/R E P E A T/ - Transcontinental in 2007: Growth in revenues and adjusted operating income before amortization despite sharp rise in Canadian dollar



    
    -   Growth of 2% in revenues and 2% in adjusted operating income before
        amortization(1); excluding the foreign exchange rate impact, growth
        of 3% and 9% respectively.
    -   Organic growth in revenues of 3% and in adjusted operating income
        before amortization(1) of 2%
    -   Slight increase in adjusted operating income margin before
        amortization and depreciation, from 15% to 15.1%; excluding the
        foreign exchange rate impact, margin of 15.8%.
    -   Decrease of 9% in earnings per share; excluding the foreign exchange
        rate impact, increase of 3%.
    -   On a per-share basis, adjusted net income(1), which excludes asset
        impairment, restructuring costs and unusual adjustments to 2006
        income taxes, went from $1.51 to $1.50, which is slightly less than
        the range of $1.52 to $1.65 announced at the start of the fiscal
        year; excluding the foreign exchange rate impact, it would have been
        $1.68, up 11%, in line with the Corporation's long-term objective.
    -   Purchase by the Corporation of 2.5 million shares, totalling
        $53 million, under its share buy-back program.
    -   Signing of an exclusive 15-year contract, valued at more than one
        billion U.S. dollars (excluding paper), to print the San Francisco
        Chronicle daily newspaper and its related products. Production is
        slated to start in Spring 2009.
    -   Acquisition of PLM Group, Canada's fourth-largest printer and a
        leader in the direct marketing segment.
    -   Announcement of the appointment of François Olivier as President and
        Chief Executive Officer effective February 20, 2008.
    -   Decision by management to end the practice of providing a specific
        annual earnings-per-share objective.
    -   Excellent financial position for further growth.

    Note:  Following the announcement of December 6, 2007, the financial
    -----  statements for fiscal 2006 have been restated. See next page.


    ---------------------------
    (1) Refer to Reconciliation of Non-GAAP Financial Measures, on page 7.
    

    MONTREAL, Dec. 18 /CNW Telbec/ - Transcontinental announced today that it
recorded adjusted net earnings per share of $1.50 for 2007, which is slightly
lower than the range of $1.52 to $1.65 announced at the beginning of the
fiscal year. The excellent performance by the Media sector, due in part to the
successful integration of Chenelière Education, and by the Printing Products
and Services sector, especially the Mexican operations, as well as the organic
growth in most of our segments, could not completely offset the impact of: the
unprecedented rise in the Canadian dollar versus the U.S. dollar, which in the
fourth quarter had a negative impact of $0.05 per share compared to 2006, and
the impact of the mortgage crisis in the United States on our direct marketing
activities since last July.
    "In this past fiscal year, Transcontinental again demonstrated its
ability to improve its operating performance under difficult conditions, with
an increase of 11% in adjusted net earnings per share, excluding the foreign
exchange rate impact, which is in line with our long-term objective," said Luc
Desjardins, President and Chief Executive Officer of Transcontinental. "In
2008, we will fully benefit from the reorganizations and technology
investments of the past two years. We are confident that we will achieve the
objectives of our Evolution 2010 business project, which aims to achieve,
among other things, an average increase in adjusted earnings per share of 10%
per year, excluding the impact of the foreign exchange rate, and average
organic growth in revenues of 5% per year. To that end, we have launched The
Race Towards Excellence to mobilize our people around four major areas:
Talent, Sales Growth, Efficiency and Digital. We will also focus on our three
priority growth areas: outsourcing of newspaper printing, direct marketing and
digital development in the Media sector."
    The Corporation is in an excellent financial position for further growth,
for example by acquisitions, with a net funded debt to total capitalization
ratio of 29% as at October 31, 2007, below the long-term objective of 35% -
50%.

    Restatement of Prior Years' Financial Statements

    On December 6, 2007, Transcontinental Inc. announced that it would be
restating its financial statements for prior years. While preparing its
year-end financial statements, management identified two non-cash accounting
errors. First, income tax liabilities at the end of fiscal 2006 were
understated by approximately $10 million. This was mainly related to
accounting provisions for income taxes on inter-company transactions and to
future income tax assets on operating losses considered twice. Second,
property, plant and equipment of Mexican subsidiaries were overstated by
approximately $12 million (net impact of about $10 million, net of related
income taxes) at the end of fiscal 2006, due to amortization calculated
incorrectly. The impact of these restatements on net income will total
approximately $20 million, of which approximately $2 million relates to 2006
and approximately $18 million to prior years. This has no impact on cash flow
or cash balances. Prior to these restatements, 2006 net income was
$137.9 million and 2006 total property, plant and equipment was
$713.6 million.
    The Corporation's internal controls and procedures are very sound overall
and the recent improvements, which led to the discovery of these two errors,
reduce the risk of similar errors occurring in the future.

    Financial Highlights

    In fiscal 2007, consolidated revenues rose 2%, from $2.28 billion to
$2.33 billion, while adjusted operating income before amortization also rose
2%, from $342.7 million to $350.4 million. Excluding the foreign exchange rate
impact of the Canadian dollar versus its U.S. and Mexican counterparts, which
caused revenues to decline by $28.2 million and adjusted operating income
before amortization by $22.3 million, revenue would have grown 3% and adjusted
operating income before amortization by 9%. Note that organic growth accounted
for a $60.9 million increase in revenue, up 3%, and for a $7.3 million
increase in adjusted operating income before amortization, up 2%. Organic
growth in operating income stems mainly from the printing of commercial
products, magazines and catalogues, Mexican operations and door-to-door
distribution.
    Net income was down 11%, from $135.8 million in 2006 to $120.6 million in
2007. This decrease was mainly due to the impact of the negative foreign
exchange rate and several unusual items. On a per-share basis, due to the
positive impact of the share buy-back program, the decrease in net earnings
was limited to 9%, from $1.56 to $1.42. Adjusted net income, which does not
take into account asset impairment, restructuring costs and unusual
adjustments to 2006 income taxes, was down 4%, from $132.2 million to
$127.2 million. On a per-share basis, adjusted net income was down 1%, from
$1.51 to $1.50.
    Excluding the negative foreign exchange rate impact in fiscal 2007,
adjusted earnings per share would have been $1.68, up 11% over 2006. This
measurement is a good indicator of the Corporation's operating performance in
2007.
    In the fourth quarter, Transcontinental recorded consolidated revenues of
$618 million, up 2% compared to $605 million in the same quarter of 2006,
while adjusted operating income before amortization rose 3%, from
$97.2 million to $100.6 million. Excluding fluctuations in the exchange rate
between the Canadian dollar and its U.S. and Mexican counterparts, which
reduced revenue by $12 million and adjusted operating income before
amortization by $7.3 million, revenues would have grown by 4% and adjusted
operating income before amortization by 11%. Note that organic growth
accounted for $26.5 million of quarterly revenues, up 4%, and for $2.7 million
of adjusted operating income before amortization, up 3%.
    Net income declined 24%, from $51.1 million to $38.6 million; on a
per-share basis, net earnings declined 22%, from $0.59 to $0.46. Adjusted net
income, which does not take into account asset impairment, restructuring costs
and unusual adjustments to 2006 income taxes, was down 6%, from $41.8 million
to $39.3 million; on a per-share basis, adjusted net earnings declined 2%,
from $0.48 to $0.47. Excluding the foreign exchange rate impact, adjusted net
earnings per share would have grown 8%.
    For more detailed financial information, please see Management's
Discussion and Analysis for the Year ended October 31, 2007 at
www.transcontinental.com, under "Investors."

    Change in the Corporation's Practices with Respect to Disclosure of
    Information

    Over the past year, Transcontinental has reviewed its practices with
respect to the disclosure of information. Given changes in its environment,
the Corporation needs to increasingly focus on its medium to long-term
development for the benefit of its shareholders. In light of this, management
deems it more advisable to discontinue the practice of providing an explicit
earnings-per-share projection on an annual basis. Consequently, management
will continue to announce long-term financial objectives like those for the
Evolution 2010 business project, to provide forward-looking information on the
Corporation's sensitivity to exchange rates, as well as information on income
tax rates, capital expenditures and non-capitalized investments, and to
provide qualitative statements about market conditions and the activities of
business units.
    This modification does not in any way change Transcontinental's
commitment to maintaining transparent and open communication with financial
markets and the financial community. Management believes that this decision is
in the best interests of the Corporation and its shareholders.

    
    Operating Highlights

    The main operating highlights for fiscal 2007 are as follows:

    Media Sector
    ------------

    -   Community newspapers act as the voices of the communities they serve,
        which makes them indispensable. Transcontinental strengthened its
        position as Canada's second-largest publisher of community newspapers
        with the acquisition of The Grenfell Sun, The Broadview Express and
        The Oxbow Herald, in Saskatchewan, along with The Seaway News, in
        Ontario, and The Springhill-Parrsboro Record, in Nova Scotia. The
        Corporation also confirmed its leading position in Quebec in the
        construction and renovation market by adding six magazines from print
        media group Les Editions Ma Maison.

    -   Transcontinental has identified custom publishing as a major growth
        segment. To offer this service to its Canadian and U.S. customers,
        the Corporation launched Transcontinental Custom Communications, a
        joint venture with Seven Squared, one of the top custom publishing
        agencies in the United Kingdom.

    -   Transcontinental is Canada's largest publisher of consumer magazines.
        Following an exclusive agreement with well-known U.S. publisher
        Meredith Corporation, Transcontinental launched the Canadian version
        of More magazine. Named Magazine of the Year by Advertising Age in
        the U.S. in 2006, More targets the 40+ female demographic. This is an
        underexploited niche in the Canadian market and rounds out
        Transcontinental's portfolio of women's magazines. The early issues
        were highly successful with advertisers and readers alike.

    -   Organic growth accounted for $23 million in revenue in the Media
        sector, up 4% over 2006, and $4 million in its adjusted operating
        income before amortization, up 4.2%. Growth was achieved through
        digital development, numerous special projects in newspapers and
        magazines, including the launch of new titles, and door-to-door
        distribution.

    -   The Internet and digital technology are becoming increasingly
        integrated into the day-to-day activities of consumers, which is
        pushing the newspaper and magazine industry to adapt and innovate. In
        2007, Transcontinental put even more focus on developing digital
        platforms and it now heads a network of more than 120 sites that
        reach an average of four million unique visitors a month. These sites
        serve communities of interest in business and finance, fashion and
        lifestyle, renovation, design and decorating, gardening, seniors,
        sports & leisure, local communities and classified ads. Most of the
        sites are interactive extensions of magazines and daily or weekly
        newspapers, but others have no print counterpart. Note the launch of
        the new French-language site lebelage.ca, aimed at the 50+ community;
        the revamped version of lesaffaires.com, the top French-language
        business and finance site in Canada; as well as canadianliving.com
        and thehockeynews.com. All these sites have seen their audiences and
        levels of engagement increase substantially, with a 29% increase in
        the number of unique monthly visitors and a 46% increase in the
        number of pages viewed.

    Printing Sectors
    ----------------

    -   The Corporation identified direct marketing as one of its main growth
        niches. Already one of the key players in the United States,
        Transcontinental consolidated its position in Canada by acquiring PLM
        Group. Founded in 1987, PLM has about 500 employees in the Greater
        Toronto area and reported revenue of $126 million in 2006. In
        addition to direct marketing products and services, PLM offers
        leading edge services such as premedia and digital printing. Its
        diversified customer base includes many leading companies.

    -   Newspaper printing in the United States is another priority growth
        segment for Transcontinental. An important step was taken in early
        fiscal 2007 with the signing of a 15-year contract, valued at one
        billion U.S. dollars (two billion dollars including paper), in which
        Hearst Corporation outsourced the printing of the San Francisco
        Chronicle and its related products to Transcontinental. The project
        is on schedule and the new plant is slated to start printing in
        spring 2009. The team is in place, the site has been chosen and the
        printing equipment ordered.

        Also in 2007, Transcontinental set up a division that will be devoted
        full time to the North American development of its newspaper printing
        outsourcing service and operations at its newspaper printing plants
        in the United States. Talks are progressing with a number of
        publishers and the Corporation is optimistic about the eventual
        announcement of another contract.

    -   Transcontinental was, for the third time in a row, the designated
        printer of the French edition of the Harry Potter series for the
        Canadian market. With more than 800 pages per copy, the 260,000
        copies of Harry Potter et les reliques de la mort, the seventh and
        final volume in the series, printed by Transcontinental Gagné, hit
        the Canadian market as scheduled on October 26, 2007.

    -   Organic growth in sales means offering existing customers a broader
        range of products and services. The renewal of the contract with the
        Hudson's Bay Company is an excellent example of this. In addition to
        printing the flyers for Zellers, The Bay and Home Outfitters,
        Transcontinental will also be handling the loyalty programs for these
        banners, as well as several new value-added products and services.
        About $75 million of this contract, valued at $350 million, is new
        business for Transcontinental.

        Furthermore, in April, Transcontinental started printing the flyers
        for the Provigo chain at its plant in Saint-Hyacinthe, Quebec. This
        gain came from a new agreement with Loblaw Companies Ltd. that took
        effect in 2006. Under this contract, Transcontinental continues to
        print flyers for the Loblaw banner across Canada and in spring 2007
        added the Provigo banner. The contract has an annualized value of
        over $60 million, of which one third is new business from Provigo.
    

    Environment
    -----------

    A leader in protecting the environment and sustainable development,
Transcontinental plans to continue exercising its leadership in its own way:
by mobilizing its employees and taking concrete action. In 2007, the
Corporation received an award from PrintAction magazine in the category "Most
Progressive Environmental Process." Company-wide environmental policies and
procedures are founded on three guiding principles: protection of the
environment for present and future generations, reduction of risk and
efficiency improvement, and introduction of improved technology and processes.
    Numerous initiatives from every level of the company were implemented in
2007. These included the launch of Vision durable, a magazine on sustainable
development, and its website visiondurable.com; the offer to book publishers
of 100% recycled paper at price equivalent to regular paper; the announcement
that Transcontinental Direct Montreal had achieved FSC certification, the
company's seventh printing plant to do so; "green" issues of several magazines
and newspapers, including Canadian Living, Coup de pouce and Métro; and awards
won in the United States by Transcontinental Direct Pennsylvania and
Transcontinental Miami Valley, in Ohio.
    The fourth quarter was marked by two major initiatives.
    First, the Corporation announced that it was introducing a paper
purchasing policy that promotes the use of environmentally friendly paper,
drafted with input from Markets Initiative. According to this non-profit
organization dedicated to protecting forests and biodiversity,
"Transcontinental is the first major North American print-media conglomerate
to take such a comprehensive step towards safeguarding our forests and
climate."
    The Corporation also announced that its Publi-Sac, distributed weekly to
some three million households in Quebec and eastern Ontario, will be
biodegradable by early 2008. Transcontinental has chosen an oxo-biodegradable
technology known as Totally Degradable Plastic Additives(TM) (TDPA(TM)),
developed by EPI, a Vancouver-based company considered a pioneer in innovative
environmental technologies.

    Reconciliation of Non-GAAP Financial measures

    Financial data have been prepared in conformity with Canadian Generally
Accepted Accounting Principles (GAAP). However, certain measures used in this
press release do not have any standardized meaning under GAAP and could be
calculated differently by other companies. The Corporation believes that
certain non-GAAP financial measures, when presented in conjunction with
comparable GAAP financial measures, are useful to investors and other readers
because that information is an appropriate measure for evaluating the
Corporation's operating performance. Internally, the Corporation uses this
non-GAAP financial information as an indicator of business performance, and
evaluates management's effectiveness with specific reference to these
indicators. These measures should be considered in addition to, not as a
substitute for or superior to, measures of financial performance prepared in
accordance with GAAP.

    
    Below is a table that reconciles GAAP financial measures to non-GAAP
financial measures.

    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended
                                       October 31              October 31

                                    2007        2006        2007        2006
    (in millions of dollars,
     except per share amounts)             (restated)              (restated)
    -------------------------------------------------------------------------
    Net income                   $  38.6     $  51.1     $ 120.6     $ 135.8
    Non-controlling interest           -           -         0.3         0.5
    Income taxes                    16.9        (1.3)       53.6        37.6
    Discount on sale of accounts
     receivable                      2.3         2.5        11.1         8.3
    Financial expenses               9.1         8.5        32.2        30.7
    Impairment of assets and
     restructuring costs             1.0         7.7         9.7        12.6
    Amortization                    32.7        28.7       122.9       117.2
    -------------------------------------------------------------------------
    Adjusted operating income
     before amortization         $ 100.6     $  97.2     $ 350.4     $ 342.7
    -------------------------------------------------------------------------

    Net income                   $  38.6     $  51.1     $ 120.6     $ 135.8
    Impairment of assets and
     restructuring costs
     (after tax)                     0.7         5.8         6.6         9.1
    Unusual adjustments to
     income taxes                      -       (15.1)          -       (12.7)
    -------------------------------------------------------------------------
    Adjusted net income             39.3        41.8       127.2       132.2
    -------------------------------------------------------------------------
    Average number of shares
     outstanding (in millions)      83.7        86.4        84.9        87.3
    -------------------------------------------------------------------------
    Adjusted earnings per share  $  0.47     $  0.48     $  1.50     $  1.51
    -------------------------------------------------------------------------
    Cash flow related to
     operating activities        $ 104.0     $ 225.4     $ 241.0     $ 214.0
    Changes in non-cash
     operating items                21.8       142.5       (48.1)      (57.1)
    -------------------------------------------------------------------------
    Cash flow from operating
     activities before changes
     in non-cash operating items $  82.2     $  82.9     $ 289.1     $ 271.1
    -------------------------------------------------------------------------
    Long-term debt                                       $ 523.3     $ 467.9
    Current portion of long-term
     debt                                                   14.2        12.7
    Cash and temporary
     investments                                           (48.5)      (89.3)
    -------------------------------------------------------------------------
    Net indebtedness                                     $ 489.0     $ 391.3
    -------------------------------------------------------------------------
    

    Corporate Affairs

    On September 13, 2007, the Corporation's Board of Directors unanimously
recommended the appointment of François Olivier as President and Chief
Executive Officer effective February 20, 2008, the date of the next annual
shareholders' meeting. Mr. Olivier has been with Transcontinental since 1993
and has an impressive track record, having risen through the ranks one by one,
from managing one printing plant to becoming President of the Printing
Products and Services sector. Until February 20, Mr. Olivier will act as the
Chief Operating Officer, with responsibility for the Corporation's three
operating sectors. To ensure a smooth transition, Luc Desjardins will remain
President and Chief Executive Officer until then. Mr. Desjardins joined
Transcontinental in 2000 as Chief Operating Officer and became Chief Executive
Officer in early 2004. The appointment of Mr. Olivier reflects corporate
continuity.
    In addition, Rémi Marcoux, the founder and Executive Chairman of the
Board of Transcontinental, was invested as a Member into the Order of Canada
in October. This award is the country's highest civilian honour. As noted by
the office of the Governor General, "Rémi Marcoux is the perfect example of
those builders who contribute to the vitality of the economic sector and the
growth of communities. He has made Transcontinental a flagship of the Canadian
economy in the field of printing and publishing. The company is also known as
one of the most socially responsible in Canada".

    Normal Course Issuer Bid - Fiscal 2007

    On November 15, 2006, The Corporation was authorized to purchase for
cancellation on the open market, between November 21, 2006 and November 20,
2007, up to 3,448,698 of its Class A Subordinate Voting Shares, representing
5% of the 68,973,966 issued and outstanding Class A Subordinate Voting Shares
as of November 7, 2006, and up to 852,907 of its Class B Shares, representing
5% of its 17,058,145 issued and outstanding Class B Shares as of November 7,
2006.
    During the twelve-month period ended October 31, 2007, the Corporation
purchased 2,354,700 of its Class A Subordinate Voting Shares at a weighted
average price of $21.27 for a total consideration of $50.1 million. It also
bought 137,800 of its Class B Shares at a weighted average price of $21.69 for
a total consideration of $3 million. Of the total consideration of
$53.1 million, $13.3 million corresponds to the book value and $39.8 million
corresponds to the premium paid. The premium was accounted for as a decrease
in retained earnings. The purchases were made in the normal course of business
at market prices through the facilities of the Toronto Stock Exchange in
accordance with the requirements of the exchange.
    In the fourth quarter of fiscal 2007, the Corporation purchased 140,800
of its Class A Subordinate Voting Shares at a weighted average price of $20.92
for a total consideration of $3 million. It also bought 18,000 of its Class B
Shares at a weighted average price of $21.19 for a total consideration of
$0.4 million. Of the total consideration of $3.4 million, $0.8 million
corresponds to the book value and $2.6 million corresponds to the premium
paid. The premium was accounted for as a decrease in retained earnings.

    Dividend

    At its December 17, 2007 meeting, the Corporation's Board of Directors
declared a quarterly dividend of $0.07 per share on Class A Subordinate Voting
Shares and Class B Shares. These dividends are payable on January 25, 2008 to
shareholders of record at the close of business on January 7, 2008. On an
annual basis, this represents a dividend of $0.28 per common share. Dividends
paid by Transcontinental to Canadian residents are eligible dividends under
federal and provincial income tax laws.

