Press release

For immediate release

Continued growth for COGECO in the third quarter of 2009

Montreal, July 10, 2009 – Today, COGECO Inc. (TSX: CGO) (“COGECO” or the “Company”) announced its financial

results for the third quarter and first nine months of fiscal 20 09, ended May 31, 2009.

For the third quarter and first nine mont hs of fiscal 2009:

• Consolidated revenue incre ased by 11.4% to $316.3 million, and by 14.8% to $936.5 million, respectively;

• Consolidated operating income from continuing operations before amortization

(1)

grew by 10.4% to reach

$129.4 million, and by 16.5% to reach $380.8 million;

• In the first nine months of fiscal 2009, the cable subsidiary, Cogeco Cable Inc. (“Cogeco Cable”), recorded a

$399.6 million non-cash impairment loss on its investment in Cabovisão - Televisão por Cabo, S.A.

(“Cabovisão”) as a result of recurring competitive pressure resulting in subscriber losses that were more severe

than originally anticipated. Net of related income taxes and non-controlling interest, the impairment loss

amounted to $124 million;

• Third quarter consolidated net income amounted to $10.5 million, compared to $9.5 million for the same period

of the prior year. Excluding an unfavourable income tax adjustment of $2 million related to the utilization of pre-

acquisition tax losses in Cabovisão, net of non-controlling interest, and a $3.5 million favourable reduction of

withholding and stamp tax contingent liabilities

(1)

, also in Cabovisão, net of non-controlling interest, consolidated

net income would have amounted to $8.9 million, a decrease of $0.6 million, or 6.3%, compared to $9.5 million

for the third quarter of fiscal 2008;

• For the first nine months, consolidated net loss amounted to $93.8 million, compared to net income of

$15.5 million in the prior year. Excluding the impairment loss described above, the adjustments related to

income taxes and withholding and stamp tax contingent liabilities in Cabovisão described above for the current

quarter, the $7.9 million income tax adjustment related to the reduction of Canadian federal income tax rates,

net of non-controlling interest, and a loss from discontinued operations of $18.1 million in the first nine months of

the prior year, consolidated net income would have amounted to $28.6 million for the first nine months of

fiscal 2009, compared to $25.6 million in the prior year, an increa se of $3 million, or 11.9%;

• Free cash flow

(1)

reached $32.4 million for the quarter, representing a decrease of 12.6% over the same period

of the prior year, and $86.3 million, representing an incre ase of 8.6%, for the first nine months;

• In the cable sector, revenue-generating units (“RGU”)

(2)

grew by 14,985 net additions in the quarter and 93,325

net additions in the first nine months, for a total of 2,810,199 RGU at May 31, 2009.

“The financial results of our cable sector and of our radio activities in Canada drive COGECO’s growth in the third quarter.

All of our radio stations have shown improvement in reaching their target audiences. For the nine month period in the

cable sector, our Canadian operations are growing at a steady pace with net additions of 140,215 RGU. In our European

(1)

The indicated terms do not have standard definitions prescribed by Canadian Generally Accepted Accounting Principles (“GAAP”) and therefore, may not be

comparable to similar measures presented by other companies. For more details, please consult the “Non-GAAP financial measures” section of the

Management’s discussion and analysis.

(2)

Represents the sum of Basic Cable, High Speed Internet (HSI), Digital Television and Telephony service customers.

- 2 -

operations, Digital Television service continues to grow in our markets with the addition of 20,976 new customers. We

have recently realigned our short term strategic plan in order to curtail subscriber losses that continue to adversely affect

the financial results of our Portuguese operations in the current difficult competitive environment”, declared Louis Audet,

President and CEO of COGECO.

FINANCIAL HIGHLIGHTS

Quarters ended May 31, Nine months ended May 31,

2009 2008

(1)

Change 2009 2008

(1)

Change

($000, except percentages and per share data) $ $ % $ $ %

(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 316,310 283,878 11.4 936,510 816,027 14.8

Operating income from contin ui ng op erati ons before

amortization

(2)

129,404 117,206 10.4 380,771 326,903 16.5

Operating income from contin ui ng op erati ons 61,750 58,642 5.3 182,269 158,954 14.7

Impairment of goodwill and intan gi bl e assets – – – 399,648 – –

Income (loss) from continuing operations 10,480 9,538 9.9 (93,758) 33,509 –

Loss from discontinued operations – – – – (18,057)

–

Net income (l oss) 10,480 9,538 9.9 (93,758) 15,452 –

Net income excluding the impai rment loss, the tax

adjustments and the loss from discontinued operations

(2)

8,933 9,538 (6.3)

28,646 25,600 11.9

Cash flow from operating activities from continuing

operations 102,653 112,893 (9.1)

253,603 252,439 0.5

Cash flow from operations from continuing operations

(2)

95,498 96,068 (0.6)

291,475 262,819 10.9

Capital expenditures and increase in deferred charges 63,082 58,961 7.0 205,199 183,364 11.9

Free cash flow

(2)

32,416 37,107 (12.6)

86,276 79,455 8.6

Earnings (loss) per share

Basic

Income (loss) from continuing operations 0.63 0.57 10.5 (5.60) 2.01 –

Loss from discontinued operations – – – – (1.08)

–

Net income (l oss) 0.63 0.57 10.5 (5.60) 0.93 –

Net income excl uding the impairment loss, the income

tax adjustment and the loss from discontinued

operations

(2)

0.53 0.57 (7.0)

1.71 1.54 11.0

Diluted

Income (loss) from continuing operations 0.63 0.57 10.5 (5.60) 2.00 –

Loss from discontinued operations – – – – (1.08)

–

Net income (l oss) 0.63 0.57 10.5 (5.60) 0.92 –

Net income excluding the impairment loss, the tax

adjustments and the loss from discontinued

operations

(2)

0.53 0.57 (7.0)

1.71 1.53 11.8

(1)

Certain comparati ve figur es have be en reclas sifi ed t o conform to t he cur rent y ear’s present ation. Fi nanc ial inf ormat ion for the prev ious year h as b een r estate d to

reflect the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

(2)

The indicated terms do not have standardiz ed def inition s prescr ibed by Canadia n Generally Acc epted Accounting Pri nciples (“GAAP ”) and therefo re, may not be

comparable to similar measures presented by other companies. For more details, please consult the “Non-GAAP financial measures” section of the

Management’s discussion and analysis.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute forward-looking information within the meaning of securities laws.

Forward-looking information may relate to COGECO’s future outlook and anticipated events, business, operations,

financial performance, financial condition or results and, in some cases, can be identified by terminology such as "may";

"will"; "should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee",

"ensure" or other similar expressions concerning matters that are not historical facts. In particular, statements regarding

the Company’s future operating results and economic performance and its objectives and strategies are forward-looking

statements. These statements are based on certain factors and assumptions including expected growth, results of

operations, performance and business prospects and opportunities, which COGECO believes are reasonable as of the

- 3 -

current date. While management considers these assumptions to be reasonable based on information currently available

to the Company, they may prove to be incorrect. The Company cautions the reader that the current adverse economic

conditions make forward-looking information and the underlying assumptions subject to greater uncertainty and that,

consequently, they may not materialize, or the results may significantly differ from the Company’s expectations. It is

impossible for COGECO to predict with certainty the impact that the current economic downtown may have on future

results. Forward-looking information is also subject to certain factors, including risks and uncertainties (described in the

“Uncertainties and main risk factors” section of the Company’s 2008 annual Management’s Discussion and Analysis

(MD&A) that could cause actual results to differ materially from what COGECO currently expects. These factors include

technological changes, changes in market and competition, governmental or regulatory developments, general economic

conditions, the development of new products and services, the enhancement of existing products and services, and the

introduction of competing products having technological or other advantages, many of which are beyond the Company’s

control. Therefore, future events and results may vary significantly from what management currently foresees. The reader

should not place undue importance on forward-looking information and should not rely upon this information as of any

other date. While management may elect to, the Company is under no obligation (and expressly disclaims any such

obligation), and does not undertake to update or alter this information before the next quarter.

This analysis should be read in conjunction with the Company’s consolidated financial statements, and the notes thereto,

prepared in accordance with Canadian GAAP and the MD&A included in the Company’s 2008 Annual Report. Throughout

this discussion, all amounts are in Canadian dollars unless otherwise indi cated.

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)

CORPORATE STRATEGI ES AND OBJECTIVES

COGECO Inc.’s (“COGECO” or the “Company”) objectives are to maximize shareholder value by increasing profitability

and ensuring continued growth. The strategies employed to reach these objectives, supported by tight controls over costs

and business processes, are specific to each sector. For the cable sector, sustained corporate growth and the continuous

improvement of networks and equipment are the main strategies used. The radio activities focus on continuous

improvement of programming in order to increase market share, and, thereby, profitability. COGECO uses growth of

revenue and operating income before amortization

(1)

, free cash flow

(1)

and revenue-generating units (“RGU”)

(2)

growth in

order to measure its performance against these objectives for the cable sector. Below are the Company’s recent

achievements in furthering the corporate obje ctives.

Tight control over costs and business processes

• For the first nine months of fiscal 2009, the Company’s operating costs increased over last year by 13.6%

compared to a revenue growth of 14.8%;

• During the quarter, the Company’s cable subsidiary, Cogeco Cable Inc. (“Cogeco Cable”) has implemented new

processes and software to track its home terminal devices from their initial purchase to their return by customers,

and has adjusted the carrying values of the assets accordingly. The Company has continued its project to

improve the design and implementation of internal controls, and the project is progressing according to

management’s plan. Please see the “Controls and procedures ” section for further details.

Cable sector

Sustained corporate growth

Canadian operations

• Digital Television service :

o On July 9, the following High Definition (“HD”) Television service s wer e launched:

 Télé-Québec HD, Canal Évasion HD, TV5 HD, PBS HD, Mystère HD, The Score HD, National

Geographic HD and Discovery HD in Québec.

• Telephony service:

o During the third quarter, the Telephony service was launched in the following cities:

 Brighton, Wyoming, Petrolia, Oil City, Napanee and De seronto, Ontario;

 North Hatley, Ayers Cliff, Gaspé, Forestville and St-Étienne-des-Grès, Québec.

(1)

The indicated term s do not have stan dardized def initio ns presc ribed by Cana dian Gener ally Ac cepted Acc ounting Principl es (“GA AP” ) and therefor e, may not be

comparable to similar measures presented by other companies. For more details, please consult the “Non-GAAP financial measures” section.

(2)

Represents the sum of Basic Cable, High Speed Internet (HSI), Digital Television and Telephony service customers.

- 4 -

European operations

• Bundled offers:

o Cabovisão - Televisão por Cabo, S.A. (“Cabovisão”) realigned some of its bundle offers to retain and

attract customers.

• Television service:

o Continued deployment of Cabovisã o’s Digital Television service;

o Launch of Jim Jam, Luxe HD, MVM TV , Telesur, Re giões TV, TVGlobo and PFC channels.

• High-speed Internet (“HSI”) service:

o On July 7, announcement of the launch of the Nitro 60 Mbps and Nitro 120 Mbps Internet services, the

fastest available in the Portuguese market.

Continuous improv ement of networks and equipment

• During the first nine months of fiscal 2009, the Company invested approximately $76.9 million in its cable

infrastructure including head-ends and upgrades and rebuilds.

Other

• Spring’s BBM Canada survey conducted with the Portable People Meter (“PPM”) shows that RYTHME FM has

maintained its leadership position with audiences in the adult and female categories in the Montréal and Trois-

Rivières markets. The other RYTHME FM stations continue to gain market share. As for the 93

station in Québec

City, it registered its highest numbers ev er and has reclaimed the first position in this very competitive market.

Discontinued Operations

In October 2007, the Board of Directors of TQS, an indirect subsidiary of the Company, engaged CIBC World Markets to

advise on and assess strategic options for the TQS network in the face of financial difficulties. On December 18, 2007, the

Québec Superior Court issued an order under the Companies’ Creditors Arrangement Act (Canada) protecting TQS, its

subsidiaries and its parent 3947424 Canada Inc. (“TQS Group”) from claims by their creditors. On June 26, 2008, the

Canadian Radio-television and Telecommunications Commission (“CRTC”) approved the proposed transfer of ownership

and control of TQS to Remstar Corporation Inc. (“Remstar”) and on August 29, 2008, the transfer of ownership and

control of TQS to Remstar was completed, which allowed the new ownership group to pursue the broadcasting activities

of TQS.

Effective December 18, 2007, the Company has ceased to consolidate the financial statements of the TQS Group.

Accordingly, the results of operations and cash flows for the three month period ended November 30, 2007, have been

reclassified as discontinued operations.

The results of the discontinued operations were as follows:

Quarters ended May 31, Nine months ended May 31,

2009 2008 2009 2008

($000) $ $ $ $

(unaudited)

(unaudited) (unaudited)

(unaudited)

Revenue – – – 38,499

Operating costs – – – 35,822

Operating income before amort iz ati o n – – – 2,677

Amortization – – – 1,364

Operating income – – – 1,313

Financial expens e – – – 291

Impairment of assets – – – 30,298

Loss before income taxes and the following items – – – (29,276)

Income taxes – – – –

Non-controlling interest – – – (11,219)

Loss from discontinued operations – – – (18,057)

- 5 -

The cash flows of the discontinued ope rations were as follows:

Quarters ended May 31, Nine months ended May 31,

($000) 2009 2008 2009 2008

$ $ $ $

(unaudited)

(unaudited) (unaudited)

(unaudited)

Cash flow from operating activities – – – (3,973)

Cash flow from investing activities – – – (133)

Cash flow from financing activities – – – 4,106

Cash flow from discontinued operations – – – –

Continuing Operations

RGU growth in the cable sector

During the first nine months ended May 31, 2009, the consolidated number of RGU increased by 93,325, or 3.4%, to

reach 2,810,199 RGU, on target to attain the Company’s RGU growth projections of 100,000 net additions issued on

October 29, 2008 and revised on April 8, 2009, which represents approximately 3.7%, for the fiscal year ending

August 31, 2009. Please consult the fiscal 2009 revised projections in the “Fiscal 2010 preliminary financial guidelines”

section for further details.

Revenue and operating income from continuing operations before amortization growth

For the third quarter of fiscal 2009, revenue increased by $32.4 million, or 11.4%, to reach $316.3 million while operating

income before amortization from continuing operations grew by $12.2 million, or 10.4%, to reach $129.4 million. For the

first nine months of the year, revenue increased by $120.5 million, or 14.8%, to reach $936.5 million while operating

income before amortization from continuing operations grew by $53.9 million, or 16.5%, to reach $380.8 million and

management expects to attain its revised guidelines of $1,238 million in revenue and $505 million in operating income

before amortization from continuing operations for the 2009 fiscal year, as issued on April 8, 2009. Please consult the

fiscal 2009 revised projections in the “Fiscal 2010 pre liminary financial guidelines” section for further details.

Free cash flow

In the third quarter of fiscal 2009, COGECO generated free cash flow of $32.4 million compared to $37.1 million for the

same period last year. For the nine month period ended May 31, 2009, COGECO generated free cash flow of

$86.3 million compared to $79.5 million in the prior year. The reduction in free cash flow for the quarter is mainly due to

the cable sector and resulted from an increase in capital expenditures and the decrease in cash flow from operations

(1)

due to the increase in current income taxes. For the first nine months, the growth in free cash flow is essentially from the

cable sector and is due to increases in cash flow from operations, resulting primarily from the improvement of Cogeco

Cable’s operating income before amortization, partly offset by increases in capital expenditures. On April 8, 2009,

management revised its guidelines for free cash flow to $85 million for the 2009 fiscal year. Due to the usual higher level

of capital expenditures in the last quarter of the year, management expects to meet its free cash flow guidelines. Please

consult the fiscal 2009 revised projectio ns in the “Fiscal 2010 preliminary financial guidelines” section for fu rther details.

IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS

In the second quarter of fiscal 2009, the competitive position of Cogeco Cable’s subsidiary Cabovisão in the Iberian

Peninsula further deteriorated due to the continuing difficult competitive environment and recurring intense customer

promotions and advertising initiatives from competitors in the Portuguese market. Please refer to the “Cable sector”

section for further details. In accordance with current accounting standards, management considered that the continued

RGU and local currency revenue decline were more severe and persistent than expected, resulting in a decrease in the

value of Cogeco Cable’s investment in the Portuguese subsidiary. As a result, Cogeco Cable tested goodwill and all long-

lived assets for impairment at February 28, 2009.

Goodwill is tested for impairment using a two step approach. The first step consists of determining whether the fair value

of the reporting unit exceeds the net carrying amount of that reporting unit, including goodwill. In the event that the net

carrying amount exceeds the fair value, a second step is performed in order to determine the amount of the impairment

(1)

Cash flow from operations does not have a standardized definition prescribed by Canadian GAAP and therefore, may not be comparable to similar measures

presented by other companies. For more details, please consult the “Non-GAAP financial measures” section.

- 6 -

loss. Cogeco Cable completed its impairment tests on goodwill and concluded that goodwill was impaired at

February 28, 2009. As a result, a non-cash impairment loss of $339.2 million was recorded in the second quarter. Fair

value of the reporting unit was determined using the discounted cash flow method. Future cash flows were based on

internal forecasts and consequently, considerable management judgement was necessary to estimate future cash flows.

