CABLE AND RADIO: COGECO GROWTH MAIN DRIVERS.

Press release

For immediate release

Cable and radio: COGECO growth main drivers

Montréal, July 6, 2007 – Today, COGECO Inc. (TSX: CGO) announced its financial results for the

third quarter ended May 31, 2007.

For the third quarter of fiscal 2007, COGECO’s improved results are mainly due to its cable

subsidiary’s performance. On a consolidated basis, revenue increased by 46.2% reaching

$277.4 million and operating income before amortization improved by 44.4%, standing at

$95.5 million. Net income decreased by $2.5 million, or 44.7% compared to the same period last

year mainly due to a non recurring charge in the quarter. The cable subsidiary continued to exceed

the last financial projections. Revenue generating units (RGUs) are up as well as overall financial

results. The media sector improved its revenue mainly due to the performance of the radio and

despite the highly competitive environment in the television market.

Cable sector

Cogeco Cable’s results are still ahead of its last financial projections. Revenue was up 56.3%

reaching $240.6 million and operating income before amortization improved by 54.8%, standing at

$97.9 million.

“Our financial results exceed last April’s guidance. Our Canadian and Portuguese subsidiaries are

experiencing a steady progression thanks to a continuous improved penetration of our Digital

Telephony service in Canada and improved penetration of all services in Portugal. Our customers

appreciate our triple play of leading video, internet and voice services,” said Mr. Louis Audet,

President and CEO of COGECO.

Media sector

“In Radio, RYTHME FM maintains its first position in the Montreal market. Our Trois-Rivières and

Sherbrooke stations are progressing well and we are continuing to recapture market share with our

two radio stations in Quebec City. In Television, TQS maintained the second position among all

the other conventional television networks despite the fact that competition is fiercer than ever in

this market,” added Mr. Audet.

Revised 2007 projections and preliminary guidelines for 2008

To better reflect the improved performance of the cable sector for the first nine months of fiscal

2007 and to take into consideration a non-recurring charge of $ 2.5 million recorded in the third

quarter of fiscal 2007, management has revised its projections for the fiscal year 2007. Therefore,

consolidated revenue should reach approximately $1,075 million, operating income before

amortization $363 million and net income should stand at $48 million.

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In addition, the Company announced its 2008 preliminary guidelines, setting revenue outlook at

about $1,190 million, operating income before amortization to approximately $425 million and free

cash flow

to approximately $60 million.

FINANCIAL HIGHLIGHTS

Quarters ended May 31,

Nine months ended May 31,

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

(unaudited)

2007 2006

Change

2007 2006

Change

Revenue $

277,364

189,718 46.2 $

801,776 $ 547,555 46.4

Operating income before amortization

95,495

66,111 44.4 267,531 184,469

45.0

Net income 3,059

5,529 (44.7)

44,356

12,801 -

Cash flow from operations

(1)

76,282

52,093 46.4 201,583 140,579 43.4

Less:

Capital expenditures and increase in deferred

charges

58,377

38,463 51.8 186,378 112,822 65.2

Free cash flow

(1)

17,905

13,630 31.4 15,205 27,757 (45.2)

Per share data

Basic net income $

0.18

0.33 (45.5) $

2.67 $ 0.78 -

(1)

Cash flow from operations and free cash flow do not have standard definitions prescribed by Canadian generally accepted accounting

principles (GAAP) and should be treated accordingly. For more details, please consult the Non-GAAP financial measures section.

FORWARD-LOOKING STATEMENT

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

securities laws. Forward-looking information may relate to our future outlook and anticipated events, our

business, our operations, our financial performance, our financial condition or our 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 our future

operating results and economic performance and our 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 we believe are

reasonable as of the current date. While we consider these assumptions to be reasonable based on

information currently available to us, they may prove to be incorrect. Forward-looking information is also

subject to certain factors, including risks and uncertainties (described in the section “Uncertainties and main

risk factors” of the Company’s 2006 annual MD&A) that could cause actual results to differ materially from

what we currently expect. 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 our control. Therefore, future

events and results may vary significantly from what we currently foresee. You should not place undue

importance on forward-looking information and should not rely upon this information as of any other date.

While we may elect to, we are under no obligation (and expressly disclaim any such obligation) and do not

undertake to update or alter this information before next quarter.

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

prepared in accordance with Canadian GAAP and the MD&A included in the Company’s 2006 Annual

Report. Throughout this discussio n, all amounts are in Canadian dollars unless otherwise indi cated.

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MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)

CORPORATE STRATEGIES AND OBJECTIVES

COGECO’s objectives are to maximize shareholder value by increasing profitability and by

ensuring continued growth. The strategies for reaching those objectives are, for the cable sector,

constant corporate growth through the diversification and improvement of products and services as

well as clientele and territories, effective management of capital and tight cost control. The media

sector focuses on continuous improvement of its programming to increase its market share, and

therefore, its profitability. The Company measures its performance with regard to these objectives

with operating income before amortization growth, free cash flow

and RGU

growth for the cable

sector. Below are the recent achievements of the cable and media sectors in furtherance of

COGECO’s objectives.

Tight control over costs, business processes

• During the third quarter and the first nine months of fiscal 2007, the Company’s operating

costs increased by 47.1% over the same period last year, essentially in line with revenue

growth;

• The design of internal controls over financial reporting as per National Instrument 52-109 is

still underway. As discussed in the 2006 annual MD&A, the Company had identified certain

material weaknesses in the design of internal controls over financial reporting. During the

first quarter of fiscal 2007 for the media sector and the third quarter of fiscal 2007 for the

Portugal operations, the employees have received the corporate Code of Ethics. Other

than these remediations, there have been no changes to the identified material

weaknesses since August 31, 2006. The documentation and remediation of internal

controls are progressing normally.

Cable sector

Sustained corporate growth

Canadian operations

• Digital Television services:

o On March 26, 2007, signature of an agreement with Twentieth Century Fox Film

Corporation for the Video On Demand (VOD) offering;

o Addition of three High Definition (HD) channels to the HD offering in Ontario, on

March 27, 2007;

o On June 5, 2007, addition of six HD channels to the HD offering in Québec.

• Digital Telephony service:

o Available to 77% of homes passed in Cogeco Cable’s territories, as at May 31,

2007;

o Since February 28, 2007, deployment of the Digital Telephony service in Trenton,

Belleville, Cannifton, Amherstburg and Belle River in Ontario, as well as Plessisville

in Québec.

See the “Non-GAAP financial” section for explanations.

See the “Customer statistics” section of the cable sector section for detailed explanations.

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• High Speed Internet service (HSI):

o On March 9, 2007, access to Wi-Fi connections for Cogeco Cable Ontario

customers in Burlington, Oakville and Hamilton.

Portuguese operations and its integration

• Cabovisão

- Televisão por Cabo, S.A. (Cabovisão) is in the process of completing its plan

to launch its Digital Television service during fiscal 2007.

Continuous improvement of networks and equipment

• During the first nine months of fiscal 2007, Cogeco Cable has invested approximately

$74 million in its infrastructure including head-ends and upgrade/rebuild.

Effective management of capital

• The cable subsidiary redeemed the remaining $35.7 million of its $125 million 8.44%

Second Secured Debentures due July 31, 2007.

Media sector

• During the third quarter, TQS has continued its programming investment in order to

recapture market share. Management is confident that Fall programming will enable TQS to

progress.

• RYTHME FM was confirmed, with the announcement of the last BBM survey, to be in top

position in the Montreal market and is gaining market share in its Trois-Rivières and

Sherbrooke stations. The 93

and RYTHME FM stations in Québec City continue to gain

new listeners in a particularly competitive market.

RGU growth

During the first nine months of fiscal 2007, the consolidated number of RGUs increased by 11.5%

to reach almost 2.44 million units, en route towards the achievement of Cogeco Cable’s 2007

revised projections of 13% to 14% for the fiscal year 2007.

Revenue and operating income before amortization growth

During the third quarter and first nine months, consolidated revenue increased respectively by

46.2% to reach $277.4 million and by 46.4% to reach $801.8 million. For the same periods,

operating income before amortization grew by $29.4 million, or 44.4%, to reach $95.5 million and

by $83.1 million, or 45%, to reach $267.5 million, mainly due to stronger RGU growth and to the

consolidation of the financial results of Cabovisão acquired on August 1, 2006 in the cable sector.

Considering the improved performance of the cable sector during the first nine months of fiscal

2007, management has revised its projections for the fiscal year 2007. Subsequent to these

adjustments, revenue is now expected to reach between $1,070 million and $1,075 million while

operating income before amortization should decrease to $363 million, mainly due to a non-

recurring charge of approximately $2.5 million recorded in the third quarter of fiscal 2007 with

regards to the termination of the Senior Management’s Performance Unit Plan. Please consult the

‘’Fiscal 2007 financial guidelines’’ section for further details.

Free cash flow

In the third quarter of fiscal 2007, COGECO generated free cash flow of $17.9 million, compared to

$13.6 million for the same period last year, as a result of an increase in operating income before

amortization in the cable sector. For the nine month period ended May 31, 2007, the Company

generated a free cash flow of $15.2 million compared to $27.8 million for the same period the year

before, mainly due to higher capital expenditures in order to sustain RGU growth in the cable

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sector. Capital expenditures and deferred charges amounted to $58.4 million and $186.4 million

for the third quarter and first nine months of 2007. The increase in capital expenditures for the

cable sector in the first nine months also includes the acquisition of customer premise equipment

amounting to approximately $8 million to serve expected RGU growth.

The free cash flow for fiscal 2007 should remain between $10 million to $15 million. Please consult

the ‘’Fiscal 2007 financial guidelines’’ section for further details.

