SECOND QUARTER ON THE RISE FOR COGECO.

Press release

For immediate release

SECOND QUARTER ON THE RISE FOR COGECO

Montreal, April 10, 2008 – Today, COGECO Inc. (TSX: CGO) announced its financial results for

the second quarter and first six months of fiscal 2008, ended February 29, 2008.

Second quarter 2008 and first six months consolidated results show continuous growth:

• Revenue increased by 14.1% to $271.9 million in the second quarter and by 13.6% to

$532.1 million for the first six months;

• Operating income from continuing operations before amortization grew by 25% to

$109.3 million in the second quarter and by 20.4% to $210.6 million for the first six

months;

• Free cash flow

(1)

reached $19.4 million in the second quarter and $42.3 million for the

first six months.

Cable sector

• Revenue-generating units (“RGUs”)

(2)

reached 2,624,885 with 56,196 and 139,220

net additions in the second quarter and first six months;

• On March 11, Cogeco Cable acquired 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.

Other

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

station in Quebec City continue to propose radio programming appealing to their

audiences.

• On December 18, 2007, the Quebec 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 up to March 10. 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, the Quebec

Superior Court agreed with TQS Inc. Board of Director decision to accept the offer of

Remstar Corporation Inc. to acquire all shares held by Cogeco Radio-Télévision Inc.

and CTV Television Inc., the two shareholders of TQS Inc.

Free cash flow does not have standard definitions prescribed by Canadian generally accepted accounting principles (GAAP) and should be

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

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

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“On a consolidated basis, COGECO’s second quarter financial result is positive. In the cable

sector, Cogeco Cable continued to grow. In Canada, in a rational competitive environment,

Cogeco Cable is performing above expectations. Our Portuguese cable subsidiary evolved in a

very competitive environment that is changing more recently into a disciplined market.” said Louis

Audet, President and CEO of COGECO. “

In radio, we are well positioned to keep our leading position in

key markets and gain market share in our other markets.

We are confident to exceed our fiscal 2008

guidelines and, as a result, revising them upwards.

With regards to TQS, the two shareholders,

COGECO and CTV Television, agreed to sell all of their shares to Remstar Corporation Inc. This will

allow a new ownership group to pursue the activities of TQS

,” added Mr. Aud et.

FINANCIAL HIGHLIGHTS

Quarters ended

(unaudited)

Six months ended

(unaudited)

February

29,

February

28,

February

29,

February

28,

($000, except percentages and per share data)

2008 2007

Change

2008 2007

Change

Revenue $ 271,894 $

238,378 14.1 $

532,149 $ 468,611 13.6

Operating income from continuing

operations before amortization

109,346 87,478 25.0 210,555 174,849

20.4

Income from continuing operations 16,315 36,655 (55.5) 23,971 43,501 (44.9)

Loss from discontinued operations (425) (2,109) 79.8 (18,057) (2,204) -

Net income 15,890 34,546 (54.0) 5,914 41,297 (85.7)

Cash flow from operations

(1)

85,374 63,353 34.8 166,751 128,550 29.7

Less:

Capital expenditures and increase in

deferred charges

66,000 52,892 24.8 124,403 127,308 (2.3)

Free cash flow

(1)

19,374 10,461 85.2 42,348 1,242 -

Earnings (loss ) per share

Basic

Income from continuing operations

$ 0.98 $

2.21

- $

1.44 $ 2.63

Loss from discontinued operations

(0.03)

(0.13) - (1.08) (0.13)

Net income

0.95 2.08 - 0.35 2.49

Diluted

Income from continuing operations

0.97 2.20

- 1.43 2.61

Loss from discontinued operations

(0.03)

(0.13) - (1.08) (0.13)

Net income

0.95 2.07 - 0.35 2.48

(1)

Cash flow from op erat ions an d free cash fl ow d o n ot h ave s tandard definiti ons prescribed by Can adi an g enerally accepted accounting pri ncipl es

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

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FORWARD-LOOKING STATEMENT

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

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

business, our operations, our financial performance, our financial condition or our results and, in some

cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate";

"believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee", "ensure" or other similar

expressions concerning matters that are not historical facts. In particular, statements regarding our future

operating results and economic performance and our objectives and strategies are forward-looking

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

results of operations, performance and business prospects and opportunities, which we believe are

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

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

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

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 by

ensuring continued growth. The strategies for reaching those objectives, supported by tight cost

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

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

activities focus on continuous improvement of programming to increase market share, and,

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

growth of operating income before amortization, free cash flow

and RGU

growth for the cable

sector. Below are the recent achievements in furthering of COGECO’s objectives.

Tight control over costs and business processes

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

7.7% compared to a revenue growth of 14.1%;

• 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 had 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.

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

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

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Cable sector

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

Canadian operations

• Acquisition:

o March 11, 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.

• Digital Television services:

o During the second quarter:

o Launch of Super Channel and Playhouse Disney in Ontario;

o Launch of Disney ABC I nternational television on Cogeco On Demand;

o Launch of Les idées de ma maison in Québec, a brand new digital channel;

o March 4, 2008, launch of Family On Demand in Ontario, a new On Demand service.

• Telephony service:

o During the second quarter:

o Launch of Telephony in Port Hope, Cobourg, Smiths Falls, Perth and Parry

Sound in Ontario;

o March 11, launch of Telephony in Huntsville, Bracebridge and Gravenhurst, Ontario;

o March 19, launch of Telephony in Bic, Ste-Luce, Ste-Blandine, St-Fabien,

St-Gédéon and St-Martin-de-Beauce, Québec.

• Customer service:

o Opening of three (3) new Cogeco stores located in Oakville and Hamilton, Ontario

and in St-Hyacinthe, Québec.

European operations

• Cabovisão

- Televisão por Cabo, S.A. (Cabovisão) continued its Digital Television service

deployment.

• Opening of four (4) new Cabovisão stores located in Alcobaça, Portalegre, Sacavém and

São João da Madeira.

Continuous improvement of networks and equipment

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

$47.7 million in its infrastructure including headends and upgrade/rebuild.

Effective management of capital

• March 5, Cogeco Cable issued a $100 million senior unsecured debenture bearing an

interest rate of 5.936%, maturing in 2018, by way of a private placement.

Other

• RYTHME FM network and the 93

station in Quebec City continue to expand their audience

and gain market share in their territories.

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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 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

Quebec 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 up to March 10, 2008. 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, the Quebec

Superior Court agreed with TQS Inc. Board of Director decision to accept the offer of Re mstar

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

Television Inc., the two shareholders of TQS 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 six month periods ended February 28, 2007, have

been reclassified as a discontinued operation. The Company has no investment in the TQS

Group as at February 29, 2008. The assets and liabilities related to the discontinued operations

as at August 31, 2007, were as follows:

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(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

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

- 7 -

The results of the discontinued operations were as follows:

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Revenue $ 5,741 $ 23,068 $ 38,499 $ 56,572

Operating costs 5,865 26,877 35,822 59,385

Operating income (loss) before amortization (124) (3,809) 2,677 (2,813)

Amortization 248 1,094 1,364 2,178

Operating income (loss) (372) (4,903) 1,313 (4,991)

Financial expense 53 266 291 411

Impairment of assets – – 30,298 –

Loss before income taxes and the following items (425) (5,169) (29,276) (5,402)

Income taxes – (1,653) – (1,725)

Non-controlling interest – (1,407) (11,219) (1,469)

Shares in the earnings of a general partnership – – – (4)

Loss from discontinued operations $ (425) $ (2,109) $ (18,057) $ (2,204)

The cash flow of the discontinued operations was as follows:

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Cash flow from operating activities $ 1,770 $ 2,110 $ (3,973) $ (7,867)

Cash flow from investing activities (48) (494) (133) (688)

Cash flow from financing activities (1,722) (1,616) 4,106 8,555

Cash flow from discontinued operations $ – $ – $ – $ –

Continuing Operations

RGU growth in the cable sector

During the first six months ended February 29, 2008, the consolidated number of RGUs increased

by 5.6% to reach over 2.6 million units. In its initial projections, Cogeco Cable had expected fiscal

year ending August 31, 2008 RGU growth to reach approximately 10% and has since revised

downwards its guidelines to an increase of approximately 9%. Please consult the ‘’Fiscal 2008

financial guidelines’’ section for further details.

