FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of ~~August~~May, ~~2008~~2009

SUN MEDIA CORPORATION

(Translation of registrant’s name into English)

333 King Street East, Toronto, Ontario M5A 3X5 CANADA

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.


Form 20-F þ		Form 40-F o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.


Yes o		No þ

TABLE OF CONTENTS

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER 2009 STATEMENTS OF INCOME STATEMENTS OF COMPREHENSIVE INCOME STATEMENTS OF SHAREHOLDER’S EQUITY STATEMENTS OF CASH FLOWS BALANCE SHEETS SIGNATURE

Quarterly Report for the Period Ending ~~June~~ March 3031, ~~2008~~2009 of SUN MEDIA CORPORATION Filed in this Form 6-K

Documents index

1. Quarterly report for the period ending ~~June~~March 3031, ~~2008~~2009 for Sun Media Corporation

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~SECOND~~FIRST QUARTER ~~2008~~2009

COMPANY PROFILE

Sun Media Corporation (“Sun Media” or the “Company”), a newspaper publishing company, is a subsidiary of Quebecor Media Inc. (“Quebecor Media”), itself a subsidiary of Quebecor Inc. Sun Media publishes ~~205~~194 publications across Canada in urban and community markets. The Urban Daily Group consists of eight paid daily newspapers, and three weekly publications as well as Sun Media’s distribution business, Messageries Dynamiques. In addition, the Urban Daily Group operates six free daily publications, 24 Hours in Toronto, Ottawa, Calgary, Edmonton and Vancouver and 24 Heures in Montreal. The Community Newspaper Group includes ~~the majority of~~ Sun Media’s other publications, including nine paid daily community newspapers and ~~179~~168 weekly newspapers, weekly shopping guides and agricultural and other specialty publications. ~~The Community Newspaper Group~~ ~~has its own distribution sales operation, NetMedia.~~

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations covers the main activities of the ~~second~~first quarter of ~~2008~~2009 and the major changes from the last financial year. It should be read in conjunction with the information in the Annual Report (Form 20-F) for the year ended December 31, ~~2007~~2008 which is available on the website of the U.S. Securities and Exchange Commission at www.sec.gov. References to Canadian dollars, Cdn$ and $ are to the currency of Canada, and references to U.S. dollars and US$ are to the currency of the United States.

HIGHLIGHTS SINCE FIRST QUARTER 2008

On July 2, 2008, management at the Journal de Québec and its unionized pressroom, newsroom and office employees reached an agreement in principle to end the labour disruption that began in April 2007. The employees returned to work in August 2008.

On July 22, 2008, Sun Media acquired the remaining 24.99% shares of Le Courrier du Sud (1998) Inc. (“Courrier”) for cash consideration of $7.2 million. Courrier publishes five weekly publications in the Montreal region in Quebec.

NON-GAAP FINANCIAL MEASURE

~~Management~~In its analysis of operating results, Sun Media uses the supplemental financial measure operating income. Sun Media defines operating income as net income before amortization, financial expenses, gain on valuation and translation of financial instruments, restructuring of operations, equity loss on investment in SUN TV Company (“SUN TV”), income taxes and non-controlling interest. Operating income, and ratios using this measure, are not required by or recognized under Canadian Generally Accepted Accounting Principles (“GAAP”) or U.S. GAAP. Operating income is not intended to be a measure that should be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity. It is not intended to represent funds available for debt service, dividends, reinvestment or other discretionary uses; it should not be considered in isolation as a substitute for measures of performance prepared in accordance with Canadian GAAP ~~and~~or U.S. GAAP. Operating income is used by Sun Media because management believes it is a meaningful measure of performance commonly used in the publishing industry and by the investment community to analyze and compare companies. Operating income has limitations as an analytical tool, including:

• it does not reflect financial expenses, including interest payments, or the cash ~~necessary~~required to pay interest and other financial expenses; • it does not reflect income tax expense or the cash ~~necessary~~required to pay income taxes; • although amortization is a non-cash charge, the assets being amortized will often have to be replaced in the future, and operating income does not reflect cash requirements for such capital expenditures; • it does not reflect the cash required to pay expenses relating to ~~the~~Sun ~~Company~~Media’s restructuring initiatives; • it does not reflect cash outlays for future contractual commitments; and • it does not reflect impairments or equity losses, including Sun Media’s equity losses in and advances to SUN TV.

Sun Media’s definition of operating income may not be identical to similarly titled measures reported by other companies, limiting the usefulness of operating income as a comparative measure. Table 1 provides the reconciliation of net income to operating income under Canadian GAAP and the reconciliation of operating income to cash flows provided by operating activities under Canadian GAAP for the three months ended March 31, 2009 and 2008.

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~SECOND~~FIRST QUARTER ~~2008~~2009

~~Sun~~Table ~~Media~~1 Reconciliation ~~defines~~between the operating income asmeasure ~~net~~used ~~income~~in ~~before~~this ~~amortization,~~report ~~financial expenses, gain/loss on valuation~~ and ~~translation~~the ofnet ~~financial instruments, reserve for restructuring of operations, equity losses and impairment,~~ income ~~taxes~~ and ~~non-controlling interest. Sun Media’s definition of~~cash ~~operating~~flows ~~income~~provided ~~may differ from the methods used~~ by ~~other companies, limiting the usefulness of~~ operating ~~income~~activities asmeasures aused ~~comparative~~in ~~measure. Table 1 provides~~ the ~~reconciliation~~unaudited ofinterim ~~net~~financial ~~income to~~statements: ~~operating~~(in ~~income~~millions ~~under Canadian GAAP and the reconciliation~~ of ~~operating income to cash provided by operations under~~ Canadian ~~GAAP, for the three and six months ended June 30, 2008 and 2007.~~dollars)

Table 1


	Three Months Ended
	March 31,
	2009			2008


Net income	$	6.6		$	21.0
Amortization		5.1			5.6
Financial expenses		10.0			10.8
Gain on valuation and translation of financial instruments		(2.7	)		(5.9	)
Restructuring of operations		2.7			1.6
Equity loss on investment in SUN TV		0.5			0.6
Income taxes		0.7			4.1
Non-controlling interest		—			0.1


Operating income	$	22.9		$	37.9

Financial expenses		(10.0	)		(10.8	)
Restructuring of operations		(2.7	)		(1.6	)
Current income taxes		—			(0.2	)
Amortization of financing costs and long-term debt discount and other		0.4			0.4
Change in non-cash balances related to operating activities		7.9			(14.5	)


Cash flows provided by operating activities	$	18.5		$	11.2

~~Reconciliation~~2009/2008 ~~between~~FIRST ~~the~~QUARTER ~~operating income measure used in this report and the net income and cash~~COMPARISON ~~provided by operations measures used in the consolidated financial statements~~

	Three months ended June 30						Six months ended June 30
	2008			2007			2008			2007
				(in millions of Canadian dollars)
Net income	$	31.1		$	23.4		$	52.1		$	40.8
Amortization		6.1			8.6			11.7			16.5
Financial expenses		10.6			11.2			21.4			22.5
(Gain) loss on valuation and translation of financial instruments		(3.5	)		10.9			(9.4	)		4.8
Restructuring charges		1.1			4.8			2.7			10.7
Equity loss on investment in SUN TV		0.4			0.6			1.0			1.2
Income taxes		8.7			(4.1	)		12.8			(5.3	)
Non-controlling interest		0.3			0.5			0.4			0.8
Operating income	$	54.8		$	55.9		$	92.7		$	92.0
Financial expenses		(10.6	)		(11.2	)		(21.4	)		(22.5	)
Restructuring charges		(1.1	)		(4.8	)		(2.7	)		(10.7	)
Current income taxes		(0.4	)		(0.4	)		(0.6	)		(0.6	)
Amortization of deferred financing costs and long-term debt discount and other		0.2			0.4			0.6			0.9
Change in non-cash operating working capital		(4.6	)		7.2			(19.1	)		14.0
Cash provided by operations	$	38.3		$	47.1		$	49.5		$	73.1

Revenues: $188.2 million, a decrease of $25.7 million (12.0%).

~~2008/2007~~• ~~SECOND~~Advertising ~~QUARTER~~revenues ~~COMPARISON~~ decreased $26.2 million or 15.8%, and revenues from commercial printing and other sources decreased $0.3 million or 2.3%. However, circulation revenues increased $0.8 million or 2.4%. The Company is experiencing a period of dramatic transformation due to the industry-wide changes of the past several years and continues to operate in a difficult economic environment, which is negatively impacting the Company’s advertising revenues. • Advertising revenues in the Urban Daily Group were 18.5% below last year. This variance is largely explained by a significant decline in classified advertising revenue and to a lesser extent, a decline in retail and national advertising revenue. Advertising revenues declined in all paid urban daily newspapers, with the largest declines coming from the Toronto Sun, Calgary Sun and Edmonton Sun. Advertising revenues from the free dailies declined 16.9%. • Advertising revenues in the Community Newspaper Group and other operations decreased 10.0%, with more than one half of the decline resulting from advertising softness in the Alberta region. The Ontario and Quebec regions also experienced declines in advertising revenues. • Circulation revenues increased primarily due to higher home delivery yields experienced in certain urban daily newspapers, offset partly by declines in the Community Newspaper Group.

~~Revenues~~Cost of sales, selling and administrative expenses: $~~240~~165.93 million, ana ~~increase~~decrease of $010.47 million (06.21%).

• ~~Advertising~~Payroll ~~revenues~~expenses ~~increased~~decreased 121.5%, ~~circulation~~newsprint ~~revenues~~expense ~~decreased~~increased 61.37%, and ~~combined~~all ~~revenues from commercial printing and~~ other ~~sources~~cost ~~decreased 0.8%. • Revenues~~ of ~~the Urban Daily Group were 0.7% below last year. This variance is explained by the free dailies that recorded an increase of 34.6%~~sales, asselling ~~well as the consolidation of the Vancouver 24 Hours at 100% instead of 50%. This was offset by a reduction in the paid dailies mainly in Ontario~~ and ~~Quebec.~~administrative •expenses ~~The revenues of the community operations~~ increased 2.9.8% ~~due to particularly strong results in publications west of Ontario~~.

Cost of Sales, Selling and Administrative Expenses: $186.1 million, an increase of $1.5 million (0.8%).

• Payroll expenses decreased 7.3%, newsprint expense decreased 14.3% and all other cost of sales, selling and administrative expenses increased 17.2%.

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~SECOND~~FIRST QUARTER ~~2008~~2009

•

Payroll expenses decreased in the quarter primarily due to:

o• restructuring initiatives implemented in the areas of production, editorial as well as other general workforce reduction programs; o• labour savings resulting from the transfer of newspaper printing to Quebecor Media’s printing facilities in Islington, Ontario and Mirabel, Quebec; • labour ~~disruption~~savings resulting from the current lock-out of unionized editorial, classified, sales support and business office employees at the Journal de ~~Québec~~Montreal; oand ~~reduced~~• ~~stock~~the ~~compensation~~reversal ~~expense~~ of $34.09 million of bonuses relating to 2008;

Partially offset by:

	o		normal wage and benefit increases;
	o		staff additions to support increased business primarily in the western operations, and new operations such as the press facility in Ottawa and the additional 50% ownership of Vancouver 24 Hours.

•

higher salaries at the Journal de Quebec as labour savings were realized from April 2007 thru to August 2008 in connection with a labour dispute which involved unionized pressroom newsroom and office employees.

•		The decrease in newsprint was mainly the result of reduced newsprint pricing of 6.2% and higher newsprint rebates as compared to the prior year.
•		The increase in other cost of sales, selling and administrative expenses of 17.2% was due to:

•

Newsprint expense increased in the quarter primarily due to higher newsprint pricing, offset by lower newsprint consumption as a result of lower average page counts and lower average circulation.

o• ~~higher~~Other ~~external~~cost ~~printing~~of ~~costs~~sales, ~~which~~selling ~~are~~and ~~offset~~administrative byexpenses ~~salary~~increased ~~savings realized~~ in ~~connection with~~ the ~~transfer~~quarter ofprimarily ~~printing~~due ~~of certain publications~~ to ~~Quebecor Media press facilities;~~:

•

higher external printing costs which are offset by salary savings realized in connection with the transfer of printing of certain publications to Quebecor Media’s press facilities; and

•

higher Quebecor Media management fees of $1.7 million;

Partially offset by:

	o		savings in the management fee charged by Quebecor Media of $0.7 million;
	o		savings in capital tax expense.

•

savings as a result of cost containment initiatives.

Operating income: $5422.89 million, a decrease of $115.10 million (239.05%).

•

Operating income decreased primarily due to:

o• ~~higher~~softness ~~external printing costs~~ in ~~connection~~advertising ~~with~~revenues ~~the~~which ~~transfer~~declined ofby ~~printing~~$26.2 ofmillion ~~certain~~over ~~publications~~the toprior ~~Quebecor Media press facilities from internal presses~~year; ~~o weaker revenues in the paid urban daily newspapers in Ontario~~ and ~~Quebec;~~

•

higher Quebecor Media management fees of $1.7 million;

Partially offset by:

	o		growth in the free daily publications of 32.6%, with improved contributions in the majority of the publications;
	o		a decrease in overall labour costs resulting from the transfer of printing to Quebecor Media press facilities and other restructuring initiatives, newsprint savings and a decrease in certain corporate expenses including stock compensation of $3.0 million, Quebecor Media management fees of $0.7 million and capital taxes.

•

a decrease in payroll expenses resulting restructuring initiatives implemented throughout 2008; and

~~Amortization~~• ~~expense:~~the reversal of $64.1 9 million, aof ~~decrease~~bonuses ofrelating ~~$2.5 million~~to ~~(29.6%).~~ 2008;

• ~~Amortization~~savings ~~expense decreased~~ as ~~2007~~a ~~included~~result ~~an additional amortization charge~~ of ~~$2.0~~cost ~~million~~containment ~~related to the shortened estimated useful life of production equipment associated with the consolidation of the Company’s printing facilities~~initiatives.

~~Financial expenses~~Amortization: $105.62 million, a decrease of $0.65 million (58.79%).

• ~~The~~Amortization ~~decrease~~decreased ~~was~~as ~~mainly~~certain ~~due~~long-lived assets were fully amortized at the end of 2008 as compared to: the end of 2007.

oFinancial ~~lower~~expenses: ~~interest~~$10.0 million, ~~rates on the senior notes as~~ a ~~result~~decrease of a$0.8 million ~~fixed-for-fixed cross-currency interest rate swap maturing and being replaced with a fixed-for-floating cross-currency interest rate swap in February 2008;~~(7.6%).

~~Gain/loss~~• onFinancial ~~valuation~~expenses ~~and~~decreased ~~translation~~mainly ofdue ~~financial instruments: gain of $3.5 million, compared~~ to ~~a loss of $10.9 million in the second quarter of 2007.~~ :

• ~~The~~lower ~~decrease~~interest ~~was~~rates ~~mainly~~on ~~due~~the Company’s Senior Notes as a result of a fixed to: fixed cross-currency interest rate swap maturing and being replaced with a fixed to floating cross-currency interest rate swap in February 2008.

	o		$5.1 million decrease in net loss on derivative instruments and foreign currency translation of financial instruments;
	o		$9.3 million favourable impact related to a change in accounting estimates of the fair value of derivative financial instruments, reflecting market developments and recent accounting guidelines (see “Recent accounting developments” below);

Gain on valuation and translation of financial instruments: $2.7 million, compared to $5.9 million in the first quarter of 2008.

