Cogeco Inc - Management Reports 2020

MANAGEMENT’S DISCUSSION AND ANALYSIS ("MD&A")

MD&A

MD&A
Forward-looking statements....................................................	10	Discontinued operations..........................................................	36
Overview of the business........................................................	11	Quarterly operating results.......................................................	38
Operating and financial results...............................................	18	Fiscal 2021 financial guidelines..............................................	47
Related party transactions......................................................	21	Corporate social responsibility program...................................	49
Cash flow analysis.................................................................	22	Uncertainties and main risk factors..........................................	53
Communications segment.......................................................	26	Controls and procedures..........................................................	62
Financial position...................................................................	30	Accounting policies.................................................................	62
Capital resources and liquidity................................................	31	Non-IFRS financial measures...................................................	66

COGECO INC. 2020 ANNUAL REPORT MD&A 9

1. FORWARD-LOOKING STATEMENTS

Certain statements contained in this Management’s Discussion and Analysis ("MD&A") may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to Cogeco Inc.’s ("Cogeco" or the "Corporation") future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee", "ensure" or other similar expressions concerning matters that are not historical facts. Particularly, statements regarding the Corporation’s financial guidelines, future operating results and economic performance, objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities, which Cogeco believes are reasonable as of the current date. Refer in particular to the "Corporate Objectives and Strategies" and "Fiscal 2021 Financial Guidelines" sections of the present MD&A for a discussion of certain key economic, market and operational assumptions we have made in preparing forward-looking statements. While Management considers these assumptions to be reasonable based on information currently available to the Corporation, they may prove to be incorrect. Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what Cogeco currently expects. These factors include risks such as competitive risks, business risks (including potential disruption to our supply chain), regulatory risks, public health crisis and emergencies such as the current COVID-19 pandemic, technology risks, financial risks (including variations in currency and interest rates), economic conditions, human-caused and natural threats to our network, infrastructure and systems, community acceptance risks, ethical behavior risks, ownership risks and litigation risks, many of which are beyond the Corporation's control. Moreover, the Corporation's radio operations are significantly exposed to advertising budgets from the retail industry, which can fluctuate due to changing economic conditions. For more exhaustive information on these risks and uncertainties, the reader should refer to the "Uncertainties and Main Risk Factors" section of the present MD&A. These factors are not intended to represent a complete list of the factors that could affect Cogeco and future events and results may vary significantly from what Management currently foresees. The reader should not place undue importance on forward-looking information contained in this MD&A which represent Cogeco's expectations as of the date of this MD&A (or as of the date they are otherwise stated to be made) and are subject to change after such date. While Management may elect to do so, the Corporation is under no obligation (and expressly disclaims any such obligation) and does not undertake to update or alter this information at any particular time, whether as a result of new information, future events or otherwise, except as required by law.

All amounts are stated in Canadian dollars unless otherwise indicated. This report should be read in conjunction with the Corporation's consolidated financial statements and the notes thereto prepared in accordance with the International Financial Reporting Standards ("IFRS") for the year ended August 31, 2020.

In preparing this MD&A, the Corporation has taken into account information available up to October 27, 2020, the date of this MD&A, unless otherwise indicated. Additional information relating to the Corporation, including its Annual Information Form, is available on the SEDAR website at www.sedar.com or on the Corporation's website at corpo.cogeco.com.

10 COGECO INC. 2020 ANNUAL REPORT MD&A

2. OVERVIEW OF THE BUSINESS

Cogeco is a diversified holding corporation which operates in the communications and media sectors. In fiscal 2020, the Corporation reported its operating results in two operating segments: Communications and Other. The reporting structure reflects how the Corporation manages its business activities, makes decisions about resources to be allocated to the segments and assesses their performance. For the year ended August 31, 2020, the proportion of each segment as a percentage of the Corporation's consolidated revenue and adjusted EBITDA[(1)] were as follows:

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2.1 COMMUNICATIONS SEGMENT

Through its Cogeco Communications Inc. ("Cogeco Communications") subsidiary, Cogeco provides a wide range of Internet, video and telephony services through its two-way broadband fibre networks in Canada and the United States, primarily to residential customers, as well as to small and medium sized businesses across its coverage area. Cogeco Communications operates in Canada under the Cogeco Connexion name in Québec and Ontario, and along the East Coast of the United States under the Atlantic Broadband brand (in 11 states from Maine to Florida). 2.2 OTHER

Through its subsidiary, Cogeco Media Inc. ("Cogeco Media"), Cogeco owns and operates 22 radio stations across Québec and one station in Ontario including talk network stations 98.5 in Montréal, 106.9 in Mauricie, 107.7 in Estrie and 104.7 in Outaouais; Rhythme FM network stations in Montréal, Mauricie and Estrie; the stations of the Planète network in Saguenay-Lac-St-Jean, the Capitale Rock and Wow network in Abitibi-Témiscamingue, and the Pop network in Lachute and in Hawkesbury (Ontario). Cogeco Media owns CIME stations in the Laurentians, CKOI, The Beat and Radio Circulation in Montréal, as well as FM 93 and M102.9 in Québec City. Cogeco Media also owns Cogeco Nouvelles, the largest private radio agency in Québec.

2.3 COMMUNICATIONS SEGMENT NETWORKS AND INFRASTRUCTURE

BROADBAND OPERATIONS

Cogeco Connexion and Atlantic Broadband provide residential Internet, video and telephony services and business services through advanced fibre optic and two-way broadband distribution networks. Cogeco Connexion and Atlantic Broadband deliver these services through their own long distance fibre optic systems, advanced hybrid fibre-coaxial ("HFC") broadband distribution networks, point-to-point fibre networks and fibre-to-the-home ("FTTH") network technologies.

Cogeco Connexion's distribution network covers a large territory from Western Ontario to Eastern Québec. Atlantic Broadband's distribution network covers the East Coast of the United States, from the southern part of Maine to southern Virginia, as well as portions of South Carolina and a large footprint in Southern Florida. Each of Cogeco Connexion's and Atlantic Broadband's core transport networks have a broad reach and are designed to easily interconnect, at very high speed, their many local distribution systems to video content providers, other public telephony networks, software application providers and the world-wide Internet.

(1) The indicated terms do not have standardized definitions prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section of the MD&A, including reconciliation to the most comparable IFRS financial measures.

COGECO INC. 2020 ANNUAL REPORT MD&A 11

For residential services, Cogeco Connexion and Atlantic Broadband are deploying optical fibres to nodes serving small clusters of homes passed, with multiple fibres per node in most cases, to rapidly extend the capacity of the system with smaller clusters when necessary. This "just in time" process, known as "node splitting", leads to further improvement in quality and reliability while increasing the "just in time" capacity of two-way services such as Internet, video-on-demand ("VOD") and telephony and optimizing the efficiency of capital investments. The HFC distribution infrastructure is designed with radio frequency ("RF") capacity of up to 1 GHz of bandwidth capacity, depending on the market served and customer needs.

In each market, the signals are carried on their HFC network for delivery to their customers. Fibre optic strands are capable of carrying hundreds of video, data and voice channels over extended distances without signal amplification. Cogeco Connexion and Atlantic Broadband will continue to deploy fibre optic cable as warranted to further improve system reliability and reduce system maintenance cost. This hybrid combination of fibre optic and coaxial cable is the most efficient choice when it comes to delivering high quality networks with judicious capital investments.

Cogeco Connexion and Atlantic Broadband’s telephony service uses VoIP technology which makes possible to have a telephone conversation over a dedicated Internet IP network instead of dedicated voice transmission lines. IP networks allow the elimination of circuit switching telephony and the associated waste of bandwidth. Instead, packet switching is used, whereby IP packets with voice data are sent over the network only when data needs to be sent, for example when a caller is talking. VoIP’s advantages over traditional telephony include lower costs per call, especially for long‑distance calls, and lower infrastructure costs as, once the IP infrastructure is installed, little or no additional telephony infrastructure is needed.

Cogeco Connexion and Atlantic Broadband use CableLabs' DOCSIS technology to deliver Internet and business services over HFC networks. DOCSIS has numerous advanced features to ensure a continuous transmission and high quality of service delivery. In addition, this technology provides a flexible and expandable platform to further increase IP transmission speeds and to provide other products such as symmetrical services, which are particularly well suited for commercial customer applications. Cogeco Connexion offers Internet speeds of up to 1 Gbps in approximately 72% of its footprint and 120 Mbps in virtually all of its footprint. Atlantic Broadband offers up to 1 Gbps Internet speeds to approximately 90% of its footprint of serviceable homes and business. Cogeco Connexion and Atlantic Broadband intend to continue deploying 1 Gbps speeds in the coming years through several technologies depending on the location, with DOCSIS 3.1 being the most cost effective.

Cogeco Connexion and Atlantic Broadband are deploying FTTH technology in all new residential developments which meet specific criteria of size, proximity to the existing plant and service penetration rate. Cogeco Connexion and Atlantic Broadband use a FTTH technology called radio frequency over glass ("RFoG"). The primary benefit of RFoG is its compatibility backward and forward with existing cable modem termination system ("CMTS") investments and back-office systems.

2.4 UPDATE ON THE IMPACT OF THE COVID-19 PANDEMIC ON OPERATIONS AND RESULTS

CONSOLIDATED

The impact of the COVID-19 pandemic from the Communications segment are described below.

Our media business, included in the "Other Segment", was negatively impacted by the COVID-19 pandemic as the bulk of its radio revenue is generated from the retail industry which was significantly impacted by the COVID-19 pandemic during the second half of our fiscal year. As most retail stores in Quebec were forced to close temporarily by government decree from March to June, their media spending was significantly reduced during the period. This had a direct impact on our radio business, which recorded a year-over-year decline of 33% in revenue during the third quarter and 29% during the fourth quarter. To mitigate the negative impact of such a decline, the business took immediate actions to reduce its cost base, which partially mitigated the revenue shortfall. The severity and duration of the pandemic and its economic impact, especially on the retail industry, remain unknown at the moment. We do however expect our media business to be in a strong position from a market share perspective when the situation eventually stabilizes.

COMMUNICATIONS SEGMENT

The COVID-19 pandemic had the following impacts on our business during the second half of the fiscal year:

Incremental demand for our high speed Internet product (more customers and upgrades in packages);
More stable customer base for our video and telephony products (fewer connections and disconnections) and increased video-ondemand and phone long-distance usage;
Lower residential video revenue at our Canadian broadband subsidiary due to credits given to customers on certain sports packages;
Lower revenue related to the delay in price increases at both our Canadian and American broadband subsidiaries;
Lower revenue related to the temporary discontinuation of data overage fees at our Canadian broadband subsidiary and the waiving of late fees charged at our American broadband subsidiary;
Lower commercial revenue, mostly related to the video and telephony products and for specific verticals such as hotels and restaurants;
Lower advertising revenue, including a reduction in political advertising at our American broadband subsidiary;
Lower customer service expenses due to more self-installations of new customers, offset by temporary COVID-specific cost increases;
Lower expenses related to the closure of all of our retail stores during the confinement period; and

12 COGECO INC. 2020 ANNUAL REPORT MD&A

Increase in capital expenditures related to acceleration of certain projects due to increased user data demand on our networks and to avoid potential supply chain disruptions during the early part of the pandemic, partly offset by a lower level of construction activity in some areas.

These COVID-19 related impacts taken in aggregate did not have a material effect on our results. We also took advantage of the changes in customer behaviors and working practices to accelerate the digitization of our operations. We intend to further drive digitization initiatives to better serve our client base, increase employee satisfaction and improve productivity.

2.5 BUSINESS DEVELOPMENTS

Acquisition of DERYtelecom

On October 21, 2020, Cogeco Communications announced that its subsidiary, Cogeco Connexion, had entered into a definitive agreement to purchase DERYtelecom, the third largest cable provider in the province of Québec, for $405 million. DERYtelecom offers Internet, television and telephony services to approximately 100,000 customers in over 200 municipalities across several regions in Québec.

The purchase price will be financed with a combination of cash on hand and Cogeco Communications' Term Revolving Facility. The transaction, which will be executed essentially through an asset purchase, is subject to regulatory approvals under the Competition Act along with other customary closing conditions and is expected to close no later than the end of the second quarter of the fiscal year 2021.

CRTC's wholesale Internet services 2019 costing decision

On September 10, 2020, the Federal Court of Appeal (the "Court") dismissed the appeal by Cogeco Communications, together with other telecommunications service providers (the "Cable Carriers"), of the costing decision rendered in 2019 by the Canadian Radio-television and Telecommunications Commission ("CRTC") regarding new rates for aggregated wholesale Internet services for resellers (the "Telecom Order 2019-288"). On September 28, 2020, the CRTC approved a request submitted by the Cable Carriers to stay the implementation of Telecom Order 2019-288 regarding final rates for aggregated wholesale high-speed access services until it completes its review of that order. As at August 31, 2020, the total retroactive payments based on the CRTC's final aggregated wholesale service rates' 2019 costing decision, if not otherwise modified, is estimated at approximately $43 million, of which approximately $25 million relates to fiscal years from 2016 to 2019, and approximately $18 million relates to fiscal year 2020. Due to the significant uncertainty surrounding both the outcome of this decision and its financial implications, Cogeco Communications has therefore not recorded the impact of the reduced rates as at August 31, 2020 and 2019. Please refer to the "Commitment, contingencies and guarantees" subsection for further details.

Altice USA, Inc. and Rogers Communications Inc.'s proposal

On September 1, 2020, Cogeco and Cogeco Communications received an unsolicited non-binding proposal from Altice USA, Inc. and Rogers Communications Inc. to acquire all of the issued and outstanding multiple and subordinate voting shares of both companies. On September 2, 2020, following separate deliberations of the independent board members, the Boards of Directors of Cogeco and Cogeco Communications rejected the proposal after Gestion Audem, the Audet family's holding company, had stated that its shares were not for sale. On October 18, 2020, Cogeco and Cogeco Communications received a revised unsolicited non-binding proposal from Altice USA, Inc. and Rogers Communications Inc. That same day, Gestion Audem rejected this revised proposal, stating again that it was not interested in selling its shares. The revised proposal was submitted for review to the Board of Directors of both companies. On October 20, 2020, following separate deliberations of the independent board members, the Boards of Directors of Cogeco and Cogeco Communications announced that they had unanimously rejected the revised proposal.

Other business developments

On July 20, 2020, Cogeco Communications proceeded with the early redemption of the Senior Secured Debentures Series 2 due November 16, 2020. A redemption premium of $2.8 million was charged to financial expense, in connection with the early redemption.