Significant changes in assumptions could result in further impairments of goodwill.

Intangible assets with definite lives, such as customer relationships, must be tested for impairment by comparing the

carrying amount of the asset or group of assets to the expected future undiscounted cash flow to be generated by the

asset or group of assets. Accordingly, Cogeco Cable completed its impairment test on customer relationships at

February 28, 2009, and determined that the carrying value of customer relationships exceeded its fair value. As a result, a

non-cash impairment loss of $60.4 million was re corded in the second quarter.

The impairment loss affected the Company’s goodwill and customer relationship asset balances as follows at

February 28, 2009:

($000) $

(unaudited)

Goodwill 339,206

Customer relationships 60,442

Future income taxes (16,018)

Impairment loss net of related income taxes 383,630

Non-controlling interest (259,679)

Impairment loss net of related income taxes and non-controlling interest 123,951

OPERATING RESULTS – CONSOLIDATED OVERVIEW

Quarters ended May 31, Nine months ended May 31,

2009 2008

(1)

Change 2009 2008

(1)

Change

($000, except percentages) $ $ % $ $ %

(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 316,310 283,878 11.4 936,510 816,027 14.8

Operating costs 186,906 166,672 12.1 555,739 489,124 13.6

Operating income from contin ui ng op erati ons before

amortization

(2)

129,404 117,206 10.4 380,771 326,903 16.5

Operating margin

(2)

40.9% 41.3% 40.7% 40.1%

(1)

Certain comparati ve figur es have be en reclas sifi ed t o conform to t he cur rent y ear’s present ation. Fi nanc ial inf ormat ion for the prev ious year h as b een r estate d to

reflect the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

(2)

The indicated terms do not have standardized definitions prescribed by Canadian GAAP and therefore, may not be comparable to similar measures presented by

other companies. For more details, please consult the “Non-GAAP financial measures” section.

Revenue

Fiscal 2009 third-quarter revenue improved, mainly in its cable sector, by $32.4 million, or 11.4%, to reach $316.3 million.

Cable revenue, driven by increased RGU combined with rate increases and the acquisition of MaXess Networx®,

FibreWired Burlington Hydro Communications and Cogeco Data Services (the “ recent acquisitions ”) in the second h alf of

fiscal 2008 in the Canadian operations, partly offset by a net RGU loss in European operations, went up by $30.7 million,

or 11.2%, in the third quarter of fiscal 2009.

In the first nine months of the year, revenue improved by $120.5 million, or 14.8%, to reach $936.5 million. The majority of

the increase is attributable to the cable sector, with an increase of $118.2 million, or 14.9%, due to an increased number

of RGU combined with rate increases and the recent acquisitions in the second half of fiscal 2008 in the Canadian

operations, and the strength of the Euro against the Canadian dollar, despite a RGU loss in the first nine months of the

year in European operation s.

- 7 -

Operating costs

Operating costs increased by $20.2 million, or 12.1%, to reach $186.9 million in the third quarter and by $66.6 million, or

13.6%, to reach $555.7 million in the first nine months of fiscal 2009 compared to the prior year. The increase in operating

costs was mainly attributable to the cable sector, due to the servicing of additional RGU and the impact of the recent

acquisitions in Canada, and in Europe due to the appreciation of the Euro over the Canadian dollar and an increase in the

level of uncollectible customer accounts.

Operating income from continuing operation s before amortization

Operating income from continuing operations before amortization grew, essentially in its cable segment, by $12.2 million,

or 10.4%, to reach $129.4 million in the third quarter of fiscal 2009 compared to the corresponding period of the prior year,

and for the nine month period ended May 31, 2009, by $53.9 million, or 16.5%, to reach $380.8 million. The cable sector

contributed to the growth by $11.2 million during the third quarter, and $50.5 million during the first nine months of the

fiscal year.

FIXED CHARGES

Quarters ended May 31, Nine months ended May 31,

2009 2008

(1)

Change 2009 2008

(1)

Change

($000, except percentages) $ $ % $ $ %

(unaudited) (unaudited) (unaudited) (unaudited)

Amortization 67,654 58,564 15.5 198,502 167,949 18.2

Financial expens e 14,362 17,748 (19.1)

56,168 51,631 8.8

(1)

Certain comparati ve figur es have be en reclas sifi ed t o conform to t he cur rent y ear’s present ation. Fi nanc ial inf ormat ion for the prev ious year h as b een r estate d to

reflect the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

Fiscal 2009 third quarter and first nine-month period amortization amounted to $67.7 million and $198.5 million,

respectively, compared to $58.6 million and $167.9 million for the corresponding period the year before. The increase in

amortization expense was mainly due the cable sector and attributable to additional capital expenditures arising from

customer premise equipment acquisitions to sustain RGU growth, to the recent acquisitions in the Canadian operations

and to the appreciation of the Euro currency over the Canadian dollar.

Third-quarter financial expense decreased by $3.4 million compared to the prior year mainly due to a foreign exchange

gain on unhedged long-term debt and the reduction of interest rates during the quarter partly offset by the increase in

Indebtedness (defined as bank indebtedness, derivative financial instruments and long-term debt). In the first nine months

of the year, financial expense increased by $4.5 million due to the rapid appreciation of the US dollar and the Euro over

the Canadian dollar and the increase in the level of Indebtedness, partly offset by interest rate reductions. More

specifically, financial expense in the cable sector was adversely impacted by foreign exchange losses of $2.7 million in

the first nine months of fiscal 2009, despite the favourable impact of foreign exchange gains of $1.7 million in the quarter,

mainly on unhedged long-term debt, as the majority of customer premise equipment is purchased and subsequently paid

in US dollars. The losses in the first nine months of the year were essentially due to the unusually high US dollar volatility

with the Bank of Canada closing rate fluctuating from $1.0620 per US dollar at August 31, 2008 to $1.0917 per US dollar

at May 31, 2009, reaching a high of $1.2991 per US dollar on March 9, 2009. For the corresponding periods of the prior

year, the cable subsidiary recorded no foreign exchange gains or losses in the quarter and foreign exchange gains of

$0.9 million in the first nine months.

REDUCTION OF WITHHOLDING AND STAMP TAX CONTINGENT LIABILITIES

COGECO’s indirect Portuguese subsidiary, Cabovisão, had recorded contingent liabilities for withholding and stamp taxes

relating to fiscal years prior to its acquisition by Cogeco Cable. At the date of acquisition, the amount accrued represented

management’s best estimate based on the available information. Management reviews its estimate periodically to take

into consideration payments made relating to these contingencies as well as newly available information which would

allow the cable subsidiary to improve its previous estimate. During the third quarter of fiscal 2009, Cabovisão received a

preliminary report from the Portuguese tax authorities with respect to some of the items included in the contingent

liabilities. Accordingly, management has reviewed its estimate of the contingent liabilities to reflect the new information

available in this preliminary report, and has determined that a reduction of €7 million, equivalent to $10.9 million, of the

amount previously accrued was req uired at May 31, 2009, in order to reflect management’s best estimate.

- 8 -

INCOME TAXES

Fiscal 2009 third-quarter income tax expense amounted to $26.3 million compared to $10.3 million in fiscal 2008. The

income tax expense in the cable sector for the third quarter and first nine months was unfavourably impacted by a non-

cash income tax expense of $6.1 million resulting from the recognition and subsequent utilization of Cabovisão’s pre-

acquisition income tax losses following the receipt of preliminary tax audit reports for those fiscal years. Excluding this

amount, income tax expense for the quarter would have amounted to $20.2 million compared to $10.3 million in the prior

year. For the first nine months of the year, income tax expense amounted to $36.4 million compared to $5.1 million in the

prior year. The income tax expense for the first nine months of fiscal 2009 includes a future income tax recovery of

$16 million related to the impairment loss recorded in the second quarter and an unfavourable impact of $6.1 million from

the utilization of Cabovisão’s pre-acquisition tax losses described above, both in the cable sector. The income tax

expense for the comparable period of the prior year includes the impact of the reduction in corporate income tax rates

announced on October 16, 2007 by the Canadian federal government in its Economic Statement and considered

substantively enacted on December 14, 2007 (the “reduction of Canadian federal income tax rates”). The reduction of

these corporate income tax rates reduced future income tax expense by $24.1 million in the first nine months of fiscal

2008. Excluding the effects of these items, income tax expense would have amounted to $46.2 million for the first nine

months of fiscal 2009, compared to $29.3 million in fiscal 2008. The increases in income tax expense in fiscal 2009 are

mainly due to the increase in operating income before amortization surpassing that of the fixed charges in the Canadian

operations.

NON-CONTROLLING INTEREST

The non-controlling interest represents a participation of approximately 67.7% in Cogeco Cable’s results. During the third

quarter of fiscal 2009 the income attributable to non-controlling interest amounted to $21.5 million, and a loss of

$205.3 million for the nine months ended May 31, 2009, due to the impairment loss recorded in the cable sector. The

income attributable to non-controlling interest for the comparable periods of the prior year amounted to $21.1 million and

$68.6 million, respectively.

NET INCOME (LOSS)

Fiscal 2009 third-quarter net income amounted to $10.5 million, or $0.63 per share, compared to $9.5 million, or $0.57 per

share, for the same period last year. Net income for the third quarter of fiscal 2009 includes an unfavourable impact of

$2 million from the utilization of Cabovisão’s pre-acquisition tax losses and a favourable impact from the reduction of

withholding and stamp tax contingent liabilities in the amount of $3.5 million described above, also in Cabovisão, both net

of non-controlling interest. Excluding the impact of these items

(1)

, net income would have amounted to $8.9 million, or

$0.53 per share

(1)

, compared to $9.5 million, or $0.57 per share in the prior year, representing decreases of 6.3% and 7%,

respectively. Net income reduction for the quarter is mainly attributable to the cable sector and has resulted from the

decline of the financial results of the European operations due to the net RGU loss and the increase in income tax

expense described in the “Income taxes” section above, partly offset by the improvement of the Canadian operations and

the appreciation of the Euro currency compared to the Canadian dollar during the majority of the quarter. Please consult

the “Non-GAAP financial measures” section for further details.

Net loss in the first nine month period of fiscal 2009 amounted to $93.8 million, or $5.60 per share, compared to net

income of $15.5 million, or $0.93 per share, for the same period last year. In addition to the impacts described above for

the quarter, the net loss in the first nine months of fiscal 2009 was affected by the impairment loss of $399.6 million

recorded in the second quarter of the year in the cable sector, as described in the “Impairment of goodwill and intangible

assets” section. Net of related income taxes and non-controlling interest, the impairment loss reduced net income for the

first nine months by $124 million. The net income amounts of the 2008 fiscal year included an income tax recovery of

$24.1 million resulting from the reduction of corporate income tax rates in the second quarter of fiscal 2008 as described

in the “Income taxes” section, net of non-controlling interest of $16.2 million, for a net impact on income of $7.9 million,

and losses from discontinued operations of $18.1 million for the first nine months of fiscal 2008. Excluding the effect of the

above items, net income would have amounted to $28.6 million, or $1.71 per share, for first nine months ended

May 31, 2009, compared to $25.6 million, or $1.54 per share, for the first nine months of the 2008 fiscal year, representing

increases of 11.9% and 11%, respectively. Net income progression has resulted mainly from the growth in the cable

sector of operating income before amortization exceeding that of fixed charges in the Canadian operations, offset by the

decline of the financial results in the European operations and the increase in income tax expense described in the

“Income taxes” section above.

(1)

The indicated terms do not have standardized definitions prescribed by Canadian GAAP and therefore, may not be comparable to similar measures presented by

other companies. For more details, please consult the “Non-GAAP financial measures” section.

- 9 -

CASH FLOW AND LIQUIDITY

Quarters ended May 31, Nine months ended May 31,

2009 2008 2009 2008

($000) $ $ $ $

(unaudited) (unaudited) (unaudited) (unaudited)

Operating activities from continuing operations

Cash flow from operations

(1)

95,498 96,068 291,475 262,819

Changes in non-cash operating items 7,155 16,825 (37,872) (10,380)

102,653 112,893 253,603 252,439

Investing activities from continuing operations

(2)

(61,719) (74,415) (202,514) (197,487)

Financing activities from continuing operations

(2)

(44,677) 18,771 (42,266) (39,815)

Effect of exchange rate changes on cash and cash equivalents denominated in

foreign currencies (1,866) 1,063 (538) 1,265

Net change in cash and cash equivalents from continuing operations (5,609) 58,312 8,285 16,402

Cash and cash equivalents, beginning of period 51,366 24,369 37,472 66,279

Cash and cash equivalents, end of period 45,757 82,681 45,757 82,681

(1)

Cash flow from operations does not have a standardized definition prescribed by Canadian GAAP and therefore, may not be comparable to similar measures

presented by other companies. For more details, please consult the “Non-GAAP financial measures” section.

(2)

Excludes assets acquired under capital leases.

Fiscal 2009 third quarter cash flow from operations reached $95.5 million, 0.6% lower than the comparable period last

year, primarily due to the increase in current income tax expense, partly offset by the increase in operating income before

amortization and the decrease in financial expense. Changes in non-cash operating items generated cash inflows of

$7.2 million, mainly as a result of an increase in income tax liabilities, partly offset by a decrease in accounts payable and

accrued liabilities in the third quarter of fiscal 2009. In the prior year, the cash inflows of $16.8 million were mainly a result

of an increase in accounts payable and accrued liabilities and in income tax liabilities.

In the first nine months of fiscal 2009, cash flow from operations reached $291.5 million, 10.9% higher than the

comparable period last year, primarily due to the increase in operating income before amortization, partly offset by the

increases in current income tax expense and financial expense. Changes in non-cash operating items generated cash

outflows of $37.9 million, mainly as a result of a decrease in accounts payable and accrued liabilities and an increase in

income taxes receivable, partly offset by an increase in income tax liabilities. The cash outflows of $10.4 million in the

prior year were mainly due to a decrease in accounts payable and accrued liabilities in the first nine months of the year,

partly offset by an increase in income tax liabilities.

In the third quarter of fiscal 2009, investing activities from continuing operations including assets acquired under capital

leases stood at $62.9 million due primarily to the cable sector, with capital expenditures of $57.7 million and an increase

of $5.1 million in deferred charges and others. The capital expenditures, stemming essentially from the cable sector,

increased compared to the same period last year due to the following factors:

• An increase in scalable infrastructure capital spending mainly due to the timing of the expansion and head-end

improvements, system powering and equipment reliability to sustain increased customer demand for HSI and

Telephony services in Canada;

• An increase in line extensions due to the expansion of the networks in Canada;

• An increase from the appreciation of the Euro and the US dollar over the Canadian dollar;

• A decrease in capital expenditures associated with network upgrades and rebuilds due to the timing of these

initiatives;

• A decrease in customer premise equipment spending which reflect lower RGU growth in Canadian operations

and net RGU losses in European operati ons.

- 10 -

In the first nine months of fiscal 2009, investing activities from continuing operations including assets acquired under

capital leases stood at $204.9 million due primarily to the cable sector, with capital expenditures of $186.6 million and an

increase of $18 million in deferred charges and others. The capital expenditures, stemming essentially from the cable

sector, increased compared to the same period last year due to the following factors:

• An increase in customer premise equipment capital spending resulting from RGU growth in Canadian operations

fuelled in part by continued interest for the HD Television service, combined with the deployment of Digital

Television in Portugal, net of RGU losses in the other services in European operations;

• An increase in scalable infrastructure capital spending mainly due to the timing of the expansion and head-end

improvements, system powering and equipment reliability to sustain increased customer demand for HSI and

Telephony services in Canada;

• An increase in support capital spending due to improvements in the information systems to sustain the business

activities and the acquisition of a new facility in the Canadian operations, and to the acquisition of a power

generator for Cogeco Data Service s;

• An increase in line extensions due to the expansion of the networks in Canada;

• An increase from the appreciation of the Euro and the US dollar over the Canadian dollar;

• A decrease in capital expenditures associated with network upgrades and rebuilds due to the timing of these

initiatives.

Deferred charges and others are mainly attributable to reconnect costs in the cable sector. The increase in deferred

charges and others for the third quarter amounted to $5.1 million compared to $7.4 million for the same period the year

before, and to $18 million compared to $21.1 million for the first nine months of the year. Slower RGU growth explained

the lower increases recorded in fiscal 2009.

In the third quarter and first nine months, the Company generated free cash flows amounting to $32.4 million and

$86.3 million, respectively, compared to $37.1 million and $79.5 million for the same periods of the preceding year,

representing a decrease of 12.6% for the quarter, and an increase of 8.6% for the nine months ended May 31, 2009. The

reduction in free cash flow for the quarter is mainly due to the cable sector and resulted from an increase in capital

expenditures and the decrease in cash flow from operations. For the first nine months, the growth in free cash flow is

essentially from the cable sector and is due to increases in cash flow from operations, partly offset by increases in capital

expenditures. The aggregate amount of total capital expenditures and deferred charges and others increased by

$3.6 million for the quarter ended May 31, 2009, and by $21.1 million for the first nine months of fiscal 2009 compared to

the corresponding periods of the prior year due to the factors explained above.

In the third quarter of 2009, Indebtedness affecting cash decreased by $40.3 million mainly due to the free cash flow of

$32.4 million, the increase in non-cash operating items of $7.2 million, and the decrease in cash and cash equivalents of

$5.6 million, net of the dividend payment of $5.3 million described below. Indebtedness mainly decreased through the net

repayments on Cogeco Cable’s revolving loans of $56.5 million, net of an increase of $17 million in bank indebtedness.

