Management's Discussion and Analysis
of Financial Condition and Results of Operations

For the Nine Months Ended December 31, 2003 and the Years Ended
March 31, 2003, and March 31, 2002

AND

Consolidated Financial Statements
For the Nine Months Ended December 31, 2003 and the Years Ended
March 31, 2003 and March 31, 2002

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         Management's Discussion and Analysis of the financial position and results of operations is prepared at June 1, 2004, and should be read in conjunction with the accompanying audited financial statements and the notes therein.

         During the current period, the Company changed its year - end from March 31 to December 31. Accordingly , this report covers the nine-month period from April 1, 2003 through December 31, 2003, referred to as Fiscal 2004. The year ended March 31, 2003 is referred to as Fiscal 2003. This Management's Discussion and Analysis of Financial Condition and Results of Operations compares Fiscal 2003 with the transition year of nine-months ended December 31, 2003. For illustrative purposes, we have included information for the nine months ended December 31, 2002 to provide a comparison of similar periods.

         This discussion contains forward-looking statements. Forward-looking statements are subject by their nature to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in this discussion. The forward-looking information contained herein is current only as at the date of this document. There should not be an expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

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For the nine-months ended December 31, 2003, long-term financial liabilities include $59.6 million of long-term production liabilities (March 31, 2003 — $103.2 million; March 31, 2002 — $56.0 million) and $6.4 million of long-term liabilities pertaining to the acquisition of certain broadcast intangible assets (March 31, 2003 — $8.7 million; March 31, 2002 — $10.8 million). Both of these amounts have been included in accounts payable and accrued liabilities on the balance sheet.

        The Company's principal business activities are carried out through three operating groups: the Broadcast Group, the Motion Picture Distribution Group and the Entertainment Group (see note 26 to the Company's consolidated financial statements). Over the past few years, the Company has been transforming itself into a broadcast-driven company, by investing in and growing its broadcast business and reducing the amount of capital and other resources devoted to production and related sales.

        The Broadcast Group includes the results from the Company's controlling ownership interest in twelve Canadian specialty television channels — Showcase Television, Life Network, History Television, HGTV Canada, Food Network Canada, Showcase Action, Showcase Diva, National Geographic Channel, BBC Canada,

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BBC Kids, Discovery Health Channel and IFC — The Independent Film Channel Canada. Each of the Company's channels carries a strategic brand, has access to a supply of high quality content and aligns with one of the Company's three core genres: lifestyle, drama and factual programming. The Company also has a 50% interest in two established Canadian French-language specialty channels and a minority interest in three other channels — one analog and two digital.

        Continuing a five-year trend, the Company's channels demonstrated significant audience growth and outpaced the specialty industry overall for the broadcast year ended August 31, 2003. The Company's channels' total regulated revenue as reported by the Canadian Radio-television and Telecommunications Commission ("CRTC") grew by 25.3% during the broadcast year ended August 31, 2003, compared to an overall industry growth of 10.4%. The Company holds an 8.9% market share of total regulated revenue in the specialty and pay TV sector. Advertising revenues and subscriber revenues were up 42.6% and 14.6% respectively in the broadcast year ended August 31, 2003.

        The Company expects its seven established analog channels to continue to demonstrate strong growth in advertising sales. Also, with the number of households in Canada equipped with digital technology projected to continue to grow, growth for the Company's seven digital channels is expected to be strong in terms of subscriber revenues, as well as in terms of audience growth and advertising revenues.

        The Company continues to hold licences for a number of unlaunched digital specialty television channels, and regularly assesses the marketplace and the competitive landscape in order to determine if and when it is appropriate to launch a new digital specialty television channel. Given the strong performance of the Company's existing well-branded digital specialty television channels, the Company is considering the launch of at least one new digital specialty television channel within the next two years. The Company is also considering the potential for expansion into international territories of selected digital specialty television channels and is exploring further possible partnership opportunities with the BBC and its BBC Kids brand internationally.

        The Motion Picture Distribution Group is the largest distributor of motion pictures in Canada, measured both by number of releases and theatrical box office receipts, with a growing presence in motion picture distribution in the United Kingdom through Momentum Pictures. For the nine months ended December 31, 2003, approximately 81.7% of the Group's revenue was from Canadian operations ("Domestic Distribution") with the remaining 18.3% from operations in the United Kingdom ("Momentum Pictures"). Domestic Distribution obtains distribution rights for motion pictures primarily through its longstanding output agreements with New Line Cinema, Miramax Films, and Focus Features, a unit of Universal Studios, three of the leading U.S. based independent studios, as well as from smaller independent producers and distributors based in the United States, Canada and around the world. In the United Kingdom, Momentum Pictures primarily acquires theatrical, home entertainment and television distribution rights for motion pictures one motion picture at a time and, on occasion, pursuant to multi-picture agreements. The Group typically distributes those motion pictures for theatrical exhibition, for home entertainment, television viewing and ancillary markets. The Group also holds a 51.0% interest in Alliance Atlantis Cinemas ("Cinemas"), a partnership with Famous Players Inc. ("Famous Players") that operates a chain of niche-focused movie cinemas in Canada.

        The Motion Picture Distribution Group's business is driven by commercial acceptance of the films distributed. Commercial acceptance is generally measured by theatrical box office. The level of box office for a film will determine the level of theatrical, videocassette and digital video disk ("video/DVD") and television revenue a film will ultimately earn.

        The Company completed an initial public offering for units of the Movie Distribution Income Fund ("the Fund") on October 15, 2003. The Company received gross proceeds of $254.0 million on the closing of the offering from the sale of a 49.0% interest in its motion picture distribution business. This sale was concluded through an initial sale of a 42.6% interest in the business to Motion Picture Distribution LP ("Distribution LP") in exchange for 57.4% of the total outstanding LP units plus a promissory note, and then a further sale of a 6.4% interest was completed on the exercise of an over-allotment option by the underwriting group of the Fund. Distribution LP repaid the promissory note from net proceeds it received from the sale of LP units to the Fund, together with drawings on a new term loan from a group of financial institutions. The Company continues to consolidate the operations of Distribution LP into the Alliance Atlantis results. Net earnings and earnings per share are both reduced by amounts accrued to the 49.0% interest from the date of completion of the sale. Even

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though a $75.0 million term loan that has been secured by Distribution LP is non-recourse to Alliance Atlantis, it is included in Alliance Atlantis' reported consolidated total indebtedness. The Company's future cash flows will be impacted by the expected monthly distributions to holders of Distribution LP Units.