3 • The decrease was due to:

•

a $5.6 million unfavourable variance in the gain on embedded derivatives and derivative instruments for which hedge accounting is not used;

Partially offset by:

•

a $1.5 million favourable variance in loss on foreign currency translation of financial instruments for which hedge accounting is not used; and

•

a $0.9 million favourable variance on gain/loss on ineffective portion of fair value hedges.

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~SECOND~~FIRST QUARTER ~~2008~~2009

Restructuring ~~charge~~of operations: $12.17 million, compared with $41.86 million in the ~~second~~first quarter of ~~2007~~2008.

• Restructuring charges for the ~~second~~first quarter of ~~2008~~2009 ~~were~~of $12.17 million ~~relating~~related to ~~the~~severances ~~centralization~~for ofemployees ~~classified~~in ~~sales~~a ~~and~~number ~~service functions~~ of ~~certain urban daily~~ publications, ~~and~~in the ~~restructuring~~Western ofregion, ~~the~~including ~~newspaper~~24 ~~layout~~Hours ~~and~~Vancouver, ~~production~~Edmonton ~~operations at the Toronto~~ Sun~~. • During the quarter~~, ~~payments~~Calgary ofSun ~~$2.2 million were made relating to the press consolidation~~ and ~~general~~several ~~workforce~~Alberta ~~reduction~~community ~~charges that were recorded in 2006 and 2007~~publications. • Restructuring charges for the second quarter of 2007 of $4.8 million related to the restructuring of printing facilities, news production operations, as well as general workforce reduction initiatives.

~~Income~~• ~~tax~~Restructuring ~~expense:~~charges ~~$8.7 million~~for ~~(effective~~the ~~tax~~first ~~rate~~quarter of ~~21.6%),~~2008 ~~compared~~of to $4.1 .6 million ~~recovery in~~related ~~the~~to ~~same~~production ~~quarter~~and ofother ~~2007~~general ~~(effective~~workforce ~~tax~~reduction ~~rate of -21~~programs.~~6%).~~

•Income ~~The~~taxes: ~~unfavourable~~$0.7 million ~~variance~~(effective ~~was~~tax ~~mainly~~rate ~~due~~of 9.7%), compared to: $4.1 million expense in the same quarter of 2008 (effective tax rate of 16.4%).

	o		$20.4 million increase in income before taxes and non-controlling interest;
	o		unfavourable future tax adjustments relating to SUN TV equity losses ($2.2 million), the disposition of certain publications ($2.0 million) and the acquisition of non-capital losses in prior periods ($1.5 million).

•

The favourable variance was mainly due to:

~~Net~~• ~~income:~~ $3117.~~1 million,~~9 ~~compared with $23.4~~ million decrease in ~~the~~income ~~same~~before ~~quarter~~taxes inand ~~2007.~~non-controlling interest;

• The increase was mainly due to:

o less amortization of $2.5 million; o reduced financial expenses and gain on valuation and translation of financial instruments of $15.0 million; o lower restructuring charges of $3.7 million; o reduction in earnings attributed to a non-controlling interest and reduced equity loss on investment in SUN TV Company of $0.4 million.

Offset by:

	o		lower operating income of $1.1 million;
	o		increase in income tax expense of $12.8 million;

2008/2007 SECOND QUARTER YEAR-TO-DATE COMPARISON

Revenues: $454.2 million, a decrease of $6.6 million (1.4%).

• Advertising revenues decreased 0.3%, circulation revenues decreased 7.7%, and combined revenues from commercial printing and other sources increased 1.4%. • Revenues of the Urban Daily Group were 2.4% below last year. This variance is explained by the free dailies that recorded an increase of 30.7%, as well as the consolidation of the Vancouver 24 Hours at 100% instead of 50%. This was offset by a reduction in the paid dailies mainly in Ontario and Quebec. • The revenues of the community operations increased 0.5% due to strong results in the Alberta operations.

Cost of Sales, Selling and Administrative Expenses: $361.5 million, a decrease of $7.3 million (2.0%).

• Payroll expenses decreased 7.9%, newsprint expense decreased 16.0% and all other cost of sales, selling and administrative expenses increased 11.1%.

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER 2008

• Payroll expenses decreased primarily due to:

o labour savings resulting from the labour disruption at the Journal de Québec; o restructuring initiatives, with the most significant savings at the Journal de Montréal and the Toronto Sun relating to the closure of the majority of the press operations; o additional charges recorded in 2007 by the Journal de Montréal relating to press operations and an unfavourable ruling on the lockout of its press employees; o reduced stock compensation expense of $4.8 million;

Partially offset by:

	o		normal wage and benefit increases;
	o		staff additions to support increased business as well as new operations such as the press facility in Ottawa, 24 Hours in Edmonton and Calgary, and the additional 50% ownership in Vancouver 24 Hours.

•

$9.8 million decrease in non-taxable dividends.

•		Newsprint expenses decreased primarily due to reduced newsprint pricing of 10.5% and increased corporate rebates.
•		Incremental cost of sales, selling and administrative expenses of 11.1% were incurred year-to-date as a result of:

Net income: $6.6 million, compared with $21.0 million in the same quarter in 2008.

o increased external printing costs due to the transfer of printing to Quebecor Media and the related closure of certain Sun Media press facilities; o increased promotion and circulation costs to support circulation levels, primarily in the Montreal and Quebec markets;

Offset by:

o reduced corporate costs including a lower Quebecor Media management fee of $1.0 million and capital tax expense.

Operating income: $92.7 million, an increase of $0.7 million (0.7%).

• Increased operating income can be attributed to:

	o		growth in the free daily publications of 25.8%;
	o		reduced corporate expenses including stock compensation of $4.8 million, Quebecor Media management fees of $1.0 million and capital taxes;

Partially offset by:

o a decline in the operating results of the Ontario paid urban dailies, primarily the Toronto Sun as a result of soft revenues.

Amortization expense: $11.7 million, a decrease of $4.8 million (29.3%).

• Amortization expense decreased as 2007 included an additional amortization charge of $3.9 million related to the shortened estimated useful life of production equipment associated with the consolidation of the Company’s press facilities.

Financial expenses: $21.4 million, a decrease of $1.1 million (4.8%).

•

The decrease was mainly due to:

o• lower ~~interest~~operating ~~rates~~income ~~on the senior notes as a result~~ of a$15.0 ~~fixed-for-fixed cross-currency interest rate swap maturing and being replaced with a fixed-for-floating cross-currency interest rate swap in February 2008~~million;

~~Gain/loss~~• lower gain on valuation and translation of financial instruments: ~~gain~~ of $93.~~4 million,~~2 ~~compared to a loss of $4.8~~ million ~~in the first six months of 2007.~~ ;

• ~~The~~higher ~~decrease~~restructuring ~~was~~charges ~~mainly~~of ~~due~~$1.1 ~~to:~~million;

	o		$4.9 million decrease in net (gain) loss on derivative instruments and foreign currency translation of financial instruments;
	o		$9.3 million favourable impact related to a change in accounting estimates of the fair value of derivative financial instruments, reflecting market developments and recent accounting guidelines (see “Recent accounting developments” below);

Partially offset by:

5 • lower income taxes of $3.4 million;

~~Table~~• lower amortization of ~~Contents~~$0.5 million;

~~SUN~~• ~~MEDIA~~lower ~~CORPORATION MANAGEMENT’S~~financial ~~DISCUSSION~~expenses ~~AND~~of ~~ANALYSIS~~$0.8 OFmillion; ~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER 2008~~ and

~~Restructuring~~• ~~charge:~~lower ~~$2.7 million,~~non-controlling ~~compared~~interest ~~with~~of $100.~~7 million~~1 ~~in the first six months of 2007~~million.

• Restructuring charges for the six months ended June 30, 2008 were $2.7 million relating to the centralization of classified sales, restructuring of newspaper layout and press operations as well as other general workforce reduction programs. • Restructuring charges for the six months ended June 30, 2007 of $10.7 million related to the restructuring of printing facilities, news production operations, as well as general workforce reduction initiatives. • During the year, payments of $5.1 million (2007 — $7.6 million) have been made as a result of these plans.

Income tax expense: $12.8 million (effective tax rate of 19.6%), compared to $5.3 million recovery in the first six months of 2007 (effective tax rate of -14.8%).

• The unfavourable variance was mainly due to:

	o		$29.1 million increase in income before income taxes and non-controlling interest;
	o		unfavourable future tax adjustments relating to SUN TV equity losses ($2.2 million), the disposition of certain publications ($2.0 million) and the acquisition of non-capital losses in prior periods ($2.1 million).

Net income: $52.1 million, an increase of $11.3 million (27.7%).

• The increase was mainly due to:

o higher operating income of $0.7 million; o less amortization of $4.8 million; o reduced financial expenses and gain on valuation and translation of financial instruments of $15.3 million; o lower restructuring charges of $8.0 million; o reduction in earnings attributed to a non-controlling interest and reduced equity loss on investment in SUN TV Company of $0.6 million;

Offset by:

o increase in income tax expense of $18.1 million.

CASH FLOWS AND FINANCIAL POSITION

Operating ~~activities~~Activities

Cash flows provided by ~~operations~~operating activities: $3818.35 million in the ~~second~~first quarter of ~~2008~~2009, compared ~~with~~ with $4711.12 million in the same quarter of ~~2007~~2008.

• The $87.83 million ~~decrease~~increase was mainly due to:

	o		payments of $15.6 million to related parties in connection with stock options exercised in the current and previous quarter;
	o		$1.1 million decrease in operating income;

•

$19.0 million of payments made in the first quarter of 2008 for exercised stock options which were not repeated in 2009 (the stock option plan of Quebecor Media did not allow the exercise of any option before 2008, although it covered a six-year compensation value);

•

improved working capital management;

Partially offset by:

o timing of payments for operating expenses and restructuring costs.

	•		$15.0 million decrease in operating income;

	•		$7.2 million increase in restructuring payments.

6 • During the quarter, payments of $10.0 million were made mainly relating to the major restructuring initiative implemented during the fourth quarter of 2008.

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~SECOND~~FIRST QUARTER ~~2008~~2009

•Investing ~~Year-to-date cash flows provided by operations decreased $23.6 million due to:~~Activities

	o		payments of approximately $21 million in connection with exercised stock options;
	o		timing of collections in accounts receivable across the majority of operations;

•

Additions to property, plant and equipment increased $0.5 million in the first quarter of 2009 as management made investments in production-related equipment as well as information technology infrastructure.

Financing Activities

Long-term debt: a decrease of $3.7 million in the first quarter of 2009.

•

The decrease was due mainly to:

	•		repayment of $10.0 million on the revolving bank credit facilities;

	•		mandatory and other principal debt repayments by Sun Media in the amount of $0.1 million;

Partially offset by:

	o		higher operating income of $0.7 million;
	•		$6.0 million unfavourable impact of foreign currency translation and fair value adjustments; and
	o		lower payments for restructuring costs.
	•		amortization of financing costs and long-term debt discount of $0.4 million.

~~Investing~~• ~~activities~~ Liabilities related to derivative financial instruments decreased by $8.6 million in the first quarter of 2009, mainly due to a favourable impact on foreign currency translation.

•		Additions to property, plant and equipment decreased $2.4 million in the second quarter of 2008 as management made significant investments in 2007 relating to Sun Media’s call centre operations, advertising and circulation systems, and editorial content management system.
•		Sun Media made an investment of $500.0 million in preferred shares of Mirabel in the second quarter of 2008 using proceeds from the issuance of convertible obligations for tax consolidation purposes between Quebecor Media and its subsidiaries.

Financial Position as of March 31, 2009

~~Financing~~Total ~~activities~~available liquidity: total available liquidity is comprised of the revolving credit facility of $70.0 million and a bank overdraft facility of $5.0 million, of which nil was drawn, resulting in available liquidity of $75.0 million.

~~• The decrease in long~~Long-term debt: of $29288.5 2 million, incompared ~~the~~with ~~second~~$291.9 million ~~quarter~~as of December 31, 2008, ~~was~~a ~~mainly~~$3.7 million ~~due~~decrease to(see ~~the~~“Financing ~~following~~Activities” ~~cash changes:~~above).

	o		repayments of $24.0 million on the revolving bank credit facilities using proceeds from the issuance of subordinated debt to Quebecor Media of $24.0 million;
	o		mandatory and other principal debt repayments by Sun Media in the amount of $0.4 million;

Dividends: During the three-month period ended March 31, 2009, the Company paid $8.0 million in dividends.

~~Other~~Management ~~non-~~expects that the principal needs for cash ~~adjustments:~~relating to Sun Media’s existing operations will be to fund operating activities and working capital, capital expenditures, distributions to its shareholder, debt repayment and debt service. Management also believes that cash provided by operating activities and the available sources of financing described above will be sufficient to cover the Company’s principal cash requirements. Pursuant to its financing agreements, the Company is required to maintain certain financial ratios. The key covenants in these agreements include an interest coverage ratio and leverage ratio (long-term debt over operating income). As of March 31, 2009, the Company was in compliance with its required ratios.

oOTHER ~~$5.5~~DEVELOPMENTS ~~million~~SINCE ~~favourable~~END ~~impact~~OF ~~of foreign currency translation and fair value adjustments;~~2008

~~Marginally~~On April 16, ~~offset~~2009, ~~by:~~AbitibiBowater Inc. (“AbitibiBowater”) and some of its Canadian subsidiaries placed themselves under the protection of the Companies’ Creditors Arrangement Act in Canada. On the same date, AbitibiBowater and its U.S. and Canadian subsidiaries placed themselves under the protection of Chapter 11 of the United States Bankruptcy Code. AbitibiBowater is the main supplier of newsprint to Sun Media. These proceedings have had no material impact on the operations of Sun Media to date. However, Sun Media continues to monitor the situation.

o amortization of financing costs and long-term debt discount of $0.4 million.

• The increase in long-term debt of $16.9 million in the six months ended June 30, 2008 was mainly due to the following cash changes in the year:

o net borrowings under revolving bank facilities of $10.0 million;

Offset by:

o mandatory principal and other debt repayments in the amount of $0.5 million;

Other non-cash adjustments:

	o		$6.7 million unfavourable impact of foreign currency translation and fair value adjustments;
	o		amortization of financing costs and long-term debt discount of $0.7 million.

• Related party transactions increased cash by $491.0 million in the second quarter of 2008 and $433.0 million year-to-date.

o The Company issued subordinated debt of $24.0 million to Quebecor Media in the second quarter of 2008 to repay net borrowings under revolving bank facilities; o Sun Media issued a convertible obligation of $500.0 million to Imprimerie Mirabel Inc. (“Mirabel”), using the proceeds to purchase preferred shares of Mirabel as part of a tax consolidation transaction; o Dividends of $33.0 million and $91.0 million were declared and paid in the second quarter and six months ending June 30, 2008, respectively, to Quebecor Media.