For the same period of the prior year, Indebtedness affecting cash increased by $22.9 million, primarily due to the

issuance by Cogeco Cable on March 5, 2008 of a $100 million senior unsecured debenture by way of a private

placement, the proceeds of which were used in part by the cable subsidiary to reimburse its bank indebtedness of

$17.7 million and to finance the acquisition of MaXess Networx® for $16.1 million, partly offset by repayments on the

revolving credit facility of $58.6 million in the cable sector and a reduction of the Company’s Term Facility for an amount of

$2 million from the free cash flow of $37.1 million and the increase in non-cash operating items of $16.8 million.

During the third quarter of fiscal 2009, dividends of $0.08 per share for subordinate and multiple voting shares, totalling

$1.3 million, were paid by the Company, compared to $0.07 per share, totalling $1.2 million in the third quarter of

fiscal 2008. Dividends paid by a subsidiary to non-controlling interests amounted to $3.9 million during the third quarter of

fiscal 2009, for consolidated dividend payments of $5.3 million.

In the first nine months of fiscal 2009, Indebtedness affecting cash decreased by $28 million due to the free cash flow of

$86.3 million, partly offset by the reduction of non-cash operating items of $37.9 million, the payment of dividends totalling

$15.8 million described below and the increase in cash and cash equivalents of $8.3 million. Indebtedness decreased

through the repayment, in the cable sector, of US$150 million Senior Secured Notes Series A and the related derivative

financial instrument of $56.2 million, both maturing on October 31, 2008, for a total of $238.7 million, and of net

repayments on Cogeco Cable’s revolving loans of $79.5 million, net of the issuance on October 1, 2008 of Senior Secured

Notes, Series A and Series B, maturing October 1, 2015 and October 1, 2018, respectively, for net proceeds of

approximately $255 million, and by an increase of $45.1 million in bank indebtedness. For the same period of the prior

year, Indebtedness affecting cash decreased by $29.7 million mainly due to a net reduction of the amount outstanding on

the revolving credit facility of $123.1 million in the cable sector and a reduction of the Company’s Term Facility of

$6.5 million, partly offset by the issuance of a senior unsecured debenture, as discussed above.

- 11 -

During the first nine months of fiscal 2009, quarterly dividends of $0.08 per share for subordinate and multiple voting

shares, totalling $4 million, were paid by the Company, compared to quarterly dividends of $0.07 per share, totalling

$3.5 million in the first nine months of the prior year. Dividends paid by a subsidiary to non-controlling interests amounted

to $11.8 million, for consolidated dividend payment s of $15.8 million in the nine month period ended May 31, 2009.

At May 31, 2009, the Company had a working capital deficiency of $363.7 million compared to $611.8 million as at

August 31, 2008. The decrease in the deficiency is mainly attributable to the cable sector and is due to the repayment of

the US$150 million Senior Secured Notes, Series A and the related derivative financial instrument for a total of

$238.7 million on October 31, 2008, using the proceeds of issuance of the Senior Secured Notes Series A and B. As part

of the usual conduct of its cable business, COGECO maintains a working capital deficiency due to a low level of accounts

receivable as a large portion of the cable subsidiary’s customers pay before their services are rendered, unlike accounts

payable and accrued liabilities, which are paid after products are delivered or services are rendered, thus enabling

Cogeco Cable to use cash and cash e quivalents to reduce Indebtedness.

At May 31, 2009, Cogeco Cable had used $425.4 million of its $885 million Term Facility for a remaining availability of

$459.6 million and the Company had drawn $12 million of its $50 million Term Facility, for a remaining availability of

$38 million.

On October 1, 2008, the Company’s cable subsidiary, Cogeco Cable, completed, pursuant to a private placement, the

issuance of US$190 million Senior Secured Notes Series A maturing October 1, 2015, and $55 million Senior Secured

Notes Series B maturing October 1, 2018. The Senior Secured Notes Series B bear interest at the coupon rate of 7.60%

per annum, payable semi-annually. Cogeco Cable has entered into cross-currency swap agreements to fix the liability for

interest and principal payments on the Senior Secured Notes Series A in the amount of US$190 million, which bear

interest at the coupon rate of 7.00% per annum, payable semi-annually. Taking into account these agreements, the

effective interest rate on the Senior Secured Notes Series A is 7.24% and the exchange rate applicable to the principal

portion of the US dollar-denominated debt has been fixed at $1.0625 per US dollar.

On June 9, 2009, Cogeco Cable completed, pursuant to a public debt offering, the issue of 5.95% Senior Secured

Debentures Series 1 for $300 million maturing June 9, 2014. The Debentures were priced at $99.881 per $100 principal

amount for an effective yield of 5.98% per annum. The net proceeds of sale of the Debentures were used to reimburse

Cogeco Cable’s existing indebted ness and for general corporate purposes.

The assumptions used in the actuarial valuations performed for the year ended August 31, 2008 were adjusted to reflect

the current rates of return and market conditions, and accordingly, the payments made by the Company to fund the

actuarial deficit of its defined benefit pension plans were higher in fiscal 2009 than in fiscal 2008. Based on the

August 31, 2008 actuarial valuations, the Company made payments of approximately $1 million in the first nine months of

the 2009 fiscal year.

Transfers of funds from non-wholly owned subsidiaries to COGECO are subject to approval by the subsidiaries’ Board of

Directors and may also be restricted under the terms and conditions of certain debt instruments. In accordance with

applicable corporate and securities laws, significant transfers of funds from COGECO may be subject to approval by

minority shareholders.

FINANCIAL POSITION

Since August 31, 2008, there have been major changes to the balances of “fixed assets”, “intangible assets”, “goodwill”,

“accounts payable and accrued liabilities”, “future income tax assets” “income taxes receivable”, “income tax liabilities”,

“future income tax liabilities”, “cash and cash equivalents”, “Indebtedness” and “non-controlling interest”.

The $12.3 million increase in fixed assets is mainly related to increases in capital expenditures to sustain RGU growth and

to the recent acquisitions in Canada in the cable sector, partly offset by the depreciation of the Euro compared to the

Canadian dollar since August 31, 2008. The $67.4 million and $334.1 million reductions in intangible assets and goodwill

are due to the impairment loss recorded on Cogeco Cable’s investment in Cabovisão in the second quarter of this fiscal

year. The $12.8 million decrease in future income tax liabilities is attributable to the cable sector and is mainly due to the

impairment loss described above. The $46.5 million decrease in accounts payable and accrued liabilities is related to the

timing of payments made to suppliers, the reduction of withholding and stamp tax contingent liabilities, and the

fluctuations of the Euro currency over the Canadian dollar in the cable sector. The $6.4 million reduction in future income

tax assets is due to the utilization of Ontario minimum tax credits and tax loss carry forwards to reduce current income

taxes in the cable subsidiary. The $8 million increase in income taxes receivable is due to income tax payments relating to

fiscal 2008 in the cable sector. The $6.8 million increase in income tax liabilities is a result of the increase in operating

income before amortization surpassing that of the fixed charges. Indebtedness has decreased by $18.3 million and cash

and cash equivalents has increased by $8.3 million as a result of the factors previously discussed in the “Cash Flow and

- 12 -

Liquidity” section. The $213.7 million decrease in non-controlling interest is due to the impairment loss recorded on the

cable subsidiary’s investment in Cabovisão in the second quarter of the year as described in the “Impairment of goodwill

and intangible assets” section, net of improvements in the cable subsidiary’s operating results excluding the impairment

loss.

A description of COGECO’s share data as at June 30, 2009 is presented in the table below:

Number of shares/options Amount

($000)

Common shares

Multiple voting shares

Subordinate voting shares

1,842,860

14,942,470

120,994

Options to purchase subordinate voting shares

Outstanding options

Exercisable options

79,650

In the normal course of business, COGECO has incurred financial obligations, primarily in the form of long-term debt,

operating and capital leases and guarantees. COGECO’s obligations, discussed in the 2008 annual MD&A, have not

materially changed since August 31, 2008, except for the new financing in the cable sector discussed in the “Cash Flow

and Liquidity” section.

DIVIDEND DECLARATION

At its July 10, 2009 meeting, the Board of Directors of COGECO declared a quarterly eligible dividend of $0.08 per share

for subordinate and multiple voting shares, payable on August 6, 2009, to shareholders of record on July 23, 2009. The

declaration, amount and date of any future dividend will continue to be considered and approved by the Board of Directors

of the Company based upon the Company’s financial condition, results of operations, capital requirements and such other

factors as the Board of Directors, at its sole discretion, deems relevant. There is therefore no assurance that dividends will

be declared, and if declared, their amount and freque ncy may vary.

FINANCIAL MANAGEME NT

On January 21, 2009, the Company’s cable subsidiary, Cogeco Cable, entered into a swap agreement with a financial

institution to fix the floating benchmark interest rate with respect to the Euro-denominated Term Loan facilities for a

notional amount of €111.5 million. The interest rate swap to hedge the Term Loans has been fixed at 2.08% until their

maturity at July 28, 2011. The notional value of the swap will decrease in line with the amortization schedule of the Term

Loans. In addition to the interest rate swap of 2.08%, Cogeco Cable will continue to pay the applicable margin on these

Term Loans in accordance with its Term Facility. Since the issuance on January 21, 2009, the fair value of interest rate

swap decreased by $2 million, which is recorded as a decrease of other comprehensive income net of income taxes of

$0.6 million and non-controlling interest of $1 million.

On October 1, 2008, Cogeco Cable entered into cross-currency swap agreements to set the liability for interest and

principal payments on its US$190 million Senior Secured Notes, Series A maturing in October 1, 2015. These agreements

have the effect of converting the U.S. interest coupon rate of 7.00% per annum to an average Canadian dollar interest

rate of 7.24% per annum. The exchange rate applicable to the principal portion of the debt has been ﬁxed at $1.0625 per

US dollar. Since the issuance on October 1, 2008, amounts due under the US$190 million Senior Secured Notes Series A

increased by $5.5 million due to the US dollar’s appreciation over the Canadian dollar. The fair value of cross-currency

swaps decreased by a net amount of $0.3 million, of which an increase of $5.5 million offsets the foreign exchange loss

on the debt denominated in US dollars. The difference of $5.8 million was recorded as a decrease of other comprehensi ve

income, net of income taxes of $0.2 million and non-controlling interest of $3.9 million.

Cogeco Cable’s net investment in the self-sustaining foreign subsidiary, Cabovisão, is exposed to market risk attributable

to fluctuations in foreign currency exchange rates, primarily changes in the value of the Canadian dollar versus the Euro.

This risk is mitigated since the major part of the purchase price for Cabovisão was borrowed directly in Euros. This debt is

designated as a hedge of net investments in self-sustaining foreign subsidiaries and, accordingly, Cogeco Cable realized

a foreign exchange gain of $9.6 million in the first nine months of fiscal 2009, which is presented net of non-controlling

interest of $6.5 million in other comprehensive income. The exchange rate used to convert the Euro into Canadian dollars

for the balance sheet accounts at May 31, 2009 was $1.5433 per Euro compared to $1.5580 per Euro at August 31, 2008.

The average exchange rates prevailing during the third quarter and first nine months used to convert the operating results

of the European operations were $1.6126 per Euro and $1.5951 per Euro, respectively, compared to $1.5694 and

$1.4851 per Euro for the same periods of the prior year.

- 13 -

The following table shows the Canadian dollar impact of a 10% change in the average exchange rate of the Euro currency

into Canadian dollars on European operating results in the cable sector for the first nine months ended May 31, 2009:

Nine months ended May 31, 2009 As reported

Exchange rate

impact

($000) $ $

(unaudited) (unaudited)

Revenue 180,875 18,088

Operating income before amort iz ati o n 53,617 5,362

The Company is also impacted by foreign currency exchange rates, primarily changes in the values of the US dollar

relative to the Canadian dollar with regards to purchases of equipment, as the majority of customer premise equipment in

the cable sector is purchased and subsequently paid in US dollars. Please consult the “Fixed charges” section of this

MD&A and the Foreign Exchange Risk section in note 15 of the consolidated financial statements for further details.

CABLE SECTOR

CUSTOMER STATISTICS

Net additions (losses) % of Penetration

(1)

Quarters ended May 31, Nine months ended May 31, May 31,

May 31, 2009 2009 2008 2009 2008 2009 2008

RGU 2,810,199 14,985 50,889 93,325 190,109 – –

Basic Cable service customers 1,130,527 (13,547)

(1,589)

(22,702)

16,001 – –

HSI service customers

(2)

651,617 1,519 6,865 18,849 53,119 59.7 56.7

Digital Television service customers 534,152 19,235 26,055 67,954 60,187 47.8 38.5

Telephony service customers

(3)

493,903 7,778 19,558 29,224 60,802 47.2 44.2

(1)

As a percentage of Basic Cable service customers in areas served.

(2)

Customers subscribing to the HSI service without the Basic Cable service totalled 86,887 as at May 31, 2009 compared to 82,780 at May 31, 200 8.

(3)

Customers subscribing to the Telephony service without the Basic Cable service totalled 31,774 as at May 31, 2009 compared to 25,301 at May 31, 2008.

In the cable sector, third quarter and first nine months RGU net additions were lower than for the same periods last year

and reflect an early sign of maturation in some services for the Canadian operations and the difficult competitive

environment in Portugal. The number of net losses for Basic Cable stood at 13,547 customers for the quarter and

22,702 customers for the first nine months, compared to net losses of 1,589 customers and net additions of

16,001 customers, respectively, for the same periods of the prior year. This decrease is due to net customer losses in the

European operations reflecting a continuing difficult competitive environment in the Iberian Peninsula, recurring intense

customer promotions and advertising initiatives from competitors for their new respective third leg of the triple-play service

in the Portuguese market, partly offset by increases in Canadian operations stemming from continuous improvements to

the service offering, targeted marketing activities and an upswing in subscription activity in border markets due to the

impending over-the-air digital conversion in the United States. The number of net additions to HSI service stood at 1,519

customers for the quarter and 18,849 customers for the first nine months, compared to 6,865 and 53,119 customers,

respectively, for the same periods last year. The growth in HSI customer net additions continues to stem from the

enhancement of the product offering, the impact of the bundled offer (Cogeco Complete Connection) of Television, HSI

and Telephony services, and promotional activities in Canadian operations offset by net customer losses in European

operations due to the factors mentioned above. The Digital Television service net additions stood at 19,235 and 67,954

customers, for the quarter and nine month period ended May 31, 2009, respectively, compared to 26,055 and 60,187

customers for the same periods in the prior year due to targeted marketing initiatives in the second half of fiscal 2008 and

in 2009 to improve market penetration and to the continuing strong interest for the HD Television service in Canadian

operations, as well as the launch of the Digital Television service in Portugal in the third quarter of fiscal 2008. In the

quarter and first nine months, Telephony customers grew by 7,778 and 29,224 customers to reach 493,903 at

May 31, 2009, compared to a growth of 19,558 and 60,802 customers for the same periods of the prior year. The lower

growth is mostly attributable to the increased penetration in areas where the service is already offered and to fewer new

areas where the service was launched in Canadian operations offset by net customer losses in European operations due

to the difficult competitive environment. Telephony service coverage in Canada, as a percentage of homes passed, is now

above 90% compared to 83% at May 31, 2008. The service is offered in all of the Company’s territories in Portugal.

- 14 -

In addition to the launch of new channels and retention strategies during the quarter in the European operations, new

marketing and other operating initiatives were implemented, the result of which should help in reducing customer attrition

in the upcoming quarters.

OPERATING RESULTS

Quarters ended May 31, Nine months ended May 31,

2009 2008

(1)

Change 2009 2008

(1)

Change

($000, except percentages) $ $ % $ $ %

(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 305,672 274,944 11.2 910,030 791,879 14.9

Operating costs 176,941 157,452 12.4 527,096 459,713 14.7

Management fees – COGECO Inc. – – – 9,019 8,714 3.5

Operating income from contin ui ng op erati ons before

amortization 128,731 117,492 9.6 373,915 323,452 15.6

Operating margin 42.1% 42.7% 41.1% 40.8%

(1)

Certain comparati ve figur es have be en reclas sifi ed t o conform to t he cur rent y ear’s present ation. Fi nanc ial inf ormat ion for the prev ious year h as b een r estate d to

reflect the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

Revenue

Fiscal 2009 third-quarter consolidated revenue improved by $30.7 million, or 11.2%, to reach $305.7 million, and first

nine-month consolidated revenue by $118.2 million, or 14.9%, to reach $910 million, when compared to the prior year.

Driven by an increased number of RGU combined with rate increases and the recent acquisitions in the second half of

fiscal 2008, third-quarter Canadian operations revenue went up by $37.2 million, or 17.6%, and for the first nine months

by $116.8 million, or 19.1%.

Fiscal 2009 third-quarter European operations revenue decreased by $6.4 million, or 10.1%, at $57.6 million, compared to

the same period of the prior year, as a result of a net RGU loss in the quarter. First nine month revenue increased by

$1.3 million, or 0.7%, to reach $180.9 million, due to the strength of the Euro against the Canadian dollar, despite a RGU

loss in the first nine months of the year. Revenue from the European operations in the local currency for the third quarter

amounted to €35.7 million, a decrease of €5.1 million, or 12.5%, and to €113.5 million, a decrease of €7.4 million, or 6.1%,

for the first nine months.