        Consistent with other income trusts, Movie Distribution Income Funds' fiscal year-end is December 31. In order to align with the reporting schedule for Movie Distribution Income Fund, the Company has now adopted a year-end of December 31.

        With the successful initial public offering of units in Movie Distribution Income Fund, the Company was able to accelerate debt reduction efforts, surface value in its motion picture distribution business and gain a partner to help finance future growth opportunities.

        Distribution LP's focus for future growth is continental Europe, through start-ups and acquisitions, using Momentum Pictures as a foundation. Distribution LP's strategy is to diversify the revenue stream and to reduce the relative weighting of the Canadian operations. Distribution LP also continues its aggressive pursuit of potential ways to maximize the value of its motion picture library, which consists of approximately 6,000 titles, through the availability of and customer uptake in new technologies such as video-on-demand.

        Subsequent to the period end on May 12, 2004, a subsidiary of Distribution LP completed the acquisition of Spanish film distributor Aurum Producciones, S.A. ("Aurum") for a purchase price of approximately $74.0 million ($45.0 million euros). The purchase price was funded through increased borrowing under Distribution LP's senior credit facility, a private placement of units of the Fund ("Units") and cash on hand. Distribution LP entered into an amended and restated credit agreement with its senior lenders to increase the authorized borrowing amount under its senior credit facility from $100.0 million to $125.0 million. The Fund completed a private placement of 1,436,000 Units from treasury at $10.45 per unit through a syndicate of agents. The Fund applied the gross proceeds of the private placement to acquire Class A Ordinary limited partnership units ("Ordinary LP Units") of Distribution LP. The Company, in order to maintain its 51.0% interest in Distribution LP, also acquired 1,494,612 Ordinary LP Units of Distribution LP at $10.45 per unit, such that Distribution LP realized combined gross proceeds of approximately $30.6 million from the offering of Ordinary LP Units. Aurum is the largest independent film distributor in Spain with a 6.5% market share of theatrical box office receipts in 2003. Aurum distributes motion pictures in Spain in all media (theatrical, video/DVD and television) and has a library of over 400 films. Since the acquisition of Aurum has just been completed, it is not practical for the Company to disclose a condensed balance sheet at the acquisition date and as a result purchase price allocation has not been completed. Therefore, no determination has been made of goodwill or other intangible assets if any (see note 31 to the Company's consolidated financial statements).

        The Entertainment Group acquires and distributes television programs to Canadian, American and international broadcasters, home video distributors, and sub-distributors, and produces several in-house productions that align with the content needs of the Company's Broadcast Group.

        Over the past five years the Company has significantly reduced capital-intensive production activities, as the international market for the type of production the Company has traditionally produced has changed fundamentally. In the year ended March 31, 1999, the Company delivered over 325 hours of prime-time drama production, none of which was part of the CSI franchise. In the nine-month period ended December 31, 2003, the Company reduced prime-time drama production to just 58 hours, 53.4% of which were part of the CSI franchise. Decline in revenues in the Entertainment Group is consistent with this strategy.

        As discussed in note 3 to the Company's consolidated financial statements, in the face of the continued weakened international demand for prime-time dramatic programming the Company conducted an extensive review of its Entertainment Group operations and took decisive action in December 2003 to restructure the Entertainment Group. Under the restructuring plan, the Entertainment Group materially reduced the size and scope of its production business by eliminating entire categories of production such as new prime-time drama series (with the exception of the CSI franchise), movies-of-the-week and miniseries and in-house feature films. This step has enabled the Company to significantly reduce staffing levels and to close certain production-related offices. The total impact of the restructuring on the Company's pre-tax earnings for the nine-month period ended December 31, 2003 is $223.7 million.

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        As part of the Entertainment Group restructuring plan, a decision was made to sell the Company's post-production businesses as they were no longer considered strategically important to the Company following the curtailment of production activities. Accordingly, the previously reported results of operations and financial position for these businesses have been reported as discontinued operations (see note 18 to the Company's consolidated financial statements).

        During the nine months ended December 31, 2003 the Company identified certain revisions to its prior years' financial statements. These items were identified primarily as a result of an extensive review of the Entertainment Group's distribution and participation liabilities, and the Company's consolidation process. Items identified included charges for net underaccruals of distribution and participation liabilities; adjustments to assets for recoupable print and advertising costs which should have reduced distribution and participation liabilities; errors in the elimination of certain intercompany transactions within the Entertainment Group and between the Entertainment Group and the Motion Picture Distribution Group; adjustments for unreconciled program related payables; and a resultant change in the hedged position of the net investment in certain foreign operations. The net amount of these items was a charge of $49.3 million, including income tax provisions of $4.1 million, which has been recorded through a restatement of previously reported amounts. Certain amounts requiring reclassification between investment in film and television programs and distribution and participation liabilities were identified as well as a reclassification between future income taxes and income taxes payable. Accordingly, the results of operations and financial position for the Company were changed for fiscal 2003 and the year ended March 31, 2002 ("fiscal 2002") (see note 29 to the Company's consolidated financial statements).

        Following the significant review that was announced in December 2003, the Entertainment Group is now primarily an international distributor of television content with limited and highly selective involvement in the creation of content. The Entertainment Group will now focus on three key areas — the CSI franchise and the children's and factual genres. In the factual and children's genres, the Company seeks to create or acquire profitable international rights to selected programs. Decisions on factual programming will be driven primarily by the content needs of the Broadcast Group, while decisions on children's programming will be driven by market demand as well as merchandising and licensing opportunities. The Company continues to sell titles from its catalogue, which contains 800 titles and 5,400 hours, including CSI , from its international television distribution operation.

        The Entertainment Group also includes results from the CSI franchise, which the Company co-owns, co-produces, and distributes outside of the United States.

        The growth in the Entertainment Group is expected to predominantly relate to the CSI franchise. The Company and CBS Productions have produced a pilot episode of a possible spin-off to the CSI franchise, CSI: NY. CBS network announced that it would begin airing CSI: NY , during the 2004/2005 broadcast season. Currently, the Company has licensed international broadcast rights, outside the United States, to both the original CSI: Crime Scene Investigation and its spin-off CSI: Miami to more than 150 territories around the world, sharing worldwide revenues on a 50/50 basis with CBS Productions after certain distribution fees, marketing/distribution expenses, production costs and third-party profit participations.

