COGECO REPORTS STRONG THIRD-QUARTER 2008 FINANCIAL RESULTS.

Press release

For immediate release

COGECO reports strong third-quarter 2008 financial results

Montreal, July 9, 2008 – Today, COGECO Inc. (TSX: CGO) announced its financial results for the

third quarter and first nine months of fiscal 2008, ended May 31, 2008.

Third-quarter 2008 and first nine months consolidated results show continuous growth:

• Revenue increased by 13.8% to $283.9 million in the third quarter and by 13.6% to

$816 million for the first nine months;

• Operating income from continuing operations before amortization grew by 22.4% to

$117.2 million in the third quarter and by 21.1% to $327.8 million for the first nine

months;

• Free cash flow

(1)

reached $37.1 million in the third quarter and $79.5 million for the

first nine months.

Cable sector

• Revenue-generating units (“RGUs”)

(2)

grew by 50,889 and 190,109 net additions,

respectively, for a total of 2,675,774 RGUs at May 31, 2008.

External growth

• In order to further develop Cogeco Cable’s business telecommunications activities, the

Company pursued its external growth strategy and concluded the acquisition of all

assets of MaXess Networx®, ENWIN Energy Ltd.’s telecommunications division (City of

Windsor’s energy company). In addition, the Company announced the acquisition of all

the assets of FibreWired Burlington Hydro Communications (Burlington Hydro Electric’s

telecommunications division). On June 13, Cogeco Cable also announced its entry into

the Greater Toronto Area market through the announcement of the acquisition of all the

shares of Toronto Hydro Telecom Inc., the telecommunications subsidiary of Toronto

Hydro Corporation, subject to certain conditions, including regulatory approval by the

Commissioner of Competition.

Other

• Radio revenue has improved in the third quarter. RYTHME FM network and the 93

station in Québec City continue to grow advertising revenues;

• On May 22, 2008, the plan of arrangement proposed by Remstar Corporation was

approved by the creditors of TQS Inc., its subsidiaries and its parent, 3947424 Canada

(1)

Free cash flow does not have a standardized d efinition prescr ibed by Canadian genera lly accepted accounting principl es (GAAP) and therefore,

may not be comparable to similar measures presented by other companies. For more details, please consult the “ Non-GAAP financial me asures ”

section.

(2)

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

- 2 -

Inc., (the “TQS Group”) and subsequently approved by the Superior Court of Québec

on June 4, 2008. Certain employees of TQS Inc. and their union filed a motion on

June 19, 2008 for leave to appeal the order of the Superior Court of Québec approving

the plan. On June 26, 2008, the Canadian Radio-television and Telecommunications

Commission (“CRTC”) approved the proposed transfer of ownership and control of

TQS Inc. to Remstar Corporation.

Fiscal 2009 Preliminary Financial Guidelines:

The Company announces its 2009 preliminary guidelines, setting revenue outlook at about

$1,198 million, an increase of $108 million compared to the revised fiscal 2008 projections

issued in April 2008. Operating income before amortization should increase to

approximately $500 million, an improvement of $55 million compared to the revised fiscal

2008 projections, and free cash flow

(1)

should grow by approximately $35 million to reach

$110 million.

“On a consolidated basis, COGECO ’s third-quarter 2008 financial results are positive. In the cable

sector, Cogeco Cable’s internal growth continued on a steady pace. The Company is also

pursuing its external growth strategy, as shown by the acquisitions of MaXess Networx® and

FibreWired Burlington Hydro Communications, which will enhance our Cogeco Business Solutions

offering. As for the acquisition of Toronto Hydro Telecom, this is a great growth opportunity for

Cogeco Cable as it provides us the capacity to serve the business telecommunication market

through the addition of owned and operated points of presence throughout the Greater Toronto

Area, linked to our other broadband facilities extending over the dense telecommunications

corridor from Windsor to Cornwall in Ontario” declared Louis Audet, President and CEO of

COGECO. “On the radio side, COGECO is experiencing an increase in revenue with programming

that meets audience and advertiser expectations”, added Mr. Audet.

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FINANCIAL HIGHLIGHTS

Quarters ended May 31, Nine months ended May 31,

($000, except percentages and per

share data)

2008 2007 Change 2008 2007 Change

$ $

(unaudited)

(unaudited) (unaudited)

Revenue 283,878 249,424 13.8 816,027 718,035 13.6

Operating income from continuing

operations before amortization 117,204 95,791 22.4 327,759 270,640 21.1

Income from continuing

operations

9,538 5,025 89.8 33,509 48,526 (30.9)

Loss from discontinued

operations –

(1,966) – (18,057) (4,170) –

Net income 9,538 3,059 – 15,452 44,356 (65.2)

Cash flow from operations

(1)

96,068 76,862 25.0 262,819 205,412 27.9

Less:

Capital expenditures and

increase in deferred charges

58,961 57,810 2.0 183,364 185,118 (0.9)

Free cash flow

(1)

37,107 19,052 94.8 79,455 20,294 –

Earnings (loss) per share

Basic

Income from continuing

operations 0.57 0.30 90.0 2.01 2.93 (31.4)

Loss from discontinued

operations – (0.12) – (1.08) (0.25) –

Net income 0.57 0.18 – 0.93 2.67 –

Diluted

Income from continuing

operations 0.57 0.30 90.0 2.00 2.91 (31.3)

Loss from discontinued

operations – (0.12) – (1.08) (0.25) –

Net income 0.57 0.18 – 0.92 2.66 –

(1)

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

principles (“GAAP”) and there fore, may not be comparabl e to similar measures presented by other comp anies. For more details, p lease consult

the “Non-GAAP financial measures” section.

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 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 “Uncertainties and main risk

factors” section of the Company’s 2007 annual Management’s Discussion and Analysis (MD&A) that could

cause actual results to differ materially from what we currently expect. These factors include technological

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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 2007 Annual

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

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)

CORPORATE STRATEGIES AND OBJECTIVES

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

continued growth. The strategies employed to reach these objectives, supported by tight cost

control and business processes, are specific to each sector. For the cable sector, sustained 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 (the “Company”) uses growth of operating income

before amortization, free cash flow

(1)

and 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 objectives.

Tight control over costs and business processes

• For the third quarter of 2008, the Company’s operating costs increased over last year by

8.5% compared to a revenue growth of 13.8%;

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

still underway. As discussed in the 2007 annual MD&A, the Company identified certain

material weaknesses in the design of internal controls over financial reporting and there

has been improvement in the design of internal controls on some significant processes

during the quarter. The documentation and remediation of internal controls weaknesses are

progressing normally.

Cable sector

Continuous improvement of the service offering and expansion of the customer base

Canadian operations

•

Acquisitions:

June 30, conclusion of the acquisition of all assets of FibreWired Burlington Hydro

Communications, Burlington Hydro Electric’s telecommunications division (City of

Burlington’s energy company) to expand Cogeco Business Solutions’ commercial

broadband service offering in Burlington, Ontario;

(1)

Free cash flow does not have a standardized definition 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

(2)

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

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o June 13, announcement of the acquisition of all the shares of Toronto Hydro

Telecom Inc., the telecommunications subsidiary of Toronto Hydro Corporation (City

of Toronto’s energy company); subject to certain conditions, including regulatory

approval by the Commissioner of Competition, in order to further develop Cogeco

Cable’s business telecommunications activities by entering the Greater Toronto

Area market;

o March 31, conclusion of the acquisition of all the assets of MaXess Networx®,

ENWIN Energy Ltd.’s telecommunications division (City of Windsor’s energy

company) to strengthen Cogeco Business Solutions’ Data offering in Windsor,

Ontario.

• High Speed Internet service:

o June 7, launch of Wi-Fi Internet access at LaSalle Park in Burlington, Ontario;

o May 7, launch of Wi-Fi Internet access in Québec with the deployment of the first

seven Québec hotspots in Trois-Rivières.

• Digital Television services:

o June 24, launch of Food Network On Demand, HGTV On Demand and National

Geographic On Demand in Ontario territories;

o May 6, launch of RDI HD and ARTV HD, two new High Definition (HD) channels in

Québec;

o March 4, launch of Family On Demand in Ontario, a new On Demand service.

• Telephony service:

o June 24, launch of Telephony in Maitland and Prescott, Ontario;

o June 17, launch of Telephony in Wickham, St-Cyrille-de-Wendover, Morin-Heights,

Shawbridge, St-Germain-de-Grantham and St-Prosper-de-Dorchester, Québec;

o June 4, launch of Telephony in Tillbury, Ontario;

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

o St-Pie, St-Damase, Ste-Madeleine, Acton Vale, St-Thomas d’Aquin,

St-Dominique-de-Bagot, Val-David, St-Donat-de-Montcalm, St-Faustin,

St-Adolphe-d’Howard, Bic, Ste-Luce, Ste-Blandine, St-Fabien, St-Gédéon and

St-Martin-de-Beauce in Québec;

o Kemptville, Acton, Winona, Smithville, Ridgeway, Huntsville, Bracebridge and

Gravenhurst, in Ontario.

• Customer service:

o Opening of a Cogeco Cable store located in Drummondville, Québec.

European operations

• Digital Television services:

o Cabovisão - Televisão p or Cabo, S.A. (“Cabovisão”) continued its Digital Television

service deployment.

• Customer service:

o Opening of two (2) new Cabovisão stores located in Paivas (Seixal) and Castelo

Branco.

Continuous improvement of networks and equipment

• During the first nine months of fiscal 2008, Cogeco Cable has invested approximately

$71.8 million in its infrastructure including headends and upgrade/rebuild.

Other

• RYTHME FM network and the 93

station in Québec City continue to grow advertising

revenues.

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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. TQS’ position in the Québec Francophone over-the-air television market

deteriorated markedly in spite of the measures and investments initiated by the Company over the

last several months. The gradual loss of advertising revenue to specialty TV networks and content

accessible over the Internet, combined with increased production costs, the Canadian Radio-

television and Telecommunications Commission’s (“CRTC”) refusal to grant general interest

television networks the same ability to charge subscriber fees for signal distribution as the

speciality television networks, the programming strategy of Société Radio-Canada (“SRC”), which

acts like a commercial player rather than a publicly-owned television broadcaster and SRC’s notice

of disaffiliation in Saguenay, Sherbrooke and Trois-Rivières after a 50-year partnership all

contributed to this decision. After considering CIBC World Markets’ report, the Board of Directors

of TQS concluded that it was in the best interest of TQS, its employees and creditors to request

court protection. On December 18, 2007, the Québec Superior Court issued an order under the

Companies’ Creditors Arrangement Act (Canada) protecting TQS Inc., its subsidiaries and its

parent 3947424 Canada Inc. (“the TQS Group”) from claims by their creditors for an initial

suspension period ending on January 17, 2008, which period was afterwards renewed. Under the

order, RSM Richter Inc. has been appointed as monitor, with a mandate to support the applicants,

under Court supervision, in preparing a creditors arrangement plan. On March 10, 2008, the

Québec Superior Court agreed with TQS Inc.’s Board of Director decision to accept the offer made

by Remstar Corporation Inc. to acquire all shares held by Cogeco Radio-Television Inc. and CTV

Television Inc., the two shareholders of TQS. On May 22, 2008, the plan of arrangement proposed

by Remstar Corporation Inc. was approved by the creditors of the TQS Group and subsequently

approved by the Superior Court of Québec on June 4, 2008. Certain employees of TQS Inc. and

their union filed a motion on June 19, 2008 for leave to appeal the order of the Superior Court of

Québec approving the plan. On June 26, 2008, the CRTC approved the proposed transfer of

ownership and control of TQS Inc. to Remstar Corporation Inc.

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

the TQS Group. Accordingly, the investment in the TQS Group as at August 31, 2007, as well as

its results of operations and its cash flow for the period of September 1, 2007 to December 18,

2007 and for the three and nine-month periods ended May 31, 2007, have been reclassified as a

discontinued operation.