Operating costs

For the third quarter and first nine months of fiscal 2009, operating costs, excluding management fees payable to

COGECO Inc., increased by $19.5 million and $67.4 million to reach $176.9 million and $527.1 million, respectively,

increases of 12.4% and 14.7% compared to the prior year. Operating costs increased due to the servicing of additional

RGU and the impact of the recent acquisitions in Canada, and in Europe, due to the appreciation of the Euro over the

Canadian dollar and an increase in the level of uncollectible customer accounts.

Operating income before amortization

Fiscal 2009 third quarter and first nine-month operating income before amortization increased by $11.2 million, or 9.6%, to

reach $128.7 million, and by $50.5 million, or 15.6%, to reach $373.9 million, respectively, as a result of various rate

increases, recent acquisitions, and RGU growth generating additional revenues which outpaced operating cost increases

in the quarter and first nine months of the year. Cogeco Cable’s third quarter operating margin decreased to 42.1% from

42.7% for the same period of the prior year. The operating margin in Canada improved to 45.9% from 44.3% which offset

the decrease in the European operating margin to 25.9% from 37.6%. For the first nine months of fiscal 2009, Cogeco

Cable’s operating margin improved to 41.1% from 40.8% with the Canadian operating margin improving to 43.9% from

42.5% and the European operating margin decreasing to 29.6% from 35.3% the year before.

- 15 -

FISCAL 2010 PRELIMINARY FINANCIAL GUIDELINES

Consolidated

Preliminary Revised projections

Projections April 8, 2009

Fiscal 2010

Fiscal 2009

(in millions of dollars) $ $

Financial guidelines

Revenue 1,285 1,238

Operating income before amort iz ati o n 505 505

Financial expens e 70 70

Current income taxes (55)

Net income (l oss) 30 (87)

Capital expenditures and deferred charges 360 300

Free cash flow

130 85

Cable sector

For fiscal 2010, Cogeco Cable expects to grow revenue and maintain operating income before amortization essentially at

the same level as the fiscal 2009 projections. The preliminary guidelines take into consideration the global economic

slowdown which is expected to continue during 2010. In Canada, Cogeco Cable’s footprint includes certain regions in

Ontario (Burlington and Windsor) where the automobile industry is a significant driver of economic activity. The sharp

downturn experienced by the automobile industry in recent months may have an adverse impact on the level of economic

activity and consumer expenditures on goods and services within those communities. In previous recessionary periods,

demand for cable telecommunications services has generally proven to be resilient. However, there is no assurance that

demand would remai n resilient in a prolonged global rece ssion.

In Portugal, fiscal year 2009 was marked by a continuing difficult competitive environment in the Iberian Peninsula,

recurring intense customer promotions and advertising initiatives from competitors for their new respective third leg of the

triple-play service in the Portuguese market. These factors were the main contributors to the decline in net RGU and in

the financial results of Cabovisão. Furthermore, digital terrestrial television services were launched in Portugal in the

second half of fiscal 2009, and this development may limit the growth or result in some attrition of Basic Cable television

service customers and consequently have an adverse impact on RGU. Management has realigned its short term strategic

plan in order to curtail subscriber losses and is expecting RGU loss deceleration in fiscal 2010. In addition, Cabovisão

recently launched new channels and retention strategies, which combined with new marketing and other operating

initiatives, should reduce customer attrition in fiscal 2010. These factors should result in slower growth for Cogeco Cable

when compared to prio r years.

Fiscal 2010 consolidated revenue should increase by approximately 3.7% compared to the prior year. The Canadian

operations revenue should increase as a result of additional RGU from continued deployment of the Telephony service

and expanded penetration of the HSI and Digital Television services in fiscal 2010. Canadian operations will also benefit

from the impact of rate increases implemented in fiscal 2009 in Ontario, averaging $1.00 per Basic Cable service

customer. Cogeco Cable plans to expand its Canadian Basic Cable Service clientele through consistently effective

marketing, competitive product offerings and superior customer service. As the penetration of HSI, Telephony and Digital

Television services increase, the demand for these products should slow, reflecting early signs of maturity. Revenue from

European operations should decrease, mainly from the impact of the significant decline in RGU in fiscal 2009 and that is

expected to continue in fiscal 2010, although to a lesser extent, and from the impact of retention strategies implemented in

fiscal 2009. Digital Television service is still under deployment and should continue to generate net additions in fiscal

2010. European operations revenue should reflect attrition due to the expected fluctuations in the value of the Euro

compared to the Canadian dollar. For fiscal 2009, the expected foreign exchange rate was approximately $1.60 per Euro

while for fiscal 2010, it is anticipated that the Euro should be conv erted at a rate of approximately $1.50 per Euro.

The operating costs increase of approximately 6.4% should come both from the Canadian and European operations. The

Canadian operating costs increase is mainly attributable to servicing additional RGU, to inflation and salary increases as

well as to the new Local Programming Improvement Fund for which payments will be required as of September 2009. The

European operations costs increases are essentially due to new marketing initiatives and the launch of new channels.

For fiscal 2010, consolidated operating income before amortization should remain essentially the same at $500 million

coming from the revenue growth offset by the increase in operating costs. Cogeco Cable expects to achieve an operating

margin of approximately 40%.

- 16 -

Cogeco Cable expects the amortization of capital assets and deferred charges to increase by $15 million, mainly due to

capital expenditures and deferred charges related to RGU additions and other initiatives in fiscal 2009 and 2010. In

addition, cash flows from operations will finance capital expenditures and deferred charges, expected to amount to

$360 million, an increase of $60 million compared to fiscal 2009 projections. The increase in capital expenditures are

mainly due to customer premise equipment required to support RGU growth, to scalable infrastructure for product

enhancements and the deployment of new technologies and to support capital to improve business information systems

and facility requirements. Cogeco Cable expects to generate free cash flow in the order of $125 million, an increase of

approximately $45 million compared to the fiscal 2009 projections mainly due to anticipated income tax recoveries of

approximately $55 million resulting from modifications to the corporate structure, offsetting the increase in capital

expenditures. Generated free cash flow should be used primarily to reduce Indebtedness, thus improving Cogeco Cable’s

leverage ratios. Despite the anticipated decrease in Indebtedness, financial expense will remain the same at $70 million

due to an increase in the average interest rate from the recent issuance of $300 million Senior Secured Debentures

Series 1.

Preliminary Revised projections

Projections April 8, 2009

Fiscal 2010 Fiscal 2009

(in millions of dollars, except net customer additions and operating margin) $ $

Financial guidelines

Revenue

1,250

1,205

Operating income before amort iz ati o n 500 500

Operating margin 40% 42%

Financial expens e 70 70

Amortization 285 270

Current income taxes (55) 50

Capital expenditures and deferred charges

360

300

Free cash flow 125 80

Net customer additions guidelines

RGU 125,000 100,000

The exchange rate used for the fiscal 2010 preliminary projections is $1.50 per Euro compared to $1.60 per Euro for the

April 2009 revised projections.

Other sector

Revenue should increase to approximately $35 million due to improved audience ratings in radio and operating income

before amortization should reach $5 million.

Preliminary Revised projections

Projections April 8, 2009

Fiscal 2010 Fiscal 2009

(in millions of dollars) $ $

Financial guidelines

Revenue 35 33

Operating income before amort iz ati o n 5 5

CONTROLS AND PRO CEDURES

The application of Bill 198 and its regulations represents an exercise in continuous improvement, which is leading the

Company to formalize processes and control measures that are already in place and to introduce new ones. COGECO

has chosen to make this a strategic endeavour, which will result in operational improvements and better management.

The President and Chief Executive Officer and the Vice President, Finance and Chief Financial Officer, together with

management, have evaluated the effectiveness of the Company’s disclosure controls and procedures and the design of

internal controls over financial reporting as at May 31, 2009 and August 31, 2008. They have concluded that the

- 17 -

Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to

the Company is complete and reliable. However, certain material weaknesses were identified in the design of internal

controls over financial reporting at these dates. The status of the remediation of the material weaknesses identified at

August 31, 2008 is as follows:

The evaluation of Cogeco Data Services Inc. was completed during the third quarter of 2009 and management has

concluded that the operations of its subsidia ry do not meet materiality criteria on a consolidated basis.

During the third quarter of fiscal 2009, the Company’s cable subsidiary, Cogeco Cable has implemented new processes

and software to track its home terminal devices from their initial purchase to their return by customers, and has adjusted

the carrying values of the assets accordingly. This adjustment did not have a material impact on the Company’s financial

statements. Controls in relation to those new processes are presently in monitoring mode and management expects to

conclude, before the end o f fiscal 2009, on the full remediation of this material weakness identified at August 31, 2008.

During the fiscal year ending August 31, 2008, management has documented evidence of existing controls and designed

and implemented new and enhanced automated and manual internal controls over financial reporting for many processes

for its Canadian operations. Material weaknesses related to access controls over various databases and automated

controls were identified and have now been remediated.

On August 1, 2006, Cogeco Cable purchased Cabovisão in Portugal. During the fiscal year ended August 31, 2007,

management conducted a project to review the design of internal controls over financial reporting of significant processes.

As at May 31, 2009, some key internal controls are still under evaluation and implementation. Some controls over access

to databases, segregation of duties, and policy design are under review as well as some automated controls and any

material weaknesses identified will be remediated before the end of the 2009 fiscal year.

As required under NI 52-109, management anticipates certifying design and effectiveness of internal controls over

financial reporting within the 2009 fiscal year.

UNCERTAINTIES AND M AIN RISK FACTORS

There has been no significant change in the uncertainties and main risk factors faced by the Company since

August 31, 2008, except as described below. A detailed description of the uncertainties and main risk factors faced by

COGECO can be found in the 2008 annual MD&A.

Cogeco Cable’s footprint includes certain regions in Ontario (Burlington and Windsor) and in Portugal (Palmela) where the

automobile industry is a significant driver of economic activity. The sharp downturn experienced by the automobile

industry in recent months may have an adverse impact on the level of economic activity and consumer expenditures on

goods and services within those communities. In previous recessionary periods, demand for cable telecommunications

services has generally proven to be resilient. However, there is no assurance that demand will remain resilient in a

prolonged global recession.

Despite Cogeco Cable’s strong balance sheet and the proactive management of debt maturities, the present situation in

financial markets and the credit crisis may result in reduced availability of capital in both the debt and equity markets in

the coming years. As Cogeco Cable’s current credit facilities and other sources of financing reach their respective

maturities, the terms of bank and other debt facilities may be less favourable upon renewal.

Market conditions may also have an impact on the Company’s defined benefit pension plans as there is no assurance that

the actual rate of return on plan assets will approximate the assumed rate of return used in the most recent actuarial

valuation. Market driven changes may impact the assumptions used in future actuarial valuations and could result in the

Company being required to make contributions in the future that differ significantly from the current contributions to the

Company’s defined benefit pension pla ns.

The Company is exposed to interest rate risks for both fixed interest rate and ﬂoating interest rate instruments.

Fluctuations in interest rates will have an effect on the valuation and the collection or repayment of these instruments

which could result in a significant impact on the Company’s financial expense. At May 31, 2009, approximately 80% of

Cogeco Cable’s debt is at fixed interest rates.

The current volatility of currency exchange and interest rate in the financial markets is unusually high and could lead to an

increase in the level of risk on hedging instruments to which Cogeco Cable is a party, should one or more of the

counterparties to these instrument s become financially distresse d and unable to meet their obligations.

- 18 -

Digital terrestrial television services have been launched in Portugal in April 2009. This development may limit the growth

or result in some attrition of Basic Cable television service customers, and consequently have an adverse impact on RGU

in the cable sector.

ACCOUNTING POLICIES AND ESTIMATES

There has been no significant change in COGECO’s accounting policies, estimates and future accounting

pronouncements since August 31, 2008, except as described below. A description of the Company’s policies and

estimates can be found in the 2008 annual MD&A.

Capital disclosures and financial instruments

Effective September 1, 2008, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”) Handbook

Section 1535, Capital Disclosures, Section 3862, Financial Instruments – Disclosures and Section 3863, Financial

Instruments – Presentation.

Capital disclosures

Section 1535 of the CICA Handbook requires that an entity disclose information that enables users of its financial

statements to evaluate the entity’s objectives, policies and processes for managing capital, including disclosures of any

externally imposed capital requirements and the consequences for non-compliance. These new disclosures are included

in note 15 of the Company’s interim consolidated financial statements.

Financial instruments

Section 3862 on financial instrument disclosures requires the disclosure of information about the significance of financial

instruments for the entity's financial position and performance and the nature and extent of risks arising from financial

instruments to which the entity is exposed during the period and at the balance sheet date, and how the entity manages

those risks.

Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the

classification of financial instruments, from the perspective of the issuer, between liabilities and equities, the classification

of related interest, dividends, gains and losses, and circumstances in which financial assets and financial liabilities are

offset.

The adoption of these standards did not have any impact on the classification and measurements of the Company’s

financial instruments. The new disclosures pursuant to these new Sections are included in note 15 of the Company’s

interim consolidated financial statement s.

Credit risk and fair value of financial assets and financial liabilities

On January 20, 2009, the Emerging Issues Committee (“EIC”) of the Canadian Accounting Standards Board issued EIC

Abstract 173, Credit Risk and Fair Value of Financial Assets and Financial Liabilities, which establishes guidance

requiring an entity to consider its own credit risk as well as the credit risk of the counterparty in determining the fair value

of financial assets and financial liabilities, including derivative instruments. EIC 173 is applicable to all financial assets and

liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009

and is applicable to the Company for its second quarter of fiscal 2009 with retrospective application, without restatement

of prior periods, to the beginning of its current fiscal year. The adoption of this new abstract during the second quarter

decreased derivative financial instruments assets by $3.5 million, decreased future income tax liabilities by $1 million,

decreased non-controlling interest by $1.8 million and decreased accumulated other comprehensive income by

$0.8 million at December 1, 2008 and had no significant impact on the consolidated balance sheet at September 1, 2008.

General standards of financial sta tement presentation

The CICA amended Section 1400 of the CICA Handbook, General Standards of Financial Statement Presentation, to

include a requirement for management to make an assessment of the entity’s ability to continue as a going concern when

preparing financial statements. These changes, including the related disclosure requirements, were adopted by the

Company on September 1, 2008 and had no impact on the interim consolidated financial statements.

- 19 -

FUTURE ACCOUNTING PRO NOUN CEMENTS

Business combinations, consolidated financial statements and non-controlling interests

During January 2009, the CICA issued Handbook Section 1582, Business Combina tions, which replaces Section 1581 of

the same name, and Sections 1601, Consolidated Financial Statements and 1602, Non-Controlling Interests, which

together replace Section 1600, Consolidated Financial Statements. These new Sections harmonize significant aspects of

Canadian accounting standards with the International Financial Reporting Standards (“IFRS”) that will be mandated for

entities with fiscal year beginning on or a fter January 1, 2011.

Section 1582 requires that all business acquisitions be measured at the fair value of the acquired entity at the acquisition

date even if the business combination is achieved in stages, or if less than 100% of the equity interest in the acquiree is

owned at the acquisition date, and expands the definition of a business subject to an acquisition. The Section also

establishes new guidance on the measurement of consideration given and the recognition and measurement of assets

acquired and liabilities assumed in a business combination. Furthermore, under this new guidance, acquisition costs,

which were previously included as a component of the consideration given, and any negative goodwill resulting from the

allocation of the purchase price, which was allocated as a reduction of non-current assets acquired under the previous

standard, will be recorded in earnings in the current period. This new Section will be applied prospectively and will only

impact the Company’s consolidated financial statements for future acquisitions concluded in periods subsequent to the

date of adoption.

Sections 1601 and 1602 dealing with consolidated financial statements require an entity to measure non-controlling

interest upon acquisition either at fair value or at the non-controlling interest's proportionate share of the acquiree's

identifiable net assets. The new Sections also require non-controlling interest to be presented as a separate component of

shareholders' equity.

The new standards will apply as of the beginning of the first annual reporting period beginning on or after January 1, 2011,

with simultaneous early adoption permitted. Early adoption may reduce the amount of restatement required upon

conversion to IFRS. The Company is currently assessing the impact of these new Sections on its consolidated financial

statements.

Harmonization of Canadian and International accounting standards

In March 2006, the Accounting Standards Board of the CICA released its new strategic plan, which proposed to abandon

Canadian GAAP and effect a complete convergence to the IFRS for publicly accountable entities.

In April 2008, the CICA published an exposure draft as guidance which requires the transition to IFRS to replace

Canadian GAAP as currently employed by Canadian publicly accountable enterprises. In March 2009, the CICA issued its

second exposure draft on that matter which addresses additional IFRS standards, considers comments received to date

and clarifies certain matters. The changeover will occur no later than fiscal years beginning on or after January 1, 2011.

Accordingly, the Company expects that its first interim consolidated financial statements presented in accordance with

IFRS will be for the three-month period ending November 30, 2011, and its first annual consolidated financial statements

presented in accordance with IFRS will be for the year ending August 31, 2012.

IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition,

measurement and disclosure requirements. The Company has established a project team including representatives from

various areas of the organization to plan and complete the transition to IFRS. This team reports periodically to the Audit

Committee, who oversees the IFRS implementation project on behalf of the Board of Directors. The Company will be

assisted by external advisors as required.

The implementation project consists of three primary phases, which may occur concurrently as IFRS are applied to

specific areas of operations:

• Scoping and diagnostic phase —This phase involves performing a high-level impact assessment to identify key

areas that are expected to be impacted by the transition to IFRS. The result of these procedures is the ranking of

IFRS impacts in order of priority in order to assess the timing and complexity of transition efforts that will be

required in subse quent phases.

• Impact analysis, evaluation and design phase — In this phase, each area identified from the scoping and

diagnostic phase will be addressed in order of descending priority, with project teams established as deemed

necessary. This phase involves specification of changes required to existing accounting policies, information

systems and business processes, together with an analysis of policy choices permitted under IFRS and the

development of draft IFRS financial statement content.

• Implementation and review phase — This phase includes execution of changes to information systems and

business processes, completing formal authorization processes to approve recommended accounting policy

- 20 -

changes and training programs across the organization, as necessary. It will culminate in the collection of

financial information necessary to compile IFRS-compliant financial statements, embedding IFRS in business

processes, eliminating any unnecessary data collection processes and finally the approval by the Audit

Committee of the IFRS financial statements. Implementation also involves delivery of further training to staff as

revised systems begin to take effect.

The Company completed the scoping and diagnostic phase in February 2009, and is now conducting the impact analysis,

evaluation and design phase. As implications of the conversion are identified, information technology and data system

impacts as well as impacts on business activities will be assessed. The Company’s analysis of IFRS and comparison with

currently applied accounting principles has identified a number of differences that may require information system

changes or which are likely to have a material impact on the financial statements of the Company.

Set out below are the main areas where changes in accounting policies are expected to have a significant impact on the

Company’s consolidated financial statements. The list below should not be regarded as a complete list of changes that

will result from transition to IFRS. It is intended to highlight those areas that the Company believes to be the most

significant; however, analysis of changes is still in process and the selection of accounting policies where choices are

available under IFRS has not been completed. We note that the regulatory bodies that promulgate Canadian GAAP and

IFRS have significant ongoing projects that could affect the ultimate differences between Canadian GAAP and IFRS and

their impact on the Company’s consolidated financial statements in future years. The future impacts of IFRS will also

depend on the particular circumstances prevailing in those years. The standards listed below are those existing based on

current Canadian GAAP and IFRS. At this stage, the Company is not able to reliably quantify the impacts expected on its

consolidated financial state ments for these differences. They are as follows:

• Presentation of Financial Statements (IAS 1)

• Income Taxes (IAS 12)

• Property, Plant and Equipment (IAS 16)

• Revenue (IAS 18)

• Impairment of Assets (IAS 36)

• Business Combinations (IFRS 3)

Furthermore, IFRS 1, First-Time Adoption of International Financial Reporting Standards, provides entities adopting IFRS

for the first time with a number of optional exemptions and mandatory exceptions to the general requirement for full

retrospective application of IFRS which may differ from the requirements of the sections listed above. The Company is

analyzing the various accounting policy choices available and will implement those determined to be most appropriate in

the Company’s circumstances. The Company has not yet determined the aggregate financial impact of adopting IFRS 1

on its consolidated financial statements.

The conversion project is progressing according to the plan establishe d by management.

NON-GAAP FINANCI AL MEASURES

This section describes non-GAAP financial measures used by COGECO throughout this MD&A. It also provides

reconciliations between these non-GAAP measures and the most comparable GAAP financial measures. These financial

measures do not have standard definitions prescribed by Canadian GAAP and may not be comparable with similar

measures presented by other companies. These measures include “cash flow from operations from continuing

operations”, “free cash flow”, “operating income from continuing operations before amortization”, “operating margin”, “net

income excluding the impairment loss, the tax adjustments and the loss from discontinued operations”, and “earnings per

share excluding the impairment loss, the tax adjustm ents and the loss from discontinued operations”.

Cash flow from operations from continuing operations and free cash flow

Cash flow from operations from continuing operations is used by COGECO’s management and investors to evaluate cash

flows generated by operating activities excluding the impact of changes in non-cash operating items. This allows the

Company to isolate the cash flows from operating activities from the impact of cash management decisions. Cash flow

from operations from continuing operations is subsequently used in calculating the non-GAAP measure “free cash flow”.

Free cash flow is used by COGECO’s management and investors to measure COGECO’s ability to repay debt, distribute

capital to its shareholders and finance its growth.

- 21 -

The most comparable Canadian GAAP financial measure is cash flow from operating activities from continuing

operations. Cash flow from operations from continuing operations is calculated as follows:

Quarters ended May 31, Nine months ended May 31,

2009 2008 2009 2008

($000) $ $ $ $

(unaudited) (unaudited) (unaudited) (unaudited)

Cash flow from operating activities from continuing operations 102,653 112,893 253,603 252,439

Changes in non-cash operating items (7,155) (16,825) 37,872 10,380

Cash flow from operations from continuing operations 95,498 96,068 291,475 262,819

Free cash flow is calculated as follows:

Quarters ended May 31, Nine months ended May 31,

2009 2008 2009 2008

($000) $ $ $ $

(unaudited) (unaudited) (unaudited) (unaudited)

Cash flow from operations from continuing operations 95,498 96,068 291,475 262,819

Acquisition of fixed assets (56,664) (50,940) (184,534) (160,286)

Increase in deferred charges (5,256) (7,050) (18,242) (20,661)

Assets acquired under capital leases – as per note 13 b) (1,162) (971) (2,423) (2,417)

Free cash flow 32,416 37,107 86,276 79,455

Operating income from continuing operation s before amortization and operating margin

Operating income from continuing operations before amortization is used by COGECO’s management and investors to

assess the Company’s ability to seize growth opportunities in a cost effective manner, to finance its ongoing operations

and to service its debt. Operating income from continuing operations before amortization is a proxy for cash flows from

operations excluding the impact of the capital structure chosen, and is one of the key metrics used by the financial

community to value the business and its financial strength. Operating margin is a measure of the proportion of the

Company's revenue which is left over, before taxes, to pay for its fixed costs, such as interest on Indebtedness. Operating

margin is calculated by dividing operating income fro m continuing operations before amortization by revenue.

The most comparable Canadian GAAP financial measure is operating income from continuing operations. Operating

income from continuing operations before amortizatio n and operating margin are calculated as follows:

Quarters ended May 31, Nine months ended May 31,

2009 2008

(1)

2009 2008

(1)

($000, except percentages) $ $ $ $

(unaudited) (unaudited) (unaudited) (unaudited)

Operating income from continuing operations 61,750 58,642 182,269 158,954

Amortization 67,654 58,564 198,502 167,949

Operating income from continuing operations before amortization 129,404 117,206 380,771 326,903

Revenue 316,310 283,878 936,510 816,027

Operating margin 40.9% 41.3% 40.7% 40.1%

(1)

Certain comparati ve figur es have be en reclas sifi ed t o conform to t he cur rent y ear’s present ation. Fi nanc ial inf ormat ion for the prev ious year h as b een r estate d to

reflect the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

- 22 -

Net income excluding the impairment loss, the tax adjustments and the loss from discontinued operations and

earnings per share excluding the impairment loss, the tax adjustments and the loss from discontinued

operations

Net income excluding the impairment loss, the tax adjustments and the loss from discontinued operations and earnings

per share excluding the impairment loss, the tax adjustments and the loss from discontinued operations are used by

COGECO’s management and investors to evaluate what would have been the net income and earnings per share

excluding these adjustments. This allows the Company to isolate the unusual adjustments in order to evaluate the net

income and earnings per share from ongoing activities.

The most comparable Canadian GAAP financial measures are net income and earnings per share. These above-

mentioned non-GAAP financial measures are calculated as follows:

Quarters ended May 31, Nine months ended May 31,

2009 2008 2009 2008

($000) $ $ $ $

(unaudited) (unaudited) (unaudited) (unaudited)

Net income (loss) 10,480 9,538 (93,758)

15,452

Adjustments:

Impairment loss net of related income taxes and non-controlling interest – – 123,951 –

Tax adjustments net of non-controlling interest:

Reduction of withholding and stamp tax contingent liabilities (3,531)

– (3,531)

–

Utilization of pre-acquisition tax losses 1,984 – 1,984 –

Reduction of Canadian federal income tax rates – – – (7,909)

Loss from discontinued operations – – – 18,057

Net income excluding the impairment loss, the tax adjustments and

the loss from discontinued operations

8,933 9,538 28,646 25,600

Weighted average number of multiple voting and subordinate voting

shares outstanding 16,758,923 16,682,468 16,746,931 16,676,369

Effect of dilutive stock options

3,947 54,599 11,432 70,256

Weighted average number of diluted multiple voting and subordinate

voting shares outstanding 16,762,870 16,737,067 16,758,363 16,746,625

Earnings per share excluding the impairment loss, the tax

adjustments and the loss from discontinued operations

Basic 0.53 0.57 1.71 1.54

Diluted 0.53 0.57 1.71 1.53

ADDITIONAL INFORMATION

This MD&A was prepared on July 9, 2009. Additional informat ion relating to the Company, including its Annual Information

Form, is available on the SEDAR web site at ww w.sedar.com.

ABOUT COGECO

COGECO is a diversified communications company. Through its Cogeco Cable subsidiary, COGECO provides its

residential customers with Audio, Analogue and Digital Television, as well as HSI and Telephony services using its two-

way broadband cable networks. Cogeco Cable also provides, to its commercial customers, data networking, e-business

applications, video conferencing, hosting services, Ethernet, private line, VoIP, HSI access, dark fibre, data storage, data

security and co-location services and other advanced communication solutions. Through its Cogeco Diffusion subsidiary,

COGECO owns and operates the RYTHME FM radio stations in Montréal, Québec City, Trois-Rivières and Sherbrooke,

as well as the 93

station in Québec City. COGECO’s subordinate voting shares are listed on the Toronto Stock Exchange

(TSX: CGO). The subordinate voting shares of Cogeco Cable are also listed on the Toronto Stock Exchange (TSX: CCA).

– 30 –

- 23 -

Source: COGECO Inc.

Pierre Gagné

Vice President, Finance and Chief Financial Officer

Tel.: 514-764-4700

Information: Media

Marie Carrier

Director, Corporate Communications

Tel.: 514-764-4700

Analyst Conference Call: Friday, July 10, 2009 at 11:00 A.M. (EDT)

Media representatives may attend as listeners only.

Please use the following dial-in number to have access to the conference call by dialling

five minutes before the start of the conference:

Canada/USA Access Nu mber: 1 800-820-02 31

International Access Number: +1 416-640-5926

Confirmation Code: 4714736

By Internet at www.cogeco.ca/investors

A rebroadcast of the conference call will be available until July 17, by dialling:

Canada and USA access number: 1 888-203-1112

International access number: +1 6 47-436-0148

Confirmation code: 4714736

- 24 -

Supplementary Quarterly Financial Information

(unaudited)

Quarters ended May 31, February 28/29, November 30, August 31,

($000, except percentages and per share data)

2009

2008

(1)

2009

2008

(1)

2008

2007

(1)

2008

(1)

2007

(1)

Revenue 316,310 283,878 311,825 271,894 308,375 260,255 292,873 251,300

Operating income from contin ui ng op erati ons

before amortization

(2)

129,404 117,206 126,663 109,523 124,704 100,174 122,019 100,755

Operating margin

(2)

40.9% 41.3% 40.6% 40.3% 40.4% 38.5% 41.7% 40.1%

Amortization 67,654 58,564 66,785 56,346 64,063 53,039 61,775 54,723

Operating income from contin ui ng op erati ons 61,750 58,642 59,878 53,177 60,641 47,135 60,244 46,032

Financial expens e 14,362 17,748 18,028 17,550 23,778 16,333 19,066 19,084

Reduction of withholding and stamp tax

contingent liabilities (10,930) – – – – – – –

Impairment of goodwill and intan gi bl e ass ets – – 399,648 – – – – –

Income taxes 26,334 10,285 175 (14,426) 9,848 9,277 9,849 (7,480)

Loss (gain) on dilution – 3 22 (25) 26 107 19 (27,011)

Non-controlling interest 21,504 21,068 (242,704) 33,763 15,936 13,762 21,559 24,240

Income (loss) from continuing operations 10,480 9,538 (115,291) 16,315 11,053 7,656 9,656 37,097

Loss from discontinued operations – – – (425) – (17,632) – (6,713)

Net income (l oss) 10,480 9,538 (115,291) 15,890 11,053 (9,976) 9,656 30,384

Net income excluding the impairment loss, the

tax adjustments and the loss from

discontinued operations

(2)(3)

8,933 9,538 8,660 8,406 11,053 7,656 9,656 5,309

Cash flow from operations from continuing

operations

(2)

95,498 96,068 100,351 85,374 95,626 81,377 99,969 78,153

Cash flow from operating activities from

continuing operations 102,653 112,893 120,480 92,942 30,470 46,604 146,052 107,155

Free cash flow

(2)

32,416 37,107 32,089 19,374 21,771 22,974 20,981 9,131

Earnings (loss) per share

Basic

Income (loss) from continuing operations 0.63 0.57 (6.89) 0.98 0.66 0.46 0.58 2.23

Loss from discontinued operations – – – (0.03) – (1.06) – (0.40)

Net income (l oss) 0.63 0.57 (6.89) 0.95 0.66 (0.60) 0.58 1.83

Net income excluding the impair me nt

loss, the tax adjustments and the loss

from discontinued oper ations

(2)(3)

0.53 0.57 0.52 0.50 0.66 0.46 0.58 0.32

Diluted

Income (loss) from continuing operations 0.63 0.57 (6.89) 0.97 0.66 0.46 0.58 2.21

Loss from discontinued operations – – – (0.03) – (1.06) – (0.40)

Net income (l oss) 0.63 0.57 (6.89) 0.95 0.66 (0.60) 0.58 1.81

Net income excluding the impair me nt

loss, the tax adjustments and the loss

from discontinued oper ations

(2)(3)

0.53 0.57 0.52 0.50 0.66 0.46 0.58 0.32

(1)

Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information for the four quarters of fiscal 2008 and

fourth quarter of fiscal 2007 reflects the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

(2)

The indicated terms do not have standardiz ed def inition s prescr ibed by Canadia n Generally Acc epted Accounting Pri nciples (“GAAP ”) and therefo re, may not be

comparable to similar measures presented by other companies. For more details, please consult the “Non-GAAP financial measures” section of the

Management’s discussion and analysis.

(3)

Net income for the quarter ended Au gust 31, 2007 has bee n adjusted to remov e a $27 million gain o n dilution resulting fr om shares is sued by a subsidiary and

income tax adjustments of $4.8 million, net of non-controlling interest, related to the recognition of benefits stemming from prior years’ income tax losses and

minimum income tax paid, a nd a reduction of Canadian fed eral income t ax rates in add ition to the a djustments described in t he “ Non-GAAP financial measures”

section of the Management’s discussion and analysis.

The cable sector’s operating results are not generally subject to material seasonal ﬂuctuations. However, the loss in Basic

Cable service customers is usually greater, and the addition of HSI service customers is generally lower in the third

quarter, mainly because students leave their campus at the end of the school year. Cogeco Cable offers its services in

several university and college towns such as Kingston, Windsor, St. Catharines, Hamilton, Peterborough, Trois-Rivières

and Rimouski in Canada, and Aveiro, Covilhã, Evora, Guarda and Coimbra in Portugal.

- 25 -

Cable Sector Customer Statistics

(unaudited)

May 31, 2009 August 31, 2008

Homes passed

Ontario 1,043,590 1,029,121

Québec 512,266 502,490

Canada 1,555,856 1,531,611

Portugal 904,141

(1)

895,923

Total 2,459,997 2,427,534

Revenue generating units

Ontario 1,472,676 1,387,054

Québec 659,447 604,854

Canada 2,132,123 1,991,908

Portugal 678,076 724,966

Total 2,810,199 2,716,874

Basic cable service customers

Ontario 600,160 596,229

Québec 265,569 260,865

Canada 865,729 857,094

Portugal 264,798 296,135

Total 1,130,527 1,153,229

Discretionary service customer s

Ontario 496,706 493,858

Québec 224,792 215,820

Canada 721,498 709,678

Portugal – –

Total 721,498 709,678

Pay TV service customers

Ontario 105,260 97,753

Québec 50,044 47,075

Canada 155,304 144,828

Portugal 66,295 57,715

Total 221,599 202,543

High speed internet service customers

Ontario 373,884 352,553

Québec 135,549 120,914

Canada 509,433 473,467

Portugal 142,184 159,301

Total 651,617 632,768

Digital television service customers

Ontario 320,765 288,345

Québec 167,959 153,401

Canada 488,724 441,746

Portugal 45,428 24,452

Total 534,152 466,198

Telephony service customer s

Ontario 177,867 149,927

Québec 90,370 69,674

Canada 268,237 219,601

Portugal 225,666 245,078

Total 493,903 464,679

(1)

Cogeco Cable is currently assessing the number of homes passed.