OPERATING RESULTS – CONSOLIDATED OVERVIEW

Quarters ended May 31,

Nine months ended May 31,

($000s, except percentages)

2007

2006

Change

2007 2006

Change

Revenue $ 277,364 $

189,718 46.2 $

801,776 $ 547,555 46.4

Operating costs 181,869 123,607 47.1 534,245 363,086 47.1

Operating income before amortization

95,495 66,111 44.4 267,531 184,469 45.0

Operating margin 34.4 %

34.8 %

33.4 % 33.7 %

Revenue

Revenue, for the third quarter and the first nine months of 2007 rose by $87.6 million, or 46.2%, to

reach $277.4 million and by $254.2 million, or 46.4%, to reach $801.8 million respectively,

compared to the same periods last year. Cable revenue, driven by a strong RGU growth together

with rate increases and the consolidation of the financial results of Cabovisão, went up by

$86.7 million, or 56.3%, and $249.4 million, or 56%, respectively, in the third quarter and the first

nine months of fiscal 2007. Media revenue increased by $1 million or 2.8% in the third quarter and

by $4.8 million, or 4.7% in the first nine months essentially due to higher radio advertising revenue.

Operating income before amortization

Operating income before amortization grew by $29.4 million, or 44.4%, to reach $95.5 million in

the third quarter of fiscal 2007, respectively, and by $83.1 million, or 45%, to reach $267.5 million

in the first nine months of fiscal 2007 compared to the corresponding periods of last year. The

cable sector contributed to the growth by $34.6 million and $88.2 million during the third quarter

and the first nine months, partly reduced by $0.5 million in the third quarter and $0.3 million in the

first nine months in the media sector.

FIXED CHARGES

Quar ters ended May 31,

Nine months ended May 31,

($000s, except percentages)

2007

2006

Change

2007 2006

Change

Amortization $ 48,835 $ 30,658 59.3 $ 139,786 $ 90,758 54.0

Financial expense

21,851

14,120 54.8

67,791

42,312 60.2

Amortization amounted to $48.8 million and $139.8 million during the third quarter and the first

nine months of fiscal 2007 compared to $30.7 million and $90.8 million for the same periods the

year before. Amortization increased mainly as a result of the consolidation of the financial results

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of Cabovisão and to the increased capital expenditures arising from customer growth resulting in

higher demand for customer premise equipment, scalable infrastructure, upgrade/rebuild, support

capital and deferred charges in the cable sector.

During the third quarter and first nine months of fiscal 2007, financial expense increased by

$7.7 million and $25.5 million respectively, compared to the same periods in fiscal 2006. This is

due to the higher level of Indebtedness (defined as bank indebtedness and long-term debt)

required to finance the acquisition of the Portuguese subsidiary, Cabovisão, and to a non recurring

charge of $2 million during the quarter in connection with its financing.

INCOME TAXES

For the third quarter of fiscal 2007, income taxes amounted to $9.7 million compared to

$8.5 million in fiscal 2006. The increase is mainly due to higher operating income before

amortization net of fixed charges in the cable sector, partly offset by an adjustment of $2.2 million

of income taxes in the media sector. For the first nine months of fiscal 2007, income taxes

amounted to $18.7 million compared to $20.8 million for the same period last year. The income tax

decrease was attributable to the cable sector’s and mainly due to the elimination of Canadian

federal capital tax on January 1, 2006 and to the recognition in the second quarter of benefits

related to prior years’ minimum income tax paid, partly offset by an increase in operating income

before amortization surpassing the increase in fixed charges.

NON-CONTROLLING INTEREST

The non-controlling interest represents approximately a 65% interest in Cogeco Cable’s results

and a 40% interest in TQS Inc. During the third quarter and first nine months of fiscal 2007, the

non-controlling interest amounted to $12 million and $27.8 million, mainly due to the cable sector

results. The non-controlling interest for the comparable periods of last year amounted to

$7.3 million and $17.6 million respectively.

NET INCOME

Net income for the third quarter of fiscal 2007 amounted to $3.1 million, or $0.18 per share,

compared to $5.5 million, or $0.33 per share, for the same p e riod last year. The decrease is mainly

attributable to a non recurring charge of $2.5 million incurred during the quarter for the termination

of the Company’s Senior Manageme nt Performance Unit Plan and to an adjustment of $2.2 million

of income taxes in the media sector. For the first nine months of fiscal 2007, net income stood at

$44.4 million, or $2.67 per share, compared to $12.8 million, or $0.78 per share for the comparable

period last year. Excluding a gain on dilution of $30.9 million attributable to the issuance of shares

by Cogeco Cable during the first nine months of fiscal 2007, net income would have amounted to

$13.4 million or $0.81 per share. The net income increase, excluding the gain on dilution, is the

result of the rise in operating income before amortization outpacing fixed charges growth.

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CASH FLOW AND LIQUIDITY

Quarters ended May 31,

Nine months ended May 31,

($000s)

2007

2006

2007 2006

Operating Activities

Cash flow from operations $

76,282

52,093

201,583

140,579

Changes in non-cash operating items

(24,800)

(4,558)

(106,230) (53,643)

51,482

47,535

95,353

86,936

Investing Activities

(1)

(54,108)

(16,912)

(181,130)

(110,047)

Financing Activities

(1)

(14,501)

(30,623)

35,452

23,111

Net change in cash and cash equivalents $

(17,127)

(50,325) $ -

Effect of exchange rate changes on cash and cash

equivalents denominated in foreign currencies

(1,774)

1,486

Cash and cash equivalents at beginning

41,578

71,516

Cash and cash equivalents at end $

22,677

(1) Excludes assets acquired under capital leases.

During the third quarter of 2007, cash flow from operations reached $76.3 million, 46.4% higher

than for the comparable period last year, primarily due to the increase in operating income before

amortization partly offset by an increase in financial expense in the cable sector, and by a decline

in the operating income before amortization in the media sector. Changes in non-cash operating

items generated greater cash outflows than for the same period last year, mainly as a result of a

decrease in accounts payable and accrued liabilities from non recurring payments made by the

cable Portuguese subsidiary in accordance with the terms of the acquisition.

During the first nine months of fiscal 2007, cash flow from operations reached $201.6 million, an

increase of 43.4% compared to the same period the year before, mostly due to the increase in

operating income before amortization partly offset by an increase in financial expense in the cable

sector. Changes in non-cash operating items generated greater cash outflows than the same

period last year, mainly as a result of a decrease in accounts payable and accrued liabilities from

non recurring payments made by the cable Portuguese subsidiary in accordance with the terms of

the acquisition and by an increase in accounts and income tax receivables.

On March 9, 2007, Cogeco Cable and Cable Satisfaction International Inc. came to an agreement

for a final adjustment of the working capital which was still outstanding since the date of

acquisition, and consequently, an amount of $3.3 million was received by Cogeco Cable during the

third quarter of fiscal 2007.

In the third quarter of fiscal 2007, investing activities stood at $54.7 million mainly due to capital

expenditures of $51.8 million and an increase in deferred charges of $6 million, partly offset by the

reimbursement of $3.3 million following the working capital final adjustment in the cable sector. For

the first nine months, investing activities stood at $181.1 million due to capital expenditures of

$164.3 million and an increase in deferred charges of $19.3 million.

During the third quarter and first nine months of fiscal 2007, the increases related to capital

expenditures compared to the same periods last year are mainly due to the following factors in the

cable sector:

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¾ The Portuguese operations capital expenditures amounted to $8.6 million and $29 million

respectively for the third quarter and the first nine months of fiscal 2007, essentially to

support RGU growth.

¾ The increase in customer premise equipment expenditures resulted from a greater demand

for HSI and Digital Telephony services, from a rise in the number of HD terminals and from

a greater ratio of digital terminals per digital home. Furthermore, customer premise

equipment amounting to approximately $8 million was acquired by Cogeco Cable during

the first nine months to serve expected RGU growth.

¾ The growth in capital expenditures for scalable infrastructure was mainly attributable to the

support of the Digital Telephony roll-out for the Canadian operations.

¾ The increase in capital expenditures associated with the network upgrade and rebuild

program for the Canadian operations was due to the acceleration of the program to expand

the bandwidth to 750 MHz and 550 MHz for the Ontario and Québec networks, and to

improve network reliability. An increase in the number of households with access to two-

way service was also a factor and the percentage of customers with access to two-way

service rose from 92% as at May 31, 2006 to 93% as at May 31, 2007.

The third quarter and first nine months of fiscal 2007 increases in deferred charges are explained

by higher reconnect costs attributable to the significant level of RGU growth.

In the third quarter of fiscal 2007, the Company generated free cash flow in the amount of

$17.9 million compared to $13.6 million the preceding year. For the first nine months of fiscal 2007,

the Company generated free cash flow in the amount of $15.2 million compared to $27.8 million for

the same period the year before. The third quarter free cash flow increase over the same period

last year is attributable to the cable sector and mainly due to growth in operating income before

amortization, partly offset by higher level of capital expenditures and deferred charges to serve

RGU growth and to support Digital Telephony service roll-out and by the increase in financial

expense. The first nine months free cash flow decrease compared to the same period in 2006 is

attributable to the cable sector and mainly due to several factors: a higher level of capital

expenditures (including the acquisition of customer premise equipment amounting to

approximately $8 million to serve expected RGU growth), deferred charges generated by RGU

growth, to support the Digital Telephony service roll-out and by the increase in financial expense.

These factors were partly offset by the growth in operating income before amortization.