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Revenue and operating income before amortization growth

For the second quarter of fiscal 2008, revenue increased by $33.5 million, or 14.1%, to reach

$271.9 million while operating income before amortization grew by $21.9 million, or 25%, to reach

$109.3 million. For the first six months of 2008, revenue increased by $63.5 million, or 13.6%, to

reach $532.1 million, while operating income before amortization grew by $35.7 million, or 20.4%,

to reach $210.6 million. For fiscal 2008, the Company had expected revenue to reach

$1,120 million and now anticipates revenue to reach $1,090 million, while operating income is

expected to increase from $431 million to $445 million. Management has revised its guidelines in

the cable sector to reflect better than projected average monthly service revenue per Basic cable

service customer (ARPU) and price increases to occur in Canada and, in Portugal, to reflect a

more competitive market and the better performance of the euro over the Canadian dollar

compared to its original projection. Management also revised its guidelines to reflect the

discontinuity of the TQS operations. Please consult the “Fiscal 2008 financial guidelines” section

for further details.

Free cash flow

In the second quarter of fiscal 2008, COGECO generated free cash flow of $19.4 million,

compared to $10.5 million for the same period last year. For the six-month period ended

February 29, 2008, the Company generated free cash flow of $42.3 million compared to

$1.2 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 increased by $13.1 million in the

second quarter compared to the corresponding period of last year. For the six-month period of

2008, capital expenditures and deferred charges decreased by $2.9 million compared to the same

period of the previous year. Considering the improved performance of the cable subsidiary during

the first six months of 2008, management has revised upwards its guidelines of free cash flow from

$73 million to $75 million. Please consult the ‘’Fiscal 2008 financial guidelines’’ section for further

details.

OPERATING RESULTS – CONSOLIDATED OVERVIEW

Quarters ended

Six months ended

February 29, February 28,

($000,

except percentages)

2008 2007

Change

2008

2007

Change

Revenue $ 271,894 $ 238,378 14.1 $

532,149 $ 468,611 13.6

Operating costs 162,548 150,900 7.7 321,594 293,762 9.5

Operating income

before amortization 109,346 87,478 25.0 210,555 174,849

20.4

Operating margin 40.2 %

36.7 %

39.6 % 37.3 %

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Revenue

Fiscal 2008 second quarter revenue improved, essentially by its Cable segment, by $33.5 million,

or 14.1%, to reach $271.9 million, and, for the first six-month period, by $63.5 million, or 13.6%, to

reach $532.1 million. Cable revenue, driven by an increased number of RGU, combined with rate

increases, went up by $33.2 million, or 14.3%, and by $63 million, or 13.9%, respectively, in the

second quarter and first six months of fiscal 2008.

Operating income before amortization

Operating income before amortization grew, essentially by its Cable segment, by $21.9 million, or

25%, to reach $109.3 million in the second quarter of fiscal 2008 and by $35.7 million, or 20.4%, to

reach $210.6 million in the first six months of fiscal 2008 compared to the corresponding periods of

last year. The cable sector contributed to the growth by $21.7 million and $36.4 million during the

second quarter and first six months of fiscal 2008, respectively.

FIXED CHARGES

Quarters ended Six months ended

February 29, February 28, %

($000, except percentages)

2008 2007 Change

2008

2007

Change

Amortization $ 56,346 $ 44,018 28.0 $

109,385 $ 88,773 23.2

Financial expense 17,373 23,915 (27.4)

34,741 45,529 (23.7)

Fiscal 2008 second quarter and first six-month period amortization amounted to $56.3 million and

$109.4 million compared to $44 million and $88.8 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 $5.8 million and $10.2 million in the second

quarter and first six 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 second quarter and first six-month period financial expense decreased by $6.5 million

and $10.8 million, respectively, compared to the same periods in fiscal 2007. 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

second quarter 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 second quarter income taxes recovery amounted to $14.4 million compared to an

expense of $4.2 million in fiscal 2007. For the first six months of fiscal 2008, income taxes

recovery amounted to $5.1 million compared to an expense of $10.8 million in 2007. The decrease

is essentially due 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, 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% ef fective 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.

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The reduction of these corporate income tax rates reduced future income tax expense by

$24.1 million in the second quarter and first six months of fiscal 2008. The second quarter and first

six months of fiscal 2008 income tax reduction were partly offset by an increase in income taxes

resulting from an increase in operating income before amortization and lower financial expense

that have outpaced the increase in amortization expense in the cable sector. Excluding the effect

of the tax rate reductions, income tax expense would have amounted to $9.7 million for the 2008

second quarter and $19 million for the 2008 first six-month period compared to $4.2 million and

$10.8 million, respectively, for the same periods the year before.

GAIN ON DILUTION RESULTING FROM SHARES ISSUED BY A SUBSIDIARY

During the second quarter 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 second quarter of fiscal 2007, 7,344 subordinate voting shares pursuant to its

Employee Stock Purchase Plan and 218,761 subordinate voting shares pursuant to its Employee

Stock Option Plan for cash considerations of $0.2 million and $4 million, respectively. As a result,

the Company’s interest in Cogeco Cable Inc. decreased from 39.2% to 34.7% and a gain on

dilution of $31 million was recorded for the three and six-month periods ended February 28, 2007.

NON-CONTROLLING INTEREST

The non-controlling interest represents a participation of approximately 67.6% in Cogeco Cable’s

results. During the second quarter and first six months of 2008, the non-controlling interest

amounted to $33.8 million and $47.5 million, respectively, due to the cable sector’s strong results.

The non-controlling interest for the comparable periods of last year amounted to $9.6 million and

$17.3 million, respectively.

NET INCOME

Fiscal 2008 second quarter net income amounted to $15.9 million, or $0.95 per share, compared

to $34.5 million, or $2.08 per share, for the same period last year. The net income decrease in the

second quarter of fiscal 2008 was due to the following factors: a gain on dilution amounting to

$31 million was recorded in the second quarter of fiscal 2007, 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 $7.8 million, net of non-controlling interest, from the cable sector.

Fiscal 2008 first six-month period net income amounted to $5.9 million, or $0.35 per share,

compared to $41.3 million, or $2.49 per share, for the same period in 2007. The net income

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

amounting to $31 million was recorded in the second quarter of fiscal 2007, a loss from

discontinued operations of $18.1 million recorded in the first six 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 $7.8 million, net of non-controlling interest, from the

cable sector.

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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 second quarter of fiscal 2008 would have amounted to $8.4 million, or $0.50 per

share, compared to $5.7 million, or $0.34 per share, for the same period in 2007, an improvement

of 47.9% and 47.1%, respectively. For the 2008 six-month period, net income, excluding the

adjustments discussed above, would have amounted to $16.1 million, or $0.97 per share,

compared to $12.5 million, or $0.76 per share, in 2007, an increase of 29% and 27.6%,

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

CASH FLOW AND LIQUIDITY

Quarters ended

Six months ended

February 29, February 28, February 29, February 28,

($000)

2008 2007 2008 2007

Operating Activities

Cash flow from operations $

85,374 $

63,353 $ 166,751 $

128,550

Changes in non-cash operating items 7,568

(1,869) (27,205)

(76,812)

92,942 $

61,484 $ 139,546 $

51,738

Investing Activities

(1)

(64,743) $

(52,231) $ (123,072) $

(126,334)

Financing Activities

(1)

(22,329) $

11,773 $ (58,586) $

41,398

Effect of exchange rate changes on cash and cash

equivalents denominated in foreign currencie s

355 $

1,644 $ 202 $

3,260

Net change in cash and cash equivalents $

6,225 $

22,670 $ (41,910) $

(29,938)

Cash and cash equivalents at beginning

18,144 18,908 66,279 71,516

Cash and cash equivalents at end

24,369 $

41,578 $ 24,369 $

41,578

(1) Excludes assets acquired under capital leases.

Fiscal 2008 second quarter cash flow from operations reached $85.4 million, 34.8% 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 higher cash inflows compared to the same period last year, attributable

to the cable sector and mainly as a result of an increase in income tax liabilities.