    Additional Information

    Upon releasing its quarterly results, Transcontinental will hold a
conference call for the financial community today at 10:00 a.m. Media may hear
the call in listen-only mode or tune in to the simultaneous audio broadcast on
Transcontinental's website, which will be archived for 30 days. For Media
requests for information or interviews, please contact Nessa Prendergast,
Director, Media Relations, at (514) 954-2809.

    About Transcontinental

    The largest printer in Canada and sixth-largest in North America,
Transcontinental is also the country's leading publisher of consumer magazines
and French-language educational resources, and its second-largest community
newspaper publisher. Transcontinental distinguishes itself by creating
strategic partnerships that integrate the company into its customers' value
chain, notably through its unique newspaper printing outsourcing model and its
value-added services. From mass to highly personalized marketing, the company
offers its clients integrated solutions which include a continent-leading
direct marketing offering, a diverse digital platform and a door-to-door
advertising material distribution network. Transcontinental is a company whose
values, including respect, innovation and integrity, are central to its
operation.

    Transcontinental (TSX: TCL.A, TCL.B) has more than 15,000 employees in
Canada, the United States and Mexico, and reported revenues of C$2.3 billion
in 2007.

    Note: This press release contains certain forward-looking statements
concerning the future performance of the Corporation. Such statements, based
on the current expectations of management, inherently involve numerous risks
and uncertainties, known and unknown. We caution that all forward-looking
information is inherently uncertain and actual results may differ materially
from the assumptions, estimates or expectations reflected or contained in the
forward-looking information, and that actual future performance will be
affected by a number of factors, many of which are beyond the Corporation's
control, including, but not limited to, the economic situation, exchange rate,
energy costs, increased competition and the Corporation's capacity to
implement its strategic plan and cost-reduction program and make and integrate
acquisitions into its activities. The risks, uncertainties and other factors
that could influence actual results are described in the Corporation's
Management's Discussion and Analysis and the Annual Information Form.
    The forward-looking information in this release is based on current
expectations and information available as of December 18, 2007. We disclaim
any intention or obligation to update or revise any forward-looking statements
unless otherwise required by the Securities Authorities.

    
                                           CONSOLIDATED STATEMENTS OF INCOME
                                                                   unaudited

    (in millions of dollars,      Three months ended     Twelve months ended
     except per share data)           October 31              October 31
    -------------------------------------------------------------------------
                                    2007        2006        2007        2006
                                           (restated               (restated
                                              Note 2)                 Note 2)
    -------------------------------------------------------------------------

    Revenues                   $   618.3   $   605.0   $ 2,326.2   $ 2,282.3
    Operating costs                446.9       442.1     1,707.5     1,686.1
    Selling, general and
     administrative expenses        70.8        65.7       268.3       253.5
    -------------------------------------------------------------------------

    Operating income before
     amortization, impairment
     of assets and
     restructuring costs           100.6        97.2       350.4       342.7
    Amortization                    32.7        28.7       122.9       117.2
    Impairment of assets and
     restructuring costs
     (Note 5)                        1.0         7.7         9.7        12.6
    -------------------------------------------------------------------------

    Operating income                66.9        60.8       217.8       212.9
    Financial expenses               9.1         8.5        32.2        30.7
    Discount on sale of accounts
     receivable (Note 7)             2.3         2.5        11.1         8.3
    -------------------------------------------------------------------------

    Income before income taxes
     and non-controlling
     interest                       55.5        49.8       174.5       173.9
    Income taxes (Note 4)           16.9        (1.3)       53.6        37.6
    Non-controlling interest           -           -         0.3         0.5
    -------------------------------------------------------------------------
    Net income                 $    38.6   $    51.1   $   120.6   $   135.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Per share (basic)
     (Note 9)
    Net income                 $    0.46   $    0.59   $    1.42   $    1.56
    -------------------------------------------------------------------------
    Per share (diluted)
     (Note 9)
    Net income                 $    0.46   $    0.59   $    1.42   $    1.55
    -------------------------------------------------------------------------


    Average number of shares
     outstanding (in millions)      83.7        86.4        84.9        87.3
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.



                             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                                   unaudited

                                  Three months ended     Twelve months ended
    (in millions of dollars)          October 31              October 31
    -------------------------------------------------------------------------
                                    2007        2006        2007        2006
                                           (restated               (restated
                                              Note 2)                 Note 2)
    -------------------------------------------------------------------------

    Net income                 $    38.6   $    51.1   $   120.6   $   135.8

    Other comprehensive loss:

    Unrealized net gains on
     derivatives designated
     as cash flow hedges, net
     of income taxes of
     $3.5 million and
     $5.0 million for the
     three-month and
     twelve-month periods
     ended October 31, 2007,
     respectively                    6.7           -         9.7           -

    Reclassification adjustment
     for net gains on
     derivatives designated as
     cash flow hedges in prior
     periods transferred to net
     income in the current
     period, net of income
     taxes of $0.6 million and
     $2.2 million for the
     three-month and twelve-
     month periods ended
     October 31, 2007,
     respectively                   (0.9)          -        (4.3)          -
    -------------------------------------------------------------------------
    Change in net gains on
     derivatives designated as
     cash flow hedges                5.8           -         5.4           -

    Unrealized (losses) gains
     on translation of financial
     statements of self-sustaining
     foreign operations             (8.5)        2.4       (16.3)       (3.2)
    -------------------------------------------------------------------------

    Other comprehensive (loss)
     income                         (2.7)        2.4       (10.9)       (3.2)
    -------------------------------------------------------------------------
    Comprehensive income       $    35.9   $    53.5   $   109.7   $   132.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                                                   unaudited

                                                         Twelve months ended
    (in millions of dollars)                                  October 31
    -------------------------------------------------------------------------
                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------

    Balance, beginning of period, as
     previously reported                               $   769.0   $   703.1
    Adjustments to opening retained earnings (Note 2)      (19.9)      (17.8)
    -------------------------------------------------------------------------
                                                           749.1       685.3
    Financial Instruments - Recognition and
     Measurement (Note 3)                                   (0.2)          -
    -------------------------------------------------------------------------
    Restated balance, beginning of period                  748.9       685.3
    Net income                                             120.6       135.8
    -------------------------------------------------------------------------
                                                           869.5       821.1
    Premium on redemption of shares (Note 9)               (39.8)      (50.2)
    Dividends on shares                                    (23.3)      (21.8)
    -------------------------------------------------------------------------
    Balance, end of period                             $   806.4   $   749.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.



                                                 CONSOLIDATED BALANCE SHEETS
                                                                   unaudited

    (in millions of dollars)
    -------------------------------------------------------------------------
                                                           As at       As at
                                                      October 31, October 31,
                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------


    Current assets
      Cash and temporary investments                   $    48.5   $    89.3
      Accounts receivable (Note 7)                         196.9       176.3
      Income taxes receivable                                1.3         2.2
      Inventories                                           91.0        92.8
      Prepaid expenses and other current assets             18.4        17.4
      Future income tax assets                              11.8         6.3
    -------------------------------------------------------------------------
                                                           367.9       384.3

    Property, plant and equipment                          739.7       701.3
    Goodwill                                               934.6       881.5
    Intangible assets                                      172.5       165.8
    Future income tax assets                                64.6        59.1
    Other assets                                            90.3        70.4
    -------------------------------------------------------------------------
                                                       $ 2,369.6   $ 2,262.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Current liabilities
      Accounts payable and accrued liabilities         $   400.5   $   417.4
      Income taxes payable                                  32.3        52.4
      Deferred subscription revenues and deposits           52.9        54.2
      Current portion of long-term debt                     14.2        12.7
    -------------------------------------------------------------------------
                                                           499.9       536.7

    Long-term debt                                         523.3       467.9
    Future income tax liabilities                          108.4        77.4
    Other liabilities                                       58.2        42.0
    -------------------------------------------------------------------------
                                                         1,189.8     1,124.0
    -------------------------------------------------------------------------

    Non-controlling interest                                 2.2         0.8
    -------------------------------------------------------------------------

    Commitments and contingent liabilities (Note 15)

    Shareholders' equity
      Share capital (Note 9)                               395.1       407.6
      Contributed surplus (Note 11)                          9.2         6.9
      Retained earnings                                    806.4       749.1
      Accumulated other comprehensive loss (Note 12)       (33.1)      (26.0)
    -------------------------------------------------------------------------
                                                           773.3       723.1
    -------------------------------------------------------------------------
                                                         1,177.6     1,137.6
    -------------------------------------------------------------------------
                                                       $ 2,369.6   $ 2,262.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.



                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                   unaudited

                                  Three months ended     Twelve months ended
    (in millions of dollars)          October 31              October 31
    -------------------------------------------------------------------------
                                    2007        2006        2007        2006
                                           (restated               (restated
                                              Note 2)                 Note 2)
    -------------------------------------------------------------------------


    Operating activities
      Net income               $    38.6   $    51.1   $   120.6   $   135.8
      Items not affecting
       cash and cash
       equivalents
        Amortization                40.2        32.4       149.0       132.4
        Impairment of assets
         (Note 5)                      -         7.0         3.6         6.5
        Loss (gain) on
         disposal of assets          0.1        (0.3)       (0.1)       (1.4)
        Future income taxes         (2.7)      (12.3)       (1.4)      (15.6)
        Non-controlling interest       -           -         0.3         0.5
        Accrued pension benefit
         asset and liability         1.9         2.3         8.7         9.1
        Stock-based compensation
         and other stock-based
         payments (Note 10)          0.2         0.6         2.6         2.0
        Other                        3.9         2.1         5.8         1.8
    -------------------------------------------------------------------------
      Cash flow from operating
       activities before changes
       in non-cash operating
       items                        82.2        82.9       289.1       271.1
      Changes in non-cash
       operating items              21.8       142.5       (48.1)      (57.1)
    -------------------------------------------------------------------------
      Cash flow related to
       operating activities        104.0       225.4       241.0       214.0
    -------------------------------------------------------------------------

    Investing activities
      Business acquisitions
       (Note 13)                  (117.0)     (114.0)     (132.5)     (117.0)
      Acquisitions of property,
       plant and equipment         (47.2)      (33.3)     (130.2)     (113.9)
      Disposals of property,
       plant and equipment           1.3         0.9         3.3         9.0
      Increase in other assets      (9.3)       (4.9)      (28.4)      (29.9)
    -------------------------------------------------------------------------
      Cash flow used in
       investing activities       (172.2)     (151.3)     (287.8)     (251.8)
    -------------------------------------------------------------------------

    Financing activities
      Increase in long-term debt     2.6         0.6         2.6         0.6
      Reimbursement of long-term
       debt                          0.4        (0.7)     (108.4)       (8.2)
      Increase in revolving term
       credit facility              77.8           -       191.3           -
      Dividends on shares           (5.9)       (5.6)      (23.3)      (21.8)
      Redemption of shares (Note 9) (3.4)      (10.4)      (53.1)      (67.2)
      Issuance of shares (Note 9)      -          -          0.7         2.9
      Other                            -          -         (0.6)       (0.5)
    -------------------------------------------------------------------------
      Cash flow related to
       (used in) financing
       activities                   71.5      (16.1)         9.2       (94.2)
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash and cash
     equivalents denominated in
     foreign currencies             (1.6)       2.3         (3.2)       (0.7)
    -------------------------------------------------------------------------

    Increase (decrease) in cash
     and cash equivalents            1.7       60.3        (40.8)     (132.7)
    Cash and cash equivalents
     at beginning of period         46.8       29.0         89.3       222.0
    -------------------------------------------------------------------------
    Cash and cash equivalents
     at end of period          $    48.5   $   89.3   $     48.5   $    89.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Additional information
      Interest paid            $     2.6   $    1.1   $     29.4   $    26.9
      Income taxes paid             12.3        9.9         67.5        96.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.



                               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                                                    unaudited
                For the three-month and twelve-month periods ended October 31
    -------------------------------------------------------------------------

    The interim financial statements should be read in conjunction with the
    most recent annual consolidated financial statements.

    1.  Significant accounting policies

    These interim consolidated financial statements have been prepared in
    accordance with Canadian generally accepted accounting principles
    ("GAAP"), using the same accounting policies as outlined in Note 1 and
    Note 3 to the consolidated financial statements for the year ended
    October 31, 2007. The operating results for the interim periods are not
    necessarily indicative of full-year results due to the seasonality of
    certain operations of the Corporation. Results of both publishing and
    printing operations are significantly influenced by the advertising
    market, which is stronger in the second and fourth quarters.

    2.  Restatement

    In the context of the preparation of its consolidated financial
    statements for the period ended October 31, 2007, the Corporation's
    management identified two accounting errors in prior years' financial
    statements relating to the amortization of the property, plant and
    equipment and income taxes.

    Amortization of property, plant and equipment

    Amortization on property, plant and equipment of the Corporation's
    Mexican subsidiaries was calculated using an incorrect cost basis.
    Accordingly, amortization expense and income tax expense have been
    increased by $0.7 million and reduced by $0.2 million, respectively, for
    the three-month period ended October 31, 2006. For the twelve-month
    period ended October 31, 2006, amortization expense and income tax
    expense have been increased by $2.9 million and reduced by $0.8 million,
    respectively.

    As of October 31, 2006, Property, plant and equipment and future income
    tax liabilities have been reduced by $12.3 million and $3.4 million,
    respectively. Opening retained earnings and accumulated other
    comprehensive loss for the twelve-month period ended October 31, 2006
    have been reduced by $8.0 million and $1.2 million, respectively.

    Income taxes

    As of October 31, 2006 income taxes payable and future income tax
    liabilities were globally understated by $9.8 million, mainly due to
    errors in accounting provisions for income taxes on inter-company
    transactions and to future income tax assets on operating losses
    considered twice, for years prior to 2006. Future income tax liabilities
    and income taxes payable as of October 31, 2006, have been increased by
    $10.7 million and reduced by $0.9 million, respectively. Opening retained
    earnings for the year ended October 31, 2006 have been reduced by
    $9.8 million.

    Net income and earnings per share impact

    Net income for the three-month and twelve-month periods ended October 31,
    2006, has been reduced by $0.5 million and $2.1 million, respectively.
    For the three-month period ended October 31, 2006, net basic and diluted
    earnings per share have been both reduced by $0.01. Net basic and diluted
    earnings per share have been reduced by $0.02 and $0.03, respectively,
    for the twelve-month period ended October 31, 2006.

    3.  Changes in accounting policies

    a) Financial Instruments - Recognition and measurement

    On November 1, 2006, the Corporation adopted Section 3855 of the Canadian
    Institute of Chartered Accountants' ("CICA") Handbook, Financial
    Instruments - Recognition and measurement. It exposes the standards for
    recognizing and measuring financial instruments in the balance sheet and
    the standards for reporting gains and losses in the consolidated
    financial statements. Financial assets available for sale, assets and
    liabilities held for trading and derivative financial instruments, part
    of a hedging relationship or not, have to be measured at fair value.

    The Corporation has made the following classifications:

        -  Cash and temporary investments are classified as financial assets
           held for trading and are measured at fair value. Gains and losses
           related to periodical revaluation are recorded in net income.

        -  Other than temporary investments will be classified as either
           financial assets held to maturity and will thus be measured at
           amortized cost or as available-for-sale and will thus be marked-
           to-market through comprehensive income at each period end.

        -  Accounts receivable are classified as loans and receivables and
           are initially measured at fair value and subsequently at amortized
           cost using the effective interest rate method.

        -  Bank overdraft, accounts payable and accrued liabilities, other
           liabilities and long-term debt are classified as other liabilities
           and are initially measured at fair value and subsequently at
           amortized cost using the effective interest rate method.

    The adoption of this Section is done retroactively without restatement of
    the consolidated financial statements of prior periods. As at November 1,
    2006, the impact on the consolidated balance sheet of measuring the
    financial assets and liabilities using the effective interest rate method
    and of reclassifying the costs directly attributable to the issuance of
    the long-term debt against long-term debt was an increase in future
    income tax assets of $0.1 million and a decrease in property, plant and
    equipment, other assets, long-term debt and opening retained earnings of
    $1.2 million, $1.8 million, $2.7 million and $0.2 million, respectively.

    The impact on the consolidated balance sheet of measuring hedging
    derivatives at fair value as at November 1, 2006 was an increase in other
    assets, future income tax liabilities and other liabilities of
    $6.5 million, $1.8 million and $0.9 million, respectively, and a decrease
    in accumulated other comprehensive loss of $3.8 million. Prior periods
    were not restated.

    The Corporation selected November 1, 2002 as its transition date for
    embedded derivatives. An embedded derivative is a component of a
    financial instrument or another contract of which the characteristics are
    similar to a derivative. This had no impact on the consolidated financial
    statements.

    b) Financial instruments - Disclosure and presentation

    On November 1, 2006, the Corporation adopted Section 3861 of the CICA
    Handbook, Financial Instruments - Disclosure and presentation. This
    Section establishes standards for presentation of financial instruments
    and non-financial derivatives, and defines the information that should be
    disclosed about them.

    c) Comprehensive income

    On November 1, 2006, the Corporation adopted Section 1530 of the CICA
    Handbook, Comprehensive Income. It describes reporting and disclosure
    recommendations with respect to comprehensive income and its components.
    Comprehensive income is the change in shareholders' equity, which results
    from transactions and events from sources other than the Corporation's
    shareholders. These transactions and events include changes in the
    currency translation adjustment relating to self-sustaining foreign
    operations and unrealized gains and losses resulting from changes in fair
    value of certain financial instruments.

    The adoption of this Section implied that the Corporation now presents a
    consolidated statement of comprehensive income as a part of the
    consolidated financial statements. The comparative consolidated financial
    statements are restated to reflect the application of this Section only
    for changes in the balances for foreign currency translation of self-
    sustaining foreign operations.

    d) Equity

    On November 1, 2006, the Corporation adopted Section 3251 of the CICA
    Handbook, Equity, replacing Section 3250, Surplus. It describes standards
    for the presentation of equity and changes in equity for a reporting
    period as a result of the application of Section 1530, Comprehensive
    Income.

    e) Hedges

    On November 1, 2006, the Corporation adopted Section 3865 of the CICA
    Handbook, Hedges. The recommendations of this Section expand the
    guidelines required by Accounting Guideline 13 (AcG-13), Hedging
    Relationships. This Section describes when and how hedge accounting can
    be applied as well as the disclosure requirements. Hedge accounting
    enables the recording of gains, losses, revenues and expenses from the
    derivative financial instruments in the same period as for those related
    to the hedged item.

    4.  Income taxes

                                  Three months ended     Twelve months ended
                                      October 31              October 31
    -------------------------------------------------------------------------
                                    2007        2006        2007        2006
                                           (restated               (restated
                                              Note 2)                 Note 2)
    -------------------------------------------------------------------------
    Statutory tax rate            32.5 %      34.7 %      32.4 %      33.9 %
      Effect of foreign tax
       rate differences             (1.1)       (3.0)       (2.6)       (3.6)
      Other                         (0.9)       (3.9)        0.9        (1.4)
    -------------------------------------------------------------------------
    Effective tax rate before
     the following items:           30.5        27.8        30.7        28.9
      Effect of changes in
       statutory tax rates (a)         -           -           -        (3.5)
      Retroactive taxes (b)            -           -           -         4.9
      Reduction in income tax
       expense arising from
       the recognition of tax
       losses (c)                      -       (30.5)                   (8.7)
    -------------------------------------------------------------------------
    Effective tax rate            30.5 %      (2.7)%      30.7 %      21.6 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    a)  On June 6, 2006, Bill C-13, an act to implement certain provisions of
        the budget tabled in Parliament on May 2, 2006, was submitted for a
        third reading in the House of Commons and then became law as Bill
        C-13 received royal assent on June 22, 2006. A decrease of
        $6.0 million in future income tax liabilities was recorded in the
        third quarter of fiscal 2006 to reflect the changes in statutory tax
        rates.

    b)  On June 9, 2006, the Quebec government enacted Bill 15 in the Quebec
        National Assembly to amend the Taxation Act and other legislative
        provisions. An unusual charge for retroactive taxes and related
        charges of $8.4 million was recorded in the third quarter of fiscal
        2006.

    c)  During the fourth quarter of 2006, future income tax assets related
        to tax losses of U.S. subsidiaries were fully recognized as
        management now believes more likely than not that they will be
        realized. An amount of $15.1 million was accounted for as an increase
        in future income tax assets.