During the third quarter of 2007, the level of Indebtedness decreased by $12.9 million. The

decrease in the level of Indebtedness is mainly due to the free cash flow generated of $17.9 million

and to the decrease of $18.9 million in cash and cash equivalents, partly offset by a decline of

$24.8 million in non-cash operating items. For the same period last year, Indebtedness decreased

by $28.6 million mainly due to free cash flow of $13.6 million, a decrease in restricted cash of

$20.3 million partly offset by a decrease in non-cash operating items of $4.6 million. In addition, a

dividend of $0.07 per share for subordinate and multiple voting shares, totalling $1.2 million, was

paid during the third quarter of fiscal 2007 compared to a dividend of $0.0625 per share or

$1 million for the third quarter of fiscal 2006.

During the first nine months of 2007, the level of Indebtedness decreased by $147.4 million mainly

due to the completion of a public offering of 5,000,000 subordinate shares for a net proceeds of

$184.2 million, the generated free cash flow of $15.2 million and the decrease of $48.8 million in

cash and cash equivalents, partly offset by a decline of $106.2 million in non-cash operating items.

For the same period last year, Indebtedness grew by $27.7 million mainly due to a decline in non-

cash operating items of $53.6 million partly offset by generated free cash flow of $27.8 million. In

addition, dividends totalling $3.4 million were paid during the first nine months of fiscal 2007

compared to $3.1 million for the same period the year before.

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As at May 31, 2007, the working capital deficiency was reduced by an amount of $168.2 million

mainly as a result of Cogeco Cable’s $184.2 million net proceeds of share issuance being used to

reimburse the $125 million Senior Secured debentures Series A and to the repayment of certain

suppliers subsequent to the Cabovisão acquisition. COGECO maintains a working capital

deficiency due to a low level of accounts receivable since the majority of the cable subsidiary’s

customers pay before their services are rendered, contrary to accounts payable and accrued

liabilities, which are paid after products or services are rendered. In addition, the cable subsidiary

generally uses cash and cash equivalents to reduce Indebtedness.

As at May 31, 2007, the cable subsidiary had used $606 million of its $900 million Term Facility

and the Company had drawn $16.5 million of its Term Facility.

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, 2006, there have been major changes to ‘’Fixed Assets’’, ‘’Preliminary Goodwill’’,

‘’Accounts Payable and accrued liabilities’’, ‘’Accounts receivable’’, ‘’Indebtedness’’, ‘’Cash and

cash equivalents’’, ‘’Non-controlling interest’’, ‘’Foreign currency translation adjustment’’, ‘’Pension

plan liabilities and accrued employee benefits’’ and ‘’Future income tax liabilities’’.

The $49.2 million rise in fixed assets is mainly related to increased capital expenditures to sustain

RGU growth in the cable sector during the first nine months as well as anticipated growth in the

coming months. The increase of $1 million in preliminary goodwill is mainly the result of the

appreciation of the euro currency over the Canadian dollar partly offset by an adjustment of

$6.2 million to the purchase price following the resolution of the working capital adjustments and

the reevaluation of costs related to the acquisition of Cabovisão in the cable sector. The

$15.1 million increase in accounts receivable is essentially due to an increase in the general level

of receivables in line with the revenue growth and to the euro currency appreciation over the

Canadian dollar in the cable sector. The $90.6 million and $48.8 million reductions in accounts

payable and accrued liabilities and cash and cash equivalents respectively, are related to

payments made with regards to the acquisition of Cabovisão. The $1.2 million increase in foreign

currency translation adjustment is the result of the appreciation of the euro currency over the

Canadian dollar. The $5.1 million increase in Pension plan liabilities and accrued employee

benefits is mainly the result of an adjustment of reserve for the termination of the Senior

Management Performance Unit Plan. The $8.3 million increase in Future income tax liabilities is

mainly due to the utilization of income tax losses in the cable sector. The non-controlling interest

rise of $186.2 million is mainly due to the impact of the share issuance and the increase in the

results of Cogeco Cable. The decrease in Indebtedness by $135.6 million is the result of the

factors previously discussed in the “Cash Flow and Liquidity” section.

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A description of COGECO’s share data as at June 30, 2007 is presented in the table below:

Number of shares/

options

Amount

($000s)

Common Shares

Multiple voting shares

Subordinate voting shares

1,842,860

14,827,271

118,971

Options to Purchase Subordinate Voting Shares

Outstanding options

Exercisable options

198,279

In the normal course of business, COGECO incurred financial obligations, primarily in the form of

long-term debt, operating and capital leases and guarantees. COGECO’s obligations, described in

the MD&A of the 2006 annual report, have not materially changed since August 31, 2006 except

for the repayment of the $125 million Second Secured Debentures Series A and the partial

repayment of $26.4 million of the $900 million Term Facility in the cable sector discussed in the

“Cash Flow and Liquidity” section. Furthermore, during the second quarter, Cogeco Cable has

guaranteed the payment by Cabovisão of certain taxes for municipal rights of way assessed by the

Municipality of Seixal in Portugal for the years 2004 and 2005 totalling €5.7 million (the «Tax

Amounts»), which are currently being challenged by Cabovisão. Trustworthy financial guarantees

were required under applicable Portuguese law in order for Cabovisão to challenge the Tax

Amounts and withhold payment thereof until a final judgment, no longer subject to appeal, is

rendered by the Portuguese courts having jurisdiction in this matter. As a result, Cogeco Cable

may be required to pay, upon written demand by the Municipality of Seixal, the required amounts

following final judgment up to a maximum aggregate amoun t of €5.7 million, should Cabovisão fail

to pay such required amounts.

The Company and its subsidiary, Cogeco Cable Inc., have also adopted Performan ce Units Plans

for key employees which are described in the Company’s annual consolidated financial statements

and which have been terminated. The Company has created a new senior executive designated

employee incentive unit plan. According to the new plan, senior executives and other key

employees periodically receive a given number of units which entitled the participant to receive

subordinate voting shares of the Company after three years less one day from the date of grant.

During the first nine months, the Company granted 25,556 units. The Company establishes the

value of the compensation related to the units granted based on the market value of the

Company’s subordinate voting shares at the date of grant and a compensation expense is

recognized over the vesting period, which is three years. A trust was created for the purpose of

purchasing these shares on the stock exchange in order to guard against stock price fluctuation.

The Company instructed the trustee to purchase 25,556 subordinate voting shares of the

Company on the stock market. These shares were purchased for a cash consideration of

$1,054,000

and are held in trust for participant until they are completely vested. The trust,

considered as a variable interest entity, is consolidated in the Company’s financial statement

with the value of the acquired shares presented as treasury shares in reduction of capital stock.

The termination of the old plans had a non recurring negative impact of approximately $2.5 million

during the third quarter.

DIVIDEND DECLARATION

At its July 6, 2007 meeting, the Board of Directors of COGECO declared a quarterly eligible

dividend of $0.07 per share for subordinate and multiple voting shares, payable on August 3 2007,

to shareholders of record on July 20, 2007.

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FOREIGN EXCHANGE MANAGEMENT

Cogeco Cable has entered into cross-currency swap agreements to set the liability for interest and

principal payments on its US$150 million Senior Secured Notes. These agreements have the

effect of converting the US interest coupon rate of 6.83% per annum to an average Canadian

dollar ﬁxed interest rate of 7.254% per annum. The exchange rate applicable to the principal

portion of the debt has been ﬁxed at CDN$1.5910. Amounts due under the US$15 0 million Senior

Secured Notes Series A decreased by CDN$5.4 million at the end of the third quarter compared to

August 31, 2006 due to the Canadian dollar’s appreciation. Since the Senior Secured Notes Series

A are fully hedged, the fluctuation is offset by a variation in deferred credit described in Note 7 of

the third quarter 2007 interim financial statements. The CDN$78.2 million deferred credit

represents the difference between the quarter-end exchange rate and the exchange rate on the

cross-currency swap agreements, which determine the liability for interest and principal payments

on the Senior Secured Notes Series A.

As noted in the MD&A of the 2006 annual report, the cable subsidiary’s investment in the

Portuguese subsidiary, Cabovisão, is exposed to market risk attributable to fluctuations in foreign

currency exchange rate, 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 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 CDN$1.2 million

in the first nine months of fiscal 2007 which is deferred and recorded in the foreign currency

translation adjustment. The exchange rate used by the cable subsidiary to convert the euro

currency into Canadian dollar for the balance sheet accounts as at May 31, 2007 was $1.4392 per

euro compared to $1.4156 per euro as at August 31, 2006. The average exchange rate prevailing

during the third quarter and first nine months of fiscal 2007 used to convert the operating results of

the Portuguese operations were $1.5202 per euro and $1.4946 per euro, respectively.

CABLE SECTOR

CUSTOMER STATISTICS

Canadian operations

Net additions (losses) % of Penetration

(1) (4)

Quarters ended

May 31,

Nine months ended

May 31,

2007 2007 2006 2007 2006 2007 2006

RGUs

(2)

1,748,852 35,768 48,081 192,916 163,960

Basic service customers

851,784 (2,910)

(3,349) 18,607 11,059

HSI service customers

(3)

403,473 11,030 12,378 60,393 52,831 50.7 43.1

Digital Television service customers

371,132 8,583 23,635 43,768 69,597 44.5 38.8

Digital Telephony service customers 122,463 19,065 15,417 70,148 30,473 18.5 7.6

(1)

As a percentage of basic service customers in areas served.

(2)

Represent the sum of basic service, HSI service, Digital Television service and Digital Telephony servic e customers.

(3)

Customers subscribing only to Internet or Digit al Telephony services totalled 66,072 as at May 31, 2007 compared to 60,786 as at May 31, 2006.

(4)

An audit of homes passed in Ontario was completed during the first quarter of fiscal 2007 and, as a result, the number of homes passed was reduced by 42,386.

