NOTE 12: CAPITAL STOCK

a) Authorized
An unlimited number of Class A non-voting shares ("Class A shares").

An unlimited number of Class B subordinate voting shares ("Class B shares"), entitled to one vote each and exchangeable for Class A shares on a one-for-one basis.

65,000, 5% non-cumulative Special shares ("Special shares"), entitled to ten votes each and convertible on the basis of two Class B shares for each Special share.

In order to ensure compliance with Federal Government directions, the Broadcasting Act and regulations governing specialty, pay and pay-per-view television services and radio stations (the "Regulations"), the Company has imposed restrictions respecting the issuance, transfer and, if applicable, voting of the Company's shares. Pursuant to such restrictions, the Company can prohibit the issuance of shares or refuse to register the transfer of shares or, if applicable, prohibit the voting of shares in circumstances that would or could adversely affect the ability of the Company and its affiliates, pursuant to the provisions of the Regulations, to obtain, maintain, renew or amend any licence required to carry on any business of the Company and its affiliates, including a licence to carry on a broadcasting undertaking, or to comply with such provisions or with those of any such licence.

b) Issued and Outstanding Capital Stock

	2006		2005
(in thousands except for number of shares)	Number of shares outstanding	Carrying value of shares	Number of shares outstanding	Carrying value of shares
Class A shares:
Beginning of year	51,714,927	$572,925	52,736,841	$577,278
Shares converted from Class B shares	145,800	143	11,900	12
Stock options exercised (note 12.c))	785,678	16,856	727,686	15,099
Shares repurchased (note 12.h))	(2,798,339)	(31,183)	(1,761,500)	(19,464)
End of year	49,848,066	558,741	51,714,927	572,925
Class B shares:
Beginning of year	3,240,622	3,169	3,252,522	3,181
Shares converted to Class A shares	(145,800)	(143)	(11,900)	(12)
End of year	3,094,822	3,026	3,240,622	3,169
Special shares	65,000	325	65,000	325
		$562,092		$576,419

c) Stock Option Plan, Restricted Share Unit Plan and Deferred Share Unit Plan
Under the provisions of the Company's employee stock option plan, the Company may grant options to key employees to purchase a maximum of 5,244,445 Class A shares, without exceeding 10% of the aggregate number of outstanding Class A and Class B shares on a non-diluted basis when combined with the number of shares reserved for issuance under the Company's other stock-based compensation arrangements. The option exercise price is set at the closing price for the Class A shares on the Toronto Stock Exchange on the last business day before the date on which the options are granted. Under the stock option plan, approximately 30% of the stock options vest progressively over 4 or 5 years from the date of granting and approximately 70% vest on the basis of the level of achievement of certain financial performance targets measured over a period of three fiscal years beginning with the fiscal year of their grant. Options have a term of 5 or 10 years.

Under the Company's restricted share unit plan, restricted share units ("RSUs") can be granted to the Company's senior executives as part of their long-term compensation program. RSUs are granted to senior executives without any monetary consideration being payable to the Company, and their vesting is entirely based on the level of achievement of certain financial performance targets measured over a period of three fiscal years beginning with the fiscal year of their grant. Upon vesting, each RSU is convertible into one fully paid Class A share issued from treasury, up to a maximum of 276,100 Class A shares, without any further monetary consideration payable to the Company in respect thereof.

Under the Company's deferred share unit plan, deferred share units ("DSUs") can be granted to the Company's directors as consideration for their compensation entitlements. A DSU is a fully vested phantom share of the Company with the same value as a Class A share. It is converted and its value is paid in cash to the holder following termination of Board service, based on the market value of Class A shares on the date of payment. No shares are required to be reserved under the Company's deferred share unit plan.

The status of the Company's employee stock option plan as at August 31, is summarized as follows:

	2006		2005
	Number of shares outstanding	Weighted average exercise price ($)	Number of shares outstanding	Weighted average exercise price ($)
Beginning of year	3,329,714	23.38	3,964,440	22.38
Granted	319,252	30.67	314,056	30.65
Exercised	(785,678)	21.45	(727,686)	20.76
Cancelled/Expired	(22,991)	27.50	(221,096)	24.37
End of year	2,840,297	24.70	3,329,714	23.38
Exercisable - end of year	1,896,119	22.48	1,746,556	20.95

The following table summarizes information relating to the outstanding stock options:

Range of exercise prices ($)	Number of options outstanding at August 31, 2006	Weighted average remaining life (years)	Weighted average exercise price ($)	Number of options exercisable at August 31, 2006	Weighted average exercise price ($)
8.50 - 10.55	89,796	1.38	8.50	89,796	8.50
10.56 - 15.75	70,353	3.33	12.76	70,353	12.76
15.76 - 20.08	6,324	3.70	16.75	6,324	16.75
20.09 - 24.53	1,086,128	5.02	22.84	1,049,412	22.81
24.54 - 27.91	979,146	5.36	25.45	660,442	24.71
27.92 - 30.67	608,550	3.80	30.66	19,792	30.65
8.50 - 30.67	2,840,297	4.72	24.70	1,896,119	22.48