- 7 -

The assets and liabilities related to the discontinued operations as at August 31, 2007, were as

follows:

($000)

(unaudited)

Accounts receivable 23,611

Prepaid expenses 442

Broadcasting rights 14,647

Current assets 38,700

Broadcasting rights 17,456

Fixed assets 21,653

Broadcasting licenses 3,000

Non-current assets 42,109

Bank indebtedness 8,173

Accounts payable and accrued liabilities 28,893

Broadcasting rights payable 8,531

Income tax liabilities 141

Deferred and prepaid income 42

Current portion of long-term debt 251

Current liabilities 46,031

Share in the partner’s deficiency of a general partnership 518

Broadcasting rights payable 4,408

Pension plan liabilities 1,444

Non-controlling interest 11,219

Long-term liabilities 17,589

- 8 -

The results of the discontinued operations were as follows:

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

($000)

2008 2007 2008 2007

$ $

(

unaudited

)

(unaudited)

(

unaudited

)

(unaudited)

Revenue – 28,329 38,499 84,901

Operating costs – 28,625 35,822 88,010

Operating income (loss) before amortization – (296)

2,677 (3,109)

Amortization – 1,110 1,364 3,288

Operating income (loss) – (1,406)

1,313 (6,397)

Financial expense – 248 291 659

Impairment of assets – – 30,298 –

Loss before income taxes and the following items – (1,654)

(29,276) (7,056)

Income taxes – 1,624 – (101)

Non-controlling interest – (1,311)

(11,219) (2,780)

Shares in the earnings of a general partnership – (1)

– (5)

Loss from discontinued operations – (1,966)

(18,057) (4,170)

The cash flow of the discontinued operations was as follows:

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

($000)

2008 2007 2008 2007

$ $ $ $

(

unaudited

)

(unaudited)

(

unaudited

)

(unaudited)

Cash flow from operating activities – (187) (3,973) (8,054)

Cash flow from investing activities – (567) (133) (1,255)

Cash flow from financing activities – 754 4,106 9,309

Cash flow from discontinued operations – – – –

Continuing Operations

RGU growth in the cable sector

During the first nine months ended May 31, 2008, the consolidated number of RGUs increased by

190,109, or 7.6% to reach 2,675,774 units, which is in line with Cogeco Cable’s revised RGU

growth projections of 225,000 units, representing growth of approximately 9%, for the fiscal year

ended August 31, 2008. Please consult the fiscal 2008 revised projections in the “Fiscal 2009

preliminary financial guidelines” section for further details.

- 9 -

Revenue and operating income before amortization growth

For the third quarter of fiscal 2008, revenue increased by $34.5 million, or 13.8%, to reach

$283.9 million while operating income before amortization grew by $21.4 million, or 22.4%, to

reach $117.2 million. For the first nine months of 2008, revenue increased by $98 million, or

13.6%, to reach $816 million, while operating income before amortization grew by $57.1 million, or

21.1%, to reach $327.8 million. For fiscal 2008, the Company expects revenue to reach

$1,090 million, while operating income is expected to reach $445 million. Please consult the fiscal

2008 revised projections in the “Fiscal 2009 preliminary financial guidelines” section for further

details.

Free cash flow

In the third quarter of fiscal 2008, COGECO generated free cash flow of $37.1 million, compared to

$19.1 million for the same period last year. For the nine-month period ended May 31, 2008, the

Company generated free cash flow of $79.5 million compared to $20.3 million for the same period

the year before. These increases result mainly from the cable sector and are attributable to an

increase in operating income before amortization and a reduction in financial expense. Capital

expenditures and deferred charges remained essentially the same compared to the corresponding

periods last year. Due to the usual higher level of capital expenditures in the fourth quarter, the

Company projects free cash flow of $75 million for the fiscal year ended August 31, 2008. Please

consult the fiscal 2008 revised projections in the “Fiscal 2009 preliminary financial guidelines”

section for further details.

OPERATING RESULTS – CONSOLIDATED OVERVIEW

Quarters ended May 31, Nine months ended May 31,

($000, except percentages)

2008 2007 Change 2008 2007 Change

$ $ % $ $ %

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

Revenue 283,878 249,424 13.8 816,027 718,035 13.6

Operating costs 166,674 153,633 8.5 488,268 447,395 9.1

Operating income before

amortization 117,204 95,791 22.4 327,759 270,640 21.1

Operating margin 41.3% 38.4% 40.2% 37.7%

Revenue

Fiscal 2008 third-quarter revenue improved, mainly by its Cable segment, by $34.5 million, or

13.8%, to reach $283.9 million, and, for the first nine-month period, by $98 million, or 13.6%, to

reach $816 million. Cable revenue, driven by an increased number of RGUs, combined with rate

increases, went up by $34.3 million, or 14.3%, and by $97.3 million, or 14%, respectively, in the

third quarter and first nine months of fiscal 2008.

Operating costs

For the third quarter and the first nine months of fiscal 2008, operating costs increased by

$13 million, or 8.5% and $40.9 million, or 9.1%, compared to last year, to reach $166.7 million and

$488.3 million, respectively. The increase in operating costs for the third quarter and first nine-

month period of 2008 was mainly attributable to the cable sector and due to servicing additional

RGUs in Canada and Portugal. In addition, for the first nine-month period, operating costs were

impacted by the timing of certain marketing initiatives in Portugal, including a major campaign to

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increase brand awareness, and costs related to the design of internal controls and review of

business processes to comply with National Instrument 52-109.

Operating income before amortization

Operating income before amortization grew, essentially by its Cable segment, by $21.4 million, or

22.4%, to reach $117.2 million in the third quarter of fiscal 2008 and by $57.1 million, or 21.1%, to

reach $327.8 million in the first nine months of fiscal 2008 compared to the corresponding periods

of the prior year. The cable sector contributed to the growth by $19.6 million and $56 million during

the third quarter and first nine months of fiscal 2008, respectively.

FIXED CHARGES

Quarters ended May 31, Nine months ended May 31

($000, except percentages)

2008 2007 Change 2008

2007 Change

$ $ % $ $ %

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

Amortization 58,564 47,725 22.7 167,949 136,498 23.0

Financial expense 17,746 21,603 (17.9)

52,487 67,132 (21.8)

Fiscal 2008 third-quarter and first nine-month period amortization amounted to $58.6 million and

$167.9 million compared to $47.7 million and $136.5 million for the same periods the year before.

Amortization expense increased for both periods mainly due to the following factors in the cable

sector: the completion, in the fourth quarter of fiscal 2007, of the purchase price allocation of the

Cabovisão acquisition, which includes the revaluation of tangible and intangible assets for an

additional amortization expense of approximately $6.2 million and $16.4 million in the third quarter

and first nine months, respectively, and additional capital expenditures arising from the required

customer premise equipment to sustain RGU growth and to support the deployment of the Digital

Television service in Portugal.

Fiscal 2008 third-quarter and first nine-month period financial expense decreased by $3.9 million

and $14.6 million, respectively, compared to the same periods in fiscal 2007. During the first nine

months of fiscal 2008, the Company’s cable subsidiary reduced its level of Indebtedness (defined

as bank indebtedness and long-term debt) from the net proceeds of subordinate voting shares

issued during fiscal 2007. During the first nine-month period of fiscal 2007, Cogeco Cable also

recorded a one-time charge of $2.6 million related to the early repayment of its Second Secured

Debentures, Series A.

INCOME TAXES

Fiscal 2008 third-quarter income tax expense amounted to $10.3 million compared to $8.1 million

in fiscal 2007. The effective tax rate for the three months ended May 31, 2008 was 25.2%

compared to 30.4% for the same period of 2007, mainly due to the cable sector’s lower corporate

income tax rates in Canada and to income tax reductions in European operations resulting from

the revaluation of tangible and intangible assets upon the completion of the Cabovisão purchase

price allocation in the fourth quarter of fiscal 2007.

For the first nine months of fiscal 2008, income tax expense amounted to $5.1 million compared to

$18.8 million in 2007. Included in first nine months of 2008 expense is a recovery of $24.1 million

related to the reduction in corporate income tax rates announced on October 16, 2007 by the

Canadian federal government in its Economic Statement. According to the new tax initiatives,

- 11 -

corporate income tax rates have been further reduced from 20.5% to 19.5% effective January 1,

2008, from 20% to 19% effective January 1, 2009, from 19% to 18% effective January 1, 2010,

from 18.5% to 16.5% effective January 1, 2011, and to 15% effective January 1, 2012. These

corporate income tax rates were considered substantively enacted on December 14, 2007. The

effective tax rates for the first nine months of 2008 and 2007 were 4.8% and 28.1%, respectively.

Excluding the effect of the tax rate reductions, the effective tax rate for the first nine months of

2008 was 27.3%.

GAIN ON DILUTION RESULTING FROM SHARES ISSUED BY A SUBSIDIARY

During the first nine months of 2007, the Company’s subsidiary, Cogeco Cable Inc., completed a

public offering totalling 5,000,000 subordinate voting shares. The offering resulted in gross

proceeds of $192.5 million and net proceeds of $184.2 million. The Company’s subsidiary has also

issued, during the first nine months of fiscal 2007, 7,344 subordinate voting shares pursuant to its

Employee Stock Purchase Plan and 305,573 subordinate voting shares pursuant to its Employee

Stock Option Plan for cash considerations of $0.2 million and $5.7 million, respectively. As a result,

the Company’s interest in Cogeco Cable Inc. decreased from 39.2% to 34.6% and a gain on

dilution of $30.9 million was recorded for the nine-month period ended May 31, 2007.

NON-CONTROLLING INTEREST

The non-controlling interest represents a participation of approximately 67.7% in Cogeco Cable’s

results. During the third quarter and first nine months of 2008, the non-controlling interest

amounted to $21.1 million and $68.6 million, respectively, due to the cable sector’s strong results.

The non-controlling interest for the comparable periods of last year amounted to $13.3 million and

$30.6 million, respectively.

NET INCOME

Fiscal 2008 third-quarter net income amounted to $9.5 million, or $0.57 per share, compared to

$3.1 million, or $0.18 per share, for the same period last year. The net income increase in the third

quarter of fiscal 2008 was mainly due to growth in operating income before amortization exceeding

those of the fixed charges, net of non-controlling interest, from the cable sector, and to the loss

from discontinued operations of $2 million in the third quarter of fiscal 2007.

Fiscal 2008 first nine-month period net income amounted to $15.5 million, or $0.93 per share,

compared to $44.4 million, or $2.67 per share, for the same period in 2007. The net income

decrease in the first nine months of fiscal 2008 was due to the following factors: a gain on dilution

amounting to $30.9 million was recorded in the first nine months of fiscal 2007, a loss from

discontinued operations of $18.1 million recorded in the first nine months of fiscal 2008, partially

offset by the growth in operating income before amortization exceeding those of the fixed charges

and the effect of income tax rate reductions of $24 million, net of non-controlling interest, from the

cable sector.

Excluding the effect of the fiscal 2007 gain on dilution and the effect of the fiscal 2008 income tax

rate reductions net of non-controlling interest and the loss from discontinued operations, net

income for the third quarter of fiscal 2008 would have amounted to $9.5 million, or $0.57 per share,

compared to $5.1 million, or $0.31 per share, for the same period in 2007, an improvement of

87.5% and 83.9%, respectively. For the 2008 nine-month period, net income, excluding the

adjustments discussed above, would have amounted to $25.7 million, or $1.54 per share,

compared to $17.6 million, or $1.06 per share, in 2007, an increase of 45.9% and 45.3%,

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

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CASH FLOW AND LIQUIDITY

Quarters ended May 31, Nine months ended May 31,

($000)

2008 2007 2008 2007

$ $ $ $

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

Operating activities

Cash flow from operations 96,068 76,862 262,819 205,412

Changes in non-cash operating items 16,825 (25,193) (10,380) (102,005)

112,893 51,669 252,439 103,407

Investing activities

(1)

(74,415) (53,541) (197,487) (179,875)

Financing activities

(1)

18,771 (15,255) (39,815) 26,143

Effect of exchange rate changes on cash and cash

equivalents denominated in foreign currencies 1,063 (1,774) 1,265 1,486

Net change in cash and cash equivalents 58,312 (18,901) 16,402 (48,839)

Cash and cash equivalents at beginni ng 24,369 41,578 66,279 71,516

Cash and cash equivalents at end 82,681 22,677 82,681 22,677

(1(

Excludes assets acquired under capital leases.

Fiscal 2008 third-quarter cash flow from operations reached $96.1 million, 25% higher than for the

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

and to a reduction in financial expense in the cable sector. Changes in non-cash operating items

generated cash inflows compared to cash outflows for the same period last year, attributable to the

cable sector and mainly as a result of an increase in accounts payable and accrued liabilities and

in income tax liabilities.

Fiscal 2008 first nine-month period cash flow from operations reached $262.8 million, an increase

of 27.9% compared to the same period the year before, primarily due to the growth in operating

income before amortization and to a reduction in financial expense in the cable sector. Changes in

non-cash operating items generated lower cash outflows than for the same period last year,

attributable to the cable sector and mainly as a result of a smaller decrease in accounts payable

and accrued liabilities, and an increase in income tax liabilities. The larger reduction in accounts

payable and accrued liabilities in the first nine months of fiscal 2007 was due to non-recurring

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

acquisition.

In the third quarter of fiscal 2008, investing activities stood at $74.4 million mainly due to capital

expenditures of $50.9 million, a business acquisition of $16.1 million and from an increase of

$7.1 million in deferred charges in the cable sector. The capital expenditures 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 resulted from higher RGU

growth fuelled in part by increased interest for High Definition technology for the Canadian

operations combined with the deployment of Digital Television in Portugal, partly offset by

lower RGU growth in Portugal.