RGUs generated lower growth in the third quarter of 2007 compared to the same period last year

mainly due to Digital Television service. During the third quarter, Digital Telephony customers grew

by 19,065 to reach 122,463 compared to a growth of 15,417 for the same period last year. This

growth is mostly attributable to the launch of the service in new markets and increased penetration

in areas where the service is offered. Coverage of homes passed has now reached 77%

compared to 50% last year. The net losses of basic service customers in the third quarter reached

- 12 -

2,910, compared to a loss of 3,349 for the same period last year mainly due to students leaving

campuses at the end of the school year. The number of net additions to HSI service stood at

11,030 compared to 12,378 for the same period last year. The growth of HSI and the reduction of

net losses for basic service customers compared to the same period last year is mostly due to the

enhancement of the product offering, the impact of the bundled offer of Television, HSI and Digital

Telephony services (Cogeco Complete Connection), and promotional activities.

The net additions of Digital Television service customers stood at 8,583 compared to 23,635 for

the same period last year. The decrease in net additions this quarter compared to the same

quarter last year reflects a maturing of the digital TV segment following a period of robust growth,

especially in the second and third quarters of fiscal 2006. Nevertheless, customers continue to

demonstrate strong interest in HD technology. Furthermore, Cogeco Cable adjusted the service

offering and price gap differential between analog TV services and Digital Television services in

the second half of fiscal 2006 which has also contributed to a moderation of the strong growth

experienced in the first nine months of fiscal 2006.

Portuguese operations

Net additions % of Penetration

(1)

May 31,

2007

Quarter ended

May 31, 2007

Nine months ended

May 31, 2007

RGUs

(2)

687,237 16,666

58,196

Basic service customers

289,247 5,694

19,553

HSI service customers

157,087 5,424

20,809

54.3

Telephony service customers 240,903 5,548 17,834 83.3

(1)

As a percentage of basic service customers in areas served.

(2) Represent the sum of basic service, HSI service and Telephony service customers.

For the third quarter, all services generated customer growth in line with the Cogeco Cable’s

guidelines. Basic service grew by 5,694 customers, HSI by 5,424 customers and Telephony by

5,548 customers.

OPERATING RESULTS

Quarters ended May 31,

Nine months ended May 31,

($000s, except percentages)

2007

2006

% Change

2007

2006 % Change

Revenue $ 240,612 $

153,956 56.3 $

694,566 $ 445,126 56.0

Operating costs 142,738 88,145 61.9 417,671 256,620 62.8

Management fees - COGECO

Inc.

- 2,567 - 8,568 8,392 2.1

Operating income before

amortization

97,874 63,244 54.8 268,327 180,114 49.0

Operating margin 40.7 %

41.1

38.6 % 40.5 %

Revenue

In the third quarter of fiscal 2007, consolidated revenue grew by $86.7 million, or 56.3%, to reach

$240.6 million and by $249.4 million, or 56% to reach $694.6 million for the first nine months of

2007. These increases are mainly due to strong RGU growth, to the consolidation of the financial

results of the Portuguese operations acquired on August 1, 2006 and to rate increases. Canadian

operations revenue, driven by an increased number of customers in basic, HSI, Digital Telephony

- 13 -

and Digital Television services as well as rate increases, went up by $28.8 million, or 18.7% in the

third quarter and by $80.5 million, or 18.1%, in the first nine months of fiscal 2007. The Portuguese

operations revenue amounted to $57.8 million for the third quarter of fiscal 2007 and to

$168.9 million for the first nine months of fiscal 2007.

Operating costs

For the third quarter and the first nine months of fiscal 2007, operating costs excluding

management fees payable to COGECO Inc. increased by $54.6 million and $161.1 million to reach

$142.7 million and $417.7 million respectively, an increase of 61.9% and 62.8% compared to last

year. The increase in operating costs is mainly attributable to the inclusion of the operating costs of

Cabovisão and to servicing additional RGU in Canada, including the increased penetration of

Digital Telephony service.

Operating income before amortization

For the third quarter and the first nine months of fiscal 2007, operating income before amortization

increased by $34.6 million, or 54.8%, to reach $97.9 million and by $88.2 million, or 49%, to reach

$268.3 million, respectively, as a result of RGU growth, the consolidation of the Portuguese

operations and rate increases outpacing increases in operating costs. Cogeco Cable’s third

quarter and first nine months’ operating margins declined from 41.1% to 40.7% and from 40.5% to

38.6% respectively as a result of the Digital Telephony deployment in Canada and the

consolidation of the Portuguese operations lower operating margin. Considering the improved

performance of Cogeco Cable during the first nine months of fiscal 2007, management has revised

upwards its projections for the fiscal year 2007. Therefore, operating income before amortization

should increase to $368 million. Please consult the ‘’Fiscal 2007 financial guidelines’’ section for

further details.

MEDIA SECTOR

OPERATING RESULTS

Quarters ended May 31,

Nine months ended May 31,

($000s, except percentages)

2007

2006

Change

2007

2006

Change

Revenue $ 36,803 $

35,813 2.8 $

107,363 $ 102,582 4.7

Operating costs 34,694 33,203 4.5 105,540 100,415 5.1

Operating income

before amortization

2,109 2,610 (19.2)

1,823 2,167 (15.9)

Operating margin

5.7 %

7.3 %

1.7 %

2.1 %

Revenue

During the third quarter of fiscal 2007, revenue stood at $36.8 million, an increase of $1 million, or

2.8%, compared to the same period last year. For the first nine month period of 2007, revenue

increased by $4.8 million, or 4.7% to reach $107.4 million. During these periods, radio revenue has

increased by 20% and 16.9% respectively, mainly due to improved audience ratings. Television

revenue has remained relatively stable in the third quarter and increased by 1.8% for the first nine

months of fiscal 2007 compared to last year even if the market conditions are difficult for generalist

- 14 -

television services. During the first nine months of fiscal 2007, TQS is the conventional television

network in the Francophone market that has limited its audience ratings decline.

Operating income before amortization

The operating income before amortization declined by $0.5 million and by $0.3 million in the third

quarter and first nine months of fiscal 2007 compared to last year. For the third quarter and first

nine months, TQS’s operating income before amortization decreased as a result of greater

investment in television programming, combined with lower revenue growth. Radio’s operating

income before amortization increased in the third quarter and first nine months due to revenue

growth.

FISCAL 2007 AND 2008 FINANCIAL GUIDELINES

($ million, except customer data)

Preliminary

Projections

Fiscal 2008

Revised

Projections

July 6, 2007

Fiscal 2007

Revised

Projections

April 11, 2007

Fiscal 2007

Consolidated Financial Guideli nes

Revenue 1,190 1,070 to 1,075 1,075 to 1,080

Operating income before amortization

425 363 365

Net income

28 48 50

Free cash flow

60 10 to 15 10 to 15

Cable sector–

Financial Guidelines

Revenue 1,050 940 945

Operating income before amortization 425 368 365

Operating margin 40% to 41% About 39% About 39%

Financial expense 80 85 85

Amortization 215 185 192

Capital expenditures and deferred charges 260 260 260

Free cash flow 60 20 15

Customer Addition Guidelines

Basic service 30,000 39,000 37,000 to 40,000

HSI service 75,000 93,000 85,000 to 90,000

Digital Television service 54,000 52,000 60,000 to 65,000

Telephony services 100,000 113,000 105,000 to 110,000

RGU 259,000 297,000 287,000 to 305,000

Media sector–

Financial Guidelines

Revenue

140 131 to 135 131 to 135

Operating income before amortization

1 to 3 1 to 3 1 to 3

Amortization

7 7 7

Capital expenditures and deferred charges

7 7 7

- 15 -

FISCAL 2007 FINANCIAL GUIDELINES

Cable sector

Given the performance of Cogeco Cable during the first nine months of fiscal 2007, management

has revised its guidelines for fiscal year 2007.

Subsequent to these adjustments, projected revenue is reduced while operating income before

amortization and net income were revised upward. Operating margin should essentially remain the

same. Revenue is reduced to reflect the improvement of the Canadian dollar compared to the euro

currency and as a result, for guideline purposes, the euro is converted at an average rate of

$1.4250 per euro while Cogeco Cable was using an average rate of $1.50 per euro last April. The

operating income before amortization increases due to the reduction in operating costs.

Cogeco Cable should generate free cash flow of $20 million and projected net income should

stand at about $68 million due to operating income before amortization improvement and reduction

in the expected amortization expense from $192 million to $185 million.

In furtherance of its existing line of business and external growth strategy, the Cogeco Cable may

investigate further cable system acquisition opportunities, including cable systems located outside

Canada over time.

Media sector

Media sector is maintaining its 2007 original financial guidelines.

Consolidated outlook

For fiscal 2007, COGECO revised from its last April projections its operating income before

amortization from $365 million to $363 million and net income from $50 million to $48 million to

take into consideration a non recurring charge of $2.5 million recorded in the third quarter with

regards to the termination of its old Senior Management Performance Unit Plan. Free cash flow

should remain between $10 million to $15 million.