Fiscal 2008 first six-month period cash flow from operations reached $166.8 million, an increase of

29.7% 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, an increase in income tax liabilities and a smaller increase in accounts

receivable. The larger reduction in accounts payable and accrued liabilities in the first six 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 second quarter of fiscal 2008, investing activities stood at $64.7 million mainly due to capital

expenditures of $58.5 million and from an increase of $6.1 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:

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The increase in customer premise equipment resulted from the timing to acquire such equipment

in the first quarter of fiscal 2007, to build an inventory for the Canadian operations and to the

deployment of Digital Television service in Portugal, partly offset by lower RGU growth.

¾ The increase in scalable infrastructure is mainly due to the expansion and the improvement

of headends, system powering and equipment reliability to sustain increased customer

demand for HSI and Telephony services.

¾ The increase in support capital is due to the improvement in information systems to support

the business requirements and to the acquisition of vehicles.

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

due to the timing of expenses as an accelerated program was deployed in fiscal 2007 to

accelerate the bandwidth expansion and the network reliability for the Canadian operations.

In the first six months of fiscal 2008, investing activities stood at $123.1 million mainly due to

capital expenditures of $109.3 million and from an increase of $13.6 million in deferred charges in

the cable sector. The capital expenditures from the cable sector decreased compared to the same

period last year due to the following factors:

¾ The reduction in customer premise equipment resulted from lower RGU growth, partly

offset by the deployment of Digital Television in Portugal.

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

due to the timing of expenses as an accelerated program was deployed in fiscal 2007 to

accelerate the bandwidth expansion and the network reliability for the Canadian operations.

¾ The increase in scalable infrastructure is mainly due to the expansion and the improvement

of headends, system powering and equipment reliability to sustain increased customer

demand for HSI and Telephony services.

¾ The increase in support capital is due to the improvement in information systems to support

the business operations and to the acquisition of vehicles.

Fiscal 2008 second quarter and first six-month period deferred charges, which are mainly

attributable to reconnect costs in the cable sector, were lower than for the same periods the year

before mainly due to lower RGU growth.

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

the amount of $19.4 million and $42.3 million, respectively, compared to $10.5 million and

$1.2 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. Capital expenditures

and deferred charges increased by $13.1 million in the second quarter and decreased by

$2.9 million for the first six-month period compared to the corresponding periods of last year due to

the factors explained above.

Fiscal 2008 second quarter debt repayment amounted to $18.2 million. This repayment came from

the generated free cash flow of $19.4 million, partly offset by a $1.2 million dividend payment

described below. For the same period last year, indebtedness decreased by $174.4 million. This

reduction was mainly attributable to the cable sector and due to the following factors: the partial

early repayment by Cogeco Cable, in the amount of $89.3 million, of its 8.44% Second Secured

Debentures, Series A, in the aggregate principal amount of $125 million due July 31, 2007

(the “Debentures’’), to the repayment of a portion of the Term Facility, amounting to $51.4 million,

and to the repayment of the bank indebtedness in the amount of $29.3 million. These repayments

were made using the net proceeds of $184.2 million from the completion of a public offering of

5,000,000 subordinate voting shares on February 2, 2007. The Company also repaid $2.5 million

of its own Term Facility. In addition, dividends of $0.07 per share for subordinate and multiple

voting shares, totalling $1.2 million, were paid during the second quarter of fiscal 2008 and fiscal

2007.

- 13 -

During the first half of fiscal 2008, the level of indebtedness decreased by $52.6 million mainly due

to the following factors: the generated free cash flow of $42.3 million, the reduction of $41.9 million

in cash and cash equivalents partly used to offset the $27.2 million reduction in non-cash operating

items. These factors have been partly offset by a dividend payment of $2.3 million described

below. For the same period last year, indebtedness decreased by $143.1 million mainly due to the

repayment by Cogeco Cable of its Debentures for $89.3 million and to the repayment of its

$49.1 million of Term Facility and to the $2.5 million repayment of the Company’s Term Facility. In

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

$2.3 million, were paid during the first six months of fiscal 2008 compared to quarterly dividends of

$0.0625 and $0.07 per share for subordinate and multiple voting shares, paid respectively for the

first and the second quarter of fiscal 2007, totalling $2.2 million.

As at February 29, 2008, the Company had a working capital deficiency of $401.7 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 for an amount of $240.2 million due within the next twelve months by October 31,

2008. 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 February 29, 2008, the cable subsidiary had used $409.3 million of its $900 million Term

Facility and the Company had drawn $21 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 $29.2 million fixed assets rise is mainly related to increased capital expenditures to sustain

RGU growth and by the appreciation of the euro over the Canadian dollar in the cable sector. The

$41.9 million and $28.4 million reductions in cash and cash equivalents and accounts payable and

accrued liabilities, respectively, are related to suppliers’ payments in the cable sector. The

$8.6 million increase in income tax liabilities is due to the utilization of most of Cogeco Cable’s tax

losses carry forwards before fiscal 2008. The $4.9 million accounts receivable increase is

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

$5.9 million and $22.7 million future income tax assets and future income tax liabilities reductions,

respectively, are attributable to Cogeco Cable and mainly due to the corporate income tax rates

reduction announced by the Canadian federal government and considered substantively enacted

on December 14, 2007. The $13.2 million goodwill increase is due to the appreciation of the euro

over the Canadian dollar in the cable sector. The $2.5 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 $50.9 million increase in non-controlling interest is mainly due to the improved

- 14 -

results in the cable sector. Finally, the derivative financial instruments have increased by

$92.8 million and indebtedness has decreased by $129.7 million as a result of accounting changes

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

“Accounting policies and estimates” section for further details.

A description of COGECO’s share data as at March 31, 2008 is presented in the table below:

Number of shares/

options

Amount

($000)

Common Shares

Multiple voting shares

Subordinate voting shares

1,842,860

14,832,586

119,127

Options to Purchase Subordinate Voting Shares

Outstanding options

Exercisable options

188,758

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. The Company posted a guarantee

for a maximum amount of $12 million in favour of CIBC, which is also TQS’ banker, in the event of

any default by TQS under the terms of its own credit agreement. TQS’ credit agreement provides

security over its assets, including its accounts receivable. If the guarantee were to be called in, the

Company would be subrogated to the rights of CIBC and benefit from the same security. In March

2008, the Company was unconditionally released from all of its obligations under the guarantee.

Furthermore, on January 8, 2008, Cogeco Cable 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 was issued on March 5, 2008, bears interest at

a fixed rate of 5.936% and will mature on March 5, 2018. The debenture 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.

DIVIDEND DECLARATION

At its April 10, 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 May 8, 2008, to

shareholders of record on April 24, 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$10.8 million at the end of

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

- 15 -

fair value of cross-currency swaps increased by $9.3 million, of which $10.8 million offset the

foreign exchange gain on the US$ debt. The difference of $1.4 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$9.1 million in the first six

months of 2008, which is presented in other comprehensive income. The exchange rate used to

convert the euro into Canadian dollars for the balance sheet accounts as at February 29, 2008

was $1.4944 per euro compared to $1.4390 per euro as at August 31, 2007. The average

exchange rates prevailing during the second quarter and first six months of 2008 used to convert

the operating results of the European operations were $1.4741 and $1.4430 per euro, respectively,

compared to $1.5146 and $1.4818 per euro, respectively, for the same periods last year.

CABLE SECTOR

CUSTOMER STATISTICS

Net additions % of Penetration

(1)

Quarters ended Six months ended

February

29,

2008

February

29,

2008

February

28,

2007

February

29,

2008

February

28,

2007

February

29,

2008

February

28,

2007

RGUs

(2)

2,624,885 56,196 84,399 139,220 198,678

Basic Cable service

customers 1,160,750 4,593 11,883 17,590 35,376

HSI service customers

(3)

622,113 17,154 27,736 46,254 64,748 56.1 50.4

Digital Television service

customers

414,011 17,879 13,961 34,132 35,185 49.1 43.3

Telephony service customers

428,011 16,570 30,819 41,244 63,369 43.1 36.8

(1)

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

(2)

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

(3)

Customers subscribing only to HSI or Telephony servic es t otalled 86,204 as at February 29, 2008 compared to 68,966 as at February 28, 2007.