    5.  Impairment of assets and restructuring costs

    The following table summarizes the impairment of assets and restructuring
    costs:

    -------------------------------------------------------------------------
                       Twelve months ended October 31
    -------------------------------------------------------------------------
    (in millions
     of dollars)                         Total                  2007
    -------------------------------------------------------------------------
                                                       Liability
                                                           as at
                                 Charged       Fore-  October 31,    Charged
                               to income      casted        2006   to income

    Commercial printing
     operations (a)
    Printing Products and
     Services
    Workforce reduction costs   $    1.8    $    1.8     $     -    $    1.8

    Transfer of printing
     equipment and other costs       1.4         1.7           -         1.4

    Marketing Products and
     Services
    Workforce reduction costs        1.6         1.6           -         1.6

    Transfer of printing
     equipment and other costs       0.6         0.8           -         0.6
    -------------------------------------------------------------------------
                                     5.4         5.9           -         5.4
    Printing Products and
     Services
    Impairment of assets             0.3         0.3         n/a         0.3
    Marketing Products and
     Services
    Impairment of assets             3.3         3.3         n/a         3.3
    -------------------------------------------------------------------------
                                $    9.0    $    9.5    $      -    $    9.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Magazine publishing
     operations (b)
    Impairment of assets        $    6.8    $    6.8         n/a    $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Toronto printing
     operations (c)
    Workforce reduction costs   $    3.0    $    3.0    $    1.4    $    0.2
    Transfer of printing
     equipment and other costs       1.0         1.0           -         0.4
    -------------------------------------------------------------------------
                                     4.0         4.0         1.4         0.6
    Impairment of assets             0.2         0.2         n/a           -
    -------------------------------------------------------------------------
                                $    4.2    $    4.2    $    1.4    $    0.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Book printing operations (d)
    Workforce reduction costs   $    1.3    $    1.3    $      -    $      -
    Transfer of printing
     equipment and other costs       3.9         3.9           -         0.1
    -------------------------------------------------------------------------
                                     5.2         5.2           -         0.1
    Impairment of assets             1.6         1.6         n/a           -
    -------------------------------------------------------------------------
                                $    6.8    $    6.8    $      -    $    0.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Manufacturing strategy (e)
    Printing Products and
     Services
    Workforce reduction costs   $    0.3    $    0.3    $      -    $      -
    Marketing Products and
     Services
    Workforce reduction costs        0.4         0.4           -           -
    -------------------------------------------------------------------------
                                     0.7         0.7           -           -
    Printing Products and
     Services
    Impairment of assets             4.9         4.9         n/a           -
    Marketing Products and
     Services
    Impairment of assets             1.9         1.9         n/a           -
    -------------------------------------------------------------------------
                                $    7.5    $    7.5    $      -    $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Winnipeg printing
     operations (f)
    Workforce reduction costs   $    2.2    $    2.2    $      -    $      -
    Transfer of printing
     equipment and other costs       1.0         1.0           -           -
    -------------------------------------------------------------------------
                                     3.2         3.2           -           -
    Impairment of assets            (0.5)       (0.5)        n/a           -
    -------------------------------------------------------------------------
                                $    2.7    $    2.7    $      -    $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total                                               $    1.4    $    9.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                       Twelve months ended October 31
    -------------------------------------------------------------------------

                                         2007                   2006
    -------------------------------------------------------------------------
                                           Liability
                                               as at
                                          October 31,    Charged
                                    Paid        2007   to income        Paid

    Commercial printing
     operations (a)
    Printing Products and
     Services
    Workforce reduction costs   $    0.7    $    1.1      $    -    $      -

    Transfer of printing
     equipment and other costs       1.4           -           -           -

    Marketing Products and
     Services
    Workforce reduction costs        1.3         0.3           -           -

    Transfer of printing
     equipment and other costs       0.6           -           -           -
    -------------------------------------------------------------------------
                                     4.0         1.4           -           -

    Printing Products and
     Services
    Impairment of assets             n/a         n/a           -         n/a
    Marketing Products and
     Services
    Impairment of assets             n/a         n/a           -         n/a
    -------------------------------------------------------------------------
                                $    4.0    $    1.4    $      -    $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Magazine publishing
     operations (b)
    Impairment of assets             n/a         n/a    $    6.8         n/a
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Toronto printing
     operations (c)
    Workforce reduction costs   $    1.0    $    0.6    $    2.8    $    1.4
    Transfer of printing
     equipment and other costs       0.4           -         0.6         0.6
    -------------------------------------------------------------------------
                                     1.4         0.6         3.4         2.0
    Impairment of assets             n/a         n/a         0.2         n/a
    -------------------------------------------------------------------------
                                $    1.4    $    0.6    $    3.6    $    2.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Book printing operations (d)
    Workforce reduction costs   $      -    $      -    $      -    $    0.8
    Transfer of printing
     equipment and other costs       0.1           -         2.7         2.7
    -------------------------------------------------------------------------
                                     0.1           -         2.7         3.5
    Impairment of assets             n/a         n/a           -         n/a
    -------------------------------------------------------------------------
                                $    0.1    $      -    $    2.7    $    3.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Manufacturing strategy (e)
    Printing Products and
     Services
    Workforce reduction costs   $      -    $      -    $      -    $      -
    Marketing Products and
     Services
    Workforce reduction costs          -           -           -         0.4
    -------------------------------------------------------------------------
                                       -           -           -         0.4
    Printing Products and
     Services
    Impairment of assets             n/a         n/a           -         n/a
    Marketing Products and
     Services
    Impairment of assets             n/a         n/a           -         n/a
    -------------------------------------------------------------------------
                                $      -    $      -    $      -    $    0.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Winnipeg printing
     operations (f)
    Workforce reduction costs    $     -    $      -    $      -    $    0.1
    Transfer of printing
     equipment and other costs         -           -           -         0.2
    -------------------------------------------------------------------------
                                       -           -           -         0.3
    Impairment of assets             n/a         n/a        (0.5)        n/a
    -------------------------------------------------------------------------
                                 $     -    $      -    $   (0.5)   $    0.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total                        $    5.5   $    2.0    $   12.6    $    6.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                        Three months ended October 31
    -------------------------------------------------------------------------
    (in millions
     of dollars)                                     2007
    -------------------------------------------------------------------------
                               Liability                           Liability
                                   as at                               as at
                                 July 31,    Charged              October 31,
                                    2007   to income        Paid        2007

    Commercial printing
     operations (a)
    Printing Products and
     Services
    Workforce reduction costs   $    1.2    $      -    $    0.1    $    1.1
    Transfer of printing
     equipment and other costs         -         0.4         0.4           -
    Marketing Products and
     Services
    Workforce reduction costs        0.4         0.1         0.2         0.3
    Transfer of printing
     equipment and other costs         -         0.5         0.5           -
    -------------------------------------------------------------------------
                                $    1.6    $    1.0    $    1.2    $    1.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Magazine publishing
     operations (b)
    Impairment of assets             n/a    $      -         n/a         n/a
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Toronto printing
     operations (c)
    Workforce reduction costs   $    0.6    $      -    $      -    $    0.6
    Transfer of printing
     equipment and other costs         -           -           -           -
    -------------------------------------------------------------------------
                                     0.6           -           -         0.6
    Impairment of assets             n/a           -         n/a         n/a
    -------------------------------------------------------------------------
                                $    0.6    $      -    $      -    $    0.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Book printing
     operations (d)
    Workforce reduction costs   $      -    $      -    $      -    $      -
    Transfer of printing
     equipment and other costs         -           -           -           -
    -------------------------------------------------------------------------
                                $      -    $      -    $      -    $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total                       $    2.2    $    1.0    $    1.2    $    2.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------
                       Three months ended October 31
    -------------------------------------------------

                                         2006
    -------------------------------------------------
                                 Charged
                               to income        Paid

    Commercial printing
     operations (a)
    Printing Products and
     Services
    Workforce reduction costs   $      -    $      -
    Transfer of printing
     equipment and other costs         -           -
    Marketing Products and
     Services
    Workforce reduction costs          -           -
    Transfer of printing
     equipment and other costs         -           -
    -------------------------------------------------
                                $      -    $      -
    -------------------------------------------------
    -------------------------------------------------
    Magazine publishing
     operations (b)
    Impairment of assets        $    6.8         n/a
    -------------------------------------------------
    -------------------------------------------------
    Toronto printing
     operations (c)
    Workforce reduction costs   $      -    $    0.6
    Transfer of printing
     equipment and other costs       0.3         0.3
    -------------------------------------------------
                                     0.3         0.9
    Impairment of assets             0.2         n/a
    -------------------------------------------------
                                $    0.5    $    0.9
    -------------------------------------------------
    -------------------------------------------------
    Book printing
     operations (d)
    Workforce reduction costs   $      -    $      -
    Transfer of printing
     equipment and other costs       0.4         0.4
    -------------------------------------------------
                                $    0.4    $    0.4
    -------------------------------------------------
    -------------------------------------------------
    Total                       $    7.7    $    1.3
    -------------------------------------------------
    -------------------------------------------------

    a)  During the first quarter of fiscal 2007, the Corporation initiated a
        restructuring plan for its commercial printing operations in the
        Printing Products and Services and Marketing Products and Services
        sectors, with an impact of incurring restructuring costs within the
        twelve months following the announcement.

    b)  During the fourth quarter of fiscal 2006, the Corporation performed
        an impairment test on non-amortizable intangible assets by estimating
        the operating income and future cash flows it expects to generate
        from the underlying assets. Due to competitive market conditions in
        the magazine publishing group of the Media sector, the expected
        operating income and cash flows of certain titles were lower than
        forecasted for 2005. Consequently, forecasted future results for
        purposes of the annual impairment test were revised and were
        insufficient to justify the book value of these trade names. In the
        Media sector, an impairment of assets of $6.8 million, representing
        the totality of the book value of these trade names, was thus charged
        to income for the three-month and twelve-month periods ended
        October 31, 2006.

    c)  During the second quarter of fiscal 2006, the Corporation adopted a
        plan for the consolidation of its commercial products and direct-
        marketing printing facilities located in the Toronto area in the
        Marketing Products and Services sector. The consolidation is expected
        to be completed in 2008.

    d)  During the second quarter of fiscal 2005, the Corporation announced
        the consolidation of certain book printing operations in the Printing
        Products and Services sector. The consolidation was completed during
        the first quarter of 2007.

    e)  During the first quarter of fiscal 2005, the Corporation announced
        major investment projects to purchase equipment in the Printing
        Products and Services and Marketing Products and Services sectors.
        The projects were completed during the third quarter of 2006.

    f)  During the fourth quarter of fiscal 2004, the Corporation announced
        the consolidation of its Winnipeg retail printing operations in the
        Marketing Products and Services sector. The consolidation was
        completed during the first quarter of 2006.

    6.  Employee future benefits

    Pension plans

    The Corporation offers various contributory and non-contributory defined
    benefit pension plans and defined contribution pension plans to its
    employees and those of its participating subsidiaries. The cost related
    to those plans is as follows:

                                  Three months ended     Twelve months ended
    (in millions of dollars)          October 31              October 31
    -------------------------------------------------------------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Pension plans
      Defined benefit pension
       plans                    $    6.0    $    5.7   $    23.5   $    24.4
      Defined contribution
       pension plans                 0.8         0.6         3.2         3.0
    -------------------------------------------------------------------------
                                $    6.8    $    6.3   $    26.7   $    27.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.  Accounts receivable

    As at October 31, 2007, $273 million of accounts receivable ($282 million
    as at October 31, 2006) had been sold under the accounts receivable
    securitization program, of which $37 million ($39 million as at
    October 31, 2006) was kept by the Corporation as retained interest,
    resulting in a net consideration of $236 million, including C$209 million
    and US$29 million ($243 million as at October 31, 2006, including
    C$206 million and US$33 million) which represents the maximum net
    consideration the Corporation could have obtained on those dates in
    accordance with the program terms and conditions. The retained interest
    is recorded in the Corporation's accounts receivable at the lower of cost
    and fair market value. Under the program, the Corporation recognized an
    aggregate discount on sale of accounts receivable of $2.3 million and
    $11.1 million, respectively, for the three-month and twelve-month periods
    ended October 31, 2007 ($2.5 million and $8.3 million for the same
    periods in 2006).

    8.  Debt instruments

    On June 1st, 2007, Unsecured Senior Debentures totalling $100 million
    matured. These have been reimbursed using the existing term revolving
    credit facility.

    9.  Share capital

    Earnings per share

    The table below shows the calculation of basic and diluted earnings per
    share:

                                  Three months ended     Twelve months ended
                                      October 31              October 31
    -------------------------------------------------------------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Numerator (in millions
     of dollars)
      Net income                $   38.6   $    51.1   $   120.6   $   135.8
    -------------------------------------------------------------------------
    Denominator (in millions)
      Weighted average number
       of shares                    83.7        86.4        84.9        87.3
      Dilutive effect of stock
       options and warrants          0.1         0.1         0.1         0.1
    -------------------------------------------------------------------------
      Weighted average diluted
       number of shares             83.8        86.5        85.0        87.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share    $   0.46   $    0.59   $    1.42   $    1.56
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted earnings per share  $   0.46   $    0.59   $    1.42   $    1.55
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Stock options and warrants presented below were considered to be anti-
    dilutive in the calculation of the diluted earnings per share since their
    exercise price was greater than the average stock price during those
    periods.

                                               Three months ended
    ------------------------------------------------------------------------
                                       October 31               July 31
    ------------------------------------------------------------------------
                                    2007        2006        2007        2006
    ------------------------------------------------------------------------
    Stock options                605,540   1,397,100     612,600     942,600
    Warrants                           -     350,000           -     350,000
    ------------------------------------------------------------------------


                                               Three months ended
    ------------------------------------------------------------------------
                                         April 30            January 31
    ------------------------------------------------------------------------
                                    2007        2006        2007        2006
    ------------------------------------------------------------------------
    Stock options                629,420   1,406,380     638,340   1,055,160
    Warrants                           -     350,000           -     350,000
    ------------------------------------------------------------------------

    Exercise of stock options

    When officers and senior executives exercise their stock options, the
    amounts received from them are credited to share capital. For stock
    options granted since November 1, 2002, the amount previously accounted
    for as an increase to contributed surplus is also transferred to share
    capital. For the three-month and twelve-month periods ended October 31,
    2007, the amounts received were negligible and $0.7 million,
    respectively, and no amount and $0.1 million were transferred from
    contributed surplus to share capital for the same periods. For the three-
    month and twelve-month periods ended October 31, 2006, no amount and
    $2.9 million, respectively, were received and no amount and $0.2 million,
    respectively, were transferred from contributed surplus to share capital.

    Redemption of shares

    The Corporation was authorized to purchase for cancellation on the open
    market, between November 21, 2005 and November 20, 2006, up to 3,578,325
    of its Class A Subordinate Voting Shares, representing 5% of the
    71,566,506 issued and outstanding Class A Subordinate Voting Shares as of
    November 11, 2005, and up to 887,015 of its Class B Shares, representing
    5% of the 17,740,294 issued and outstanding Class B Shares as of
    November 11, 2005.

    The Corporation was authorized to purchase for cancellation on the open
    market, between November 21, 2006 and November 20, 2007, up to 3,448,698
    of its Class A Subordinate Voting Shares, representing 5% of the
    68,973,966 issued and outstanding Class A Subordinate Voting Shares as of
    November 7, 2006, and up to 852,907 of its Class B Shares, representing
    5% of the 17,058,145 issued and outstanding Class B Shares as of
    November 7, 2006.

    The purchases were made in the normal course of business at market prices
    through the facilities of the Toronto Stock Exchange in accordance with
    the requirements of the exchange.

    During the fourth quarter of fiscal 2007, the Corporation purchased
    140,800 of its Class A Subordinate Voting Shares at a weighted average
    price of $20.92 for a total consideration of $3.0 million and 18,000 of
    its Class B Shares at a weighted average price of $21.19 for a total
    consideration of $0.4 million. Of the total consideration of
    $3.4 million, $0.8 million corresponds to the book value and $2.6 million
    corresponds to the premium paid. The premium was accounted for as a
    decrease in retained earnings.

    During the twelve-month period ended October 31, 2007, the Corporation
    purchased 2,354,700 of its Class A Subordinate Voting Shares at a
    weighted average price of $21.27 for a total consideration of
    $50.1 million and 137,800 of its Class B Shares at a weighted average
    price of $21.69 for a total consideration of $3.0 million. Of the total
    consideration of $53.1 million, $13.3 million corresponds to the book
    value and $39.8 million corresponds to the premium paid. The premium was
    accounted for as a decrease in retained earnings.

    During the fourth quarter of fiscal 2006, the Corporation purchased
    486,700 of its Class A Subordinate Voting Shares at a weighted average
    price of $18.86 for a total consideration of $9.2 million and 64,000 of
    its Class B Shares at a weighted average price of $18.79 for a total
    consideration of $1.2 million. Of the total consideration of
    $10.4 million, $2.7 million corresponds to the book value and
    $7.7 million corresponds to the premium paid. The premium was accounted
    for as a decrease in retained earnings.

    During the twelve-month period ended October 31, 2006, the Corporation
    purchased 2,895,300 of its Class A Subordinate Voting Shares at a
    weighted average price of $19.03 for a total consideration of $55.1
    million and 639,651 of its Class B Shares at a weighted average price of
    $18.86 for a total consideration of $12.1 million. Of the total
    consideration of $67.2 million, $17.0 million corresponds to the book
    value and $50.2 million corresponds to the premium paid. The premium was
    accounted for as a decrease in retained earnings.

    10. Stock-based compensation plans

    Share unit plan

    On December 14, 2006, the Corporation modified its share unit plan to
    include additional senior executives. Previously, the only participant in
    this plan was the President and Chief Executive Officer. The share units
    are granted in the form of deferred share units ("DSU") or restricted
    share units ("RSU"). A portion of share units will vest based on economic
    value creation compared to a target and another portion of share units
    will vest based on tenure.

    No share units were granted for the three-month periods ended October 31,
    2007 and 2006. For the twelve-month period ended October 31, 2007, 138
    310 DSU and 30 788 RSU (none in 2006) were granted.

    As at October 31, 2007, 165,592 DSU and 26,507 RSU were outstanding
    (33,193 DSU in 2006). The amounts recorded in the consolidated statements
    of income for the three-month and twelve-month periods ended October 31,
    2007 were a reversal of an expense of 0.4 million and an expense of
    $0.2 million, respectively. The impact on the consolidated statements of
    income for the three-month and twelve-month periods ended October 31,
    2006 was negligible. No amount has been paid under the plan for the
    three-month and twelve-month periods ended October 31, 2007 and 2006.
    Stock option plan

    As at October 31, 2007, 1,865,306 stock options were granted, of which,
    979,936 could be exercised.

    There were no stock options granted for the three-month period ended
    October 31, 2007 and 2006. For the twelve-month periods ended October 31,
    2007 and 2006, 160,100 and 570,400 stock options were granted with a
    weighted average exercise price of $20.90 and $19.26, respectively.

    The table below summarizes the assumptions used to calculate the weighted
    average fair value of stock options granted on the date of the grant
    using the Black-Scholes model for the twelve-month periods ended
    October 31:

                                                            2007        2006
    ------------------------------------------------------------------------
    Fair value of stock options                        $    5.16   $    5.19
    Assumptions:
    ------------------------------------------------------------------------
    Dividend rate                                           1.1%        0.9%
    Expected volatility                                    22.6%       25.0%
    Risk-free interest rate                                3.96%       4.00%
    Expected life                                        5 years     5 years

    Stock-based compensation costs of $0.6 million and $0.6 million were
    charged to income for the three-month periods ended October 31, 2007 and
    2006, respectively. For the twelve-month periods ended October 31, 2007
    and 2006, $2.4 million and $2.0 million were charged to income,
    respectively.

    11. Contributed surplus

    (in millions of dollars)                  Twelve months ended October 31
    -------------------------------------------------------------------------
                                                            2007        2006
    -------------------------------------------------------------------------
    Balance, beginning of period                       $     6.9   $     5.1
    Compensation costs relating to
     stock-based compensation plans (Note 10)                2.4         2.0
    Exercise of stock options (Note 9)                      (0.1)       (0.2)
    -------------------------------------------------------------------------
    Balance, end of period                             $     9.2   $     6.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. Accumulated other comprehensive loss

    (in millions of dollars)                  Twelve months ended October 31
    -------------------------------------------------------------------------
                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------
    Balance, beginning of period,
     as previously reported                            $       -   $       -
    Unrealized net losses on translation of
     financial statements of self-sustaining
     foreign operations                                    (26.0)      (22.8)
    Financial Instruments - Recognition
     and Measurement (Note 3)                                3.8           -
    -------------------------------------------------------------------------
    Restated balance, beginning of period                  (22.2)      (22.8)
    Change in net gains on derivatives
     designated as cash flow hedges                          5.4           -
    Unrealized net losses on translation
     of financial statements of self-sustaining
     foreign operations                                    (16.3)       (3.2)
    -------------------------------------------------------------------------
    Balance, end of period                             $   (33.1)  $   (26.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at October 31, 2007, gains on derivatives designated as cash flow
    hedges of $7.2 million, net of income taxes of $3.5 million, reported
    under "Accumulated other comprehensive loss" in the consolidated balance
    sheet are expected to be reclassified to net income within the next
    twelve months. The remaining gains of $2.0 million, net of income taxes
    of $1.0 million, are expected to be reclassified to net income in 2009
    and 2010.

    The increase over 2006 in Accumulated other comprehensive loss is mainly
    due to unrealized net losses arising from the translation of foreign
    currency denominated assets and liabilities of self-sustaining foreign
    operations, mainly the result of the appreciation of the Canadian dollar
    compared to the U.S. dollar and the Mexican peso, partially compensated
    by net gains arising from the evaluation of the derivative financial
    instruments at fair market value in the consolidated balance sheet.