- 26 -

COGECO INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(unaudited)

Three months ended May 31, Nine months ended May 31,

(In thousands of dollars, except per share data) 2009 2008 2009 2008

$ $ $ $

Revenue 316,310 283,878 936,510 816,027

Operating costs 186,906 166,672 555,739 489,124

Operating income from continuing operations before amortization

129,404 117,206 380,771 326,903

Amortization (note 3) 67,654 58,564 198,502 167,949

Operating income from continuing operations 61,750 58,642 182,269 158,954

Financial expense (note 4) 14,362 17,748 56,168 51,631

Reduction of withholding and stamp tax contingent liabilities (note 5) (10,930) ─ (10,930) ─

Impairment of goodwill and intangible assets (note 6) ─ ─ 399,648 ─

Income (loss) from continuing operations before income taxes

and the following items

58,318

40,894

(262,617)

107,323

Income taxes (note 7) 26,334 10,285 36,357 5,136

Loss on dilution resulting from shares issued by a subsidiary ─ 3 48 85

Non-controlling interest 21,504 21,068 (205,264) 68,593

Income (loss) from continuing operations 10,480 9,538 (93,758) 33,509

Loss from discontinued operations (note 16) ─ ─ ─ (18,057)

Net income (loss) 10,480 9,538 (93,758) 15,452

Earnings (loss) per share (note 8)

Basic

Income (loss) from continuing operations 0.63 0.57 (5.60) 2.01

Loss from discontinued operations ─ ─ ─ (1.08)

Net income (loss) 0.63 0.57 (5.60) 0.93

Diluted

Income (loss) from continuing operations 0.63 0.57 (5.60) 2.00

Loss from discontinued operations ─ ─ ─ (1.08)

Net income (loss) 0.63 0.57 (5.60) 0.92

- 27 -

COGECO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

Three months ended May 31,

Nine months ended May 31,

(In thousands of dollars) 2009

2008

2009

2008

Net income (loss) 10,480

9,538

(93,758)

15,452

Other comprehensive income

Unrealized gains (losses) on derivative financial instruments

designated as cash flow hedges, net of income tax recovery

of $3,847,000 and $11,000 and non-controlling interest of

$22,173,000 and $1,566,000 (income tax expense of

$279,000 and income tax recovery of $908,000 and non-

controlling interest of $860,000 and $4,653,000 in 2008)

(10,584)

412

(742)

(2,226)

Reclassification to net income of realized losses (gains) on

derivative financial instruments designated as cash flow

hedges, net of income tax recovery of $4,615,000 and

income tax expense of $746,000 and non-controlling interest

of $20,104,000 and $3,037,000 (income tax recovery of

$199,000 and income tax expense of $1,465,000 and non-

controlling interest of $738,000 and $5,421,000 in 2008)

9,595

(353)

(1,460)

2,594

Unrealized gains (losses) on translation of a net investment in

self-sustaining foreign subsidiaries, net of non-controlling

interest of $8,925,000 and $7,528,000 ($15,588,000 and

$32,087,000 in 2008)

(4,260)

7,454

3,596

15,345

Unrealized losses (gains) on translation of long-term debts

designated as hedges of a net investment in self-sustaining

foreign subsidiaries, net of non-controlling interest of

$7,709,000 and $1,033,000 ($10,837,000 and $21,162,000

in 2008)

3,680

(5,182)

(494)

(10,120)

(1,569)

2,331

900

5,593

Comprehensive income (loss) 8,911

11,869

(92,858)

21,045

- 28 -

COGECO INC.

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

(unaudited)

Nine months ended May 31,

(In thousands of dollars) 2009 2008

$ $

Balance at beginning, as previously reported 295,808 274,946

Changes in accounting policies ─ 424

Balance at beginning, as restated 295,808 275,370

Net income (loss) (93,758) 15,452

Dividends on multiple voting shares (442) (387)

Dividends on subordinate voting shares (3,576) (3,114)

Balance at end 198,032 287,321

- 29 -

COGECO INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands of dollars) May 31, 2009 August 31, 2008

$ $

Assets

Current

Cash and cash equivalents 45,757 37,472

Accounts receivable 65,032 64,910

Income taxes receivable 11,528 3,569

Prepaid expenses 15,196 13,271

Future income tax assets 4,263 8,661

141,776 127,883

Investments 739 739

Fixed assets 1,273,929 1,261,610

Deferred charges 56,703 57,841

Intangible assets (note 9) 1,048,969 1,116,382

Goodwill (note 9) 153,710 487,805

Future income tax assets 5,265 7,221

2,681,091 3,059,481

Liabilities and Shareholders' equity

Liabilities

Current

Bank indebtedness 55,406 10,302

Accounts payable and accrued liabilities 212,518 259,038

Income tax liabilities 27,599 20,793

Deferred and prepaid income 32,407 32,859

Derivative financial instruments ─ 79,791

Current portion of long-term debt (note 10) 177,504 336,858

505,434 739,641

Long-term debt (note 10) 910,471 737,055

Derivative financial instruments 2,319 ─

Deferred and prepaid income and other liabilities 12,351 11,859

Pension plan liabilities and accrued employees benefits 11,510 9,645

Future income tax liabilities 243,507 256,307

1,685,592 1,754,507

Non-controlling interest 670,224 883,948

Shareholders' equity

Capital stock (note 11) 121,006 120,049

Treasury shares (note 11) (1,847) (1,522)

Contributed surplus 2,220 1,727

Retained earnings 198,032 295,808

Accumulated other comprehensive income (note 12) 5,864 4,964

325,275 421,026

2,681,091 3,059,481

- 30 -

COGECO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Three months ended May 31, Nine months ended May 31,

(In thousands of dollars) 2009 2008 2009 2008

$ $ $ $

Cash flow from operating activities

Income (loss) from continuing operations 10,480 9,538 (93,758) 33,509

Adjustments for:

Amortization (note 3)

67,654 58,564 198,502 167,949

Amortization of deferred transaction costs

634 742 1,985 2,215

Reduction of withholding and stamp tax contingent liabilities (note 5)

(10,930)

─ (10,930) ─

Impairment of goodwill and intangible assets (note 6)

─ ─ 399,648 ─

Future income taxes (note 7)

7,828 4,690 566 (13,050)

Non-controlling interest

21,504 21,068 (205,264) 68,593

Loss on dilution resulting from shares issued by a subsidiary

─ 3 48 85

Foreign exchange gain on unhedged long-term debt

(2,376)

─ (2.376) ─

Stock-based compensation

396 1,022 1,260 2,092

Loss on disposal of fixed assets

29 151 233 388

Other

279 290 1,561 1,038

95,498 96,068 291,475 262,819

Changes in non-cash operating items (note 13 a)) 7,155 16,825 (37,872) (10,380)

Cash flow from operating activities from continuing operations 102,653 112,893 253,603 252,439

Cash flow from operating activities from discontinued operations (note 16) ─ ─ ─ (3,973)

102,653 112,893 253,603 248,466

Cash flow from investing activities

Acquisition of fixed assets (note 13 b)) (56,664)

(50,940)

(184,534) (160,286)

Increase in deferred charges (5,256)

(7,050)

(18,242) (20,661)

Business acquisitions, net of cash and cash equivalents acquired ─ (16,105)

─ (16,105)

Other 201 (320)

262 (435)

Cash flow from investing activities from continuing operations (61,719)

(74,415)

(202,514) (197,487)

Cash flow from investing activities from discontinued operations (note 16) ─ ─ ─ (133)

(61,719)

(74,415)

(202,514) (197,620)

Cash flow from financing activities

Increase (decrease) in bank indebtedness 16,986 (15,686)

45,104 2,090

Net repayments under the term facilities (56,515)

(60,451)

(86,464) (129,586)

Issuance of long-term debt, net of transaction costs ─ 99,759 254,771 99,810

Repayments of long-term debt and settlement of derivative financial instruments

(801)

(731)

(241,428) (2,007)

Issue of subordinate voting shares 936 266 957 327

Acquisition of treasury shares ─ ─ (325) (468)

Dividends on multiple voting shares (147)

(129)

(442) (387)

Dividends on subordinate voting shares (1,192)

(1,038)

(3,576) (3,114)

Issue of shares by a subsidiary to non-controlling interest ─ 62 964 3,354

Dividends paid by a subsidiary to non-controlling interest (3,944)

(3,281)

(11,827) (9,834)

Cash flow from financing activities from continuing operations (44,677)

18,771 (42,266) (39,815)

Cash flow from financing activities from discontinued operations (note 16) ─ ─ ─ 4,106

(44,677)

18,771 (42,266) (35,709)

Effect of exchange rate changes on cash and cash equivalents

denominated in foreign currencies

(1,866)

1,063

(538)

1,265

Net change in cash and cash equivalents (5,609)

58,312 8,285 16,402

Cash and cash equivalents at beginning 51,366 24,369 37,472 66,279

Cash and cash equivalents at end 45,757 82,681 45,757 82,681

See supplemental cash flow information in note 13.

- 31 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

1. Basis o f Pre sentation

In the opinion of management, the accompanying unaudited interim consolidated financial statements, prepared in

accordance with Canadian generally accepted accounting principles, present fairly the financial position of

COGECO Inc. (“the Company”) at May 31, 2009 and August 31, 2008 as well as its results of operations and its cash

flows for the three and nine month periods ended May 31, 2009 and 2008.

While management believes that the disclosures presented are adequate, these unaudited interim consolidated

financial statements and notes should be read in conjunction with COGECO Inc.’s annual consolidated financial

statements for the year ended August 31, 2008. These unaudited interim consolidated financial statements follow the

same accounting policies as the most recent annual consolidated financial statements, except for the adoption of the

new accounting policies described below.

Adoption of new accounting policies

Capital disclosure s and financial instruments

Effective September 1, 2008, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”)

Handbook Section 1535, Capital Disclosures, Section 3862, Financial Instruments – Disclosures and Section 3863,

Financial Instruments – Presentation.

Capital disclosures

Section 1535 of the CICA Handbook requires that an entity disclose information that enables users of its financial

statements to evaluate the entity’s objectives, policies and processes for managing capital, including disclosures of

any externally imposed capital requirements and the consequences for non-compliance. These new disclosures are

included in note 15.

Financial instruments

Section 3862 on financial instrument disclosures requires the disclosure of information about the significance of

financial instruments for the entity's financial position and performance and the nature and extent of risks arising from

financial instruments to which the entity is exposed during the period and at the balance sheet date, and how the

entity manages those risks.

Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives. It deals

with the classification of financial instruments, from the perspective of the issuer, between liabilities and equities, the

classification of related interest, dividends, gains and losses, and circumstances in which financial assets and

financial liabilities are offset.

The adoption of these standards did not have any impact on the classification and measurements of the Company’s

financial instruments. The new disclosures pursuant to these new Sections are included in not e 15.

General standards of financial statement presentation

The CICA amended Section 1400 of the CICA Handbook, General Standards of Financial Statement Presentation, to

include a requirement for management to make an assessment of the entity’s ability to continue as a going concern

when preparing financial statements. These changes, including the related disclosure requirements, were adopted by

the Company on September 1, 200 8 and had no impact on the interim consolidated finan cial statements.

- 32 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

1. Basis o f Pre sentation (continued)

Credit risk and fair value of financial assets and financial liabilities

On January 20, 2009, the Emerging Issues Committee (“EIC”) of the Canadian Accounting Standards Board issued

EIC Abstract 173, Credit Risk and Fair Value of Financial Assets and Financial Liabilities, which establishes guidance

requiring an entity to consider its own credit risk as well as the credit risk of the counterparty in determining the fair

value of financial assets and financial liabilities, including derivative instruments. EIC 173 is applicable to all financial

assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after

January 20, 2009 and was applicable to the Company for its second quarter of fiscal 2009 with retrospective

application, without restatement of prior periods, to the beginning of its current fiscal year. The adoption of this new

abstract during the second quarter decreased derivative financial instruments assets by $3.5 million, decreased future

income tax liabilities by $1 million, decreased non-controlling interest by $1.8 million and decreased accumulated

other comprehensive income by $0.8 million at December 1, 2008 and had no significant impact on the consolidated

balance sheet at September 1, 2008.

Future accounting pronouncement

Business combinations, consolidated financial statements a nd non-controlling interests

During January 2009, the CICA issued Handbook Section 1582, Business Combinations, which replaces Section

1581 of the same name, and Sections 1601, Consolidated Financial Statements and 1602, Non-Controlling Interests,

which together replace Section 1600, Consolidated Financial Statements. These new Sections harmonize significant

aspects of Canadian accounting standards with the International Financial Reporting Standards (“IFRS”) that will be

mandated for entities for fiscal year beginning on or after January 1, 2011.

Section 1582 requires that all business acquisition be measured at the fair value of the acquired entity at the

acquisition date even if the business combination is achieved in stages, or if less than 100% of the entity interest in

the acquiree is owned at the acquisition date, and expands the definition of a business subject to an acquisition. The

Section also establishes new guidance on the measurement of consideration given and the recognition and

measurement of assets acquired and liabilities assumed in a business combination. Furthermore, under this new

guidance, acquisition costs, which were previously included as a component of the consideration given, and any

negative goodwill resulting from the allocation of the purchase price, which was allocated as a reduction of non-

current assets acquired under the previous standard, will be recorded in earnings in the current period. This new

Section will be applied prospectively and will only impact the Company’s consolidated financial statements for future

acquisitions concluded in periods subsequent to the d ate of adoption.

Sections 1601 and 1602 dealing with consolidated financial statements require an entity to measure non-controlling

interest upon acquisition either at fair value or at the non-controlling interest's proportionate share of the acquiree's

identifiable net assets. The new Sections also require non-controlling interest to be presented as a separate

component of shareholde rs' equity.

The new standards will apply as of the beginning of the first annual reporting period beginning on or after January 1,

2011, with simultaneous early adoption permitted. Early adoption may reduce the amount of restatement required

upon conversion to IFRS. The Company is currently assessing the impact of these new Sections on its consolidated

financial statements.

- 33 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

1. Basis o f Pre sentation (continued)

Harmonization of Canadian and International accounting standard s

In March 2006, the Accounting Standards Board of the CICA released its new strategic plan, which proposed to

abandon Canadian GAAP and effect a complete conv ergence to the IFRS for publicly accountable entities.

In April 2008, the CICA published an exposure draft as guidance which requires the transition to IFRS to replace

Canadian GAAP as currently employed by Canadian publicly accountable enterprises. In March 2009, the CICA

issued its second exposure draft on that matter which addresses additional IFRS standards, considers comments

received to date and clarifies certain matters. The changeover will occur no later than fiscal years beginning on or

after January 1, 2011. Accordingly, the Company expects that its first interim consolidated financial statements

presented in accordance with IFRS will be for the three-month period ending November 30, 2011, and its first annual

consolidated financial statements presented in accordance with IFRS will be for the year e nding August 31, 2012.

IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition,

measurement and disclosure requirements. The Company has established a project team including representatives

from various areas of the organization to plan and complete the transition to IFRS. This team reports periodically to

the Audit Committee, who oversees the IFRS implementation project on behalf of the Board of Directors. The

Company will be assisted by external advisors as required.

The implementation project consists of three primary phases, which may occur concurrently as IFRS are applied to

specific areas of operations:

• Scoping and diagnostic phase — This phase involves performing a high-level impact assessment to identify key

areas that are expected to be impacted by the transition to IFRS. The result of these procedures is the ranking of

IFRS impacts in order of priority to assess the timing and complexity of transition efforts that will be required in

subsequent phases.

• Impact analysis, evaluation and design phase — In this phase, each area identified from the scoping and

diagnostic phase will be addressed in order of descending priority, with project teams established as deemed

necessary. This phase involves specification of changes required to existing accounting policies, information

systems and business processes, together with an analysis of policy choices permitted under IFRS and the

development of draft IFRS financial statement co ntent.

• Implementation and review phase — This phase includes execution of changes to information systems and

business processes, completing formal authorization processes to approve recommended accounting policy

changes and training programs across the organization, as necessary. It will culminate in the collection of

financial information necessary to compile IFRS-compliant financial statements, embedding IFRS in business

processes, eliminating any unnecessary data collection processes and finally the approval by the Audit

Committee of the IFRS consolidated financial statements. Implementation also involves additional staff training

with the deployment of revised systems.

The Company completed the scoping and diagnostic phase in February 2009, and is now conducting the impact

analysis, evaluation and design phase. As implications of the conversion are identified, the impact on information

technology, data system and business activities will be assessed. The Company’s analysis of the IFRS and the

comparison with currently applied accounting principles has identified a number of differences that may require

information system changes or which are likely to have a material impact on the consolidated financial statements of

the Company.

- 34 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

1. Basis o f Pre sentation (continued)

Set out below are the main areas where changes in accounting policies are expected to have a significant impact on

the Company’s consolidated financial statements. The list below should not be regarded as a complete list of changes

that will result from transition to the IFRS. It is intended to highlight areas that the Company believes to be the most

significant; however, analysis of changes is still in process and the selection of accounting policies where choices are

available under IFRS has not been completed. We note that the regulatory bodies that promulgate the Canadian

GAAP and the IFRS have significant ongoing projects that could affect the ultimate differences between Canadian

GAAP and IFRS and their impact on the Company’s consolidated financial statements in future years. The future

impacts of the IFRS will also depend on the particular circumstances prevailing in those years. The standards listed

below are those existing based on current Canadian GAAP and IFRS. At this stage, the Company is not able to

reliably quantify the expected impacts of these differences on its consolidated financial statements. They are as

follows:

• Presentation of Financial Statements (IAS 1)

• Income Taxe s (IAS 12)

• Property, Plant and Equipment (IAS 16)

• Revenue (IAS 18)

• Impairment of Assets (IAS 36)

• Business Combinations (IFRS 3)

Furthermore, IFRS 1, First-Time Adoption of International Financial Reporting Standards, provides entities adopting

IFRS for the first time with a number of optional exemptions and mandatory exceptions to the general requirement for

full retrospective application of IFRS which may differ from the requirements of the sections listed above. The

Company is analyzing the various accounting policy choices available and will implement those determined to be

most appropriate in the Company’s circumstances. The Company has not yet determined the aggregate financial

impact of adopting IFRS 1 on its consolidated finan cial statements.