On May 1, 2020, Cogeco Communications' subsidiary, Cogeco Connexion, completed the acquisition of iTéract Inc., a telecommunications service provider operating in southern Québec using a combination of fixed-wireless and fibre-to-the-home technologies, and owner of 15 spectrum licenses, for $16 million.

On March 10, 2020, Cogeco Communications' subsidiary, Atlantic Broadband, completed the acquisition of Thames Valley Communications, a broadband services company operating in Southeastern Connecticut, for a net consideration of $67 million (US$50 million).

COGECO INC. 2020 ANNUAL REPORT MD&A 13

2.6 CORPORATE OBJECTIVES AND STRATEGIES

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14 COGECO INC. 2020 ANNUAL REPORT MD&A

COMMUNICATIONS SEGMENT

For further details on Cogeco Communications' strategic plan that is aligned to the growth pillars defined above, please refer to the 2020 Annual Report of Cogeco Communications Inc. available on www.sedar.com or on the Corporation's website at corpo.cogeco.com.

MEDIA ACTIVITIES

Our media business focuses on the continuous improvement of its programming and the diversification of its product portfolio in order to increase its market share and thereby its profitability.

ANTICIPATED RESULTS OF THE CORPORATION'S STRATEGIES

Results from the successful implementation of the above-described strategies should increase revenue and adjusted EBITDA thus leading to heightened profitability and reduced Indebtedness that will be measured based on the criteria described in greater details in the "Fiscal 2021 financial guidelines" section. Please refer to the "Key performance indicators and performance highlights" section for further details on the fiscal 2020 results and achievements.

COGECO INC. 2020 ANNUAL REPORT MD&A 15

2.7 KEY PERFORMANCE INDICATORS AND PERFORMANCE HIGHLIGHTS

The following key performance indicators are closely monitored to ensure that business strategies and objectives are closely aligned with shareholder value creation. The key performance indicators are not measurements in accordance with IFRS and should not be considered an alternative to other measures of performance in accordance with IFRS. The Corporation's method of calculating key performance indicators may differ from other companies and, accordingly, these key performance indicators may not be comparable to similar measures presented by other companies. The Corporation measures its performance, with regard to these objectives by monitoring revenue, adjusted EBITDA[(1)] and free cash flow[(1) ] on a constant currency basis[(1)] .

						Achievement of
						the revised
	Actual	Original projections (2)	Revised projections (4)		Actual	projections
		Fiscal 2020	Fiscal 2020		Fiscal 2020
	Fiscal 2019 (1)	(constant currency) (3)	(constant currency) (3)	(constant currency) (3)		Fiscal 2020
(in millions of Canadian
dollars, except
percentages)	$	$		$	%
Financial guidelines
Revenue	2,444	increase of 2% to 4%	low-single digit percentage growth	2,463	0.8	Achieved
Adjusted EBITDA(1)(5)	1,132	increase of 2.5% to 4.5%	low-single digit percentage growth	1,161	2.6	Achieved
Acquisition of property, plant
and equipment	439	$465 to $485	N/A	482	9.8	N/A
Free cash flow(5)	469	increase of 5% to 11%	mid-single digit percentage growth	464	(1.2)	Under-achieved

N/A: non applicable

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(2) The Corporation withdrew its fiscal 2020 financial guidelines during the second quarter as it was not possible to reliably estimate the impact of the COVID-19 pandemic on the financial results of the Corporation for the remainder of the fiscal year.

(3) Actual results are presented in constant currency based on fiscal 2019 average foreign exchange rates of 1.3255 USD/CDN.

(4) Fiscal 2020 financial guidelines were reinstated and revised at the time of issuing third quarter results based on the experience gained while operating during the pandemic.

(5) The indicated terms do not have standardized definitions prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section of the MD&A.

For further details on the Corporation's operating results, please refer to the "Operating and financial results" and the "Cash flow analysis" sections.

REVENUE

Fiscal 2020 revenue in constant currency increased by 0.8%, achieving the Corporation's revised projections mostly as a result of revenue for all segments being in line with expectations.

ADJUSTED EBITDA[(1)]

Fiscal 2020 adjusted EBITDA in constant currency increased by 2.6%, achieving the Corporation's revised projections mainly due to growth in revenue exceeding growth in operating expenses.

FREE CASH FLOW[(1)]

Fiscal 2020 free cash flow in constant currency decreased by 1.2%, under-achieving the Corporation's revised projections mainly as a result of higher than expected capital expenditures in the American broadband services operations mainly due to:

higher purchases of customer premise equipments and other related costs in order to support the increased number of connections driven by demand for our high speed Internet product, which led to the segment's strong overall primary service units[(2)] performance in the fourth quarter and during fiscal 2020;
a higher than expected level of construction activity in Florida despite the limitations imposed by the COVID-19 pandemic; and
accelerated purchases of certain equipment to prevent potential supply chain shortages in the context of the COVID-19 pandemic.

(1) The indicated terms do not have standardized definitions prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section of the MD&A. (2) Represents the sum of Internet, video and telephony customers.

16 COGECO INC. 2020 ANNUAL REPORT MD&A

2.8 THREE-YEAR ANNUAL FINANCIAL HIGHLIGHTS

Years ended August 31,	2020	2019 (1)	2018 (1)
(in thousands of Canadian dollars, except percentages andper share data)	$	$	$
Operations
Revenue	2,479,474	2,444,062	2,262,030
Adjusted EBITDA	1,168,487	1,131,980	1,035,110
Integration, restructuring and acquisition costs	11,562	12,851	20,463
Profit for the year from continuing operations	401,833	368,165	399,950
Profit (loss) for the year from discontinued operations	—	75,380	(24,381)
Profit for the year	401,833	443,545	375,569
Profit for the year from continuing operations attributable to owners of the Corporation	128,084	119,222	134,158
Profit for theyear attributable to owners of the Corporation	128,084	143,163	126,437
Cash flow
Cash flows from operating activities	941,628	890,077	638,377
Acquisition of property, plant and equipment	487,240	439,055	460,910
Free cash flow	464,125	469,155	320,147
Financial condition
Cash and cash equivalents	406,113	559,393	86,352
Total assets	7,024,696	7,125,037	7,335,547
Indebtedness(2)	3,290,354	3,514,185	3,951,791
Long-term financial liabilities(3)	3,260,521	3,486,458	3,838,060
Equityattributable to owners of the Corporation	761,501	754,768	710,908
Per share data(4)
Earnings (loss) per share
Basic
From continuing operations	8.05	7.38	8.19
From discontinued operations	—	1.48	(0.47)
From continuing and discontinued operations	8.05	8.86	7.72
Diluted
From continuing operations	7.98	7.32	8.13
From discontinued operations	—	1.47	(0.47)
From continuing and discontinued operations	7.98	8.79	7.66
Dividends	1.90	1.72	1.56

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 and 2018 were not restated. For further details, please consult the "Accounting policies" section of the MD&A.

(2) Indebtedness is defined as the total of bank indebtedness and principal on long-term debt.

(3) Long-term financial liabilities include long-term debt, derivative financial instruments and other financial liabilities.

(4) Per multiple and subordinate voting shares.

COGECO INC. 2020 ANNUAL REPORT MD&A 17

3. OPERATING AND FINANCIAL RESULTS

3.1 OPERATING RESULTS

						Change in		Foreign
						constant		exchange
Years ended August 31,	2020	(1)	2019	(2)	Change	currency	(3)	impact	(3)
(in thousands of Canadian dollars, except percentages)	$		$		%	%		$
Revenue	2,479,474		2,444,062		1.4	0.8		16,477
Operatingexpenses	1,310,987		1,312,082		(0.1)	(0.8)		9,301
Adjusted EBITDA	1,168,487		1,131,980		3.2	2.6		7,176

(1) For fiscal 2020, the average foreign exchange rate used for translation was 1.3456 USD/CDN.

(2) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(3) Fiscal 2020 actuals are translated at the average foreign exchange rate of fiscal 2019, which was 1.3255 USD/CDN.

REVENUE

Fiscal 2020 revenue increased by 1.4% ( 0.8% in constant currency) mainly due to:

growth of 2.2% (1.5% in constant currency) in the Communications segment due to organic growth and the impact of the Thames Valley Communications acquisition completed on March 10, 2020 in the American broadband services operations, partly offset by
a decrease in the Canadian broadband services operations; and
lower revenue in the Other segment due to a decline of the radio advertising market resulting directly from the COVID-19 pandemic as the bulk of its radio revenue is generated from the retail industry which was significantly impacted by the COVID-19 pandemic during the second half of fiscal 2020.

For further details on the Communications segment's revenue, please refer to the "Communications segment" section.

OPERATING EXPENSES

Fiscal 2020 operating expenses decreased by 0.1% (0.8% in constant currency) as a result of lower operating expenses in the Communications segment and in the media activities. During fiscal 2020, Cogeco Media benefited from a governmental assistance program, namely the Canada Emergency Wage Subsidy, which contributed in part to the lower operating expenses in the media activities.

For further details on the Communications segment's operating expenses, please refer to the "Communications segment" section.

ADJUSTED EBITDA

Fiscal 2020 adjusted EBITDA increased by 3.2% (2.6% in constant currency), which was mostly attributable to higher adjusted EBITDA in the Communications segment as a result of increases in both the American and Canadian broadband services operations, partly offset by a decline in the media activities.

For further details on the Communications segment's adjusted EBITDA, please refer to the "Communications segment" section.

3.2 INTEGRATION, RESTRUCTURING AND ACQUISITION COSTS

Fiscal 2020 integration, restructuring and acquisition costs amounted to $11.6 million resulting mostly from organizational changes resulting in cost optimization, as well as costs related to the acquisition and integration of Thames Valley Communications and iTéract in the Communications segment.

Fiscal 2019 integration, restructuring and acquisition costs amounted to $12.9 million mostly due to an operational optimization program that included a voluntary departure program in the Communications segment combined with costs related to the acquisition of 10 regional radio stations.

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3.3 DEPRECIATION AND AMORTIZATION

Years ended August 31,	2020	2019	Change
(in thousands of Canadian dollars, except percentages)	$	$	%
Depreciation of property, plant and equipment(2)	444,940	426,683	4.3
Amortization of intangible assets	59,017	57,293	3.0
	503,957	483,976	4.1

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(2) Includes the depreciation of right-of-use assets amounting to $8.3 million for the year ended August 31, 2020.

Fiscal 2020 depreciation and amortization expense increased by 4.1% due to additional depreciation of property, plant and equipment as a result of higher capital expenditures combined with the appreciation of the US dollar against the Canadian dollar compared to the prior year and the impact of IFRS 16 adoption.

3.4 FINANCIAL EXPENSE

Years ended August 31,	2020	2019	Change
(in thousands of Canadian dollars, except percentages)	$	$	%
Interest on long-term debt, excluding interest on lease liabilities	160,177	179,692	(10.9)
Interest on lease liabilities	2,479	—	—
Gain on debt modification	(22,898)	—	—
Net foreign exchange loss (gain)	198	(2,898)	—
Amortization of deferred transaction costs	1,185	1,913	(38.1)
Capitalized borrowing costs	(584)	(690)	(15.4)
Other	(4,350)	363	—
	136,207	178,380	(23.6)

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

Fiscal 2020 financial expense decreased by 23.6% mainly due to:

lower interest rates and lower outstanding debt on the First Lien Credit Facilities;
a non-cash gain on debt modification related to the amendment made to the Senior Secured Term Loan B Facility on February 3, 2020 resulting from the reduction of the interest rate by 0.25%; and
interest revenue resulting from investments of excess cash; partly offset by
the appreciation of the US dollar against the Canadian dollar compared to the prior year.

3.5 INCOME TAXES

Years ended August 31,	2020	2019	Change
(in thousands of Canadian dollars, except percentages)	$	$	%
Current	59,432	57,623	3.1
Deferred	55,496	30,985	79.1
	114,928	88,608	29.7

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

COGECO INC. 2020 ANNUAL REPORT MD&A 19

Years ended August 31,	2020	2019	Change
(in thousands of Canadian dollars, except percentages)	$	$	%
Profit before income taxes	516,761	456,773	13.1
Combined Canadian income tax rate	26.50 %	26.50 %	—
Income taxes at combined Canadian income tax rate	136,942	121,045	13.1
Difference in operations' statutory income tax rates	2,174	1,575	38.0
Impact on income taxes arising from non-deductible expenses and non-taxable profit	111	(52)	—
Tax impacts related to foreign operations	(24,135)	(28,633)	(15.7)
Other	(164)	(5,327)	(96.9)
	114,928	88,608	29.7

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

Fiscal 2020 income taxes expense increased by 29.7% mainly due to:

the increase in profit before income taxes; and
the effect of a non-recurring reduction in income tax in 2019 related to the disposal of Cogeco Peer 1.

3.6 PROFIT FOR THE YEAR

Years ended August 31,	2020	2019	Change
(in thousands of Canadian dollars, except percentages and earnings per share)	$	$	%
Profit for the year from continuing operations	401,833	368,165	9.1
Profit for the year	401,833	443,545	(9.4)
Profit for the year from continuing operations attributable to owners of the Corporation	128,084	119,222	7.4
Profit for the year attributable to owners of the Corporation	128,084	143,163	(10.5)
Profit for the year attributable to non-controlling interest(2)	273,749	300,382	(8.9)
Basic earnings per share from continuing operations	8.05	7.38	9.1
Basic earnings per share	8.05	8.86	(9.1)

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(2) At August 31, 2020, the non-controlling interest relates to a participation of approximately 67.3% in the profit for the year attributable to owners of Cogeco Communications in addition to the 21% ownership of Caisse de dépôt et placement du Québec ("CDPQ") in Cogeco Communications' Atlantic Broadband subsidiary.

Fiscal 2020 profit for the year from continuing operations and profit for the year from continuing operations attributable to owners of the Corporation increased by 9.1% and 7.4%, respectively, as a result of:

higher adjusted EBITDA; and
the decrease in financial expense mainly due to the $22.9 million non-cash gain on debt modification resulting from the reduction of the interest rate by 0.25% in the second quarter of fiscal 2020; partly offset by
the increase in income taxes; and
the increase in depreciation and amortization.

Fiscal 2020 profit for the year and profit for the year attributable to owners of the Corporation decreased by 9.4% and 10.5%, respectively, mainly due to discontinued operations which generated a profit of $75.4 million resulting from the sale of Cogeco Peer 1 for the prior year in addition to the elements mentioned above.