        Other     In fiscal 2004, the Company consolidated its head office facilities into one location in Toronto by closing one of its locations, resulting in a lease abandonment charge of $8.3 million. This was recorded in the Company's operating expenses in the Other Group in fiscal 2004. In conjunction with consolidating its offices, the Company extended the lease and increased the space at its current location and received a rent inducement from the landlord totaling $7.6 million. This inducement is being recognized into income over the remaining lease term.

         Operating expenses The Company's operating expenses also include $1.8 million in non-recurring costs related to its structured financing limited partnership interest, reflected in the Other Group. Operating expenses also includes a $9.7 million charge for doubtful accounts in the Entertainment Group. This charge was recorded directly as a result of the Entertainment Group review.

        Indebtedness     The Company continues to keenly focus on generating free cash flow and making significant and increasing progress in its primary financial objective of reducing its indebtedness. In Calendar 2004, the Company expects to refinance its existing 13.0% $US300 million senior subordinated notes. The notes are

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redeemable at the option of the Company in whole or in part, at any time on or after December 15, 2004 at specified redemption rates ranging from 106.5% of the principal amount at December 15, 2004 to 100.0% of the principal amount after December 15, 2007, plus accrued and unpaid interest.

        Revenues     The Company and its consolidated subsidiaries earn revenue from various sources, the most significant of which are described below.

        The Broadcast Group's revenue is earned from fees paid to the Company by cable, Direct To Home ("DTH") satellite and other broadband systems operators based on fees paid to them by subscribers to the Company's specialty television channels, as well as directly from advertisers who purchase advertising on the Company's specialty television channels. Additionally, other Broadcast Group revenues are generated from the rental of facilities, government tax credits and licence fees earned on the distribution of certain programming.

        The Motion Picture Distribution Group generates revenue from the theatrical distribution of motion pictures, the licencing of rights to conventional and specialty broadcasters, the sale of videos and DVDs, the exhibition of motion pictures through its chain of cinemas, and government assistance for distribution activities. The Company derives motion picture distribution revenue from licence fees earned on theatrical and television distribution. Licence fees from theatrical distribution are earned from theatre owners who exhibit films distributed by the Company in their theatres for a percentage of box office revenue.

        The Entertainment Group generates revenue from the production and distribution of television programming and feature films, domestically and internationally. The Company generates revenue by licencing both internally produced television programming and feature films as well as acquired content to Canadian, American and international broadcasters, home video distributors, and sub-distributors. Government assistance with respect to production activity is received in the form of government grants and tax credits. There are several sources of funds available for the financing of the Company's production and distribution activities, including financing from equity investors, non-equity funding, broadcast licence fees and government assistance. Equity investors can be co-producers, broadcasters and also government organizations, such as Telefilm and La Société de Dévelopement des Enterprises Culturelles (SODEC). Non-equity funding primarily comes through the Canadian Television Fund (the Licence Fee Program) that tops up Canadian broadcast licence fees for the respective Canadian broadcasters.

        Revenue classified under Other had historically been derived primarily from Sentinel Hill Alliance Atlantis Equicap Limited Partnership ("SHAAELP"), in which one of the Company's subsidiaries has a 30.0% limited partnership interest. SHAAELP originates and sells structured financing products related to the film and television industries by packaging items related to production services into limited partnerships and selling them to investors to encourage production. SHAAELP receives fees for selling these limited partnerships. There has been no revenue recognized in SHAAELP for the nine months ended December 31, 2003 or for the year ended March 31, 2003. For the year ended March 31, 2002, the Company recognized $12.3 million in SHAAELP revenue.

        The Company's wholly owned structured financing business, Equicap Financial Corporation, previously provided high yield loans to independent film and television producers. Revenue was derived from interest on the loans and arrangement fees. In the nine months ended December 31, 2003 the Company wound down this business.

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Results of Operations

        As a result of the change in the Company's fiscal year-end to December 31, this discussion will compare the nine-months ended December 31, 2003 to the year ended March 31, 2003. However in order to provide readers with a meaningful analysis of comparative results, the discussion for the most part compares the results for the nine-month period ended December 31, 2003 with those for the corresponding nine-month period ended December 31, 2002.

        The following table presents a consolidated summary of the Company's Operating Groups for the nine months ended December 31, 2003, and the 12 months ended March 31, 2003 and 2002 (in millions of Canadian dollars):

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(1)

The percentage columns show percentage of total revenue for revenue items, operating expenses, earnings (loss) from operations before undernoted and discontinued operations, net operating earnings (loss), net earnings (loss), adjusted EBITDA, adjusted operating earnings (loss), and adjusted net operating earnings (loss) and percentage of group revenue for direct operating expenses, direct profit and EBITDA.

(2)

The Company uses EBITDA, direct profit (loss), operating earnings (loss), net operating earnings (loss), adjusted EBITDA, adjusted operating earnings (loss) and adjusted net operating earnings (loss) to gain a better understanding of the results of the business. These financial measures are not recognized under Canadian or United States generally accepted accounting principles ("GAAP"). These non-GAAP financial measures are provided to enhance the user's and investor's understanding of the Company's historical and current financial performance and its prospects for the future. Management believes that these measures provide useful information as they exclude amounts that are not indicative of the Company's core operating results and ongoing operations and provide a more consistent basis for comparison between years. The Company uses EBITDA, direct profit (loss), operating earnings (loss), net operating earnings (loss), adjusted EBITDA, adjusted operating earnings (loss) and adjusted net operating earnings (loss) to measure operating performance. The Company has defined EBITDA, calculated using figures determined in accordance with Canadian GAAP, as earnings (loss) before undernoted, which are earnings before amortization, unusual items, interest, equity losses in affiliates, minority interest, dilution gains, investment gains and losses, foreign exchange gains and losses, income taxes and discontinued operations, net of tax. Direct profit (loss) is defined as revenue less direct operating expenses, as defined in note 26 to the Company's consolidated financial statements. Operating earnings (loss) has been defined as earnings (loss) from operations before undernoted and discontinued operations, which are earnings before dilution gains, investment gains and losses, foreign exchange gains and losses, income taxes and discontinued operations, net of tax. Net operating earnings is defined as operating earnings, net of an applicable portion of income tax. See reconciliation of non-GAAP measures on page 10.