The conversion project is progressing according to the established plan.

- 35 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

2. Segmented Information

The principal financi al information per business segment is prese nted in the tables below:

Cable Other and eliminations Consolidated

Three months ended May 31, 2009 2008 2009 2008 2009 2008

$ $ $ $ $ $

Revenue 305,672 274,944 10,638 8,934 316,310 283,878

Operating costs 176,941 157,452 9,965 9,220 186,906 166,672

Operating income (loss) from continuing

operations before amortization

128,731

117,492

673

(286)

129,404

117,206

Amortization 67,513 58,209 141 355 67,654 58,564

Operating income (loss) from continuing

operations

61,218

59,283

532

(641)

61,750

58,642

Financial expense 14,206 17,374 156 374 14,362 17,748

Reduction of withholding and stamp tax

contingent liabilities

(10,930)

─

(10,930)

─

Income taxes 26,172 10,767 162 (482) 26,334 10,285

Loss on dilution resulting from shares issued

by a subsidiary

─

Non-controlling interest 21,504 21,068 ─ ─ 21,504 21,068

Income (loss) from continuing operations 10,266 10,071 214 (533) 10,480 9,538

Total assets

(1)

2,636,362 3,019,155 44,729 40,326 2,681,091 3,059,481

Fixed assets

(1)

1,270,386 1,257,965 3,543 3,645 1,273,929 1,261,610

Intangible assets

(1)

1,023,629 1,091,042 25,340 25,340 1,048,969 1,116,382

Goodwill

(1)

153,710 487,805 ─ ─ 153,710 487,805

Acquisition of fixed assets

(2)

57,663 51,878 163 33 57,826 51,911

(1)

At May 31, 2009 and August 31, 2008.

(2)

Includes capital leases that are excluded from the consolidated statements of cash flows.

- 36 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

2. Segmented Information (continued)

Cable Other and eliminations Consolidated

Nine months ended May 31, 2009 2008 2009 2008 2009 2008

$ $ $ $ $ $

Revenue 910,030 791,879 26,480 24,148 936,510 816,027

Operating costs 536,115 468,427 19,624 20,697 555,739 489,124

Operating income from continuing operations

before amortization

373,915

323,452

6,856

3,451

380,771

326,903

Amortization 198,079 166,885 423 1,064 198,502 167,949

Operating income from continuing operations 175,836 156,567 6,433 2,387 182,269 158,954

Financial expense 55,588 50,387 580 1,244 56,168 51,631

Reduction of withholding and stamp tax

contingent liabilities

(10,930)

─

(10,930)

─

Impairment of goodwill and intangible assets 399,648 ─ ─ ─ 399,648 ─

Income taxes 34,778 4,764 1,579 372 36,357 5,136

Loss on dilution resulting from shares issued

by a subsidiary

─

Non-controlling interest (205,264)

68,593 ─ ─ (205,264)

68,593

Income (loss) from continuing operations (98,032)

32,738 4,274 771 (93,758)

33,509

Loss from discontinued operations ─ ─ ─ (18,057) ─ (18,057)

Total assets

(1)

2,636,362 3,019,155 44,729 40,326 2,681,091 3,059,481

Fixed assets

(1)

1,270,386 1,257,965 3,543 3,645 1,273,929 1,261,610

Intangible assets

(1)

1,023,629 1,091,042 25,340 25,340 1,048,969 1,116,382

Goodwill

(1)

153,710 487,805 ─ ─ 153,710 487,805

Acquisition of fixed assets

(2)

186,611 162,479 346 224 186,957 162,703

(1)

At May 31, 2009 and August 31, 2008.

(2)

Includes capital leases that are excluded from the consolidated statements of cash flows.

- 37 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

2. Segmented Information (continued)

The following tables set out certain geog raphic market information based on client location:

Three months ended May 31, Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Revenue

Canada 258,739 219,862 755,635 636,485

Europe 57,571 64,016 180,875 179,542

316,310 283,878 936,510 816,027

Three months ended May 31, 2009 August 31, 2008

$ $ $ $

Fixed assets

Canada 982,139 944,328

Europe 291,790 317,282

1,273,929 1,261,610

Intangible assets

Canada 1,048,969 1,052,608

Europe ─ 63,774

1,048,969 1,116,382

Goodwill

Canada 116,890 116,890

Europe 36,820 370,915

153,710 487,805

3. Amortization

Three months ended May 31, Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Fixed assets 60,163 50,105 171,219 143,099

Deferred charges 6,298 5,684 18,157 17,084

Intangible assets 1,193 2,775 9,126 7,766

67,654 58,564 198,502 167,949

- 38 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

4. Financial expense

Three months ended May 31, Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Interest on long-term debt 15,300 17,788 52,599 51,620

Foreign exchange losses (gains) (1,687)

2 2,716 (856)

Amortization of deferred transaction costs 408 408 1,222 1,222

Other 341 (450)

(369) (355)

14,362 17,748 56,168 51,631

5. Reduction of withholding and stamp tax contingent liabilities

The Company’s Portuguese cable subsidiary, Cabovisão – Televisão por Cabo, S.A. (“Cabovisão”), had recorded

contingent liabilities for withholding and stamp taxes relating to fiscal years prior to its acquisition. At the date of

acquisition, the amount accrued represented management’s best estimate based on the available information.

Management reviews its estimates periodically to take into consideration payments made relating to these

contingencies as well as newly available information which would allow the Company’s subsidiary to improve its

previous estimate. During the third quarter of fiscal 2009, Cabovisão received a preliminary report from the

Portuguese tax authorities with respect to some of the items included in the contingent liabilities. Accordingly,

management has reviewed its estimate of the contingent liabilities to reflect the new information available in this

preliminary report, and has determined that a reduction of €7 million, equivalent to $10.9 million, of the amount

previously accrued wa s required at May 31, 2009, in order to reflect management’s best estimate.

- 39 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

6. Impairment of goodwill and intangible assets

Three months ended May 31,

Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Impairment of goodwill ─ ─ 339,206 ─

Impairment of intangible assets ─ ─ 60,442 ─

─ ─ 399,648 ─

In the second quarter of fiscal 2009, the competitive position of Cabovisão in the Iberian Peninsula further

deteriorated due to the continuing unfavourable economic climate and recurring intense customer promotions and

advertising initiatives from competitors in the Portuguese market. In accordance with current accounting standards,

management considers that the continued RGU and local currency revenue decline, are more severe and persistent

than expected, resulting in a decrease in the value of the Company’s subsidiary’s investment in the Portuguese

subsidiary. As a result, the Company’s subsidiary tested goodwill and all long-lived assets for impairment at February

28, 2009.

Goodwill is tested for impairment using a two step approach. The first step consists of determining whether the fair

value of the reporting unit exceeds the net carrying amount of that reporting unit, including goodwill. In the event that

the net carrying amount exceeds the fair value, a second step is performed in order to determine the amount of the

impairment loss. The Company’s subsidiary has completed its impairment tests on goodwill and has concluded that

goodwill was impaired at February 28, 2009. As a result, an impairment loss of $339.2 million was recorded in the

second quarter. Fair value of the reporting unit was determined using the discounted cash flow method. Future cash

flows are based on internal forecasts and consequently, considerable management judgement is necessary to

estimate future cash flows. Significant changes in a ssumption s could result in further impairments of goodwil l .

Intangible assets with definite lives, such as customer relationships, must be tested for impairment by comparing the

carrying amount of the asset or group of assets to the expected future undiscounted cash flow to be generated by the

asset or group of assets. Accordingly, the Company’s subsidiary has completed its impairment test on customer

relationships at February 28, 2009, and has determined that the carrying value of customer relationships exceeds its

fair value. As a result, an impairment loss of $60.4 million was recorded in the second quarter.

- 40 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

7. Income Taxes

Three months ended May 31, Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Current 18,506 5,595 35,791 18,186

Future 7,828 4,690 566 (13,050)

26,334 10,285 36,357 5,136

The following table provides a reconciliation between Canadian statutory federal and provincial income taxes and the

consolidated income tax expen se:

Three months ended May 31, Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Income (loss) before income taxes 58,318 40,894 (262,617) 107,323

Combined income tax rate 32.49 % 33.42 % 32.49 % 33.39 %

Income taxes at combined income tax rate 18,949 13,665 (85,334) 35,840

Adjustments for loss or income subject to lower or

higher tax rates

(38)

(944)

(918)

(1,294)

Decrease in future income taxes as a result of

decreases in substantively enacted tax rates

─

(24,146)

Decrease in income tax recovery arising from the

non-deductible impairment of goodwill

─

89,890

─

Utilization of pre-acquisition tax losses 6,142 ─ 6,142 ─

Decrease in income tax recovery arising from non-

deductible expenses

238

298

512

602

Effect of foreign income tax rate differences 1,127 (2,821)

25,155 (6,198)

Other (84)

87 910 332

Income taxes at effective income tax rate 26,334 10,285 36,357 5,136

- 41 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

8. Earnings (Loss) per Share

The following table provides a reconciliation between basic and diluted earnings (loss) per share:

Three months ended May 31, Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Income (loss) from continuing operations 10,480 9,538 (93,758) 33,509

Loss from discontinued operations ─ ─ ─ (18,057)

Net income (loss) 10,480 9,538 (93,758) 15,452

Weighted average number of multiple voting and

subordinate voting shares outstanding

16,758,923

16,682,468

16,746,931

16,676,369

Effect of dilutive stock options

(1)

─ 54,599 ─ 70,256

Weighted average number of diluted multiple voting

and subordinate voting shares outstanding

16,758,923

16,737,067

16,746,931

16,746,625

Earnings (loss) per share

Basic

Income (loss) from continuing operations 0.63 0.57 (5.60) 2.01

Loss from discontinued operations ─ ─ ─ (1.08)

Net income (loss) 0.63 0.57 (5.60) 0.93

Diluted

Income (loss) from continuing operations 0.63 0.57 (5.60) 2.00

Loss from discontinued operations ─ ─ ─ (1.08)

Net income (loss) 0.63 0.57 (5.60) 0.92

(1)

The weighted average dilutive number of subordinate voting shares, which were anti-dilutive for the three and nine month periods ended May 31, 2009,

amounted to 3,947 and 11,432. For the three and nine month periods ended May 31, 2009, 32,782 stock options (33,182 and 22,121 in 2008) were

excluded from the calculation of diluted earnings (loss) per share as the exercise price of the options was greater than the average share price of the

subordinate voting shares.

- 42 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

9. Goodwill and Intangible Assets

May 31, 2009 August 31, 2008

$ $

Customer relationships 34,077 101,490

Broadcasting licenses

25,120 25,120

Customer base

989,772 989,772

1,048,969 1,116,382

Goodwill

153,710 487,805

1,202,679 1,604,187

a) Intangible assets

During the first nine months, intangible assets variations were as follows:

Customer

relationships

Broadcasting

licenses

Customer

Base

Total

$ $ $ $

Balance at August 31, 2008 101,490 25,120 989,772 1,116,382

Amortization (9,126)

─ ─ (9,126)

Foreign currency translation adjustment 2,155 ─ ─ 2,155

Impairment (note 6) (60,442)

─ ─ (60,442)

Balance at May 31, 2009 34,077 25,120 989,772 1,048,969

b) Goodwill

During the first nine months, goodwill variation was as follows:

Balance at August 31, 2008 487,805

Foreign currency translation adjustment 11,253

Recognition of pre-acquisition tax losses (6,142)

Impairment (note 6) (339,206)

Balance at May 31, 2009 153,710

- 43 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

10. Long-Term Debt

Maturity Interest rate May 31, 2009 August 31, 2008

% $ $

Parent company

Term Facility 2011

(1)

3.11

(2)

11,853 18,748

Obligations under capital leases 2013 6.61 – 9.29 100 77

Subsidiaries

Term Facility

Term loan – €94,096,350 2011 1.69

(2)(5)

144,712

145,832

Term loan – €17,358,700 2011 1.69

(2)(5)

26,668

26,881

Revolving loan – €69,250,000 (€126,000,000 at August 31, 2008) 2011 1.63

(2)

106,873

196,308

Revolving loan 2011 1.22

(2)

104,918

94,375

Senior Secured Debentures Series 1 2009 6.75 149,989

149,814

Senior Secured Notes

Series A – US$150 million 2008 6.83

(3)

─

159,233

Series B 2011 7.73 174,482

174,338

Senior Secured Notes

(4)

Series A – US$190 million 2015 7.00 205,923

─

Series B 2018 7.60 54,568

─

Senior Unsecured Debenture 2018 5.94 99,782

99,768

Obligations under capital leases 2013 6.47 – 9.93 8,074 8,492

Other ─ ─ 33 47

1,087,975 1,073,913

Less current portion 177,504 336,858

910,471 737,055

(1)

In December 2008, the Term Facility has been extended for an additional year.

(2)

Average interest rate on debt at May 31, 2009, including stamping fees.

(3)

Cross-currency swap agreements have resulted in an effective interest rate of 7.254% on the Canadian dollar equivalent of the US denominated debt of the

Company’s subsidiary, Cogeco Cable Inc.

(4)

On October 1, 2008, the Company’s subsidiary, Cogeco Cable Inc., issued US$190 million Senior Secured Notes Series A maturing October 1, 2015, and

$55 million Senior Secured Notes Series B maturing October 1, 2018, net of transaction costs of $2.1 million. The Senior Secured Notes Series B bear

interest at the coupon rate of 7.60% per annum, payable semi-annually. The Company’s subsidiary has entered into cross-currency swap agreements to fix

the liability for interest and principal payments on the Senior Secured Notes Series A in the amount of US$190 million, which bear interest at the coupon rate

of 7.00% per annum, payable semi-annually. Taking into account these agreements, the effective interest rate on the Senior Secured Notes Series A is 7.24%

and the exchange rate applicable to the principal portion of the US dollar-denominated debt has been fixed at $1.0625.

(5)

On January 21, 2009, the Company’s subsidiary, Cogeco Cable Inc., entered into a swap agreement with a financial institution to fix the floating benchmark

interest rate with respect to the Euro-denominated Term Loan facilities for a notional amount of €111.5 million. The interest swap rate to hedge the Term

Loans has been fixed at 2.08% until their maturity of July 28, 2011. The notional value of the swap will decrease in line with the amortization schedule of the

Term Loans. In addition to the interest swap rate of 2.08%, the Company’s subsidiary will continue to pay the applicable margin on these Term Loans in

accordance with the Term Facility.

- 44 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

11. Capital Stock

Authorized, an unlimited number

Preferred shares of first and second rank, issuable in series and non-voting, except when specified in the Articles of

Incorporation of the Company or in the Law.

Multiple voting shares, 20 votes per share.

Subordinate voting share, 1 vote per share.

May 31, 2009 August 31, 2008

$ $

Issued

1,842,860 multiple voting shares 12 12

14,942,470 subordinate voting shares (14,897,586 at August 31, 2008) 120,994 120,037

121,006 120,049

During the first nine months, subordinat e voting share transactions were a s follows:

Number of shares Amount

Balance at August 31, 2008 14,897,586 120,037

Shares issued for cash under the Employee Stock Purchase Plan and Stock Option Plan 44,884 957

Balance at May 31, 2009 14,942,470 120,994

Stock-based plans

The Company offers, for the benefit of its employees and those of its subsidiaries, an Employee Stock Purchase Plan

and a Stock Option Plan for certain executives, which are described in the Company’s annual consolidated financial

statements. During the first nine months of 2009 and 2008, no stock options were granted to employees by COGECO

Inc. However, the Company’s subsidiary, Cogeco Cable Inc., granted 138,381 stock options (113,084 in 2008) with

an exercise price ranging from $31.90 to $34.46 ($41.45 to $49.82 in 2008), of which 29,711 stock options (22,683 in

2008) were granted to COGECO Inc.’s employees. The Company records compensation expense for options granted

on or after September 1, 2003. As a result, a compensation expense of $310,000 and $585,000 ($595,000 and

$1,502,000 in 2008) was recorded for the three and nine month periods ended May 31, 2009.

- 45 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

11. Capital Stock (continued)

The fair value of stock options granted by the Company’s subsidiary, Cogeco Cable Inc., for the nine months period

ended May 31, 2009 was $7.70 ($12.59 in 2008) per option. The fair value was estimated at the grant date for

purposes of determining the stock-based compensation expense using the binomial option pricing model based on

the following assumptions:

2009 2008

% %

Expected dividend yield

1.40 0.90

Expected volatility

29 27

Risk-free interest rate

4.22 4.25

Expected life in years

4.0 4.0

At May 31, 2009, the Company had outstanding stock options providing for the subscription of 79,650 subordinate

voting shares. These stock options can be exercised at various prices ranging from $20.95 to $37.50 and at various

dates up to October 19, 2011.