• A decrease in scalable infrastructure capital spending mainly due to the timing of the

expansion and the headend improvements, system powering and equipment reliability to

sustain increased customer demand for HSI and Telephony services.

• An increase in capital expenditures associated with the network upgrade and rebuild due to

the construction costs incurred to increase the number of homes passed in Portugal.

- 13 -

In the first nine months of fiscal 2008, investing activities stood at $197.5 million mainly due to

capital expenditures of $160.3 million, an increase of $20.6 million in deferred charges in the cable

sector and a business acquisition of $16.1 million. The capital expenditures from the cable sector

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

• A reduction in customer premise equipment resulted from the timing to acquire such

equipment in fiscal 2007, in the Canadian operations, to ensure the availability of

equipment required to sustain expected RGU growth, partly offset by the deployment of

Digital Television service in Portugal.

• An increase in support capital due to the improve ment in information systems to sustain the

business operations and to the acquisition of vehicles.

Deferred Charges are mainly attributable to reconnect costs. Fiscal 2008 third-quarter and first

nine-month period capital spending amounted to $7.1 million and $20.6 million compared to

$6 million and $19.3 million for the same periods the year before. The higher reconnect costs

associated with RGUs in Canada combined with the deployment of the Digital television service in

Portugal explained the increases recorded so far in 2008.

In the third quarter and first nine months of fiscal 2008, the Company generated free cash flow in

the amount of $37.1 million and $79.5 million, respectively, compared to $19.1 million and

$20.3 million for the same periods of the preceding year. The free cash flow increases over last

year’s same periods are attributable to the cable sector and are mainly due to an increase in

operating income before amortization and to a reduction in financial expense. The aggregate of the

capital expenditures and deferred charges remained essentially the same compared to the same

periods in the prior year.

Indebtedness increased by $22.9 million in the third quarter of fiscal 2008. This increase is

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. The debenture bears interest at a fixed rate of

5.936%, is redeemable at Cogeco Cable’s option at any time, in whole or in part, prior to maturity,

at 100% of the principal amount plus a make-whole premium and will mature on March 5, 2018.

The increase in Indebtedness was 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. For the same period last year, Indebtedness decreased by $13.6 million. The

decrease in the level of Indebtedness is mainly due to the free cash flow generated of $19.1 million

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

$25.2 million in non-cash operating items. In addition, dividends of $0.07 per share for subordinate

and multiple voting shares, totalling $1.2 million, were paid by the Company during the third

quarters of fiscal 2008 and fiscal 2007. Dividends paid by a subsidiary to non-controlling interests

were $3.3 million during the third quarter, for consolidated dividend payments of $4.4 million.

During the first nine months of fiscal 2008, the level of Indebtedness 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.

This decrease was partly offset by the issuance of a senior unsecured debenture, as discussed

above. For the same period last year, Indebtedness decreased by $156.7 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 $20.3 million and the decrease of $48.8 million in cash and

cash equivalents, partly offset by a decline of $102 million in non-cash operating items. In addition,

quarterly dividends of $0.07 per share for subordinate and multiple voting shares, totalling

$3.5 million, were paid by the Company during the first nine months of fiscal 2008 compared to

quarterly dividends of $0.0625 per share for the first quarter and $0.07 per share for the second

- 14 -

and third quarters, totalling $3.4 million, were paid during the first nine months of fiscal 2007.

Dividends paid by a subsidiary to non-controlling interests were $9.8 million during the first nine

months of fiscal 2008, bringing the consolidated dividend payments to $13.3 million.

As at May 31, 2008, the Company had a working capital deficiency of $350.4 million compared to

$127.3 million as at August 31, 2007. The greater deficiency is mainly attributable to Cogeco

Cable’s US$150 million Senior Secured Notes, Series A and its related derivative financial

instruments of $91.3 million for an aggregate amount of $240.1 million due on October 31, 2008.

Due to the nature of its business, 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, thus enabling the cable subsidiary to use cash and cash

equivalents to reduce Indebtedness.

As at May 31, 2008, the cable subsidiary had used $366.8 million of its $900 million Term Facility

and the Company had drawn $19 million of its $50 million 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, 2007, except for the changes in the presentation of assets and liabilities related

to discontinued operations, there have been major changes to the balance of Fixed assets, Cash

and cash equivalents, Accounts payable and accrued liabilities, Income tax liabilities, Accounts

receivable, Future income tax assets, Future income tax liabilities, Goodwill, Accumulated other

comprehensive income (loss), Non-controlling interest, Derivative financial instruments, and

Indebtedness.

The $55.2 million increase in fixed assets is mainly due to increased capital expenditures to

sustain RGU growth and by the appreciation of the Euro over the Canadian dollar in the cable

sector. The $16.4 million increase in cash and cash equivalents is mainly related to the net

proceeds of issuance of senior unsecured debentures, as discussed in the “Cash Flow and

Liquidity” section, as well as the free cash flow generated of $79.5 million, partly offset by the net

reductions of the cable subsidiary’s revolving credit facility of $123.1 million and the Company’s

Term Facility of $6.5 million, the acquisition of MaXess Networx® for $16.1 million and dividends

paid totalling $13.3 million, $9.8 million of which were paid by the cable sector. The $13.9 million

reduction in accounts payable and accrued liabilities is primarily related to the timing of payments

made to suppliers in the cable sector. The $14 million increase in income tax liabilities and the

$9.8 million reduction in future income tax assets are due to the utilization of Cogeco Cable’s tax

loss carry forwards before fiscal 2008. The $7.6 million accounts receivable increase is essentially

due to revenue growth and its related level of receivables in the cable sector. The $21 million

future income tax liabilities reduction, also attributable to the cable sector, is mainly due to the

corporate income tax rate reductions announced by the Canadian federal government and

considered substantively enacted on December 14, 2007. The $25.2 million goodwill increase is

due to the appreciation of the Euro over the Canadian dollar in the cable sector. The $4.9 million

increase in accumulated other comprehensive income (loss) is mainly the result of the appreciation

of the Euro over the Canadian dollar, partly offset by the changes in accounting policies related to

financial instruments in the cable sector. The $74.1 million increase in non-controlling interest is

mainly due to the improved results in the cable sector. Finally, the derivative financial instruments

have increased by $91.3 million and Indebtedness has decreased by $88.2 million as a result of

accounting changes and factors previously discussed in the “Cash Flow and Liquidity” section, net

- 15 -

of the unfavourable impact of the appreciation of the Euro over the Canadian dollar. Please consult

the “Accounting policies and estimates” section for further details.

A description of COGECO’s share data as at June 30, 2008 is presented in the table below:

Number of

shares/options

Amount

($000)

Common shares

Multiple voting shares

Subordinate voting shares

1,842,860

14,851,586

119,393

Options to purchase Subordinate voting shares

Outstanding options

Exercisable options

169,758

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 2007 annual MD&A, have not materially changed since August 31, 2007, except that on

December 14, 2007, the Company concluded an amended and restated credit agreement with a

group of four Canadian banks led by the Canadian Imperial Bank of Commerce (“CIBC”), which

will now act as agent for the banking syndicate. The annually renewable three-year amended

credit agreement establishes a revolving credit of $50 million to which may be added a further

credit of $25 million under certain conditions. The amended credit agreement maintains certain

financial commitments with the same security by the Company, its subsidiary Cogeco Radio-

Television Inc., and indirect subsidiary, Cogeco Diffusion Inc.

In November 2007, the Company posted a guarantee for a maximum amount of $12 million in

favour of CIBC, the bank of the TQS Group. On March 18, 2008, the Company was unconditionally

relieved from all of its obligations under the guarantee, as CIBC was fully repaid by Remstar

Corporation for all indebtedness of the TQS Group under the TQS credit agreement.

Furthermore, on March 5, 2008, Cogeco Cable issued a $100 million senior unsecured debenture

by way of a private placement. The debenture bears interest at a fixed rate of 5.936%, is

redeemable at the Cogeco Cable’s option at any time, in whole or in part, prior to maturity, at

100% of the principal amount plus a make-whole premium and will mature on March 5, 2018.

On June 30, 2008, Cogeco Cable completed the acquisition of all the assets of FibreWired

Burlington Hydro Communications, Burlington Hydro Electric’s telecommunications division (City of

Burlington’s energy company) for a total consideration of $12.5 million. FibreWired Burlington

Hydro Communications operates a broadband network equipped with next generation Ethernet

technology, provides Burlington organizations with the broadband capacity they need for data

networking, high-speed Internet access, hosting services, e-business applications, video

conferencing and other advanced communications. Cogeco Cable will use this network to expand

its commercial broadband service offering in the area, which is in Cogeco Cable’s footprint.

On June 13, 2008, Cogeco Cable announced the acquisition of all of the shares of Toronto Hydro

Telecom Inc., the telecommunications subsidiary of Toronto Hydro Corporation (City of Toronto’s

energy company) for a total purchase price of $200 million, subject to certain conditions, including

regulatory approval by the Commissioner of Competition. In addition, the Company will assume a

working capital deficiency and liabilities of approximately $4 million. Toronto Hydro Telecom Inc.

offers data communications and other telecommunications services such as Ethernet, private line,

Voice-over-Internet protocol (“VoIP”), high-speed Internet access, dark fibre, data storage, data

security and co-location to a wide range of business customers and organizations throughout the

Greater Toronto Area (“GTA”). This agreement will allow Cogeco Cable to further the development

of its business telecommunications activities.

- 16 -

On March 31, 2008, Cogeco Cable completed the acquisition of all the assets of MaXess

Networx®, ENWIN Energy Ltd.’s telecommunications division (City of Windsor’s energy company),

for a total cost of $16.1 million, including transaction costs. MaXess Networx® operates a

broadband network equipped with next generation ATM and Ethernet technology and provides

organizations in south-western Ontario with the broadband capacity required for data networking,

high-speed Internet access, e-business applications, video conferencing and other advanced

communications.

DIVIDEND DECLARATION

At its July 9, 2008 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 6, 2008,

to shareholders of record on July 23, 2008.

FOREIGN EXCHANGE MANAGEMENT

The Company’s subsidiary, 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 U.S. 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 CAN$1.5910. Amounts due under

the US$150 million Senior Secured Notes, Series A decreased by CAN$9.5 million at the end of

the third quarter compared to August 31, 2007 due to the Canadian dollar’s appreciation. The fair

value of cross-currency swaps increased by a net amount of $7.8 million, of which $9.5 million

offset the foreign exchange gain on the US$ debt. The difference of $1.7 million was recorded as

an increase of other comprehensive income.

As noted in the MD&A of the 2007 Annual Report, Cogeco Cable’s investment in the Portuguese

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 CAN$16.2 million in the first nine

months of 2008, which is presented net of non-controlling interest of $11 million in other

comprehensive income. The exchange rate used to convert the Euro into Canadian dollars for the

balance sheet accounts as at May 31, 2008 was $1.5448 per Euro compared to $1.4390 per Euro

as at August 31, 2007. The average exchange rates prevailing during the third quarter and first

nine months of 2008 used to convert the operating results of the European operations were

$1.5694 and $1.4851 per Euro, respectively, compared to $1.5202 and $1.4946 per Euro,

respectively, for the same periods last year.

- 17 -

CABLE SECTOR

CUSTOMER STATISTICS

Net additions (losses) % of Penetration

(1)

Quarters ended

May 31,

Nine months ended

May 31,

2008 2008 2007 2008 2007 2008 2007

RGUs

(2)

2,675,774 50,889 52,434 190,109 251,112

Basic Cable service

customers 1,159,161 (1,589) 2,784 16,001 38,160

HSI service

customers

628,978 6,865 16,454 53,119 81,202 56.7 51.7

Digital Television

service customers 440,066 26,055 8,583 60,187 43,768 38.5 44.5

Telephony service

customers

447,569 19,558 24,613 60,802 87,982 44.2 38.2

(1)

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

(2)

Represents the sum of Basic Cable, HSI, Digital Television and Telephony service customers.

In Canada, third-quarter 2008 RGU net additions were higher than for the same period last year

but reflect an early sign of maturation in some services. In Portugal, fiscal 2008 third-quarter and

first nine-month periods were marked by an unfavourable economic environment, aggressive

marketing campaigns from competitors, including periodic intense price competition, and the

arrival of multiple triple-play providers in the Portuguese market. Cabovisão did not match the

competition’s highly discounted offering at all times. These factors were the main contributors to

net customer losses in the Basic Cable and lower customer growth in HSI and in Telephony

services compared to the same period last year. The net RGU growth in the European operations

is attributable to the launch of the Digital Television service in the third quarter of 2008.

Management considers the current competitive dynamic is Portugal to be transitory. Cabovisão’s

performance since its acquisition by Cogeco Cable has exceeded management’s original business

plan, and long-term growth prospects remain excellent in management’s view.