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~SECOND~~FIRST QUARTER ~~2008~~2009

~~FINANCIAL~~ADDITIONAL ~~POSITION AT JUNE 30, 2008~~INFORMATION

Total available liquidity: total available liquidity is comprised of the revolving credit facility of $70.0 million and a bank overdraft facility of $5.0 million, of which $18.0 million was drawn, resulting in available liquidity of $57.0 million.

Long-term debt: total $242.0 million, compared with $225.1 million at December 31, 2007, a $16.9 million increase (see “Financing activities” above).

Management expects that its principal needs for cash relating to Sun Media’s existing operations will be to fund operating activities and working capital, capital expenditures, distributions to its shareholder, debt repayment and debt service. Management also believes that cash flow from operations and the available sources of financing described above will be sufficient to cover the Company’s principal cash requirements. Pursuant to its financing agreements, the Company is required to maintain certain financial ratios. The key indicators listed in these agreements include interest coverage ratio and leverage ratio (long-term debt over operating income). At June 30, 2008, the Company was in compliance with required ratios.

Contractual Obligations

As of ~~June~~March 3031, ~~2008~~2009, material contractual obligations included ~~principal~~capital repayment and interest ~~payments~~ on ~~convertible obligations,~~ long-term debt, ~~subordinated~~and ~~loan~~Subordinated Loans, obligations related to derivative financial instruments and operating lease arrangements. Table 2 shows a summary of contractual obligations related to financial instruments. There is no material change during the ~~second~~ first quarter of ~~2008~~2009 in operating lease arrangements compared to the disclosures in the Annual Report for the year ended December 31, 2008 ~~2007~~ (Form 20-F).

Table 2 Financial contractual obligations as of March 31, 2009 (in millions of Canadian dollars)

Financial Contractual Obligations as at June 30, 2008 (in millions of Canadian dollars)


			Less than						5 years
	Total		1 year		1-3 years		3-5 years		and more

Long-term debt	$	290.1	$	0.4	$	0.8	$	288.9	$	—
Interest on long-term debt ^(a)		65.7		16.6		33.1		16.0		—
Subordinated Loans		261.5		—		—		237.5		24.0
Interest on Subordinated Loans		84.9		18.3		36.5		30.0		0.1
Derivative instruments ^(b)		58.5		—		—		58.5		—

Total	$	760.7	$	35.3	$	70.4	$	630.9	$	24.1

			Less than						5 years
(a)	Estimated interest payable on long-term debt based on the hedged and unhedged interest rates and hedged foreign exchange rate as of March 31, 2009.
	Total		1 year		1-3 years		3-5 years		and more
(b)	Estimated future disbursements related to derivative financial instruments used for foreign exchange hedging.
Convertible obligations (a)	$	1,069.7	$	—	$	—	$	—	$	1,069.7
Interest on convertible obligations (a)		1,605.6		114.5		229.0		229.0		1,033.1
Long-term debt		253.8		0.4		0.8		252.6		—
Interest on long-term debt (b)		121.9		24.0		48.0		47.0		2.9
Subordinated loan		261.5		—		—		—		261.5
Interest on subordinated loan		98.4		18.3		36.5		36.5		7.1
Derivative instruments (c)		105.0		—		—		105.0		—
Total financial contractual obligations	$	3,515.9	$	157.2	$	314.3	$	670.1	$	2,374.3

~~(a)~~The ~~These~~table ~~amounts~~above ~~are~~excludes ~~offset~~obligations byunder ~~investments~~convertible inobligations ~~preferred~~to ~~shares of~~ related ~~parties~~companies ~~and~~for ~~associated~~which proceeds ~~dividends.~~are ~~(b)~~used ~~Estimate of interest~~ to beinvest ~~paid~~in onpreferred ~~long-term~~shares ~~debt~~of ~~based~~related oncompanies ~~the~~for ~~hedged~~tax ~~and~~consolidation ~~unhedged~~purposes of ~~interest~~Quebecor ~~rates~~Media and ~~hedged~~its ~~foreign exchange rate at June 30, 2008~~subsidiaries. ~~(c) Estimated future disbursements on the principal portion of derivative financial instruments related to foreign exchange hedging.~~

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER 2008

Financial Instruments

Sun Media uses a number of financial instruments, mainly cash and cash equivalents, trade receivables, temporary investments, long-term investments, bank indebtedness, trade payables, accrued liabilities, long-term debt and derivative financial instruments.

InAs ~~the normal course~~ of ~~business~~March 31, 2009, Sun Media iswas ~~exposed~~using toderivative ~~fluctuations~~financial ininstruments ~~interest~~to ~~and~~manage its exchange ~~rates~~rate and interest rate exposure. The Company ~~manages~~has ~~this~~entered ~~exposure~~into ~~through~~foreign-exchange ~~staggered~~forward ~~maturities~~ contracts and ancross-currency ~~optimal~~interest ~~balance~~rate ofswap arrangements to hedge the foreign currency risk exposure on ~~fixed-~~the ~~and~~entirety ~~variable~~of its U.S. dollar-denominated long-term debt. Sun Media also uses interest rate swaps in order to manage the impact of interest rate fluctuations on other long-term debt.

AsThe atCompany ~~June 30,~~does ~~2008,~~not ~~Sun~~hold ~~Media~~or ~~was~~use ~~using~~any derivative financial instruments tofor ~~reduce~~trading ~~its exchange and interest rates exposure~~purposes. ~~The Company has entered into foreign-exchange forward contracts and~~ cross-currency interest rate swap arrangements to hedge the foreign currency risk exposure on the entirety of its U.S. dollar-denominated long-term debt. Sun Media also uses interest rate swaps in order to manage the impact of interest rate fluctuations on its long-term debt.

The ~~Company~~fair ~~does~~value ~~not~~of ~~hold~~derivative orfinancial ~~use~~instruments ~~any~~is estimated using valuation models that project future cash flows and discount the future amounts to a present value using the contractual terms of the derivative instrument and factors observable in external markets, such as period-end swap rates and foreign exchange rates. An adjustment is also included to reflect non-performance risk, impacted by the financial and economic environment prevailing at the date of the valuation, in the recognized measure of fair value of the derivative instruments ~~for~~by ~~trading~~applying ~~purposes~~a credit default premium to a net exposure by the counterparty or by the Company (see Table 3).

The fair value of derivative financial instruments is estimated using period-end swap rates, adjusted to reflect the Company’s non-performance risk (see Table 3).

Table 3

Fair Value of Derivative Financial Instruments (in millions of dollars)

	June 30, 2008				December 31, 2007
	Notional	Fair value			Notional		Fair value
	value	asset (liability)			value		asset (liability)
Derivative financial instruments
Interest rate swap agreement	CA $ 39.1	$	0.1			$ —	$	—
Foreign-exchange forward contracts	US $205.0	$	(89.0	)	US $205.0		$	(85.8	)
Cross-currency interest rate swap agreements	US $205.0	$	(25.7	)	US $205.0		$	(47.3	)

In the second quarter, Sun Media recorded a net gain of nil on embedded derivatives that are not closely related to the host contracts and derivative financial instruments for which hedge accounting is not used ($19.4 million loss in the second quarter of 2007). A gain of $1.5 million ($11.9 million gain in the second quarter of 2007) was recognized in connection with the foreign currency translation of financial instruments. In the second quarter of 2008, Sun Media recorded a $2.0 million gain on the ineffective portion of fair value hedges ($3.4 million loss in the second quarter of 2007). Finally, a gain of $0.1 million was recorded under other comprehensive income in the second quarter of 2008 in relation to cash flow hedges ($0.2 million loss in the second quarter of 2007).

In the six months ended June 30, 2008, Sun Media recorded an $11.9 million gain on embedded derivatives that are not closely related to the host contracts and derivative financial instruments for which hedge accounting is not used ($20.0 million loss in the six months ended June 30, 2007). A loss of $4.3 million ($15.1 million gain in the six months ended June 30, 2007) was recognized in connection with the foreign currency translation of financial instruments. In the six months ended June 30, 2008, Sun Media recorded a $1.8 million gain on the ineffective portion of fair value hedges ($0.1 million gain in the six months ended June 30, 2007). Finally, a gain of $1.6 million was recorded under other comprehensive income in the six months ended June 30, 2008 in relation to cash flow hedges ($0.1 million gain in the six months ended June 30, 2007).

Related party transactions

The Company has earned revenue for advertising and other services, and incurred expenses for purchases and services, with related companies under common control in the normal course of operations, including the printing of certain publications at Quebecor Media’s printing facilities in Toronto, Ontario and Saint-Janvier-de-Mirabel, Quebec. As at June 30, 2008, other related party transactions included investments in preferred shares, convertible obligations and subordinated loans from Quebecor Media. These transactions are described in note 5 to the Consolidated Financial Statements included in this Quarterly Report.

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~SECOND~~FIRST QUARTER ~~2008~~2009

~~RECENT~~Table ~~ACCOUNTING~~3 Fair ~~DEVELOPMENTS~~value of derivative financial instruments ~~Canadian~~(in ~~GAAP~~millions of dollars)

Current changes in accounting policies


	March 31, 2009					December 31, 2008
			Book value					Book value
	Notional		and			Notional		and
	value		Fair value			value		Fair value
Derivative financial instruments
Interest rate swap	$	38.8	$	(3.0	)	$	38.9	$	(3.0	)
Foreign exchange forward contracts	US$	205.0	$	(33.8	)	US$	205.0	$	(40.3	)
Cross-currency interest rate swaps	US$	205.0	$	(10.6	)	US$	205.0	$	(12.7	)

OnIn ~~January~~the three months ended March 131, ~~2008~~2009, ~~the~~Sun ~~Company~~Media ~~adopted~~recorded ~~Canadian~~a ~~Institute~~net gain of ~~Chartered~~$6.4 million ~~Accountants~~on embedded derivatives that are not closely related to the host contracts and derivative financial instruments for which hedge accounting is not used (~~“CICA”~~$11.9 million gain in 2008) ~~Section~~. A loss of $4.3 ~~3031,~~million ~~Inventories,~~($5.8 million ~~which~~loss ~~provides~~in ~~more~~2008) ~~extensive~~was ~~guidance~~recognized onin the ~~recognition~~first ~~and~~quarter in connection with the foreign currency ~~measurement~~translation of ~~inventories~~financial instruments for which hedge accounting is not used. In addition, ~~and~~Sun Media ~~related~~recorded ~~disclosures~~a $0.7 million ~~The~~gain ~~adoption~~on the ineffective portion of ~~this~~fair ~~new~~value ~~section~~hedges ~~had~~($0.3 million noof ~~impact~~loss onin 2008). Finally, a gain of $0.02 million was recorded under other comprehensive income in the ~~consolidated~~first ~~financial~~quarter ~~statements~~of 2009 in relation to cash flow hedging relationships ($1.5 million in 2008).

OnRelated ~~January 1,~~Party ~~2008, the Company adopted the CICA Section 1535, Capital Disclosures, Section 3862,~~Transactions Financial Instruments — Disclosures, and Section 3863, Financial Instruments — Presentation. These sections relate to disclosures and presentation of information and did not affect the consolidated financial results. All the disclosure requirements related to these new accounting standards are presented in note 13 to the Consolidated Financial Statements.

~~Current~~The ~~changes~~Company has earned revenue for advertising and other services, and incurred expenses for purchases and services, with related companies under common control in ~~accounting~~the ~~estimates~~normal course of operations, including the printing of certain publications at Quebecor Media’s printing facilities in Toronto, Ontario and Saint-Janvier-de-Mirabel, Quebec. As of March 31, 2009, other related party transactions included investments in preferred shares, convertible obligations and subordinated loans from Quebecor Media and its subsidiaries.

~~The~~In ~~Company~~addition, ~~estimates~~as ~~the fair value of its derivative financial instruments using~~ a ~~discounted cash~~result ~~flow valuation technique, since no quoted market prices exist for such instruments. During the second quarter~~ of ~~2008,~~cost ~~the~~containment ~~Company~~strategies made some amendments to the technique used in measuring the fair value of its derivatives in a liability position. These amendments change the way the Company factored its non-performance risk in its valuation technique, considering market developments and ~~recent~~ ~~accounting guidelines. As a result of these changes,~~ the ~~fair~~centralization ~~value~~ of ~~these derivatives~~corporate ~~decreased by $9~~management,~~274~~ ~~and~~Sun ~~the~~Media ~~gain~~is onproviding ~~valuation~~general and ~~translation~~administrative ofsupport ~~financial~~to ~~instruments~~certain ~~increased~~operations bywithin ~~$9,274~~Quebecor ~~($7,815~~Media’s ~~net~~newspaper ~~of income taxes)~~group.

~~Future~~CHANGES ~~changes~~IN inACCOUNTING ~~accounting policies~~POLICIES

InCurrent ~~January 2008,~~changes ~~the CICA issue Section 3064, Goodwill and Intangible Assets, which will replace Section 3062, Goodwill and Other Intangible Assets, and results~~ in ~~the~~accounting ~~withdrawal~~policies ofunder ~~Section 3450, Research~~Canadian ~~and Development Costs and Emerging Issues Committee (“EIC”) Abstract 27, Revenues and~~GAAP Expenditures During the Pre-operating Period, and amendments to AcG-11, Enterprises in the Development Stage. The standard provides guidance on the recognition of intangible assets in accordance with the definition of an asset and the criteria for asset recognition as well as clarifying the application of the concept of matching revenues and expenses, whether these assets are separately acquired or internally developed. This standard applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008. The Company is currently evaluating the effects of adopting this standard.

InOn ~~February~~January ~~2007~~1, ~~Canada’s~~2009, ~~Accounting~~the ~~Standards~~Company ~~Board~~adopted ~~confirmed~~Canadian ~~that~~Institute ~~Canadian~~of ~~GAAP~~Chartered Accountants (“CICA”) Section 3064, asGoodwill ~~used~~and ~~by publicly~~Intangible ~~accountable~~Assets, ~~enterprises~~which replaced Section 3062, ~~will~~Goodwill beand ~~fully~~Other Intangible ~~converged~~Assets, ~~into~~and ~~International~~which ~~Financial~~resulted ~~Reporting~~in the withdrawal of Section 3450, Research and Development ~~Standards~~Costs and of Emerging Issues Committee (“~~IFRS~~EIC”) Abstract 27, asRevenues ~~issued~~and byExpenditures During the Pre-operating ~~International~~Period, ~~Accounting~~and ~~Standards~~which ~~Board~~resulted also in the amendment of Accounting Guideline (“~~IASB~~AcG”) 11, Enterprises in the Development Stage. ~~The~~This new standard provides guidance on the recognition of ~~Company~~intangible ~~will~~assets bein ~~required~~accordance towith ~~report~~the ~~under~~definition ~~IFRS~~of an asset and the criteria for ~~its~~asset recognition, ~~2011~~whether ~~interim~~those ~~and~~assets ~~annual~~are ~~financial~~separately ~~statements~~acquired or internally developed, as well as it clarifies the application of the concept of matching revenues and expenses. As a result of the ~~The~~adoption ~~Company~~of isthese ~~currently~~new ~~assessing~~rules, the ~~impacts~~Company made reclassifications in order to present certain assets, mainly software, as intangible assets instead of presenting them as property, plant and equipment (refer to note 2(a) to the ~~IFRS~~unaudited ~~convergence~~interim ~~initiative~~financial statements for more details about these adjustments).