FISCAL 2008 PRELIMINARY FINANCIAL OUTLOOK

Cable sector

For fiscal 2008, Cogeco Cable expects strong revenue and operating income before amortization

growth. The revenue increase of approximately 12% should come from the combined Canadian

and Portuguese operations. The Canadian operations revenue should increase by approximately

13% from continued deployment of Digital Telephony service, by expanded penetration of HSI

services in fiscal 2007 and 2008, as well as Digital Television services. In addition, rate increases

implemented in March 2007 in Ontario and in April 2007 in Quebec, of at most $3 per customer

and averaging $1 per basic service customer for both divisions and by $1.50 per Ontario Analog

Value Pak customer implemented in April 2007. Cogeco Cable plans to expand its Canadian basic

service clientele through consistently effective marketing, competitive product offering and superior

customer service. As the penetration of HSI and Digital Television services increase, the demand

for these products should slow down but be offset by increased demand for Digital Telephony

service. Revenue from the Portuguese operations should increase by approximately 11% from

€152 million to €168 million from rate increases of approximately €0.65 (CDN$1) per basic service

customer implemented in March 2007, by additional rate increases during fiscal 2008, by

sustained RGU growth from fiscal 2007 and 2008, and from the launch of Digital Television in late

Fiscal 2007. However, the Portuguese operations should also contribute by approximately 7% in

revenue growth due to the effect of the foreign exchange transaction. For fiscal 2007, the expected

- 16 -

Canadian dollar value of the euro should be approximately $1.48 per euro while for fiscal 2008,

the euro should be converted at a rate of $1.4250 per euro.

Growth in revenue and sustained cost control should help achieve a significant increase in

operating income before amortization by approximately 15%. Cogeco Cable expects to achieve an

operating margin of approximately 40% to 41%.

Cogeco Cable expects the amortization of capital assets and deferred charges to increase by

$30 million, mainly due to capital expenditures and deferred charges for RGU additions in fiscal

2007 and 2008. Management expects that cash flows generated by operations will finance capital

expenditures and deferred charges, expected to amount to $260 million, essentially the same as

for fiscal 2007. The cable subsidiary expects to generate free cash flow in the order of $60 million,

an increase of approximately $40 million compared to fiscal 2007 projections. Generated free cash

flow should be used primarily to reduce Indebtedness, thus improving Cogeco Cable’s leverage

ratios. Given the anticipated decrease in Indebtedness, financial expense will slightly decline

Media sector

Revenue should increase to approximately $140 million mainly due to improved audience ratings

in radio. Operating income before amortization, capital expenditures and deferred charges as well

as amortization should remain about the same as for fiscal 2007.

Consolidated outlook

For fiscal 2008, COGECO expects to improve operating income before amortization by

approximately 17%. Free cash flow should generate approximately $60 million and net income of

approximately $28 million should be earned as a result of growth in operating income before

amortization outpacing fixed charges.

UNCERTAINTIES AND MAIN RISK FACTORS

There has been no significant change in the risk factors and uncertainties facing COGECO as

described in the Company’s MD&A of the 2006 annual report.

ACCOUNTING POLICIES AND ESTIMATES

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

accounting pronouncements since August 31, 2006. A description of these policies and estimates

can be found in the Company’s 2006 annual MD&A.

NON-GAAP FINANCIAL 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’” and “free cash flow”.

Cash flow from operations

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

flow generated by operating activities excluding the impact of changes in non-cash operating

- 17 -

items. This allows the Company to isolate the cash flow from operating activities from the impact of

cash management decisions. Cash flow from operations is subsequently used in calculating the

Non-GAAP measure “free cash flow”. Cash flow from operations is calculated as follows:

($ 000)

Quarters ended May 31,d

August 31,

Nine months ended May 31,

2007

2006

2007

2006

Cash flow from operating activities $ 51,482 $ 47,535 $ 95,353 $ 86,936

Changes in non-cash operating items 24,800

4,558

106,230 53,643

Cash flow from operations $ 76,282 $ 52,093 $ 201,583 $ 140,579

Free cash flow

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

debt, distribute capital to its shareholders and finance its growth. Free cash flow is calculated as

follows:

($ 000)

Quarters ended May 31,

Nine months ended May 31,

2007

2006

2007

2006

Cash flow from operations

76,282 $ 52,093 $

201,583 $

140,579

Acquisition of fixed assets

(51,816) (33,035) (164,327) (98,357)

Increase in deferred charges

(6,000) (4,229) (19,258) (11,728)

Assets acquired under capital leases – as per

Note 10 b)

(561) (1,199) (2,793) (2,737)

Free cash flow

17,905 $ 13,630 $

15,205 $

27,757

ADDITIONAL INFORMATION

This MD&A was prepared on July 6, 2007. Additional information relating to the Company,

including its Annual Information Form, is available on the SEDAR Web site at www.sedar.com.

ABOUT COGECO

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

COGECO provides about 1,749,000 revenue-generating units (RGUs) to approximately 1,470,000

homes passed in its Canadian service territory and about 688,000 RGUs to approximately 849,000

homes passed in its Portuguese service territory. Through its two-way broadband cable networks,

Cogeco Cable provides its residential and commercial customers with analog and Digital

Television and services, High Speed Internet access as well as Telephony services. Through its

Cogeco Radio-Television subsidiary, COGECO holds a 60% interest and operates the TQS

network, six TQS television stations, and three French CBC-affiliated television stations in

partnership with CTV Television. Cogeco Radio-Television also wholly 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 (CGO). The subordinate voting shares of Cogeco Cable are also listed on the

Toronto Stock Exchange (CCA).

– 30 –

- 18 -

Source: COGECO Inc.

Pierre Gagné

Vice President, Finance and Chief Financial Officer

Tel.: (514) 874-2600

Information: Media

Marie Carrier

Director, Corporate Communications

Tel.: (514) 874-2600

Analyst Conference Call: Monday, July 9, 2007 at 1:30 P.M.(EDT)

Media representatives may attend as listeners only.

Please use the following dial-in number to have access to the

conference call by dialing 10 minutes before the start of the

conference:

Canada/USA Access Number: 1-800 811-7286

International Access Number: + 1-913 981-4902

Confirmation Code: 8913434

By Internet at www.cogeco.ca/investors

A rebroadcast of the conference call will be available until July 18, by

dialing:

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

International access number: + 1- 719 457-0820

Confirmation code: 8913434

- 19 -

Supplementary Quarterly Financial Information

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

2007

(1)

2006 2007

(1)

2006 2006

(1)

2005 2006

(1)

2005

($000, except percentages

and per share data)

Revenue $ 277,364 $ 189,718 $ 261,120 $

177,359 $

263,292 $

180,478 $ 199,351 $

164,210

Operating income before

amortization

95,495

66,111 83,669

57,765 88,367

60,593

68,645

56,485

Operating margin 34.4% 34.8% 32.0% 32.6% 33.6% 33.6% 34.4% 34.4%

Amortization 48,835 30,658 45,112 30,217 45,839 29,883 36,446 30,769

Financial expense 21,851 14,120 24,181 14,231 21,759 13,961 16,864 14,366

Income taxes 9,679 8,461 2,580 5,706 6,463 6,611 (13,950)

5,052

Non-controlling interest 12,007 7,293 8,240 4,842 7,557 5,455 19,022 5,422

Gain (loss) on dilution (64) - 30,990 - (7)

- - -

Net income 3,059 5,529 34,546 2,679 6,751 4,593 10,300 630

Cash flow from

operations

76,282 52,093 59,266 41,644 66,035 46,842 51,729 43,215

Net income per share $ 0.18 $ 0.33 $ 2.08 $

0.16 $

0.41 $

0.28 $ 0.62 $

0.04

(1) Include operating results of the cable subsidiary, Cabovisão, since the date of acquisition of control on August 1, 2006.

Cable sector operating results are generally not subject to material seasonal ﬂuctuations.

However, the loss of basic service customers is usually greater, and the addition of HSI customers

is generally lower in the third quarter, mainly due to students leaving campuses at the end of the

school year. However, the media sector’s operating results may be subject to significant seasonal

variations. The revenue depends on audience ratings and the market for conventional radio and

television advertising expenditures in the Province of Québec. Advertising sales, mainly national

advertising, are normally weaker in the second and fourth quarters and, as a result, the operating

margin is generally lower in those quarters.

COGECO INC. - 20 -

Customer Statistics

May 31, August 31,

2007 2006

Homes Passe

Ontario (1) 986 49

1 002 187

Québec 482 851 474 717

Canada 1 469 34

1 476 904

Portugal 848 17

826 369

Total 2 317 520 2 303 273

Revenue Generating Unit

Ontario 1 236 229 1 104 157

Québec 512 623 451 779

Canada 1 748 852 1 555 936

Portugal 687 237 629 041

Total 2 436 089 2 184 977

Basic Service Customer

Ontario 600 192 587 289

Québec 251 592 245 888

Canada 851 78

833 177

Portugal 289 247 269 694

Total 1 141 031 1 102 871

Discretionnary Service Customer

Ontario 472 003 463 783

Québec 201 42

192 895

Canada 673 427 656 678

Portugal - -

Total 673 427 656 678

Pay TV Service Customer

Ontario 90 765 84 425

Québec 41 229 38 455

Canada 131 99

122 880

Portugal 54 042 54 089

Total 186 036 176 969

High Speed Internet Service Customer

Ontario 309 85

269 328

Québec 93 619 73 752

Canada 403 473 343 080

Portugal 157 087 136 278

Total 560 560 479 358

Digital Video Service Customers

Ontario 241 801 213 556

Québec 129 331 113 808

Canada 371 132 327 364

Portugal - -

Total 371 132 327 364

Telephony Service Customer

Ontario 84 382 33 984

Québec 38 081 18 331

Canada 122 463 52 315

Portugal 240 903 223 069

Total 363 366 275 384

(1) An audit of homes passed in Ontario was completed during the first quarter of fiscal 2007 and, as a result,

the number of homes passed was reduced by 42,386

- 21 -

COGECO INC.