Additionally, earnings (loss) before undernoted and earnings (loss) from operations before undernoted and discontinued operations include cash and non-cash items that relate to restructuring activities in the Entertainment Group. Management does not expect to undertake restructuring activities of a similar magnitude or nature in the imminent future and therefore believes that the impact of these activities and their associated charges should be eliminated when evaluating the current operating performance of the Company. For this reason, management has also used adjusted EBITDA, adjusted operating earnings, and adjusted net operating earnings to evaluate the performance of the business. Adjusted EBITDA has been defined as EBITDA less cash and non-cash restructuring items included in earnings (loss) before undernoted, adjusted operating earnings (loss) has been defined as operating earnings (loss) less cash and non-cash restructuring items included in earnings (loss) from operations before undernoted, and adjusted net operating earnings has been defined as adjusted operating earnings (loss), net of an applicable portion of income tax.

While many in the financial community consider EBITDA, operating earnings and net operating earnings to be important measures of operating performance, they should be considered in addition to, but not as a substitute for, net earnings (loss) from operations before discontinued operations, net earnings, cash flow and other measures of financial performance prepared in accordance with Canadian GAAP which are presented in the attached consolidated financial statements. In addition, the Company's calculation of EBITDA, operating earnings (loss) and net operating earnings (loss) may be different than the calculation used by other companies and therefore comparability may be affected.

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        The following table presents a consolidated summary of Company's Operating Groups for the nine months ended December 31, 2003 and 2002 (in millions of Canadian dollars):

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(1)

The percentage columns show percentage of total revenue for revenue items, operating expenses, earnings (loss) from operations before undernoted and discontinued operations, net operating earnings (loss), net earnings (loss), adjusted EBITDA, adjusted operating earnings (loss), and adjusted net operating earnings (loss) and percentage of group revenue for direct operating expenses, direct profit and EBITDA.

(2)

The Company uses EBITDA, direct profit (loss), operating earnings (loss), net operating earnings (loss), adjusted EBITDA, adjusted operating earnings (loss) and adjusted net operating earnings (loss) to gain a better understanding of the results of the business. These non financial measures are not recognized under Canadian or United States generally accepted accounting principles ("GAAP"). These non-GAAP financial measures are provided to enhance the user's and investor's understanding of the Company's historical and current financial performance and its prospects for the future. Management believes that these measures provide useful information as they exclude amounts that are not indicative of the Company's core operating results and ongoing operations and provide a more consistent basis for comparison between years. The Company uses EBITDA, direct profit (loss), operating earnings (loss), net operating earnings (loss), adjusted EBITDA, adjusted operating earnings (loss) and adjusted net operating earnings (loss) to measure operating performance. The Company has defined EBITDA, calculated using figures determined in accordance with Canadian GAAP, as earnings (loss) before undernoted, which are earnings before amortization, unusual items, interest, equity losses in affiliates, minority interest, dilution gains, investment gains and losses, foreign exchange gains and losses, income taxes and discontinued operations, net of tax. Direct profit (loss) is defined as revenue less direct operating expenses, as defined in note 26 to the Company's consolidated financial statements. Operating earnings (loss) has been defined as earnings (loss) from operations before undernoted and discontinued operations, which are earnings before dilution gains, investment gains and losses, foreign exchange gains and losses, income taxes and discontinued operations, net of tax. Net operating earnings is defined as operating earnings, net of an applicable portion of income tax. See reconciliation of non-GAAP measures on page 10.

Additionally, earnings (loss) before undernoted and earnings (loss) from operations before undernoted and discontinued operations include cash and non-cash items that relate to restructuring activities in the Entertainment Group. Management does not expect to undertake restructuring activities of a similar magnitude or nature in the imminent future and therefore believes that the impact of these activities and their associated charges should be eliminated when evaluating the current operating performance of the Company. For this reason, management has also used adjusted EBITDA, adjusted operating earnings, and adjusted net operating earnings to evaluate the performance of the business. Adjusted EBITDA has been defined as EBITDA less cash and non-cash restructuring items included in earnings (loss) before undernoted, adjusted operating earnings (loss) has been defined as operating earnings (loss) less cash and non-cash restructuring items included in earnings (loss) from operations before undernoted, and adjusted net operating earnings has been defined as adjusted operating earnings (loss), net of an applicable portion of income tax.
While many in the financial community consider EBITDA, operating earnings and net operating earnings to be important measures of operating performance, they should be considered in addition to, but not as a substitute for, net earnings (loss) from operations before discontinued operations, net earnings, cash flow and other measures of financial performance prepared in accordance with Canadian GAAP which are presented in the attached consolidated financial statements. In addition, the Company's calculation of EBITDA, operating earnings (loss) and net operating earnings (loss) may be different than the calculation used by other companies and therefore comparability may be affected.

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        The following table presents a reconciliation of net earnings (loss), as reported under Canadian generally accepted accounting principles ("GAAP"), to EBITDA, direct profit (loss), operating earnings (loss), net operating earnings (loss), adjusted EBITDA, adjusted operating earnings (loss), and net adjusted operating earnings (loss) for the nine months ended December 31, 2003 and 2002 and the 12 months ended March 31, 2003 and 2002 (in millions of Canadian dollars):

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        The following table presents a reconciliation of diluted net earnings (loss) per share, as reported under Canadian GAAP, to net operating earnings (loss) per share and to adjusted net operating earnings (loss) per share for the nine months ended December 31, 2003 and 2002 and the 12 months ended March 31, 2003 and 2002:

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The following table presents a reconciliation of cash and cash equivalents provided by (used in) operating activities, as reported under Canadian GAAP, to operating cash flow and free cash flow for the nine months ended December 31, 2003 and 2002 and the 12 months ended March 31, 2003 and 2002 (in millions of Canadian dollars):

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Operating cash flow is defined as cash and cash equivalents provided by (used in) operating activities, excluding the net changes in other non-cash balances related to operations, less investments in property and equipment. Free cash flow is defined as the total of cash and cash equivalents provided by (used in) operating activities and provided by (used in) investing activities. Operating cash flow and free cash flow are measures used by the Company to measure its operating performance. Management uses operating cash flow and free cash flow to assess the Company's ability to satisfy its working capital needs, repay debt, and fund capital expenditures and acquisitions. These non-GAAP financial measures are provided to give users and investors a better understanding of the Company's cash flow from normal or operational business activities. Operating cash flow and free cash flow and related measures may or may not be consistent with the calculation of similar measures for other companies and should not be viewed as alternatives to cash and cash equivalents provided by (used in) operating activities or other measures of performance calculated in accordance with Canadian generally accepted accounting principles.