In Canada, second quarter 2008 RGUs’ net additions were lower than for the same period last

year and reflect an early sign of maturation in most services. In Portugal, Cabovisão faced intense

competition and, as a result, all services generated lower customer growth. RGUs grew at a slower

pace since competition offered deep discounts to attract customers during most of the first six-

month period. Cabovisão did not match the competition’s highly discounted offering. However,

since then, the pricing environment has become more rational. Cabovisão’s performance since its

acquisition by Cogeco Cable has exceeded management’s original business plan and growth

prospects for the future remain excellent in management’s view.

The number of net additions for Basic Cable in the Canadian market stood at 1,869 customers

compared to a growth of 5,277 customers for the same period last year due to the expiry of certain

promotional offers. In Portugal, Basic Cable service grew by 2,724 customers compared to 6,606

customers.

In Canada, the number of net additions to HSI service stood at 15,058 customers compared to

20,428 customers for the same period last year. During the second quarter of 2008, HSI customer

- 16 -

net additions were mostly due to the enhancement of the product offering, the impact of the

bundled offer of Television, HSI and Telephony services (Cogeco Complete Connection) and

promotional activities. HSI service customers in Portugal increased by 2,096 customers compared

to 7,308 customers in 2007.

Canadian net additions of Digital Television service stood at 17,879 customers compared to

13,961 customers for the same period last year. The increase in net additions this quarter

compared to the same quarter last year is due to targeted marketing initiatives in 2008 to improve

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

Telephony customers grew in both operating units. In Canada, net additions stood at 16,201 to

reach 183,052 compared to a growth of 24,467 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

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

percentage of homes passed, has now reached 80% compared to 74% last year. Telephony

service in Portugal grew by 369 customers compared to 6,352 customers for the same period of

the preceding year.

OPERATING RESULTS

Quarters ended

Six months ended

February 29, February 28,

($000,

except percentages)

2008 2007

Change

2008

2007

Change

Revenue $ 265,102 $ 231,952 14.3 $

516,935 $ 453,954 13.9

Operating costs 152,942 141,033 8.4 301,403 274,933 9.6

Management fees -

COGECO Inc. 3,679 4,128 (10.9) 8,714 8,568 1.7

Operating income

before amortization 108,481 86,791 25.0 206,818 170,453 21.3

Operating margin 40.9 %

37.4 %

40.0 % 37.5 %

Revenue

Fiscal 2008 second quarter consolidated revenue improved by $33.2 million, or 14.3%, to reach

$265.1 million, and for the first six-month period, by $63 million, or 13.9%, to reach $516.9 million.

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

Canadian operations revenue went up by $30.2 million, or 17.3%, and 2008 first six-month period

by $58.6 million, or 17.1%.

Fiscal 2008 second quarter European operations revenue increased by $2.9 million, or 5.1%, to

reach $59.9 million and 2008 six-month period by $4.4 million, or 4%, to reach $115.5 million

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

implemented rate increases. However, the strength of the Canadian dollar against the euro

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

- 17 -

Operating costs

For the second quarter and the first six months of fiscal 2008, operating costs, excluding

management fees payable to COGECO Inc., increased by $11.9 million and $26.5 million to reach

$152.9 million and $301.4 million, respectively, an increase of 8.4% and 9.6% compared to last

year. The increase in operating costs for the second quarter of 2008 was mainly attributable to

servicing additional RGUs in Canada and Portugal. The increase in operating costs for the first six-

month period was also attributable to servicing additional RGUs in Canada and Portugal, including

the increased penetration of the Telephony service in Canada, the timing of certain marketing

initiatives in Portugal, including a major campaign to increase brand awareness, and to 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 second quarter and first six-month period operating income before amortization

increased by $21.7 million, or 25%, to reach $108.5 million and by $36.4 million, or 21.3%, to

reach $206.8 million, respectively, as a result of RGU growth and various rate increases outpacing

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

40.9% from 37.4% 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 from 38.3% to 42.2% and in

Europe from 34.7% to 36.6%.

For the first six months of fiscal 2008, the operating margin improved to 40% from 37.5% due to

the reasons described above with the Canadian operating margin improving and the European

operating margin remaining essentially the same compared to the same period the year before.

FISCAL 2008 FINANCIAL GUIDELINES

Cable sector

Given the improved performance of the cable sector during the first six months of fiscal 2008,

management has revised most of its guidelines for the 2008 fiscal year.

For its Canadian operations, management has revised upwards its guidelines to reflect better than

projected ARPU and rate increases to occur. RGU growth should be lower than initially projected

due to the lower than anticipated Telephony service customers’ growth and the expiration of Basic

Cable service promotions. For its European operations, management has revised downwards its

guidelines for RGU growth and revenue to reflect the fierce competition that Cabovisão faced

during the first six months of fiscal 2008, which is partially offset by rate increases, tight cost

controls and the strengthening of the euro over the Canadian dollar.

Subsequent to these adjustments, projected revenue, operating income before amortization and

net income were revised upwards. The increase in projected revenue from $1,050 million to

$1,060 million should come from the Canadian operations. The operating income before

amortization should increase to $440 million from $425 million and operating margin should

increase from about 41% to 42%. Net income should stand at about $123 million.

Management is also raising its guidance for capital expenditures and deferred charges from

$260 million to $275 million to increase the capacity of its infrastructure to sustain growth and to

build additional homes passed. Amortization expense is expected to increase from $215 million to

$225 million to reflect the increase in capital expenditures and deferred charges and the impact

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

Cabovisão acquisition, which included the revaluation of tangible and intangible assets. As a result

- 18 -

of the revised projections, free cash flow is now expected to reach $70 million from the $65 million

initially projected.

Consolidated

The Company is also revising its guidelines to reflect the discontinuity of the TQS operations.

Subsequent to the above adjustments in the cable sector and in the television operations, revenue

should stand at approximately $1,090 million, operating income before amortization should

increase from $431 million to $445 million, free cash flow should increase from $73 million to

$75 million and net income should remain essentially the same to approximately $22 million.

($ million, except customer data)

Revised

Projections

Fiscal 2008

April 10, 2008

Revised

Projections

Fiscal 2008

January 9, 2008

Projections

Fiscal 2008

Consolidated Financial Guideli nes

Revenue 1,090 1,120 1,190

Operating income before amortization

445 431 425

Net income 22 22 30

Free cash flow

75 73 65

Cable sector–

Financial Guidelines

Revenue 1,060 1,050 1,050

Operating income before amortization 440 425 425

Operating margin 41% to 42% 40% to 41% 40% to 41%

Financial expense 72 72 72

Amortization 225 215 215

Net income 123 118 118

Capital expenditures and deferred charges 275 260 260

Free cash flow 70 65 65

Customer Addition Guidelines

Basic Cable service 15,000 30,000 30,000

HSI services 75,000 75,000 75,000

Digital Television service 54,000 54,000 54,000

Telephony service 81,000 100,000 100,000

RGUs 225,000 259,000 259,000

UNCERTAINTIES AND MAIN RISK FACTORS

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

since August 31, 2007, except as described below.

The 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 1, 2007, the CRTC sent a

letter to all broadcast licensees. The letter stated that the CRTC will not collect Part II license fees

- 19 -

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 4 and 5 in Ottawa. During the hearing,

questions were raised by the hearing panel concerning the appropriateness of considering Part II

Licence Fees as a tax rather than a fee under the relevant portion of the Broadcasting Act. The

decision of the Federal Court of Appeal is not expected until later this year. The Company believes

that there is a reasonable likelihood that the Federal Court’s decision will be reversed. The

Company has accrued $10.2 million with respect to these fees for fiscal year 2007 and the first six

months of fiscal 2008. In the unlikely event that the Federal Court of Appeal or the Supreme Court

of Canada, should this case be appealed to that level, maintains the decision from the Federal

Court, this would have a beneficial impact on the future financial results of the Company.

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.