CONSOLIDATED STATEMENTS OF INCOME

Three months ended May 31, Nine months ended May 31,

(In thousands of dollars, except per share data)

2007

2006

2007

2006

(unaudited) (unaudited) (unaudited)

(unaudited)

Revenue $ 277,364

$ 189,718

$ 801,776

$ 547,555

Operating costs

181,869

123,607

534,245

363,086

Operating income before amo rtizatio n 95,495

66,111

267,531

184,469

Amortization (note 3)

48, 835

30,658

139,786

90,758

Operating income 46,660

35,453

127,745

93,711

Financial expense (note 7)

21,851

14,120

67,791

42,312

Income before income taxes and the following

items 24,809

21,333

59,954

51,399

Income taxes (note 4)

9,679

8,461

18,722

20,778

Non-controlling interest

12,007

7,293

27,804

17,590

Loss (gain) on dilution resulti ng from shares issued

by a subsidiary

(30,919)

Share in the earnings (loss) of a general partnership

(50)

(230)

Net income $ 3,059

$ 5,529

$ 44,356

$ 12,801

Earnings per share (no t e 5)

Basic

$0.18

$0.33

$2.67

$0.78

Diluted

0.18

0.33

2.66

0.77

- 22 -

COGECO INC.

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

Nine months ended May 31,

(In thousands of dollars)

2007

2006

(unaudited)

Balance at beginning $ 204,734

$ 185,762

Net income

44,356

12,801

Dividends on multiple voting shares

(374)

(347)

Dividends on subordinate voting shares

(2,987)

(2,749)

Balance at end $ 245,729

$ 195,467

- 23 -

COGECO INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

May 31,

2007

August 31,

2006

(unaudited)

(audited)

Assets

Current

Cash and cash equivalents

$ 22,677

$ 71,516

Restricted cash

491

569

Accounts receivable

87,113

71,989

Income tax receivable

1,480

Prepaid expenses

9,222

7,204

Broadcasting rights

12,839

15,632

133,822

166,910

Income tax receivable

1,313

Broadcasting rights

20,750

18,083

Investments

539

Fixed assets

1,098,169

1,048,998

Deferred charges

50,951

49,433

Broadcasting licenses and customer base (note 6)

1,017,892

Preliminary goodwill (note 6)

423,152

422,108

$ 2,746,588

$ 2,723,963

Liabilities and Shareholders' equity

Liabilities

Current

Bank indebtedness

$ 16,097

$ 7,891

Accounts payable and accrued liab ilities

222,193

312,837

Broadcasting rights payable

10,803

7,721

Income tax liabilities

1,307

666

Deferred and prepaid income

28,659

26,737

Current portion of long-term debt (note 7)

2,400

126,904

281,459

482,756

Long-term debt (note 7)

1,190,002

1,209,254

Share in the partner’s deficiency of a general partnership

832

841

Deferred and prepaid income

11,593

10,525

Broadcasting rights payable

5,028

5,777

Pension plan liabilities and accrued employee benefits

16,225

11,098

Future income tax liabilities

220,118

211,848

Non-controlling interest

658,783

472,605

2,384,040

2,404,704

Shareholders' equity

Capital stock (note 8)

118,983

117,552

Treasury shares (note 8)

(1,054)

Contributed surplus – stock-based compensation

2,115

1,425

Retained earnings

245,729

204,734

Foreign currency translation adjustment (note 9)

(3,225)

(4,452)

362,548

319,259

$ 2,746,588

$ 2,723,963

- 24 -

COGECO INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

Three months ended May 31, Nine months ended May 31,

(In thousands of dollars)

2007

2006

2007

2006

(unaudited)

Cash flow from operating activities

Net income

$ 3,059

$ 5,529

$ 44,356

$ 12,801

Items not affecting cash and cash equivalents

Amortization (note 3)

48,835

30,658

139,786

90,758

Amortization of deferred financing costs

532

243

1,713

724

Future income taxes (note 4)

9,163

7,391

12,542

16,609

Non-controlling interest

12,007

7,293

27,804

17,590

Loss (gain) on dilution resulti ng from shares issued

by a subsidiary

(30,919)

Stock-based compensation

2,990

720

6,078

890

Other

(368)

259

223

1,207

76,282

52,093

201,583

140,579

Changes in non-cash oper ating items (note 10a))

(24,800)

(4,558)

(106,230)

(53,643)

51,482

47,535

95,353

86,936

Cash flow from investing activities

Acquisition of fixed assets (not e 10b))

(51,816)

(33,035)

(164,327)

(98,357)

Increase in deferred charges

(6,000)

(4,229)

(19,258)

(11,728)

Decrease in restricted cash

20,322

Adjustments related to business acquisition

3,279

1,894

Other

429

473

(54,108)

(16,912)

(181,130)

(110,047)

Cash flow from financing activities

Increase (decrease) in bank i ndebtedness

736

(14,170)

8,206

13,451

Increase in long-term debt

22,861

18,000

Repayment of long-term debt

(36,487)

(14,447)

(178,487)

(3,768)

Issue of subordinate voting shares

974

1,431

1,274

Acquisition of treasury shares (note 8)

(1,054)

Dividends on multiple voting shares

(129)

(116)

(374)

(347)

Dividends on subordinate voting shares

(1,037)

(918)

(2,987)

(2,749)

Issue of subordinate voting shares by a subsidiary to

non-controlling interest, net of issue costs

1,411

190,066

166

Dividends paid by a subsidiary to non-controlling

interest

(1,776)

(972)

(4,210)

(2,916)

(14,501)

(30,623)

35,452

23,111

Net change in cash and cas h equivalents (17,127)

(50,325)

Effect of exchange rate changes on cash and cash

equivalents denominated i n foreign currencies

(1,774)

1,486

Cash and cash equivalents at beginning

41,578

71,516

Cash and cash equivalents at end $ 22,677

$ 22,677

See supplemental cash flow information in note 10.

- 25 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

1. Basis of Presentation

In the opinion of management, the accompanying unaudited interim consolidated financial statements, prepared in

accordance with Canadian generally accepted accounting principles, contain all adjustments necessary to present

fairly the financial position of COGECO Inc. as at May 31, 2007 and August 31, 2006 as well as its results of

operations and its cash flow for the three and nine month periods ended May 31, 2007 and 2006.

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, 2006. These unaudited interim consolidated financial statements follow the

same accounting policies as the most recent annual consolidated financial statements.

2. Segmented Information

The Company’s activities are divided into two business segments: Cable and Media. The Cable segment is

comprised of cable, high-speed Internet access and telephony services, and the Media segment is comprised of radio

and television operations.

The principal financi al information per business segment is presente d in the tables below:

Head Office

Cable Media and elimination Consolidated

Three months ended May 31,

(unaudited)

2007 2006 2007 2006 2007 2006 2007 2006

Revenue $ 240,612 $ 153,956 $ 36,803 $ 35,813 $ (51) $ (51) $ 277,364 $ 189,718

Operating costs 142,738 90,712 34,694 33,203 4,437 (308) 181,869 123,607

Operating income (loss) before

amortization

97,874

63,244 2,109 2,610 (4,488)

257

95,495 66,111

Amortization 47,278 29,048 1,513 1,562 44 48 48,835 30,658

Operating income (loss) 50,596 34,196 596 1,048 (4,532) 209 46,660 35,453

Financial expense 21,273 13,634 273 200 305 286 21,851 14,120

Income taxe s 8,942 8,191 1,962 (11) (1,225) 281 9,679 8,461

Net assets employed

(1) (2)

$ 2,365,939 $ 2,210,823 $ 71,817 $ 70,550 $ 7,879 $ 7,477 $ 2,445,635 $ 2,288,850

Total assets

(2)

2,616,207 2,602,603 120,796 112,609 9,585 8,751 2,746,588 2,723,963

Fixed assets

(2)

1,073,119 1,021,538 24,517 26,794 533 666 1,098,169 1,048,998

Preliminary goodwill

(2)

423,152 422,108 - - - - 423,152 422,108

Acquisition of fixed assets 51,817 33,780 560 454 - - 52,377 34,234

(1)

Total assets less cash and cash equivalents, accounts payable and accrued liabilities, broadcasting rights payable and deferred and prepaid income.

(2)

As at May 31, 2007 and August 31, 2006.

- 26 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

2. Segmented Information (continued)

Head Office

Cable Media and elimination Consolidated

Nine months ended May 31,

(unaudited)

2007 2006 2007 2006 2007 2006 2007 2006

Revenue $ 694,566 $ 445,126 $ 107,363 $ 102,582 $ (153) $ (153) $ 801,776 $ 547,555

Operating costs 426,239 265,012 105,540 100,415 2,466 (2,341) 534,245 363,086

Operating income (loss) before

amortization

268,327

180,114 1,823 2,167 (2,619)

2,188

267,531 184,469

Amortization 135,159 85,981 4,494 4,651 133 126 139,786 90,758

Operating income (loss) 133,168 94,133 (2,671) (2,484) (2,752) 2,062 127,745 93,711

Financial expense 66,045 40,992 752 522 994 798 67,791 42,312

Income taxe s 18,800 21,572 242 (1,738) (320) 944 18,722 20,778

Net assets employed

(1) (2)

$ 2,365,939 $ 2,210,823 $ 71,817 $ 70,550 $ 7,879 $ 7,477 $ 2,445,635 $ 2,288,850

Total assets

(2)

2,616,207 2,602,603 120,796 112,609 9,585 8,751 2,746,588 2,723,963

Fixed assets

(2)

1,073,119 1,021,538 24,517 26,794 533 666 1,098,169 1,048,998

Preliminary goodwill

(2)

423,152 422,108 - - - - 423,152 422,108

Acquisition of fixed assets 165,786 99,489 1,334 1,498 - 107 167,120 101,094

(1)

Total assets less cash and cash equivalents, accounts payable and accrued liabilities, broadcasting rights payable and deferred and prepaid income.

(2)

As at May 31, 2007 and August 31, 2006.