Nine-Month Period Ended December 31, 2003 Compared to the Year Ended
March 31, 2003 (revised)

        Management focuses on and measures the results of the Company's operations based on direct profit (loss) and earnings (loss) before undernoted, as presented on the Company's consolidated statements of earnings (loss), provided by each business segment (for further discussion on the business segments refer to note 26 to the Company's consolidated financial statements).

        Revenue     Revenue was $640.2 million for the nine-month period ended December 31, 2003 compared with $872.0 million for the year ended March 31, 2003. The decrease in revenue is mainly due to the difference in length of the two fiscal periods.

        Revenue was $640.2 million for the nine-month period ended December 31, 2003 compared to $646.2 million for the nine-month period ended December 31, 2002. The decrease in revenue is the net result of an increase in both the Broadcast Group's and the Motion Picture Distribution Group's revenues, more than offset by a decrease in Other revenue and a decrease in revenue in the Entertainment Group, the latter is the result of the Company's longstanding strategy to reduce its prime-time drama production.

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        The following table outlines further information on the Company's Broadcast Group revenue (in millions of Canadian dollars).

        The Broadcast Group — Operating Channels' revenue was $144.9 million for the nine-month period ended December 31, 2003 compared to $120.2 million for the nine-month period ended December 31, 2002, representing a 20.5% growth in revenue. This increase was primarily the result of growth in advertising revenues in the Operating Channels, as the Company continues to be a leader in the fundamental shift of Canadian television viewers toward Specialty and Pay television channels at the expense of conventional broadcast channels. While the Operating Channels' subscriber revenues saw increases of 5.8% over the equivalent period in the prior year, advertising and other revenues increased by 34.5% in the current nine-month period. Operating Channels' advertising revenue, on its own, increased by 40.7% for the nine-month period ended December 31, 2003 compared to the nine-month period ended December 31, 2002. The growth in advertising revenue reflects strong growth in audiences, with particularly strong growth for Showcase Television and Food Network Canada.

        The Broadcast Group — Developing Channels' revenue was $17.5 million for the nine-month period ended December 31, 2003 compared to $13.3 million for the nine-month period ended December 31, 2002, representing a 31.6% growth in revenue. This favourable variance is a result of an increase in the number of subscribers. Developing Channels include only the Company's digital specialty television channels, which were launched towards the end of the September 2001 quarter. As detailed in statistics provided by Nielsen Media Research for the period from January 5, 2004 to April 4, 2004, three of the Company's seven digital channels were ranked among the top 10 digital specialty television channels for viewers aged 25 to 54. In particular, Showcase Action was ranked number one and Showcase Diva was ranked number three. (See note 26 to the consolidated financial statements of the Company for a definition of Developing Channels.)

        Total paid subscribers for the channels in which the Company holds a controlling ownership grew 7.2% to 33.4 million subscribers at December 31, 2003 compared to December 31, 2002.

        The Company's Operating Channels advertising revenue growth was driven mostly by rate growth, with modest growth in the inventory sell out rate. The Company's Developing Channels advertising revenue growth was driven by volume rather than rate as these newer channels continue to attract a growing number of advertisers.

        The Motion Picture Distribution Group's revenue was $307.8 million for the nine-month period ended December 31, 2003 compared to $299.1 million for the nine-month period ended December 31, 2002, representing an increase of $8.7 million, or 2.9%. The increase in revenue is the result of an increase in revenue from Domestic Distribution, offset by a decrease in revenue from both Momentum Pictures and Cinemas.

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        The following table outlines further information on the Company's Motion Picture Distribution Group's revenue that has not been shown on the consolidated statements of loss (in millions of Canadian dollars).

        Management does not focus on direct profit or EBITDA using the above distinction as the cost of the underlying asset, the distribution right, is not necessarily distinguished between the theatrical, video/DVD and television distribution channels.

        Domestic Distribution's revenue was $241.0 million for the nine-month period ended December 31, 2003 compared to $227.6 million for the nine-month period ended December 31, 2002. The majority of this increase is due to the theatrical performance of The Lord of the Rings: The Return of the King, Elf, Spy Kids 3D: Game Over, Scary Movie 3 and Kill Bill Volume 1. Revenue for the nine-month period ended December 31, 2002 was generated by such releases as The Lord of the Rings: The Two Towers and Austin Powers 3 . Momentum Pictures' revenue was $56.3 million in the nine-month period ended December 31, 2003 compared to $59.5 million in the nine-month period ended December 31, 2002. The decrease is the result of lower theatrical revenue offset by an increase in video/DVD sales. Revenue from theatrical releases in the current period did not reach the prior period theatrical revenue levels of Crossroads and My Little Eye. Cinemas' revenue was $10.5 million in the nine-month period ended December 31, 2003 compared to $12.0 million for the nine-month period ended December 31, 2002. The decrease is the result of lower attendance.

        Revenue from Momentum Pictures accounted for 18.3% of the Motion Picture Distribution Group's revenue for the nine-month period ended December 31, 2003 compared to 19.9% for the nine-month period ended December 31, 2002. Momentum Pictures accounted for 19.9% of the Motion Picture Distribution Group's EBITDA compared to 9.2% in the same period in the prior year.

        Domestic Distribution released 66 titles theatrically in both the nine-month periods ended December 31, 2003 and 2002. Additionally, 122 videos and 126 DVDs were released in the nine-month period ended December 31, 2003, compared to 153 videos and 169 DVDs released in the nine-month period ended December 31, 2002. Momentum Pictures released 16 titles theatrically in the nine-month period ended December 31, 2003, compared to 11 titles in the nine-month period ended December 31, 2002. Additionally, 22 videos and 36 DVDs were released in the nine-month period ended December 31, 2003, compared to 29 videos and 27 DVDs released in the nine-month period ended December 31, 2002. The Motion Picture Distribution Group releases a large number of motion pictures from recognized studios through multiple distribution platforms and thereby creates a diversified portfolio of motion pictures. Although the number of releases in any particular period may impact the level of revenues earned by the Motion Picture Distribution Group within a period, the revenues and corresponding direct margins can be impacted by the theatrical and subsequent home video performance of particular releases within specific periods. Specifically, revenue in the nine-month period ended December 31, 2003 benefited from the theatrical performance of such films as The Lord of the Rings: The Return of the King, Elf, Spy Kids 3D: Game Over, Scary Movie 3, and Kill Bill Volume 1 , and the video/DVD release of The Lord of the Rings: The Two Towers.