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

- 20 -

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 February 29, 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-

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 second

quarter and first six-month period ended February 29, 2008 increased derivative financial

instruments liabilities by $1.5 million and $9.3 million, increased future income tax liabilities by

$0.3 million and $0.5 million, increased non-controlli ng interest by $0.4 million and $0.6 million and

increased accumulated other comprehensive income by $0.2 million and $0.3 million, respectively.

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

- 21 -

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 February 29, 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.

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 fi scal 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.

- 22 -

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:

($000)

Quarters ended Six months ended

February 29,

February 28,

February 29,

February 28,

2008

2007

2008

2007

Cash flow from operating activities $ 92,942 $ 61,484 $ 139,546 $ 51,738

Changes in non-cash operating items

(7,568)

1,869

27,205

76,812

Cash flow from operations $ 85,374 $ 63,353 $ 166,751 $ 128,550

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:

($000) Quarters ended Six months ended

February 29, February 28, February 29, February 28,

2008 2007 2008 2007

Cash flow from operations

85,374 $

63,353 $

166,751 $

128,550

Acquisition of fixed assets

(58,533)

(44,819)

(109,346) (111,818)

Increase in deferred charges

(6,094)

(6,046)

(13,611) (13,258)

Assets acquired under capital leases – as per

Note 12 b) (1,373)

(2,027)

(1,446) (2,232)

Free cash flow

19,374 $

10,461 $

42,348 $

1,242

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

adjustments net of non-controlling interest.

Net income excluding 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.

($000) Quarters ended Six months ended

February 29, February 28, February 29, February 28,

2008 2007 2008 2007

Net income

15,890 $

34,546 $

5,914 $

41,297

Adjustments:

Loss (gain) on dilution

(25) (30,990) 82 (30,983)

Discontinued operations

425 2,109 18,057 2,204

Income tax adjustments net of non-controlling

interest (7,909) - (7,909) -

Net income excluding above adjustments

8,381 $

5,665 $

16,144 $

12,518

- 23 -

ADDITIONAL INFORMATION

This MD&A was prepared on April 10, 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 2,625,000 revenue-generating units (RGUs) to 2,390,000

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

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, Quebec City, Trois-Rivières and Sherbrooke, as well as the 93

station in Quebec 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) 874-2600

Information: Media

Marie Carrier

Director, Corporate Communications

Tel.: (514) 874-2600

Analyst Conference Call: Frida y, April 11, 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: 7255545

By Internet at www.cogeco.ca/investors

A rebroadcast of the conference call will be available until April 19 by

dialing:

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

International access number: + 1 647 436-0148

Confirmation code: 7255545

- 24 -

Supplementary Quarterly Financial Information

(unaudited)

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

2008

(1)

2007

(1)

2007

(1)

2006

(1)

2007

(1)

2006

(1)

2007

(1)

2006

($000, except percentages

and per share data)

Revenue $ 271,894 $ 238,378 $ 260,255 $

230,233 $

251,300 $

181,419 $ 249,424 $

161,381

Operating income from

continuing operations

before amortization

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

65,648

Operating margin 40.2% 36.7% 38.9% 37.9% 40% 40.2% 38.4% 40.7%

Amortization 56,346 44,018 53,039 44,755 54,723 35,259 47,725 29,509

Financial expense 17,373 23,915 17,368 21,614 18,924 16,747 21,603 14,025

Income taxes (14,426) 4,233 9,277 6,535 (7,480)

(12,389) 8,055 8,710

Loss (gain) on dilution (25) (30,990) 107 7 (27,011)

- 64 -

Non-controlling interest 33,763 9,647 13,762 7,619 24,240 20,652 13,318 7,517

Income from continuing

operations

16,315 36,655

7,656 6,846

37,097

12,749

5,025

5,862

Loss from discontinued

operations

(425) (2,109)

(17,632)

(95)

(6,713)

(2,449)

(1,966)

(333)

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

6,751 30,384 10,300 3,059 5,529

Cash flow from

operations

85,374 63,353 81,377 65,197 78,153 56,759 76,862 51,474

Earnings (loss ) per

Basic

Income from

continuing

operations

$ 0.98 $ 2.21 $ 0.46 $

0.41 $

2.23 $

0.77 $ 0.30 $

0.35

Loss from

discontinued

operations

(0.03) (0.13)

(1.06)

(0.01)

(0.40)

(0.15) (0.12)

(0.02)

Net income 0.95 2.08 (0.60) 0.41 1.82 0.62 0.18 0.33

Diluted

Income from

continuing

operations

0.97 2.20 0.46 0.41 2.21 0.77 0.30 0.35

Loss from

discontinued

operations

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

(0.40)

(0.15) (0.12)

(0.02)

Net income 0.95 2.07 (0.60) 0.41 1.81 0.62 0.18 0.33

(1)

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

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

However, the loss of Basic 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. - 25 -

Customer Statistics

February 29, August 31,

2008 2007

Homes Passe

Ontario

(1)

1,016,099 997,498

Québec 494,919 486,592

Canada 1,511,018 1,484,090

Portugal 878,792 859,376

Total 2,389,810 2,343,466

Revenue Generating Unit

Ontario 1,341,643 1,256,244

Québec 570,698 532,264

Canada 1,912,341 1,788,508

Portugal 712,54

4 697,157

Total 2,624,88

5 2,485,665

Basic Cable Service Customer

Ontario 600,85

594,889

Québec 258,23

254,268

Canada 859,090 849,157

Portugal 301,660 294,003

Total 1,160,750 1,143,160

Discretionnary Service Customer

Ontario 494,38

468,764

Québec 210,867 204,585

Canada 705,252 673,349

Portugal - -

Total 705,252 673,349

Pay TV Service Customer

Ontario 97,500 88,835

Québec 45,919 42,180

Canada 143,419 131,015

Portugal 56,679 54,723

Total 200,098 185,738

High Speed Internet Service Customer

Ontario 344,540 316,363

Québec 111,648 99,473

Canada 456,188 415,836

Portugal 165,925 160,023

Total 622,113 575,859

Digital Television Service Customers

Ontario 268,905 246,267

Québec 145,106 133,612

Canada 414,011 379,879

Portugal - -

Total 414,011 379,879

Telephony Service Customer

Ontario 127,343 98,725

Québec 55,709 44,911

Canada 183,052 143,636

Portugal 244,959 243,131

Total 428,011 386,767

(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

- 26 -

COGECO INC.

CONSOLIDATED STATEMENTS OF INCOME

Three months ended Six months ended

(In thousands of dollars, except per share data)

February 29,

2008

February 28,

2007

February 29,

2008

February 28,

2007

(unaudited) (unaudited) (unaudited)

(unaudited)

Revenue $ 271,894

$ 238,378

$ 532,149

$ 468,611

Operating costs

162,548

150,900

321,594

293,762

Operating income from continuing operations

before amortization 109,346

87,478

210,555

174,849

Amortization (note 3)

56,346

44,018

109,385

88,773

Operating income from continuing operations 53,000

43,460

101,170

86,076

Financial expense (note 4)

17,373

23,915

34,741

45,529

Income from continuing operations before

income taxes and the following items 35,627

19,545

66,429

40,547

Income taxes (note 5)

(14,426)

4,233

(5,149)

10,768

Loss (gain) on dilution resulti ng from shares issued

by a subsidiary (note 6)

(25)

(30,990)

(30,983)

Non-controlling interest

33,763

9,647

47,525

17,266

Share in the earnings of a general partnership – ––(5)

Income from continuing operations 16,315

36,655

23,971

43,501

Loss from discontinued operations (note 14)

(425)

(2,109)

(18,057)

(2,204)

Net income $ 15,890

$ 34,546

$ 5,914

$ 41,297

Earnings (loss) per share (no t e 7)

Basic

Income from continuing operations

$0.98

$2.21

$ 1.44

$2.63

Loss from discontinued operations

(0.03)

(0.13)

(1.08)

(0.13)

Net income

0.95

2.08

0.35

2.49

Diluted

Income from continuing operations

0.97

2.20

1.43

2.61

Loss from discontinued operations

(0.03)

(0.13)

(1.08)

(0.13)