20 COGECO INC. 2020 ANNUAL REPORT MD&A

4. RELATED PARTY TRANSACTIONS

Cogeco held, as at August 31, 2020, 32.7% of Cogeco Communications’ equity shares, representing 83% of the votes attached to Cogeco Communications’ voting shares.

Cogeco provides executive, administrative, financial, strategic planning and additional services to Cogeco Communications under a Management Services Agreement (the "Agreement"). The methodology used to establish the management fees, which was modified on May 1, 2019, is based on the costs incurred by Cogeco plus a reasonable mark-up. Provision is made for future adjustment upon the request of either Cogeco Communications or the Corporation from time to time during the term of the Agreement. For the year ended August 31, 2020, management fees paid by Cogeco Communications Inc. amounted to $24.1 million compared to $19.9 million for fiscal 2019.

No direct remuneration is payable to Cogeco's executive officers by Cogeco Communications. However, during fiscal years 2020 and 2019, Cogeco Communications granted stock options and performance share units ("PSUs") to these executive officers, as executive officers of Cogeco Communications and issued deferred share units ("DSUs") to Board directors of Cogeco, as shown in the following table:

Years ended August 31,	2020	2019
(in number of units)
Stock options	110,875	97,725
PSUs	14,375	14,625
DSUs	1,847	2,469

The following table shows the amounts that Cogeco Communications charged Cogeco with regards to Cogeco Communications' stock options, incentive share units ("ISUs") and PSUs granted to these executive officers, as well as DSUs issued to Board directors of Cogeco:

Years ended August 31,	2020	2019
(in thousands of Canadian dollars)	$	$
Stock options	1,205	1,046
ISUs	39	61
PSUs	1,386	981
DSUs	217	631
	2,847	2,719

As at August 31, 2020, the Corporation had $1.8 million payable to Cogeco Communications (nil in 2019).

COGECO INC. 2020 ANNUAL REPORT MD&A 21

5. CASH FLOW ANALYSIS

5. CASH FLOW ANALYSIS
Years ended August 31,	2020	2019	(1)	Change
(in thousands of Canadian dollars, except percentages)	$	$		%
Cash flows from operating activities	941,628	890,077		5.8
Cash flows from investing activities	(560,500)	(492,638)		13.8
Cash flows from financing activities	(530,952)	(657,766)		(19.3)
Effect of exchange rate changes on cash and cash equivalents denominated in a foreign currency	(3,456)	(439)		—
Net change in cash and cash equivalents from continuing operations	(153,280)	(260,766)		(41.2)
Net change in cash and cash equivalents from discontinued operations	—	733,807		(100.0)
Cash and cash equivalents, beginningof theyear	559,393	86,352		—
Cash and cash equivalents, end of the year	406,113	559,393		(27.4)

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

5.1 OPERATING ACTIVITIES

Fiscal 2020 cash flows from operating activities increased by 5.8% mainly from:

higher adjusted EBITDA; and
the decreases in financial expense paid and in income taxes paid; partly offset by
the increase in changes in non-cash operating activities primarily due to changes in working capital.

5.2 INVESTING ACTIVITIES

Fiscal 2020 cash flows from investing activities increased by 13.8% mainly due to:

the acquisitions of Thames Valley Communications and iTéract during the third quarter of fiscal 2020;
the increase in acquisition of property, plant and equipment in both the Canadian and American broadband services operations; partly offset by
the acquisitions, on October 3, 2018, of a fibre network and corresponding assets in south Florida previously owned by FiberLight, LLC (the "FiberLight acquisition") and on November 26, 2018, of 10 regional stations from RNC Média.

BUSINESS COMBINATIONS IN FISCAL 2020

Acquisition of Thames Valley Communications

Acquisition of iTéract

BUSINESS COMBINATION IN FISCAL 2019

Acquisition of 10 regional radio stations

On November 26, 2018, Cogeco Media completed the acquisition of 10 regional radio stations (9 located in Québec and 1 in Ontario) from RNC Média inc. The transaction, valued at $19.2 million, was approved on October 11, 2018 by the Canadian Radio-television and Telecommunications Commission.

22 COGECO INC. 2020 ANNUAL REPORT MD&A

ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT

Fiscal 2020 acquisition of property, plant and equipment increased by 11.0% (9.8% in constant currency) mainly due to the increase of capital expenditures in the Communications segment.

For further details on the Communications segment's capital expenditures, please refer to the "Communications segment" section.

5.3 FINANCING ACTIVITIES

ISSUANCE AND REPAYMENT OF DEBT

Fiscal 2020 changes in cash flows from the issuance and repayment of debt are mainly explained as follows:

Years ended August 31,	2020	2019	Explanations
(in thousands of Canadian dollars)	$	$
Increase (decrease) in bank	7,610	(5,949)	Related to the timing of payments made to suppliers.
indebtedness
Net increase (decrease) under the	25,544	(423,516)	Drawing under the Revolving loan during the third quarter of fiscal 2020. Repayment of the
revolving facilities			revolving facilities in fiscal 2019 as a result of the sale of Cogeco Peer 1 combined with free cash
			flow generated.
Repayment of notes, debentures	(269,169)	(77,660)	Redemption of the Senior Secured Debentures Series 2 during the fourth quarter of fiscal 2020
and credit facilities			combined with the repayment of US$35 million during the second quarter of fiscal 2020 both as
			a result of free cash flow generated and the quarterly repayments on the Senior Secured Term
			Loan B Facility.
Repayment of lease liabilities	(6,286)	—	Related to the adoption of IFRS 16.
Repayment of balance due on	(3,228)	(655)	Partial repayment of the balance related to the FiberLight acquisition in the first quarter of fiscal
business combinations			2020.
	(245,529)	(507,780)

DIVIDENDS

During fiscal 2020, quarterly eligible dividends of $0.475 per share, totalling $1.90 per share, were paid to the holders of multiple and subordinate voting shares, for a total paid of $30.2 million. In fiscal 2019, quarterly eligible dividends of $0.43 per share, totalling $1.72 per share, were paid to the holders of multiple and subordinate voting shares, for a total paid of $27.8 million. In addition, dividends paid by a subsidiary to non-controlling interest during fiscal 2020 amounted to $75.9 million compared to $70.8 million for the prior year. During the last five years, dividends per share increased by 12.7% on a compounded annual basis.

The dividends declaration dates and payments for multiple and subordinate voting shares are as follows:

Declaration date	Record date	Payment date	Dividendper share (in dollars)
October 30, 2019	November 13, 2019	November 27, 2019	0.475
January 14, 2020	January 28, 2020	February 11, 2020	0.475
April 7, 2020	April 21, 2020	May 5, 2020	0.475
July 15, 2020	July 29, 2020	August 12, 2020	0.475
October 31, 2018	November 14, 2018	November 28, 2018	0.43
January 10, 2019	January 24, 2019	February 7, 2019	0.43
April 9, 2019	April 23, 2019	May 7, 2019	0.43
July 10, 2019	July 24, 2019	August 7, 2019	0.43

COGECO INC. 2020 ANNUAL REPORT MD&A 23

Total dividends and dividends per share over the last five years are as follow:

==> picture [450 x 248] intentionally omitted <==

----- Start of picture text -----

$2.00 $32.0
$30.2
$30.0
$27.8 $1.90
$28.0
$1.75
$25.5 $26.0
$1.72
$24.0
$22.6
$1.50 $1.56 $22.0
$19.7
$20.0
$1.36 $18.0
$1.25
$16.0
$1.18
$14.0
$1.00 $12.0
2016 2017 2018 2019 2020
Dividends paid Dividend per share
Dividends paid ($ Millions)
Total dividend declared per share
----- End of picture text -----

NORMAL COURSE ISSUER BID ("NCIB") - Cogeco Inc.

The Corporation did not renew its NCIB program following the end of the program on August 1, 2020.

During fiscal 2020, Cogeco purchased and cancelled 119,450 subordinate voting shares with a weighted average price per share repurchased of $95.32 for a total consideration of $11.4 million.

During fiscal 2019, Cogeco purchased and cancelled 265,990 subordinate voting shares with a weighted average price per share repurchased of $77.41 for a total consideration of $20.6 million.

The normal course issuer bid purchases were as follows:

					2020
Quarters ended	Nov. 30	Feb. 29	May 31	Aug. 31	Total
(in thousands of Canadian dollars, except number of shares and
weighted average purchasepriceper share)	$	$	$	$	$
Subordinate voting shares purchased and cancelled	23,440	61,415	34,595	—	119,450
Weighted average purchase price per share	98.74	99.54	85.50	—	95.32
Purchase costs	2,314	6,114	2,958	—	11,386
					2019
Quarters ended	Nov. 30	Feb. 28	May 31	Aug. 31	Total
(in thousands of Canadian dollars, except number of shares and
weighted average purchasepriceper share)	$	$	$	$	$
Subordinate voting shares purchased and cancelled	60,790	—	175,868	29,332	265,990
Weighted average purchase price per share	59.97	—	80.53	94.81	77.41
Purchase costs	3,646	—	14,163	2,781	20,590

NCIB - Cogeco Communications Inc.

During fiscal 2020, Cogeco Communications purchased and cancelled 1,592,000 subordinate voting shares with a weighted average price per share repurchased of $103.98 for a total consideration of $165.5 million. During fiscal 2019, Cogeco Communications purchased and cancelled 327,200 subordinate voting shares with a weighted average price of $98.97 for consideration of $32.4 million.

On April 30, 2020, Cogeco Communications announced that the TSX accepted the renewal of its notice of intention for a NCIB, enabling it to acquire for cancellation up to 1,809,000 subordinate voting shares from May 4, 2020 to May 3, 2021.

Cogeco Communications has also entered into an automatic share purchase plan (the "ASPP") with a designated broker to allow for the purchase of subordinate voting shares under the NCIB at times when Cogeco Communications would ordinarily not be permitted to purchase shares due to regulatory restrictions or self-imposed blackout periods. Such purchases are executed by the broker on parameters established by Cogeco Communications prior to the pre-established ASPP period under the ASPP.

24 COGECO INC. 2020 ANNUAL REPORT MD&A

					2020
Quarters ended	Nov. 30	Feb. 29	May 31	Aug. 31	Total
(in thousands of Canadian dollars, except number of shares and
weighted average purchasepriceper share)	$	$	$	$	$
Subordinate voting shares purchased and cancelled	143,100	652,400	601,900	194,600	1,592,000
Weighted average purchase price per share	109.64	108.50	98.73	100.89	103.98
Purchase costs	15,690	70,787	59,425	19,633	165,535
					2019
Quarters ended	Nov. 30	Feb. 28	May 31	Aug. 31	Total
(in thousands of Canadian dollars, except number of shares and
weighted average purchasepriceper share)	$	$	$	$	$
Subordinate voting shares purchased and cancelled	—	—	157,400	169,800	327,200
Weighted average purchase price per share	—	—	91.87	105.55	98.97
Purchase costs	—	—	14,460	17,922	32,382

5.4 FREE CASH FLOW

						Change in		Foreign
						constant		exchange
Years ended August 31,	2020	(1)	2019	(2)	Change	currency	(3)	impact	(3)
(in thousands of Canadian dollars, except percentages)	$		$		%	%		$
Adjusted EBITDA(4)	1,168,487		1,131,980		3.2	2.6		7,176
Amortization of deferred transaction costs and discounts on long-term
debt	9,582		9,531		0.5	1.8		116
Share-based payment	10,911		10,270		6.2	6.2		—
(Gain) loss on disposals and write-offs of property, plant and equipment	(530)		2,752		—	—		—
Defined benefit plans contributions, net of expense	(700)		2,531		—	—		—
Integration, restructuring and acquisition costs	(11,562)		(12,851)		(10.0)	(9.9)		(18)
Financial expense(5)	(159,105)		(178,380)		(10.8)	(9.8)		(1,760)
Current income taxes	(59,432)		(57,623)		3.1	3.1		(5)
Acquisition of property, plant and equipment	(487,240)		(439,055)		11.0	9.8		(5,088)
Repayment of lease liabilities	(6,286)		—		—	—		(52)
Free cash flow(4)	464,125		469,155		(1.1)	(1.2)		369

(1) For fiscal 2020, the average foreign exchange rate used for translation was 1.3456 USD/CDN.

(2) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(3) Fiscal 2020 actuals are translated at the average foreign exchange rate of fiscal 2019, which was 1.3255 USD/CDN.

(4) The indicated terms do not have standardized definitions prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section, including reconciliation to the most comparable IFRS financial measures.

(5) Excludes the $22.9 million non-cash gain on debt modification recognized in the second quarter of fiscal 2020.

Fiscal 2020 free cash flow decreased by 1.1% (1.2% in constant currency) mainly due to the following:

the increase in acquisition of property, plant and equipment in both the Canadian and American broadband services operations due to the timing of certain initiatives; partly offset by
higher adjusted EBITDA; and
the decrease in financial expense resulting from lower outstanding debt, excluding the $22.9 million non-cash gain on debt modification resulting from the reduction of the interest rate by 0.25% in the second quarter of fiscal 2020.

COGECO INC. 2020 ANNUAL REPORT MD&A 25

6. COMMUNICATIONS SEGMENT

6.1 OPERATING RESULTS

							Change in		Foreign
							constant		exchange
Years ended August 31,	2020		(1)	2019	(2)	Change	currency	(3)	impact	(3)
(in thousands of Canadian dollars, except percentages)		$		$		%	%		$
Revenue	2,384,283			2,331,820		2.2	1.5		16,477
Operating expenses	1,211,422			1,203,980		0.6	(0.2)		9,301
Management fees – Cogeco Inc.	24,132			19,900		21.3	21.3		—
Adjusted EBITDA	1,148,729			1,107,940		3.7	3.0		7,176
Adjusted EBITDA margin	48.2	%		47.5 %

(1) For fiscal 2020, the average foreign exchange rate used for translation was 1.3456 USD/CDN.

(2) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(3) Fiscal 2020 actuals are translated at the average foreign exchange rate of fiscal 2019, which was 1.3255 USD/CDN.

REVENUE

					Change in		Foreign
					constant		exchange
Years ended August 31,	2020	(1)	2019	Change	currency	(2)	impact	(2)
(in thousands of Canadian dollars, except percentages)	$		$	%	%		$
Canadian broadband services	1,287,772		1,294,967	(0.6)	(0.6)		—
American broadband services	1,096,511		1,036,853	5.8	4.2		16,477
	2,384,283		2,331,820	2.2	1.5		16,477

(1) For fiscal 2020, the average foreign exchange rate used for translation was 1.3456 USD/CDN.