~~U.S.~~Current changes in accounting policies under US GAAP

OnAs of January 1, ~~2008,~~2009 the Company adopted ~~the provisions of Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“~~SFAS ~~157”)~~141R, ~~that~~Business ~~enhance guidance for using fair value to measure assets and liabilities. In February 2008~~Combinations, ~~the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS 157-1, Application of SFAS 157 to FASB Statement No. 13~~ and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, which removes certain leasing transactions from the scope of SFAS ~~No. 157~~160, ~~and FSP FAS 157-2, Effective Date of SFAS 157, which defers the~~ ~~effective date of SFAS 157 for one year for certain non~~Non-~~financial~~controlling ~~assets~~Interests ~~and non-financial liabilities, except those that are recognized or disclosed at fair value~~ in ~~the financial statements on a recurring basis. The Company is still in the process of evaluating this standard with respect to~~ its ~~effect on non-~~financial ~~assets and liabilities and has not yet determined the impact that it will have on its financial~~ statements ~~upon full adoption in 2009~~.

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~SECOND~~FIRST QUARTER ~~2008~~2009

InThe ~~December 2007,~~provisions ~~the~~of ~~FASB issued~~ SFAS ~~141~~141R ~~(Revised~~applied ~~2007),~~prospectively ~~Business~~to ~~Combinations~~business ~~(“SFAS~~combinations ~~141R”),~~for ~~and~~which the ~~SFAS~~acquisition ~~160,~~date ~~Non-controlling~~is ~~Interests~~on inor ~~Consolidated~~after ~~Financial~~December 31, ~~Statements~~2008. (“SFAS ~~160”),~~141R toestablishes ~~improve~~new guidance on the recognition and ~~converge~~measurement ~~internationally~~at ~~the~~fair ~~accounting~~value ~~for~~of ~~business~~all ~~combinations,~~assets ~~the~~and ~~reporting~~all liabilities of the acquired ~~non~~business. Non-controlling interests inare ~~consolidated~~measured ~~financial~~at ~~statements,~~either ~~accounting~~their ~~and~~fair ~~reporting~~value ~~standards for~~or ~~the~~at the non-controlling interest’s inproportionate ashare ~~subsidiary~~of ~~and for~~ the ~~deconsolidation~~fair value of aidentifiable ~~subsidiary~~assets and liabilities. The ~~provisions~~ measurement of ~~SFAS~~consideration ~~141R~~given ~~apply~~now ~~prospectively~~includes tothe ~~business~~fair ~~combinations~~value ~~for~~of ~~which~~any contingent consideration as of the acquisition date is onand orsubsequent ~~after~~changes ~~December 31,~~in ~~2008~~fair ~~and~~value ~~SFAS~~of ~~160~~the ~~shall~~contingent consideration beclassified ~~affective~~ as ofa liability are recognized in earnings. Acquisition-related costs are excluded from the ~~beginning~~purchase ofprice ~~2009~~and are expensed as incurred. ~~The~~In addition, restructuring costs ~~Company~~related isto ~~currently~~a ~~evaluating~~business ~~the~~combination ~~impact~~are no longer part of ~~adopting~~the ~~SFAS~~purchase ~~141R~~price equation and ~~SFAS~~are expensed ~~160~~as onincurred. ~~its~~The ~~consolidated~~adoption of this Section has not yet created a difference between ~~financial~~Canadian ~~statements~~and U.S. GAAP.

InThe ~~February 2007,~~new ~~the~~rules ~~FASB~~under ~~issued~~ SFAS ~~No. 159,~~160 ~~The~~establish ~~Fair~~new ~~Value~~guidance ~~Option~~on ~~for~~the ~~Financial~~accounting ~~Assets~~for ~~and~~non-controlling interests ~~Financial~~and ~~Liabilities,~~for ~~including~~transactions anwith ~~amendment~~non-controlling ~~of FASB Statement No~~interest. ~~115~~ (“SFAS ~~159”).~~160 ~~The~~requires that non-controlling ~~statement~~interest ~~permits~~be ~~entities~~presented toas ~~choose~~a toseparate ~~measure~~component ~~many~~of ~~financial~~shareholders’ ~~instruments~~equity. ~~and~~In ~~certain~~the ~~other~~statement ~~items~~of income, atnet ~~fair~~income ~~value~~is ~~that~~calculated ~~are~~before ~~not~~non-controlling ~~currently~~interest ~~required~~and tois bethen ~~measured~~attributed atto ~~fair~~shareholders ~~value~~ and ~~establishes~~ ~~presentation~~non-controlling ~~and~~interest. ~~disclosure~~In ~~requirements~~addition, ~~designed~~changes toin ~~facilitate~~the ~~comparisons~~Company’s ~~between~~ownership ~~entities~~interest ~~that~~in a subsidiary ~~choose~~that ~~different~~do ~~measurement~~not ~~attributes~~result ~~for~~in ~~similar~~a ~~types~~loss of ~~assets~~control ~~and~~are ~~liabilities.~~now ~~The~~accounted ~~Company adopted~~for ~~SFAS~~as Noequity transactions. ~~159~~ onThe ~~January 1,~~new presentation ~~2008~~applies ~~with~~retroactively noand ~~impact~~U.S. onGAAP ~~its~~prior ~~consolidated~~periods ~~financial~~figures ~~statements~~were restated.

On January 1, 2009, the Company adopted the provisions of SFAS 157, Fair Value Measurements, related to the guidance for using fair value to measure certain non-financial assets and non-financial liabilities, except those that are not recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption had no impact on the Company’s financial statements.

RECENT ACCOUNTING DEVELOPMENTS IN CANADA

The CICA issued three new accounting standards in January 2009 — Section 1582, Business Combinations, Section 1601, Consolidated Financial Statements, and Section 1602, Non-controlling interests, to converge the accounting for business combinations and the reporting of non-controlling interest to International financial reporting standards (“IFRS”).

Section 1582, Business Combinations, replaces Section 1581, Business Combinations, and establishes new guidance on the recognition and measurement at fair value of all assets and all liabilities of the acquired business. Non-controlling interests are measured at either their fair value or at the non-controlling interest’s proportionate share of the fair value of identifiable assets and liabilities. The measurement of consideration given now includes the fair value of any contingent consideration as of the acquisition date and subsequent changes in fair value of the contingent consideration classified as a liability are recognized in earnings. Acquisition-related costs are excluded from the purchase price and are expensed as incurred. In addition, restructuring costs related to a business combination are no longer part of the purchase price equation and are expensed as incurred. Section 1582 applies prospectively to business combinations realized in or subsequent to the first annual reporting period beginning on or after January 1, 2011.

Section 1601, Consolidated Financial Statements, and Section 1602, Non-Controlling Interests, which together replace Section 1600, Consolidated Financial Statements, establish new guidance on the accounting for non-controlling interests and for transactions with non-controlling interest. The new Sections require that non-controlling interest be presented as a separate component of shareholders’ equity. In the statement of income, net income is calculated before non-controlling interest and is then attributed to shareholders and non-controlling interest. In addition, changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are now accounted for as equity transactions. These Sections apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011, and have to be adopted concurrently with Section 1582.

SUN MEDIA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST QUARTER 2009

In February 2008, Canada’s Accounting Standards Board confirmed that Canadian GAAP, as used by publicly accountable enterprises, will be fully converged to IFRS, as issued by the International Accounting Standards Board (“IASB”). For its 2011 interim and annual financial statements, the Company will be required to report under IFRS and to provide IFRS comparative information for the 2010 fiscal year.

IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences on recognition, measurement and disclosures. As part of the IFRS conversion project, the Company has established an implementation team, which includes a project manager, senior levels of management from all relevant departments and subsidiaries, a steering committee to oversee the project, and it has also engaged an external expert advisor to assist. Regular progress reporting to senior management and to the Audit Committee on the status of the IFRS conversion project has been established.

The conversion project consists of four phases:

Diagnostic phase: This phase involves a detailed review and initial scoping of accounting differences between Canadian GAAP and IFRS, a preliminary evaluation of IFRS 1 exemptions for first time IFRS adopters, and a high-level assessment of potential consequences to financial reporting, business processes, internal controls, and information systems

Design and solutions development phase: This phase involves prioritizing accounting treatment issues and preparing a conversion plan, quantifying the impact of converting to IFRS, reviewing and approving accounting policy choices, performing a detailed impact assessment and designing changes to systems and business processes, developing IFRS training material, and drafting IFRS financial statement content.

Implementation phase: This phase involves embedding changes to systems, business processes and internal controls, determining the opening IFRS transition balance sheet and tax impacts, parallel accounting under Canadian GAAP and IFRS, and preparing detailed reconciliations of Canadian GAAP to IFRS financial statements.

Post implementation phase: This phase involves conversion assessment, evaluating improvements for a sustainable operational IFRS model, and the testing of the internal controls environment.

The Company has completed a detailed diagnostic impact assessment and design phase of the project and is currently executing the solutions development phase of the project. Initial training has been provided to key employees and further investment in training and resources will be made throughout the transition to facilitate a timely and efficient changeover to IFRS.

At this time, the comprehensive impact of the changeover on the Company’s future financial position and results of operations is not yet determinable. The IASB is expected to continue issuing new accounting standards during the transition period. As a result, the final impact of IFRS on the Company’s consolidated financial statements can only be measured once all the IFRS applicable standards at the conversion date are known. The Company continues to monitor and assess the impact of evolving differences between Canadian GAAP and IFRS.

Forward-looking statements

This ~~quarterly~~ report contains forward-looking statements with respect to ~~the~~our ~~Company’s~~ financial condition, results of operations, and business ~~strategies~~ and certain of our plans and objectives. These forward-looking statements are made pursuant to the “Safe Harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the ~~industry~~industries in which ~~Sun~~we ~~Media operates~~operate as well as beliefs and assumptions made by our management. Such statements include, in particular, statements about our plans, prospects, financial position and business strategies. Words such as “may,”, “will,” , “expect,”, “continue,”, “intend,”, “estimate,”, “anticipate,”, “plan,”, “foresee,” , “believe” or “seek” or the negatives of these terms or variations of them or similar terminology are intended to identify such forward-looking statements. Although ~~management~~we ~~believes~~believe that the expectations reflected in these forward-looking statements are reasonable, these statements, by their nature, involve risks and uncertainties and are not guarantees of future performance. Such statements are also subject to assumptions concerning, among other things: our anticipated business strategies; anticipated trends in our business; and ~~the Company’s ability to continue to control costs.~~ Management can give no assurance that these estimates and expectations will prove to have been correct. Actual outcomes and results may, and often do, differ from what is expressed, implied or projected in such forward-looking statements, and such differences may be material.

Some important factors that could cause actual results to differ materially from those expressed in these forward-looking statements include, but are not limited to:

• general economic, financial or market conditions; • the intensity of competition within the newspaper industry and from other communications and advertising media and platforms; • cyclical and seasonal variations in the businesses of local, regional or national advertisers and in the Company’s advertising revenue; • labour disputes or strikes; • changes in the Company’s ability to obtain raw materials critical to the operations, such as newsprint, in sufficient quantities and at reasonable prices;

• exchange rate fluctuations that affect the Company’s ability to repay its U.S. dollar-denominated debt; and • interest rate fluctuations that affect Sun Media’s ability to repay its U.S. dollar-denominated debt, or that could impact Sun Media’s accounting estimates.

SUN MEDIA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~SECOND~~FIRST QUARTER ~~2008~~2009

~~Management~~our ~~cautions~~ability ~~you~~to ~~that~~continue ~~the~~to ~~above~~control ~~list~~costs. ofWe ~~cautionary~~can ~~statements~~give isno ~~not~~assurance ~~exhaustive.~~that ~~These~~these estimates and ~~other~~expectations ~~factors~~will ~~are~~prove ~~discussed~~to inbe ~~further~~correct. ~~detail~~Actual ~~elsewhere~~outcomes inand ~~the~~results ~~Quarterly Report~~may, and inoften ~~Sun Media’s Annual Report on Form 20-F~~do, ~~for~~differ ~~the~~from what ~~fiscal~~is ~~year ended December 31~~expressed, ~~2007,~~implied ~~including~~or ~~under~~projected ~~the section~~in ~~“Risk~~such ~~Factors”. Each of these~~ forward-looking statements, ~~speaks~~and ~~only~~such ~~as of the date of~~differences ~~this~~may ~~report~~be material. ~~Sun~~Some ~~Media~~important ~~will~~factors ~~not~~that ~~update~~could ~~these~~cause ~~statements~~actual ~~unless~~results ~~securities laws require it~~ to dodiffer ~~so.~~materially from ~~Management~~those ~~advises~~expressed ~~you~~in tothese ~~consult~~forward-looking ~~any~~statements ~~documents~~include, ~~the~~but ~~Company~~are ~~may~~not ~~file~~limited ~~or furnish with the U.S.~~to: ~~Securities and Exchange Commission.~~

12 • general economic, financial or market conditions; • variations in the businesses of our local, regional or national advertisers and in our advertising revenue; • the intensity of competition within the newspaper industry and from other communications and advertising media and platforms and the fragmentation of the media landscape; • our ability to successfully restructure our operations to optimize their efficiency in the context of the changing newspapers industry; • labour disputes or strikes; • changes in our ability to obtain raw materials critical to our operations, such as newsprint, at reasonable prices; • exchange rate fluctuations that affect our ability to repay our U.S. dollar-denominated debt; and • interest rate fluctuations that affect our ability to repay our U.S. dollar-denominated debt, or that could have an impact on our accounting estimates.

Management cautions you that the above list of cautionary statements is not exhaustive. These and other factors are discussed in further detail elsewhere in this Quarterly Report and in Sun Media’s Annual Report on Form 20-F, for the fiscal year ended December 31, 2008, including under the section “Risk Factors”. Each of these forward-looking statements speaks only as of the date of this report. Management advises you to consult any documents the Company may file with or furnish to the U.S. Securities and Exchange Commission.

SUN MEDIA CORPORATION ~~CONSOLIDATED~~ STATEMENTS OF INCOME (inIn thousands of Canadian dollars) (~~unaudited~~Unaudited)

	Three months ended June 30						Six months ended June 30
	Three months ended March 31
	2008			2007			2008			2007
	2009			2008
REVENUES	$	~~240~~188,~~931~~175		$	~~240~~213,~~545~~850		$	~~454,179~~		$	~~460,817~~
Cost of sales and selling and administrative expenses		~~186~~165,~~168~~250			~~184~~175,~~685~~938			~~361,504~~			~~368,804~~
Amortization		65,~~078~~119			85,~~630~~622			~~11,700~~			~~16,538~~
Financial expenses (note 3)		109,~~632~~951			1110,~~273~~770			~~21,402~~			~~22,487~~
(Gain) loss on valuation and translation of financial instruments (note 3)		(3,556	)		10,917			(9,442	)		4,862
Gain on valuation and translation of financial instruments (note 4)		(2,731	)		(5,886	)
Reserve for restructuring of operations (note 4)		1,125			4,783			2,711			10,707
Restructuring of operations (note 5)		2,715			1,586
Equity loss on investment in SUN TV Company		~~461~~549			~~678~~562			~~1,023~~			~~1,215~~
INCOME BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST		407,~~023~~322			1925,~~579~~258			~~65,281~~			~~36,204~~
Income taxes
Income taxes:
Current		~~406~~—			~~394~~233			~~639~~			~~670~~
Future		~~8,244~~713			(43,~~629~~914	)		~~12,158~~			~~(6,019~~	)
		8,650			(4,235	)		12,797			(5,349	)
		713			4,147
		31,373			23,814			52,484			41,553
INCOME BEFORE NON-CONTROLLING INTEREST		6,609			21,111
Non-controlling interest		~~223~~—			~~434~~125			~~348~~			~~741~~
NET INCOME	$	316,~~150~~609		$	2320,~~380~~986		$	~~52,136~~		$	~~40,812~~

See accompanying notes to consolidated financial statements.