The net loss of customers for Basic Cable in the Canadian market stood at 520 customers

compared to 2,910 customers for the same period last year. Third-quarter Basic Cable service

customer losses are due to the end of the school year for college and university students. In

addition, 2007 third-quarter net losses were unusually high due to the end of an aggressive

promotional offer which resulted in a significant number of customer disconnections. In Portugal,

Basic Cable service decreased by 1,069 customers compared to an increase of 5,694 customers

in the same period of the prior year.

In Canada, the number of net additions to HSI service stood at 8,480 customers compared to

11,030 customers for the same period last year. During the third quarter of 2008, 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. HSI service customers in Portugal decreased by 1,615 customers

compared to an increase of 5,424 customers in 2007.

Canadian net additions of Digital Television service stood at 11,585 customers compared to 8,583

customers for the same period last year due to targeted marketing initiatives in 2008 to improve

the penetration rate. It also reflects the continuing strong interest for High Definition technology.

The Digital Television service was launched in Portugal in the third quarter of 2008, with the

addition of 14,470 customers in that period.

Telephony customers grew in both operating units. In Canada, net additions stood at 17,113 to

reach 200,165 compared to a growth of 19,065 for the same period last year. The lower growth is

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

- 18 -

to fewer new areas where the service was launched. Telephony service coverage, as a

percentage of homes passed, has now reached 83% compared to 77% last year. Telephony

service in Portugal grew by 2,445 customers compared to 5,548 customers for the same period of

the preceding year.

OPERATING RESULTS

Quarters ended May 31, Nine months ended May 31,

($000, except percentages)

2008 2007 Change 2008 2007 Change

$ $ % $ $ %

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

Revenue 274,944 240,612 14.3 791,879 694,566 14.0

Operating costs 157,454 142,738 10.3 458,857 417,671 9.9

Management fees - COGECO Inc. – – – 8,714 8,568 1.7

Operating income before

amortization

117,490 97,874 20.0 324,308 268,327 20.9

Operating margin 42.7% 40.7% 41.0% 38.6%

Revenue

Fiscal 2008 third-quarter consolidated revenue improved by $34.3 million, or 14.3%, to reach

$274.9 million, and for the first nine-month period by $97.3 million, or 14% to reach $791.9 million.

Driven by an increased number of RGUs combined with rate increases, 2008 third-quarter

Canadian operations revenue went up by $28.2 million, or 15.4%, and 2008 first nine-month period

by $86.7 million, or 16.5%.

Fiscal 2008 third-quarter European operations revenue increased by $6.2 million, or 10.7%, to

reach $64 million, and 2008 nine-month period by $10.6 million, or 6.3%, to reach $179.5 million

compared to the same periods last year. European operations have generated lower RGU growth

and implemented rate increases. Furthermore, the strength of the Euro against the Canadian

dollar compared with last year has increased revenue growth when translated to Canadian dollars.

Operating costs

For the third quarter and the first nine months of fiscal 2008, operating costs, excluding

management fees payable to COGECO Inc., increased by $14.7 million, or 10.3% and $41.2

million, or 9.9%, compared to last year, to reach $157.5 million and $458.9 million, respectively.

The increase in operating costs for the third quarter 2008 was mainly attributable to servicing

additional RGUs in Canada and Portugal. The increase in operating costs for the first nine-month

period was attributable to servicing additional RGUs in Canada and Portugal, the timing of certain

marketing initiatives in Portugal, including a major campaign to increase brand awareness, and

costs related to the design of internal controls and review of business processes to comply with

National Instrument 52-109.

Operating income before amortization

Fiscal 2008 third-quarter and first nine-month period operating income before amortization

increased by $19.6 million, or 20%, to reach $117.5 million and by $56 million, or 20.9%, to reach

$324.3 million, respectively, as a result of RGU growth and various rate increases outpacing

operating cost increases. Cogeco Cable’s third-quarter of 2008 operating margin increased to

42.7% from 40.7% due to rate increases implemented during the first quarter of fiscal 2008 and the

third quarter of fiscal 2007. The operating margin in Canada improved to 44.3% from 43.2% and in

Europe to 37.7% from 32.7%.

- 19 -

For the first nine months of fiscal 2008, the operating margin improved to 41% from 38.6% due to

the reasons described above with the Canadian operating margin improving to 42.6% from 40.2%

and the European operating margin to 35.4% from 33.7% when compared to the same period the

year before.

FISCAL 2009 PRELIMINARY FINA NCIAL GUIDELINES

Cable sector

The fiscal 2009 preliminary financial guidelines exclude the acquisition of Toronto Hydro Telecom

Inc., which is subject to the approval by the Commissioner of Competition. The revised guidelines,

with other changes as required, will be presented upon completion of the transaction and the

release of the 2008 year-end results.

For fiscal 2009, Cogeco Cable expects to grow revenue and operating income before amortization.

The preliminary guidelines take into consideration the global economical slowdown that is

occurring and should continue during 2009. In Canada and Portugal, mortgage interest rate

increases and higher commodity prices are leaving consumers with a lower level of disposable

income. In addition, Portugal’s anticipated gross domestic product growth for 2009 will be

negatively impacted as the Government deficit will be one of the highest of the European Union in

recent history, while the competitive landscape should remain unchanged. Results from this

scenario should generate slower growth when compared to prior years.

The revenue increase of approximately 10% should come from the combined Canadian and

European operations. The Canadian operations revenue should increase by approximately 13%

from continued deployment of Telephony service, by expanded penetration of HSI service and

Digital Television services in fiscal 2008 and 2009 and the impact of the rate increases

implemented in fiscal 2008 in Ontario and in Québec, averaging $1.75 per Basic Cable service

customer for both divisions. 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 maturity. Revenue from the European

operations should increase by approximately 3.5% from €162 million to €168 million mainly from

rate increases of approximately €1.30 (CDN$2) per Basic Cable service customer implemented in

fiscal 2008, sustained RGU growth from fiscal 2008 and 2009 and from the launch of Digital

Television service in the second half of fiscal 2008. The European operations should contribute to

approximately 2% in revenue growth due to the effect of foreign exchange translation. For fiscal

2008, the expected Canadian dollar value of the Euro should be approximately $1.48 per Euro

while for fiscal 2009, it is anticipated that the Euro should be converted at a rate of approximately

$1.44 per Euro.

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

operating income before amortization by approximately 12% to 13%. Cogeco Cable expects to

achieve an operating margin of approximately 42.5%.

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

$25 million, mainly due to capital expenditures and deferred charges for RGU additions in fiscal

2008 and 2009. Management expects that cash flows generated by operations will finance capital

expenditures and deferred charges, expected to amount to $275 million, essentially the same as

for fiscal 2008. Cogeco Cable expects to generate free cash flow in the order of $105 million, an

increase of approximately $35 million compared to fiscal 2008 projections. Generated free cash

flow should be used primarily to reduce Indebtedness, thus improving the cable subsidiary’s

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

- 20 -

approximately $7 million. Net income of approximately $125 million should be achieved as a result

of growth in operating income before amortization exceeding the increase in fixed charges.

Consolidated

($ million, except customer data and operating margin)

Preliminary

Projections

Fiscal 2009

Revised Projections

Fiscal 2008

April 10, 2008

$ $

Consolidated Financial Guideli nes

Revenue 1,198 1,090

Operating income before amortization 500 445

Net income 42 22

Free cash flow 110 75

Cable sector–

Financial Guidelines

Revenue 1,165 1,060

Operating income before amortization 495 440

Operating margin 42.5% 41% to 42%

Financial expense 65 72

Amortization 250 225

Net income 125 123

Capital expenditures and deferred charges 275 275

Free cash flow 105 70

Customer Addition Guidelines

RGUs 175,000 225,000

UNCERTAINTIES AND MAIN RISK FACTORS

There have been no significant changes in the risk factors and uncertainties facing COGECO

since August 31, 2007, except for the Part II Licence Fees payable to the Canadian Radio-

television and Telecommunications Commission (CRTC). On December 14, 2006, the Federal

Court of Canada ruled that the Part II Licence Fees payable to the CRTC are an unlawful tax. Both

the Plaintiffs (the members of the Canadian Association of Broadcasters, Videotron Ltee and CF

Cable TV Inc.) and the Defendant (the Crown) have appealed this decision to the Federal Court of

Appeal. The Defendant was seeking to reverse the Court decision that Part II Licence Fees are

unlawful and the Plaintiffs were seeking a Court order requiring a refund of past fees paid. The

Appeal hearing was held on December 4 and 5 in Ottawa and a decision was rendered on April

28, 2008 in favour of the Crown, to the effect that the fees are valid regulatory charges. On June

26 and 27, 2008, the Plaintiffs filed applications for leave to appeal to the Supreme Court of

Canada. The Defendant must respond to these applications within 60 days. COGECO has

accrued the full amount with respect to these fees for fiscal year 2007 and the first nine months of

fiscal 2008.

ACCOUNTING POLICIES AND ESTIMATES

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

accounting pronouncements since August 31, 2007, except as described below. A description of

the Company’s policies and estimates can be found in the 2007 annual MD&A.

- 21 -

Financial instruments

Effective September 1, 2007, the Company adopted the Canadian Institute of Chartered

Accountants (“CICA”) Handbook Section 1530, Comprehensive Income, Section 3855, Financial

Instruments – Recognition and Measurement, Section 3861, Financial Instruments – Disclosure

and Presentation, and Section 3865, Hedges.

Statement of Comprehensive Income

A new statement entitled Consolidated Statements of Comprehensive Income was added to the

Company’s consolidated financial statements and includes net income as well as other

comprehensive income. Other comprehensive income represents changes in shareholders’ equity

arising from transactions and events from non-owner sources, such as changes in foreign currency

translation adjustments of net investments in self-sustaining foreign subsidiaries and long-term

debt designated as a hedge of net investments in self-sustaining foreign subsidiaries and changes

in the fair value of effective cash flow hedging instruments.

Recognition and Measurement of Financial Instruments

Under these new standards, all financial assets, including derivatives, must be classified as

available for sale, held for trading, held to maturity or loans and receivables. All financial liabilities,

including derivatives, must be classified as held for trading or other liabilities. All financial

instruments classified as available for sale or held for trading are recognized at fair value on the

consolidated balance sheet while financial instruments classified as loans and receivables or other

liabilities will continue to be measured at amortized cost using the effective interest rate method.

The standards allow the Company to designate certain financial instruments, on initial recognition,

as held for trading.

All of the Company's financial assets are classified as held for trading or loans and receivables.

The Company has classified its cash and cash equivalents as held for trading. Accounts receivable

have been classified as loans and receivables. All of the Company’s financial liabilities were

classified as other liabilities, except for the Company’s subsidiary’s cross-currency swaps, which

were classified as held for trading. Held for trading assets and liabilities are carried at fair value on

the consolidated balance sheet, with changes in fair value recorded in the consolidated statement

of income, except for the changes in fair value of the cross-currency swaps, which are designated

as cash flow hedges of the Senior Secured Notes, Series A and are recorded in other

comprehensive income. Loans and receivables and all financial liabilities are carried at amortized

cost using the effective interest method. Upon adoption, the Company determined that none of its

financial assets are classified as available for sale or held to maturity. Except for the treatment of

transaction costs and derivative financial instruments mentioned below, the provisions of the new

accounting standards had no impact on the consolidated financial statements on September 1,

2007 and May 31, 2008.

Transaction costs

Effective September 1, 2007, transaction costs are capitalized on initial recognition and presented

as a reduction of the related financing, except for transaction costs on the revolving loan and the

swingline facility, which are presented as deferred charges. These costs are amortized over the

term of the related financing using the effective interest rate method, except for transaction costs

on the revolving loan and the swingline facility, which are amortized over the term of the related

financing on a straight-line basis. Previously, all transaction costs were capitalized and amortized

on a straight-line basis over the term of the related financing, over a period not exceeding five

years. The impact of these adjustments reduced deferred charges by $1.2 million, reduced long-

- 22 -

term debt by $3.1 million, increased future income tax liabilities by $0.6 million, increased non-

controlling interest by $0.9 million and increased retained earnings by $0.4 million.