(2) Fiscal 2020 actuals are translated at the average foreign exchange rate of fiscal 2019, which was 1.3255 USD/CDN.

Fiscal 2020 revenue increased by 2.2% (1.5% in constant currency) resulting from:

growth in the American broadband services operations mainly as a result of:
growth in both residential and business Internet service customers as more customers work from home in the context of the COVID-19 pandemic;
rate increases mostly implemented during the fourth quarter of fiscal 2019; and
the impact of the Thames Valley Communications acquisition completed on March 10, 2020; partly offset by
the temporary waiving of late fees charged to customers as a relief measure in the context of the COVID-19 pandemic.
a decrease in the Canadian broadband services operations mainly due to:
a decline in video service customers; and
lower net pricing from consumer sales primarily as a result of product bundles being promoted more actively from the fourth quarter of fiscal 2019 to the second quarter of fiscal 2020; partly offset by
rate increases implemented during the first and the fourth quarters of fiscal 2020 for certain services;
customers' transition to higher value offerings;
continued growth in Internet service customers; and
growth in commercial revenue.

26 COGECO INC. 2020 ANNUAL REPORT MD&A

OPERATING EXPENSES

						Change in		Foreign
						constant		exchange
Years ended August 31,	2020	(1)	2019	(2)	Change	currency	(3)	impact	(3)
(in thousands of Canadian dollars, except percentages)	$		$		%	%		$
Canadian broadband services	587,752		606,286		(3.1)	(3.1)		331
American broadband services	600,425		571,208		5.1	3.5		8,969
Other	23,245		26,486		(12.2)	(12.2)		1
	1,211,422		1,203,980		0.6	(0.2)		9,301

(1) For fiscal 2020, the average foreign exchange rate used for translation was 1.3456 USD/CDN.

(2) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(3) Fiscal 2020 actuals are translated at the average foreign exchange rate of fiscal 2019, which was 1.3255 USD/CDN.

Fiscal 2020 operating expenses increased by 0.6% (decrease of 0.2% in constant currency) mainly from:

a decrease in the Canadian broadband services operations due to:
lower programming costs resulting from lower video service customers;
lower installation costs due to the effects of the COVID-19 pandemic, with more self installations and remote repairs;
additional costs of $4.5 million incurred in the first quarter of fiscal 2019 to support the stabilization phase of the new customer management system implemented in the third quarter of fiscal 2018;
retroactive costs of $3.2 million incurred in the first quarter of fiscal 2019 related to higher than expected rates established by the Copyright Board of Canada for the retransmission of distant Canadian and American television signals in Canada for the period from 2014 to 2018; and
the impact of IFRS 16 adoption; partly offset by
higher marketing initiatives; and
additional expenses related to certain initiatives.
lower corporate costs; partly offset by
additional costs in the American broadband service operations due to:
higher compensation expenses and costs related to additional headcount to support growth;
additional operating expenses resulting from the impact of the Thames Valley Communications acquisition; and
additional costs related to the development and implementation of a new financial and human capital management system; partly offset by
the impact of IFRS 16 adoption; and
a non-recurring gain on a disposal of property, plant and equipment amounting to US$1.7 million.

MANAGEMENT FEES

Fiscal 2020 management fees paid to Cogeco reached $24.1 million compared to $19.9 million for fiscal 2019. For further details on Cogeco Communications' management fees, please refer to the "Related party transactions" section.

COGECO INC. 2020 ANNUAL REPORT MD&A 27

ADJUSTED EBITDA

						Change in		Foreign
						constant		exchange
Years ended August 31,	2020	(1)	2019	(2)	Change	currency	(3)	impact	(3)
(in thousands of Canadian dollars, except percentages)	$		$		%	%		$
Canadian broadband services	700,020		688,681		1.6	1.7		(331)
American broadband services	496,086		465,645		6.5	4.9		7,508
Other	(47,377)		(46,386)		2.1	2.1		(1)
	1,148,729		1,107,940		3.7	3.0		7,176

(1) For fiscal 2020, the average foreign exchange rate used for translation was 1.3456 USD/CDN.

(2) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(3) Fiscal 2020 actuals are translated at the average foreign exchange rate of fiscal 2019, which was 1.3255 USD/CDN.

Fiscal 2020 adjusted EBITDA increased by 3.7% (3.0% in constant currency) as a result of:

an increase in the American broadband services operations mainly as a result of organic growth and the impact of the Thames Valley Communications acquisition; and
an increase in the Canadian broadband services operations due to a decline in operating expenses.

ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT

Fiscal 2020 acquisition of property, plant and equipment increased by 11.4% (10.2% in constant currency) mainly as follows:

In the American broadband services operations, capital expenditures increased by 20.2% (18.2% in constant currency) resulting from:
higher purchases of customer premise equipments and other related costs in order to support the increased number of connections driven by demand for high speed Internet product, as well as resulting from equipment upgrades and the timing of certain initiatives;
additional investments to improve and expand the network infrastructure in Florida;
accelerated purchases of certain equipment to prevent potential supply chain shortages; and
costs related to the development and implementation of a new financial and human capital management system.
In the Canadian broadband services operations, capital expenditures increased by 2.7% (2.2% in constant currency) resulting from:
higher costs related to the maintenance, growth and expansion of our network infrastructure; and
higher purchases of customer premise equipment due to the timing of certain initiatives.

6.2 PRIMARY SERVICE UNIT STATISTICS

==> picture [503 x 185] intentionally omitted <==

28 COGECO INC. 2020 ANNUAL REPORT MD&A

August 31, 2020 Consolidated (1) Canada United States (1)	Net additions (losses) Years ended August 31, 2020 (2) August 31, 2019 (3)
Primary service units 2,757,631 1,799,706 957,925 Internet service customers 1,304,228 812,016 492,212 Video service customers 936,636 619,249 317,387 Telephony service customers 516,767 368,441 148,326	27,615 (39,571) 58,900 27,155 (30,794) (43,882) (491) (22,844)

(1) Net of a provision related to non-paying customers who have not been disconnected.

(2) Excludes 15,977 primary service units (9,077 Internet services, 5,111 video services and 1,789 telephony services) from the acquisition of Thames Valley Communications and 2,227 primary service units (1,871 Internet services, 181 video services and 175 telephony services) from the acquisition of iTéract Inc. completed both in the third quarter of fiscal 2020.

(3) During the third quarter of fiscal 2018, the Canadian broadband services operations implemented a new customer management system, replacing 22 legacy systems. While the customer management system was still in the stabilization phase, contact center congestion resulted in lower services activations during most of the first quarter of 2019. Contact center and marketing operations had returned to normal at the end of the first quarter of 2019.

INTERNET

Fiscal 2020 Internet service customers net additions amounted to 58,900 compared to 27,155 for fiscal 2019. The growth in fiscal 2020 was due to:

the ongoing interest in high speed offerings especially as more customers were working from home in the context of the COVID-19 pandemic;
the sustained interest in bundle offers;
the continued demand from Internet resellers in Canada; and
growth in the residential and business sectors in the United States; partly offset by
competitive offers in the industry.

VIDEO

Fiscal 2020 video service customers net losses amounted to 30,794 compared to 43,882 for fiscal 2019. The loss in fiscal 2020 was due to:

highly competitive offers in the industry; and
a changing video consumption environment; partly offset by
customers' ongoing interest in digital advanced video services;
customers' interest in video services bundled with fast Internet offerings.

TELEPHONY

Fiscal 2020 telephony service customers net losses amounted to 491 compared to 22,844 for fiscal 2019. The loss in fiscal 2020 was due to:

increasing mobile wireless penetration in North America and various unlimited offers launched by mobile wireless operators causing some customers to cancel their landline telephony services for mobile wireless telephony services only; partly offset by
growth in the residential and business sectors in the United States; and
more telephony bundles being marketed during the first half of fiscal 2020 in Canada.

COGECO INC. 2020 ANNUAL REPORT MD&A 29

7. FINANCIAL POSITION

7.1 WORKING CAPITAL

As part of the usual conduct of its business, Cogeco generally maintains a working capital deficiency due to a low level of trade and other receivables since a large proportion of the Corporation’s customers pay before their services are rendered, while trade and other payables are usually paid after products are delivered or services are rendered, enabling the Corporation to use the resulting cash and cash equivalents to reduce Indebtedness. However, the Corporation had working capital surpluses at August 31, 2019 and August 31, 2020 due to the increase in cash and cash equivalents resulting from the sale of Cogeco Peer 1 in the third quarter of fiscal 2019.

The variations are as follows:

	August 31, 2020	August 31, 2019	Change	Explanations
(in thousands of Canadian
dollars)	$	$	$
Current assets
Cash and cash equivalents	406,113	559,393	(153,280)	Please refer to the "Cash flow analysis" section.
Trade and other receivables	97,414	98,375	(961)	Not significant.
Income taxes receivable	4,835	18,767	(13,932)	Lower tax installments made during fiscal 2020 in the Canadian broadband
				services operations, some of which were related to the deferral of income tax
				installments until September 2020 pursuant to governments allowing delays in
				the context of the COVID-19 pandemic.
Prepaid expenses and other	30,197	24,184	6,013	Mainly related to the increase in prepayments for annual maintenance
				agreements.
Derivative financial	—	109	(109)	Not significant.
instrument
	538,559	700,828	(162,269)
Current liabilities
Bank indebtedness	7,610	—	7,610	Timing of payments made to suppliers.
Trade and other payables	226,247	276,782	(50,535)	Timing of payments made to suppliers combined with the depreciation of the US
				dollar against the Canadian dollar.
Provisions	34,114	36,803	(2,689)	Not significant.
Income tax liabilities	40,040	16,693	23,347	Deferral of income tax installments until September 2020 pursuant to
				governments allowing delays in the context of the COVID-19 pandemic.
Contract liabilities and other	47,387	43,768	3,619	Not significant.
liabilities
Derivative financial	4,374	—	4,374	Related to two derivative financial instruments maturing in January 2021.
instruments
Current portion of long-term	32,914	29,144	3,770	Mainly from the recognition of the current portion of lease liabilities following
debt				the adoption of IFRS 16.
	392,686	403,190	(10,504)
Working capital surplus	145,873	297,638	(151,765)

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

30 COGECO INC. 2020 ANNUAL REPORT MD&A

7.2 OTHER SIGNIFICANT CHANGES

	August 31, 2020	August 31, 2019	Change	Explanations
(in thousands of Canadian
dollars)	$	$	$
Non-current assets
Property, plant and	2,124,214	2,024,173	100,041	Related to the acquisition of Thames Valley Communications in the third quarter
equipment				of fiscal 2020, the acquisition of property, plant and equipment during fiscal
				2020 as well as the recognition of right-of-use assets following the adoption of
				IFRS 16, partly offset by the depreciation of the US dollar against the Canadian
				dollar and the depreciation for the year.
Intangible assets	2,886,556	2,936,999	(50,443)	Depreciation of the US dollar against the Canadian dollar and amortization for
				the year, partly offset by the acquisition of iTéract which included spectrum
				licenses and the acquisition of Thames Valley Communications in the third
				quarter of fiscal 2020.
Non-current liabilities
Long-term debt	3,192,301	3,439,399	(247,098)	Related to the early redemption of the Senior Secured Debentures Series 2 on
				July 20, 2020, the repayment of US$35 million combined with the quarterly
				repayment on the Senior Secured Term Loan B Facility and the depreciation of
				the US dollar against the Canadian dollar, partly offset by the recognition of the
				long-term portion of lease liabilities following the adoption of IFRS 16.

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

8. CAPITAL RESOURCES AND LIQUIDITY

8.1 CAPITAL STRUCTURE

The financial covenants related to the indebtedness of Cogeco Inc. are primarily based on a ratio of net indebtedness to adjusted EBITDA, computed on the basis of the Cogeco Media subsidiary's adjusted EBITDA results and the dividends and management fees received from Cogeco Communications, net of corporate expenses.

COMMUNICATIONS SEGMENT

The table below summarizes debt-related financial ratios over the last two fiscal years:

Years ended August 31,	2020 2019
Average cost of indebtedness(1) Fixed rate indebtedness(2) Average term: long-term debt (in years) Net indebtedness(3)/ adjusted EBITDA Adjusted EBITDA / financial expense(4)	3.8 % 4.4 % 78 % 78 % 4.2 4.9 2.4 2.6 7.5 6.3

(1) Excludes amortization of deferred transaction costs and commitment fees but includes the impact of interest rate swaps.

(2) Taking into consideration the interest rate swaps in effect at the end of each fiscal year.

(3) Net indebtedness is defined as the total of bank indebtedness and principal on long-term debt, less cash and cash equivalents.

(4) Financial expense for fiscal 2020 excludes the $22.9 million gain on debt modification related to the amendment made to the Senior Secured Term Loan B facility.

In fiscal 2020, the financial leverage ratio relating to net indebtedness over adjusted EBITDA has declined as a result of growing adjusted EBITDA and a reduction in net indebtedness from generated free cash flow.

COGECO INC. 2020 ANNUAL REPORT MD&A 31

8.2 OUTSTANDING SHARE DATA

A description of Cogeco’s share data at September 30, 2020 is presented in the table below. Additional details are provided in note 19 of the consolidated financial statements.

	Number of	Amount
(in thousands of Canadian dollars, except number of shares)	shares	$
Common shares
Multiple voting shares	1,602,217	10
Subordinate voting shares	14,399,638	115,237

8.3 FINANCING

On February 3, 2020, Cogeco Communications amended its Senior Secured Term Loan B Facility, whereby the most significant change consisted in the reduction of the interest rate by 0.25%. Consequently, Cogeco Communications recognized, during the second quarter of fiscal 2020, a $22.9 million non-cash gain on debt modification. As a result, the interest expense on the Senior Secured Term Loan B Facility will be higher than the interest paid until its maturity date in January 2025 as Cogeco Communication will continue to record the interest expense at the effective interest rate in place prior to the amendment.

On December 20, 2019, the Corporation extended its $100 million Term Revolving Facility maturity date by an additional year until February 3, 2025.

On December 6, 2019, Cogeco Communications' Term Revolving Facility was decreased by $50 million to $750 million and the maturity date was extended by an additional year until January 24, 2025. Moreover, on the same date, the maturity date of the US$150 million Senior Secured Revolving Facility, benefiting two subsidiaries related to Atlantic Broadband, was extended by an additional 18 months until July 4, 2024.