SUN MEDIA CORPORATION ~~CONSOLIDATED~~ STATEMENTS OF COMPREHENSIVE INCOME (inIn thousands of Canadian dollars) (~~unaudited~~Unaudited)

	Three months ended June 30						Six months ended June 30
	Three months ended March 31
	2008			2007			2008		2007
	2009			2008
Net income	$	31,150		$	23,380		$	52,136	$	40,812
COMPREHENSIVE INCOME:
Other comprehensive income, net of income taxes:
Net income	$	6,609		$	20,986
Unrealized gain (loss) on derivative instruments, net of income taxes expense (recovery) of $37 and $723 in the three and six-month periods ended June 30, 2008 (2007 - $(231) and $239)		100			(154	)		1,621		68
Other comprehensive (loss) income:
Comprehensive income	$	31,250		$	23,226		$	53,757	$	40,880
Unrealized (loss) gain on derivative instruments, net of income tax recovery of $6 in 2009 and income tax expense of $686 in 2008		(24	)		1,521
Comprehensive income	$	6,585		$	22,507

SUN MEDIA CORPORATION
STATEMENTS OF SHAREHOLDER’S EQUITY
(In thousands of Canadian dollars)
(Unaudited)


								Accumulated
								Other			Total
	Capital		Contributed		Retained			Comprehensive			Shareholder's
	Stock		Surplus		Earnings			Loss			Equity
SHAREHOLDER’S EQUITY

Balance as of December 31, 2007	$	272,428	$	—	$	77,074		$	(1,521	)	$	347,981

Net income		—		—		20,986			—			20,986
Dividends		—		—		(58,000	)		—			(58,000	)
Other comprehensive income		—		—		—			1,521			1,521


Balance as of March 31, 2008	$	272,428	$	—	$	40,060		$	—		$	312,488

Net income		—		—		71,919			—			71,919
Dividends		—		—		(76,000	)		—			(76,000	)
Other comprehensive loss		—		—		—			(2,187	)		(2,187	)
Sale of certain operating assets to a company under common control		—		591		—			—			591


Balance as of December 31, 2008	$	272,428	$	591	$	35,979		$	(2,187	)	$	306,811

Net income		—		—		6,609			—			6,609
Dividends		—		—		(8,000	)		—			(8,000	)
Other comprehensive loss		—		—		—			(24	)		(24	)


Balance as of March 31, 2009	$	272,428	$	591	$	34,588		$	(2,211	)	$	305,396

See accompanying notes to consolidated financial statements.

SUN MEDIA CORPORATION CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (in thousands of Canadian dollars) (unaudited)

	Three months ended June 30						Six months ended June 30
	2008			2007			2008			2007
Retained earnings — beginning of period	$	40,060		$	54,109		$	77,074		$	41,677
Net income		31,150			23,380			52,136			40,812
		71,210			77,489			129,210			82,489
Dividends		(33,000	)		(42,000	)		(91,000	)		(47,000	)
Retained earnings — end of period	$	38,210		$	35,489		$	38,210		$	35,489

See accompanying notes to consolidated financial statements.

SUN MEDIA CORPORATION ~~CONSOLIDATED~~ STATEMENTS OF CASH FLOWS (inIn thousands of Canadian dollars) (~~unaudited~~Unaudited)

	Three months ended June 30						Six months ended June 30
	Three months ended March 31
	2008			2007			2008			2007
	2009			2008
CASH FLOWS RELATED TO OPERATIONS
				(restated
Net income	$	31,150		$	23,380		$	52,136		$	40,812
				note 2(a))
Adjustments for:
CASH FLOWS RELATED TO OPERATING ACTIVITIES
Amortization of property, plant and equipment		5,761			8,328			11,067			15,937
Net income	$	6,609		$	20,986
Amortization of other assets		317			302			633			601
Adjustments for:
(Gain) loss on valuation and translation of financial instruments (note 3)		(3,556	)		10,917			(9,442	)		4,862
Amortization of property, plant and equipment		3,761			4,638
Amortization of financing costs and long-term debt discount		354			487			706			972
Amortization of intangible assets		1,358			984
Future income taxes		8,244			(4,629	)		12,158			(6,019	)
Gain on valuation and translation of financial instruments (note 4)		(2,731	)		(5,886	)
Non-controlling interest		223			434			348			741
Amortization of financing costs and long-term debt discount		358			352
Equity loss on investment in SUN TV Company		461			678			1,023			1,215
Future income taxes		713			3,914
Other		(4	)		12			(4	)		11
Non-controlling interest		—			125
		42,950			39,909			68,625			59,132
Equity loss on investment in SUN TV Company		549			562
Net change in non-cash balances related to operations		(4,659	)		7,228			(19,139	)		13,986
Other		32			—
Cash flows provided by operations		38,291			47,137			49,486			73,118
		10,649			25,675
CASH FLOWS RELATED TO INVESTING ACTIVITIES
Net change in non-cash balances related to operating activities		7,866			(14,480	)
Additions to property, plant and equipment		(4,262	)		(6,678	)		(7,245	)		(12,774	)
Cash flows provided by operating activities		18,515			11,195
Equity investment in SUN TV Company		—			(1,300	)		—			(1,300	)
CASH FLOWS RELATED TO INVESTING ACTIVITIES
Investment in preferred shares of related company (note 5)		(500,000	)		—			(500,000	)		—
Acquisition of property, plant and equipment		(3,429	)		(2,916	)
Advances to affiliated companies		—			(870	)		—			(870	)
Acquisition of intangible assets		(80	)		(67	)
Other		~~588~~—			~~108~~(539	)		49			~~114~~
Cash flows used in investing activities		(~~503~~3,~~674~~509	)		(83,~~740~~522	)		~~(507,196~~	)		~~(14,830~~	)
CASH FLOWS RELATED TO FINANCING ACTIVITIES
Net (repayments) borrowings under revolving bank facilities		(23,979	)		—			9,964			—
Change in bank indebtedness		2,932			9,195
Issuance of subordinated debt to Quebecor Media (note 5)		24,000			—			24,000			—
Net (repayments) borrowings under revolving bank facilities		(9,997	)		33,943
Issuance of convertible obligations to related company (note 5)		500,000			—			500,000			—
Increase in long-term debt, net of financing fees		159			28
Repayment of long-term debt		(~~428~~100	)		(~~973~~100	)		~~(500~~	)		~~(1,945~~	)
Dividends to Quebecor Media		(33,000	)		(42,000	)		(91,000	)		(47,000	)
Dividends		(8,000	)		(58,000	)
Other		(51	)		(168	)		(51	)		(589	)
Cash flows used in financing activities		(15,006	)		(14,934	)
Cash flows provided by (used in) financing activities		466,542			(43,141	)		442,413			(49,534	)
Decrease in cash and cash equivalents		—			(7,261	)
Net increase (decrease) in cash and cash equivalents / bank indebtedness		1,159			(4,744	)		(15,297	)		8,754
Cash and cash equivalents — beginning of period		—			7,261
(Bank indebtedness) cash and cash equivalents — beginning of period		(9,195	)		17,363			7,261			3,865
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	—		$	—
(BANK INDEBTEDNESS) CASH AND CASH EQUIVALENTS — END OF PERIOD	$	(8,036	)	$	12,619		$	(8,036	)	$	12,619
Cash interest payments on long-term debt	$	11,314		$	13,829
CHANGES IN NON-CASH OPERATING WORKING CAPITAL
Cash interest payments on convertible obligations and subordinated loans		4,563			4,134
Accounts receivable		2,632			318			9,149			12,034
Cash income tax payments (net of refunds)		104			262
Inventories		(272	)		(310	)		(714	)		377
Accrued restructuring charges		(1,111	)		993			(2,379	)		3,115
Accounts payable and accrued charges		(6,903	)		7,115			(25,462	)		2,183
Dividend income receivable from related companies		14,199			(15,050	)		(1,213	)		351
Interest payable on convertible obligations to related companies		(13,727	)		14,596			1,188			(341	)
Other		523			(434	)		292			(3,733	)
	$	(4,659	)	$	7,228		$	(19,139	)	$	13,986
Cash interest payments on long-term debt	$	572		$	5,155		$	14,401		$	23,246
Cash interest payments on convertible obligations and subordinated loan	$	35,046		$	1,800		$	39,181		$	33,132
Cash income tax payments (net of refunds)	$	285		$	313		$	547		$	667

See accompanying notes to consolidated financial statements.

SUN MEDIA CORPORATION ~~CONSOLIDATED~~ BALANCE SHEETS (inIn thousands of Canadian dollars) (~~unaudited~~Unaudited)

	June 30,			December 31,
	March 31,			December 31,
	2008			2007
	2009			2008
				(restated
				note 2(a))
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—		$	7,261
Accounts receivable	$	98,938		$	122,158
Accounts receivable		130,041			139,190
Income taxes		366			549
Income taxes		732			1,445
Dividend receivable from related companies		6,085			491
Dividend income receivable from related companies (note 5)		2,914			1,701
Inventories		5,765			6,220
Inventories		7,258			6,544
Prepaid expenses		5,158			4,299
Prepaid expenses		6,845			3,973
Future income taxes		35,546			35,843
Future income taxes		27,888			23,527
		151,858			169,560
		175,678			183,641
Investment in preferred shares of related companies		199,750			199,750
INVESTMENT IN PREFERRED SHARES OF RELATED COMPANIES (NOTE 5)		1,069,750			569,750
Equity investment in SUN TV Company		1,356			1,905
EQUITY INVESTMENT IN SUN TV COMPANY		2,712			3,735
Property, plant and equipment		132,259			132,623
PROPERTY, PLANT AND EQUIPMENT		146,278			150,100
Intangible and other assets		35,134			32,784
FUTURE INCOME TAXES		22,786			36,224
Goodwill		770,931			770,931
OTHER ASSETS		15,173			17,291
	$	1,291,288		$	1,307,553
GOODWILL		769,159			769,159
LIABILITIES AND SHAREHOLDER’S EQUITY
	$	2,201,536		$	1,729,900
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Bank indebtedness	$	84,~~036~~945		$	—2,013
Accounts payable and accrued charges		122,~~284~~851			~~150~~134,~~125~~957
Deferred revenue		1918,~~554~~239			1918,~~094~~666
Interest payable on convertible obligations to related companies (note 5)		2,834			1,646
Interest payable on convertible obligations to related companies		5,946			480
Current portion of long-term debt (note 6)		400			400
Current portion of long-term debt (note 8)		400			400
		153,108			171,265
		152,381			156,516
LONG-TERM DEBT (NOTE 6)		241,587			224,745
Long-term debt (note 8)		288,173			291,903
SUBORDINATED LOAN TO QUEBECOR MEDIA (NOTE 5)		261,500			237,500
Derivative financial instruments		47,401			55,951
CONVERTIBLE OBLIGATIONS TO RELATED COMPANIES (NOTE 5)		1,069,750			569,750
Other liabilities		26,198			25,043
DERIVATIVE FINANCIAL INSTRUMENTS (NOTE 11)		114,634			133,090
Future income taxes		10,489			10,079
OTHER LIABILITIES		24,874			24,985
Subordinated loans from Quebecor Media		261,500			261,500
FUTURE INCOME TAXES		24,188			19,724
Convertible obligations to related companies		199,750			199,750
NON-CONTROLLING INTEREST		1,157			860
		985,892			1,000,742
SHAREHOLDERS’ EQUITY
SHAREHOLDER’S EQUITY
Capital stock		272,428			272,428
Retained earnings		38,210			77,074
Contributed surplus		591			591
Accumulated other comprehensive income (loss) (note 8)		100			(1,521	)
Retained earnings		34,588			35,979
		310,738			347,981
Accumulated other comprehensive loss		(2,211	)		(2,187	)
	$	2,201,536		$	1,729,900
		305,396			306,811
Subsequent event (note 13)
	$	1,291,288		$	1,307,553

See accompanying notes to consolidated financial statements.

SUN MEDIA CORPORATION ~~Notes~~NOTES toTO ~~Consolidated~~FINANCIAL ~~Financial Statements~~STATEMENTS For the three-month ~~and~~period ~~six-month periods~~ ended ~~June~~March 3031, ~~2008~~2009 (inIn thousands of Canadian dollars~~, except for share information~~) (~~unaudited~~Unaudited)

NATURE OF BUSINESS

Sun Media Corporation (“Sun Media” or the “Company”), a newspaper publishing company, is a subsidiary of Quebecor Media Inc. (“Quebecor Media”), itself a subsidiary of Quebecor Inc. The Company publishes urban daily newspapers, community newspapers, as well as other specialty publications in communities across Canada and maintains a number of online publications. Sun Media is also active in the newspaper, magazine and flyer distribution business. In addition, Sun Media provides a wide range of commercial printing and other related services to third parties through its national network of production and printing facilities.

BASIS OF PRESENTATION

These consolidated financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles (“GAAP”). The same accounting policies as described in the Company’s latest annual consolidated financial statements have been used with the exception of the changes described in note 2 below. However, these ~~consolidated~~ financial statements do not include ~~all~~ all disclosures required under Canadian GAAP for annual ~~consolidated~~ financial statements and accordingly should be read in conjunction with the Company’s latest annual consolidated financial statements and the notes thereto. In the opinion of management, these ~~consolidated~~ financial statements contain all the adjustments considered necessary.

Sun Media’s business is seasonal due, among other factors, to seasonal advertising patterns and influences on people’s reading habits. Because the Company depends on the sale of advertising for a significant portion of its revenue, operating results are also sensitive to prevailing economic conditions, including changes in local, regional and national economic conditions, particularly as they may affect advertising expenditures. Accordingly, the results of operations for interim periods should not necessarily be considered indicative of full-year results.

References to Canadian dollars, Cdn$ and $ are to the currency of Canada, and references to U.S. dollars and US$ are to the currency of the United States.

Certain comparative figures for previous periods have been reclassified to conform to the presentation adopted for the three-month ~~and~~period ~~six-month periods~~ ended ~~June~~March 3031, ~~2008~~2009.