The Company also offers a senior executives and designated employee incentive unit plan (the “Incentive Share Unit

Plan”) which is described in the Company’s annual consolidated financial statements. During the first nine months,

the Company granted 17,702 Incentive Share Units (12,852 in 2008). These shares were purchased for a cash

consideration of $325,000 ($468,000 in 2008) and are held in trust for participants until they are completely vested.

The trust, considered as a variable interest entity, is consolidated in the Company’s financial statements with the

value of the acquired shares presented as treasury shares in reduction of capital stock. A compensation expense of

$133,000 and $371,000 ($95,000 and $258,000 in 2008) was recorded for the three and nine month periods ended

May 31, 2009 related to this plan.

The Company and its subsidiary, Cogeco Cable Inc., offer deferred share unit plans (“DSU Plans”) which are

described in the Company’s annual consolidated financial statements. During the first nine months, 11,113 and 6,282

deferred share units were awarded to the participants in connection with the DSU Plans by the Company and its

subsidiary, respectively. Recovery of expense of $47,000 and expenses of $304,000 were recorded for the three and

nine month periods ende d May 31, 2009 for the liabilities related to these plans.

12. Accumulated Other Comprehensive Income

Translation of a net

investment in self-

sustaining foreign

subsidiaries

Cash flow hedges

Total

$ $ $

Balance at August 31, 2008 5,064 (100)

4,964

Other comprehensive income (loss) 3,102 (2,202)

900

Balance at May 31, 2009 8,166 (2,302)

5,864

- 46 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

13. Statements of Cash Flows

a) Changes in non-cash operating items

Three months ended May 31, Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Accounts receivable 475 (1,869)

(19) (6,148)

Income taxes receivable (1,468)

199 (7,990) 1,406

Prepaid expenses (2,200)

1,222 (2,026) 2,418

Accounts payable and accrued liabilities (5,732)

11,371 (34,730) (20,995)

Income tax liabilities 16,437 5,643 6,852 13,833

Deferred and prepaid income and other liabilities (357)

259 41 (894)

7,155 16,825 (37,872) (10,380)

b) Other information

Three months ended May 31, Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Fixed asset acquisitions through capital leases 1,162 971 2,423 2,417

Interest paid 22,518 20,319 56,488 53,063

Income taxes paid (received) 3,168 (245)

36,563 2,895

14. Employees Future Benefits

The Company and its Canadian subsidiaries offer their employees contributory defined benefit pension plans, a

defined contribution pension plan or collective registered retirement savings plans, which are described in the

Company’s annual con solidated financial statements. The total expenses rel ated to these plans are as follows:

Three months ended May 31, Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Contributory defined benefit pension plans 767 657 2,261 1,973

Defined contribution pension plan and collective

registered retirement savings plans

1,093

861

2,919

2,283

1,860 1,518 5,180 4,256

- 47 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

15. Financial and Capital Management

a) Financial management

Management’s objectives are to protect COGECO Inc. and its subsidiaries against material economic exposures and

variability of results and against certain financial risks including credit risk, liquidity risk, interest rate risk and foreign

exchange risk.

Credit risk

Credit risk represents the risk of financial loss for the Company if a customer or counterparty to a financial asset fails

to meet its contractual obligations. The Company is exposed to credit risk arising from the derivative financial

instruments, cash and cash equivalents and trade accounts receivable, the maximum exposure of which is

represented by the carrying amounts reported on the balance sheet.

Credit risk from the derivative financial instruments arises from the possibility that counterparties to the cross-currency

swap and interest rate swap agreements may default on their obligations in instances where these agreements have

positive fair values for the Company. The Company reduces this risk by completing transactions with financial

institutions that carry a credit rating equal to or superior to its own credit rating. The Company assesses the

creditworthiness of the counterparties in order to minimize the risk of counterparties default under the agreements. At

May 31, 2009, management believes that the credit risk relating to its swaps is minimal, since the lowest credit rating

of the counterparties to the agreements is A

–

Cash and cash equivalents consist mainly of highly liquid investments, such as money market deposits. The

Company has deposited the cash and cash equivalents with reputable financial institutions, from which management

believes the risk of loss to be remote.

The Company is also exposed to credit risk in relation to its trade accounts receivable. In the current global economic

environment, the Company’s credit exposure is higher but it is difficult to predict the impact this could have on the

Company’s accounts receivable balances. To mitigate such risk, the Company continuously monitors the financial

condition of its customers and reviews the credit history or worthiness of each new major customer. At May 31, 2009,

no customer balance represents a significant portion of the Company’s consolidated trade receivables. The Company

establishes an allowance for doubtful accounts based on specific credit risk of its customers by examining such

factors as the number of overdue days of the customer’s balance outstanding as well as the customer’s collection

history. The Company believes that its allowance for doubtful accounts is sufficient to cover the related credit risk. The

Company has credit policies in place and has established various credit controls, including credit checks, deposits on

accounts and advance billing, and has also established procedures to suspend the availability of services when

customers have fully utilized approved credit limits or have violated existing payment terms. Since the Company has a

large and diversified clientele dispersed throughout in it’s market area in Canada and Portugal, there is no significant

concentration of credit risk. The following table provides further details on the Company’s accounts receivable

balances:

May 31, 2009 August 31, 2008

$ $

Trade accounts receivable 77,408 73,160

Allowance for doubtful accounts

(17,297) (13,181)

60,111 59,979

Other accounts receivable

4,921 4,931

65,032 64,910

- 48 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

15. Financial and Capital Management (continued)

The following table provides further details on trade accounts receivable, net of allowance for doubtful accounts.

Trade accounts receivable past due is defined as amount outstanding beyond normal credit terms and conditions for

the respective customers. A large portion of Cogeco Cable Inc.’s customers are billed in advance and are required to

pay before their services are rendered. The Company considers amount outstanding at the due date as trade

accounts receivable past due.

May 31, 2009 August 31, 2008

$ $

Net trade accounts receivable not past due 44,676 43,659

Net trade accounts receivable past due

15,435 16,320

60,111 59,979

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The

Company manages liquidity risk through the management of its capital structure and access to different capital

markets. It also manages liquidity risk by continuously monitoring actual and projected cash flows to ensure sufficient

liquidity to meet its obligations when due. At May 31, 2009, the available amount of the Company’s Term Facilities

was $497.6 million. Management believes that the committed Term Facilities will, until their maturities in July 2011

and December 2011, provide sufficient liquidity to manage its long-term debt maturities and support working capital

requirements.

The following table summarizes the contractual maturities of the financial liabilities and related capital amounts:

2009 2010 2011 2012 2013 Thereafter Total

(three months) (twelve months) (twelve months) (twelve months) (twelve months)

$ $ $ $ $ $ $

Bank indebtedness 55,406 ─ ─ ─ ─ ─ 55,406

Accounts payable and accrued liabilities 212,518 ─ ─ ─ ─ ─ 212,518

Long-term debt

(1)

174,218 40,357 319,340 187,000 ─ 362,423 1,083,338

Derivative financial instruments

Cash outflows (Canadian dollar) ─ ─ ─ ─ ─ 201,875 201,875

Cash inflows (Canadian dollar

equivalent of US dollar)

─

(207,423)

Obligations under capital leases

(2)

1,941 3,276 2,350 1,616 295 6 9,484

444,083 43,633 321,690 188,616 295 356,881 1,355,198

(1)

Principal excluding obligations under capital leases.

(2)

Including interest.

- 49 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

15. Financial and Capital Management (continued)

The following table is a summary of interest payable on long-term debt (excluding interest on capital leases) that are

due for each of the next five years and thereafter, based on the principal and interest rate prevailing on the current

debt at May 31 and their respective maturitie s:

2009 2010 2011 2012 2013 Thereafter Total

(three months) (twelve months) (twelve months) (twelve months) (twelve months)

$ $ $ $ $ $ $

Interest payments on long-term debt 11,081 43,994 42,968 26,999 24,636 78,210 227,888

Interest payments on derivative

financial instruments

4,812

18,696

17,398

14,614

30,445

100,579

Interest receipts on derivative financial

instruments

(4,322)

(16,957)

(16,182)

(14,520)

(30,249)

(96,750)

11,571 45,733 44,184 27,093 24,730 78,406 231,717

Interest rate risk

The Company is exposed to interest rate risks for both fixed interest rate and ﬂoating interest rate instruments.

Fluctuations in interest rates will have an effect on the valuation and collection or repayment of these instruments. At

May 31, 2009, all of the Company’s long-term debt was at fixed rate, except for the Company’s Term Facilities. On

January 21, 2009, the Company’s subsidiary, Cogeco Cable Inc., entered into a swap agreement with a financial

institution to fix the floating benchmark interest rate with respect to the Euro-denominated Term Loan facilities for a

notional amount of €111.5 million. The interest swap rate to hedge the Term Loans has been fixed at 2.08% until their

maturity of July 28, 2011. The notional value of the swap will decrease in line with the amortization schedule of the

Term Loans. In addition to the interest swap rate of 2.08%, the Company subsidiary will continue to pay the applicable

margin on these Term Loans in accordance with the Term Facility. The Company’s subsidiary elected to apply cash

flow hedge accounting on this derivative financial instrument. The sensitivity of the Company’s annual financial

expense to a variation of 1% in the interest rate applicable to the Term Facilities is approximately $2.2 million based

on the current debt at May 31, 2009 and taking into consideration the effect of the interest rate swap agreement.

Foreign exchange risk

The Company is exposed to foreign exchange risk related to its long-term debt denominated in US dollars. In order to

mitigate this risk, the Company has established guidelines whereby currency swap agreements can be used to fix the

exchange rates applicable to its US dollar denominated long-term debt. All such agreements are exclusively used for

hedging purposes. Accordingly, on October 2, 2008, the Company’s subsidiary, Cogeco Cable Inc., entered into

cross-currency swap agreements to set the liability for interest and principal payments on its US$190 million Senior

Secured Notes Series A issued on October 1, 2008. These agreements have the effect of converting the US interest

coupon rate of 7.00% per annum to an average Canadian dollar interest rate of 7.24% per annum. The exchange rate

applicable to the principal portion of the debt has been fixed at $1.0625. The Company’s subsidiary elected to apply

cash flow hedge accounting on these derivative financial instruments.

- 50 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

15. Financial and Capital Management (continued)

The Company is also exposed to foreign exchange risk on cash and cash equivalents, bank indebtedness and

accounts payable denominated in US dollars or Euros. At May 31, 2009, cash and cash equivalents denominated in

US dollars amounted to US$2,081,000 (bank indebtedness of US$286,000 at August 31, 2008) while accounts

payable denominated in US dollars amounted to US$3,875,000 (US$16,121,000 at August 31, 2008). At May 31,

2009, Euro-denominated cash and cash equivalents amounted to €1,176,000 (€219,000 at August 31, 2008) while

accounts payable denominated in Euros amounted to €50,000 (€163,000 at August 31, 2008). Due to their short-term

nature, the risk arising from fluctuations in foreign exchange rates is usually not significant, except for the unusual

high volatility of the US dollar compared to the Canadian dollar during the first nine months of fiscal 2009. During the

nine month period ended May 31, 2009, the exchange rate increased from $1.0620 at August 31, 2008, to $1.0917 at

May 31, 2009, reaching a high of $1.2991 on March 9, 2009. The impact of a 10% change in the foreign exchange

rates (US dollar and Euro s) would change financial expense by app roximately $22,000.

Furthermore, the Company’s net investment in self-sustaining foreign subsidiaries is exposed to market risk

attributable to fluctuations in foreign currency exchange rates, primarily changes in the values of the Canadian dollar

versus the Euro. This risk is mitigated since the major part of the purchase price for Cabovisão-Televisão por Cabo,

S.A. was borrowed directly in Euros. At May 31, 2009, the net investment amounted to €184,959,000 (€446,051,000

at August 31, 2008) while long-term debt denominated in Euros amounted to €180,705,000 (€237,455,000 at

August 31, 2008). The exchange rate used to convert the Euro currency into Canadian dollars for the balance sheet

accounts at May 31, 2009 was $1.5433 per Euro compared to $1.5580 per Euro at August 31, 2008. The impact of a

10% change in the exchange rate of the Euro into Canadian dollars would change financial expense by approximately

$0.7 million and other comprehensive income by approximately $0.2 million.

Fair value

Fair value is the amount at which willing parties would accept to exchange a financial instrument based on the current

market for instruments with the same risk, principal and remaining maturity. Fair values are estimated at a specific

point in time, by discounting expected cash flows at rates for debts of the same remaining maturities and conditions.

These estimates are subjective in nature and involve uncertainties and matters of significant judgement, and

therefore, cannot be determined with precision. In addition, income taxes and other expenses that would be incurred

on disposition of these financial instruments are not reflected in the fair values. As a result, the fair values are not

necessarily the net amounts that would be realized if these instruments were settled. The carrying value of all of the

Company’s financial instru ments approximates fair value, except as otherwise noted in the following table:

May 31, 2009 August 31, 2008

Carrying value Fair value Carrying value Fair value

$ $ $ $

Long-term debt 1,087,975 1,076,624 1,073,913 1,068,469

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COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

15. Financial and Capital Management (continued)

b) Capital management

The Company’s objectives in managing capital are to ensure sufficient liquidity to support the capital requirements of

its various businesses, including growth opportunities. The Company manages its capital structure and makes

adjustments in light of general economic conditions, the risk characteristics of the underlying assets and the

Company’s working capital requirements. Management of the capital structure involves the issuance of new debt, the

repayment of existing debts using cash g enerated by operations and the level of distribution to shareholders.

The capital structure of the Company is composed of shareholders’ equity, bank indebtedness, long-term debt and

assets or liabilities related to derivative financial instru ments.

The provisions under the Term Facilities provide for restrictions on the operations and activities of the Company.

Generally, the most significant restrictions relate to permitted investments and dividends on multiple and subordinate

voting shares, as well as incurrence and maintenance of certain financial ratios primarily linked to the operating

income before amortization, financial expense and total Indebtedness. At May 31, 2009, the Company was in

compliance with all debt covenants a nd was not subject to any other externally imposed capital requirements.

The following table summarizes certain of the key ratios used by management to monitor and manage the Company’s

capital structure:

May 31, 2009 August 31, 2008

Net indebtedness

(1)

/ Shareholders’ equity 3.4 2.7

Net indebtedness

(1)

/ Operating income before amortization

(2)

2.2 2.5

Operating income before amortization / Financial expense

(3)

6.8 6.3

(1)

Net indebtedness is defined as the total of bank indebtedness, long-term debt and derivative financial instrument liability, less cash and cash equivalents.

(2)

Calculation based on operating income before amortization for the last twelve month periods ended May 31, 2009 and August 31, 2008.

(3)

Calculation based on operating income before amortization and financial expense for the nine month period ended May 31, 2009 and twelve month period

ended August 31, 2008.

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COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2009

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

16. Discontinued Operations

In October 2007, the Board of Directors of TQS, an indirect subsidiary of the Company, engaged CIBC World Markets

to advise on and assess strategic options for the TQS network in the face of financial difficulties. On December 18,

2007, the Québec Superior Court issued an order under the Companies’ Creditors Arrangement Act (Canada)

protecting TQS, its subsidiaries and its parent 3947424 Canada Inc. (“TQS Group”) from claims by their creditors. On

June 26, 2008, the Canadian Radio-television and Telecommunications Commission (“CRTC”) approved the

proposed transfer of ownership and control of TQS to Remstar Corporation Inc. (“Remstar”) and on August 29, 2008,

the transfer of ownership and control of TQS to Remstar was completed, which allowed the new ownership group to

pursue the broadcasting activities of TQS.

Effective December 18, 2007, the Company has ceased to consolidate the financial statements of the TQS Group.

Accordingly, the results of operations and cash flows for the three month period ended November 30, 2007, has been

reclassified as disco ntinued operations. The results of the discontinued operations were as follows:

Three months ended May 31, Nine months ended May 31,

2009 2008 2009 2008

$ $ $ $

Revenue ─ ─ ─ 38,499

Operating costs ─ ─ ─ 35,822

Operating income before amortization ─ ─ ─ 2,677

Amortization ─ ─ ─ 1,364

Operating income ─ ─ ─ 1,313

Financial expense ─ ─ ─ 291

Impairment of assets ─ ─ ─ 30,298

Loss before income taxes and the following items ─ ─ ─ (29,276)

Income taxes ─ ─ ─ ─

Non-controlling interest ─ ─ ─ (11,219)

Loss from discontinued operations ─ ─ ─ (18,057)

17. Subsequent event

On June 9, 2009, the Company’s subsidiary, Cogeco Câble Inc., completed, pursuant to a public debt offering, the

issue of 5.95% Senior Secured Debentures Series 1 for $300 million maturing June 9, 2014. The Debentures were

priced at $99.881 per $100 principal amount for an effective yield of 5.98% per annum. The net proceeds of sale of

the Debentures were used to reimburse Cogeco Cable Inc.’s existing indebtedness and for general corporate

purposes.

18. Comparative figures

Certain comparative figures have been reclassified to conform to the current year’s presentation to reflect the

reclassification of foreign exchange gains or losses from operating costs to financial expense.