    13. Business acquisitions

    During the twelve-month period ended October 31, 2007, the Corporation
    made the following acquisitions:

    Operating                                                        Date of
    sector      Acquisitions                                     acquisition
    ------------------------------------------------------------------------
    Marketing   98% of the shares of PLM Group Ltd.,        October 16, 2007
    Products    commercial printer in the Greater Toronto
    and         Area
    Services

    Media       Assets of Seaway News, owner of a weekly       July 28, 2007
                newspaper in Cornwall, Seaway News,
                serving the eastern Ontario region

                Assets of Résonat Distribution Ltée, Québec    June 18, 2007
                Site Web.com Ltée and Condo Direct Ltée.,
                owners of Condo Direct and Condo et Loft
                D'aujourd'hui, magazines related to home
                building and renovation in Quebec

                100% of the shares of Les Productions          June 18, 2007
                Ma Maison Direct Ltée and Magazine des
                Maisons Neuves du Grand Montréal Ltée,
                owners of Maison D'aujourd'hui, Maison
                Direct, MaisonMax.com, MaisonNeuve.com
                and www.maisonmax.com Web site, magazines
                and web site related to home building and
                renovation in Quebec

                100% of the shares of The Oxbow Herald Ltd,    June 14, 2007
                owner of The Oxbow Herald, weekly newspaper
                in SouthEast Saskatchewan

                Assets of The Broadview Express and            May 1st, 2007
                The Grenfell Sun, weekly newspapers in
                Southern Saskatchewan

                100% of the shares of Radville Star        December 19, 2006
                Management, owner of The Radville Star
                and The Deep South Star, newspaper in
                Southern Saskatchewan

    ------------------------------------------------------------------------

                                          Chenelière
                                           Education
    (in millions of dollars)         PLM        Inc.      Others       Total
    -------------------------------------------------------------------------
    Assets acquired
      Working capital          $    26.9   $    (0.5)  $     0.4   $    26.8
      Property, plant and
       equipment                    42.4           -         0.4        42.8
      Goodwill (tax basis of
       $3.6 million)                75.0         0.5         8.9        84.4
      Amortizable intangible
       assets                       14.8        (0.7)          -        14.1
      Other assets                   0.4           -           -         0.4
    -------------------------------------------------------------------------
                                   159.5        (0.7)        9.7       168.5
    -------------------------------------------------------------------------
    Liabilities assumed
      Deferred revenues              7.7           -           -         7.7
      Long-term debt                18.1           -           -        18.1
      Other liabilities              0.3           -           -         0.3
      Future income tax
       liabilities                  13.3        (0.4)          -        12.9
      Non-controlling interest       1.9           -           -         1.9
    -------------------------------------------------------------------------
                                    41.3        (0.4)          -        40.9
    -------------------------------------------------------------------------
                               $   118.2   $    (0.3)  $     9.7   $   127.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration
      Cash paid                $    94.8   $       -   $     9.4   $   104.2
      Bank overdraft in
       acquired operations          15.2           -           -        15.2
      Balance of sale payable,
       maturing within one
       year, bearing no
       interest                        -        (0.3)        0.3           -
      Short-term liabilities         8.2           -           -         8.2
    -------------------------------------------------------------------------
                               $   118.2   $    (0.3)  $     9.7   $   127.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    PLM Group Ltd.

    The purchase price allocation of PLM Group Ltd. is preliminary and could
    change once the valuation of the assets acquired is concluded and the
    final determination of the costs related to the acquisition has been
    made.

    Chenelière Education Inc.

    During the twelve-month period ended October 31, 2007, adjustments were
    made to the purchase price allocation of Chenelière Education Inc, which
    was acquired on August 31, 2006, to reflect the final valuation of the
    assets acquired and the final determination of the costs related to the
    acquisition.

    During the twelve-month period ended October 31, 2007, the Corporation
    paid an amount of $13.1 million, of which $0.6 million was included in
    short-term liabilities and $12.5 million in balance of sale payable as at
    October 31, 2006. As at October 31, 2007, the balance in short-term
    liabilities is $0.2 million, which is included in "Accounts payable and
    accrued liabilities" and the balance of sale payable is $3.1 million,
    which is included in "Current portion of long-term debt" in the
    consolidated balance sheet.

    Others

    The purchase price allocations of the other acquisitions are preliminary
    and could change once the valuation of the assets acquired is concluded
    and the final determination of the costs related to these acquisitions
    has been made.

    14. Financial Instruments

    During the first quarter of fiscal 2007, the Corporation entered into a
    total return swap agreement with a financial institution in order to
    minimize the impact of the fluctuations in its Class A Subordinate Voting
    Share price on its compensation expense which includes a charge related
    to its share unit plan as described in Note 10. The Corporation now
    receives or pays, on a quarterly basis, the difference between the fixed
    share price of the total return swap and the Class A Subordinate Voting
    Share price, less any amount previously received or paid. As at
    October 31, 2007, the total return swap agreement covered 118,000 Class A
    Subordinate Voting Shares. The term of this total return swap agreement
    ranges from one to five years, with a fixed price of $21.07. The fair
    value of the swap agreement, which is negligible as at October 31, 2007,
    is recorded in the Corporation consolidated balance sheet with changes in
    fair value recognized in net income.

    15. Commitments and contingent liabilities

    Machinery and equipment

    The Corporation is committed to acquire machinery and equipment. As at
    October 31, 2007, these commitments represented $76.0 million, including
    C$31.3 million, US$45.3 million and (euro)1.4 million. Minimum payments
    required in 2008 and 2009 are $67.4 million and $8.6 million,
    respectively.

    Settlement of a lawsuit

    On October 8, 2004, the Corporation announced that an unfavourable ruling
    was rendered by a California court in the lawsuit brought by Softbank
    Content Services, Inc. against 9112-0691 Québec inc. (previously named
    MPO Canada inc.), a holding company owned equally by Transcontinental
    inc. and 3093-8195 Québec inc., a subsidiary of MPO S.A. The lawsuit
    involved a guarantee awarded to Softbank Content Services, Inc. by MPO
    Canada inc. in 1999 on behalf of Americ Disc Inc., its then wholly-owned
    subsidiary. During the second quarter of fiscal 2007, following a ruling
    on appeal, the Corporation paid a total amount of US$5.8 million to
    Softbank Content Services, Inc. in final settlement of the lawsuit. This
    amount was provided for in 2004.

    16. Segmented information

    Sales between sectors of the Corporation are measured at fair value.
    Transactions, other than sales, are measured at carrying value.

                                  Three months ended     Twelve months ended
    (in millions of dollars)          October 31              October 31
    -------------------------------------------------------------------------
                                    2007        2006        2007        2006
                                           (restated               (restated
                                             Note 2)                 Note 2)
    -------------------------------------------------------------------------
    Revenues
      Printing Products and
       Services                $   185.6   $   190.9   $   718.2   $   714.7
      Marketing Products and
       Services                    282.2       279.9     1,066.6     1,082.2
      Media                        178.9       161.1       633.5       579.8
      Other activities and
       unallocated amounts           3.9         3.1        14.7        12.7
      Inter-segment sales
        Printing Products
         and Services              (19.4)      (17.2)      (66.3)      (61.5)
        Marketing Products
         and Services               (8.9)       (8.7)      (24.1)      (29.8)
        Media                       (4.0)       (4.1)      (16.4)      (15.8)
    -------------------------------------------------------------------------
      Total inter-segment
       sales                       (32.3)      (30.0)     (106.8)     (107.1)
    -------------------------------------------------------------------------
                                $  618.3   $   605.0   $ 2,326.2   $ 2,282.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating income before
     amortization, impairment
     of assets
     and restructuring costs
      Printing Products and
       Services                 $   30.1   $    33.6   $   121.1   $   116.7
      Marketing Products and
       Services                     38.4        41.1       129.3       147.6
      Media                         39.4        28.4       123.9        97.9
      Other activities and
       unallocated amounts          (7.3)       (5.9)      (23.9)      (19.5)
    -------------------------------------------------------------------------
                                $  100.6   $    97.2   $   350.4   $   342.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating income
      Printing Products and
       Services                 $   18.1   $    24.7   $    77.1   $    74.8
      Marketing Products and
       Services                     22.0        25.4        62.1        82.0
      Media                         35.5        17.9       107.9        80.4
      Other activities and
       unallocated amounts          (8.7)       (7.2)      (29.3)      (24.3)
    -------------------------------------------------------------------------
                                $   66.9   $    60.8   $   217.8   $   212.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Acquisitions of property,
     plant and equipment(1)
      Printing Products and
       Services                 $   33.9   $    9 .4   $    67.5   $    40.9
      Marketing Products and
       Services                     10.1        16.7        54.8        57.1
      Media                          5.2         5.2        10.9        10.9
      Other activities and
       unallocated amounts           1.1         2.0         5.2         5.0
    -------------------------------------------------------------------------
                                $   50.3   $    33.3   $   138.4   $   113.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Amortization of property,
     plant and equipment,
     intangible assets and
     deferred charges
      Printing Products and
       Services                 $   11.8   $    10.6   $    41.0   $    39.1
      Marketing Products and
       Services                     15.8        15.2        61.1        62.5
      Media                          3.8         3.8        15.5        10.7
      Other activities and
       unallocated amounts           1.3         1.3         5.3         4.9
    -------------------------------------------------------------------------
                                $   32.7   $    30.9   $   122.9   $   117.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Those amounts represent total expenditures for additions to property,
    plant and equipment, whether they are paid or not.

                                                           As at       As at
                                                      October 31  October 31
                                                            2007        2006
                                                                   (restated
    (in millions of dollars)                                          Note 2)
    -------------------------------------------------------------------------
    Assets
      Printing Products and Services                   $   569.4   $   531.9
      Marketing Products and Services                      922.2       787.4
      Media                                                771.8       773.3
      Other activities and unallocated amounts             106.2       169.8
    -------------------------------------------------------------------------
                                                       $ 2,369.6   $ 2,262.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
      Printing Products and Services                   $   110.3   $   110.5
      Marketing Products and Services                      319.8       273.2
      Media                                                504.3       496.9
      Other activities and unallocated amounts               0.2         0.9
    -------------------------------------------------------------------------
                                                       $   934.6   $   881.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    17. Subsequent events

    Federal Corporate income tax rate reductions

    On December 13, 2007, Bill C-28 received third reading in the House of
    Commons. Accordingly, the Federal Corporate Income tax rate reductions
    announced in the October 30, 2007 Economic Statement became substantively
    enacted for the purpose of preparing the consolidated financial
    statements in accordance with Canadian GAAP. This future decrease in
    federal tax rate will reduce both the income tax expense and net future
    income tax liabilities by approximately $6.5 million during the first
    quarter of fiscal 2008.

    Business acquisition

    As of November 19, 2007, the Corporation acquired an additional 2% of the
    shares of PLM Group Ltd. The Corporation owns 100% of the shares of PLM
    Group Ltd since that date.

    Redemption of shares

    The Corporation purchased 27,400 of its Class A Subordinate Voting Shares
    at a weighted average price of $20.61 for a total consideration of
    $0.6 million and 4,000 of its Class B Shares at a weighted average price
    of $20.75 for total consideration of $0.1 million between November 1,
    2007 and November 20, 2007 in accordance with its Normal Course Issuer
    Bid as described in Note 9.

    18. Effect of new accounting standards not yet implemented

    Inventories

    In March 2007, the CICA issued Section 3031, Inventories, replacing
    Section 3030, Inventories. This Section applies to interim and annual
    financial statements for fiscal years beginning on or after January 1,
    2008. The Section prescribes the accounting treatment for inventories
    such as measurement of inventories at the lower of cost and net
    realizable value. It provides guidance on the determination of cost and
    its subsequent recognition as an expense, including any write-downs to
    net realizable value and reversal of previous write-downs of inventories
    arising from an increase in net realizable value. It also provides
    guidance on the cost methodologies that are used to assign costs to
    inventories and it describes the required disclosures on the carrying
    amount of inventories, the amount of inventories recognized as an expense
    and the amount of write-downs or reversal of write-downs of inventories.
    The Corporation is currently evaluating the impact of the adoption of
    this new Section on the consolidated financial statements.

    Financial Instruments - Disclosures

    In December 2006, the CICA issued Section 3862, Financial Instruments -
    Disclosures, replacing Section 3861 - Financial Instruments - Disclosure
    and Presentation. This Section applies to fiscal years beginning on or
    after October 1, 2007. It describes the required disclosures related to
    the significance of financial instruments on the entity's financial
    position and performance and the nature and extent of risks arising for
    financial instruments to which the entity is exposed and how the entity
    manages those risks. This Section complements the principles of
    recognition, measurement and presentation of financial instruments of
    Sections 3855, Financial Instruments - Recognition and Measurement, 3863,
    Financial Instruments - Presentation and 3865, Hedges. The Corporation is
    currently evaluating the impact of the adoption of this new Section on
    the consolidated financial statements.

    Financial Instruments - Presentation

    In December 2006, the CICA issued Section 3863, Financial Instruments -
    Presentation, replacing Section 3861 - Financial Instruments - Disclosure
    and Presentation. This Section applies to fiscal years beginning on or
    after October 1, 2007. It establishes standards for presentation of
    financial instruments and non-financial derivatives. The Corporation is
    currently evaluating the impact of the adoption of this new Section on
    the consolidated financial statements.

    Capital Disclosures

    In December 2006, the CICA issued Section 1535, Capital Disclosures. This
    Section applies to fiscal years beginning on or after October 1, 2007. It
    establishes standards for disclosing information about an entity's
    capital and how it is managed to enable users of financial statements to
    evaluate the entity's objectives, policies and procedures for managing
    capital. The Corporation is currently evaluating the impact of the
    adoption of this new Section on the consolidated financial statements.

    19. Comparative figures

    Certain prior period figures have been reclassified to conform with the
    current period presentation.



    Deloitte
                                                    Samson Bélair/Deloitte &
                                                    Touche s.e.n.c.r.l.
                                                    1 Place Ville Marie
                                                    Suite 3000
                                                    Montreal QC H3B 4T9
                                                    Canada

                                                    Tel: 514-393-5239
                                                    Fax: 514-390-4111
                                                    www.deloitte.ca

    Auditors' report

    To the Shareholders of
    Transcontinental Inc.

    We have audited the consolidated balance sheets of Transcontinental Inc.
as at October 31, 2007 and 2006 and the consolidated statements of income,
comprehensive income, retained earnings and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
    We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation.
    In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Corporation as at October
31, 2007 and 2006 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted accounting
principles.


    Samson Bélair/Deloitte & Touche s.e.n.c.r.l.

    Chartered Accountants

    Montréal, Canada
    December 14, 2007

                                                    Membre de
                                                    Deloitte Touche Tohmatsu



                                           CONSOLIDATED STATEMENTS OF INCOME
                                              For the years ended October 31

    (in millions of dollars, except per share data)
    -------------------------------------------------------------------------
                                               Notes        2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------

    Revenues                                           $ 2,326.2   $ 2,282.3
    Operating costs                                      1,707.5     1,686.1
    Selling, general and administrative
     expenses                                              268.3       253.5
    -------------------------------------------------------------------------

    Operating income before amortization,
     impairment of assets and
     restructuring costs                                   350.4       342.7
    Amortization                                  23       122.9       117.2
    Impairment of assets and restructuring costs   4         9.7        12.6
    -------------------------------------------------------------------------

    Operating income                                       217.8       212.9
    Financial expenses                             5        32.2        30.7
    Discount on sale of accounts receivable        7        11.1         8.3
    -------------------------------------------------------------------------

    Income before income taxes and
     non-controlling interest                              174.5       173.9
    Income taxes                                   6        53.6        37.6
    Non-controlling interest                                 0.3         0.5
    -------------------------------------------------------------------------
    Net income                                         $   120.6   $   135.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Per share (basic)                             16
    Net income                                         $    1.42   $    1.56
    -------------------------------------------------------------------------
    Per share (diluted)                           16
    Net income                                         $    1.42   $    1.55
    -------------------------------------------------------------------------

    Average number of shares outstanding
     (in millions)                                          84.9        87.3
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.



                             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                              For the years ended October 31

    (in millions of dollars)
    -------------------------------------------------------------------------
                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------

    Net income                                         $   120.6   $   135.8
    Other comprehensive loss:
    Unrealized net gains on derivatives designated
     as cash flow hedges, net of income taxes of
     $5.0 million for the year ended October 31,
     2007                                                    9.7           -
    Reclassification adjustment for net gains on
     derivatives designated as cash flow hedges in
     prior years transferred to net income in the
     current year, net of income taxes of $2.2 million
     for the year ended October 31, 2007                    (4.3)          -
    -------------------------------------------------------------------------
    Change in net gains on derivatives designated as
     cash flow hedges                                        5.4           -
    Unrealized net losses on translation of financial
     statements of self-sustaining foreign operations      (16.3)       (3.2)
    -------------------------------------------------------------------------
    Other comprehensive loss                               (10.9)       (3.2)
    -------------------------------------------------------------------------
    Comprehensive income                               $   109.7   $   132.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                              For the years ended October 31

    (in millions of dollars)
    -------------------------------------------------------------------------
                                               Notes        2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------

    Balance, beginning of year, as previously
     reported                                          $   769.0   $   703.1
    Adjustments to opening retained earnings       2       (19.9)      (17.8)
    -------------------------------------------------------------------------
                                                           749.1       685.3
    Financial Instruments - Recognition and
     Measurement                                   3        (0.2)          -
    -------------------------------------------------------------------------
    Restated balance, beginning of year                    748.9       685.3
    Net income                                             120.6       135.8
    -------------------------------------------------------------------------
                                                           869.5       821.1

    Premium on redemption of shares               16       (39.8)      (50.2)
    Dividends on shares                                    (23.3)      (21.8)
    -------------------------------------------------------------------------
    Balance, end of year                               $   806.4   $   749.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.



                                                 CONSOLIDATED BALANCE SHEETS
                                                            As at October 31

    (in millions of dollars)
    -------------------------------------------------------------------------
                                               Notes        2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------

    Current assets
      Cash and temporary investments                   $    48.5   $    89.3
      Accounts receivable                          7       196.9       176.3
      Income taxes receivable                      6         1.3         2.2
      Inventories                                  8        91.0        92.8
      Prepaid expenses and other current assets             18.4        17.4
      Future income tax assets                     6        11.8         6.3
    -------------------------------------------------------------------------
                                                           367.9       384.3

    Property, plant and equipment                  9       739.7       701.3
    Goodwill                                      10       934.6       881.5
    Intangible assets                             11       172.5       165.8
    Future income tax assets                       6        64.6        59.1
    Other assets                                  12        90.3        70.4
    -------------------------------------------------------------------------
                                                       $ 2,369.6   $ 2,262.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Current liabilities
      Accounts payable and accrued liabilities         $   400.5   $   417.4
      Income taxes payable                         6        32.3        52.4
      Deferred subscription revenues and deposits           52.9        54.2
      Current portion of long-term debt           14        14.2        12.7
    -------------------------------------------------------------------------
                                                           499.9       536.7

    Long-term debt                                14       523.3       467.9
    Future income tax liabilities                  6       108.4        77.4
    Other liabilities                             15        58.2        42.0
    -------------------------------------------------------------------------
                                                         1,189.8     1,124.0
    -------------------------------------------------------------------------

    Non-controlling interest                                 2.2         0.8
    -------------------------------------------------------------------------

    Commitments, guarantees and contingent
     liabilities                                  24

    Shareholders' equity
      Share capital                               16       395.1       407.6
      Contributed surplus                         18         9.2         6.9
      Retained earnings                                    806.4       749.1
      Accumulated other comprehensive loss        19       (33.1)      (26.0)
    -------------------------------------------------------------------------
                                                           773.3       723.1
    -------------------------------------------------------------------------
                                                         1,177.6     1,137.6
    -------------------------------------------------------------------------
                                                       $ 2,369.6   $ 2,262.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.