Cash flow hedge

All derivatives are measured at fair value with changes in fair value recorded in the consolidated

statements of income unless they are effective cash flow hedging instruments. The changes in fair

value of cash flow hedging derivatives are recorded in other comprehensive income, to the extent

effective, until the variability of cash flows relating to the hedged asset or liability is recognized in

the consolidated statement of income. Any hedge ineffectiveness is recognized in the consolidated

statement of income immediately. Accordingly, the Company’s subsidiary’s cross-currency swaps

must be measured at fair value in the consolidated financial statements. Since these cross-

currency swaps are used to hedge cash flows on Senior Secured Notes, Series A denominated in

U.S. dollars, the changes in fair value are recorded in other comprehensive income. The impact of

measuring the cross-currency swaps at fair value on the interim consolidated financial statements

on September 1, 2007, increased derivative financial instruments liabilities by $83.5 million,

decreased deferred credit presented in long-term debt by $80.2 million, decreased future income

tax liabilities by $1.1 million, decreased non-controlling interest by $1.5 million and decreased

opening accumulated other comprehensive income by $0.7 million. The impact of measuring the

cross-currency swaps at fair value on the interim consolidated financial statements for the third

quarter decreased derivative financial instruments liabilities by $1.6 million, increased future

income tax liabilities by $0.1 million, increased non-controlling interest by $0.1 million and

increased accumulated other comprehensive income by $0.1 million. The impact of measuring the

cross-currency swaps at fair value on the interim consolidated financial statements for the nine-

month period ended May 31, 2008 increased derivative financial instruments liabilities by

$7.8 million, decreased future income tax liabilities by $0.6 million, increased non-controlling

interest by $0.8 million and increased accumulated other comprehensive income by $0.4 million.

Net investment hedge

Financial statements of self-sustaining foreign subsidiaries are translated using the rate in effect at

the balance sheet date for asset and liability items, and using the average exchange rates during

the period for revenue and expenses. Adjustments arising from this translation are deferred and

recorded as foreign currency translation adjustments in accumulated other comprehensive income

and are included in income only when a reduction in the investment in these foreign subsidiaries is

realized. Unrealized foreign exchange gains and losses on long-term debt denominated in foreign

currency, that is designated as a hedge of net investments in self-sustaining foreign subsidiaries,

are recorded as foreign currency translation adjustments in accumulated other comprehensive

income, net of income taxes and non-controlling interest. As a result, an amount of $1.0 million

was reclassified as at August 31, 2007 from the foreign currency translation adjustment to the

accumulated other comprehensive income and the Company’s comparative financial statements

were restated in accordance with transition rules.

Embedded derivatives

All embedded derivatives that are not closely related to the host contracts, are measured at fair

value, and with changes in fair value recorded in the consolidated statement of income. On

September 1, 2007 and as at May 31, 2008, there are no significant embedded derivatives or non-

financial derivatives that require separate fair value recognition on the consolidated balance sheet.

In accordance with the new standards, the Company selected September 1, 2002 as its transition

date for adopting the standard related to embedded derivatives.

- 23 -

Upcoming standards

In 2006, the CICA issued Handbook Section 3862, Financial Instruments – Disclosures, and

Section 3863, Financial Instruments – Presentation. These Sections are to be applied to interim

and annual financial statements relating to fiscal years beginning on or after October 1, 2007. The

Company is currently evaluating the impact of these new standards.

Accounting changes

In July 2006, the CICA issued Section 1506, Accounting Changes, which modifies certain aspects

of the previous standard. A reporting entity may not change its accounting method unless required

by primary source of GAAP or to provide a more reliable and relevant presentation of the financial

statements. In addition, changes in accounting methods must be applied retroactively and

additional information must be disclosed. This Section applies to interim and annual financial

statements relating to fiscal years beginning on or after January 1, 2007. During the first quarter,

the Company adopted this new standard and concluded that it had no significant impact on these

consolidated financial statements.

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, free cash flow and net income,

excluding gain on dilution, loss from discontinued operations and income tax adjustments, net of

non-controlling interest.

Cash flow from operations

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

flow generated by operating activities from continuing operations, excluding the impact of changes

in non-cash operating 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:

Quarters ended May 31, Nine months ended May 31,

($000)

2008 2007 2008 2007

$ $ $ $

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

Cash flow from operating activities 112,893 51,669 252,439 103,407

Changes in non-cash operating items (16,825)

25,193 10,380 102,005

Cash flow from operations 96,068 76,862 262,819 205,412

- 24 -

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. Free cash flow is

calculated as follows:

Quarters ended May 31, Nine months ended May 31,

($000) 2008 2007 2008 2007

$ $ $ $

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

Cash flow from operations 96,068 76,862 262,819 205,412

Acquisition of fixed assets (50,940)

(51,249)

(160,286) (163,067)

Increase in deferred charges (7,050)

(6,000)

(20,661) (19,258)

Assets acquired under capital leases – as per

Note 13b) (971)

(561)

(2,417) (2,793)

Free cash flow 37,107 19,052 79,455 20,294

Net income excluding loss (gain) on dilution, loss from discontinued operations and

income tax adjustments net of non-controlling interest.

Net income excluding loss (gain) on dilution, loss from discontinued operations and income tax

adjustments, net of non-controlling interest, is used by COGECO’s management and investors in

order to evaluate what would have been the net income excluding gain on dilution, loss from

discontinued operations and income tax adjustments net of non-controlling interest. This allows the

Company to isolate the one time adjustments in order to evaluate the net income from continuing

operations.

Quarters ended May 31, Nine months ended May 31,

($000) 2008 2007 2008 2007

$ $ $ $

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

Net income 9,538 3,059 15,452 44,356

Adjustments:

Loss (gain) on dilution 3 64 85 (30,919)

Discontinued operations – 1,966 18,057 4,170

Income tax adjustments net of non-controlling

interest – – (7,909) –

Net income excluding above adjustments 9,541 5,089 25,685 17,607

ADDITIONAL INFORMATION

This MD&A was prepared on July 9, 2008. Additional information relating to the Company,

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

ABOUT COGECO

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

COGECO provides approximately 2,676,000 revenue-generating units (RGUs) to 2,410,000

homes passed in its Canadian and Portuguese service territories. Through its two-way broadband

- 25 -

cable networks, Cogeco Cable provides its residential and commercial customers with Analogue

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

Radio-Television 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 –

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: Thursday, July 10, 2008 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 dialing five minutes before the start of the

conference:

Canada/USA Access Number: 1 866 321-8231

International Access Number: + 1 416 642-5213

Confirmation Code: 4152342

By Internet at www.cogeco.ca/investors

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

dialing:

Canada and USA access number: 1 888 203-1112

International access number: + 1 647 436-0148

Confirmation code: 4152342

- 26 -

Supplementary Quarterly Financial Information

(unaudited)

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

2008

(1)

2007

(1)

2008

(1)

2007

(1)

2007

(1)

2006

(1)

2007

(1)

2006

(1)

($000, except percentages and

per share data)

$ $ $ $ $ $ $ $

Revenue 283,878 249,424 271,894 238,378 260,255 230,233 251,300 181,419

Operating income before

amortization 117,204 95,791 109,346 87,478 101,209 87,371 100,595 73,000

Operating margin 41.3% 38.4% 40.2% 36.7% 38.9% 37.9% 40.0% 40.2%

Amortization 58,564 47,725 56,346 44,018 53,039 44,755 54,723 35,259

Financial expense 17,746 21,603 17,373 23,915 17,368 21,614 18,924 16,747

Income taxes 10,285 8,055 (14,426)

4,233 9,277 6,535 (7,480)

(12,389)

Loss (gain) on dilution 3 64 (25)

(30,990)

107 7 (27,011)

Non-controlling interest 21,068 13,318 33,763 9,647 13,762 7,619 24,240 20,652

Income from continuing

operations 9,538 5,025 16,315 36,655 7,656 6,846 37,097 12,749

Loss from discontinued

operations – (1,966)

(425)

(2,109)

(17,632)

(95) (6,713)

(2,449)

Net income (loss) 9,538 3,059 15,890 34,546 (9,976)

6,751 30,384 10,300

Cash flow from operations 96,068 76,862 85,374 63,353 81,377 65,197 78,153 56,759

Earnings (loss ) per share

Basic

Income from continuing

operations

0.57 0.30 0.98 2.21 0.46 0.41 2.23 0.77

Loss from discontinued

operations – (0.12)

(0.03) (0.13) (1.06) (0.01) (0.40)

(0.15)

Net income (loss) 0.57 0.18 0.95 2.08 (0.60) 0.41 1.82 0.62

Diluted

Income from continuing

operations 0.57 0.30 0.97 2.20 0.46 0.41 2.21 0.77

Loss from discontinued

operations

– (0.12)

(0.03) (0.13) (1.06) (0.01) (0.40)

(0.15)

Net income (loss) 0.57 0.18 0.95 2.07 (0.60) 0.41 1.81 0.62

(1)

Includes 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 Cable service customers is usually greater, and the addition of HSI

service customers is generally lower, in the fourth quarter, mainly due to students leaving

campuses at the end of the school year

COGECO INC. - 27 -

Customer Statistics

May 31, August 31,

2008 2007

Homes Passe

Ontario

(1)

1 023 089 997 498

Québec 498 863 486 592

Canada 1 521 952 1 484 090

Portugal 887 476 859 376

Total 2 409 428 2 343 466

Revenue Generating Unit

Ontario 1 365 81

1 256 244

Québec 583 183 532 264

Canada 1 948 999 1 788 508

Portugal 726 77

697 157

Total 2 675 77

2 485 66

Basic Cable Service Customer

Ontario 600 000 594 889

Québec 258 570 254 268

Canada 858 570 849 157

Portugal 300 591 294 003

Total 1 159 161 1 143 160

Discretionnary Service Customer

Ontario 495 082 468 764

Québec 212 033 204 585

Canada 707 11

673 349

Portugal - -

Total 707 11

673 349

Pay TV Service Customer

Ontario 98 01

88 835

Québec 45 540 42 180

Canada 143 55

131 015

Portugal 57 671 54 723

Total 201 22

185 738

High Speed Internet Service Customer

Ontario 349 27

316 363

Québec 115 39

99 473

Canada 464 668 415 836

Portugal 164 310 160 023

Total 628 978 575 859

Digital Television Service Customers

Ontario 277 274 246 267

Québec 148 322 133 612

Canada 425 596 379 879

Portugal 14 470 -

Total 440 066 379 879

Telephony Service Customer

Ontario 139 268 98 725

Québec 60 897 44 911

Canada 200 16

143 636

Portugal 247 40

243 131

Total 447 569 386 767

(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

- 28 -

COGECO INC.

CONSOLIDATED STATEMENTS OF INCOME

Three months ended May 31,

Nine months ended May 31,

(In thousands of dollars, except per share data) 2008

2007 2008

2007

(unaudited)

(unaudited) (unaudited)

(unaudited)

Revenue 283,878

249,424

816,027

718,035

Operating costs 166,674

153,633

488,268

447,395

Operating income from continuing operations before

amortization

117,204

95,791

327,759

270,640

Amortization (note 4) 58,564

47,725

167,949

136,498

Operating income from continuing operations 58,640

48,066

159,810

134,142

Financial expense (note 5) 17,746

21,603

52,487

67,132

Income from continuing operations before income taxes and

the following items

40,894

26,463

107,323

67,010

Income taxes (note 6) 10,285

8,055

5,136

18,823

Loss (gain) on dilution resulting from shares issued by a

subsidiary (note 7)

(30,919)

Non-controlling interest 21,068

13,318

68,593

30,584

Share in the loss (earnings) of a general partnership –

–

(4)

Income from continuing operations 9,538

5,025

33,509

48,526

Loss from discontinued operations (note 15) –

(1,966)

(18,057)

(4,170)

Net income 9,538

3,059

15,452

44,356

Earnings (loss) per share (note 8)

Basic

Income from continuing operations 0.57

0.30

2.01

2.93

Loss from discontinued operations –

(0.12)

(1.08)

(0.25)

Net income 0.57

0.18

0.93

2.67

Diluted

Income from continuing operations 0.57

0.30

2.00

2.91

Loss from discontinued operations –

(0.12)

(1.08)

(0.25)

Net income 0.57

0.18

0.92

2.66

- 29 -

COGECO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(In thousands of dollars) 2008

2007 2008

2007

(unaudited)

(unaudited) (unaudited)

(unaudited)

Net income 9,538

3,059

15,452

44,356

Other comprehensive income

Unrealized gains (losses) on derivative financial instruments

designated as cash flow hedges, net of income taxes

expense of $279,000 and income taxes recovery of $908,000

and non-controlling interest of $860,000 and $4,653,000

412

–

(2,226)

–

Reclassification of realized losses (gains) to net income on

derivative financial instruments designated as cash flow

hedges, net of income taxes recovery of $199,000 and

income taxes expense of $1,465,000 and non-controlling

interest of $738,000 and $5,421,000

(353)

–

2,594

–

Unrealized gains (losses) on translation of net investments in

self-sustaining foreign subsidiaries, net of non-controlling

interest of $15,588,000 and $32,087,000 ($32,069,000 and

$6,474,000 in 2007)

7,454

(15,405)

15,345

3,110

Unrealized gains (losses) on translation of long-term debts

designated as hedge of net investments in self-sustaining

foreign subsidiaries, net of non-controlling interest of

$10,837,000 and $21,16 2,000 (net of income taxes recovery

of $1,703,000 and non-controlling interest of $22,165,000

and $5,646,000 in 2007)

(5,182)

10,648

(10,120)

(2,711)

2,331

(4,757)

5,593

399

Comprehensive income 11,869

(1,698)

21,045

44,755

- 30 -

COGECO INC.