Net income

0.95

2.07

0.35

2.48

- 27 -

COGECO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended Six months ended

(In thousands of dollars)

February 29,

2008

February 28,

2007

February 29,

2008

February 28,

2007

(unaudited) (unaudited) (unaudited)

(unaudited)

Net income $ 15,890

$ 34,546

$ 5,914

$ 41,297

Other comprehensive income

Unrealized gains and l osses on derivative financial

instruments designated as cash flow hedges, net

of income taxes of $44,000 and $1,187,000 and

non-controlling interest of $1,013,0 00 and

$5,513,000

(485)

–

(2,638)

–

Reclassification of realized gains a nd losses to net

income on derivative financial instruments

designated as cash flow hedges, net of income

taxes of $319,000 and $1,664,000 and non-

controlling interest of 1,367,000 and $6,159,000

654

–

2,947

–

Unrealized gain on translation of net investments in

self-sustaining foreign subsidiaries, net of non-

controlling interest of $9,505,000 and $16,499,000

($1,617,000 and $27,2 49,0 00 in 2007)

4,545

859

7,891

17,397

Unrealized loss on translation of long-term debt

designated as hed ge of net in vestments in self-

sustaining foreign subsidiaries, net of non-

controlling interest of $6,012,0 00 and $10,325,000

(net of income taxes of $1,703,000 and non-

controlling interest of $1,863,000 and $20,316,000

in 2007)

(2,875)

(989)

(4,938)

(12,894)

1,839

(130)

3,262

4,503

Comprehensive income $ 17,729

$ 34,416

$ 9,176

$ 45,800

- 28 -

COGECO INC.

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

Six months ended

(In thousands of dollars)

February 29, 2008

February 28, 2007

(unaudited)

Balance at beginning , as reported $ 274,946

$ 204,734

Changes in accounting p olicies (note 1)

424

–

Balance at beginning , as restated 275,370

204,734

Net income

5,914

41,297

Dividends on multiple voting shares

(258)

(245)

Dividends on subordinate voting shares

(2,076)

(1,950)

Balance at end $ 278,950

$ 243,836

- 29 -

COGECO INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

February 29, 2008

August 31, 2007

(unaudited)

Assets

Current

Cash and cash equivalents

$ 24,369

$ 66,279

Accounts receivable

57,646

52,734

Income taxes receivable

2,371

3,138

Prepaid expenses

7,203

8,675

Future income tax assets

12,094

17,986

Current assets related to discontinued operations (note 14)

–

38,700

103,683

187,512

Income taxes receivable

1,397

1,345

Investments

739

Fixed assets

1,152,477

1,123,270

Deferred charges

55,679

55,450

Intangible assets (note 8)

1,081,231

1,083,750

Goodwill (note 8)

355,773

342,584

Non-current assets related to discontinu ed operations (note 14)

–

42,109

$ 2,750,979

$ 2,836,759

Liabilities and Shareholders' equity

Liabilities

Current

Bank indebtedness

$ 17,776

$–

Accounts payable and accrued liab ilities

192,013

220,450

Income tax liabilities

9,796

1,209

Deferred and prepaid income

28,398

29,837

Derivative financial instruments

92,834

–

Current portion of long-term debt (note 9)

164,558

17,327

Current liabilities related to discontinued operations ( note 14)

–

46,031

505,375

314,854

Long-term debt (note 9)

741,583

1,036,256

Share in the partners’ deficiency of a general partnership

368

518

Deferred and prepaid income

11,790

11,501

Pension plan liabilities

8,126

7,378

Future income tax liabilities

244,973

267,646

Non-controlling interest

839,505

788,557

Long-term liabilities related to discontinued operations (note 14)

–

17,589

2,351,720

2,444,299

Shareholders' equity

Capital stock (note 10)

119,139

119,078

Treasury shares (note 10)

(1,522)

(1,054)

Contributed surplus – stock-based compensation

1,163

499

Retained earnings

278,950

274,946

Accumulated other comprehensive income (loss) (note 11)

1,529

(1,009)

399,259

392,460

$ 2,750,979

$ 2,836,759

- 30 -

COGECO INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

Three months ended Six months ended

(In thousands of dollars)

February 29,

2008

February 28,

2007

February 29,

2008

February 28,

2007

(unaudited)

Cash flow from operating activities

Income from continuing operations

$ 16,315

$ 36,655

$ 23,971

$ 43,501

Adjustments for:

Amortization (note 4)

56,346

44,018

109,385

88,773

Amortization of deferred financing costs

751

535

1,473

1,181

Future income taxes (note 5)

(22,918)

1,108

(17,740)

5,022

Non-controlling interest

33,763

9,647

47,525

17,266

Loss (gain) on dilution resulti ng from shares issued by a

subsidiary (note 6)

(25)

(30,990)

(30,983)

Stock-based compensation

682

2,121

1,070

3,088

Loss (gain) on disposal of fixed assets

(105)

(22)

237

(39)

Other

565

281

748

741

85,374

63,353

166,751

128,550

Changes in non-cash oper ating items (note 12a))

7,568

(1,869)

(27,205)

(76,812)

92,942

61,484

139,546

51,738

Cash flow from investing activities

Acquisition of fixed assets (not e 12b))

(58,533)

(44,819)

(109,346)

(111,818)

Increase in deferred charges

(6,094)

(6,046)

(13,611)

(13,258)

Costs related to business acquisition

–

(1,385)

–

(1,385)

Decrease (increase) in restricted cash

–

(3)

–

Other

(116)

(115)

(64,743)

(52,231)

(123,072)

(126,334)

Cash flow from financing activities

Increase (decrease) in bank i ndebtedness

17,570

(30,640)

17,776

(1,092)

Increase in long-term debt – –

–

Repayment of long-term debt

(35,748)

(143,729)

(70,411)

(141,993)

Issue of subordinate voting shares

337

457

Acquisition of treasury shares

–

(468)

–

Dividends on multiple voting shares

(129)

(258)

(245)

Dividends on subordinate voting shares

(1,038)

(1,031)

(2,076)

(1,950)

Issue of shares by a subsidiary to non-contro lling interest,

net of issue costs

236

188,427

3,292

188,655

Dividends paid by a subsidiary to non-controlling interest

(3,281)

(1,462)

(6,553)

(2,434)

(22,329)

11,773

(58,586)

41,398

Effect of exchange rate ch anges on cash and cash

equivalents denominated in foreign currencies 355

1,644

202

3,260

Cash flow from continuing operations 6,225

22,670

(41,910)

(29,938)

Cash flow from discontinued operations (note 14)

–

Net change in cash and cas h equivalents 6,225

22,670

(41,910)

(29,938)

Cash and cash equivalents at beginning

18,144

18,908

66,279

71,516

Cash and cash equivalents at end $ 24,36 9

$ 41,578

$ 24,369

$ 41,578

See supplemental cash flow information in note 12.

- 31 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

1. Basis of Presentation

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

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

fairly the financial position of COGECO Inc. as at February 29, 2008 and August 31, 2007 as well as its results of

operations and its cash flow for the three and six month periods ended February 29, 2008 and February 28, 2007.

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 14).

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 Instrum ents – Disclosure and Presentation and Section 3865, Hedges.

Statement of Compreh ensive 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 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 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

February 29, 2008.

- 32 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

(amounts in tables are in thousands of dollars, except 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 rela ted 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 consolid ated 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 and six month periods

ended February 29, 2008 increased derivative financial instruments liabilities by $1.5 million and $9.3 million,

increased future income tax liabilities by $0.3 million and $0.5 million, increased non-controlling interest by

$0.4 million and $0.6 million and increased accumulated other comprehen sive in come by $0.2 million and $0.3 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 exch ange 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.

- 33 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

(amounts in tables are in thousands of dollars, except 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 February 29, 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.

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 consolid ated financial statements.