    Approved on behalf of the Board of Directors,

    (s) Rémi Marcoux                         (s) Robert Chevrier
    Rémi Marcoux                             Robert Chevrier,
    Director                                 Director



                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              for the years ended October 31

    (in millions of dollars)
    -------------------------------------------------------------------------
                                               Notes        2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------

    Operating activities
      Net income                                       $   120.6   $   135.8
      Items not affecting cash and cash
       equivalents
        Amortization                              23       149.0       132.4
        Impairment of assets                       4         3.6         6.5
        Gain on disposal of assets                          (0.1)       (1.4)
        Future income taxes                        6        (1.4)      (15.6)
        Non-controlling interest                             0.3         0.5
        Accrued pension benefit asset and
         liability                                22         8.7         9.1
        Stock-based compensation and other
         stock-based payments                     17         2.6         2.0
        Other                                                5.8         1.8
    -------------------------------------------------------------------------
    Cash flow from operating activities before
     changes in non-cash operating items                   289.1       271.1
    Changes in non-cash operating items           20       (48.1)      (57.1)
    -------------------------------------------------------------------------
    Cash flow related to operating activities              241.0       214.0
    -------------------------------------------------------------------------

    Investing activities
      Business acquisitions                       21      (132.5)     (117.0)
      Acquisitions of property, plant and
       equipment                                          (130.2)     (113.9)
      Disposals of property, plant and equipment             3.3         9.0

      Increase in other assets                             (28.4)      (29.9)
    -------------------------------------------------------------------------
    Cash flow used in investing activities                (287.8)     (251.8)
    -------------------------------------------------------------------------

    Financing activities
      Increase in long-term debt                             2.6         0.6
      Reimbursement of long-term debt                     (108.4)       (8.2)
      Increase in revolving term credit facility           191.3           -
      Dividends on shares                                  (23.3)      (21.8)
      Redemption of shares                        16       (53.1)      (67.2)
      Issuance of shares                          16         0.7         2.9
      Other                                                 (0.6)       (0.5)
    -------------------------------------------------------------------------
    Cash flow related to (used in) financing
     activities                                              9.2       (94.2)
    -------------------------------------------------------------------------

    Effect of exchange rate changes on cash and
     cash equivalents denominated in foreign
     currencies                                             (3.2)       (0.7)
    -------------------------------------------------------------------------

    Decrease in cash and cash equivalents                  (40.8)     (132.7)
    Cash and cash equivalents at beginning of year          89.3       222.0
    -------------------------------------------------------------------------
    Cash and cash equivalents at end of year           $    48.5   $    89.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.



                              Notes to the Consolidated Financial Statements
                                              For the years ended October 31
                              (in millions of dollars, except per share data)
    -------------------------------------------------------------------------

                     1. Significant accounting policies

    The consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles ("GAAP") and include
the following significant accounting policies:

    a) Consolidation

    The consolidated financial statements include the accounts of the
    Corporation and those of its subsidiaries, joint ventures and variable
    interest entities for which the Corporation is the principal beneficiary.
    Business acquisitions are accounted for under the purchase method and the
    results of operations of these businesses are included in the
    consolidated financial statements from the acquisition date. Investments
    in joint ventures are accounted for using the proportionate consolidation
    method and investments in companies subject to significant influence are
    accounted for using the equity method. Other investments are recorded at
    cost.

    b) Use of estimates

    The consolidated financial statements include amounts based on
    management's estimates and judgements, considering the materiality of
    these amounts. Actual results could differ from the estimates. The most
    significant areas requiring the use of management estimates relate to:
    impairment of assets and restructuring costs, accounting for income
    taxes, amortization periods of property, plant and equipment, valuation
    of goodwill and intangible assets, stock- based compensation costs and
    accounting for employee future benefits.

    c) Revenue recognition

    Printing Products and Services and Marketing Products and Services
    sectors revenues are recognized when products are shipped or delivered in
    accordance with the customer contract or when services are rendered and
    the ability to collect is reasonably assured. Most sales are promptly
    delivered to clients; consequently, the Corporation does not have
    significant finished goods in inventory.

    Volume discounts are recorded as reductions in revenues in the
    consolidated statements of income.

    Media sector revenues are recognized as follows:

    Advertising revenues:

    Advertising revenues are recorded at the billing date, which corresponds
    to the publication date in the case of a daily or weekly publication, and
    the date of issue in the case of a monthly publication.

    Subscription revenues:

    Subscription revenues are recorded on an accrual basis rather than when
    subscriptions are received. These revenues are therefore recorded in
    deferred subscription revenues and subsequently transferred to income
    based on the subscription term.

    Distribution revenues:

    Door-to-door distribution revenues are recorded at the time of billing,
    which corresponds to the delivery date of the advertising material.

    Newsstand revenues:

    Newsstand revenues are recorded at the time of delivery, net of a
    provision for returns and delivery costs.

    Educational book revenues:

    Educational book revenues are recognized upon shipment to customers,
    since title passes upon shipment.

    d) Income taxes

    The Corporation records income taxes using the liability method of
    accounting. Under this method, future income tax assets and liabilities
    are determined based on the differences between the carrying amount and
    the tax basis of the assets and liabilities and are measured using tax
    rates in effect when these differences are expected to reverse in
    accordance with enacted laws or those substantively enacted at the date
    of the financial statements. Future income tax assets are recognized only
    if management believes it is more likely than not that they will be
    realized.

    e) Tax credits

    The Corporation benefits from income tax credits related to operating
    costs and property, plant and equipment, depending on the jurisdiction
    where they are expended. These credits are accounted for either as a
    reduction of operating costs or property, plant and equipment.

    f) Cash and cash equivalents

    Cash and cash equivalents include cash, bank overdraft and temporary
    investments with original maturities of less than three months. Cash and
    cash equivalents are presented at fair value.

    g) Transfer of receivables

    The Corporation's receivables securitization program complies with sale
    of assets criteria and, consequently, is recorded off balance sheet.

    h) Inventories

    Raw materials are valued at the lower of cost and replacement value. Work
    in progress and finished goods are valued at the lower of cost and net
    realizable value. Cost is determined using the first in, first out
    method.

    i) Property, plant and equipment

    Property, plant and equipment are stated at cost and amortized using the
    straight-line method over their estimated useful lives, as follows:

    -------------------------------------------------------------------------
    Buildings                                        20 - 40 years
    Machinery and equipment                          3 - 15 years
    Machinery and equipment under capital leases     3 - 15 years
    Other equipment                                  2 - 5 years
    Leasehold improvements                           Term of the lease
    -------------------------------------------------------------------------

    Costs, such as interest, directly incurred for the acquisition or
construction of property, plant and equipment are capitalized and amortized
over the useful life of the corresponding asset. Assets under construction are
not amortized until they are ready for their intended use.
    Property, plant and equipment held for sale are stated at the lower of net
book value or fair value.

    j) Goodwill

    Goodwill represents the excess of acquisition cost over fair value of net
    assets of acquired businesses. Goodwill has an indefinite useful life and
    is not amortized, but it is tested annually for impairment or more
    frequently if impairment indicators arise.

    k) Intangible assets

    Amortizable intangible assets consist of educational book titles,
    printing contracts, customer relationships and non-compete agreements.
    These assets are amortized based on historical sales patterns, which vary
    from 6 to 9 years, for educational book titles, and over the printing
    contract terms, the customer relationships or the non-compete agreement
    terms, which vary from 3 to 15 years.

    Non-amortizable intangible assets consist of trade names, mainly
    magazines and newspapers, acquired and their related circulation. These
    assets have an indefinite useful life and are not amortized, but tested
    annually for impairment or more frequently if impairment indicators
    arise.

    l) Deferred charges

    Deferred charges include incentives, start-up costs and long-term
    technology project costs, which are amortized on a straight-line basis
    over 2 to 10 year periods, and educational books prepublication costs,
    which are amortized over a maximum of five years based on historical
    sales patterns.

    m) Asset retirement obligations

    Legal obligations linked to removal obligations on certain buildings are
    recorded in the period in which they are incurred. The obligation is
    initially measured at fair value using an expected present value
    technique and is subsequently adjusted for any changes resulting from the
    passage of time and any changes to the timing or the amount of the
    original estimate. Upon initial recognition of a liability for an asset
    retirement obligation, an asset retirement cost is capitalized as part of
    the carrying amount of the related asset by the same amount as the
    liability and is amortized into income over its remaining useful life.

    n) Employee future benefits

    The accrued benefit obligation is determined by independent actuaries
    using the projected benefit method prorated on services and is based on
    management's best economic and demographic estimates. The Corporation
    amortizes the unrecognized net aggregate actuarial gains and losses in
    excess of 10% of the greater of the accrued benefit obligation or the
    fair value of plan assets, and past service costs, over the expected
    average remaining service life ("EARSL") of the employee group covered by
    the plans which ranges from 13 to 18 years. The transitional obligation
    resulting from the initial application of Section 3461 of the Canadian
    Institute of Chartered Accountants' ("CICA") Handbook in November 2000 is
    also amortized over the EARSL of the employee group covered by the plans.
    For the purpose of calculating the expected return on plan assets, the
    fair market value is used.

    o) Share unit plan

    Deferred share units ("DSU") and restricted share units ("RSU") are
    recognized as a compensation expense on a straight-line basis, over the
    three-year vesting period. DSUs and RSUs are remeasured at fair market
    value at each reporting period, until settlement in the case of DSUs or
    until the vesting date in the case of RSUs, which corresponds to the
    settlement date, using the trading price of the Corporation's Class A
    Subordinate Voting Shares. Fair market value variations are accounted for
    as compensation expense with a corresponding credit to "Other
    liabilities" in the consolidated balance sheet. Vested DSUs and RSUs will
    be paid, at the Corporation's option, in cash or with Class A Subordinate
    Voting Shares of the Corporation purchased on the open market.

    p) Foreign currency translation

    Operating foreign subsidiaries, with the exception of sales offices, are
    considered self-sustaining foreign operations and the current rate method
    is used to translate their financial statements into Canadian dollars.
    The resulting translation adjustments are reported under "Accumulated
    other comprehensive loss" in the consolidated balance sheet and
    recognized in income only when a reduction of the investment in these
    foreign operations has been realized. Integrated foreign operations,
    including foreign sales offices, are translated using the temporal method
    and the foreign exchange gains or losses are recognized in income.

    q) Financial instruments

    The Corporation identifies, assesses and manages financial risks related
    to fluctuations in stock-based compensation costs, in interest rates, in
    foreign exchange rates and in commodity prices in order to minimize their
    impact on the Corporation's results and financial position. The
    Corporation manages its financial risks in accordance with specific
    criteria approved by its Board of Directors and does not engage in purely
    speculative transactions. If the Corporation did not use derivative
    financial instruments, it would have a greater exposure to market
    volatility.

    Hedging relationships:

    The Corporation maintains proper documentation concerning its risk
management objectives and strategies under which hedging activities are
derived as well as for the relationships between the various hedging
instruments and the hedged items. This process consists of matching all
derivative hedging instruments to specific assets and liabilities, to firm
commitments or specific anticipated transactions.
    In managing its foreign exchange exposure, the Corporation uses various
derivative financial instruments to hedge its exposure toward specific
anticipated transactions and a portion of its foreign denominated accounts
receivable. Consequently, an adjustment is made to the hedged items to reflect
the hedge rate.
    When a hedging relationship is put in place and throughout its duration,
there must be a reasonable assurance that the relationship will remain
effective and in accordance with the Corporation's risk management objective
and strategy as initially documented. When hedging instruments mature or
become ineffective before their maturity and are not replaced within the
Corporation's documented hedging strategy, any gains, losses, revenues or
expenses associated with the hedging instrument that had previously been
recognized in other comprehensive income as a result of applying hedge
accounting are carried forward to be recognized in net income in the same
period or periods during which the asset acquired or liability incurred
affects net income. If the hedged item ceases to exist due to its maturity,
expiry, cancellation or exercise before the hedging instrument expires, any
gains, losses, revenues or expenses associated with the hedging instrument
that had previously been recognized in other comprehensive income as a result
of applying hedge accounting are recognized in the reporting period's net
income along with the corresponding gains, losses, revenues or expenses
recognized on the hedged item.


                               2. Restatement

    In the context of the preparation of its consolidated financial statements
for the year ended October 31, 2007, the Corporation's management identified
two accounting errors in prior years' financial statements relating to the
amortization of the property, plant and equipment and income taxes.

    Amortization of property, plant and equipment

    Amortization on property, plant and equipment of the Corporation's Mexican
subsidiaries was calculated using an incorrect cost basis. Accordingly,
amortization expense and income tax expense for the year ended October 31,
2006 have been increased by $2.9 million and reduced by $0.8 million,
respectively. Property, plant and equipment and future income tax liabilities
as of October 31, 2006 have been reduced by $12.3 million and $3.4 million,
respectively. Opening retained earnings and accumulated other comprehensive
loss for the year ended October 31, 2006 have been reduced by $8.0 million and
$1.2 million, respectively.

    Income taxes

    As of October 31, 2006, income taxes payable and future income tax
liabilities were globally understated by $9.8 million, mainly due to errors in
accounting provisions for income taxes on inter-company transactions and to
future income tax assets on operating losses considered twice, for years prior
to 2006. Future income tax liabilities and income taxes payable as of
October 31, 2006 have been increased by $10.7 million and reduced by $0.9
million, respectively. Opening retained earnings for the year ended October
31, 2006 have been reduced by $9.8 million.

    Net income and earnings per share impact

    For the year ended October 31, 2006, net income has been reduced by
$2.1 million and net basic and diluted earnings per share have been reduced by
$0.02 and $0.03, respectively.


                      3. Changes in accounting policies

    a) Financial Instruments - Recognition and measurement

    On November 1, 2006, the Corporation adopted Section 3855 of the CICA
    Handbook, Financial Instruments - Recognition and measurement. It exposes
    the standards for recognizing and measuring financial instruments in the
    balance sheet and the standards for reporting gains and losses in the
    consolidated financial statements. Financial assets available for sale,
    assets and liabilities held for trading and derivative financial
    instruments, part of a hedging relationship or not, have to be measured
    at fair value.

    The Corporation has made the following classifications:

    - Cash and temporary investments are classified as financial assets held
      for trading and are measured at fair value. Gains and losses related to
      periodical revaluation are recorded in net income.
    - Other than temporary investments will be classified as either financial
      assets held to maturity and will thus be measured at amortized cost or
      as available-for-sale and will thus be marked-to-market through
      comprehensive income at each period end.
    - Accounts receivable are classified as loans and receivables and are
      initially measured at fair value and subsequently at amortized cost
      using the effective interest rate method.
    - Bank overdraft, accounts payable and accrued liabilities, other
      liabilities and long-term debt are classified as other liabilities and
      are initially measured at fair value and subsequently at amortized cost
      using the effective interest rate method.

    The adoption of this Section is done retroactively without restatement of
the consolidated financial statements of prior periods. As at November 1,
2006, the impact on the consolidated balance sheet of measuring the financial
assets and liabilities using the effective interest rate method and of
reclassifying the costs directly attributable to the issuance of the long-term
debt against long-term debt was an increase in future income tax assets of
$0.1 million and a decrease in property, plant and equipment, other assets,
long-term debt and opening retained earnings of $1.2 million, $1.8 million,
$2.7 million and $0.2 million, respectively.
    The impact on the consolidated balance sheet of measuring hedging
derivatives at fair value as at November 1, 2006 was an increase in other
assets, future income tax liabilities and other liabilities of $6.5 million,
$1.8 million and $0.9 million, respectively, and a decrease in accumulated
other comprehensive loss of $3.8 million. Prior periods were not restated.
    The Corporation selected November 1, 2002 as its transition date for
embedded derivatives. An embedded derivative is a component of a financial
instrument or another contract of which the characteristics are similar to a
derivative. This had no impact on the consolidated financial statements.

    b) Financial instruments - Disclosure and presentation

    On November 1, 2006, the Corporation adopted Section 3861 of the CICA
    Handbook, Financial Instruments - Disclosure and presentation. This
    Section establishes standards for presentation of financial instruments
    and non-financial derivatives, and defines the information that should be
    disclosed about them.

    c) Comprehensive income

    On November 1, 2006, the Corporation adopted Section 1530 of the CICA
    Handbook, Comprehensive Income. It describes reporting and disclosure
    recommendations with respect to comprehensive income and its components.
    Comprehensive income is the change in shareholders' equity, which results
    from transactions and events from sources other than the Corporation's
    shareholders. These transactions and events include changes in the
    currency translation adjustment relating to self-sustaining foreign
    operations and unrealized gains and losses resulting from changes in fair
    value of certain financial instruments.

    The adoption of this Section implied that the Corporation now presents a
    consolidated statement of comprehensive income as a part of the
    consolidated financial statements. The comparative consolidated financial
    statements are restated to reflect the application of this Section only
    for changes in the balances for foreign currency translation of self-
    sustaining foreign operations.

    d) Equity

    On November 1, 2006, the Corporation adopted Section 3251 of the CICA
    Handbook, Equity, replacing Section 3250, Surplus. It describes standards
    for the presentation of equity and changes in equity for a reporting
    period as a result of the application of Section 1530, Comprehensive
    Income.

    e) Hedges

    On November 1, 2006, the Corporation adopted Section 3865 of the CICA
    Handbook, Hedges. The recommendations of this Section expand the
    guidelines required by Accounting Guideline 13 (AcG-13), Hedging
    Relationships. This Section describes when and how hedge accounting can
    be applied as well as the disclosure requirements. Hedge accounting
    enables the recording of gains, losses, revenues and expenses from the
    derivative financial instruments in the same period as for those related
    to the hedged item.

    f) Non-monetary transactions

    In 2005, the CICA issued Section 3831 of the CICA Handbook, Non-Monetary
    Transactions, replacing Section 3830 of the same name. Under these new
    standards, the Corporation should measure an asset exchanged or
    transferred in a non-monetary transaction, initiated in periods beginning
    on or after January 1, 2006, at the more reliable measure of the fair
    value of the asset given up and the fair value of the asset received,
    unless: the transaction lacks commercial substance; the transaction is an
    exchange of a product or property held for sale in the ordinary course of
    business for a product or property to be sold in the same line of
    business to facilitate sales to customers other than the parties to the
    exchange; neither the fair value of the assets received nor the fair
    value of the asset given up is reliably measurable; or the transaction is
    a non-monetary non-reciprocal transfer to owners. An asset exchanged or
    transferred in a non-monetary transaction that is not measured at fair
    value is measured at the carrying amount of the asset given up adjusted
    by the fair value of any monetary consideration received or given.

    The Corporation adopted these new recommendations prospectively. The
    implementation of these new recommendations did not have a material
    impact on the Corporation's consolidated financial statements.


               4. Impairment of assets and restructuring costs

    The following table summarizes the impairment of assets and restructuring
costs:

    -------------------------------------------------------------------------
                        Total             2007                2006
    -------------------------------------------------------------------------

                                  Liabi-               Liabi-
                                   lity                 lity
                   Char-          as at   Char-        as at    Char-
                    ged            Octo-   ged          Octo-    ged
                     to             ber     to           ber      to
                     in    Fore-     31,    in-           31,     in-
                   come  casted    2006   come   Paid   2007    come    Paid

    Commercial printing operations (a)
    Printing Products and Services
    Workforce
     reduction
     costs        $ 1.8   $ 1.8   $   -  $ 1.8  $ 0.7  $ 1.1   $   -   $   -
    Transfer of
     printing
     equipment
     and other
     costs          1.4     1.7       -    1.4    1.4      -       -       -
    Marketing Products and Services
    Workforce
     reduction
     costs          1.6     1.6       -    1.6    1.3    0.3       -       -
    Transfer of
     printing
     equipment and
     other costs    0.6     0.8       -    0.6    0.6      -       -       -
    -------------------------------------------------------------------------
                    5.4     5.9       -    5.4    4.0    1.4       -       -

    Printing Products and Services
    Impairment of
     assets         0.3     0.3     n/a    0.3    n/a    n/a       -     n/a
    Marketing Products and Services
    Impairment of
     assets
                    3.3     3.3     n/a    3.3    n/a    n/a       -     n/a
    -------------------------------------------------------------------------
                  $ 9.0   $ 9.5   $   -  $ 9.0  $ 4.0  $ 1.4   $   -   $   -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Magazine publishing operations (b)
    Impairment
     of assets    $ 6.8   $ 6.8     n/a  $   -    n/a    n/a   $ 6.8     n/a
    -------------------------------------------------------------------------
    Toronto printing operations (c)
    Workforce
     reduction
     costs        $ 3.0   $ 3.0   $ 1.4  $ 0.2  $ 1.0  $ 0.6   $ 2.8   $ 1.4
    Transfer of
     printing
     equipment
     and other
     costs          1.0     1.0       -    0.4    0.4      -     0.6     0.6
    -------------------------------------------------------------------------
                    4.0     4.0     1.4    0.6    1.4    0.6     3.4     2.0
    Impairment
     of assets      0.2     0.2     n/a      -    n/a    n/a     0.2     n/a
    -------------------------------------------------------------------------
                  $ 4.2   $ 4.2   $ 1.4  $ 0.6  $ 1.4  $ 0.6   $ 3.6   $ 2.0
    -------------------------------------------------------------------------
    Book printing operations (d)
    Workforce
     reduction
     costs        $ 1.3   $ 1.3   $   -  $  -   $   -  $  -    $   -   $ 0.8
    Transfer
     of printing
     equipment
     and other
     costs          3.9     3.9       -    0.1    0.1     -      2.7     2.7
                    5.2     5.2       -    0.1    0.1     -      2.7     3.5
    -------------------------------------------------------------------------
    Impairment
     of assets      1.6     1.6     n/a     -     n/a   n/a        -     n/a
                  $ 6.8   $ 6.8   $   -  $ 0.1  $ 0.1  $  -    $ 2.7   $ 3.5
    -------------------------------------------------------------------------
    Manufacturing strategy (e)
    Printing Products and Services
    Workforce
     reduction
     costs        $ 0.3   $ 0.3   $   -  $   -  $   -  $  -    $   -   $   -
    Marketing Products and Services
    Workforce
     reduction
     costs          0.4     0.4       -      -      -      -       -     0.4
    -------------------------------------------------------------------------
                    0.7     0.7       -      -      -      -       -     0.4
    -------------------------------------------------------------------------
    Printing Products and Services
    Impairment
    of assets       4.9     4.9     n/a      -    n/a    n/a       -     n/a
    Marketing Products and Services
    Impairment
     of assets      1.9     1.9     n/a      -    n/a    n/a       -     n/a
    -------------------------------------------------------------------------
                  $ 7.5   $ 7.5   $   -  $   -  $   -  $   -   $   -   $ 0.4
    -------------------------------------------------------------------------
    Winnipeg printing operations (f)
    Workforce
     reduction
     costs        $ 2.2   $ 2.2   $   -  $   -  $   -  $   -  $    -   $ 0.1
    Transfer of
     printing
     equipment
     and other
     costs          1.0     1.0       -      -      -      -       -     0.2
    -------------------------------------------------------------------------
                    3.2     3.2       -      -      -      -       -     0.3
    Impairment
     of assets     (0.5)   (0.5)    n/a      -    n/a    n/a    (0.5)    n/a
    -------------------------------------------------------------------------
                  $ 2.7   $ 2.7   $   -  $   -  $   -  $   -  $ (0.5)  $ 0.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total                         $ 1.4  $ 9.7  $ 5.5  $ 2.0  $ 12.6   $ 6.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    a) During the first quarter of fiscal 2007, the Corporation initiated a
       restructuring plan for its commercial printing operations in the
       Printing Products and Services and Marketing Products and Services
       sectors, with an impact of incurring restructuring costs within the
       twelve months following the announcement.

    b) During the fourth quarter of fiscal 2006, the Corporation performed an
       impairment test on non-amortizable intangible assets by estimating the
       operating income and future cash flows it expects to generate from the
       underlying assets. Due to competitive market conditions in the
       magazine publishing group of the Media sector, the expected operating
       income and cash flows of certain titles were lower than forecasted for
       2005. Consequently, forecasted future results for purposes of the
       annual impairment test were revised and were insufficient to justify
       the book value of these trade names. In the Media sector, an
       impairment of assets of $6.8 million, representing the totality of the
       book value of these trade names, was thus charged to income for the
       year ended October 31, 2006.

    c) During the second quarter of fiscal 2006, the Corporation adopted a
       plan for the consolidation of its commercial products and
       direct-marketing printing facilities located in the Toronto area in
       the Marketing Products and Services sector. The consolidation is
       expected to be completed in 2008.

    d) During the second quarter of fiscal 2005, the Corporation announced
       the consolidation of certain book printing operations in the Printing
       Products and Services sector. The consolidation was completed during
       the first quarter of 2007.

    e) During the first quarter of fiscal 2005, the Corporation announced
       major investment projects to purchase equipment in the Printing
       Products and Services and Marketing Products and Services sectors. The
       projects were completed during the third quarter of 2006.

    f) During the fourth quarter of fiscal 2004, the Corporation announced
       the consolidation of its Winnipeg retail printing operations in the
       Marketing Products and Services sector. The consolidation was
       completed during the first quarter of 2006.