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

Nine months ended May 31,

(In thousands of dollars) 2008

2007

(unaudited)

Balance at beginning, as reported 274,946

204,734

Changes in accounting policies (note 1) 424

–

Balance at beginning, as restated 275,370

204,734

Net income 15,452

44,356

Dividends on multiple vot ing shares (387)

(374)

Dividends on subordinate voting shares (3,114)

(2,987)

Balance at end 287,321

245,729

- 31 -

COGECO INC.

CONSOLIDATED BALANCE SHEET S

(In thousands of dollars) May 31, 2008

August 31, 2007

(unaudited)

Assets

Current

Cash and cash equivalents 82,681

66,279

Accounts receivable 60,288

52,734

Income taxes receivable 2,073

3,138

Prepaid expenses 6,291

8,675

Future income tax assets 8,145

17,986

Current assets related to discontinued operations (note 15) –

38,700

159,478

187,512

Income taxes receivable 1,444

1,345

Investments 739

739

Fixed assets 1,178,511

1,123,270

Deferred charges 56,687

55,450

Intangible assets (note 8) 1,082,627

1,083,750

Goodwill (note 8) 367,772

342,584

Non-current assets related to discontinued operations (note 15) –

42,109

2,847,258

2,836,759

Liabilities and Shareholders' equity

Liabilities

Current

Bank indebtedness 2,090

–

Accounts payable and accrued liabilities 206,578

220,450

Income tax liabilities 15,186

1,209

Deferred and prepaid income 28,471

29,837

Derivative financial instruments 91,285

–

Current portion of long-term debt (note 10) 166,303

17,327

Current liabilities related to discontinued operations (note 15) –

46,031

509,913

314,854

Long-term debt (note 10) 797,029

1,036,256

Share in the partners’ deficiency of a general partnership –

518

Deferred and prepaid income 11,765

11,501

Pension plan liabilities and accrued employees benefits 8,748

7,378

Future income tax liabilities 246,656

267,646

Non-controlling interest 862,639

788,557

Long-term liabilities related to discontinued operations (note 15) –

17,589

2,436,750

2,444,299

Shareholders' equity

Capital stock (note 11) 119,405

119,078

Treasury shares (note 11) (1,522)

(1,054)

Contributed surplus – stock-based compensation 1,444

499

Retained earnings 287,321

274,946

Accumulated other comprehensive income (loss) (note 12) 3,860

(1,009)

410,508

392,460

2,847,258

2,836,759

- 32 -

COGECO INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

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

(In thousands of dollars)

2008

2007 2008

2007

$ $

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

Cash flow from operating activities

Income from continuing operations 9,538

5,025 33,509

48,526

Adjustments for:

Amortization (note 4)

58,564

47,725 167,949

136,498

Amortization of deferred financ in g cos t s

742

532 2,215

1,713

Future income taxes (note 6)

4,690

7,520 (13,050)

12,542

Non-controlling interest

21,068

13,318 68,593

30,584

Loss (gain) on dilution resulting from shares issued by a subsidiary

(note 7)

(30,919)

Stock-based compensation

1,022

2,990 2,092

6,078

Loss (gain) on disposal of fixed assets

151

(130) 388

(169)

Other

290

(182) 1,038

559

96,068

76,862 262,819

205,412

Changes in non-cash operating items (note 13a)) 16,825

(25,193) (10,380)

(102,005)

112,893

51,669 252,439

103,407

Cash flow from investing activities

Acquisition of fixed assets (note 13b)) (50,940)

(51,249) (160,286)

(163,067)

Increase in deferred charges (7,050)

(6,000) (20,661)

(19,258)

Business acquisition and related adjustments (note 2) (16,105)

3,279 (16,105)

1,894

Decrease in restricted cash –

– –

Other (320)

429 (435)

468

(74,415)

(53,541) (197,487)

(179,875)

Cash flow from financing activities

Increase (decrease) in bank indebtedness (15,686)

(20) 2,090

(1,112)

Increase in long-term debt 99,759

22,861 99,810

22,861

Repayment of long-term debt (61,182)

(36,485) (131,593)

(178,478)

Issue of subordinate voting shares 266

974 327

1,431

Acquisition of treasury shares –

(1,054) (468)

(1,054)

Dividends on multiple vot ing shares (129)

(129) (387)

(374)

Dividends on subordinate voting shares (1,038)

(1,037) (3,114)

(2,987)

Issue of shares by a subsidiary to non-controlling interest, net of issue

costs

1,411

3,354

190,066

Dividends paid by a subsidiary to non-controlling interest (3,281)

(1,776) (9,834)

(4,210)

18,771

(15,255) (39,815)

26,143

Effect of exchange rate changes on cash and cash equivalents

denominated in foreign currencies

1,063

(1,774)

1,265

1,486

Cash flow from continuing operations 58,312

(18,901) 16,402

(48,839)

Cash flow from discontinued operations (note 15) –

– –

–

Net change in cash and cash equivalents 58,312

(18,901) 16,402

(48,839)

Cash and cash equivalents at beginning 24,369

41,578 66,279

71,516

Cash and cash equivalents at end 82,681

22,677 82,681

22,677

See supplemental cash flow information in note 13.

- 33 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and 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. (“the Company”) as at May 31, 2008 and August 31, 2007 as well as its

results of operations and its cash flow for the three and nine-month periods ended May 31, 2008 and 2 007.

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, 2007. 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 on financial instruments described below and the presentation of the investment in the

discontinued operations (see note 15).

Financial instrume nts

Effective September 1, 2007, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”)

Handbook Section 1530, Comprehensive Income, Section 3855, Financial Instruments – Recognition and

Measurement, Section 3861, Financial Instruments – Disclosure and Presentation and Section 3865, Hedges.

Statement of Comprehensive Income

A new statement, entitled Consolidated Statements of Comprehensive Income, was added to the Company’s

consolidated financial statements and includes net income as well as other comprehensive income. Other

comprehensive income represents changes in shareholders’ equity arising from transactions and events from non-

owner sources, such as changes in foreign currency translation adjustments of net investments in self-sustaining

foreign subsidiaries and long-term debt designated as a hedge of net investments in self-sustaining foreign

subsidiaries and changes in the fair value of effective cash flow hedging instruments.

Recognition and Measurement of Financial Instruments

Under these new standards, all financial assets, including derivatives, must be classified as available for sale, held for

trading, held to maturity, or loans and receivables. All financial liabilities, including derivatives, must be classified as

held for trading or other liabilities. All financial instruments classified as available for sale or held for trading are

recognized at fair value on the consolidated balance sheet while financial instruments classified as loans and

receivables or other liabilities will continue to be measured at amortized cost using the effective interest rate method.

The standards allow the Company to designate certain financi al instruments, on initial recognition, as held for tradin g.

All of the Company's financial assets are classified as held for trading or loans and receivables. The Company has

classified its cash and cash equivalents as held for trading. Accounts receivable has been classified as loans and

receivables. All of the Company’s financial liabilities were classified as other liabilities, except for the Company’s

subsidiary’s cross-currency swaps, which were classified as held for trading. Held for trading assets and liabilities are

carried at fair value on the consolidated balance sheet, with changes in fair value recorded in the consolidated

statements of income, except for the changes in fair value of the cross-currency swaps, which are designated as cash

flow hedges of the Senior Secured Notes Series A and are recorded in other comprehensive income. Loans and

receivables and all financial liabilities are carried at amortized cost using the effective interest method. Upon adoption,

the Company determined that none of its financial assets are classified as available for sale or held to maturity.

Except for the treatment of transaction costs and derivative financial instruments mentioned below, the provisions of

the new accounting standards had no impact on the consolidated financial statements on September 1, 2007 and

May 31, 2008.

- 34 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

1. Basis of Presentation (continued)

Transaction costs

Effective September 1, 2007, transaction costs are capitalized on initial recognition and presented as a reduction of

the related financing, except for transaction costs on the revolving loan and the swingline facility, which are presented

as deferred charges. These costs are amortized over the term of the related financing using the effective interest rate

method, except for transaction costs on the revolving loan and the swingline facility, which are amortized over the

term of the related financing on a straight-line basis. Previously, all transaction costs were capitalized and amortized

on a straight-line basis over the term of the related financing, over a period not exceeding five years. The impact of

these adjustments reduced deferred charges by $1.2 million, reduced long-term debt by $3.1 million, increased future

income tax liabilities by $0.6 million, increased non-controlling interest by $0.9 million and increased retained earnings

by $0.4 million.

Cash flow hedge

All derivatives are measured at fair value with changes in fair value recorded in the consolidated statements of income

unless they are effective cash flow hedging instruments. The changes in fair value of cash flow hedging derivatives

are recorded in other comprehensive income, to the extent effective, until the variability of cash flows relating to the

hedged asset or liability is recognized in the consolidated statements of income. Any hedge ineffectiveness is

recognized in the consolidated statements of income immediately. Accordingly, the Company’s subsidiary’s cross-

currency swaps must be measured at fair value in the consolidated financial statements. Since these cross-currency

swaps are used to hedge cash flows on Senior Secured Notes Series A denominated in U.S. dollars, the changes in

fair value are recorded in other comprehensive income. The impact of measuring the cross-currency swaps at fair

value on the interim consolidated financial statements on September 1, 2007, increased derivative financial

instruments liabilities by $83.5 million, decreased deferred credit presented in long-term debt by $80.2 million,

decreased future income tax liabilities by $1.1 million, decreased non-controlling interest by $1.5 million and

decreased opening accumulated other comprehensive income by $0.7 million. The impact of measuring the cross-

currency swaps at fair value on the interim consolidated financial statements for the three-month period ended

May 31, 2008 decreased derivative financial instruments liabilities by $1.6 million, increased future income tax

liabilities by $0.1 million, increased non-controlling interest by $0.1 million and increased accumulated other

comprehensive income by $0.1 million. The impact of measuring the cross-currency swaps at fair value on the interim

consolidated financial statements for the nine-month period ended May 31, 2008 increased derivative financial

instruments liabilities by $7.8 million, decreased future income tax liabilities by $0.6 million, increased non-controlling

interest by $0.8 million and increased accumulated other comprehensive income by $0.4 million.

Net investment hedge

Financial statements of self-sustaining foreign subsidiaries are translated using the rate in effect at the balance sheet

date for asset and liability items, and using the average exchange rates during the period for revenue and expenses.

Adjustments arising from this translation are deferred and recorded as foreign currency translation adjustment in

accumulated other comprehensive income and are included in income only when a reduction in the investment in

these foreign subsidiaries is realized. Unrealized foreign exchange gains and losses on long-term debt denominated

in foreign currency, that is designated as a hedge of net investments in a self-sustaining foreign subsidiaries are

recorded as foreign currency translation adjustments in accumulated other comprehensive income, net of income

taxes and non-controlling interest. As a result, an amount of $1.0 million was reclassified as at August 31, 2007 from

the foreign currency translation adjustment to the accumulated other comprehensive income and the Company’s

comparative financial statements were restated in accordance with transitional provisions.

- 35 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

1. Basis of Presentation (continued)

Embedded derivatives

All embedded derivatives that are not closely related to the host contracts are measured at fair value, with changes in

fair value recorded in the consolidated statements of income. On September 1, 2007 and as at May 31, 2008, there

are no significant embedded derivatives or non-financial derivatives that require separate fair value recognition on the

consolidated balance sheet. In accordance with the new standards, the Company selected September 1, 2002, as its

transition date for adopting the standard related to embedded de rivatives.

Upcoming standards

In 2006, the CICA issued Handbook Section 3862, Financial Instruments – Disclosures, and Section 3863, Financial

Instruments – Presentation. These Sections are to be applied to interim and annual financial statements relating to

fiscal years beginning on or after October 1, 2007. The Company is currently evaluating the impact of these new

standards.

Accounting changes

In July 2006, the CICA issued Section 1506, Accounting Changes, which modifies certain aspects of the previous

standard. A reporting entity may not change its accounting method unless required by primary source of GAAP or to

provide a more reliable and relevant presentation of the financial statements. In addition, changes in accounting

methods must be applied retroactively and additional information must be disclosed. This Section applies to interim

and annual financial statements relating to fiscal years beginning on or after January 1, 2007. During the first quarter,

the Company adopted this new standard and concluded that it had no significant impact on these consolidated

financial statements.

Future accounting pronouncements

Goodwill and intangible assets

In February 2008, the CICA issued Section 3064, Goodwill and intangible assets, replacing Section 3062, Goodwill

and other intangible assets and Section 3450, Research and development costs. The new Section establishes

standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial

recognition and of intangible assets by profit-oriented enterprises. Standards concerning goodwill are unchanged from

the standards included in the previous Section 3062. The new Section will be applicable to interim and annual

financial statements relating to fiscal years beginning on or after October 1, 2008. The Company is currently

evaluating the impact of the adoption of this new Section on its consolidated financial statements.

