I am proud of François’ achievements in 2008; they are very promising for the future. François’ in-depth knowledge of the company and the excellent credibility he has established over the years have permitted him to quickly implement a new dynamic.

Like a true leader, François has made, for the good of the corporation and our shareholders, difficult but responsible decisions with respect to business segments that have been particularly affected by the financial crisis.

I am also proud of our fiscal 2008 operating results, which were achieved under difficult economic conditions. Transcontinental maintained its momentum in the fourth quarter and ended the year with adjusted earnings per share of $1.73, compared to $1.50 in 2007; an appreciable 15% increase.

Adjusted net income, which excludes asset impairment, restructuring costs and unusual adjustments to income taxes, is a good indicator of our operating performance. Excluding the negative impact of the exchange rate, adjusted earnings per share would have been $1.78, an increase of 19%.

Indeed, excluding unusual items, the majority of financial performance indicators were up over 2007.

On behalf of the Board of Directors, I would like to thank all the employees working in our offices, news rooms, digital business units and printing plants for their dedication and for their willingness to continually improve and outperform our competitors.

We cannot say it often enough: at Transcontinental, it is our people and our leaders who really make the difference!

Another encouraging fact is that we have continued to invest in our future development, which means that we have made investments in the latest printing technologies, in the promotion of our brands and their multi-platform deployment, in the acquisition of firms that offer new marketing services, in the launch of new products and in the training and mobilization of our people.

We will reap many benefits from these investments starting in 2009.

We will also benefit in the coming year from major gains in new business. I am thinking in particular of Rogers Communications and Shoppers Drug Mart-Pharmaprix, two prestigious names that we have added to the already impressive list of companies Transcontinental does business with.

Once we have established a working relationship, our goal is to fulfill all of our customer’s needs for printing and marketing products and services. We will also start printing the San Francisco Chronicle under a 15-year outsourcing contract worth over a billion dollars.

In short, even though the economic outlook is bleak for 2009 and Transcontinental cannot completely avoid any impact, we are starting the year in a good business position. For the rest, we will make sure our production capacity is aligned with market demand, and we have an action plan ready for all our businesses.

Continuity and Transformation

The title of this annual report, The Best Idea, goes back to the very origins of our company.

Transcontinental was born out of a single idea: total service. We were the first to offer retailers a comprehensive prepress, printing and distribution service for their flyers, all at a one-stop shop. Not only was this innovative at the time, it has remained the basis of our business model.

It is clear to me that this approach is the forerunner of our outsourcing services for newspaper printing, premedia and custom communications.

Transcontinental’s primary role is to help its customers identify, reach and keep their target consumers. Our goal is to facilitate things for our customers, whether they are retailers, companies, major institutions, publishers or advertisers. In fact, this is our first guiding principle: “To listen to our customers, anticipate their needs and exceed their expectations.”

Over the years, our print-centric service offering has continually evolved to incorporate complementary products and services to meet customers’ new needs.

Along the way we have become the sixth-largest printer in North America and Canada’s leading printer, as well as its biggest publisher of consumer magazines, and, in the eastern part of the country, of community newspapers.

So what have our customers been saying to us lately?

Three things: they want to run integrated marketing campaigns on multiple communications platforms that include digital; they want more personalization; and, they want to work with fewer suppliers.

Our service offering must continue to evolve accordingly. It is by accompanying our customers and anticipating their needs that we have weathered two recessions, as well as a technological revolution, the expansion of the Internet which is now part of our daily lives, an intense and ongoing wave of consolidation in the printing and publishing industries in North America, and the economic globalization that has translated into the emerging economies of the past decade. Not to mention the unprecedented negative impact of the exchange rate in recent years.

New digital media, including mobile communications, are radically changing how we work, get information, consume and entertain ourselves.

Let me just give you a few quick figures to illustrate my point: currently a billion people on the planet have Internet access and, according to a recent survey, 18% of advertising spending will go to the Internet by 2011, which is double the figure for 2006. And we’re still only at the beginning of the wave!

Transcontinental has already made good progress. We have over 120 Web sites. Our reach of users in Canada is 17%; it rises to 36% in the “hobby, lifestyle and food” category, one of the most popular with Internet advertisers. In that category we have three of the ten most-visited sites in Canada. Our premedia service is one of the most developed in the industry. And in the past several years we have made acquisitions in the fields of data analytics, direct marketing, interactive marketing, custom communications and in a number of specialized digital services.

To take advantage of this new environment we must intensify the development of new digital platforms and integrate new personalization services. In doing so, we will gradually transform and reinvent our company.

“Reinvent” does not mean “invent.” We are maintaining continuity with what has come before. But it does mean that we will change some of the ways we do things and that we will make the decisions that are necessary for the business in the long run, even if they are difficult in the short-term—just as we have done in the past.

Our customers will see us more as advisors who suggest business solutions that are an excellent fit with their marketing plans or the demands of their markets. A partner who recommends the best idea for each individual client.

From being a printer and publisher, Transcontinental will increasingly become a company that offers services and solutions tailored to the needs of its clients.

That is the goal of the new growth strategy put together by François Olivier and his team. That strategy is centred around two complementary poles: strengthen and extend our core activities, and resolutely build the new. Together, they have identified the four priority areas of growth for the company as a whole and established a new operating structure.

All of this will help renew and maximize the potential of our offering in the marketplace.

I invite you to read the Review of Operations in which François outlines the main achievements of 2008 and his game plan for the years ahead.

Before closing, I’d like to note the arrival in 2008 of two new members of our Board of Directors: Lino A. Saputo, Jr., and François R. Roy.

Mr. Saputo is President and Chief Executive Officer of Saputo Inc. His business acumen and experience as head of this highly respected North American corporation will be very useful to us as we deal with the current rapid transformation of the communications industry.

For his part, Mr. Roy has extensive experience as a senior financial officer in the media, printing and marketing industries. He brings to the Board the benefit of his proven knowledge and unique viewpoint.

I’d like to take this opportunity to thank the members of the Board of Directors for their contribution to Transcontinental’s advancement. You have fulfilled, with great professionalism, the strategic and critical role entrusted to you by our shareholders.

Finally, I thank our customers and shareholders for their loyalty and our some 15,000 employees for their dedication and adherence to Transcontinental’s values.

Once again, in 2008, we proved our ability to grow “in and through” change, thanks to our people and their leaders throughout the company, our values, our business model based on proximity to our customers and our renewed strategy. And, I would add, thanks to our sense of social and environmental responsibility. Transcontinental is all of the above!

I look forward to the future with confidence. We will continue to prove that we can meet the expectations of our employees, customers and shareholders, the three pillars of the Corporation.

Your company is in good hands.

Rémi Marcoux, C.M., O.Q., F.C.A. Executive Chairman of the Board and Founder December 23, 2008
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