The status of the Company's restricted share unit plan as at August 31, is summarized as follows:

	2006	2005
Number of units outstanding:
Beginning of year	205,219	110,398
Granted	112,480	109,202
Cancelled/Expired	(4,197)	(14,381)
End of year	313,502	205,219

d) Stock-based Compensation Cost
During the second quarter of Fiscal 2006, the Company granted to key employees 319,252 options to purchase Class A shares of the Company (314,056 options to purchase Class A shares were granted in the second quarter of Fiscal 2005). The fair value of options granted was determined using the Black-Scholes option pricing model and the following weighted average assumptions:

	Fiscal 2006 grant	Fiscal 2005 grant
Assumptions:
Risk-free interest rate	4.24%	2.78%
Expected life	5 years	5 years
Expected volatility in the market price of the shares	18.00%	27.10%
Expected dividend yield	0.98%	0.65%
Fair value per option:	$6.78	$8.28

During the second quarter of Fiscal 2006, the Company also granted 112,480 RSUs to key senior executives (109,202 RSUs were granted in the second quarter of Fiscal 2005). The weighted average fair value of the RSUs granted is $30.67 per unit ($30.65 per unit in Fiscal 2005), which is equal to the market price of a Class A share of the Company at the time of the grant.

The compensation costs related to stock options and RSUs granted to employees are recorded in operating expenses on the consolidated statements of earnings and retained earnings, over their expected vesting period for stock options, and over a three-year vesting period for RSUs. Such compensation costs are credited to contributed surplus on the consolidated balance sheets. For the year ended August 31, 2006, the stock-based compensation cost amounted to $5.3 million ($2.6 million for the year ended August 31, 2005).

The compensation cost related to DSUs is not significant for the years ended August 31, 2006 and 2005 and is recorded in operating expenses on the consolidated statements of earnings and retained earnings.

e) Pro Forma Consolidated Results
Between September 1, 2002 and August 31, 2003, the Company granted to key employees 1,006,840 options to purchase Class A shares of the Company and these option grants were accounted for as capital transactions. If the grants had been accounted for using the fair value method, consolidated results of operations, on a pro forma basis, for the years ended August 31, 2006 and 2005 would not have been materially different.

f) Employee Share Purchase Plan
The Company's employee share purchase plan provides employees with an opportunity to acquire Class A shares through salary deductions every two weeks, subject to a maximum of 10% of their annual salaries. The Company contributes an amount equal to 20% of the employees' contributions towards the purchase of the shares. The Company's contribution is recorded in operating expenses on the consolidated statements of earnings and retained earnings. Shares are acquired on the open market and the price paid for the shares is determined at the end of each month, based on the average price of all shares purchased by the plan's custodian during the month.

g) Earnings per Share
The following is a reconciliation of the numerator and denominators used for the computation of basic and diluted earnings per share from continuing operations:

(in thousands)	2006	2005
Net earnings from continuing operations (numerator)	$123,759	$104,446
Weighted average number of shares outstanding (denominators):
Weighted average number of shares outstanding - basic	53,800	55,864
Effect of dilutive securities	859	891
Weighted average number of shares outstanding - diluted	54,659	56,755

h) Normal Course Issuer Bids
On December 8, 2004, the Company announced a normal course issuer bid through the facilities of the Toronto Stock Exchange to repurchase up to 5% of its Class A and Class B shares. In accordance with the terms of the bid, the Company repurchased for cancellation the maximum of 2,647,539 Class A shares representing no more than 5% of the outstanding shares of the class as at November 30, 2004. The share repurchase program was conducted over the maximum period of 12 months which began on December 13, 2004.

On December 7, 2005, the Company announced a renewal of its normal course issuer bid to repurchase for cancellation up to 2,554,971 Class A shares and 162,031 Class B shares, both quantities representing no more than 5% of the outstanding shares as at November 30, 2005 for their respective class of shares. The share repurchase program is being conducted over a maximum period of 12 months which began on December 13, 2005.

During the year ended August 31, 2006, the Company repurchased and cancelled a total of 2,798,339 Class A shares under the two normal course issuer bids for a total cash consideration of $92.4 million. The cash consideration exceeded the carrying value of the shares repurchased by $61.2 million, which amount was charged to retained earnings (1,761,500 Class A shares were repurchased last year for a total cash consideration of $55.9 million of which $36.4 million was charged to retained earnings).