2. CHANGES IN ACCOUNTING POLICIES ~~AND ESTIMATES~~

(a) Current changes in accounting policies On January 1, 2009, the Company adopted Canadian Institute of Chartered Accountants (“CICA”) Section 3064, Goodwill and Intangible Assets, which replaced Section 3062, Goodwill and Other Intangible Assets, and which resulted in the withdrawal of Section 3450, Research and Development Costs and of Emerging Issues Committee (“EIC”) Abstract 27, Revenues and Expenditures During the Pre-operating Period, and which resulted also in the amendment of Accounting Guideline (“AcG”) 11, Enterprises in the Development Stage. This new standard provides guidance on the recognition of intangible assets in accordance with the definition of an asset and the criteria for asset recognition, whether those assets are separately acquired or internally developed, as well as clarifying the application of the concept of matching revenues and expenses. The adoption of Section 3064 eliminated the deferral of start-up costs which are now recognized as an expense when they are incurred.

On January 1, 2008, the Company adopted Canadian Institute of Chartered Accountants (“CICA”) Section 3031, Inventories, which provides more extensive guidance on the recognition and measurement of inventories and related disclosures. The adoption of this new section had no impact on the consolidated financial statements.

On January 1, 2008, the Company adopted the CICA Section 1535, Capital Disclosures, Section 3862, Financial Instruments — Disclosures, and Section 3863, Financial Instruments — Presentation. These sections relate to disclosures and presentation of information and did not affect the consolidated financial results. All the disclosure requirements related to these new accounting standards are presented in note 11.

~~Current~~As ~~changes~~a result of the adoption of these new rules, the Company made reclassifications in ~~accounting~~order ~~estimates~~to present certain assets, mainly software, as intangible assets instead of presenting them as property, plant and equipment. The following tables summarize the adjustments that were recorded in the financial statements:

~~The~~Balance ~~Company estimates the fair value of its derivative financial instruments using a discounted~~sheet cash flow valuation technique, since no quoted market prices exist for such instruments. During the second quarter of 2008, the Company made some amendments to the technique used in measuring the fair value of its derivatives in a liability position. These amendments change the way the Company factored its non-performance risk in its valuation technique, considering market developments and recent accounting guidelines. As a result of these changes, the fair value of these derivatives decreased by $9,274 and the gain on valuation and translation of financial instruments increased by $9,274 ($7,815 net of income taxes).

Future changes in accounting policies


	As of			As of
	December 31,			December 31,
Increase (decrease)	2008			2007
Property, plant and equipment ^(a)	$	(11,712	)	$	(8,998	)
Intangible and other assets ^(a)	$	11,712		$	8,998

In January 2008, the CICA issued Section 3064, Goodwill and Intangible Assets, which will replace Section 3062, Goodwill and Other Intangible Assets, and results in the withdrawal of Section 3450, Research and Development Costs and Emerging Issues Committee (~~“EIC”~~a) net ~~Abstract 27, Revenues and Expenditures During the Pre-operating Period, and amendments to AcG-11, Enterprises in the Development Stage. The standard provides guidance on the recognition~~ of ~~intangible~~accumulated ~~assets~~amortization ~~in accordance with the definition~~ of ~~an asset and the criteria for asset recognition as well as clarifying the application of the concept of matching revenues and expenses~~$11,090 ~~whether~~(2007 ~~those~~— ~~assets are separately acquired or internally developed. This standard applies to interim and annual financial statements relating to financial years beginning on or after October 1~~$7, ~~2008. The Company~~167) ~~is currently evaluating the effects of adopting this standard.~~

InStatement February 2008, Canada’s Accounting Standards Board confirmed that Canadian GAAP, as used by publicly accountable enterprises, will be fully converged into International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Company will be required to report under IFRS for its 2011 interim and annual financial statements. The Company is currently assessing the impacts of ~~the IFRS convergence initiative.~~income

3. FINANCIAL EXPENSES AND (GAIN) LOSS ON VALUATION AND TRANSLATION OF FINANCIAL INSTRUMENTS


	Three months
	ended
Increase (decrease)	March 31, 2008
Amortization of property, plant and equipment	$	(668	)
Amortization of intangible assets	$	668

	Three months ended June 30						Six months ended June 30
Financial expenses	2008			2007			2008			2007
Interest on long-term debt	$	6,278		$	11,538		$	13,092		$	22,997
Interest on subordinated loan to related party (note 5)		4,501			—			8,635			—
Amortization of financing costs and long-term debt discount		354			487			706			972
Interest on convertible obligations to related companies (note 5)		16,877			16,395			31,792			32,791
Dividend income on preferred shares of related companies (note 5)		(17,417	)		(16,910	)		(32,829	)		(33,820	)
Other		39			(237	)		6			(453	)
	$	10,632		$	11,273		$	21,402		$	22,487

(b) Future changes in accounting policies

6The CICA issued three new accounting standards in January 2009 — Section 1582, Business Combinations, Section 1601, Consolidated Financial Statements, and Section 1602, Non-controlling Interests, to converge the accounting for business combinations and the reporting of non-controlling interest to International financial reporting standards (“IFRS”).

Section 1582, Business Combinations, replaces Section 1581, Business Combinations, and establishes new guidance on the recognition and measurement of all assets and all liabilities of the acquired business at fair value. Non-controlling interests are measured at either their fair value or at their proportionate share of the fair value of identifiable assets and liabilities. The measurement of consideration given now includes the fair value of any contingent consideration as of the acquisition date and subsequent changes in fair value of the contingent consideration classified as a liability are recognized in earnings. Acquisition-related costs are excluded from the purchase price and are expensed as incurred. In addition, restructuring costs related to a business combination are no longer part of the purchase price equation and are expensed as incurred. Section 1582 applies prospectively to business combinations realized in or subsequent to the first annual reporting period beginning on or after January 1, 2011.

Section 1601, Consolidated Financial Statements, and Section 1602, Non-Controlling Interests, which together replace Section 1600, Consolidated Financial Statements, establish new guidance on accounting for non-controlling interests and for transactions with non-controlling interest. The new Sections require that non-controlling interest be presented as a separate component of shareholders’ equity. In the statement of income, net income is calculated before non-controlling interest and is then attributed to shareholders and non-controlling interest. In addition, changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are now accounted for as equity transactions. These Sections apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011, and have to be adopted concurrently with Section 1582.

	Three months ended June 30						Six months ended June 30
(Gain) loss on valuation and translation of financial instruments	2008			2007			2008			2007
(Gain) loss on embedded derivatives and derivative instruments for which hedge accounting is not used	$	(13	)	$	19,381		$	(11,953	)	$	20,055
(Gain) loss on foreign currency translation of financial instruments for which hedge accounting is not used		(1,502	)		(11,877	)		4,274			(15,144	)
(Gain) loss on the ineffective portion of fair value hedges		(2,041	)		3,413			(1,763	)		(49	)
	$	(3,556	)	$	10,917		$	(9,442	)	$	4,862

3. FINANCIAL EXPENSES

4. RESERVE FOR RESTRUCTURING OF OPERATIONS


	Three months ended March 31,
	2009			2008
Interest on long-term debt	$	4,972		$	6,814
Interest on subordinated loans to related party		4,563			4,134
Amortization of financing costs and long-term debt discount		358			352
Interest on convertible obligations to related companies		5,466			14,915
Dividend income on preferred shares of related companies		(5,592	)		(15,412	)
Other		184			(33	)


	$	9,951		$	10,770

In the second quarter of 2008, Sun Media management began to centralize classified sales and service functions of certain urban daily publications to centres of expertise in Ontario. In addition, management began to restructure the newspaper layout and production operations at the Toronto Sun. The Company recorded a severance related restructuring charge of $1,125 (2007 — $4~~,783) in the quarter in respect of amounts expected to be incurred relating to these new initiatives~~. GAIN ~~Payments~~ON ofVALUATION ~~$2,236~~AND ~~(2007~~TRANSLATION —OF ~~$3,790)~~FINANCIAL ~~were made in the quarter relating to press~~INSTRUMENTS ~~consolidation and general workforce reduction charges that were recorded in fiscal 2006 and 2007.~~

During the six-month period ended June 30, 2008, the Company recorded termination benefits of $2,711 (2007 — $10,707) and made payments of $5,090 (2007 — $7,592) relating to workforce reduction initiatives.


	Three months ended March 31,
	2009			2008
Gain on embedded derivatives and derivative instruments for which hedge accounting is not used	$	(6,387	)	$	(11,940	)
Loss on foreign currency translation of financial instruments for which hedge accounting is not used		4,314			5,776
(Gain) loss on the ineffective portion of fair value hedges		(658	)		278


	$	(2,731	)	$	(5,886	)

	Three months ended June 30						Six months ended June 30
Continuity of reserve for restructuring	2008			2007			2008			2007
Beginning balance	$	4,568		$	14,900		$	5,836		$	12,778
Workforce reduction initiatives		1,125			4,783			2,711			10,707
Payments		(2,236	)		(3,790	)		(5,090	)		(7,592	)
Ending balance	$	3,457		$	15,893		$	3,457		$	15,893

5. RESTRUCTURING OF OPERATIONS

5During the three-month period ended March 31, 2009, restructuring charges of $2,715 were recorded for new restructuring initiatives in several publications in Western Canada. ~~TRANSACTIONS~~The ~~WITH~~amount ~~RELATED~~primarily relates ~~COMPANIES~~to severances for the elimination of positions.

(a) Investment in and convertible obligations issued to related companies


	Three months ended March 31,
	2009			2008
*Continuity of restructuring costs payable*
Beginning balance	$	20,784		$	5,836
Workforce reduction initiatives		2,715			1,586
Payments		(10,025	)		(2,854	)


Ending balance	$	13,474		$	4,568

Sun Media has invested in certain preferred shares issued by related companies: Quebecor Media, SUN TV Company (“SUN TV”) and Imprimerie Mirabel Inc. (“Mirabel”). Concurrently, Sun Media issued convertible obligations to Quebecor Media, SUN TV and Mirabel. These transactions are for tax consolidation purposes of Quebecor Media and its subsidiaries.

The convertible obligations are redeemable by the Company, in whole or in part, including accrued interest, at any time prior to maturity. The holder may, upon the occurrence of certain events, require the Company to redeem the convertible obligations at a redemption amount equal to the then outstanding principal plus any accrued and unpaid interest.

The convertible obligations are also convertible by the holder, in whole or in part, including accrued interest, at any time prior to maturity, into fully-paid and non-assessable common shares of the Company6. PENSION ~~The number of such shares shall be determined by dividing the amount to be so~~PLANS ~~converted by the fair value of one common share as determined by the Board of Directors.~~

The Company ~~may~~maintains ~~elect~~defined tocontribution ~~defer, at any time~~ and ~~from~~benefit ~~time~~pension toplans ~~time, coupon payments on the convertible obligations by extending the coupon payment period on the obligations~~ for aits ~~period of up to 12 consecutive semi-annual periods, provided, however, that no extension period may extend beyond the maturity date for each obligation, respectively~~employees. The ~~Company may, at any time, at its~~total ~~option,~~benefit ~~elect~~cost ~~to satisfy its obligations to pay any coupon (including any deferred coupon) by issuing and delivering to the holder fully-paid and non-assessable common shares~~ of ~~its~~these ~~capital stock.~~employee ~~The~~future ~~number~~benefit ofplans ~~such~~were ~~shares shall be determined by dividing the amount to be so satisfied by the fair value of one common share~~ as ~~determined by the Board of Directors.~~follows:

Quebecor Media


	Three months ended March 31,
	2009		2008
Defined contribution pension plans	$	664	$	808
Defined benefit plans		2,454		3,019


Total benefit cost	$	3,118	$	3,827

~~The~~7. TRANSACTIONS ~~following~~WITH ~~tables~~RELATED ~~summarize the Company’s issuance of convertible obligations to and its~~COMPANIES ~~investments in Quebecor Media Preferred Shares:~~

	Convertible obligation issue
Issue or redemption date	2008			2020		2021		2022		Total
Balance — January 1, 2007 and June 30, 2007	$	235,000		$	200,000	$	120,000	$	—	$	555,000
July 13, 2007		(235,000	)		—		—		—		(235,000	)
July 27, 2007		—			—		—		240,000		240,000
Balance — December 31, 2007 and June 30, 2008	$	—		$	200,000	$	120,000	$	240,000	$	560,000

The Company has earned revenue for advertising and other services provided to and incurred expenses for purchases and services obtained from related companies at prices and conditions prevailing on the market. The majority of related party purchases were for printing services.

	Quebecor Media Preferred Shares
	12.50%			10.85%			10.85%
Issue	Series A			Series F			Series G		Total
Balance — January 1, 2007 and June 30, 2007	$	235,000		$	320,000		$	—	$	555,000
July 13, 2007		(235,000	)		—			—		(235,000	)
July 27, 2007		—			—			240,000		240,000
December 20, 2007		—			(320,000	)		320,000		—
Balance — December 31, 2007 and June 30, 2008	$	—		$	—		$	560,000	$	560,000

In addition, as a result of cost containment strategies and the centralization of corporate management, Sun Media is providing general and administrative support to certain operations within Quebecor Media’s newspaper group.

~~During the three and six months ended June 30, 2008, the interest expense on the Company’s convertible obligations amounted to $14,660 and $29,320 (2007 — $15,495 and $30,991)~~8. LONG-TERM ~~For the~~DEBT three and six months ended June 30, 2008, the total interest paid on the convertible obligations was $29,481 (2007 — nil and $31,332). As at June 30, 2008, the unpaid interest on the convertible obligations was $1,450 (December 31, 2007 — $1,611).


	March 31,			December 31,
	2009			2008
Bank credit facilities	$	38,547		$	48,485
Senior notes		251,578			245,732

		290,125			294,217

Change in fair value related to hedged interest rate risk		525			312
Adjustment related to embedded derivatives		1,223			1,291
Financing fees, net of amortization		(3,300	)		(3,517	)


		288,573			292,303
Less: Current portion		(400	)		(400	)


	$	288,173		$	291,903

~~During the three and six months ended June 30, 2008, dividends of $15,148 and $30,296 (2007 — $15,980 and $31,960) were declared on the Cumulative First Preferred Shares of Quebecor Media~~9. ~~During~~ STOCK-BASED ~~the three and six months ended June 30, 2008, Sun Media received payments of dividend income~~COMPENSATION ~~of $30,463 (2007 — nil and $32,311) from Quebecor Media. As at June 30, 2008, the unpaid dividend receivable from Quebecor Media was $1,498 (December 31, 2007 — $1,665).~~

~~SUN~~The TVfollowing table provides details of changes to outstanding options of Sun Media employees in the stock-based compensation plan of Quebecor Media for the three-month period ended March 31, 2009:

The following table summarizes the Company’s issuance of convertible obligations to and its investment in SUN TV Preferred Shares:


				Weighted-
				Average Exercise
	Number			Price
Outstanding options, as of December 31, 2008		613,924		$	42.63
Options granted during the three months ended March 31, 2009		33,000		$	37.91
Options exercised during three months ended March 31, 2009		(11,850	)	$	26.88


Outstanding options, as of March 31, 2009		635,074		$	42.68


Vested options, as of March 31, 2009		39,489		$	34.15

	2020
	Convertible			SUN TV
Issue or redemption date	Obligation Issue			Preferred Shares
Balance — January 1, 2007 and June 30, 2007	$	34,375		$	34,375
December 20, 2007		(24,625	)		(24,625	)
Balance — December 31, 2007 and June 30, 2008	$	9,750		$	9,750

During the three-month period ended March 31, 2009, a net reversal of stock compensation expense related to Quebecor Media’s stock-based compensation plan was recorded in the amount of $158 (a net reversal of $383 in 2008).