- 36 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

2. Business acquisition

Acquisition of MaXess Networx®

On March 31, 2008, the Company’s subsidiary, Cogeco Cable Inc., completed the acquisition of all the assets of

MaXess Networx®, ENWIN Energy Ltd.’s telecommunications division (City of Windsor’s energy company) for a total

consideration of $15.6 million. MaXess Networx® operates a broadband network equipped with next generation ATM

and Ethernet technology and provides organizations in south-western Ontario with the broadband capacity required

for data networking, high-speed Internet access, e-business applications, video conferencing and other advanced

communications.

The acquisition was accounted for using the purchase method. The results of MaXess Networx® have been

consolidated as of the acquisition date.

The allocation of the purchase price of the acquisition is as follow:

(unaudited)

Consideration paid

Assets purchase price 15,555

Acquisition costs 550

16,105

Net assets acquired

Accounts receivable 276

Prepaid expenses

511

Fixed assets

13,794

Customer relationships

1,890

Accounts payable and accrued liabilities assumed

(350)

Deferred and prepaid income

(16)

16,105

- 37 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

3. Segmented Information

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

Cable Head office and other

(1)

Consolidated

Three months ended May 31,

(unaudited)

2008

2007

2008

2007

2008

2007

Revenue 274,944

240,612

8,934

8,812

283,878

249,424

Operating costs 157,454

142,738

9,220

10,895

166,674

153,633

Operating income from continuin g

operations before amortization

117,490

97,874

(286)

(2,083)

117,204

95,791

Amortization 58,209

47,278

355

447

58,564

47,725

Operating income from continuin g

operations

59,281

50,596

(641)

(2,530)

58,640

48,066

Financial expense 17,372

21,273

374

330

17,746

21,603

Income taxes 10,767

8,942

(482)

(887)

10,285

8,055

Loss on dilution resu lting fr om shares

issues by a subsidiary

–

Non-controlling interest –

–

21,068

13,318

21,068

13,318

Income (loss) from continuing operations 31,142

20,381

(21,604)

(15,356)

9,538

5,025

Loss from discontinued operations –

–

(1,966)

–

(1,966)

Net assets employed

(2) (3)

2,491,409

2,398,297

26,354

29,586

2,517,763

2,427,883

Total assets

(3)

2,807,517

2,714,339

39,741

122,420

2,847,258

2,836,759

Total assets related to discontinued

operations

(3)

–

80,809

–

80,809

Fixed assets

(3)

1,174,975

1,119,498

3,536

3,772

1,178,511

1,123,270

Goodwill

(3)

367,772

342,584

–

367,772

342,584

Acquisition of fixed assets 51,878

51,817

(7)

51,911

51,810

(1)

Includes radio operation and eliminations.

(2)

Total assets from continuing operations less cash and cash equivalents, accounts payable and accrued liabilities and deferred and prepaid income.

(3)

As at May 31, 2008 and August 31, 2007.

- 38 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

3. Segmented Information (continued)

Cable Head office and other

(1)

Consolidated

Nine months ended May 31,

(unaudited)

2008

2007

2008

2007

2008

2007

Revenue 791,879

694,566

24,148

23,469

816,027

718,035

Operating costs 467,571

426,239

20,697

21,156

488,268

447,395

Operating income from continuin g

operations before amortization

324,308

268,327

3,451

2,313

327,759

270,640

Amortization 166,885

135,159

1,064

1,339

167,949

136,498

Operating income from continuin g

operations

157,423

133,168

2,387

974

159,810

134,142

Financial expense 51,243

66,045

1,244

1,087

52,487

67,132

Income taxes 4,764

18,800

372

5,136

18,823

Loss (gain) on dilution resulting from

shares issues by a subsidiary

–

(30,919)

Non-controlling interest –

–

68,593

30,584

68,593

30,584

Income (loss) from continuing operations 101,416

48,323

(67,907)

203

33,509

48,526

Loss from discontinued operations –

–

(18,057)

(4,170)

(18,057)

(4,170)

Net assets employed

(2) (3)

2,491,409

2,398,297

26,354

29,586

2,517,763

2,427,883

Total assets

(3)

2,807,517

2,714,339

39,741

122,420

2,847,258

2,836,759

Total assets related to discontinued

operations

(3)

–

80,809

–

80,809

Fixed assets

(3)

1,174,975

1,119,498

3,536

3,772

1,178,511

1,123,270

Goodwill

(3)

367,772

342,584

–

367,772

342,584

Acquisition of fixed assets 162,479

165,786

224

162,703

165,860

(1)

Includes radio operation and eliminations.

(2)

Total assets from continuing operations less cash and cash equivalents, accounts payable and accrued liabilities and deferred and prepaid income.

(3)

As at May 31, 2008 and August 31, 2007.

The following tables sets out certain geographic market information base d on client’s location:

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

2008 2007 2008 2007

$ $ $ $

(unaudited)

Revenue

Canada 219,862 191,575 636,485 549,089

Europe 64,016 57,849 179,542 168,946

283,878 249,424 816,027 718,035

- 39 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

3. Segmented Information (continued)

May 31, 2008 August 31, 200 7

$ $

(unaudited)

Fixed assets

Canada 859,170 815,754

Europe 319,341 307,516

1,178,511 1,123,270

Goodwill

Canada – –

Europe 367,772 342,584

367,772 342,584

4. Amortization

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

2008 2007 2008 2007

$ $ $ $

(unaudited)

(unaudited) (unaudited)

(unaudited)

Fixed assets 50,105 42,417 143,099 120,471

Deferred charges 5,684 5,308 17,084 16,027

Intangible assets 2,775 – 7,766 –

58,564 47,725 167,949 136,498

5. Financial expense

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

2008 2007 2008 2007

$ $ $ $

(unaudited)

Interest on long-term debt 17,788 18,221 51,620 61,409

Amortization of deferred financ in g cos t s 408 532 1,222 1,713

Other (450) 2,850 (355) 4,010

17,746 21,603 52,487 67,132

- 40 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

6. Income Taxes

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

2008 2007 2008 2007

$ $ $ $

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

Current 5,595 535 18,186 6,281

Future 4,690 7,520 (13,050) 12,542

10,285 8,055 5,136 18,823

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

the consolidated income ta x expense:

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

2008 2007 2008 2007

$ $ $ $

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

Income before income tax es 40,894 26,462 107,323 67,014

Combined income tax rate 33.42% 34.83% 33.39% 34.80%

Income taxes at com bi ned income tax ra te 13,665 9,217 35,840 23,321

Loss or income subject to lower or higher tax rates (944) (475) (1,294) (248)

Decrease in future income taxes as a result of

decreases in substantively enacted tax rates

–

(24,146)

–

Income taxes arising form non-deductible expenses 298 198 602 538

Effect of foreign income tax rate differences (2,821) (788) (6,198) (3,037)

Benefit related to prior years’ minimum income taxes paid – – – (1,475)

Other 87 (97) 332 (276)

Income taxes at effective income tax rate 10,285 8,055 5,136 18,823

- 41 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

7. Gain on dilution resulting from shares issued by a subsidiary

On February 2007, the Company’s subsidiary, Cogeco Cable Inc., completed a public offering totalling 5,000,000

subordinate voting shares. The offering resulted in gross proceeds of $192,500,000 and net proceeds of

$184,211,000. The Company’s subsidiary has also issued, during the first nine months of 2007, 7,344 subordinate

voting shares pursuant to its Employee Stock Purchase Plan and 305,573 subordinate voting shares pursuant to its

Employee Stock Option Plan for cash considerations of $198,000 and $5,657,000, respectively. As a result, the

Company’s interest in Cogeco Cable Inc. decreased from 39.2% to 34.6% and a gain on dilution of $30,919,000 was

recorded for the nine-month period ended May 31, 2007.

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,

2008 2007 2008 2007

$ $ $ $

(unaudited)

(unaudited) (unaudited)

(unaudited)

Income from continuing operations 9,538 5,025 33,509 48,526

Loss from discontinued operations – (1,966) (18,057) (4,170)

Net income 9,538 3,059 15,452 44,356

Weighted average number of multiple voting and

subordinate voting shares outstanding

16,682,468

16,625,479

16,676,369

16,583,850

Effect of dilutive stock options

(1)

54,599 87,434 70,256 100,094

Weighted average number of dil uted mult ipl e voti ng an d

subordinate voting shares outstanding

16,737,067

16,712,913

16,746,625

16,683,944

Earnings (loss) per share

Basic

Income from continuing operations 0.57 0.30 2.01 2.93

Loss from discontinued operations – (0.12) (1.08) (0.25)

Net income 0.57 0.18 0.93 2.67

Diluted

Income from continuing operations 0.57 0.30 2.00 2.91

Loss from discontinued operations – (0.12) (1.08) (0.25)

Net income 0.57 0.18 0.92 2.66

(1)

For the three and nine-month peri ods ended May 31, 2008, 33,182 and 22,121 stock options (none and 24,295 in 20 07) were excluded from th e

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.

- 42 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

9. Goodwill and Other Intangible Assets

May 31, 2008 August 31, 2007

$ $

(unaudited) (unaudited)

Customer relationships 67,735 68,858

Broadcasting licenses

25,120 25,120

Customer base

989,772 989,772

1,082,627 1,083,750

Goodwill

367,772 342,584

1,450,399 1,426,334

a) Intangible assets

During the first nine months, intangible assets variations were as follows:

Customer

relationships

Broadcasting

licenses

Customer

Base

Total

$ $ $ $

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

Balance as at August 31, 2007 68,858 25,120 989,772 1,083,750

Business acquisition (note 2) 1,890 – – 1,890

Amortization (7,766) – – (7,766)

Foreign currency translation adjustment 4,753 – – 4,753

Balance as at May 31, 2008 67,735 25,120 989,772 1,082,627

b) Goodwill

During the first nine months, goodwill variation was as follows:

(unaudited)

Balance as at August 31, 2007 342,584

Foreign currency translation adjustment

25,188

Balance as at May 31, 2008 367,772

- 43 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(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, 2008 August 31, 2007

% $

(unaudited)

Parent company

Term Facility 2011

(1)

5.32

(2)

18,714

25,538

Obligations under capital leases 2010 6.49 – 6.61 85

108

Subsidiaries

Term Facility

Term loan – €104,551,500 2011 5.56

(2)

160,631

150,450

Term loan – €17,358,700 2011 5.06

(2)

26,638

24,979

Revolving loan – €115,500,000 (€196,725,000 as at August 31, 2007) 2011 5.19

(2)

178,424

283,087

Senior Secured Debentures Series 1 2009 6.75 149,753

150,000

Senior – Secured Notes

Series A – US$150 million 2008 6.83

(3)

148,782

158,430

Series B 2011 7.73 174,291

175,000

Senior Unsecured Debenture

(4)

2018 5.94 99,759

–

Deferred credit

(5)

2008 – –

80,220

Obligations under capital leases 2012 6.42 – 8.30 6,205

5,760

Other – – 50

963,332

1,053,583

Less current portion 166,303

17,327

797,029

1,036,256

(1)

On December 14, 2007, the Company concluded an amended and restated credit agreement with a group of four Canadian banks led by the

Canadian Imperial Bank of Commerce (“CIBC”), which will now act as agent for the banking syndicate. The annually renewable three-year

amended credit agreement establishes a revolving credit of $50 million to which may be added a further credit of $25 million under certain

conditions. The amended credit agreement maintains certain financial commitments with the same security by the Company, its subsidiary

Cogeco Radio-Television Inc. and indirect subsidiary, Cogeco Diffusion Inc. In November 2007, the Company posted a guarantee for a maximum

amount of $12 million in favour of CIBC, the bank of TQS Inc., its subsidiaries and its parent 3947424 Canada Inc. (“the TQS Group”). On

March 18, 2008, the Compan y was unconditionally relieved from all of its obligations under the guarantee, as CIBC was fully repaid by Remstar

Corporation Inc. for all indebtedness of the TQS Gr oup under the TQS credit agreement.

(2)

Average interest rate on debt as at May 31, 2008, 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 U.S. denominat ed

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

(4)

On January 8, 2008, the Company’s subsidiary, Cogeco Cable Inc., and the Solidarity Fund QFL entered into an agreement to issue a $100

million senior unsecured debenture by way of a private placement, subject to usual market conditions. The debenture is redeemable at the

Corporation’s option at any time, in whole or in part, prior to maturity, at 100% of the principal amount plus a make-whole premium.

(5)

The deferred credit represents the amount that was deferred for hedge accounting purpose as at August 31, 2007 under cross-currency swaps

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

accordance with the standards on financial instruments, the Company’s subsidiary’s cross-currency swaps are now presented as derivative

financial instrument liabilities (see note 1).