                            5. Financial expenses

                                                            2007       2006
    -------------------------------------------------------------------------
    Financial expenses on long-term debt               $    29.9   $   29.2
    Other (revenues) expenses                               (0.1)       1.1
    Foreign exchange loss                                    2.4        0.4
    -------------------------------------------------------------------------
                                                       $    32.2   $   30.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                               6. Income taxes

                                                            2007       2006
                                                                  (restated
                                                                     Note 2)
    -------------------------------------------------------------------------
    Statutory tax rate                                      32.4 %     33.9 %
    Effect of foreign tax rate differences                 (2.6)       (3.6)
    Other                                                   0.9        (1.4)
    -------------------------------------------------------------------------
    Effective tax rate before the following items:         30.7        28.9
    Effect of changes in statutory tax rates (a)              -        (3.5)
    Retroactive taxes (b)                                     -         4.9
    Reduction in income tax expense arising from
     the recognition of tax losses (c)                        -        (8.7)
    Effective tax rate                                     30.7 %      21.6 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    a) On June 6, 2006, Bill C-13, an act to implement certain provisions of
       the budget tabled in Parliament on May 2, 2006, was submitted for a
       third reading in the House of Commons and then became law as Bill C-13
       received royal assent on June 22, 2006. A decrease of $6.0 million in
       future income tax liabilities was recorded in fiscal 2006 to reflect
       the changes in statutory tax rates.

    b) On June 9, 2006, the Quebec government enacted Bill 15 in the Quebec
       National Assembly to amend the Taxation Act and other legislative
       provisions. An unusual charge for retroactive taxes and related
       charges of $8.4 million was recorded in fiscal 2006.

    c) During the fourth quarter of 2006, future income tax assets related to
       tax losses of U.S. subsidiaries were fully recognized as management
       now believes more likely than not that they will be realized. An
       amount of $15.1 million was accounted for as an increase in future
       income tax assets.

    Income tax expense for the years ended October 31 is as follows:

                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------
    Current                                            $    55.0   $    53.2
    Future
        Reduction in income tax expense arising
         from the recognition of tax losses                    -       (15.1)
        Reduction in future income tax expense arising
         from the origination and reversal of taxable
         temporary differences                              (1.4)       (0.5)
    -------------------------------------------------------------------------
                                                       $    53.6   $    37.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The tax impact of the temporary differences resulting in future income tax
assets and liabilities are as follows as at October 31:

                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------
    Losses carried-forward                             $    69.1   $    65.2
    Property, plant and equipment, net of tax credits      (43.4)      (29.5)
    Other assets (liabilities)
      Non-deductible provisions                             11.1         8.5
      Employee future benefits                               8.4         6.2
      Deferred charges                                      (5.8)       (5.6)
      Intangible assets and goodwill                       (70.2)      (56.7)
      Other                                                 (1.2)       (0.1)
    -------------------------------------------------------------------------
    Total future income taxes                          $   (32.0)  $   (12.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Future income taxes include the following:
      Future income tax assets - short-term            $    11.8   $     6.3
      Future income tax assets - long-term                  64.6        59.1
      Future income tax liabilities - long-term           (108.4)      (77.4)
    -------------------------------------------------------------------------
    Total future income taxes                          $   (32.0)  $   (12.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Corporation has unrecorded tax losses of $5.7 million which can be
applied against future taxable income through 2027. The Corporation also has
unrecorded capital losses of $19.0 million, which can be carried forward
indefinitely.


                           7. Accounts receivable

    On February 27, 2004, the Corporation modified its accounts receivable
securitization agreement, put in place on August 17, 2001 for a five-year
period, thereby increasing the maximum net consideration from $250 million to
$300 million, including a maximum of US$100 million. On July 27, 2005, the
Corporation obtained a three-year extension of its securitization program
under terms similar to the previous agreement, which will now mature in August
2009. Under this agreement, the Corporation sells, on an ongoing basis,
certain of its accounts receivable to a trust, which has sold its beneficial
interests to third- party investors. The Corporation has retained servicing
responsibilities, resulting in a 0.5% subordinated interest with respect to
the transferred receivables. The Corporation also has a retained interest in
the trust, including a cash reserve and rights to future excess cash flows
generated by the trust. The investors and the trust have no recourse on the
Corporation's other assets for failure of debtors to pay when due, other than
the Corporation's retained interest and an amount, not to exceed 3.5% of the
net consideration received, related to the balances of certain significant
customers in excess of the normal concentration limit provided for under the
program.
    As at October 31, 2007, $273 million of accounts receivable ($282 million
as at October 31, 2006) had been sold under the accounts receivable
securitization program, of which $37 million ($39 million as at October 31,
2006) were kept by the Corporation as retained interest, resulting in a net
consideration of $236 million, including C$209 million and US$29 million
($243 million as at October 31, 2006, including C$206 million and
US$33 million) which represents the maximum net consideration the Corporation
could have obtained on that date in accordance with the program terms and
conditions. The retained interest is recorded in the Corporation's accounts
receivable at the lower of cost and fair market value. Under the program, the
Corporation recognized an aggregate discount on sale of accounts receivable of
$11.1 million for fiscal 2007 ($8.3 million in 2006).
    The key assumptions used in measuring the fair value of the retained
interest at the date of sale resulting from securitizations completed during
the years ended October 31 are as follows:

                                                           2007        2006
    -------------------------------------------------------------------------
    Expected loss and dilution rates                        0.2 %       0.2 %
    Expected weighted average collection period after
     securitization (days)                                    5           6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at October 31, 2007, the effect of a 10% change in the expected rates
of loss and dilution on receivables would be immaterial on the fair market
value of the retained interest. These sensitivities are hypothetical and
should be used with caution. The effect of a variation in a particular
assumption on the retained interest has been calculated without changing any
other assumptions; in reality, changes in one factor may result in changes in
another, which might magnify or counteract the sensitivities.
    During 2007 and 2006, there were no defaulted receivables repurchased or
any deemed collections or defaulted receivables or dilution amounts
compensated for by the Corporation.


                               8. Inventories

                                                            2007        2006
    -------------------------------------------------------------------------
    Raw materials                                      $    48.2   $    50.6
    Work in progress and finished goods                     42.8        42.2
    -------------------------------------------------------------------------
                                                       $    91.0   $    92.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                       9. Property, plant and equipment

                                                     Accumulated
                                                          amorti-   Net book
    2007                                        Cost      zation       value
    -------------------------------------------------------------------------
    Land                                   $    25.5   $       -   $    25.5
    Buildings                                  199.3        71.3       128.0
    Machinery and equipment                  1,145.6       740.2       405.4
    Machinery and equipment under capital
     leases                                     40.0         7.6        32.4
    Other equipment and leasehold
     improvements                              223.2       150.7        72.5
    Assets under construction and deposits
     on equipment                               75.9           -        75.9
    -------------------------------------------------------------------------
                                           $ 1,709.5   $   969.8   $   739.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2006 (restated Note 2)
    -------------------------------------------------------------------------
    Land                                  $     26.5   $       -   $    26.5
    Buildings                                  199.1        66.6       132.5
    Machinery and equipment                  1,127.1       704.3       422.8
    Machinery and equipment under capital
     leases                                     10.6         6.1         4.5
    Other equipment and leasehold
     improvements                              223.2       148.9        74.3
    Assets under construction and deposits
     on equipment                               40.7           -        40.7
    -------------------------------------------------------------------------
                                          $  1,627.2   $   925.9   $   701.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Capitalized interest amounted to $1.9 million in 2007 ($0.9 million in
2006).


                                 10. Goodwill

    The changes in book value of goodwill are as follows:


                                                           Other
                    Printing   Marketing              activities
                    Products    Products                     and
                         and         and             unallocated     Consoli-
    2007            Services    Services       Media     amounts       dated
    -------------------------------------------------------------------------

    Balance,
     beginning of
     year            $ 110.5     $ 273.2     $ 496.9     $   0.9     $ 881.5
    Acquisitions
     (Note 21)             -        75.0         9.4           -        84.4
    Foreign currency
     translation
     adjustment            -       (28.2)          -           -       (28.2)
    Other               (0.2)       (0.2)       (2.0)       (0.7)       (3.1)
    -------------------------------------------------------------------------
    Balance, end of
     year            $ 110.3     $ 319.8     $ 504.3     $   0.2     $ 934.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2006
    -------------------------------------------------------------------------

    Balance,
     beginning of
     year            $ 110.5     $ 283.3     $ 420.0     $   0.9     $ 814.7
    Acquisitions
     (Note 21)             -           -        77.1           -        77.1
    Foreign currency
     translation
     adjustment            -        (9.6)          -           -        (9.6)
    Other                  -        (0.5)       (0.2)          -        (0.7)
    -------------------------------------------------------------------------
    Balance, end of
     year            $ 110.5     $ 273.2     $ 496.9     $   0.9     $ 881.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                            11. Intangible assets

                                                     Accumulated
                                                          amorti-   Net book
    2007                                        Cost      zation       value
    -------------------------------------------------------------------------
    Amortizable intangible assets
    Educational book titles                $    20.1   $     3.7   $    16.4
    Printing contracts                          17.1         6.5        10.6
    Customer relationships                      24.5         4.1        20.4
    Non-compete agreements                       4.9         2.2         2.7
    -------------------------------------------------------------------------
                                                66.6        16.5        50.1
    -------------------------------------------------------------------------
    Non-amortizable intangible assets
    Trade names and circulation                122.4           -       122.4
    -------------------------------------------------------------------------
                                           $   189.0   $    16.5   $   172.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2006
    -------------------------------------------------------------------------
    Amortizable intangible assets
    Educational book titles                $    20.1   $     0.4   $    19.7
    Printing contracts                          17.1         5.6        11.5
    Customer relationships                      12.1         3.6         8.5
    Non-compete agreements                       5.1         1.3         3.8
    -------------------------------------------------------------------------
                                                54.4        10.9        43.5
    -------------------------------------------------------------------------
    Non-amortizable intangible assets
    Trade names and circulation                122.3           -       122.3
    -------------------------------------------------------------------------
                                           $   176.7   $    10.9   $   165.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                              12. Other assets

                                                            2007        2006
    -------------------------------------------------------------------------
    Investments                                        $     0.9   $     0.9
    Accrued pension benefit asset (Note 22)                  3.4         3.0
    Deferred charges, net of accumulated amortization       65.2        61.3
    Deferred financial expenses, net of accumulated
     amortization                                            0.3         2.3
    Fair value of derivative financial instruments          14.7           -
    Other                                                    5.8         2.9
    -------------------------------------------------------------------------
                                                       $    90.3   $    70.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                        13. Operating lines of credit

    Lenders of the Corporation are unsecured and rank equally. As at
October 31, 2007, in addition to the term revolving credit facility disclosed
in Note 14, the Corporation had an authorized operating line of credit that
amounted to $4.5 million. As at that date, the operating line of credit was
not drawn. The line of credit bears interest at the bank prime rate. The line
of credit is reviewed periodically and does not require commitment fees. It is
also renewable annually and is not subject to any restrictive clauses.
    The recently acquired subsidiary, PLM Group Ltd ("PLM"), has a revolving
line of credit available of $20 million for day to day operating purposes. In
addition, PLM has a revolving term loan facility for $10 million. Both
facilities are available in Canadian and U.S. dollars. As at October 31, 2007,
none of these facilities were drawn. Canadian dollar amounts bear interest at
either prime rate plus 0.25% or the banker's acceptance rate plus 1.75%, and
U.S. dollar amounts bear interest at the US base rate plus 0.25% or LIBOR plus
1.75%. The amounts available under the facilities may be reduced based on a
percentage of accounts receivable and inventory. Security provided on both
facilities includes a general security agreement covering all assets of PLM
and assignment of accounts receivable, inventories and insurance proceeds. The
committed line of credit is renewable annually. Under the terms and conditions
of the credit agreement, PLM must comply with certain restrictive covenants
including the requirement to maintain certain financial ratios. As of
October 31, 2007, PLM was not in default under any of its obligations.


                             14. Long-term debt

                                    Effective
                                      interest
                                    rate as of
                                    October 31,
                                          2007    Maturity     2007     2006
    -------------------------------------------------------------------------
    Unsecured Senior Notes
      Series 2002 A - Tranche 1 -
       5.62% (US$75.0)                   5.77%        2012   $ 70.9   $ 83.9
      Series 2002 A - Tranche 2 -
       5.73% (US$50.0)                   5.86%        2014     47.2     55.9
      Series 2004 A - LIBOR + 0.70%
       (US$37.5)                         6.39%        2012     35.4     42.0
      Series 2004 B - LIBOR + 0.70%
       (US$37.5)                         6.39%        2012     35.4     42.0
      Series 2004 C - LIBOR + 0.80%
       (US$15.0)                         6.47%        2014     14.2     16.8
      Series 2004 D - LIBOR + 0.90%
       (US$10.0)                         6.56%        2016      9.5     11.2
    Unsecured Senior Debentures
      Series C - 9.50%                   9.50%        2008      4.5      9.1
      Series I - 6.05%                   6.27%        2009    100.0    100.0
      Others - 6.20%                        -            -        -    100.0
    Loans secured by property,
     plant and equipment having
     a net book value of $3.2,
     at fixed rates of
     5.69% to 6.28%             5.69% to 6.28%        2011      2.8      0.5
    Obligations under capital
     leases secured by
     property, plant and
     equipment having a net
     book value of $21.6, at
     fixed rates of 3.3% to
     8.0%                         3.3% to 8.0%   2008-2014     18.7      5.8
    Revolving credit facility            5.63%        2012    192.0        -
    Other loans at fixed
     rates of 0.0% to 8.0%       5.85% to 8.0%   2008-2014      7.2      6.2
    Other loans at prime rate            6.25%        2008      3.1      7.2
    -------------------------------------------------------------------------
                                                              540.9    480.6
    Unamortized deferred financing expenses                     3.4        -
    -------------------------------------------------------------------------
    Total long-term debt                                      537.5    480.6

    Current portion                                            14.2     12.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                            $ 523.3  $ 467.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The Series 2002 A Unsecured Senior Notes and the Unsecured Senior
Debentures, with the exception of the Series C Debenture which has an annual
sinking fund of 9.09%, are redeemable at the greater of par value and the
discounted value of future cash flows using an interest rate based on U.S.
Treasury Securities and Canadian government bonds, respectively, having
similar maturities. Series 2004 A, 2004 B, 2004 C and 2004 D Unsecured Senior
Notes are redeemable as of the second anniversary of issuance at a premium of
1.0%, 1.0%, 1.5% and 2.0%, respectively. These premiums decrease by 0.5% at
each subsequent anniversary until they become nil. Under the Note Purchase
Agreement and the Series C Debenture trust indenture, the Corporation must
maintain certain financial ratios.
    On June 1st, 2007, Unsecured Senior Debentures totaling $100 million
matured. These have been reimbursed using the existing term revolving credit
facility.
    As at October 31, 2007, the Corporation had a committed line of credit in
the form of a term revolving credit facility, totaling $400 million or the US
dollar equivalent. The applicable interest rate on this revolving term credit
facility is based on the credit rating assigned by Standard & Poor's Ratings
Services. Depending on the form of borrowing chosen by the Corporation, it is
currently either, bank prime rate, bankers' acceptance rate + 0.44% or LIBOR +
0.44%. Facility fees of 0.11% are also applicable on the line of credit
whether it is drawn or not and utilization fees of 0.05% are applicable if the
amount drawn is over 662/3% of the line of credit. The committed line of
credit is renewable on an annual basis and, if not renewed, it matures five
years after its issuance or the last renewal, as the case may be. It was last
renewed on August 30, 2007. Under the terms and conditions of the credit
agreement, the Corporation must comply with certain restrictive covenants,
including the requirement to maintain certain financial ratios. As of
October 31, 2007, letters of credit amounting to C$0.2 million and US$4.0
million were drawn on the committed line of credit in addition to the amount
presented above.
    For the years ended October 31, 2007 and 2006, the Corporation has not
been in default under any of its obligations.

    Principal payments to be made by the Corporation in forthcoming years are
as follows:

                                                                   Principal
                                                                    payments
    -------------------------------------------------------------------------
    2008                                                           $    14.6
    2009                                                               106.1
    2010                                                                 5.8
    2011                                                                 3.5
    2012                                                               335.7
    2013 and thereafter                                                 75.2
    -------------------------------------------------------------------------
                                                                   $   540.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Minimum payments required under capital leases, included in the amounts
presented above, are as follows:

                                                                     Minimum
                                             Capital    Interest    payments
    -------------------------------------------------------------------------
    2008                                   $     5.0   $     1.0   $     6.0
    2009                                         4.0         0.7         4.7
    2010                                         3.5         0.5         4.0
    2011                                         1.6         0.3         1.9
    2012                                         1.3         0.2         1.5
    2013 and thereafter                          3.3         0.2         3.5
    -------------------------------------------------------------------------
                                           $    18.7   $     2.9   $    21.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                            15. Other liabilities

                                                            2007        2006
    -------------------------------------------------------------------------
    Deferred subscription revenues                     $    10.6   $     9.9
    Long-term accrued liabilities                           16.0        10.9
    Accrued pension benefit liability (Note 22)             29.4        20.3
    Asset retirement obligations                             1.2         0.9
    Fair value of derivative financial instruments           1.0           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                       $    58.2   $    42.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Asset retirement obligations

    Asset retirement obligations relate to estimated future costs to remove
leasehold improvements brought to leased properties under operating leases.
Future obligations will be settled between 2008 and 2019. To determine the
initial recorded liability, the future estimated cash flows have been
discounted using the Corporation's credit-adjusted risk-free rate of 5.58% on
average. The value of undiscounted estimated cash flows as at October 31, 2007
and 2006 is $1.5 million and $1.3 million, respectively.

