outstanding
cheques
    
    $
    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 and prepaid services
    
    
    101,212
    
    
    
    33,980
    
    
    
    143
    
    
    
    
    
    
    
    135,335Income taxes
    
    
    45
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    81867,642
    
    
    
    155,151
    
    
    
    3,719
    
    
    
    (418,242
    )
    
    
    608,270Future income taxes
    
    
    125,068
    
    
    
    51,694
    
    
    
    294
    
    
    
    
    
    
    
    177,056Long-term deferred revenue
    
    
    3,423
    
    
    
    783
    
    
    
    
    
    
    
    
    
    
    
    4,206Long-term debt
    
    
    983,791
    
    
    
    25,969
    
    
    
    
    
    
    
    (25,969
    )
    
    
    983,791Non-controlling interest in a subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    774
    
    
    
    7741,979,924
    
    
    
    233,597
    
    
    
    4,013
    
    
    
    (443,437
    )
    
    
    1,774,097Shareholders Equity:Share capital
    
    
    410,725
    
    
    
    378,633
    
    
    
    25
    
    
    
    (443,656
    )
    
    
    345,727Contributed surplus
    
    
    4,464,822
    
    
    
    783,633
    
    
    
    488
    
    
    
    (76,500
    )
    
    
    5,172,443(Deficit) retained earnings
    
    
    (3,097,598
    )
    
    
    (274,268
    )
    
    
    4,372
    
    
    
    323,643
    
    
    
    (3,043,851
    )Other comprehensive loss
    
    
    (24,211
    )
    
    
    (1,395
    )
    
    
    
    
    
    
    
    
    
    
    (25,606
    )1,753,738
    
    
    
    886,603
    
    
    
    4,885
    
    
    
    (196,513
    )
    
    
    2,448,713$
    3,733,662
    
    
    $
    1,120,200
    
    
    $
    8,898
    
    
    $
    (639,950
    )
    
    $
    4,222,810
 F-57