~~During the three and six months ended June 30, 2008, interest expense on the convertible obligations amounted to $258 and $513 (2007 — $900 and $1,800)~~10. SIGNIFICANT ~~For~~DIFFERENCES ~~the~~BETWEEN ~~three~~GAAP ~~and~~IN ~~six~~CANADA ~~months~~AND ~~ended June 30,~~IN ~~2008,~~THE ~~the~~UNITED ~~total interest paid by Sun Media was $520 (2007 — $1,800). As at June 30, 2008,~~STATES ~~the unpaid interest on the convertible obligation was $28 (December 31, 2007 — $35).~~

~~During~~The ~~the~~unaudited ~~three~~interim ~~and~~financial ~~six~~statements ~~months~~have ~~ended~~been ~~June 30,~~prepared ~~2008,~~in ~~dividends~~accordance ofwith ~~$266~~Canadian ~~and~~GAAP, which ~~$530~~differ ~~(2007~~in —some ~~$930~~respects ~~and $1,860)~~from ~~were~~those ~~declared~~applicable onin the ~~SUN~~United TVStates ~~Preferred Shares~~(“U.S. ~~For~~GAAP”), ~~the~~as described ~~three~~below. ~~and~~The ~~six~~following ~~months~~tables ~~ended~~set ~~June 30, 2008,~~forth ~~Sun~~the ~~Media~~impact ~~received payments~~ of ~~dividend~~significant ~~income~~differences ofon ~~$537 (2007 — $1,860). As at June 30, 2008,~~ the Company’s ~~unpaid~~unaudited ~~dividend~~interim ~~receivable~~financial ~~from~~statements ~~SUN~~between TVCanadian ~~was~~and ~~$29~~U.S. ~~(December 31, 2007 — $36)~~GAAP.

~~Mirabel~~(a) Consolidated statements of income

On June 16, 2008, the Company issued a new convertible obligation to Mirabel in the amount of $500,000. This new convertible obligation matures on June 16, 2023 (“2023 Convertible Obligation Issue”) and bears interest at 11.00% payable semi-annually. The Company used the proceeds from the issuance of this new convertible obligation to invest in $500,000 of Mirabel Series G Preferred Shares, carrying an 11.25% annual fixed cumulative preferential dividend payable semi-annually and otherwise having terms and conditions substantially similar to the Quebecor Media and SUN TV Preferred Shares.


	Three months ended March 31,
	2009			2008
				(restated - (vii))

Net income as per Canadian GAAP	$	6,609		$	20,986
Non-controlling interest as per Canadian GAAP (vii)		—			125
Adjustments:
Pension and post-retirement benefits (i)		(104	)		141
Changes in fair value and ineffective portion of derivative instruments (iii)		(68	)		671
Non-monetary transactions (iv)		(15	)		(15	)
Stock-based compensation (v)		(1,700	)		(600	)
Capital taxes (vi)		—			(751	)
Income taxes (vi)		510			201


Net income as per U.S. GAAP	$	5,232		$	20,758


Attributable to (vii):
Equity shareholders	$	5,232		$	20,633
Non-controlling interest		—			125

The following table summarizes the Company’s issuance of convertible obligations to and its investment in Mirabel Preferred Shares:

	2023
	Convertible		Mirabel
Issue or redemption date	Obligation Issue		Preferred Shares
Balance — January 1, 2007, June 30, 2007 and December 31, 2007	$	—	$	—
June 16, 2008		500,000		500,000
Balance — June 30, 2008	$	500,000	$	500,000

During the three and six months ended June 30, 2008, interest expense on the convertible obligation amounted to $1,959 (2007 — nil) and total interest paid by Sun Media was $603 (2007 — nil). As at June 30, 2008, the unpaid interest on the convertible obligation was $1,356 (December 31, 2007 — nil).

~~During the three and six months ended June 30, 2008, dividends of $2,003~~ (~~2007 — nil~~b) Consolidated ~~were~~statements ~~declared on the Mirabel Preferred Shares. Sun Media received payments~~ of ~~dividend~~comprehensive income ~~of $616 (2007 —~~ ~~nil). As at June 30, 2008, the unpaid dividend receivable from Mirabel was $1,387 (December 31, 2007 — nil).~~

(b) Subordinated loans


	Three months ended March 31,
	2009			2008
				(restated (vii))
Comprehensive income as per Canadian GAAP	$	6,585		$	22,507
Non-controlling interest as per Canadian GAAP (vii)		—			125
Adjustments to net income as per (a) above		(1,377	)		(353	)
Adjustments to other comprehensive income:
Pension and post-retirement benefits (i)		312			701
Income taxes on comprehensive income (vi)		(84	)		(187	)


Comprehensive income as per U.S. GAAP	$	5,436		$	22,793

~~On October 31, 2007, the Company entered into a $237,500 subordinated loan agreement~~ (~~“2013 Subordinated Loan”~~c) Consolidated ~~with~~balance ~~Quebecor~~sheet ~~Media which bears interest at an annual rate of 7.00% and matures~~data on October 31, 2013. The 2013 Subordinated Loan is prepayable by the Company, in whole or in part, including accrued interest, at any time prior to maturity. Proceeds from the 2013 Subordinated Loan were used to repay the Company’s loan “B” credit facility and related hedging contracts. Quebecor Media may, upon the occurrence of certain events, cause the outstanding principal and accrued interest to become immediately due and payable.

On April 10, 2008, the Company entered into an additional $24,000 subordinated loan agreement (“2014 Subordinated Loan”) with Quebecor Media which bears interest at an annual rate of 7.00% and matures on April 10, 2014. The proceeds of 2014 Subordinated Loan were used to pay down a portion of the balance outstanding on the Company’s revolving credit facilities at the time. Aside from the maturity date, the 2014 Subordinated Loan has the same principal terms and conditions as the 2013 Subordinated Loan.


	March 31, 2009						December 31, 2008
	CDN GAAP			U.S. GAAP			CDN GAAP			U.S. GAAP
							(restated			(restated
							note 2(a))			(vii))
Intangible and other assets	$	35,134		$	25,475		$	32,784		$	23,498
Goodwill (ii)		770,931			767,508			770,931			767,508
Current liabilities		152,381			154,781			156,516			157,216
Future income tax liabilities		10,489			4,375			10,079			4,391
Long-term debt		288,173			286,950			291,903			290,612
Other liabilities		26,198			28,727			25,043			28,138
Retained earnings		34,588			31,583			35,979			34,351
Accumulated other comprehensive loss		(2,211	)		(9,880	)		(2,187	)		(10,084	)

~~For~~The ~~the~~accumulated ~~three~~other ~~and~~comprehensive ~~six~~loss ~~months~~as ~~ended~~of ~~June~~March 3031, ~~2008~~2009 ~~interest expense on the 2013 Subordinated Loan~~ and ~~2014~~ Subordinated Loan (collectively “Subordinated Loans”) was $4,501 and $8,635 (2007 — nil). For the three and six months ended June 30, 2008, the total interest paid on the Subordinated Loans was $4,442 and $8,577 (2007 — nil). As at June 30, 2008, interest payable was $650 (December 31, ~~2007 -~~2008 ~~$592).~~is ~~The balance of Subordinated Loans~~ as ~~at June 30, 2008 totalled $261,500 (December 31,~~follows: ~~2007 — $237,500).~~

6. LONG-TERM DEBT


	March 31,			December 31,
	2009			2008
Accumulated other comprehensive loss as per Canadian GAAP	$	(2,211	)	$	(2,187	)
Adjustments:
Pension and post-retirement benefits (i)		(12,946	)		(13,258	)
Income taxes on comprehensive income (vi)		5,277			5,361


Accumulated other comprehensive loss as per U.S. GAAP	$	(9,880	)	$	(10,084	)

	June 30,			December 31,
	2008			2007
Bank credit facilities	$	48,592		$	39,091
Senior notes		205,191			198,910
		253,783			238,001
Change in fair value related to hedged interest rate risks		(7,333	)		(8,571	)
Adjustment related to embedded derivatives		(504	)		82
Financing fees, net of amortization		(3,959	)		(4,367	)
		241,987			225,145
Less current portion		(400	)		(400	)
	$	241,587		$	224,745

SUN MEDIA CORPORATION Notes to Consolidated Financial Statements For the three-month and six-month periods ended June 30, 2008 (in thousands of Canadian dollars, except for share information) (unaudited)

7. STOCK-BASED COMPENSATION

The following table provides details of changes to outstanding options of Sun Media employees in the stock-based compensation plan of Quebecor Media for the six-month period ended June 30, 2008:

				Weighted-average
	Number			exercise price
Outstanding options, as at December 31, 2007		1,370,748		$	30.65
Options exercised during six months ended June 30, 2008		(645,245	)	$	17.33
Outstanding options, as at June 30, 2008		725,503		$	42.50
Vested options, as at June 30, 2008		15,265		$	23.32

During the six-month period ended June 30, 2008, a net reversal of the compensation charges related to the Quebecor Media stock-based compensation plan was recorded in the amount of $953 (2007 — net charge of $3,856).

During the six-month period ended June 30, 2008, 645,245 stock options were exercised in the amount of $21,394.

8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Balance — December 31, 2006	$	—
Cumulative effect of changes in accounting policies		(116	)
Other comprehensive income, net of income taxes of $239		68
Balance — June 30, 2007		(48	)
Other comprehensive loss, net of income taxes of $401		(1,473	)
Balance — December 31, 2007		(1,521	)
Other comprehensive income, net of income taxes of $723		1,621
Balance — June 30, 2008	$	100

No significant amount is expected to be reclassified in income over the next 12 months in connection with derivatives designated as cash flow hedges. The balance is expected to be reversed over a four-year period.

9. PENSION PLANS

The Company maintains defined benefit and defined contribution pension plans for its employees. The total costs were as follows:

	Three months ended June 30				Six months ended June 30
	2008		2007		2008		2007
Defined benefit plans	$	2,665	$	2,113	$	5,684	$	5,670
Defined contribution plans		796		887		1,604		1,591
	$	3,461	$	3,000	$	7,288	$	7,261

10. SEGMENTED INFORMATION

Management has determined that there are no reportable segments requiring disclosure. This conclusion was reached on the basis that the Company’s newspaper divisions exhibit similar economic characteristics, with similar products, production processes, and classes of customers.

11. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies are reviewed regularly to reflect changes in market conditions and the Company’s activities.

From its use of financial instruments, the Company is exposed to credit risk, liquidity risk, market risks relating to foreign exchange fluctuations, and to interest rate fluctuations, and capital risk. In order to manage its foreign exchange and interest rate risks, the Company uses derivative financial instruments (i) to achieve a targeted balance of fixed and variable rate debts and (ii) to set in Canadian dollars all future payments on debts denominated in U.S. dollars (interest and principal) and certain capital or inventory expenditures denominated in a foreign currency. The Company does not intend to settle its financial derivative instruments prior to their maturity as none of these instruments are held or issued for speculative purposes. The Company designates its derivative financial instruments either as fair value hedges or cash flow hedges when they qualify for hedge accounting.

(a) Description of derivative financial instruments

(i) Foreign exchange forward contracts:

	Currencies (sold/bought)		Maturing		Average exchange rate		Notional amount
	Cdn$ / US$		February 15, 2013		1.5227		$312,154

(ii) Cross-currency interest rate swaps:

Annual

CDN dollar

effective

Annual

exchange rate of

interest rate

nominal

interest and principal

Period

Notional

using

interest rate

payments per

covered

amount

hedge rate

of debt

one US dollar

Senior Notes

2008 to 2013

US$155,000

Cdn bankers’

7.625%

1.5227

acceptances

3 months

+3.696%

Senior Notes

2003 to 2013

US$ 50,000

Cdn bankers’

7.625%

1.5227

acceptances

3 months

+3.696%

Also, the cross-currency interest rate swaps entered into by the Company include an option that allows each party to unwind the transactions on a specific date at the then-market value.

(iii) Interest rate swap: Effective April 30, 2008, the Company entered into a variable-for-fixed interest rate swap on its term loan “C” thereby receiving floating three months Canadian bankers’ acceptance and paying fixed 3.75% until October 31, 2012. The notional amount of the swap at June 30, 2008 was $39,100. This interest rate swap was designated as a cash flow hedge.

(b) Fair value of financial instruments

The carrying amount of accounts receivable from external or related parties (classified as loans and receivables), accounts payable and accrued charges to external or related parties (classified as other financial liabilities) approximates their fair value since these items will be realized or paid within one year or are due on demand.

Carrying value and fair value of long-term debt and derivative financial instruments as at June 30, 2008 and December 31, 2007 are as follows:

	June 30, 2008				December 31, 2007
	Carrying value		Fair value		Carrying value		Fair value
Long- term debt (a) (note 6)	$	253,783	$	248,192	$	238,001	$	234,063
Cross-currency interest rate swaps, foreign exchange forward contract, and interest rate swap	$	114,634	$	114,634	$	133,090	$	133,090

(a) The carrying value of long-term debt excludes adjustments to record changes in fair value of long-term debt related to hedged interest risk, embedded derivatives and financing fees.

The fair value of long-term debt is estimated based on discounted cash flows using period-end market yields or market value of similar instruments with the same maturity, or quoted market prices when available. The interest rates used to discount estimated cash flows are based on swap yield curves at the reporting date. The fair value of the derivative financial instruments is estimated using period-end swap rates, adjusted to reflect the Company’s non-performance risk.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial asset fails to meet its contractual obligations.

In the normal course of business, the Company continuously monitors the financial condition of its customers and reviews the credit history of each new customer. As at June 30, 2008, no customer balance represented a significant portion of the Company’s consolidated trade receivables. The Company establishes an allowance for doubtful accounts based on the specific credit risk of its customers and historical trends. The allowance for doubtful accounts amounted to $8,637 as at June 30, 2008 (December 31, 2007 — $7,611). As at June 30, 2008, 10.0% of trade receivables were 90 days past their billing date (7.6% as at December 31, 2007).

The Company believes that its product lines and the diversity of its customer base are instrumental in reducing its credit risk, as well as the impact of fluctuations in product line demand. The Company does not believe that it is exposed to an unusual level of customer credit risk.

When the Company enters into derivative contracts, the counterparties (either foreign or Canadian) must have credit ratings at least in accordance with the Company’s credit risk management policy and are subject to concentration limits. Given the high minimum credit ratings required under the Company’s policy, the Company does not foresee any failure by counterparties to meet their obligations.

(d) Liquidity risk management

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due or at excessive cost. Management of the Company believes that cash flows from continuing operations and available sources of financing should be sufficient to cover committed cash requirements for capital investments, working capital, interest payments, debt repayments, pension plan contributions and dividends (or distributions) in the future.