        The Entertainment Group's revenue was $169.8 million for the nine-month period ended December 31, 2003 compared to $212.5 million for the nine-month period ended December 31, 2002, representing a decrease of $42.7 million or 20.1%. The decrease in revenue results from a variety of factors including the delivery of fewer feature films in the nine months ended December 31, 2003 compared to the nine-month period ended

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December 31, 2002. Foolproof was the only feature film delivered during the current period, compared to the prior nine-month period, which included the award winning Bowling for Columbine, The Good Thief and Ararat . Also contributing to this decrease was a decline in library revenues as the nine months ended December 31, 2002 benefited from the large international sale of Beastmaster .

        Revenue from the CSI franchise accounted for 47% of the Entertainment Group's revenue for the nine-month period ended December 31, 2003 compared to 25% for the nine-month period ended December 31, 2002. The CSI franchise accounted for $24.0 million of the Entertainment Group's direct profit in the nine-month period ended December 31, 2003 compared to $18.6 million in the same period in the prior year.

        The following table shows the Company's Entertainment Group's production deliveries for the nine months ended December 31, 2003 compared to the nine months ended December 31, 2002.

        Other revenue, which includes revenue from various corporate investments, was $0.2 million for the nine months ended December 31, 2003 compared to $1.1 million for the nine months ended December 31, 2002, representing a decrease of $0.9 million. This decrease is a result of the sale of a revenue generating property held by one of the Company's joint ventures during the first quarter of fiscal 2004.

        Direct Profit (Loss)     Direct profit (loss) is defined as revenue less direct operating expenses, which includes those expenses that are directly attributable to the cost of the product generating the revenue streams. In the case of the Entertainment Group and the Motion Picture Distribution Group, these costs include the amortization and write off, if applicable, of investment in film and television programs (with the exception of interest capitalized to film and television programs) and direct print and advertising incurred to earn revenue. In the case of the Broadcast Group, direct operating expenses include the amortization of the broadcast rights and the costs incurred to meet the Canadian Content Program Expenditure Requirements mandated by Condition of License by the Canadian Radio-television and Telecommunications Commission ("CRTC"). These include costs to create the on-air look and on-air promotion of programs.

        Direct loss (including the Developing Channels) was $16.1 million for the nine-month period ended December 31, 2003 compared to direct profit of $244.3 million in the year ended March 31, 2003 representing a decrease of $260.4 million. This decrease is partly due to the difference in length of the two fiscal periods but mainly due to the decrease in the Entertainment Group's direct profit, which decreased $242.7 million, with a loss in the nine-month period ended December 31, 2003 of $169.9 million compared to a profit of $72.8 million in the year ended March 31, 2003. This decrease is a result of significant direct operating costs in connection with the restructuring of the Entertainment Group (see note 3 of the Company's consolidated financial statements).

        Direct loss of the Entertainment Group in December 2003 includes a charge of $165.3 million directly as a result of the restructuring. This charge is primarily a result of an impairment of investment in film and television programs. In addition, direct profit for the nine months ended December 31, 2003 includes an impairment charge of approximately $28.4 million on film and television assets resulting from the impact of the strength in

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the Canadian dollar on revenue projections, used in the calculation of amortization of investment in film and television programs. A portion of the $28.4 million impairment charge related to the quarters ended June 30, 2003 and September 30, 2003. Accordingly, the previously reported results of operations for the quarters ended June 30, 2003 and September 30, 2003 were revised.

        Direct margin (including the Developing Channels) decreased to a negative margin of 2.5% in the nine-month period ended December 31, 2003 compared to a margin of 28.0% in the year ended March 31, 2003. This decrease of 30.5 percentage points is due to the decrease in the Entertainment Group's direct margin which decreased to a negative margin of 100.1% in the nine-month period ended December 31, 2003 compared to a positive margin of 24.0% in the year ended March 31, 2003 as explained above.

        Excluding the restructuring charge of $165.3 million, the Entertainment Group had a negative direct margin of 2.7% for the nine-month period ended December 31, 2003. Also, excluding this restructuring charge, the overall Company's direct margin (including the Developing Channels) was 23.3% for the nine-month period ended December 31, 2003.

        Direct loss (including the Developing Channels) was $16.1 million for the nine-month period ended December 31, 2003 compared to direct profit of $181.6 million for the nine-month period ended December 31, 2002, representing a decrease of $197.7 million, or 108.9%. The decrease is due to the significant decrease in the Entertainment Group's direct profit, which resulted in a loss of $169.9 million for the nine-month period ended December 31, 2003 compared to a profit of $52.9 million for the nine-month period ended December 31, 2002, representing a decrease of $222.8 million. Again this decrease is mainly due to the restructuring of the Entertainment Group as explained above. Offsetting this decrease is an increase in the direct profit of the Broadcast Group — Operating Channels, which increased $15.3 million to $84.0 million for the nine-month period ended December 31, 2003 from $68.7 million for the nine-month period ended December 31, 2002 as explained below.

        Excluding the restructuring charge to direct operating expenses in the Entertainment Group, the Company's direct profit (including the Developing Channels) was $149.2 million for the nine months ended December 31, 2003, representing a decrease of $32.4 million, or 17.8%, compared to the comparative nine-month period in the prior year.

        The Broadcast Group — Operating Channels' direct margin increased slightly over the nine-month period ended December 31, 2002. Specifically, the margin for the nine months ended December 31, 2003 increased to 58.0% from 57.2% for the nine months ended December 31, 2002. The increase results from increased advertising revenues in the nine-month period ended December 31, 2003 compared to the nine-month period ended December 31, 2002. As mentioned previously, direct operating expenses in the Broadcast Group include the amortization of broadcast rights and costs incurred to meet the Canadian Content Program Expenditure Requirements ("CPE"). The calculation of CPE is directly tied to the level of the previous year's regulated revenues and therefore increases in revenues in the current period will not necessarily result in a corresponding increase in current period direct operating costs.

        The Broadcast Group — Developing Channels' direct margin decreased to 49.1% for the nine months ended December 31, 2003 from 66.9% for the nine months ended December 31, 2002. This decrease is a result of increased amortization of broadcast rights as the channels mature.

        The Motion Picture Distribution Group's direct margin increased to 19.8% for the nine months ended December 31, 2003 compared to 16.7% for the nine months ended December 31, 2002. The increase in margin is due to an increase in the Domestic Distribution direct margin. The higher overall quality of Domestic Distribution's release slate during the nine months ended December 31, 2003 led to a reduction in provisions required for underperforming titles and this in turn led to an increase in the segment's direct margin.