- 34 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

2. Segmented Information

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

Cable

Head office and other

(1)

Consolidated

Three months ended

(unaudited)

February 29,

2008

February 28,

2007

February 29,

2008

February 28,

2007

February 29,

2008

February 28,

2007

Revenue $ 265,102 $ 231,952 $ 6,792 $ 6,426 $ 271,894 $ 238,378

Operating costs 156,621 145,161 5,927 5,739 162,548 150,900

Operating income from continuing

operations before amortization

108,481 86,791 865

687

109,346 87,478

Amortization 55,989 43,572 357 446 56,346 44,018

Operating income from continuing

operations

52,492 43,219 508

241

53,000 43,460

Financial expense 16,959 23,551 414 364 17,373 23,915

Income taxes (14,378) 4,261 (48) (28) (14,426) 4,233

Loss (gain) on dilution resulting from

shares issues by a subsidiary

–

– (25)

(30,990)

(25) (30,990)

Non-controlling interest

–

– 33,763 9,647 33,763 9,647

Income from continuing operations 49,911 15,407 (33,596) 21,248 16,315 36,655

Loss from discontinued operations

–

– (425) (2,109) (425) (2,109)

Net assets employed

(2) (3)

$ 2,467,879 $ 2,398,297 $ 26,530 $ 29,586 $ 2,494,409 $ 2,427,883

Total assets

(3)

2,712,807 2,714,339 38,172 122,420 2,750,979 2,836,759

Total assets related to discontinued

operations

(3)

–

80,809

–

80,809

Fixed assets

(3)

1,148,823 1,119,498 3,654 3,772 1,152,477 1,123,270

Goodwill

(3)

355,773 342,584

–

– 355,773 342,584

Acquisition of fixed assets 59,874 46,798 32 48 59,906 46,846

(1)

Include 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 February 29, 2008 and August 31, 2007.

- 35 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

2. Segmented Information (continued)

Cable

Head office and other

(1)

Consolidated

Six months ended

(unaudited)

February 29,

2008

February 28,

2007

February 29,

2008

February 28,

2007

February 29,

2008

February 28,

2007

Revenue $ 516,935 $ 453,954 $ 15,214 $ 14,657 $ 532,149 $ 468,611

Operating costs 310,117 283,501 11,477 10,261 321,594 293,762

Operating income from continuing

operations before amortization

206,818 170,453 3,737

4,396

210,555 174,849

Amortization 108,676 87,881 709 892 109,385 88,773

Operating income from continuing

operations

98,142 82,572 3,028

3,504

101,170 86,076

Financial expense 33,871 44,772 870 757 34,741 45,529

Income taxes (6,003) 9,858 854 910 (5,149) 10,768

Loss (gain) on dilution resulting from

shares issues by a subsidiary

–

– 82

(30,983)

82 (30,983)

Non-controlling interest

–

– 47,525 17,266 47,525 17,266

Income from continuing operations 70,274 27,942 (46,303) 15,559 23,971 43,501

Loss from discontinued operations

–

(18,057) (2,204) (18,057) (2,204)

Net assets employed

(2) (3)

$ 2,467,879 $ 2,398,297 $ 26,530 $ 29,586 $ 2,494,409 $ 2,427,883

Total assets

(3)

2,712,807 2,714,339 38,172 122,420 2,750,979 2,836,759

Total assets related to discontinued

operations

(3)

–

80,809

–

80,809

Fixed assets

(3)

1,148,823 1,119,498 3,654 3,772 1,152,477 1,123,270

Goodwill

(3)

355,773 342,584

–

– 355,773 342,584

Acquisition of fixed assets 110,601 113,969 191 81 110,792 114,050

(1)

Include 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 February 29, 2008 and August 31, 2007.

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

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Revenue

Canada $ 211,960 $ 181,352 $ 416,623 $ 357,514

Europe 59,934 57,026 115,526 111,097

$ 271,894 $ 238,378 $ 532,149 $ 468,611

- 36 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

2. Segmented Information (continued)

February 29, 2008 August 31, 2007

(unaudited) (unaudited)

Fixed assets

Canada $ 838,870 $ 815,754

Europe 313,607 307,516

$ 1,152,477 $ 1,123,270

Goodwill

Canada $– $–

Europe 355,773 342,584

$ 355,773 $ 342,584

3. Amortization

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Fixed assets $ 47,972 $ 38,643 $ 92,994 $ 78,054

Deferred charges 5,826 5,375 11,400 10,719

Intangible assets 2,548 – 4,991 –

$ 56,346 $ 44,018 $ 109,385 $ 88,773

4. Financial expense

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Interest on long-term debt $ 16,989 $ 22,642 $ 33,832 $ 43,188

Amortization of deferred financing costs 407 535 814 1,181

Other (23) 738 95 1,160

$ 17,373 $ 23,915 $ 34,741 $ 45,529

- 37 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

5. Income Taxes

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Current $ 8,492 $ 3,125 $ 12,591 $ 5,746

Future (22,918) 1,108 (17,740) 5,022

$ (14,426) $ 4,233 $ (5,149) $ 10,768

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

the consolidated income tax expense:

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Income before income taxes $ 35,627 $ 19,545 $ 66,429 $ 40,552

Combined income tax rate 32.82% 34.77% 33.38% 34.78%

Income taxes at combined income tax rate $ 11,694 $ 6,796 $ 22,175 $ 14,103

Loss or income subject to lower or higher tax rates 37 294 (350) 228

Decrease in future income taxes as a result of

decreases in substantively enacted tax rates

(24,146)

–

(24,146)

–

Income taxes arising form non-deductible expenses 180 235 304 341

Effect of foreign income tax rate differences (2,213) (1,425) (3,377) (2,249)

Benefit related to prior years’ minimum income taxes

paid

–

(1,475)

–

(1,475)

Other 22 (192) 245 (180)

Income taxes at effective income tax rate $ (14,426) $ 4,233 $ (5,149) $ 10,768

- 38 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

6. Gain on dilution resulting from shares issued by a subsidiary

During the second quarter of 2007, the Company’s subsidiary, Cogeco Cable Inc., completed a public offering totaling

5,000,000 subordinate voting shares. The offering resulted in gross proceeds of $192,500,000 and net proceeds of

$184,234,000. The Company’s subsidiary has also issued, during the second quarter of 2007, 7,344 subordinate

voting shares pursuant to its Employee Stock Purchase Plan and 218,761 subordinate voting shares pursuant to its

Employee Stock Option Plan for cash considerations of $198,000 and $3,995,000, respectively. As a result, the

Company’s interest in Cogeco Cable Inc. decreased from 39.2% to 34.7% and gains on dilution of $30,990,000 and

$30,983,000 were recorded for the three and six month periods ended February 28, 2007.

7. Earnings per Share

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

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Income from continuing operations $ 16,315 $ 36,655 $ 23,971 $ 43,501

Loss from discontinued operations (425) (2,109) (18,057) (2,204)

Net income $ 15,890 $ 34,546 $ 5,914 $ 41,297

Weighted average number of multiple voting and

subordinate voting shares outstanding

16,673,921

16,569,120

16,673,286

16,562,691

Effect of dilutive stock options

(1)

74,013 116,223 78,084 106,424

Weighted average number of diluted multiple voting

and subordinate voting shares outstanding

16,747,934

16,685,343

16,751,370

16,669,115

Earnings (loss) per share

Basic

Income from continuing operations $ 0.98 $ 2.21 $ 1.44 $ 2.63

Loss from discontinued operations (0.03) (0.13) (1.08) (0.13)

Net income 0.95 2.08 0.35 2.49

Diluted

Income from continuing operations 0.97 2.20 1.43 2.61

Loss from discontinued operations (0.03) (0.13) (1.08) (0.13)

Net income 0.95 2.07 0.35 2.48

(1)

For the three and six month periods ended February 29, 2008, 33,182 and 16,591 stock options (36,443 in 2007) were excluded from the

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

voting shares.