As at June 30, 2008, material contractual obligations related to financial instruments included capital repayment and interest on long-term debt and derivative instruments, where their maturities are as follows:

			Less than						5 years
	Total		1 year		1-3 years		3-5 years		and more
Convertible obligations (a) (note 5)	$	1,069,750	$	—	$	—	$	—	$	1,069,750
Interest on convertible obligations (a)		1,605,600		114,509		229,018		229,018		1,033,055
Long-term debt (note 6)		253,783		400		800		252,583		—
Interest on long-term debt (b)		121,900		24,000		48,000		47,000		2,900
Subordinated loan (note 5)		261,500		—		—		—		261,500
Interest on subordinated loan		98,384		18,255		36,510		36,510		7,109
Derivative instruments (c)		104,981		—		—		104,981		—
Total contractual obligations	$	3,515,898	$	157,164	$	314,328	$	670,092	$	2,374,314

(a) These amounts are offset by investments in preferred shares of related parties and associated dividends.

(b) Estimate of interest to be paid on long-term debt based on the hedged and unhedged interest rates and hedged foreign exchange rate at June 30, 2008.

(c) Estimated future disbursements on the principal portion of derivative financial instruments related to foreign exchange hedging.

(e) Market risk

Market risk is the risk that changes in market prices due to foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its financial instruments. The objective of market risk management is to mitigate and control exposures within acceptable parameters while optimizing the return on risk.

Foreign currency risk:

The Company is exposed to foreign currency risk on principal and interest repayments on U.S. dollar-denominated debt. Most of the Company’s revenues and expenses are denominated in Canadian dollars. The Company hedges the foreign currency risk exposure on 100% of U.S. dollar-denominated debt obligations outstanding as at June 30, 2008. Accordingly, the Company’s sensitivity to the variation of foreign currency rates is economically limited.

An increase or a decrease of 1% in the exchange rate of a Canadian dollar compared to a U.S. dollar would have no material impact on earnings or capital expenditures not hedged by derivative instruments on a yearly basis.

Interest rate risk:

The Company is exposed to interest rate risk on a portion of its long-term debt and has entered into various interest rate and cross-currency interest rate swap agreements in order to manage cash flow and fair value risk exposure to changes in interest rates.

An increase or decrease of 25 basis points in the Canadian bankers’ acceptance rate for the reporting period would have increased or decreased interest expense by approximately $200 in the second quarter and by $400 in the first half of 2008 using debt levels prevailing as at June 30, 2008.

(f) Capital management

The Company’s primary objective in managing capital is to maintain an optimal capital base in order to support the capital requirements of its various businesses, including growth opportunities.

In managing its capital structure, the Company takes into account the asset characteristics of its underlying group of companies and planned requirements for funds. Management of the capital structure involves the issuance of new debt, the repayment of existing debt using cash generated by operations and the level of distributions to shareholders. Since the last financial year, the Company has not significantly changed its strategy regarding the management of the capital structure.

The capital structure of the Company is composed of shareholders’ equity, bank indebtedness, long-term debt, liabilities related to derivative financial instruments, related party subordinated debt, convertible obligations and investments in preferred shares, non-controlling interests less cash and cash equivalents and temporary investments.

The Company was in compliance with all debt covenants and is not subject to any externally imposed capital requirements.

12. SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES

The Company’s consolidated financial statements are prepared in accordance with Canadian GAAP, which differ in some respects from those applicable in the United States (“U.S. GAAP”). The following tables set forth the impact of the material differences between Canadian and U.S. GAAP on the Company’s consolidated financial statements.

	Three months ended June 30						Six months ended June 30
(a) Consolidated statements of income	2008			2007			2008			2007
Net income as per Canadian GAAP	$	31,150		$	23,380		$	52,136		$	40,812
Adjustments:
Pension and post-retirement benefits (i)		141			150			282			299
Change in fair values and ineffective portion of derivative instruments (iii)		(1,257	)		1,500			(586	)		955
Stock-based compensation (v)		(500	)		—			(1,100	)		—
Related party transactions (vi)		(661	)		(2,190	)		(661	)		(2,740	)
Other		735			(15	)		(31	)		(31	)
Income taxes (vii)		162			(547	)		363			(396	)
Net income as adjusted as per U.S. GAAP	$	29,770		$	22,278		$	50,403		$	38,899

	Three months ended June 30						Six months ended June 30
(b) Consolidated statements of comprehensive income	2008			2007			2008			2007
Comprehensive income as per Canadian GAAP	$	31,250		$	23,226		$	53,757		$	40,880
Adjustments to net income as per (a) above		(1,380	)		(1,102	)		(1,733	)		(1,913	)
Adjustments to other comprehensive income:
Pension and post-retirement benefits (i)		701			1,093			1,402			2,187
Income taxes (vii)		(188	)		(373	)		(375	)		(746	)
Comprehensive income as per U.S. GAAP	$	30,383		$	22,844		$	53,051		$	40,408

	June 30,			December 31,
Accumulated other comprehensive income (loss)	2008			2007
Accumulated other comprehensive income (loss) as per Canadian GAAP	$	100		$	(1,521	)
Adjustments:
Pension and post-retirement benefits (i)		(34,956	)		(36,358	)
Income taxes (vii)		11,154			11,529
Accumulated other comprehensive loss as per U.S. GAAP	$	(23,702	)	$	(26,350	)

	June 30,			December 31,
(c) Consolidated shareholders’ equity	2008			2007
Shareholders’ equity as per Canadian GAAP	$	310,738		$	347,981
Cumulative adjustments:
Pension and post-retirement benefits (i)		(31,916	)		(33,600	)
Restructuring charges (ii)		(6,981	)		(6,981	)
Derivative financial instruments (iii)		(504	)		82
Non-monetary transactions (iv)		1,673			1,704
Stock-based compensation (v)		(2,700	)		(1,600	)
Related party transactions (vi)		—			661
Income taxes on U.S. adjustments (vii)		12,072			12,084
Shareholders’ equity as per U.S. GAAP	$	282,382		$	320,331

	June 30, 2008				December 31, 2007
(d) Consolidated balance sheets	CDN GAAP		U.S. GAAP		CDN GAAP		U.S. GAAP
Future income tax assets	$	22,786	$	25,181	$	36,224	$	38,137
Other assets		15,173		7,992		17,291		8,698
Goodwill		769,159		765,736		769,159		765,736
Current liabilities		153,108		155,808		171,265		172,201
Long-term debt		241,587		242,091		224,745		224,663
Other liabilities		24,874		51,570		24,985		51,443
Future income tax liabilities		24,188		14,435		19,724		9,959
Total shareholders’ equity		310,738		282,382		347,981		320,331

(i) Pension and post-retirement benefits

Under U.S. GAAP, Statement of Financial Accounting Standards (“SFAS”) No. 158, Employers’ Accounting for Defined Benefit Pension and Other ~~Post-retirement~~Postretirement Plans, requires the recognition in the balance sheets of ~~over~~the over-or under-funded positions of defined benefit pension and other postretirement ~~post-retirement~~ plans ~~on the balance sheet~~, along with a corresponding non-cash adjustment, to be recorded in the accumulated other comprehensive income (loss).

Under Canadian GAAP, a company is not required to recognize the over -or under-funded positions or to recognize an additional minimum liability. However, when a defined benefit plan gives rise to an accrued benefit asset, a company must recognize a valuation allowance for the excess of the adjusted benefit asset over the expected future benefit to be realized from ~~the~~ plan ~~asset~~assets. U.S. ~~GAAP~~ GAAP does not provide for a valuation allowance against pension assets.

SUN MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the three-month period ended March 31, 2009
(In thousands of Canadian dollars)
(Unaudited)

(ii) Restructuring charges

In respect of the 1999 acquisition of Sun Media, certain of the restructuring charges related to the acquired newspapers are recorded in the purchase equation as goodwill under Canadian GAAP, but are excluded from the purchase equation and expensed under U.S. GAAP.

17(iii) Derivative financial instruments

~~Table~~Since ofJanuary 1, ~~Contents~~2007, standards for hedge accounting under Canadian GAAP are similar to those under U.S. GAAP, as established by SFAS No 133, Accounting for Derivative Instruments and Hedging Activities.

~~SUN~~However, ~~MEDIA~~under ~~CORPORATION Notes~~Canadian toGAAP, ~~Consolidated~~certain ~~Financial~~embedded ~~Statements~~derivatives, such as early settlement options ~~For~~included in some of the ~~three-month~~Company’s borrowing agreements, do not meet the criteria to be considered closely related to their host contracts and ~~six-month~~therefore ~~periods~~must ~~ended~~be ~~June 30,~~recorded ~~2008~~at their fair value with (changes in ~~thousands~~income. ofUnder ~~Canadian~~U.S. ~~dollars~~GAAP, ~~except~~those ~~for~~embedded ~~share~~derivatives ~~information)~~are considered closely related to ~~(unaudited)~~their host contract and do not have to be recorded separately from their fair values. Accordingly, the measurement of ineffective hedging relationships recorded in income under U.S. GAAP differs from the measurement under Canadian GAAP.

(iii) Change in fair values and ineffective portion of derivative instruments

Since January 1, 2007, standards for hedge accounting under Canadian GAAP are now similar to those under U.S. GAAP, as established by SFAS 133, Accounting for Derivative Instruments and Hedging Activities.

However, under Canadian GAAP, certain embedded derivatives, such as the early settlement options included in one of the Company’s borrowing agreements, do not meet the criteria to be considered closely related to their host contracts and therefore must be recorded at their fair value with changes in income. Under U.S. GAAP, these embedded derivatives are considered closely related to their host contract and do not have to be recorded separately at their fair value. Accordingly, the measurement of ineffective hedging relationships recorded in income under U.S. GAAP differs from the measurement under Canadian GAAP.

(iv) Non-monetary transactions

In April 2005, Sun Media exchanged a community publication for another community publication. Under U.S. GAAP, this exchange of businesses is recorded in accordance with SFAS 141, Business Combinations, and the cost of the purchase should be determined as the fair value of the consideration given or the fair value of the net assets or equity interest received, whichever is more reliably measurable. Under Canadian GAAP, since this exchange of businesses is a non-monetary transaction, it is accounted for in accordance with CICA Section 3831, Non-monetary Transactions, and recorded at the carrying value of the asset or service given up in the exchange adjusted by any monetary consideration received or given.

Accordingly, under U.S. GAAP, this transaction resulted in a gain on disposal of a publication and also resulted in an increase of the purchase price of the publication acquired.

(v) Stock-based compensation

Under U.S. GAAP, in accordance with SFAS No. 123(R), Share -Based ~~Payment~~Payments, the liability related to stock-based awards that call for settlement in cash or other ~~asset,~~assets must be measured at its fair value based on the fair value of stock ~~option~~options awards and is to be ~~re-measured~~remeasured at the end of each reporting period. Under Canadian GAAP, the liability is measured and ~~re-measured~~remeasured based on the intrinsic ~~value~~values of the stocks option awards instead of at their fair ~~value~~values.

(vi) Income ~~Related party transactions~~taxes

~~The Company entered into a tax consolidation transaction with a related party through which tax losses were transferred between the parties.~~ Under Canadian GAAP, itincome ~~resulted~~taxes inare ~~the~~measured ~~recognition of~~using asubstantively ~~deferred~~enacted ~~credit of $8,400 in 2006, and in a $7,739 and $661 reduction in the Company’s income~~ tax ~~expense in 2007 and 2008~~rates, ~~respectively.~~while ~~Under~~ under U.S. GAAP, ~~since~~measurement ~~this~~is ~~transaction~~based ~~related~~on toenacted ~~an asset transfer between related parties, the difference between the carrying value of the~~ tax ~~benefits~~ ~~transferred and the cash consideration paid would have been recognized in contributed surplus~~rates.

Furthermore, under U.S. GAAP, the Financial Accounting Standards Board issued interpretation No. 48, Accounting for Uncertainty in Income Taxes (~~vii~~“FIN48”), ~~Income~~an interpretation of SFAS No. 109. FIN48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance as to derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Under Canadian GAAP, there is no such interpretation and therefore the reserve related to income tax contingencies is not based on the same level of likelihood as prescribed by FIN48.

Under U.S. GAAP, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN48”), an interpretation of SFAS 109, Accounting for Income Taxes. FIN48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance as to derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

Under Canadian GAAP, there is no such interpretation and therefore the reserve related to income tax contingencies is not based on the same level of likelihood as prescribed by FIN48.

Furthermore, under Canadian GAAP, income taxes are measured using substantively enacted tax rates, while under U.S. GAAP, measurement is based on enacted tax rates.

Other adjustments represent the tax impact of U.S. GAAP adjustments.

SUN MEDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the three-month period ended March 31, 2009
(In thousands of Canadian dollars)
(Unaudited)

(vii) Business combinations and non-controlling interest

As of January 1, 2009, the Company adopted SFAS 141R, Business Combinations, and SFAS 160, Non-controlling Interests in its financial statements.

The provisions of SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after December 31, 2008. SFAS 141R establishes new guidance on the recognition and measurement of all assets and all liabilities of the acquired business at fair value. Non-controlling interests are measured at either their fair value or at the non-controlling interest’s proportionate share of the fair value of identifiable assets and liabilities. The measurement of consideration given now includes the fair value of any contingent consideration as of the acquisition date and subsequent changes in fair value of the contingent consideration classified as a liability are recognized in earnings. Acquisition-related costs are excluded from the purchase price and are expensed as incurred. In addition, restructuring costs related to a business combination are no longer part of the purchase price equation and are expensed as incurred. The adoption of this Section has not yet created a difference between Canadian and U.S. GAAP.

The new rules under SFAS 160 establish new guidance on the accounting for non-controlling interests and for transactions with non-controlling interest. SFAS 160 requires that non-controlling interest be presented as a separate component of shareholders’ equity. In the statement of income, net income is calculated before non-controlling interest and is then attributed to shareholders and non-controlling interest. In addition, changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are now accounted for as equity transactions. The new presentation applies retroactively and U.S. GAAP prior periods figures have been restated.

(viii) Fair value measurements

On January 1, ~~2008~~2009, the Company adopted the provisions of SFAS 157, Fair Value Measurements, ~~that~~ ~~enhance~~related to the guidance for using fair value to measure assets and liabilities. In February 2008, the FASB issued FASB Staff Position (“FSP”) FAS 157-1, Application of SFAS 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, which removes certain ~~leasing transactions from the scope of SFAS 157, and FSP FAS 157-2, Effective Date of SFAS 157, which defers the effective date of SFAS 157 for one year for certain~~ non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The ~~Company~~adoption ishad ~~still~~no ~~in the process of evaluating this standard with respect to its effect on non-financial assets and liabilities and has not yet determined the~~ impact ~~that it will have~~ on its consolidated financial statements ~~upon full adoption in 2009~~.

13. SUBSEQUENT EVENT

On July 22, 2008, Sun Media acquired the remaining 24.99% of the shares of Le Courrier du Sud 1998 (Inc.) making it a wholly-owned subsidiary. The cash purchase consideration totalled approximately $7,227. This acquisition will be accounted for under the purchase method of accounting.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SUN MEDIA CORPORATION
	By:	/s/ John Leader
Date: August 26, 2008	Name:	John Leader
Date: May 20, 2009		Name:	John Leader
	~~Title:~~	~~Executive Vice President, Finance and Chief Financial Officer~~Title:	Executive Vice President, Finance and Chief Financial Officer

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Filing Compare · SUN MEDIA CORP