At August 31, 2020, the Corporation had used $50.0 million of its $100 million Term Revolving Facility and an amount of $0.02 million was used from Cogeco Communications' Term Revolving Facility of $750 million, for remaining availabilities of $50.0 million and $749.98 million, respectively. In addition, two subsidiaries of Cogeco Communications also benefit from a Senior Secured Revolving Facility of $195.6 million (US$150 million), of which $3.2 million (US$2.4 million) was used at August 31, 2020 for a remaining availability of $192.5 million (US$147.6 million).

8.4 COGECO COMMUNICATIONS CREDIT RATINGS

The table below shows Cogeco Communications’ and Atlantic Broadband’s credit ratings:

At August 31, 2020	S&P	DBRS	Moody's
Cogeco Communications
Senior Secured Notes and Debentures	BBB-	BBB (low)	NR
Atlantic Broadband
First Lien Credit Facilities	BB	NR	B1

NR : Not rated

Our ability to access debt capital markets and bank credit markets and the cost and amount of funding available partly depends on the quality of our credit ratings. Obligations rated in the "BBB" category are considered investment grade and their cost of funding is typically lower relative to the "BB/B" rating category. In addition, obligations with "BBB" ratings generally have greater access to funding than those with "BB/B" ratings.

On January 28, 2020, S&P raised the credit rating of Atlantic Broadband's First Lien Credit Facilities from BB- to BB on the basis that its strategic importance to Cogeco Communications has increased over time.

32 COGECO INC. 2020 ANNUAL REPORT MD&A

8.5 FINANCIAL RISK MANAGEMENT

Liquidity risk

The Corporation manages liquidity risk through the management of its capital structure and access to different capital markets. It also manages liquidity risk by continuously monitoring actual and projected cash flows to ensure sufficient liquidity to meet its obligations when due.

The following table summarizes the contractual maturities of the financial liabilities and lease liabilities, and related capital amounts at August 31, 2020:

(In thousands of Canadian dollars)	Contractual cash flows
	2021 2022 2023 2024 2025 Thereafter Total
	$ $ $ $ $ $ $
Bank indebtedness Trade and other payables(1) Notes, debentures and credit facilities Lease liabilities Balance due on business combinations Other liabilities	7,610 — — — — — 7,610 218,071 — — — — — 218,071 22,171 257,495 322,171 22,171 385,179 2,206,382 3,215,569 5,364 4,297 3,773 3,756 3,569 41,562 62,321 4,856 — — — — — 4,856 169 169 169 169 169 — 845
	258,241 261,961 326,113 26,096 388,917 2,247,944 3,509,272

(1) Excluding accrued interest on notes, debentures and credit facilities.

The following table is a summary of interest payable on long-term debt that is due for each of the next five years and thereafter:

	2021	2022	2023	2024	2025	Thereafter	Total
(In thousands of Canadian dollars)	$	$	$	$	$	$	$
Interest payments on notes, debentures and credit facilities(1)	93,313	86,762	80,211	67,208	39,900	12,589	379,983
Interest payments on lease liabilities	2,395	1,859	2,371	1,929	1,702	11,106	21,362
Interest receipts on derivative financial instruments	(1,851)	(1,570)	(1,297)	(756)	(127)	—	(5,601)
Interestpayments on derivative financial instruments	25,270	21,415	17,673	10,212	1,698	—	76,268
	119,127	108,466	98,958	78,593	43,173	23,695	472,012

(1) Based on the principal amounts and interest rates prevailing on the outstanding debt at August 31, 2020 and their respective maturities.

Interest rate risk

The Corporation and its subsidiary, Cogeco Communications, are exposed to interest rate risks on their floating interest rate instruments. Interest rate fluctuations will have an effect on the repayment of these instruments. At August 31, 2020, all of the Corporation’s and Cogeco Communications' notes, debentures and credit facilities were at fixed rate, except for the amounts drawn under the Corporation's Term Revolving Facility and Cogeco Communications' First Lien Credit Facilities, which are subject to floating interest rates.

To reduce the risk on the floating interest rate instruments and mitigate the impact of interest rate variations, Cogeco Communications' US subsidiary entered into fixed interest rate swap agreements. The following table shows the interest rate swaps outstanding at August 31, 2020:

Type	of hedge	Notional amount	Receive interest rate	Payinterest rate	Maturity	Hedged item
Cash	flow	US$1.1 billion	US LIBOR base rate	2.017% - 2.262%	January 2021 - November 2024	Senior Secured Term Loan B

The sensitivity of the Corporation's annual financial expense to an increase of 1% in the interest rate applicable to the unhedged portion of these facilities would represent an increase of approximately $7.4 million based on the outstanding debt and swap agreements at August 31, 2020.

COGECO INC. 2020 ANNUAL REPORT MD&A 33

Foreign exchange risk

Cogeco Communications is exposed to foreign exchange risk with respect to the interest associated with its notes, debentures and credit facilities denominated in US dollars. The impact of a 10% increase in the exchange rate of the US dollar into Canadian dollars would increase financial expense by approximately $9.6 million based on the outstanding debt and swap agreements at August 31, 2020.

The Corporation faces exposure to foreign exchange risk on cash and cash equivalents and trade and other payables denominated mainly in US dollars. The Corporation's exposure to foreign currency risk on cash and cash equivalents and trade and other payables is not significant as at August 31, 2020 and 2019.

A foreign currency exposure arises from Cogeco Communications' net investment in its US subsidiary, as a result of the translation of the net investment into the Corporation's functional currency. A portion of Cogeco Communications' net investment in its US subsidiary is hedged by Cogeco Communications' US dollar denominated Senior Secured Notes, which were designated as hedges of the net investment, while the remaining portion is economically hedged by the US subsidiary's US dollar denominated First Lien Credit Facilities.

The following table shows the aggregate investment in foreign operations attributable to owners of Cogeco Communications and the notional amount of debt borrowed to hedge this investment at August 31, 2020:

Type of hedge	Notional amount of debt	Aggregate investment	Hedged item
Net investment	US$390 million	US$1,077 million	Net investment in foreign operations in US dollar

The exchange rate used to translate the US dollar currency into Canadian dollars for the consolidated statement of financial position accounts at August 31, 2020 was $1.3042 ($1.3295 as at August 31, 2019) per US dollar. A 10% decrease in the exchange rate of the US dollar into Canadian dollars would decrease other comprehensive income by approximately $89.6 million.

Market risk

The Corporation and its subsidiary, Cogeco Communications, use derivative instruments to manage the cash flow exposure to the risk of changes in the price of their subordinate voting shares under the DSU plans. As such, the Corporation and Cogeco Communications use equity swap agreements to economically hedge the market price appreciation risk of their subordinate voting shares.

The following table shows the Corporation's equity derivative contracts outstanding at August 31, 2020:

Type of hedge	Notional	Maturity	Average shareprice	Hedged item
Economic	37,100 units	January 2021	$93.33	Equity price exposure

The following table shows Cogeco Communications' equity derivative contracts outstanding at August 31, 2020:

Type of hedge	Notional	Maturity	Average shareprice	Hedged item
Economic	48,000 units	January 2021	$102.61	Equity price exposure

As at August 31, 2020, the fair value of the equity swaps was $0.8 million and recognized as a liability. A 10% increase in the market price of the subordinate voting shares would result in a gain of approximately $0.8 million due to the equity swaps fair value appreciation, offset by a $0.8 million increase in the DSU plans expense.

8.6 FOREIGN CURRENCY

For the year ended August 31, 2020, the average rates prevailing used to convert the operating results of the Communications segment were as follows:

Years ended August 31,	2020	2019	Change	Change
	$	$	$	%
US dollar vs Canadian dollar	1.3456	1.3255	0.02	1.5

34 COGECO INC. 2020 ANNUAL REPORT MD&A

The following table highlights in Canadian dollars, the impact of a $0.02 variation of the Canadian dollar against the US dollar on the Communications segment's results for the year ended August 31, 2020:

	Communications segment
	Exchange
Year ended August 31, 2020	rate impact
(in thousands of Canadian dollars)	$
Revenue	16,477
Operating expenses	9,301
Management fees - Cogeco Inc.	—
Adjusted EBITDA	7,176
Acquisition of property, plant and equipment	5,088
Free cash flow	369

8.7 CONTRACTUAL OBLIGATIONS, CONTINGENCIES AND GUARANTEES

A) CONTRACTUAL OBLIGATIONS

The following table presents the Corporation's contractual obligations, at August 31, 2020, that are due in each of the next five years and thereafter:

Years ended August 31,	2021	2022	2023	2024	2025	Thereafter	Total
(in thousands of Canadian dollars)	$	$	$	$	$	$	$
Acquisition of property, plant and equipment(1)	1,800	1,800	1,800	1,800	1,800	1,800	10,800
Other long-term contracts(2)	52,469	37,516	28,493	25,456	20,632	36,855	201,421
Financial liabilities and lease liabilities, and
related capital amounts	258,241	261,961	326,113	26,096	388,917	2,247,944	3,509,272
Interestpayable on long-term debt	119,127	108,466	98,958	78,593	43,173	23,695	472,012
	431,637	409,743	455,364	131,945	454,522	2,310,294	4,193,505

(1) Include minimum spend commitments for acquisition of customer premise equipment.

(2) Include long-term commitments under service and product contracts for operating expenditures, including minimum spend commitments.

B) CONTINGENCIES

CRTC's wholesale Internet services 2019 costing decision

On August 15, 2019, the Canadian Radio-television and Telecommunications Commission ("CRTC") issued a costing decision setting new rates for aggregated wholesale Internet services for resellers, significantly lowering the interim rates it had previously fixed in 2016 and applying the new rates on a retroactive basis. On September 13, 2019, Cogeco Communications, together with other telecommunications service providers (the "Cable Carriers"), jointly filed an application for leave to appeal the CRTC order to the Federal Court of Appeal ("FCA") and to suspend its effect pending the Court decision to hear the matter. On November 22, 2019, the FCA granted leave to appeal the CRTC decision and stayed the order pending final judgement, with the result that operators did not have to implement the new rates nor to make the retroactive payments pending final decision of the Court. A decision dismissing the appeal of the Cable Carriers was rendered by the FCA on September 10, 2020, repealing the stay order of the Court.

In parallel, on December 13, 2019, the Cable Carriers submitted to the CRTC an application for review and variance of the CRTC order, based on substantial doubt as to the correctness of the rate setting methodology relied upon by the CRTC in the order. The application also requested a stay of the Order pending a decision from the CRTC. On September 28, 2020, the CRTC approved the Cable Carriers' request to stay the implementation of Telecom Order 2019-288 regarding final rates for aggregated wholesale high-speed access services until the CRTC completes its review of that order.

In addition to the FCA appeal and the review and variance process, on November 13, 2019, the Cable Carriers filed a petition with the Governor in Council, asking Cabinet to refer the CRTC order back to the CRTC for reconsideration in conjunction with the CRTC's planned review of its regulatory framework for wireline wholesale services and in accordance with specific policy considerations. Interested parties filed comments on February 14, 2020 and a decision was issued on August 15, 2020. The Governor in Council rendered an order confirming that the rates set by the CRTC decision do not in all instances appropriately balance the required policy objectives. However, as a review and variance process is currently pending before the CRTC, the Governor in Council confirmed that any further instructions from Cabinet to the CRTC would be premature.

COGECO INC. 2020 ANNUAL REPORT MD&A 35

As at August 31, 2020, the total retroactive payments based on the CRTC's final aggregated wholesale service rates' 2019 costing decision, if not otherwise modified, is estimated at approximately $43 million, of which approximately $25 million relates to fiscal years from 2016 to 2019, and approximately $18 million relates to fiscal year 2020. Due to the significant uncertainty surrounding both the outcome of this decision and its financial implications, Cogeco Communications has therefore not recorded the impact of the reduced rates as at August 31, 2020 and 2019.

Other

The Corporation and its subsidiaries are involved in matters involving litigations, other regulatory decisions or potential claims from customers and suppliers arising out of the ordinary course and conduct of its business. Although such matters cannot be predicted with certainty, management does not consider these exposures to be significant At August 31, 2020 and 2019, no liability has been recorded with respect to these litigations, other regulatory decisions and potential claims, except for those disclosed in 16 of the consolidated financial statements.

C) GUARANTEES

In the normal course of business, the Corporation provides indemnification in conjunction with certain transactions. While many of the agreements specify a maximum potential exposure, some do not specify a maximum amount. The overall maximum amount of an indemnification obligation will depend on future events and conditions and therefore cannot be reasonably estimated. As a result, the Corporation cannot determine how they could affect its future liquidity, capital resources or credit risk profile. At August 31, 2020 and 2019, no liability has been recorded with respect to these indemnifications, except for those disclosed in note 16 of the consolidated financial statements.

SALE OF A BUSINESS

In connection with the sale of a business, the Corporation and its subsidiaries have agreed to indemnify the purchaser against claims related to events that occurred prior to the date of sale.

LONG-TERM DEBT

Under the terms of Cogeco Communications' Senior Secured Notes, the subsidiary has agreed to indemnify the lenders against changes in regulations relative to withholding taxes and costs incurred due to changes in laws.

EMPLOYEES AND CONTRACTUAL INDEMNIFICATION AGREEMENTS

The Corporation's subsidiary, Cogeco Media, indemnifies certain of its on-air hosts against charges, costs and expenses as a result of any lawsuit, resulting from judicial or administrative proceedings in which they are named as defending party and arising from the performance of their services. The Corporation has purchased employees' and contractual's liability insurance with a deductible per loss.

SALE OF SERVICES

As part of transactions involving the sale of services, the Corporation and its subsidiaries may be required to make payments to counterparties as a result of breaches of representations and warranties made into the service agreements.

PURCHASE AND DEVELOPMENT OF ASSETS

As part of transactions involving the purchase and development of assets, the Corporation and its subsidiaries may be required to pay counterparties for costs and losses incurred as a result of breaches of representations and warranties contained in the purchase agreements.