The following tables sets out certain geo graphic market information based on client’s location:

Three months ended May 31, Nine months ended May 31,

2007 2006 2007 2006

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

Revenue

Canada $ 219,515 $ 189,718 $ 632,830 $ 547,555

Europe 57,849 - 168,946 -

$ 277,364 $ 189,718 $ 801,776 $ 547,555

- 27 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

2. Segmented Information (continued)

As at May 31, As at August 31,

2007 2006

(unaudited) (audited)

Fixed assets

Canada $ 821,332 $ 768,484

Europe 276,837 280,514

Total $ 1,098,169 $ 1,048,998

Preliminary goodwill

Canada $- $-

Europe 423,152 422,108

Total $ 423,152 $ 422,108

3. Amortization

Three months ended May 31, Nine months ended May 31,

2007 2006 2007 2006

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

Fixed assets $ 43,527 $ 25,237 $ 123,759 $ 74,074

Deferred charges 5,308 5,421 16,027 16,684

$ 48,835 $ 30,658 $ 139,786 $ 90,758

4. Income Taxes

Three months ended May 31, Nine months ended May 31,

2007 2006 2007 2006

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

Current $ 516 $ 1,070 $ 6,180 $ 4,169

Future 9,163 7,391 12,542 16,609

$ 9,679 $ 8,461 $ 18,722 $ 20,778

- 28 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

4. Income Taxes (continued)

The following table provides the reconciliation between Canadian statutory federal and provincial income taxes and

the consolidated income tax expense:

Three months ended May 31, Nine months ended May 31,

2007 2006 2007 2006

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

Income before income taxes $ 24,809 $ 21,283 $ 59,963 $ 51,169

Combined income tax rate 34.47% 34.84% 34.43% 34.84%

Income taxes at combined income tax rate $ 8,552 $ 7,415 $ 20,645 $ 17,827

Loss or income subject to lower or higher tax rates (452) 75 72 341

Decrease in income taxes as a result of increase in

substantially enacted tax rates

(91)

Large corporation tax - 807 - 2,451

Effect of foreign income tax rate differences (788) - (3,037) -

Benefit related to prior years’ minimum income tax paid - - (1,475) -

Variation of the valuation allowance 2,180 - 2,180 -

Other 187 164 337 250

Income taxes at effective income tax rate $ 9,679 $ 8,461 $ 18,722 $ 20,778

5. Earnings per Share

The following table provides a recon ciliation between basic and diluted earnings per share:

Three months ended May 31, Nine months ended May 31,

2007 2006 2007 2006

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

Net income $ 3,059 $ 5,529 $ 44,356 $ 12,801

Weighted average number of multiple voting and subordinate

voting shares outstanding

16,625,479

16,538,256

16,583,850

16,495,273

Effect of dilutive stock options

(1)

87,434 131,538 100,094 133,983

Weighted average number of diluted multiple voting and

subordinate voting shares outstanding

16,712,913

16,669,794

16,683,944

16,629,256

Earnings per share

Basic $ 0.18 $ 0.33 $ 2.67 $ 0.78

Diluted 0.18 0.33 2.66 0.77

(1)

For the three and nine month periods ended May 31, 2007, no stock option and 24,295 stock options (36,443 and 38,910 in 2006) were excluded

from the calculation of diluted earnings per share since the exercise price of the options was greater than the average share price of the

subordinate voting shares.

- 29 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

6. Preliminary Goodwill and Other Intangible Assets

Customer

base

Broadcasting

licenses

Total other

intangible

assets

Preliminary

goodwill

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

Balance as at August 31, 2006 $ 989,772 $ 28,120 $ 1,017,892 $ 422,108

Adjustment to the purchase price - - - (6,205)

Foreign currency translation adjustment - - - 7,249

Balance as at May 31, 2007 $ 989,772 $ 28,120 $ 1,017,892 $ 423,152

On March 9, 2007, the Company’s subsidiary, Cogeco Cable Inc., and Cable Satisfaction International Inc. came to

an agreement for a final adjustment to the working capital which was outstanding since the date of acquisition.

According to the agreement, the Company’s subsidiary has recorded an account receivable of an amount of

€2,194,000 ($3,279,000) in the second quarter which was received on March 16, 2007 and as a result, the purchase

price was reduced accordingly. The remaining adjustment to the purchase price is due to the reevaluation of costs

related to the acquisition of Cabovisã o–T elevisão por Cabo, S.A. (“Cabovisão”).

In addition, as mentioned in the Company’s 2006 annual consolidated financial statements, management of the

Company’s subsidiary, Cogeco Cable Inc., is currently carrying out a more specific analysis and changes will be made

to the allocation of the excess of consideration over net assets acquired as the information becomes available. For

example, since the measurement of the fair value of fixed assets had not yet been completed at the time of the

preliminary allocation, fixed assets have been presented at cost. The measurement of indefinite and finite-lived

intangible assets is also under way. Furthermore, in accordance with the Portuguese Companies Income Tax Code,

accumulated tax losses cannot be deducted if the ownership of at least 50% of the social capital changes from the

moment when the tax losses were generated, unless an authorization is granted before such change in the ownership

takes place. To this effect, a request for preservation of tax losses was filed by Cabovisão on July 28, 2006. These

losses have not been included in the preliminary purchase price allocation. As a result, the actual amounts allocated

to the identifiable assets acquired and liabilities assumed and the related operating results will vary according to the

amounts initially recorded, and such difference s could be significant.

- 30 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

7. Long-Term Debt

Maturity Interest rate

May 31,

2007

August 31,

2006

(unaudited) (audited)

Parent company

Term Facility 2010

(1)

6.29%

(2)

$ 16,500 $ 19,000

Obligations under capital leases 2010 6.49 – 6.61 116 138

Subsidiaries

Term Facility

Term loan 2011 5.33

(2)

150,000 150,000

Term loan – € 17,358,700 2011 5.00

(2)

24,983 24,573

Revolving loan

Euro currency – €299,500,000 (€317,000,000 as at

August 31, 2006)

2011

5.00

(2)

431,040

448,745

Senior Secured Debentures Series 1 2009 6.75 150,000 150,000

Senior – Secured Notes

Series A – US $150 million 2008 6.83

(3)

160,440 165,795

Series B 2011 7.73 175,000 175,000

Second Secured Debentures Series A 2007

(4)

– - 125,000

Deferred credit

(5)

2008 – 78,210 72,855

Obligations under capital leases 2010 6.42 – 8.18 6,088 5,009

Other – – 25 43

1,192,402 1,336,158

Less: current portion 2,400 126,904

$ 1,190,002 $ 1,209,254

(1)

COGECO Inc.’s Term Facility has been extended for an additional year in December 2006.

(2)

Average interest rate on debt as at May 31, 2007, including stamping fees.

(3)

Cross-currency swap agreem ents have resulted in an effective interest rate of 7.254% on the Canadian dollar equivalent of the U.S. denominate d

debt of the Company’s subsidiary, Cogeco Cable Inc.

(4)

On Februar y 2, 2007, the Company’s subsidiary, Cogeco Cable Inc., gave a notice of redemption to purchase on March 5, 2007 al l of its 8.44%

Second Secured Debentures Series A (“the Notes”) in the aggrega te principal amount of $125,000,000. Concurrently, the Company’s subsidiary

also made an offer to purchase for cancellation on February 12, 2007, all of the validly issued and held Notes upon receipt by the Trustee of a

written notice of acceptance by the holders of Notes. As a result, a total of $89,257, 000 of Notes were redeemed on Fe bruary 12, 2007, for a total

cash consideration of $91,038,000. The remaining Notes of $35,743,000 were redeemed on March 5, 2007, for a total cash consideration of

$36,550,000. The excess of the redemption price over the aggregate principal amount was recorded as financial expense.

(5)

The deferred cre dit represents the amount which would have been payable as at M a y 31, 2007 and August 31, 2006 under cross-curr enc y swaps

entered into by the Company’s subsidiary, Cogeco Cable Inc., to hedge Senior Secured Notes Series A denominated in US dollars.

Interest on long-term debt for the three and nine month periods ended May 31, 2007 amounted to $18,126,000 and

$61,109,000 ($13,477,000 and $40,128,000 in 2006).

- 31 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

8. Capital Stock

Authorized, an unlimited number

Preferred shares of first and second rank, could be issued 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,

2007

August 31,

2006

(unaudited) (audited)

Issued

1,842,860 multiple voting shares (1,849,900 as at August 31, 2006 )

(1)

$ 12 $ 12

14,827,271 subordinate voting shares (14,702,556 as at August 31, 2006) 118,971 117,540

$ 118,983 $ 117,552

(1)

During the third quarter of 2007, 7,040 multiple voting shares were converted to subordinate voting shares.

During the period, subordinate voting share transactions were as follows:

Nine months ended Twelve months ended

May 31, 2007 August 31, 2006

(unaudited) (audited)

Number of

Amount

Number of

Amount

Balance at beginning 14,702,556 $ 117,540 14,600,104 $ 116,155

Shares issued for cash under the Employee Stock Purchase Plan

and the Stock Option Plan

117,675

1,431

102,452

1,385

Conversion of multiple voting shares into subordinate voting

7,040

Balance at end 14,827,271 $ 118,971 14,702,556 $ 117,540

- 32 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

8. Capital Stock (continued)

Stock-based plans

The Company established, 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, no stock options were granted to employees by COGECO Inc.

However, the Company’s subsidiary, Cogeco Cable Inc., granted 201,587 stock options (126,059 in 2006) with an

exercise price of $26.63 to $44.54 ($25.12 to $29.05 in 2006), of which 57,247 stock options (31,743 in 2006) were

granted to COGECO Inc.’s employees. The Company’s subsidiary also granted 376,000 conditional stock options

with an exercise price of $26.63 of which 262,400 stock options were granted to COGECO Inc.’s employees. These

conditional options vest over a period of three years beginning one year after the day such options were granted and

are exercisable over ten years. The vesting of these options is conditional to the achievement of certain yearly

financial objectives by the Portuguese subsidiary, Cabovisão-Televisão por Cabo, S.A., over a period of three years.