- 44 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(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, 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, 2008 August 31, 2007

$ $

(unaudited) (audited)

Issued

1,842,860 multiple voting shares 12 12

14,851,586 subordinate voting shares (14,829,792 as at August 31, 2007) 119,393 119,066

119,405 119,078

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

Nine months ended

Twelve months ended

May 31, 2008 August 31, 2007

Number of

Amount

Number of

Amount

$ $

(unaudited) (unaudited) (audited) (audited)

Balance at beginning 14,829,792 119,066 14,702,556 117,540

Shares issued for cash under the Employee Stock Purchase Plan and

the Stock Option Plan

21,794

327

120,196

1,526

Conversion of multiple voting shares into subordinate voting shares – – 7,040 –

Balance at end 14,851,586 119,393 14,829,792 119,066

- 45 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

11. Capital Stock (continued)

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, no stock options were granted to employees by COGECO Inc. However,

the Company’s subsi diary, Cogeco Cable Inc., granted 113,084 stock options (201,587 in 200 7) with an exercise price

of $41.45 to $49.82 ($26.63 to $44.54 in 2007), of which 22,683 stock options (57,247 in 2007) were granted to

COGECO Inc.’s employees. In 2007, 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 $595,000 and $1,502,000 ($538,000 and $1,439,000 in 2007) was recorded for the three

and nine-month periods e nded May 31, 2008.

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

ended May 31, 2008 was $12.59 ($7.39 in 2007) 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:

2008 2007

% %

(unaudited) (audited)

Expected dividend yield

0.90 1.27

Expected volatility

27 32

Risk-free interest rate

4.25 4.05

Expected life in years

4.0 4.0

As at May 31, 2008, the Company had outstanding stock options providing for the subscription of 169,758 subordinate

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.

The Company and its subsidiary, Cogeco Cable Inc., also had Performance Unit Plans for key employees which

were terminated in June 2007. A compensation expense of $2,325,000 and $4,589,000 was recorded for the three

and nine-month periods e nded May 31, 2007 related to these plans.

Effective October 13, 2006, the Company established 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 12,852 Incentive Share Units (25,556 in 2007). These shares

were purchased for a cash consideration of $468,000 ($1,054,000 in 2007) 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 acqui red shares presented as treasury shares in reduction of capital stock. A

compensation expense of $95,000 and $258,000 ($128,000 in 2007) was recorded for the three and nine-month

periods ended May 31, 2008 rel ated to this plan.

In April 2007, the Company and its subsidiary, Cogeco Cable Inc., established deferred share unit plans (“DSU

Plans”) which are described in the Company’s annual consolidated financial statements. During the first nine months,

5,891 and 3,559 deferred share units were awarded to the participants in connection with the DSU Plans by the

Company and its subsidiary, respectively. A compensation expense of $332,000 was recorded for the three and nine

month periods ended May 31, 2008 related to these plans.

- 46 -

COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

12. Accumulated Other Comprehen sive Income (Loss)

Translation of net

investments in self-

sustaining foreign

subsidiaries

Cash flow hedges

Total

$ $ $

(unaudited) (unaudited) (unaudited)

Balance as at August 31, 2007 (1,009) – (1,009)

Cumulative effect of changes in accounting policy (note 1)

–

(724) (724)

Other comprehensive income 5,225 368 5,593

Balance as at May 31, 2008 4,216 (356) 3,860

13. Statements of Cash Flow

a) Changes in non-cash operating items

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

2008 2007 2008 2007

$ $ $ $

(unaudited)

(unaudited) (unaudited)

(unaudited)

Accounts receivable (1,869) 3,292 (6,148) (4,973)

Income taxes receivable 199 1,452 1,406 (2,703)

Prepaid expenses 1,222 (2,348) 2,418 (1,980)

Accounts payable and ac c rued liabilities 11,371 (27,553) (20,995) (96,142)

Income tax liabilities 5,643 (609) 13,833 759

Deferred and prepaid income 259 573 (894) 3,034

16,825 (25,193) (10,380) (102,005)

b) Other information

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

2008 2007 2008 2007

$ $ $ $

(unaudited)

(unaudited) (unaudited)

(unaudited)

Fixed asset acquisitions through capital leases 971 561 2,417 2,793

Financial expense paid 20,319 25,621 53,063 70,207

Income taxes paid (recei ve d) (245) (610) 2,895 7,590

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COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

14. Employee 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 related to these plans are as follows:

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

2008 2007 2008 2007

$ $ $ $

(unaudited)

(unaudited) (unaudited) (unaudited)

Contributory defined benefit pension plans 657 607 1,973 1,821

Defined contribution pension plan and collective registered

retirement savings plans

861

554

2,283

1,619

1,518 1,161 4,256 3,440

15. 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. TQS’ position in the

Quebec Francophone over-the-air television market deteriorated markedly in spite of the measures and investments

initiated by the Company over the last several months. The gradual loss of advertising revenue to specialty TV

networks and content accessible over the Internet, combined with increased production costs, the Canadian Radio-

television and Telecommunications Commission’s (“CRTC”) refusal to grant general interest television networks the

same ability to charge subscriber fees for signal distribution as the speciality television networks, the programming

strategy of Société Radio-Canada (“SRC”), which acts like a commercial player rather than a publicly-owned

television broadcaster and SRC’s notice of disaffiliation in Saguenay, Sherbrooke and Trois-Rivières after a 50-year

partnership all contributed to this decision. After considering CIBC World Markets’ report, the Board of Directors of

TQS concluded that it was in the best interest of TQS, its employees and creditors to request court protection. On

December 18, 2007, the Québec Superior Court issued an order under the Companies’ Creditors Arrangement Act

(Canada) protecting TQS Inc., its subsidiaries and its parent 3947424 Canada Inc. (“the TQS Group”) from claims by

their creditors for an initial suspension period ending on January 17, 2008, which period was afterwards renewed.

Under the order, RSM Richter Inc. has been appointed as monitor, with a mandate to support the applicants, under

Court supervision, in preparing a creditors arrangement plan. On March 10, 2008, the Québec Superior Court agreed

with TQS Inc.’s Board of Director decision to accept the offer made by Remstar Corporation Inc. to acquire all shares

held by Cogeco Radio-Television Inc. and CTV Television Inc., the two shareholders of TQS. On May 22, 2008, the

plan of arrangement proposed by Remstar Corporation Inc. was approved by the creditors of the TQS Group and

subsequently approved by the Superior Court of Québec on June 4, 2008. Certain employees of TQS Inc. and their

union filed a motion for leave to appeal the order of the Superior Court of Québec approving the plan on June 19,

2008. On June 26, 2008, the CRTC approved the proposed transfer of ownership and control of TQS Inc. to Remstar

Corporation Inc.

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

Accordingly, the investment in the TQS Group as at August 31, 2007, as well as its results of operations and its cash

flow for the period of September 1, 2007 to December 18, 2007 and for the three and nine-month periods ended May

31, 2007, have been recla s sified as a discontinued operation.

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COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

15. Discontinued Operations (continued)

The Company has no investment in the TQS Group as at May 31, 2008. The assets and liabilities related to the

discontinued operations a s at August 31, 2007, were as follows:

(unaudited)

Accounts receivable 23,611

Prepaid expenses

442

Broadcasting rights

14,647

Current assets

38,700

Broadcasting rights

17,456

Fixed assets

21,653

Broadcasting licenses

3,000

Non-current assets

42,109

Bank indebtedness

8,173

Accounts payable and ac c rued liabilities

28,893

Broadcasting rights payable

8,531

Income tax liabilities

141

Deferred and prepaid income

Current portion of long-term debt

251

Current liabilities

46,031

Share in the partner’s deficiency of a general partnership

518

Broadcasting rights payable

4,408

Pension plan liabilities

1,444

Non-controlling interest

11,219

Long-term liabilities

17,589

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COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

15. Discontinued Operations (continued)

The results of the discontinued op erations were as follows:

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

2008 2007 2008 2007

$ $ $ $

(unaudited)

(unaudited) (unaudited) (unaudited)

Revenue – 28,329 38,499 84,901

Operating costs – 28,625 35,822 88,010

Operating income (loss) before amor tiz atio n – (296) 2,677 (3,109)

Amortization – 1,110 1,364 3,288

Operating income (loss) – (1,406) 1,313 (6,397)

Financial expense – 248 291 659

Impairment of assets – – 30,298 –

Loss before income taxes and the following items – (1,654) (29,276) (7,056)

Income taxes – 1,624 – (101)

Non-controlling interest – (1,311) (11,219) (2,780)

Shares in the earnings of a general partnership – (1) – (5)

Loss from discontinued operations – (1,966) (18,057) (4,170)

The cash flow of the discontinued operations were as follows:

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

2008 2007 2008 2007

$ $ $ $

(unaudited)

(unaudited) (unaudited) (unaudited)

Cash flow from operating activities – (187) (3,973) (8,054)

Cash flow from investing activities – (567) (133) (1,255)

Cash flow from financing activities – 754 4,106 9,309

Cash flow from discontinued operations – – – –

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COGECO INC.

Notes to Consolidated Financial Statements

May 31, 2008

(unaudited)

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

16. Contingent liability

The Canadian Radio-television Telecommunications Commission (“CRTC”) collects two different types of fees from

broadcast licensees. These are known as Part I and Part II fees. In 2003 and 2004, lawsuits were commenced in the

Federal Court, alleging that the Part II licence fees are taxes rather than fees and that the regulations authorizing

them are unlawful. On December 14, 2006, the Federal Court ruled that the CRTC did not have the jurisdiction to

charge Part II fees. The Court ruled that licensees were not entitled to a refund of past fees paid. Both the Crown and

the applicants have appealed this case to the Federal Court of Appeal. The applicants are seeking an order requiring

a refund of past fees paid. The Crown is seeking to reverse the finding that Part II fees are unlawful. On October 1st,

2007, the CRTC sent a letter to all broadcast licensees, including the Company’s subsidiaries Cogeco Cable Inc and

Cogeco Radio-Television Inc. The letter stated that the CRTC will not collect Part II license fees due on November

30, 2007 and subsequent years unless the Federal Court of appeal or the Supreme Court of Canada (should the

case be appealed to that level) reverses the Federal Court's decision. The Appeal hearing was held on December

4th and 5th, 2007 in Ottawa and a decision was rendered on April 28, 2008 in favour of the Crown, to the effect that

the fees are valid regulatory charges. On June 26 and 27, 2008, the Plaintiffs filed applications for leave to appeal to

the Supreme Court of Canada. The Defendant must respond to these applications within 60 days. The Company’s

subsidia ries have accrued th e full amount with re spect to these fees for fiscal year 2007 and the first nine months of

fiscal 2008.

17. Subsequent events

Acquisition of FibreWired Burlington Hydro Communications

On May 1, 2008, the Company’s subsidiary, Cogeco Cable Inc., announced the acquisition of all the assets of

FibreWired Burlington Hydro Communications, Burlington Hydro Electric's telecommunications division (City of

Burlington’s energy company) for a total purchase price of $12.5 million. FibreWired Burlington Hydro

Communications operates a broadband network equipped with next generation ATM and Ethernet technology. This

enables FibreWired Burlington Hydro Communications to provide organizations in Burlington with the broadband

capacity required for data networking, high-speed Internet access, e-business applications, video conferencing and

other advanced communications. The Company’s subsidiary, which also offers broadband services to organizations in

Burlington, will use this network to expand its service offering in the area. FibreWired Burlington Hydro

Communications customers will also benefit from the Company’s subsidiary’s suite of business products and gain

access to the Corporation’s extensive fibre network spanning Ontario and Quebec. The acquisition was completed on

June 30, 2008.

Acquisition of Toronto Hydro Telecom Inc.

On June 13, 2008 the Company’s subsidiary, Cogeco Cable Inc., announced the acquisition of all of the shares of

Toronto Hydro Telecom Inc. (“THTI”), the telecommunications subsidiary of Toronto Hydro Corporation (City of

Toronto’s energy company) for a total purchase price of $200 million, subject to certain conditions, including

regulatory approval by the Commissioner of Competition. In addition, the Corporation will assume a working capital

deficiency and liabilities of approximately $4 million.

THTI offers data communications and other telecommunications

services such as Ethernet, private line, Voice-over-Internet protocol (“VoIP”), high-speed Internet access, dark fibre,

data storage, data security and co-location to a wide range of business customers and organizations throughout the

Greater Toronto Area (“GTA”). This agreement will allow the Company’s subsidiary to further the development of its

business telecommunications activities.

18. Comparative figures

Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information

for previous periods has been restated to reflect the termination of our investment in the TQS Group, which is no

longer consolidated since December 18, 2007 (see note 15).

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Press release details

COGECO REPORTS STRONG THIRD-QUARTER 2008 FINANCIAL RESULTS.

SUSTAINABILITY

Cogeco Fund

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