9. DISCONTINUED OPERATIONS

Disposal of a subsidiary in fiscal 2019

On April 30, 2019, Cogeco Communications completed the sale of Cogeco Peer 1, its Business ICT services subsidiary. The results and cash flows of Cogeco Peer 1 are presented as discontinued operations separate from the Corporation's continuing operations. As a result of the sale, Cogeco Communications recognized the following gain on disposal in the consolidated statement of profit or loss for the year ended August 31, 2019:

(in thousands of Canadian dollars)	$
Gross proceeds, net of cash disposed	720,314
Working capital adjustments	691
Transaction costs	(10,903)
Net proceeds from sale, net of cash disposed	710,102
Net assets disposed	(625,738)
Gain on disposal of a subsidiary	84,364

36 COGECO INC. 2020 ANNUAL REPORT MD&A

The following table presents the carrying value of the net assets disposed of:

(in thousands of Canadian dollars)	$
Trade and other receivables	19,988
Income taxes receivable	1,126
Prepaid expenses and other	8,532
Property, plant and equipment	361,774
Intangible assets	49,618
Other assets	9,594
Goodwill	272,591
Deferred tax assets	2,061
Trade and other payables	(22,416)
Provisions	(34)
Contract liabilities and other liabilities	(25,104)
Deferred tax liabilities	(22,183)
Foreign currencytranslation adjustment	(29,809)
	625,738

The profit of the discontinued operations was as follows:

Year ended August 31, (in thousands of Canadian dollars)	2019(1) $
Revenue Operatingexpenses	174,990 132,390
Adjusted EBITDA Depreciation and amortization Financial expense Gain on disposal of a subsidiary	42,600 43,999 (1,304) (84,364)
Profit before income taxes Income taxes	84,269 8,889
Profit for the year from discontinued operations	75,380

(1) Fiscal 2019 amounts reflect the eight-month period ended April 30, 2019.

The cash flows of the discontinued operations were as follows:

Year ended August 31,	2019(1)
(in thousands of Canadian dollars)	$
Cash flows from operating activities	41,962
Cash flows from investing activities	691,729
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies	116
Net change in cash and cash equivalents from discontinued operations	733,807

(1) Fiscal 2019 amounts reflect the eight-month period ended April 30, 2019.

COGECO INC. 2020 ANNUAL REPORT MD&A 37

10. QUARTERLY OPERATING RESULTS

10.1 QUARTERLY FINANCIAL HIGHLIGHTS

				Fiscal 2020				Fiscal 2019
Three months ended	Nov. 30	Feb. 29	May 31	Aug. 31	Nov. 30	Feb. 28	May 31	Aug. 31
(in thousands of Canadian dollars, except
percentages andper share data)	$	$	$	$	$	$	$	$
Operations
Revenue	618,469	610,797	626,013	624,195	607,361	608,574	617,617	610,510
Adjusted EBITDA	290,509	279,609	298,444	299,925	276,201	284,863	289,935	280,981
Integration, restructuring and acquisition costs	80	5,458	12	6,012	7,034	3,823	1,155	839
Profit for the period from continuing operations	94,216	113,384	97,496	96,737	82,767	87,646	102,559	95,193
Profit (loss) for the period from discontinued
operations	—	—	—	—	(3,622)	(5,369)	82,451	1,920
Profit for the period	94,216	113,384	97,496	96,737	79,145	82,277	185,010	97,113
Profit for the period from continuing operations
attributable to owners of the Corporation	31,284	34,975	31,118	30,707	27,314	27,366	33,744	30,798
Profit for the period attributable to owners of the
Corporation	31,284	34,975	31,118	30,707	26,168	25,667	59,883	31,445
Cash flow
Cash flows from operating activities	151,071	236,117	292,075	262,365	103,119	204,665	267,388	314,905
Acquisition of property, plant and equipment	122,030	111,222	123,778	130,210	101,149	94,138	97,169	146,599
Free cash flow	108,893	125,067	119,153	111,012	112,922	128,229	140,393	87,611
Per share data(2)(3)
Earnings (loss) per share
Basic
From continuing operations	1.96	2.19	1.96	1.93	1.69	1.69	2.09	1.91
From discontinued operations	—	—	—	—	(0.08)	(0.10)	1.62	0.04
From continuing and discontinued operations	1.96	2.19	1.96	1.93	1.61	1.58	3.71	1.95
Diluted
From continuing operations	1.94	2.18	1.94	1.92	1.68	1.67	2.07	1.89
From discontinued operations	—	—	—	—	(0.08)	(0.10)	1.61	0.04
From continuing and discontinued operations	1.94	2.18	1.94	1.92	1.60	1.57	3.68	1.93
Dividends per share	0.475	0.475	0.475	0.475	0.43	0.43	0.43	0.43

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated. For further details, please consult the "Accounting policies" section of the MD&A.

(2) The addition of quarterly information may not correspond to the annual total due to rounding.

(3) Per multiple and subordinate voting share.

10.2 SEASONAL VARIATIONS

Cogeco's operating results are not generally subject to material seasonal fluctuations except as follows. In the Communications segment, the number of Internet and video services customers are generally lower in the second half of the fiscal year as a result of a decrease in economic activity due to the beginning of the vacation period, the end of the television season, and students leaving their campuses at the end of the school year. Cogeco Communications offers its services in several towns with educational institutions. In the United States, certain areas are also subject to seasonal fluctuations due to the winter and summer seasons.

38 COGECO INC. 2020 ANNUAL REPORT MD&A

10.3 FOURTH-QUARTER OPERATING AND FINANCIAL RESULTS

CONSOLIDATED

OPERATING AND FINANCIAL RESULTS

				Change in	Foreign
				constant	exchange
Three months ended August 31,	2020 (1)	2019 (2)	Change	currency (3)	impact (3)
(in thousands of Canadian dollars, except percentages)	$	$	%	%	$
Revenue	624,195	610,510	2.2	1.6	4,214
Operatingexpenses	324,270	329,529	(1.6)	(2.3)	2,368
Adjusted EBITDA	299,925	280,981	6.7	6.1	1,846

(1) For the three-month period ended August 31, 2020, the average foreign exchange rate used for translation was 1.3424 USD/CDN.

(2) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(3) Fiscal 2020 actuals are translated at the average foreign exchange rate of the comparable period of fiscal 2019 which was 1.3222 USD/CDN.

REVENUE

Fiscal 2020 fourth-quarter revenue increased by 2.2% (1.6% in constant currency) compared to the same period of the prior year mainly due to:

growth of 3.7% (3.0% in constant currency) in the Communications segment due organic growth combined with the impact of the Thames Valley Communications acquisition completed on March 10, 2020 in the American broadband services operations as well as higher revenue in the Canadian broadband services operations; partly offset by
lower revenue in the Other segment due to a decline of the radio advertising market resulting directly from the COVID-19 pandemic as the bulk of its radio revenue is generated from the retail industry which was significantly impacted by the COVID-19 pandemic during the second half of fiscal 2020.

OPERATING EXPENSES

Fiscal 2020 fourth-quarter operating expenses decreased by 1.6% (2.3% in constant currency) as a result of lower operating expenses in the Communications segment and in the media activities. During the fourth quarter of fiscal 2020, Cogeco Media benefited from a governmental assistance program, namely the Canada Emergency Wage Subsidy, which contributed in part to the lower operating expenses in the media activities.

ADJUSTED EBITDA

Fiscal 2020 fourth-quarter adjusted EBITDA increased by 6.7% (6.1% in constant currency) which was mostly attributable to higher adjusted EBITDA in the Communications segment due to increases in both the American and Canadian broadband services operations, partly offset by a decrease in the media activities.

INTEGRATION, RESTRUCTURING AND ACQUISITION COSTS

Fiscal 2020 fourth-quarter integration, restructuring and acquisition costs amounted to $6.0 million due to organizational changes resulting in cost optimization.

Fiscal 2019 fourth-quarter integration, restructuring and acquisition costs amounted to $0.8 million mostly due to acquisition and integration costs in the American broadband services operations.

COGECO INC. 2020 ANNUAL REPORT MD&A 39

DEPRECIATION AND AMORTIZATION

Three months ended August 31,	2020	2019 (1)	Change
(in thousands of Canadian dollars, except percentages)	$	$	%
Depreciation of property, plant and equipment(2)	110,670	107,459	3.0
Amortization of intangible assets	15,354	14,858	3.3
	126,024	122,317	3.0

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(2) Includes the depreciation of right-of-use assets amounting to $2.0 million for the three-month period ended August 31, 2020.

Fiscal 2020 fourth-quarter depreciation and amortization increased by 3.0% due to higher depreciation of property, plant and equipment as a result of the impact of IFRS 16, higher capital expenditures during the fiscal year combined with the appreciation of the US dollar against the Canadian dollar compared to the same period of the prior year.

FINANCIAL EXPENSE

Three months ended August 31,	2020	2019 (1)	Change
(in thousands of Canadian dollars, except percentages)	$	$	%
Interest on long-term debt, excluding interest on lease liabilities	39,287	42,114	(6.7)
Interest on lease liabilities	607	—	—
Net foreign exchange gain	(147)	(446)	(67.0)
Amortization of deferred transaction costs	232	485	(52.2)
Capitalized borrowing costs	(122)	(168)	(27.4)
Other	682	(693)	—
	40,539	41,292	(1.8)

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

Fiscal 2020 fourth-quarter financial expense decreased by 1.8% mainly due to:

lower interest rates and lower outstanding debt on the First Lien Credit Facilities; partly offset by
the $2.8 million early redemption premium on the Senior Secured Debentures Series 2 on July 20, 2020; and
the appreciation of the US dollar against the Canadian dollar compared to the same period of the prior year.

INCOME TAXES

Three months ended August 31,	2020	2019 (1)	Change
(in thousands of Canadian dollars, except percentages)	$	$	%
Current	13,276	12,269	8.2
Deferred	17,337	9,071	91.1
	30,613	21,340	43.5

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

40 COGECO INC. 2020 ANNUAL REPORT MD&A

Three months ended August 31,	2020	2020	2019 (1)	2019 (1)	Change
(in thousands of Canadian dollars, except percentages)		$		$	%
Profit before income taxes	127,350		116,533		9.3
Combined Canadian income tax rate	26.50	%	26.50	%	—
Income taxes at combined Canadian income tax rate	33,748		30,881		9.3
Difference in operations' statutory income tax rates	299		1,512		(80.2)
Impact on income taxes arising from non-deductible expenses and non-taxable profit	686		438		56.6
Tax impacts related to foreign operations	(5,912)		(7,517)		(21.4)
Other	1,792		(3,974)		—
	30,613		21,340		43.5

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

Fiscal 2020 fourth-quarter income taxes expense increased by 43.5% mainly attributable to the increase in profit before income taxes.

PROFIT FOR THE PERIOD

Three months ended August 31,	2020	2019 (1)	Change
(in thousands of Canadian dollars, except percentages and earnings per share)	$	$	%
Profit for the period from continuing operations	96,737	95,193	1.6
Profit for the period	96,737	97,113	(0.4)
Profit for the period from continuing operations attributable to owners of the Corporation	30,707	30,798	(0.3)
Profit for the period attributable to owners of the Corporation	30,707	31,445	(2.3)
Profit for the period attributable to non-controlling interest(2)	66,030	65,668	0.6
Basic earnings per share from continuing operations	1.93	1.91	1.0
Basic earnings per share	1.93	1.95	(1.0)

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(2) At August 31, 2020, the non-controlling interest relates to a participation of approximately 67.3% in the profit for the year attributable to owners of Cogeco Communications in addition to the 21% ownership of CDPQ in Cogeco Communications' Atlantic Broadband subsidiary.

Fiscal 2020 fourth-quarter profit for the period from continuing operations increased by 1.6%, while profit for the period from continuing operations attributable to owners of the Corporation remained essentially the same at $30.7 million compared to $30.8 million last year, as a result of:

higher adjusted EBITDA; partly offset by
the increases in income taxes, depreciation and amortization and integration, restructuring and acquisitions costs.

Fiscal 2020 fourth-quarter profit for the period and profit for the period attributable to owners of the Corporation decreased by 0.4% and 2.3%, respectively, mainly due to discontinued operations which generated a profit of $1.9 million as a result of working capital adjustments related to the sale of Cogeco Peer 1 for the comparable period of the prior year, partly offset by the elements mentioned above.

COGECO INC. 2020 ANNUAL REPORT MD&A 41

COMMUNICATIONS SEGMENT

OPERATING AND FINANCIAL RESULTS

					Change in	Foreign
					constant	exchange
Three months ended August 31,	2020 (1)		2019 (2)	Change	currency (3)	impact (3)
(in thousands of Canadian dollars, except percentages)		$	$	%	%	$
Revenue	605,168		583,673	3.7	3.0	4,214
Operating expenses	303,728		302,833	0.3	(0.5)	2,368
Management fees – Cogeco Inc.	6,905		5,230	32.0	32.0	—
Adjusted EBITDA	294,535		275,610	6.9	6.2	1,846
Adjusted EBITDA margin	48.7	%	47.2 %

(1) For the three-month period ended August 31, 2020, the average foreign exchange rate used for translation was 1.3424 USD/CDN.

(2) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(3) Fiscal 2020 actuals are translated at the average foreign exchange rate of the comparable period of fiscal 2019 which was 1.3222 USD/CDN.

Revenue

Fiscal 2020 fourth-quarter revenue increased by 3.7% (3.0% in constant currency) mainly due to:

growth of 6.5% (4.9% in constant currency) in the American broadband services operations as a result of:
growth in both residential and business Internet service customers as more customers work from home in the context of the COVID-19 pandemic;
rate increases mostly implemented during the fourth quarter of fiscal 2019; and
the impact of the Thames Valley Communications acquisition completed on March 10, 2020; partly offset by
the temporary waving of late fees charged to customers as a relief measure in the context of the COVID-19 pandemic.
growth of 1.3% as reported and in constant currency in the Canadian broadband services operations resulting from
rate increases implemented during the first and the fourth quarters of fiscal 2020 for certain services;
customers' transition to higher value offerings; and
continued growth in Internet service customers; partly offset by
a decline in video service customers; and
lower net pricing from consumer sales primarily as a result of product bundles being promoted more actively from the fourth quarter of fiscal 2019 to the second quarter of fiscal 2020.

Operating expenses

Fiscal 2020 fourth-quarter operating expenses increased by 0.3% (decrease of 0.5% in constant currency) mainly due to:

a decrease in the Canadian broadband services operations due to: ◦ non-recurring elements totaling approximately $4 million resulting from retroactive effect of new programming contracts and certain COVID-19 pandemic related impact such as lower sales expenses;
lower marketing initiatives and installation costs due to the effects of the COVID-19 pandemic, with more self installations and remote repairs;
the impact of IFRS 16 adoption; and
lower programming costs resulting from lower video service customers.
additional costs in the American broadband services operations resulting mainly from:
higher compensation expenses and costs related to additional headcount to support growth;
additional operating expenses resulting from the impact of the Thames Valley Communications acquisition; and
additional costs related to the development and implementation of a new financial and human capital management system; partly offset by
the impact of IFRS 16 adoption.