        The Entertainment Group's direct loss for the nine-month period ended December 31, 2003 includes $24.0 million of direct profit from the CSI franchise, compared to $18.6 million in the prior year's comparable nine-month period. Direct margin of the Entertainment Group for the nine months ended December 31, 2003 includes a 30% margin on CSI revenues compared to 35% margin on CSI revenues in the comparative year nine-month period.

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        Operating Expenses     Operating expenses represent period costs that are not directly attributable to a product and include such costs as salaries and benefits, occupancy, general and administrative expenses, general marketing costs, professional fees and broadcast transponder or signal delivery costs.

        Operating expenses were $124.7 million for the nine-month period ended December 31, 2003 compared to $121.5 million for the year ended March 31, 2003. The increase in operating expenses is due to increases as set out below for the nine-month period, offset by lower costs from the shorter period represented by the nine months ended December 31, 2003 compared to the 12 months ended March 31, 2003.

        Operating expenses increased by $39.1 million, or 45.7%, to $124.7 million for the nine months ended December 31, 2003 from $85.6 million for the nine months ended December 31, 2002. The increase is comprised of a $3.4 million increase in the Broadcast Group, a $3.2 million increase in the Motion Picture Distribution Group, a $15.9 million increase in the Entertainment Group and a $16.6 million increase in Other Group.

        The increase in the Broadcast Group — Operating Channels is due to costs that are variable with the increased advertising and subscriber revenues, such as commissions and regulatory fees, as well as lower costs recovered to direct operating expenses. The increase in the Motion Picture Distribution Group is due to the timing of compensation related expenses. The Entertainment Group operating expenses for the nine-month period ended December 31, 2003 included some project related expenses, increased occupancy costs, increased professional fees, and provisions for doubtful accounts. In addition, cost recoveries declined in line with the decrease in productions. The increase in Other Group expenses is attributable to an $8.3 million one-time non-cash lease abandonment charge on one of the Company's leased locations and $1.8 million of costs related to the Company's interest in the structured financing business, stock option costs that the Company is expensing, and an increase in and timing of certain professional fees and other expenses incurred within the period.

        Earnings before undernoted (EBITDA)     For the nine months ended December 31, 2003, EBITDA (including Developing Channels operating losses) was ($140.8) million compared to $122.8 million for the year ended March 31, 2003, representing a decrease of $263.6 million. This decrease is due to the shorter fiscal period plus the charges related to the Entertainment Group restructuring activities and impairment charge effects on film and television assets due to foreign currency fluctuations on revenue projections used in the calculation of amortization, as well as higher operating expenses as noted above.

        For the nine months ended December 31, 2003, EBITDA (including Developing Channels operating losses) was ($140.8) million compared to $96.0 million for the nine months ended December 31, 2002, representing a decrease of $236.8 million, or 246.7%. As a percentage of revenue EBITDA margins decreased to a negative margin of 22.0% compared to a positive margin of 14.9% for the nine-month period ended December 31, 2002. The decrease in EBITDA percentage is due to the decrease in the Entertainment Group's direct margin as a result of the restructuring and foreign currency fluctuations, as well as the increase in the Other Group's operating expenses explained previously.

        The Broadcast Group — Operating Channels' EBITDA increased by 16.4% over the prior year nine-month period, with EBITDA of $56.7 million; the Broadcast Group — Developing Channels' operating loss improved by 36.4%, to $6.3 million, down from $9.9 million in the prior year's comparable nine-month period; the Motion Picture Distribution Group's EBITDA increased by 21.7% to $43.7 million; the Entertainment Group's EBITDA, excluding the restructuring charges of $166.0 million, was ($32.3) million compared to $40.4 million in the nine-month period ended December 31, 2002; and the Other Group's loss was $36.6 million compared to $19.1 million in the prior year comparable period.

        The decreases in the Other Group reflect the increases in operating expenses as noted previously. The Entertainment Group EBITDA of ($32.3) million, excluding the restructuring charges, includes approximately $28.4 million in charges to direct operating expenses relating to foreign currency fluctuations.

        Adjusted EBITDA     As previously defined on page 7, adjusted EBITDA for the nine months ended December 31, 2003 was $25.2 million compared to $122.8 million for the year ended March 31, 2003, representing a decrease of $97.6 million. This decrease reflects the shorter fiscal period as well as the impact of an impairment charge of approximately $28.4 million on film and television assets in the Entertainment Group,

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resulting from the impact of the strength in the Canadian dollar on revenue projections, used in the calculation of amortization of investment in film and television programs.

        For the nine months ended December 31, 2003 adjusted EBITDA was $25.2 million compared to $96.0 million for the nine months ended December 31, 2002, representing a decrease of $70.8 million, or 73.7%. As a percentage of revenue adjusted EBITDA margins decreased to 3.9% compared to 14.9% for the nine-month period ended December 31, 2002. Adjusted EBITDA excludes $165.3 million of charges included in direct operating expenses and $0.7 million of charges included in operating expenses related to the Entertainment Group restructuring (see note 3 to the Company's consolidated financial statements).

        Amortization     Amortization was $50.0 million for the nine months ended December 31, 2003 compared to $36.7 million for the year ended March 31, 2003. Amortization includes development costs charges, and amortization of property and equipment and other assets. This increase is primarily due to the write off of certain development costs as a result of the Company's review of its Entertainment operations as described in note 3 of the Company's consolidated financial statements. The impairment of development costs resulting from the Entertainment restructuring totaled $30.8 million and was directly related to decisions to abandon projects as a result of the decision to curtail production activities.

        Amortization was $50.0 million for the nine months ended December 31, 2003 compared to $22.7 million for the same period in 2002, representing an increase of $27.3 million. The increase is due primarily to the write off of certain development costs as explained above.

        Interest     Interest expense decreased $22.6 million to $62.4 million for the nine-month period ended December 31, 2003 compared to $85.0 million for the year ended March 31, 2003. The decrease is mainly due to the difference in length of the reporting periods.

        Interest expense increased $3.0 million to $62.4 million for the nine-month period ended December 31, 2003 compared to $59.4 million for the nine-month period ended December 31, 2002.