- 39 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

8. Goodwill and Other Intangible Assets

February 29, 2008 August 31, 2007

(unaudited) (unaudited)

Customer relationships $ 66,339 $ 68,858

Broadcasting licenses

25,120 25,120

Customer base

989,772 989,772

1,081,231 1,083,750

Goodwill

355,773 342,584

$ 1,437,004 $ 1,426,334

a) Intangible assets

During the first six months, intangible assets variation s we re 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

Amortization (4,991) – – (4,991)

Foreign currency translation adjustment 2,472 – – 2,472

Balance as at February 29, 2008 $ 66,339 $ 25,120 $ 989,772 $ 1,081,231

b) Goodwill

During the first six months, goodwill variation wa s as follows:

(unaudited)

Balance as at August 31, 2007 $ 342,584

Foreign currency translation adjustment

13,189

Balance as at February 29, 2008 $ 355,773

- 40 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

9. Long-Term Debt

Maturity Interest rate February 29, 2008 August 31, 2007

(unaudited) (unaudited)

Parent company

Term Facility 2011

(1)

6.06%

(2)

$ 20,553 $ 25,538

Obligations under capital leases 2010 6.49 – 6.61 93 108

Subsidiaries

Term Facility

Term loan – €104,551,500 2011 5.56

(2)

155,253 150,450

Term loan – €17,358,700 2011 5.00

(2)

25,749 24,979

Revolving loan – €152,000,000 (€196,725,000 as at August 31, 2007) 2011 4.94

(2)

227,149 283,087

Senior Secured Debentures Series 1 2009 6.75 149,695 150,000

Senior – Secured Notes

Series A – US$150 million 2008 6.83

(3)

147,395 158,430

Series B 2011 7.73 174,247 175,000

Deferred credit

(4)

2008 – – 80,220

Obligations under capital leases 2011 6.42 – 8.30 5,951 5,760

Other – – 56 11

906,141 1,053,583

Less current portion 164,558 17,327

$ 741,583 $ 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. The Company posted a guarantee for a maximum amount of $12

million in favour of CIBC, which is also TQS’ banker, in the event of any default by TQS under the terms of its own credit agreement. TQS’ credit

agreement provides security over its assets, including its accounts receivable. If the guarantee were to be called in, the Company would be

subrogated to the rights of CIBC and benefit from the same security. In March 2008, the Company was unconditionally released for all of its

obligations under the guarantee.

(2)

Average interest rate on debt as at February 29, 2008, including stamping fees.

(3)

Cross-currenc y 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)

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).

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 was issued on March 5, 2008, bears interest at a fixed rate of 5.936% and will mature on

March 5, 2018. 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.

- 41 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

10. 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.

February 29, 2008 August 31, 2007

(unaudited) (audited)

Issued

1,842,860 multiple voting shares $ 12 $ 12

14,832,586 subordinate voting shares (14,829,792 as at August 31, 2007) 119,127 119,066

$ 119,139 $ 119,078

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

Six months ended Twelve months ended

February 29, 2008 August 31, 2007

(unaudited) (audited)

Number of

Amount

Number of

Amount

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

2,794

120,196

1,526

Conversion of multiple voting shares into subordinate voting

–

7,040

–

Balance at end 14,832,586 $ 119,127 14,829,792 $ 119,066

- 42 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

10. 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 six months, no stock options were granted to employees by COGECO Inc. However, the

Company’s subsidiary, Cogeco Cable Inc., granted 99,084 stock options (200,874 in 2007) with an exercise price of

$45.59 to $49.82 ($26.63 to $33.12 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 $587,000 and $907,000 ($640,000 and $901,000 in 2007) was recorded for the three and

six month periods ended February 29, 2008.

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

ended February 29, 2008 was $12.86 ($7.38 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

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 February 29, 2008, the Company had outstanding stock options providing for the subscription of 188,758

subordinate voting shares. These stock options can be exercised at various prices ranging fro m $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 $1,558,000 and $2,264,000 was recorded for the three

and six month periods ended February 28, 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 six months, the Company granted 12,852 Incentive Share Units (none in 2007). These shares were

purchased for a cash consideration of $468,000 and are held in trust for participants until they are completely vested.

The trust, considered as a variable interest entity, is consolidated in the Company’s financial statements with the

value of the acquired shares presented as treasury shares in reduction of capital stock. A compensation expense of

$95,000 and $163,000 (none in 2007) was recorded for the three and six month periods ended February 29, 2008

related to this plan.

- 43 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

11. Accumulated Other Comprehensive 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

2,953 309 3,262

Balance as at February 29, 2008 $ 1,944 $ (415) $ 1,529

12. Statements of Cash Flo w

a) Changes in non-cash operating items

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Accounts receivable $ (2,380) $ (4,249) $ (4,279) $ (8,265)

Income taxes receivable 380 (2,562) 1,207 (4,155)

Prepaid expenses (640) 796 1,196 368

Accounts payable and accrued liabilities 6,428 8,416 (32,366) (68,589)

Income tax liabilities 5,908 (2,826) 8,190 1,368

Deferred and prepaid income (2,128) (1,444) (1,153) 2,461

$ 7,568 $ (1,869) $ (27,205) $ (76,812)

b) Other information

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Fixed asset acquisitions through capital leases $ 1,373 $ 2,027 $ 1,446 $ 2,232

Financial expense paid 11,550 19,996 32,744 44,586

Income taxes paid 2,662 7,975 3,140 8,200

- 44 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

13. 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 consoli dated financial statements. The total expenses related to these plans are as follows:

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Contributory defined benefit pension plans $ 658 $ 608 $ 1,316 $ 1,214

Defined contribution pension plan and collective

registered retirement savings plans

714

517

1,422

1,065

$ 1,372 $ 1,125 $ 2,738 $ 2,279

14. 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 Quebec Superior Court issued an order under the Companies’ Creditors Arrangement Act

(Canada) protecting TQS Inc., its subs idiaries 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 up

to March 10, 2008. 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 Quebec

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 Radi o-Television Inc. and CTV Television Inc., the two shareholders of TQS.

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 six month periods ended

February 28, 2007, have been reclassified as a di scontinued operation.

- 45 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

14. Discontinued Operations (continued)

The Company has no investment in the TQS Group as at February 29, 2008. The assets and liabilities related to the

discontinued operations as 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 accrued 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

- 46 -

COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

14. Discontinued Operations (continued)

The results of the discontinued operations were as follows:

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Revenue $ 5,741 $ 23,068 $ 38,499 $ 56,572

Operating costs 5,865 26,877 35,822 59,385

Operating income (loss) before amortization (124) (3,809) 2,677 (2,813)

Amortization 248 1,094 1,364 2,178

Operating income (loss) (372) (4,903) 1,313 (4,991)

Financial expense 53 266 291 411

Impairment of assets – – 30,298 –

Loss before income taxes and following the items (425) (5,169) (29,276) (5,402)

Income taxes – (1,653) – (1,725)

Non-controlling interest – (1,407) (11,219) (1,469)

Shares in the earnings of a general partnership – – – (4)

Loss from discontinued operations $ (425) $ (2,109) $ (18,057) $ (2,204)

The cash flow of the discontinued operat ions were as follows:

Three months ended Six months ended

February 29, 2008 February 28, 2007 February 29, 2008 February 28, 2007

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

Cash flow from operating activities $ 1,770 $ 2,110 $ (3,973) $ (7,867)

Cash flow from investing activities (48) (494) (133) (688)

Cash flow from financing activities (1,722) (1,616) 4,106 8,555

Cash flow from discontinued operations $ – $– $– $–

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COGECO INC.

Notes to Consolidated Financial Statements

February 29, 2008

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

15. 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. During the hearing, questions were raised by the hearing panel concerning the

appropriateness of considering Part II Licence Fees as a tax rather than a fee under the relevant portion of the

Broadcasting Act. The decision is not expected before several months. The Company believes that there is a

reasonable likelihood that the Federal Court's decision will be reversed. The Company’s subsidiaries had accrued

$10.2 million with respect to these fees for fiscal year 2007 and the first six months of fiscal 2008. In the unlikely

event that the Federal Court of Appeal or the Supreme Court of Canada, should this case be appealed to that level,

maintains the decision from the Federal Court, this would have a beneficial impact on the future financial results of

the Company.

16. Subsequent event

Acquisition of MaXess Networx®

On March 11, 2008, the Company’s subsidiary, Cogeco Cable Inc., announced the acquisition of all the assets of

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

completed on March 31, 2008.

17. 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 si nce December 18, 2007 (see n ote 14).

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SECOND QUARTER ON THE RISE FOR COGECO.

SUSTAINABILITY

Cogeco Fund

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