Management fees

Fiscal 2020 fourth-quarter management fees paid to the Corporation reached $6.9 million compared to $5.2 million for the same period of fiscal 2019. For further details on the Corporation's management fees, please refer to the "Related party transactions" section.

42 COGECO INC. 2020 ANNUAL REPORT MD&A

Adjusted EBITDA

Fiscal 2020 fourth-quarter adjusted EBITDA increased by 6.9% (6.2% in constant currency) resulting from:

an increase in the American broadband services segment mainly as a result of organic growth and the impact of the Thames Valley Communications acquisition; and
an increase in the Canadian broadband services segment resulting from higher revenue combined with lower operating expenses.

Acquisition of property, plant and equipment

Fiscal 2020 fourth-quarter acquisition of property, plant and equipment decreased by 11.6% (12.5% in constant currency) mainly due to:

In the Canadian broadband services operations, capital expenditures decreased by 41.3% (41.5% in constant currency) resulting from:
lower costs related to the maintenance, growth and expansion of our network infrastructure due to the timing of certain initiatives; and
lower purchases of customer premise equipment due to the timing of certain initiatives.
In the American broadband services operations, capital expenditures increased by 20.4% (18.8% in constant currency) resulting from:
higher purchases of customer premise equipments and other related costs in order to support the increased number of connections driven by demand for high speed Internet product, as well as resulting from equipment upgrades and the timing of certain initiatives;
additional investments to improve and expand the network infrastructure in Florida;
accelerated purchases of certain equipment to prevent potential supply chain shortages; and
costs related to the development and implementation of a new financial and human capital management system.

PRIMARY SERVICE UNIT STATISTICS

PRIMARY SERVICE UNIT STATISTICS
August 31, 2020 Consolidated (1) Canada United States (1)	Net additions (losses) Three months ended August 31, 2020 2019
Primary service units 2,757,631 1,799,706 957,925 Internet service customers 1,304,228 812,016 492,212 Video service customers 936,636 619,249 317,387 Telephony service customers 516,767 368,441 148,326	17,728 4,585 22,466 4,981 (2,817) (2,870) (1,921) 2,474

(1) Net of a provision related to non-paying customers who have not been disconnected.

INTERNET

Fiscal 2020 fourth-quarter Internet service customers net additions amounted to 22,466 compared to 4,981 in fiscal 2019. The fiscal 2020 fourth-quarter growth was due to:

the ongoing interest in high speed offerings especially as more customers were working from home in the context of the COVID-19 pandemic;
the sustained interest in bundle offers;
the continued demand from Internet resellers in Canada; and
growth in the residential and business sectors in the United States; partly offset by
competitive offers in the industry.

VIDEO

Fiscal 2020 fourth-quarter video net losses stood at 2,817 compared to 2,870 in fiscal 2019. The fiscal 2020 fourth-quarter loss was due to:

highly competitive offers in the industry; and
a changing video consumption environment; partly offset by
customers' ongoing interest in digital advanced video services;
customers' interest in video services bundled with fast Internet offerings; and
additional connects related to the Thames Valley Communications acquisition in the United States.

COGECO INC. 2020 ANNUAL REPORT MD&A 43

TELEPHONY

Fiscal 2020 fourth-quarter telephony net losses stood at 1,921 compared to net additions of 2,474 in fiscal 2019. The fiscal 2020 fourthquarter loss was due to:

increasing mobile wireless penetration in North America and various unlimited offers launched by mobile wireless operators causing some customers to cancel their landline telephony services for mobile wireless telephony services only; partly offset by
growth in the residential and business sectors; and
more telephony bundles being marketed during the second half of fiscal 2019 in Canada.

CASH FLOW ANALYSIS

Three months ended August 31,	2020	2019 (1)	Change
(in thousands of Canadian dollars, except percentages)	$	$	%
Cash flows from operating activities	262,365	314,905	(16.7)
Cash flows from investing activities	(128,910)	(145,740)	(11.5)
Cash flows from financing activities	(245,146)	(56,791)	—
Effect of exchange rate changes on cash and cash equivalents denominated in a foreign currency	(8,733)	(1,405)	—
Net change in cash and cash equivalents from continuing operations	(120,424)	110,969	—
Cash and cash equivalents, beginningof theperiod	526,537	448,424	17.4
Cash and cash equivalents, end of the period	406,113	559,393	(27.4)

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

OPERATING ACTIVITIES

Fiscal 2020 fourth-quarter cash flows from operating activities decreased by 16.7% mainly from:
the decrease in changes in non-cash operating activities primarily due to changes in working capital; and
the increase in financial expense paid; partly offset by
higher adjusted EBITDA; and
the decrease in income taxes paid.

INVESTING ACTIVITIES

Fiscal 2020 investment activities decreased by 11.5% mainly due to the decrease in acquisition of property, plant and equipment in the Communications segment.

ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT

Fiscal 2020 fourth-quarter acquisition of property, plant and equipment decreased by 11.2% (12.0% in constant currency) due to the decrease of capital expenditures in the Communications segment.

44 COGECO INC. 2020 ANNUAL REPORT MD&A

FINANCING ACTIVITIES

ISSUANCE AND REPAYMENT OF DEBT

Fiscal 2020 fourth-quarter changes in cash flows from the issuance and repayment of debt are mainly explained as follows:

Three months ended August 31,	2020	2019	Explanations
(in thousands of Canadian dollars)	$	$
Increase (decrease) in bank indebtedness	7,610	(5,000)	Related to the timing of payments made to suppliers.
Net decrease under the revolving	—	(4,980)	Repayments of the revolving facilities in the fourth quarter of fiscal 2019.
facilities
Repayment of notes, debentures and	(205,566)	(5,656)	Redemption of the Senior Secured Debentures Series 2 during the fourth quarter of fiscal
credit facilities			2020 as a resulted of free cash flow generated combined with quarterly repayments on
			the Senior Secured Term Loan B Facility.
Repayment of lease liabilities	(1,474)	—	Related to the adoption of IFRS 16.
	(199,430)	(15,636)

DIVIDENDS

During the fourth quarter of fiscal 2020, a quarterly eligible dividend of $0.475 per share was paid to the holders of subordinate and multiple voting shares, totaling $7.5 million, compared to a quarterly dividend paid of $0.43 per share, or $6.9 million in the fourth quarter of fiscal 2019.

NORMAL COURSE ISSUER BID - Cogeco Inc.

The Corporation did not renew its NCIB program following the end of the program on August 1, 2020.

During the fourth quarter of fiscal 2020, the Corporation did not purchase and cancel subordinate voting shares. During the fourth quarter of fiscal 2019, the Corporation purchased and cancelled 29,332 subordinate voting shares with a weighted average price per share repurchased of $94.81 for a total consideration of $2.8 million

NORMAL COURSE ISSUER BID - Cogeco Communications Inc.

During the fourth quarter of fiscal 2020, Cogeco Communications purchased and cancelled 194,600 subordinate voting shares with a weighted average price per share purchased of $100.89 for a total consideration of $19.6 million. During the fourth quarter of fiscal 2019, Cogeco Communications purchased and cancelled 169,800 subordinate voting shares with a weighted average price per share repurchased of $105.55 for a total consideration of $17.9 million.

COGECO INC. 2020 ANNUAL REPORT MD&A 45

FREE CASH FLOW

					Change in	Foreign
					constant	exchange
Three months ended August 31,	2020	(1)	2019 (2)	Change	currency (3)	impact (3)
(in thousands of Canadian dollars, except percentages)	$		$	%	%	$
Adjusted EBITDA(4)	299,925		280,981	6.7	6.1	1,846
Amortization of deferred transaction costs and discounts on long-term
debt	2,363		2,961	(20.2)	(19.2)	29
Share-based payment	3,050		2,894	5.4	5.4	—
(Gain) loss on disposals and write-offs of property, plant and equipment	(171)		1,133	—	—	—
Defined benefit plans contributions, net of expense	(2,644)		641	—	—	—
Integration, restructuring and acquisition costs	(6,012)		(839)	—	616.7	(1)
Financial expense	(40,539)		(41,292)	(1.8)	(0.8)	(426)
Current income taxes	(13,276)		(12,269)	8.2	8.1	8
Acquisition of property, plant and equipment	(130,210)		(146,599)	(11.2)	(12.0)	(1,247)
Repayment of lease liabilities	(1,474)		—	—	—	(11)
Free cash flow(4)	111,012		87,611	26.7	26.5	198

(1) For the three-month period ended August 31, 2020, the average foreign exchange rate used for translation was 1.3424 USD/CDN.
(2) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated. .
(3) Fiscal 2020 actuals are translated at the average foreign exchange rate of the comparable period of fiscal 2019 which was 1.3222 USD/CDN.

Fiscal 2020 fourth-quarter free cash flow increased by 26.7% (26.5% in constant currency) mainly as a result of the following:

higher adjusted EBITDA; and
the decrease in acquisition of property, plant and equipment mainly from lower capital expenditures in the Canadian broadband services operations, partly offset by higher capital expenditures in the American broadband operations segment resulting from the timing of certain initiatives.

46 COGECO INC. 2020 ANNUAL REPORT MD&A

11. FISCAL 2021 FINANCIAL GUIDELINES

11.1 CONSOLIDATED

The following section contains forward-looking statements concerning the business outlook for Cogeco. For a description of risk factors that could cause actual results to differ materially from what Cogeco expects, please refer to the "Uncertainties and main risk factors" section of the present MD&A.

The Corporation presents its financial guidelines on a constant currency basis and believes this presentation enables an improved understanding of the Corporation's underlying financial performance, undistorted by the effects of changes in a foreign currency rate. Measures on a constant currency basis are considered non-IFRS financial measures and do not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. The Corporation is providing the following financial guidelines for fiscal 2021, on a constant currency and consolidated basis. The financial guidelines exclude the impact from the acquisition of DERYtelecom which was announced on October 21, 2020 and is expected to close no later than at the end of the second quarter of the fiscal year 2021. They also do not take into consideration the potential impact of the review and variance process currently pending before the CRTC in connection with the final rates for aggregated wholesale Internet services for resellers. For further details, please consult the "Business developments" subsection. The projections take into consideration the experience gained while operating during the COVID-19 pandemic so far but exclude potential unexpected significant material impacts from it.

The Corporation's fiscal 2021 financial guidelines are mainly driven by those of the Communications segment which are described below.

The following table outlines fiscal 2021 financial guidelines on a consolidated basis:

	Projections	Actual
	Fiscal 2021 (1)	Fiscal 2020
(in millions of Canadian dollars, except percentages)	$	$
Financial guidelines
Revenue	Low-single digit percentage growth	2,479
Adjusted EBITDA	Remain constant	1,168
Free cash flow	Low-single digit percentage growth	464

(1) Fiscal 2021 financial guidelines are based on a USD/CDN exchange rate of 1.3456 USD/CDN.

11.2 COMMUNICATIONS SEGMENT

On a constant currency and consolidated basis, Cogeco Communications expects low-single digit percentage growth in revenue and adjusted EBITDA for fiscal 2021. Revenue should increase mainly as a result of organic growth in the American broadband services segment for both the residential and business sectors, the continued expansion in Florida, annual rate increases and the full year effect of the Thames Valley Communications acquisition completed on March 10, 2020. In the Canadian broadband services segment, revenue growth should stem primarily from growth in the business sector and Internet customer additions.

Adjusted EBITDA should increase mainly as a result of revenue growth exceeding operating expenses in both the American and Canadian

broadband services segments.

The capital intensity ratio should remain essentially stable at approximately 20%. In the American broadband services segment, capital expenditures will be driven by our continued Florida network expansion and additional investments in our network infrastructure in the areas we serve. In the Canadian broadband services segment, we expect lower customer premise equipment costs as a result of the progressive launch of our IPTV solution, sustained investments in our networks to continue to offer high performance products while expanding our networks into new areas to address the digital divide between urban centers and rural areas, combined with investments in our digital transformation.

Free cash flow[(1)] on a constant currency and consolidated basis is expected to grow at a low-single digit percentage rate mainly due to the growth of adjusted EBITDA.

(1) The indicated terms do not have standardized definitions prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section of the MD&A.

COGECO INC. 2020 ANNUAL REPORT MD&A 47

The following table outlines fiscal 2021 financial guidelines on a consolidated basis:

	Projections	Actual	Actual
	Fiscal 2021 (1)	Fiscal 2020
(in millions of Canadian dollars, except percentages)	$		$
Financial guidelines
Revenue	Low-single digit percentage growth	2,384
Adjusted EBITDA	Low-single digit percentage growth	1,149
Capital intensity	Approximately 20%	20.3	%
Free cash flow	Low-single digit percentage growth	455

(1) Fiscal 2021 financial guidelines are based on a USD/CDN exchange rate of 1.3456 USD/CDN.

48 COGECO INC. 2020 ANNUAL REPORT MD&A

12. CORPORATE SOCIAL RESPONSIBILITY PROGRAM

12.1 OVERVIEW

The Corporation has designed a corporate social responsibility ("CSR") program aimed at operating responsibly and sustainably and being a good corporate citizen. Concretely, this means we seek to integrate practices which improve the environmental and social impacts of our operations while ensuring the Corporation’s continued growth. The CSR program integrates our corporate social responsibility objectives articulated around five pillars:

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12.2 CSR GOVERNANCE

The CSR function is under the purview of the CSR Steering Committee that reports twice per year to the Corporate Governance Committee of the Board of Directors. The CSR Steering Committee, which is composed of executives from all business units, is responsible for reviewing the CSR Policy, identifying top risks, setting objectives and ambitions and monitoring CSR performance.

The CSR function is held at a corporate level and is headed by the Vice President, Enterprise Strategy and Social Responsibility who is responsible for the roll-out of corporate strategies and initiatives to promote the CSR principles and ultimately support the conduct of business in a socially responsible and ethical manner. Executives hold the business units accountable for implementing the initiatives and strategies defined by the CSR Steering Committee, including their business unit specific CSR action plans. The CSR team facilitates the integration of all business units' CSR initiatives.

The Corporation's CSR Policy, Code of Ethics and Supplier Code of Conduct together form the framework of our CSR Program.