    The reconciliation of the Corporation's liability for the asset retirement
obligations is as follows:

                                                            2007        2006
    -------------------------------------------------------------------------
    Balance, beginning of year                         $     1.1   $     1.2
    Business acquisition                                     0.3           -
    Accretion expense                                        0.1         0.1
    Reversal of liabilities                                 (0.1)          -
    Liabilities settled                                        -        (0.2)
    -------------------------------------------------------------------------
    Balance, end of year                                     1.4         1.1
    Current portion included in accounts payable and
     accrued liabilities                                     0.2         0.2
    -------------------------------------------------------------------------
                                                       $     1.2   $     0.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                              16. Share capital

    Authorized (unlimited number)

    Class A Subordinate
    Voting Shares:    subordinate participating voting shares carrying one
                      vote per share, no par value;
    Class B Shares:   participating voting shares carrying 20 votes per
                      share, convertible into Class A Subordinate Voting
                      Shares, no par value;
    Preferred Shares: first and second preferred shares, issuable in series
                      in numbers limited by the Articles of Incorporation,
                      carrying no voting rights except as provided by law or
                      in the Corporation's Articles of Incorporation,
                      entitling the holder to cumulative dividends.

                                         2007                    2006
                                  Number                  Number
                               of shares      Amount   of shares      Amount
    -------------------------------------------------------------------------
    Issued and paid
      Class A Subordinate
       Voting Shares          66,704,849   $   372.1  68,988,866   $   384.4
      Class B Shares          16,909,672        23.0  17,058,145        23.2
    -------------------------------------------------------------------------
                              83,614,521   $   395.1  86,047,011   $   407.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Class A Subordinate Voting Shares and Class B Shares

    During fiscal years 2007 and 2006, the share capital of the Corporation
changed as follows:

                                         2007                    2006
                                  Number                  Number
                               of shares      Amount   of shares      Amount
    -------------------------------------------------------------------------
    Class A Subordinate
     Voting Shares
      Balance, beginning
       of year                68,988,866   $   384.4  71,565,227   $   397.3
      Conversion of Class B
       Shares into Class A
         Subordinate Voting
         Shares                   10,673           -      43,777         0.1
      Redemption of shares    (2,354,700)      (13.1) (2,895,300)      (16.1)
      Exercise of stock
       options                    60,010         0.8     275,162         3.1
    -------------------------------------------------------------------------
      Balance, end of year    66,704,849   $   372.1  68,988,866   $   384.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Class B Shares
      Balance, beginning
       of year                17,058,145   $    23.2  17,741,573   $    24.2
      Conversion of Class B
       Shares into Class A
       Subordinate Voting
       Shares                    (10,673)          -     (43,777)       (0.1)
      Redemption of shares      (137,800)       (0.2)   (639,651)       (0.9)
    -------------------------------------------------------------------------
      Balance, end of year    16,909,672   $    23.0  17,058,145   $    23.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Redemption of shares

    The Corporation was authorized to purchase for cancellation on the open
market, between November 21, 2005 and November 20, 2006, up to 3,578,325 of
its Class A Subordinate Voting Shares, representing 5% of the 71,566,506
issued and outstanding Class A Subordinate Voting Shares as of November 11,
2005, and up to 887,015 of its Class B Shares, representing 5% of the
17,740,294 issued and outstanding Class B Shares as of November 11, 2005.
    The Corporation was authorized to purchase for cancellation on the open
market, between November 21, 2006 and November 20, 2007, up to 3,448,698 of
its Class A Subordinate Voting Shares, representing 5% of the 68,973,966
issued and outstanding Class A Subordinate Voting Shares as of November 7,
2006, and up to 852,907 of its Class B Shares, representing 5% of the
17,058,145 issued and outstanding Class B Shares as of November 7, 2006.
    The purchases were made in the normal course of business at market prices
through the facilities of the Toronto Stock Exchange in accordance with the
requirements of the exchange.
    For the year ended October 31, 2007, the Corporation purchased 2,354,700
of its Class A Subordinate Voting Shares at a weighted average price of $21.27
for a total consideration of $50.1 million and 137,800 of its Class B Shares
at a weighted average price of $21.69 for a total consideration of
$3.0 million. Of the total consideration of $53.1 million, $13.3 million
corresponds to the book value and $39.8 million corresponds to the premium
paid. The premium was accounted for as a decrease in retained earnings.
    For the year ended October 31, 2006, the Corporation purchased 2,895,300
of its Class A Subordinate Voting Shares at a weighted average price of $19.03
for a total consideration of $55.1 million and 639,651 of its Class B Shares
at a weighted average price of $18.86 for a total consideration of
$12.1 million. Of the total consideration of $67.2 million, $17.0 million
corresponds to the book value and $50.2 million corresponds to the premium
paid. The premium was accounted for as a decrease in retained earnings.

    Exercise of stock options

    When officers and senior executive exercise their stock options, the
amounts received from them are credited to share capital. For stock options
granted since November 1, 2002, the amount previously accounted for as an
increase to contributed surplus is also transferred to share capital. For the
year ended October 31, 2007, the amount received was $0.7 million, and an
amount of $0.1 million was transferred from contributed surplus to share
capital. For the year ended October 31, 2006, the amount received was
$2.9 million and $0.2 million was transferred from contributed surplus to
share capital.

    Earnings per share

    The table below shows the calculation of basic and diluted earnings per
share for the years ended October 31:
                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------
    Numerator
      Net income                                       $   120.6   $   135.8
    -------------------------------------------------------------------------
    Denominator (in millions)
      Weighted average number of shares                     84.9        87.3
      Dilutive effect of stock options and warrants          0.1         0.1
    -------------------------------------------------------------------------
      Weighted average diluted number of shares             85.0        87.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share                           $    1.42   $    1.56
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted earnings per share                         $    1.42   $    1.55
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Stock options and warrants presented below were considered to be
anti-dilutive in the calculation of the diluted earnings per share since their
exercise price was greater than the average stock price during those periods.

                                                Three months ended
    -------------------------------------------------------------------------
                                       October 31                July 31
    -------------------------------------------------------------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Stock options                605,540   1,397,100     612,600     942,600
    Warrants                           -     350,000           -     350,000
    -------------------------------------------------------------------------

                                                Three months ended
    -------------------------------------------------------------------------
                                        April 30               January 31
    -------------------------------------------------------------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Stock options                629,420   1,406,380     638,340   1,055,160
    Warrants                           -     350,000           -     350,000
    -------------------------------------------------------------------------


                     17. Stock-based compensation plans

    Stock option plan

    Since 1999, the Corporation maintains a stock option plan for the benefit
of certain of its officers and senior executives. On January 18, 2005, the
Corporation modified its stock option plan. The number of Class A Subordinate
Voting Shares authorized for issuance was then increased to 6,078,562. As at
October 31, 2007, the number of Class A Subordinate Voting Shares authorized
for issuance and the balance of shares that could be issued under this plan
were 6,078,562 and 4,884,474, respectively. The stock options granted before
March 31, 2005 start to vest after one year at a rate of 20% per year and must
be exercised no later than ten years after the grant date. The stock options
granted after March 30, 2005 start to vest after one year at a rate of 25% per
year and must be exercised no later than seven years after the grant date.
Under the plan, each stock option entitles its holder to receive one share
upon exercise and the exercise price is determined using the weighted average
price of all trades for the five days immediately preceding the grant of the
stock option.
    Stock-based compensation costs of $2.4 million and $2.0 million were
charged to income and as an increase to contributed surplus of shareholders'
equity for fiscal 2007 and 2006, respectively.
    The table below summarizes the changes in outstanding stock options for
the years ended October 31:

                                        2007                   2006

                                            Weighted                Weighted
                                             average                 average
                               Number of    exercise   Number of    exercise
                                 options       price     Options       price
    -------------------------------------------------------------------------
    Balance, beginning
     of year                   1,834,986   $   18.49   1,739,368   $   17.22
    Granted                      160,100       20.90     570,400       19.26
    Exercised                    (60,010)      12.64    (275,162)      10.64
    Cancelled                    (69,770)      20.99    (199,620)      20.51
    -------------------------------------------------------------------------
    Balance, end of year       1,865,306   $   18.79   1,834,986   $   18.49
    -------------------------------------------------------------------------
    Options exercisable as
     at October 31               979,936   $   17.10     678,486   $   15.71
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at October 31, 2007, the balance of stock options available for grant
under the plan was 3,019,168.

    The table below summarizes the attributes of the outstanding stock options
as at October 31:

                      Options outstanding               Options exercisable
    -------------------------------------------------------------------------
                                   Weighted
                                    average
                                  remaining
                                    contrac-  Weighted              Weighted
                                       tual    average               average
               Exercise      Number    life   exercise  Number of   exercise
    2007    price range  of options  (years)     price    options      price
    -------------------------------------------------------------------------
        $  8.70 - 11.13     340,386     3.5   $   9.97    340,386   $   9.97
        $ 17.80 - 24.01   1,524,920     5.9      20.76    639,550      20.89
    -------------------------------------------------------------------------
                          1,865,306     5.4   $  18.79    979,936   $  17.10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    2006
    -------------------------------------------------------------------------
        $  8.70 - 11.13     385,286     4.5   $  10.02    325,366   $   9.82
        $ 17.80 - 24.01   1,449,700     6.8      20.74    353,120      21.14
    -------------------------------------------------------------------------
                          1,834,986     6.3   $  18.49    678,486   $  15.71
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Fair value of stock options granted throughout the year was estimated on
the grant date by using the Black-Scholes model and the following weighted
average assumptions:

                                                            2007        2006
    -------------------------------------------------------------------------
    Dividend rate                                            1.1%        0.9%
    Expected volatility                                     22.6%       25.0%
     Risk-free interest rate                                3.96%       4.00%
    Expected life                                        5 years     5 years
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the years ended October 31, 2007 and 2006, the weighted average fair
value of stock options granted was $5.16 and $5.19, respectively.

    Share unit plan

    On December 14, 2006, the Corporation modified its share unit plan to
include additional senior executives. Previously, the only participant in this
plan was the President and Chief Executive Officer. The share units are
granted in the form of deferred share units ("DSU") or restricted share units
("RSU"). A portion of share units will vest based on economic value creation
compared to a target and another portion of share units will vest based on
tenure.
    For the year ended October 31, 2007, 138,310 DSU and 30,788 RSU (none in
2006) were granted.
    As at October 31, 2007, 165,592 DSU and 26,507 RSU were outstanding
(33,193 DSU in 2006). The expense recorded in the consolidated statement of
income for the year ended October 31, 2007 was $0.2 million. The impact on the
consolidated statement of income was negligible for the year ended October 31,
2006. No amount has been paid under the plan for the years ended October 31,
2007 and 2006.


                           18. Contributed surplus

    -------------------------------------------------------------------------
                                                            2007        2006
    -------------------------------------------------------------------------
    Balance, beginning of year                         $     6.9   $     5.1
    Compensation costs relating to stock-based
     compensation plans (Note 17)                            2.4         2.0
    Exercise of stock options (Note 16)                     (0.1)       (0.2)
    -------------------------------------------------------------------------
    Balance, end of year                               $     9.2   $     6.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                   19. Accumulated other comprehensive loss

    -------------------------------------------------------------------------
                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------
    Balance, beginning of year, as previously
     reported                                          $       -   $       -
    Unrealized net losses on translation of financial
     statements of self-sustaining foreign operations      (26.0)      (22.8)
    Financial Instruments - Recognition and
     measurement (Note 3)                                    3.8           -
    -------------------------------------------------------------------------
    Restated balance, beginning of year                    (22.2)      (22.8)
    Change in net gains on derivatives designated as
     cash flow hedges                                        5.4           -
    Unrealized net losses on translation of financial
     statements of self-sustaining foreign operations      (16.3)       (3.2)
    -------------------------------------------------------------------------
    Balance, end of year                                   (33.1)      (26.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at October 31, 2007, gains on derivatives designated as cash flow
hedges of $7.2 million, net of income taxes of $3.5 million, reported under
"Accumulated other comprehensive loss" in the consolidated balance sheet are
expected to be reclassified to net income within the next twelve months. The
remaining gains of $2.0 million, net of income taxes of $1.0 million, are
expected to be reclassified to net income in 2009 and 2010.
    The increase over 2006 in Accumulated other comprehensive loss is mainly
due to unrealized net losses arising from the translation of foreign currency
denominated assets and liabilities of self-sustaining foreign operations,
mainly the result of the appreciation of the Canadian dollar compared to the
U.S. dollar and the Mexican peso, partially compensated by net gains arising
from the evaluation of the derivative financial instruments at fair market
value in the consolidated balance sheet.


                               20. Cash flows

    The changes in non-cash operating items are as follows:

    -------------------------------------------------------------------------
                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------
    Accounts receivable                                $    (2.7)  $     3.2
    Income taxes receivable                                  0.9           -
    Inventories                                              4.5         6.2
    Prepaid expenses and other current assets               (2.0)        0.1
    Accounts payable and accrued liabilities               (23.5)      (28.0)
    Income taxes payable                                   (20.9)      (39.4)
    Deferred subscription revenues and deposits             (4.4)        0.8
    -------------------------------------------------------------------------
                                                       $   (48.1)  $   (57.1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Additional Information
    Interest paid                                      $    29.4   $    26.9
    Income taxes paid                                  $    67.5   $    96.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                   21. Business acquisitions and disposals

    2007

    For the year ended October 31, 2007, the Corporation made the following
acquisitions:

    Operating sector     Acquisitions                    Date of acquisition
    -------------------------------------------------------------------------
    Marketing Products   98% of the shares of PLM           October 16, 2007
    and Services         Group Ltd., commercial printer in
                         the Greater Toronto Area

    Media                Assets of Seaway News, owner of       July 28, 2007
                         a weekly  newspaper in Cornwall,
                         Seaway News, serving the eastern
                         Ontario region

                         Assets of Résonat Distribution        June 18, 2007
                         Ltée, Québec Site Web.com Ltée
                         and Condo Direct Ltée., owners
                         of Condo Direct and Condo et
                         Loft D'aujourd'hui, magazines
                         related to home building and
                         renovation in Quebec

                         100% of the shares of Les             June 18, 2007
                         Productions Ma Maison Direct
                         Ltée and Magazine des Maisons
                         Neuves du Grand Montréal
                         Ltée, owners of Maison
                         D'aujourd'hui, Maison Direct,
                         MaisonMax.com, MaisonNeuve.com
                         and www.maisonmax.com Web site,
                         magazines and web site related
                         to home building and renovation
                         in Quebec

                         100% of the shares of The Oxbow       June 14, 2007
                         Herald Ltd, owner of The Oxbow
                         Herald, weekly newspaper in
                         SouthEast Saskatchewan

                         Assets of The Broadview Express       May 1st, 2007
                         and The Grenfell Sun, weekly
                         newspapers in Southern
                         Saskatchewan

                         100% of the shares of Radville    December 19, 2006
                         Star Management, owner of
                         The Radville Star and The Deep
                         South Star, newspaper in Southern
                         Saskatchewan
    -------------------------------------------------------------------------

                                          Chenelière
                                           Education
                                     PLM         Inc.     Others       Total
    -------------------------------------------------------------------------
    Assets acquired
      Working capital          $    26.9   $    (0.5)  $     0.4   $    26.8
      Property, plant and
       equipment                    42.4           -         0.4        42.8
      Goodwill (tax basis of
       $3.6 million)                75.0         0.5         8.9        84.4
      Amortizable intangible
       assets                       14.8        (0.7)          -        14.1
      Other assets                   0.4           -           -         0.4
    -------------------------------------------------------------------------
                                   159.5        (0.7)        9.7       168.5
    -------------------------------------------------------------------------
    Liabilities assumed
      Deferred revenues              7.7           -           -         7.7
      Long-term debt                18.1           -           -        18.1
      Other liabilities              0.3           -           -         0.3
      Future income tax
       liabilities                  13.3        (0.4)          -        12.9
      Non-controlling interest       1.9           -           -         1.9
    -------------------------------------------------------------------------
                                    41.3        (0.4)          -        40.9
    -------------------------------------------------------------------------
                                $  118.2   $    (0.3)  $     9.7   $   127.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration
      Cash paid                 $   94.8   $       -   $     9.4   $   104.2
      Bank overdraft in acquired
       operations                   15.2           -           -        15.2
      Balance of sale payable,
       maturing within one year,
       bearing no interest             -        (0.3)        0.3           -
      Short-term liabilities         8.2           -           -         8.2
    -------------------------------------------------------------------------
                                $  118.2   $    (0.3)  $     9.7   $   127.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    PLM Group Ltd.

    The purchase price allocation of PLM Group Ltd. is preliminary and could
change once the valuation of the assets acquired is concluded and the final
determination of the costs related to the acquisition has been made.

    Chenelière Education Inc.

    For the year ended October 31, 2007, adjustments were made to the purchase
price allocation of Chenelière Education Inc, which was acquired on August 31,
2006, to reflect the final valuation of the assets acquired and the final
determination of the costs related to the acquisition.
    For the year ended October 31, 2007, the Corporation paid an amount of
$13.1 million, of which $0.6 million was included in short-term liabilities
and $12.5 million in balance of sale payable as at October 31, 2006. As at
October 31, 2007, the balance in short-term liabilities is $0.2 million, which
is included in "Accounts payable and accrued liabilities" and the balance of
sale payable is $3.1 million, which is included in "Current portion of
long-term debt" in the consolidated balance sheet.

    Others

    The purchase price allocations of the other acquisitions are preliminary
and could change once the valuation of the assets acquired is concluded and
the final determination of the costs related to these acquisitions has been
made.

    2006

    Operating sector     Acquisitions                    Date of acquisition
    -------------------------------------------------------------------------
    Media                Assets of The Triangle News,       October 19, 2006
                         bi-weekly newspaper in
                         Saskatchewan

                         100% of the shares of Chenelière    August 31, 2006
                         Education Inc., educational
                         resources publisher in Canada

                         50% of the shares of Pecunia          July 13, 2006
                         Communications Inc., provider
                         of webcast and video
                         communications solutions over
                         Internet Protocol

                         100% of the shares of Zoupla          June 29, 2006
                         Communications Inc.,
                         Montreal-based publisher of a
                         recipe website and household
                         tips site

                         Assets of Le Progrès de                 May 1, 2006
                         Coaticook, weekly community
                         newspaper in Quebec

                         51% of the shares (including the     April 12, 2006
                         assumed conversion of a
                         convertible debenture) of Enixa
                         Média Inc., in-store digital
                         advertising displays in Quebec
    -------------------------------------------------------------------------

    These transactions are summarized as follows:

                                          Chenelière
                                       Education Inc.     Others       Total
    -------------------------------------------------------------------------
    Assets acquired
      Working capital                      $    23.3   $    (0.3)  $    23.0
      Property, plant and equipment              5.6         0.4         6.0
      Deferred charges                          13.0         0.1        13.1
      Goodwill                                  73.7         3.4        77.1
      Amortizable intangible assets             22.4           -        22.4
      Non-amortizable intangible assets          4.6           -         4.6
    -------------------------------------------------------------------------
                                               142.6         3.6       146.2
    -------------------------------------------------------------------------
    Liabilities assumed
      Long-term debt                               -         0.4         0.4
      Future income tax liabilities             12.1           -        12.1
    -------------------------------------------------------------------------
                                                12.1         0.4        12.5
    -------------------------------------------------------------------------
                                           $   130.5   $     3.2   $   133.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration
      Cash paid                            $   114.9   $     3.2   $   118.1
      Cash in acquired operations               (1.1)          -        (1.1)
      Balance of sale payable, of
       which $6.3 million bears
       interest at prime rate
       (maturing within two years)              15.9           -        15.9
      Short-term liabilities                     0.8           -         0.8
    -------------------------------------------------------------------------
                                           $   130.5   $     3.2   $   133.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                         22. Employee future benefits

    The Corporation offers various contributory and non-contributory defined
benefit pension plans and defined contribution pension plans to its employees
and those of its participating subsidiaries. For defined benefit pension
plans, retirement benefits are generally based on years of service and
employees' compensation. Pension funding is based on actuarial estimates and
is subject to limitations under applicable income tax and other regulations.
Actuarial estimates prepared during the year were based on assumptions related
to projected employee compensation levels to the time of retirement and the
anticipated long-term rate of return on pension plan assets.
    Accrued benefit obligation, fair value of plan assets and plan asset
composition are measured at the date of the annual financial statements. The
most recent actuarial valuation of the pension plans for funding purposes was
made as of December 31, 2004. The next required valuation will be as of
December 31, 2007, at the latest.