The Company records compensation expense for options granted on or after September 1, 2003. As a result, a

compensation expense of $538,000 and $1,439,000 ($207,000 and $573,000 in 2006) was recorded for the three and

nine month periods ended May 31, 2007. If compensation expense had been recognized using the fair value-based

method at the grant date for options granted between September 1, 2001 and August 31, 2003, the Company’s net

income and earnings per share for the three and nine month periods ended May 31, 2006 would have been reduced

to the following pro forma amounts:

Three months ended Nine months ended

May 31, 2006 May 31, 2006

(unaudited) (unaudited)

Net income

As reported $ 5,529 $ 12,801

Pro forma 5,521 12,777

Basic earnings per share

As reported $ 0.33 $ 0.78

Pro forma 0.33 0.77

Diluted earnings per share

As reported $ 0.33 $ 0.77

Pro forma 0.33 0.77

The fair value of stock options granted by the Company’s subsidiary, Cogeco Cable Inc., for the nine month period

ended May 31, 2007 was $7.39 ($9.44 in 2006) per option. The fair value was estimated at the grant date for

purposes of determining stock-based compensation expense using the Binomial option pricing model based on the

following assumptions:

2007 2006

Expected dividend yield

1.27 % 1.27 %

Expected volatility

32 % 39 %

Risk-free interest rate

4.05 % 3.70 %

Expected life in years

4.0 4.0

As at May 31, 2007, the Company had outstanding stock options providing for the subscription of 198,279 subordi nate

voting shares. These stock options can be exercised at various prices ranging from $14.00 to $37.50 and at various

dates up to October 19, 2011.

- 33 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

8. Capital Stock (continued)

TQS Inc., an indirect subsidiary of the Company, has also a stock option plan for certain executives and key

employees which is described in the Company’s annual consolidated financial statements. During the first nine

months, 170,269 stock options (no stock options granted in 2006) were granted by TQS Inc. No compensation

expense (none and $154,000 in 2006) was recorded for the three and nine month periods ended May 31, 2007

related to this plan.

The Company and its subsidiary, Cogeco Cable Inc., have also adopted Performance Units Plans for key employees

which are described in the Compa ny’s annual consolidated financi al statements and which have been terminated. The

Company has created a new senior executive designated employee incentive unit plan. According to the new plan,

senior executives and other key employees periodically receive a given number of units which entitled the participant

to receive subordinate voting shares of the Company after three years less one day from the date of grant. During the

first nine months, the Company granted 25,556 units. The Company establishes the value of the compensation

related to the units granted based on the market value of the Company’s subordinate voting shares at the date of

grant and a compensation expense is recognized over the vesting period, which is three years. A trust was created for

the purpose of purchasing these shares on the stock exchange in order to guard against stock price fluctuation. The

Company instructed the trustee to purchase 25,556 subordinate voting shares of the Company on the stock market.

These shares were purchased for a cash consideration of $1,054,000 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

statement with the value of the acquired shares presented as treasury shares in reduction of capital stock. A

compensation expense of $2,453,000 and $4,717,000 ($521,000 and $326,000 in 2006) was recorded for the three

and nine months periods e nded May 31, 2007 related to these plan s.

9. Foreign Currency Translation Adjustm ent

The change in the foreign currency translation adjustment included in shareholders’ equity is the result of the

fluctuation in the exchange rates on translation of net investments in self-sustaining foreign operations and foreign

exchange gains or losses related to long-term debt denominated in foreign currency used to hedge net investments.

The net change in foreign currency translation adjustment is as follows:

Nine months ended Twelve months ended

May 31, 2007 August 31, 2006

(unaudited) (audited)

Effect of exchange rate variation on translation of net investments in self-

sustaining foreign subsidiaries

(2,828)

(12,412)

Effect of exchange rate variation on translation of long-term debt designated

as hedge of net investments in self-sustaining subsidiaries (net of income

taxes of $1,703,000 for the twelve month period ended August 31, 2006)

(397)

7,960

$ (3,225) $ (4,452)

- 34 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

10. Statements of Cash Flow

a) Changes in non-cash operating items

Three months ended May 31, Nine months ended May 31,

2007 2006 2007 2006

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

Accounts receivable $ 320 $ (691) $ (15,071) $ (9,631)

Income tax receivable 1,630 741 (2,889) (245)

Prepaid expenses (2,640) (888) (2,016) (1,428)

Broadcasting rights 3,986 2,516 126 (5,278)

Accounts payable and accrued liabilities (24,868) (1,555) (92,352) (43,833)

Broadcasting rights payable (3,097) (4,680) 2,333 5,165

Income tax liabilities (614) - 637 (299)

Deferred and prepaid income 483 (1) 3,002 1,906

$ (24,800) $ (4,558) $ (106,230) $ (53,643)

b) Other information

Three months ended May 31, Nine months ended May 31,

2007 2006 2007 2006

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

Fixed asset acquisitions through capital leases $ 561 $ 1,199 $ 2,793 $ 2,737

Interest paid 25,642 16,199 70,310 44,187

Income taxes paid (received) (530) 329 7,966 4,713

- 35 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

11. Employee Future Benefits

The Company and its 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 consolidated financi al statements. The total expenses related to these plans are as follows:

Three months ended May 31, Nine months ended May 31,

2007 2006 2007 2006

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

Contributory defined benefit pension plans $ 776 $ 727 $ 2,402 $ 2,551

Defined contribution pension plan and collective registered

retirement savings plans

667

464

1,906

1,412

$ 1,443 $ 1,191 $ 4,308 $ 3,963

12. Contingencies and guarantees

Second Put and Call Options of TQS Inc.

On February 15, 2002, the shareholders of 3947424 Canada Inc. (“TQS Holdco”), Cogeco Radio-Télévision Inc.

(“CRTI”) and Bell Globemedia Inc. (“BGM”), entered into a shareholders agreement following the acquisition of TQS

Inc. (the “Shareholders Agreement”). On October 31, 2002, BGM transferred its shares in TQS Holdco to CTV

Television Inc. (“CTV”), a subsidiary of BGM. The Shareholders Agreement provides the right for CTV to notify CRTI,

during a 180 day period starting from February 15, 2007, of its offer to sell all its shares in TQS Holdco to CRTI for an

all-cash consideration calculated as the fair market value of TQS Holdco multiplied by the ratio of shares owned by

CTV to total shares issued and outstanding in the capital of TQS Holdco, and multiplied by 1.15. CRTI may elect to

acquire CTV’s shares within 90 days following receipt of the put notice by delivering a put exercise notice to CTV. If

CRTI elects not to exercise or fails to exercise its put option, CTV may within 90 days following such election or failure

to exercise by CRTI, deliver a call notice to CRTI to purchase all the shares of CRTI in TQS Holdco for an all-cash

consideration calculated as the fair market value of TQS Holdco multiplied by the ratio of shares owned by CRTI to

total shares issued and outstanding in the capital of TQS Holdco, and multiplied by 1.30. Unless the parties decide to

modify the Shareholders Agreement, in the event that CTV notifies CRTI of its offer to sell all its shares in TQS Holdco

to CRTI, CRTI does not buy them and CTV does not buy CRTI’s shares, CRTI and CTV have agreed to put up all

TQS Holdco shares for sale to a third party purchaser, subject to requisite governmental authorizations, with a view to

obtaining the highest possible price and maximizing shareholder value.

On August 31, 2006, BGM announced that it had closed off on its new ownership structure whereby BCE sold 48% of

its voting interest in BGM to The Woodbridge Company Limited and affiliates, the Ontario Teachers’ Pension Plan and

Torstar Corporation. This transaction constitutes a change of control under the Shareholders Agreement and,

accordingly, triggers certain purchase rights under the Agreement in favour of CRTI to purchase all, but not less than

all, of the shares owned by CTV.

On November 30, 2006, COGECO Inc. has confirmed that CRTI will not exercise its right to purchase the 40%

interest that CTV holds in TQS Holdco, following the change of control of BGM on August 31, 2006 that triggered the

right for CRTI to acquire all the shares of CTV in TQS Holdco.

Furthermore, CRTI, CTV and TQS Holdco have amended the Shareholder’s Agreement to postpone the beginning of

the Second Put Option Period provided in the Agreem ent from February 15, 2007 to January 1, 2009.

- 36 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2007

(amounts in tables are in thousands of dollars, except per share data)

12. Contingencies and guarantees (continued)

Guarantees of payment to the Municipality of Seixal

During the second quarter, the Company’s subsidiary, Cogeco Cable Inc., has guaranteed the payment by Cabovisão

of certain taxes for municipal rights of way assessed by the Municipality of Seixal in Portugal for the years 2004 and

2005 totalling €5.7 million (the “Tax Amounts”), which are currently being challenged by Cabovisão. Trustworthy

financial guarantees were required under applicable Portuguese law in order for Cabovisão to challenge the Tax

Amounts and withhold payment thereof until a final judgment no longer subject to appeal is rendered by the

Portuguese courts having jurisdiction in this matter. As a result, the Company’s subsidiary may be required to pay,

upon written demand by the Municipality of Seixal, the required amounts following final judgment up to a maximum

aggregate amount of €5.7 million ($8.3 million), should Cabovisã o fail to pay such required amounts.

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CABLE AND RADIO: COGECO GROWTH MAIN DRIVERS.

SUSTAINABILITY

Cogeco Fund

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