        A $5.0 million decrease in cash interest expenses is offset by an $8.0 million increase in non-cash interest charges. These non-cash interest charges include a decrease in the interest capitalized to investment in film and television programs, which is in line with the Company's strategy to significantly reduce capital-intensive production activities, plus a relative increase in the amortization of interest previously capitalized. In addition, an increase in deferred financing charge amortization results from a pro rata write down of deferred financing costs related to the reduction to the authorized capacity of the Company's corporate senior revolving credit facility (see note 7 to the Company's consolidated financial statements). Additional deferred financing charges were also incurred in relation to the new senior revolving credit facility and term loan negotiated by the Motion Picture Distribution Limited Partnership.

        For the nine-month period ended December 31, 2003, interest expense is net of amounts capitalized to investment in film and television programs of $6.4 million compared to $9.9 million in the prior year nine-month period and includes $10.6 million compared to $7.3 million in the prior year nine-month period of amortization of interest previously capitalized to investment in film and television programs. Interest that has been capitalized and not expensed during the year is charged to interest in future periods as the related film and television programs are delivered and costs are amortized.

        Deferred financing cost amortization totals $5.4 million for the nine-month period ended December 31, 2003 compared to $4.2 million in the prior year nine-month period.

        The majority of the reduction in the cash interest expense for the nine-month period ended December 31, 2003 compared to the prior year nine-month period relates to the impact of the strength of the Canadian dollar on the interest on the U.S. dollar denominated senior subordinated notes. In addition, cash interest also decreased as a result of the reduction in the senior revolving credit facility during the period. Net indebtedness (indebtedness less cash and cash equivalents) decreased from $615.9 million at December 31, 2002 to $373.0 million at December 31, 2003, a reduction of $242.9 million. The impact on indebtedness of the $0.28 change in the value of the Canadian dollar was $85.0 million.

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        Equity Losses in Affiliates     Equity losses in affiliates decreased $3.2 million to $0.3 million for the nine-month period ended December 31, 2003 compared to $3.5 million for the year ended March 31, 2003. Equity losses in affiliates includes the Company's share of losses from its investments in two specialty television channels, One: The Body, Mind and Spirit Channel and Scream and its investment in ExtendMedia Inc. During the second quarter of fiscal 2003, the Company's ability to exercise significant influence over HMG ceased. As a result, the Company no longer accounts for this investment using the equity method and consequently equity losses in affiliates have decreased.

        Equity losses in affiliates decreased $3.4 million to $0.3 million for the nine-month period ended December 31, 2003 compared to $3.7 million for the nine-month period ended December 31, 2002 due to the reason explained above.

        Income Taxes     The income tax provision for the nine months ended December 31, 2003 increased by $27.3 million to $44.1 million compared to the year ended March 31, 2003, due mainly to $117.5 million in valuation allowances primarily taken on the losses incurred in the Company's Entertainment Group. The effective income tax rate on adjusted operating earnings, excluding the $117.5 million of valuation allowances was 42.4% driven up in the period by Entertainment Group losses in legal entities in low tax rate jurisdictions.

         Earnings (Loss) From Operations Before Undernoted And Discontinued Operations (Operating Earnings (Loss)) Operating loss for the nine-month period ended December 31, 2003 was $276.5 million compared to $15.5 million in the year ended March 31, 2003. Net operating loss for the nine-month period ended December 31, 2003 was $290.2 million, compared to a net operating loss of $23.9 million in the year ended March 31, 2003.

        Operating loss for the nine-month period ended December 31, 2003 was $276.5 million compared to an operating earnings of $2.5 million for the nine-month period ended December 31, 2002. Net operating loss for the nine-month period ended December 31, 2003 was $290.2 million, compared to a net operating loss of $5.3 million for the nine-month period ended December 31, 2002. On a per share diluted basis, net operating loss per share was $6.78 for the nine-month period ended December 31, 2003 compared to net operating loss per share of $0.12 in the comparable period in the prior year.

        Adjusted Operating Earnings (Loss)     As previously defined on page 7, adjusted operating loss for the nine-month period ended December 31, 2003 was $67.7 million compared to $2.5 million of adjusted operating earnings in the prior year comparative nine-month period. Adjusted net operating loss for the nine-month period ended December 31, 2003 was $156.5 million, compared to adjusted net operating loss of $5.3 million in the comparable period in the prior year. The adjusted net operating loss for the nine-month period ended December 31, 2003 includes a $117.5 million valuation allowance primarily on losses in the Company's Entertainment Group. On a per share diluted basis, adjusted net operating loss was $3.66 compared to adjusted net operating loss per share of $0.12 in the prior year comparative nine-month period.

        Dilution Gains     On October 15, 2003, the Company completed the restructuring of its motion picture distribution business into a Limited Partnership as part of an income trust structure immediately followed by an initial public offering of units of Movie Distribution Income Fund. The transaction resulted in a pre-tax gain to the Company of $145.1 million.

        Net Investment Gains (Losses)     In November 2003, the Company sold its investment in Galaxy Entertainment Inc. to the Cineplex Galaxy Limited Partnership for consideration having a fair value of $11.5 million and resulting in a gain to the Company of $6.3 million. This gain was offset by impairment charges of $2.2 million and $3.6 million, which were recorded in respect of certain of its investments carried at cost and equity, respectively. Additionally, an investment gain of $0.5 million was recognized on a warrant to purchase shares of a publicly traded company, Point .360.

        Foreign Exchange Gains     The foreign exchange gain of $20.6 million primarily reflects the impact of the strength in the Canadian dollar on the un-hedged portion of the Company's senior subordinated $US 300.0 million debt.

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        Unusual Items     Unusual items for the nine months ended December 31, 2003 include $12.0 million for severance and professional fees related to the restructuring of the Entertainment Group. Also included is the final production financing non-fulfilment payment of $1.3 million made to Serendipity Point Projects Inc. ("Serendipity") pursuant to an agreement dated July 18, 1998. The Company does not expect to make any further production financing non-fulfillment payments pursuant to this agreement.

        Net Earnings (Loss)     The net loss for the nine-month period ended December 31, 2003 was $169.6 million compared to $41.3 million for the year ended March 31, 2003. On a basic and diluted basis, net loss per share was $3.96 for the nine-month period ended December 31, 2003 compared to net loss per share of $0.97 for the year ended March 31, 2003.

        The net loss for the nine-month period ended December 31, 2003 was $169.6 million compared to $28.8 million for the nine-month period ended December 31, 2002. On a basic and diluted basis, net loss per share was $3.96 for the nine-month period ended December 31, 2003 compared to net loss per share of $0.67 in the nine-month period ended December 31, 2002.