    The composition of the pension plan assets is as follows:

                                                            2007        2006
    -------------------------------------------------------------------------
    Canadian and foreign stocks                               70%         64%
    Government and corporate bonds                            27          33
    Other                                                      3           3
    -------------------------------------------------------------------------
                                                             100%        100%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following table presents the changes in the accrued benefit obligation
and the fair value of plan assets, as well as the funded status of the defined
benefit plans for the years ended October 31:
                                                            2007        2006
    -------------------------------------------------------------------------
    Accrued benefit obligation
      Balance, beginning of year                       $   315.8   $   275.7
      Change in exchange rate                               (1.0)       (0.4)
      Current service cost                                  23.2        22.9
      Interest on accrued benefit obligation                18.3        16.4
      Actuarial (gains) losses                              (5.2)        5.5
      Benefits paid                                        (10.6)      (10.5)
      Plan amendments                                        0.4        (3.7)
      Employee contributions                                 9.2         9.9
    -------------------------------------------------------------------------
      Accrued benefit obligation, end of year          $   350.1   $   315.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Fair value of plan assets
      Balance, beginning of year                       $   258.4   $   212.5
      Change in exchange rate                               (0.9)       (0.2)
      Actual return on plan assets                          23.3        31.6
      Benefits paid                                        (10.6)      (10.5)
      Employer contributions                                14.9        15.1
      Employee contributions                                 9.2         9.9
    -------------------------------------------------------------------------
    Fair value of plan assets, end of year             $   294.3   $   258.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Plan deficit                                     $   (55.8)  $   (57.4)
      Unamortized net actuarial losses                      26.5        36.7
      Unamortized past service costs                         0.2         0.2
      Unamortized transitional obligation                    3.1         3.2
    -------------------------------------------------------------------------
    Accrued benefit liability                          $   (26.0)  $   (17.3)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The accrued benefit asset (liability) is included in the Corporation's
balance sheet as follows:

                                                            2007        2006
    -------------------------------------------------------------------------
    Other assets                                       $     3.4   $     3.0
    Other liabilities                                      (29.4)      (20.3)
    -------------------------------------------------------------------------
                                                       $   (26.0)  $   (17.3)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Accrued benefit obligation and fair value of plan assets as at October 31
are the following amounts in respect of plans that are not fully funded:

                                                            2007        2006
    -------------------------------------------------------------------------
    Accrued benefit obligation                         $   336.6   $   281.6
    Fair value of plan assets                              276.4       220.9
    -------------------------------------------------------------------------
    Funded status - plan deficit                       $   (60.2)  $   (60.7)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The major assumptions used are as follows:

                                                            2007        2006
    -------------------------------------------------------------------------
    Accrued benefit obligation as at October 31
      Discount rate, at year-end                            5.75%        5.4%
      Rate of compensation increase                    4.0 - 5.0%  4.0 - 5.0%
    -------------------------------------------------------------------------
    Benefit cost for years ended October 31
      Discount rate, at previous year end                    5.4%        5.5%
      Expected long-term rate of return on
       plan assets                                          7.15%        7.5%
      Rate of compensation increase                    4.0 - 5.0%  4.0 - 5.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The cost of the defined benefit pension plans recorded for the years ended
October 31, is as follows:

                                                            2007        2006
    -------------------------------------------------------------------------
    Current service cost                                $   23.2   $    22.9
    Interest on accrued benefit obligation                  18.3        16.4
    Actual return on plan assets                           (23.3)      (31.6)
    Actuarial (gains) losses on accrued benefit
     obligations                                            (5.2)        5.5
    Plan amendments                                          0.4        (3.7)
    -------------------------------------------------------------------------

    Cost of the defined benefit pension plans
     before adjustments to recognize the long-term
     nature of employee future benefit costs                13.4         9.5

    Adjustments to recognize the long-term nature
     of employee future benefit costs:
      Difference between expected return and actual
       return on plan assets for the year                    4.3        15.1
      Difference between actuarial loss (gain)
       recognized for the year and actual
       actuarial loss (gain) on accrued benefit
       obligation for the year                               5.7        (4.3)
      Difference between amortization of past
       service costs for the year and actual plan
       amendments effective for the year                       -         4.0
      Amortization of the transitional obligation            0.1         0.1
    -------------------------------------------------------------------------
    Defined benefit costs recognized                   $    23.5   $    24.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The cost and total cash amount paid for the defined contribution pension
plans for the years ended October 31 is as follows:

                                                            2007        2006
    -------------------------------------------------------------------------
    Employer contributions                             $     3.2    $    3.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                              23. Amortization

                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------
    Property, plant and equipment                       $  114.2   $   110.3
    Intangible assets                                        6.2         3.5
    Deferred charges                                         2.5         3.4
    -------------------------------------------------------------------------
                                                           122.9       117.2
    Deferred charges, presented in revenues,
     operating costs and financial expenses                 26.1        15.2
    -------------------------------------------------------------------------
                                                        $  149.0   $   132.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


           24. Commitments, guarantees and contingent liabilities

    Commitments

    Pursuant to various contracts and obligations, mainly for operating
leases, the Corporation is committed to future minimum payments of
$163.2 million. Minimum payments required over the following years for these
commitments are as follows:

        2008     2009      2010      2011      2012      2013 and thereafter
    -------------------------------------------------------------------------
      $ 26.7   $ 24.9    $ 22.4    $ 18.3    $ 15.7                   $ 55.2

    The Corporation is further committed to acquire machinery and equipment.
As at October 31, 2007, these commitments represented $76.0 million, including
C$31.3 million, US$45.3 million and (euro) 1.4 million. Minimum payments
required in 2008 and 2009 are $67.4 million and $8.6 million, respectively.

    Guarantees

    In the normal course of business, the Corporation has provided the
    following significant guarantees to third parties:

    a) Sub-lease agreements

    The Corporation has entered into sub-lease agreements, for some of its
    locations under operating leases, with expiry dates between 2008 and
    2010. If the sub-lessee defaults under any of these agreements, the
    Corporation must compensate the lessor for the default. The maximum
    exposure in respect of these guarantees is estimated at $1.3 million. As
    at October 31, 2007, the Corporation has not recorded any liability
    associated with these guarantees, since it is not probable that the sub-
    lessee will default under the agreement.

    b) Indemnification of third parties

    Under the terms of its debt agreements, the Corporation has agreed to
    indemnify the holders of such debt instruments against any increase in
    their costs or reduction in the amounts otherwise payable to them
    resulting from changes in laws and regulations. Furthermore, the
    Corporation provides certain indemnifications to third parties under the
    terms of its securitization agreement. These indemnifications require the
    Corporation to make payments to third parties in the event of (i) changes
    to certain laws and regulations, (ii) any collection shortfalls resulting
    from negative changes in foreign currency rates, and (iii) any litigation
    matters relating to the arrangement and/or underlying receivables sold.
    These indemnification agreements extend for the term of the agreements
    and do not have any limit. Given the nature of these indemnifications,
    the Corporation is unable to reasonably estimate its maximum potential
    liability payable to third parties. Historically, the Corporation has
    never made any indemnification payments and as at October 31, 2007, the
    Corporation has not recorded a liability associated with these
    indemnifications.

    c) Business disposals

    As a result of the sale of business operations or assets, the Corporation
    may occasionally agree to provide indemnity against claims from previous
    business activities. The nature of these indemnification agreements
    prevents the Corporation from estimating the maximum potential liability
    that it could be required to pay to guarantee parties. Historically, the
    Corporation has not made any significant indemnification payments, and,
    as at October 31, 2007, the Corporation has not recorded any liability
    associated with these indemnifications.

    Contingent liabilities

    In the normal course of business, the Corporation is involved in various
claims and legal proceedings. Although the resolution of these various cases
pending as at October 31, 2007, cannot be determined with certainty, the
Corporation believes that their outcome would not likely have a material
adverse effect on its financial position and operating results, given the
provisions on its books or insurance covering a number of these items.

    Settlement of a lawsuit

    On October 8, 2004, the Corporation announced that an unfavorable ruling
was rendered by a California court in the lawsuit brought by Softbank Content
Services, Inc. against 9112-0691 Québec inc. (previously named MPO
Canada inc.), a holding company owned equally by Transcontinental Inc. and
3093-8195 Québec inc., a subsidiary of MPO S.A. The lawsuit involved a
guarantee awarded to Softbank Content Services, Inc. by MPO Canada inc. in
1999 on behalf of Americ Disc Inc., its then wholly-owned subsidiary. During
the second quarter of fiscal 2007, following a ruling on appeal, the
Corporation paid a total amount of US$5.8 million to Softbank Content
Services, Inc. in final settlement of the lawsuit. This amount was provided
for in 2004.


                          25. Financial instruments

    Stock-based compensation costs risk

    During the first quarter of fiscal 2007, the Corporation entered into a
total return swap agreement with a financial institution in order to minimize
the impact of the fluctuations in its Class A Subordinate Voting Share price
on its compensation expense which includes a charge related to its share unit
plan as described in Note 17. The Corporation now receives or pays, on a
quarterly basis, the difference between the fixed share price of the total
return swap and the Class A Subordinate Voting Share price, less any amount
previously received or paid. As at October 31, 2007, the total return swap
agreement covered 118,000 Class A Subordinate Voting Shares. The term of this
total return swap agreement ranges from one to five years, with a fixed price
of $21.07. The fair value of the swap agreement, which is negligible as at
October 31, 2007, is recorded in the Corporation's consolidated balance sheet
with changes in fair value recognized in net income.

    Credit risk

    The Corporation analyzes and reviews the financial health of its current
customers on an ongoing basis and applies rigorous evaluation procedures to
all new customers. A specific credit limit is established for each customer
and reviewed periodically by the Corporation.
    The Corporation is protected against any concentration of credit risk
through its products, clientele and geographic diversity. In addition, the
Corporation has a credit insurance policy covering most of its major
customers. The policy contains the usual clauses and limits the amounts that
can be claimed by event and year of coverage. The Corporation has concluded
long-term contracts with most of its major customers. These contracts contain
cost-escalation clauses equivalent to those required by the Corporation's
suppliers. The Corporation is exposed to credit risk arising from financial
instruments if a counterparty fails to meet its obligations; however, it does
not foresee such an occurrence since it deals only with recognized financial
institutions with superior credit ratings.

    Foreign exchange risk

    The Corporation has operations in the United States and Mexico, exports
its products to the United States and purchases machinery and equipment from
European suppliers. It is therefore exposed to foreign exchange risks.
    As at October 31, 2007, the Corporation entered into foreign exchange
forward contracts to sell US$87.3 million, of which US$60.3 million and
US $27.0 million will be sold in 2008 and 2009, respectively, (US$82.0 million
in 2006) related to its strategy of hedging foreign currency cash flows from
its exports to the United States. The terms of these forward contracts range
from one month to 24 months, with rates varying from 1.0384 to 1.1744. The
Corporation was also party to collars totaling US$6.0 million (US$9.5 million
in 2006). The terms of these collar contracts range from three months to eight
months, with floor rates of 1.04 and cap rates from 1.0708 to 1.0885. Hedging
relationships were effective and in accordance with the risk management
objectives and strategies throughout fiscal 2007.
    As at October 31, 2007, the Corporation had no foreign exchange forward
contracts in connection with its commitments to acquire machinery and
equipment in Euro currency ((euro)10.3 million in 2006).

    Commodity prices risk

    During fiscal 2006, the Corporation started to manage a financial risk
related to fluctuations in natural gas prices in order to minimize the impact
on the Corporation's results and financial position. The Corporation entered
into commodity swap agreements to manage a portion of its natural gas price
fluctuation exposure and is now committed to exchange, on a monthly basis, the
difference between a fixed price and a floating natural gas price index
calculated by reference to the notional amounts. Under this program, 23% of
the expected natural gas consumption is hedged for the next three fiscal
years. Hedging relationships were effective and in accordance with the risk
management objectives and strategies during fiscal 2007.
    As at October 31, 2007, the Corporation had purchased commodity swap
agreements for 533,000 Gigajoules (615,000 Gigajoules in 2006), of which
333,000, 155,000 and 45,000 Gigajoules will mature in 2008, 2009 and 2010,
respectively. The terms of theses commodity swap agreements range from one
month to 33 months, with prices varying from $7.38 to $8.97 per Gigajoule.

    Interest rate risk

    In 2007, the majority of the Corporation's currently outstanding long-
term debt is at floating interest rates. Floating rate debt bears interest at
rates based on LIBOR or Bankers' acceptances. The Corporation is also exposed
to interest rate fluctuations through its securitization program as the
discount on the sale of accounts receivable is based on the rate of commercial
paper issued by the trust. The latter generally issues its commercial paper on
a monthly basis.

                                                             Interest rate
                                         Total loans       Fixed    Floating
    -------------------------------------------------------------------------
    Long-term debt
    2007                                   $   537.5   $   249.0   $   288.5
    2006                                   $   480.6   $   360.9   $   119.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Fair value

    The book value of certain financial instruments maturing in the short-
term approximates their fair value. These financial instruments include cash,
temporary investments, accounts receivable, accounts payable and accrued
liabilities. The table below shows the fair value and the book value of other
financial instruments as at October 31, 2007 and 2006. The fair value is
determined essentially by discounting cash flows or quoted market prices. The
fair values calculated approximate the amounts for which the financial
instruments could be settled between consenting parties, based on current
market data for similar instruments. Consequently, as estimates must be used
to determine fair value, they must not be interpreted as being realizable in
the event of an immediate settlement of the instruments.

                                       2007                    2006
                              Fair value  Book value  Fair value  Book value
    -------------------------------------------------------------------------
    Long-term debt             $   539.5   $   537.5   $   486.3   $   480.6
    Foreign exchange
     forward contracts
     and collars               $    14.3   $    14.3   $     6.3   $     1.6
    Commodity swap
     agreements                $    (0.6)  $    (0.6)  $    (0.8)  $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          26. Segmented information

    The Corporation operates in the communications industry. Sales between
    sectors of the Corporation are made at fair value. Transactions, other
    than sales, are made at carrying value.

    The corporate office is responsible for financing, development, investor
    relations and control of the Corporation and offers services in the
    fields of human resources, information technology, legal affairs,
    corporate communications, taxation and insurance and risk management.


                                                            2007        2006
                                                                   (restated
    Operating sectors                                                 Note 2)
    -------------------------------------------------------------------------
    Revenues
      Printing Products and Services                   $   718.2   $   714.7
      Marketing Products and Services                    1,066.6     1,082.2
      Media                                                633.5       579.8
      Other activities and unallocated amounts              14.7        12.7
      Inter-segment sales
        Printing Products and Services                     (66.3)      (61.5)
        Marketing Products and Services                    (24.1)      (29.8)
        Media                                              (16.4)      (15.8)
    -------------------------------------------------------------------------
      Total inter-segment sales                           (106.8)     (107.1)
    -------------------------------------------------------------------------
                                                       $ 2,326.2   $ 2,282.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating income before amortization,
     impairment of assets and restructuring costs
      Printing Products and Services                   $   121.1   $   116.7
      Marketing Products and Services                      129.3       147.6
      Media                                                123.9        97.9
      Other activities and unallocated amounts             (23.9)      (19.5)
    -------------------------------------------------------------------------
                                                       $   350.4    $   342.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating income
      Printing Products and Services                   $    77.1    $   74.8
      Marketing Products and Services                       62.1        82.0
      Media                                                107.9        80.4
      Other activities and unallocated amounts             (29.3)      (24.3)
    -------------------------------------------------------------------------
                                                       $   217.8    $  212.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Acquisitions of property, plant and
     equipment(1)
      Printing Products and Services                   $    67.5    $   40.9
      Marketing Products and Services                       54.8        57.1
      Media                                                 10.9        10.9
      Other activities and unallocated amounts               5.2         5.0
    -------------------------------------------------------------------------
                                                       $   138.4    $  113.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Amortization of property, plant and equipment,
     intangible assets and deferred charges
      Printing Products and Services                   $    41.0    $   39.1
      Marketing Products and Services                       61.1        62.5
      Media                                                 15.5        10.7
      Other activities and unallocated amounts               5.3         4.9
    -------------------------------------------------------------------------
                                                       $   122.9    $  117.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Those amounts represent total expenditures for additions to property,
        plant and equipment, whether they are paid or not.


                                                           As at       As at
                                                      October 31, October 31,
                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------
    Assets
      Printing Products and Services                   $   569.4   $   531.9
      Marketing Products and Services                      922.2       787.4
      Media                                                771.8       773.3
      Other activities and unallocated amounts             106.2       169.8
    -------------------------------------------------------------------------
                                                       $ 2,369.6   $ 2,262.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                            2007        2006
                                                                   (restated
    Geographical regions                                              Note 2)
    -------------------------------------------------------------------------
      Revenues
        Canada
          Within Canada                                $ 1,705.6   $ 1,635.3
          Exports                                          219.2       240.7
    -------------------------------------------------------------------------
                                                         1,924.8     1,876.0
        United States and Mexico                           401.4       406.3
    -------------------------------------------------------------------------
                                                       $ 2,326.2   $ 2,282.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Operating income before amortization,
       impairment of assets and restructuring
       costs
        Canada                                         $   316.6   $   301.7
        United States and Mexico                            33.8        41.0
    -------------------------------------------------------------------------
                                                       $   350.4   $   342.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Operating income
        Canada                                         $   210.4   $   201.6
        United States and Mexico                             7.4        11.3
    -------------------------------------------------------------------------
                                                       $   217.8   $   212.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                           As at       As at
                                                      October 31, October 31,
                                                            2007        2006
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------
      Assets
        Canada                                         $ 1,966.1   $ 1,807.0
        United States and Mexico                           403.5       455.4
    -------------------------------------------------------------------------
                                                       $ 2,369.6   $ 2,262.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Property, plant and equipment
        Canada                                         $   617.5   $   562.6
        United States and Mexico                           122.2       138.7
    -------------------------------------------------------------------------
                                                       $   739.7   $   701.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Goodwill
        Canada                                         $   781.4   $   699.7
        United States and Mexico                           153.2       181.8
    -------------------------------------------------------------------------
                                                       $   934.6   $   881.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


         27. Effect of new accounting standards not yet implemented

    a) Inventories

    In March 2007, the CICA issued Section 3031, Inventories, replacing
    Section 3030, Inventories. This Section applies to interim and annual
    financial statements for fiscal years beginning on or after January 1,
    2008. The Section prescribes the accounting treatment for inventories
    such as measurement of inventories at the lower of cost and net
    realizable value. It provides guidance on the determination of cost and
    its subsequent recognition as an expense, including any write-downs to
    net realizable value and reversal of previous write-downs of inventories
    arising from an increase in net realizable value. It also provides
    guidance on the cost methodologies that are used to assign costs to
    inventories and it describes the required disclosures on the carrying
    amount of inventories, the amount of inventories recognized as an expense
    and the amount of write-downs or reversal of write-downs of inventories.
    The Corporation is currently evaluating the impact of the adoption of
    this new Section on the consolidated financial statements.

    b) Financial Instruments - Disclosures

    In December 2006, the CICA issued Section 3862, Financial Instruments -
    Disclosures, replacing Section 3861 - Financial Instruments - Disclosure
    and Presentation. This Section applies to fiscal years beginning on or
    after October 1, 2007. It describes the required disclosures related to
    the significance of financial instruments on the entity's financial
    position and performance and the nature and extent of risks arising for
    financial instruments to which the entity is exposed and how the entity
    manages those risks. This Section complements the principles of
    recognition, measurement and presentation of financial instruments of
    Sections 3855, Financial Instruments - Recognition and Measurement, 3863,
    Financial Instruments - Presentation and 3865, Hedges. The Corporation is
    currently evaluating the impact of the adoption of this new Section on
    the consolidated financial statements.

    c) Financial Instruments - Presentation

    In December 2006, the CICA issued Section 3863, Financial Instruments -
    Presentation, replacing Section 3861 - Financial Instruments - Disclosure
    and Presentation. This Section applies to fiscal years beginning on or
    after October 1, 2007. It establishes standards for presentation of
    financial instruments and non-financial derivatives. The Corporation is
    currently evaluating the impact of the adoption of this new Section on
    the consolidated financial statements.

    d) Capital Disclosures

    In December 2006, the CICA issued Section 1535, Capital Disclosures. This
    Section applies to fiscal years beginning on or after October 1, 2007. It
    establishes standards for disclosing information about an entity's
    capital and how it is managed to enable users of financial statements to
    evaluate the entity's objectives, policies and procedures for managing
    capital. The Corporation is currently evaluating the impact of the
    adoption of this new Section on the consolidated financial statements.


                            28. Subsequent events

    Federal Corporate income tax rate reduction

    On December 13, 2007, Bill C-28 received third reading in the House of
Commons. Accordingly, the Federal Corporate Income tax rate reductions
announced in the October 30, 2007 Economic Statement became substantively
enacted for the purpose of preparing the consolidated financial statements in
accordance with Canadian GAAP. This future decrease in federal tax rate will
reduce both the income tax expense and net future income tax liabilities by
approximately $6.5 million during the first quarter of fiscal 2008.

    Business acquisition

    As of November 19, 2007, the Corporation acquired an additional 2% of the
shares of PLM Group Ltd. The Corporation owns 100% of the shares of
PLM Group Ltd. since that date.

    Redemption of shares

    The Corporation purchased 27,400 of its Class A Subordinate Voting Shares
at a weighted average price of $20.61 for a total consideration of
$0.6 million and 4,000 of its Class B Shares at a weighted average price of
$20.75 for a total consideration of $0.1 million between November 1, 2007 and
November 20, 2007 in accordance with its Normal Course Issuer Bid as described
in Note 16.


                           29. Comparative figures

    Certain prior year figures have been reclassified to conform with the
current year presentation.
    




For further information:

For further information: Media: Nessa Prendergast, Director, Media
Relations, Transcontinental Inc., (514) 954-2809,
nessa.prendergast@transcontinental.ca; www.transcontinental.com; Financial
Community: Jennifer F. McCaughey, Director, Investor Relations,
Transcontinental Inc., (514) 954-2821, jennifer.mccaughey@transcontinental.ca

Organization Profile

Transcontinental Inc.

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