The Senior Secured Notes Series B bear interestat the coupon rate of 7

The Senior Secured Notes Series B bear interestat the coupon rate of 7.60% per annum, payable semi-annually. The number of netlosses for Basic Cable stood at 13,547 customers for the quarter and22,702 customers for the first nine months, compared to net losses of1,589 customers and net additions of 16,001 customers, respectively, forthe same periods of the prior year. Cogeco Cable’s net investmentin the self-sustaining foreign subsidiary, Cabovisao, is exposed tomarket risk attributable to fluctuations in foreign currency exchangerates, primarily changes in the value of the Canadian dollar versus theEuro. This risk is mitigated since the major part of the purchase pricefor Cabovisao was borrowed directly in Euros.

This debt is designated asa hedge of net investments in self-sustaining foreign subsidiaries and,accordingly, Cogeco Cable realized a foreign exchange gain of $9.6million in the first nine months of fiscal 2009, which is presented netof non-controlling interest of $6.5 million in other comprehensiveincome. The difference of $5.8 million was recorded as a decrease ofother comprehensive income, net of income taxes of $0.2 million andnon-controlling interest of $3.9 million. Since theissuance on October 1, 2008, amounts due under the US$190 million SeniorSecured Notes Series A increased by $5.5 million due to the US dollar’sappreciation over the Canadian dollar. The fair value of cross-currencyswaps decreased by a net amount of $0.3 million, of which an increase of$5.5 million offsets the foreign exchange loss on the debt denominated inUS dollars. interestcoupon rate of 7.00% per annum to an average Canadian dollar interestrate of 7.24% per annum. The exchange rate applicable to the principalportion of the debt has been fixed at $1.0625 per US dollar.

The declaration, amount and date of any futuredividend will continue to be considered and approved by the Board ofDirectors of the Company based upon the Company’s financial condition,results of operations, capital requirements and such other factors as theBoard of Directors, at its sole discretion, deems relevant. There istherefore no assurance that dividends will be declared, and if declared,their amount and frequency may vary.FINANCIAL MANAGEMENTOn January 21, 2009, the Company’s cable subsidiary, Cogeco Cable,entered into a swap agreement with a financial institution to fix thefloating benchmark interest rate with respect to the Euro-denominatedTerm Loan facilities for a notional amount of EUR 111.5 million. Theinterest rate swap to hedge the Term Loans has been fixed at 2.08% untiltheir maturity at July 28, 2011. The notional value of the swap willdecrease in line with the amortization schedule of the Term Loans. Inaddition to the interest rate swap of 2.08%, Cogeco Cable will continueto pay the applicable margin on these Term Loans in accordance with itsTerm Facility.

Since the issuance on January 21, 2009, the fair value ofinterest rate swap decreased by $2 million, which is recorded as adecrease of other comprehensive income net of income taxes of $0.6million and non-controlling interest of $1 million.On October 1, 2008, Cogeco Cable entered into cross-currency swapagreements to set the liability for interest and principal payments onits US$190 million Senior Secured Notes, Series A maturing in October 1,2015 These agreements have the effect of converting the U.S. COGECO’s obligations, discussed in the2008 annual MD&A, have not materially changed since August 31, 2008,except for the new financing in the cable sector discussed in the “CashFlow and Liquidity” section.DIVIDEND DECLARATIONAt its July 10, 2009 meeting, the Board of Directors of COGECO declared aquarterly eligible dividend of $0.08 per share for subordinate andmultiple voting shares, payable on August 6, 2009, to shareholders ofrecord on July 23, 2009. The $12.8 million decrease in future income tax liabilities isattributable to the cable sector and is mainly due to the impairment lossdescribed above. The $46.5 million decrease in accounts payable andaccrued liabilities is related to the timing of payments made tosuppliers, the reduction of withholding and stamp tax contingentliabilities, and the fluctuations of the Euro currency over the Canadiandollar in the cable sector. The $6.4 million reduction in future incometax assets is due to the utilization of Ontario minimum tax credits andtax loss carry forwards to reduce current income taxes in the cablesubsidiary.

The $8 million increase in income taxes receivable is due toincome tax payments relating to fiscal 2008 in the cable sector. The $6.8million increase in income tax liabilities is a result of the increase inoperating income before amortization surpassing that of the fixedcharges. Indebtedness has decreased by $18.3 million and cash and cashequivalents has increased by $8.3 million as a result of the factorspreviously discussed in the “Cash Flow and Liquidity” section. Changes in non-cash operating items generated cashinflows of $7.2 million, mainly as a result of an increase in income taxliabilities, partly offset by a decrease in accounts payable and accruedliabilities in the third quarter of fiscal 2009. In the prior year, thecash inflows of $16.8 million were mainly a result of an increase inaccounts payable and accrued liabilities and in income tax liabilities.In the first nine months of fiscal 2009, cash flow from operationsreached $291.5 million, 10.9% higher than the comparable period lastyear, primarily due to the increase in operating income beforeamortization, partly offset by the increases in current income taxexpense and financial expense. Changes in non-cash operating itemsgenerated cash outflows of $37.9 million, mainly as a result of adecrease in accounts payable and accrued liabilities and an increase inincome taxes receivable, partly offset by an increase in income taxliabilities.