COGECO INC. 2020 ANNUAL REPORT MD&A 49

12.3 SUSTAINABLE DEVELOPMENT GOALS

In our continued effort to drive long term corporate sustainability and contribute to a better and more sustainable future for all, Cogeco has started to review the alignment of our CSR strategy with the United Nations’ ("UN") Sustainable Development Goals ("SDGs"). The SDGs are a universal call to action to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere. The 17 Goals were adopted by all UN Member States in 2015, as part of the 2030 Agenda for Sustainable Development which set out a 15-year plan to achieve the Goals[(1)] . 2020 marked the 5th anniversary of the adoption of the SDGs. The 17 SDGs articulate the world’s most pressing environmental, social and economic issues and are outlined as follows:

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Our CSR goals serve as a means to do our part to make progress towards achieving the SDG targets most relevant to our business.

12.4 FISCAL 2020 HIGHLIGHTS

To support the achievement of our CSR goals, we have developed key performance indicators for environmental, social and governance ("ESG") objectives. During fiscal 2020, key initiatives of the CSR Program were rolled-out to our business units, namely Atlantic Broadband, Cogeco Connexion and Cogeco Media. Below are some examples of the CSR initiatives that were deployed in fiscal 2020 and how they currently align with the SDGs.

ENVIRONMENTAL HIGHLIGHTS

Our environmental initiatives and targets support progress towards SDG 13: Climate action; SDG 7: Clean energy; SDG 12: Responsible consumption and production; and SDG 8: Economic growth with improved resource efficiency.

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(1) https://www.un.org/sustainabledevelopment/development-agenda/

50 COGECO INC. 2020 ANNUAL REPORT MD&A

ACCOMPLISHMENTS

34% reduction of our Greenhouse Gas ("GHG") emissions on a per revenue basis compared to fiscal year 2014, surpassing our initially set commitment of 10%. Having surpassed our target one year early, we are in the process of setting a new, longer term, more aggressive emissions reduction target in line with climate science;
We continued to measure and track our GHG emissions from all of the Corporation's business units and we implemented various energy efficiency measures as part of our energy management strategy. Measures put in place include the installation of centrally controlled thermostats with updated temperature control settings, heating, ventilation and air conditioning ("HVAC") replacements, new airflow containment design, LED lighting retrofits, and DC plants rectifier upgrades;
We began implementation of our strategy to reduce emissions from the consumption of electricity by investing in renewable energy, purchasing over 8,100 MWh of clean energy through Renewable Energy Certificates;
We tackled reduction of emissions from our vehicle fleet on multiple fronts. We replaced 130 vehicles (representing approximately 10% of the Corporation’s fleet) with more energy efficient ones. In addition, to support our longer term vehicle fleet electrification strategy, we implemented a policy that includes replacing any smaller vehicles at the end of their life with hybrid or electric vehicles. In fiscal 2020, we purchased 23 hybrid vehicles, and invested in two hybrid systems for our service vans to test the feasibility of their use in reducing fuel consumption and emissions Also, in September 2019, Cogeco Media was one of only 30 companies selected to test a fleet of electric cars as part of the Innovative Vehicle Institute Rechargeable Fleet Project;
Cogeco Connexion voluntarily purchased carbon offsets to cover some of its GHG emissions from fiscal 2020 (200 tons of CO2e). The offsets purchased are Gold Standard and will fund the Siam Solar Energy project in Thailand, as well as sensitive natural habitat restoration projects in Québec;
We published our eighth CDP (formerly "Carbon Disclosure Project") report;
We diverted more than 295,000 kilos of electronic waste from landfill during fiscal year 2020, and had an e-waste management strategy in place for 100% of Customer Premise Equipment (CPE) and office equipment at our facilities;
Approximately 20% of the Corporation's facilities underwent environmental assessments. No significant adverse impact on the environment was identified as a result of that exercise;
We continued our implementation of the Canadian Energy Efficiency Voluntary Agreement ("CEEVA"). This agreement, developed by Canadian telecommunications companies together with Natural Resources Canada, intends to limit the energy consumption of set-top boxes provided to our customers. With this agreement in place, it is expected that the total annual energy consumption in Canada, with the telecommunications companies’ contribution, including Cogeco Connexion, will be reduced and annual carbon dioxide emissions will be cut by over 100,000 tons. This is equivalent to the emissions of over 44,000 sub-compact new vehicles driving 15,000 km/year. By the end of fiscal 2020, 86% of set-top boxes purchased in Canada by Cogeco Connexion complied with the CEEVA standards. In addition, though not a signatory of the corresponding U.S. Voluntary Agreement (USVA), 55% of set-top boxes purchased in the U.S. by Atlantic Broadband complied with the USVA standards;
During the process of moving the Montréal head office to a new building, four Eco centres and a 5,000 square foot temporary sorting center were put in place to collect, sort and package surplus office supplies and equipment. The efforts resulted in the donation of more than three truckloads of material to organisations such as Habitat for Humanity, Regroupement Partage, Computers for Success and Renaissance. The majority of old office furniture was resold and refurbished. In total, more than 95% of all surplus material was diverted from waste disposal sites.

SOCIAL HIGHLIGHTS

Our social initiatives support progress towards SDG 3: good health and well-being; SDG 5: gender equality; SDG 8: Decent Work; and SDG 11: Sustainable cities and communities.

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ACCOMPLISHMENTS

We donated over $12.6 million in cash and in-kind donations during fiscal year 2020, representing 2.4% of Cogeco’s pre-tax profit. We also offered air time for fundraising purposes to several organizations in our communities and territories. Our principal focus areas are culture, education and entrepreneurship, health and well-being, environment, connectivity, diversity and inclusion;
Our workplace-related incident rate remained below industry averages in the jurisdictions where we operate;
37% of managerial level positions in fiscal 2020 were held by women, surpassing our goal of reaching 35% by 2021;
We improved our global workforce engagement score by 12% during fiscal 2020 vs 2019;
Participating employees of Cogeco Connexion volunteered 2,335 hours during the first year of the employee community involvement program launched in fiscal 2019;
We partnered with Computers for Success Canada to donate used technology in order to support the program’s intent to deliver improved access to technology for Canadians at risk of digital exclusion. During fiscal 2020, we donated more than 200 units to Computers for Success Canada.

COGECO INC. 2020 ANNUAL REPORT MD&A 51

GOVERNANCE HIGHLIGHTS

Our high corporate governance standards and initiatives support progress towards SDG 5: gender equality; SDG 8: Decent work and economic growth; and SDG 16: Peace, Justice and strong institutions.

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ACCOMPLISHMENTS

We remained in the top tier of family-controlled dual-class companies listed on a Canadian stock exchange according to the Globe and Mail’s Board Games;
95% of new and current employees are trained on the Corporation’s Code of Ethics;
Overall, considering both Cogeco Communications and Cogeco, 53% of our Board of Directors members are women;
We achieved our goal to have 100% of our top suppliers acknowledge the Corporation’s Supplier Code of Conduct or meet our CSR standards through their own code of conduct;
As part of the purchasing process, we continued to include CSR criteria in the Request for Proposal process. In fiscal 2020, during the selection of suppliers for furniture for the new Montréal head office, increased weight was given to sustainability criteria such as the product life cycle, location of manufacturing, material composition and disposal management.

For more information on our initiatives and our performance, please refer to the latest CSR Report, which was published in February 2020. It should be noted that the Corporation will also provide annual updates relative to its CSR program and related commitments directly on the Corporation's website at corpo.cogeco.com.

RECOGNITIONS

The Corporation’s CSR program and related initiatives were recognized during fiscal 2020 as follows:

For the third consecutive year, Cogeco Communications was named to Corporate Knights’ Best 50 Corporate Citizens in Canada;
Cogeco Communications is ranked among the World’s 100 Most Sustainable Corporations by Corporate Knights;
Cogeco Communications received the ISS Quality Score environmental badge, which recognizes our environmental disclosure practices;
Cogeco Communications continues to be part of the Jantzi Social Index , consisting of 50 Canadian companies that passed a set of broadly based environmental, social and governance rating criteria;
Cogeco is part of Forbes’ prestigious Canada’s Best Employers for 2020;
Cogeco received the Caring Company Certification from Imagine Canada. This certification recognizes outstanding leadership in community investment and social responsibility in Canada;
Cogeco was recognized as one of the companies at the forefront of having women in leadership positions, making the first annual Globe and Mail Women Lead Here listing in 2020.

12.5 DRIVING CSR THROUGH DIGITAL TRANSFORMATION

April 2020 marked the 50[th] anniversary of Earth Day, a unified response to an environment in crisis. Cogeco took this opportunity to highlight to employees how digital transformation can connect people, the planet and technology to drive social and environmental benefits. According to the "SMARTer 2030 ICT Solutions for 21st Century Challenges" by GeSI and Accenture report, the use of information and communications technologies ("ICT") could result in the avoidance of emissions representing almost 10 times those generated by the ICT sector. ICT, including products from the telecommunications industry, can enable a 20% reduction in global carbon emissions by 2030, holding emissions at 2015 levels. Cogeco is helping to dematerialize the economy by virtualizing services replacing higher-emission products or services with loweremission ones.

Some key initiatives undertaken in fiscal 2020 to leverage digital solutions in achieving CSR goals included:

Providing access to affordable Internet services to almost 3,000 low income families through Atlantic Broadband’s Internet Assist program and Cogeco Connexion’s participation in Canada’s Connecting Families program;
Using telematics devices that monitor driver behavior as well as other metrics related to vehicle performance to help drive fuel efficiency and reduce GHG emissions from our fleet. In fiscal 2020, the continued deployment of these devices resulted in over 90% of our fleet being connected;
Providing customers with digital tools to allow self-installation and self-swap of Cogeco's products. These self-install capabilities bypass the need for appointments and technician visits, and are more convenient for customers. They also reduce the fuel consumption and GHG emissions from our fleet. In fiscal 2020, self-installs and self-swaps resulted in a reduction of over 225,000 truck rolls and approximately 2,400 tonnes of GHG emissions avoided;
Continuing our migration to paperless billing, resulting in over 56% of customers receiving electronic bills at the end of fiscal year 2020.

52 COGECO INC. 2020 ANNUAL REPORT MD&A

13. UNCERTAINTIES AND MAIN RISK FACTORS

This section outlines the principal risks and uncertainties which Cogeco and its subsidiaries currently believe to be material. It does not purport to cover all contingencies, or to describe all possible factors that might have an influence on the Corporation or its activities at any point in time. Furthermore, the risks and uncertainties outlined in this section may or may not materialize in the end, may evolve differently than expected or may have different consequences than those that are currently anticipated. If any of the following risks, or any other risks and uncertainties that the Corporation and its subsidiaries have not yet identified or that they currently consider not to be material, actually occur or become material risks, the Corporation and its subsidiaries' businesses, guidance, prospects, financial condition, results of operations and cash flows and consequently the price of the subordinate voting shares could be materially and adversely affected.

ENTERPRISE RISK MANAGEMENT

The Corporation has a formal integrated enterprise-wide risk management ("ERM") program structured and governed based on the most recent, widely adopted Committee of Sponsoring Organisations of the Treadway Commission ("COSO") ERM integrated framework. This framework puts forward the strong connection between risk, strategy and enterprise performance. As a result, the ERM approach at Cogeco is supported by a Risk Governance Ecosystem as illustrated below.

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The Risk Governance Ecosystem solicits input from corporate functions as well as business units and feeds the strategic planning process.

Annual Consolidated Risk Assessment	Principal business risks that could impact the Corporation are identified on an annual basis. Risks
	considered are not only strategic, operational, financial, regulatory and compliance in nature but
	also environmental, social and governance ("ESG") related. In addition, as part of this annual risk
	assessment process, the Risk Appetite Framework, guiding strategic decision making, is reviewed
	and updated, as needed. Critical output from this annual risk assessment is used in the preparation
	of the corporate strategy and presented to the Board of Directors as part of the strategic planning
	process.
Business Unit Risk Assessment	As part of the strategic planning process, business units identify the principal risks specific to their
	business unit as well as mitigation plans.
Risk Oversight	On an annual basis, the Board, with the Audit Committee, reviews the principal business risks facing
	the Corporation and its subsidiaries as well as the mitigation measures implemented to manage
	these risks.
	On a quarterly basis:
	- the Corporate Risk Committee, comprised of the CEO and his direct reports, governs risk
	management.
	- the Audit Committee oversees the ERM activities and the operational and financial risks
	associated with significant programs or projects of the Corporation.
Other Risk Related Activities	A risk universe is maintained by the ERM function and updated through exchanges with members of
	the business units covering risks that could impact our risk assessment and strategic planning. In
	addition, context maps are developed at a group level and at a business unit level documenting
	forces that shape our environment representing potential opportunities, threats and risks facing the
	organization (e.g. demographic trends, rules and regulations, economy and environment,
	competition, technology trends, customer needs and uncertainties).

COGECO INC. 2020 ANNUAL REPORT MD&A 53

13.1 COMPETITIVE RISKS

The industries in which we operate are very competitive, and we expect competition to intensify in the future. Competition stems from various sources, including from traditional competitors upgrading their product offering such as incumbent phone companies investing in fiber to the home ("FTTH") networks, mobile competitors offering substitutes for fixed home Internet, Internet resellers in Canada which are gaining market share and municipalities overbuilding some of our networks.

Some of our competitors have longer operating histories, significantly greater financial, technical, marketing and other resources, greater brand recognition, a larger base of customers while some are digital native organizations with lower cost structures due to the absence of legacy systems to maintain. Our competitors may be able to adapt more quickly to new or emerging technologies, changes in customer expectations, and may also be able to develop services comparable or superior to those we offer at more competitive prices. Aggressive pricing and market offers of our competitors could result in pricing pressures and increased customer acquisition and retention costs and could put pressure and adversely affect our businesses and results of operations. Our ability to compete successfully within one or more of our market segments may thus decline in the future due to increased competition from current competitors or from new entrants taking bold actions to establish, sustain or increase their position in the market. Our businesses and results of operations could be materially adversely affected to the extent that we are unable to retain our existing customers and grow our customer base or have to lower revenue per customer in order to maintain market share.

Our principal competitive risks can be broken down as follows.

We face intensifying competition in the Canadian broadband services segment of Cogeco Communications from traditional service providers and new entrants (e.g. Internet resellers, municipalities) .

Large traditional phone companies and mobile service providers are our main network-based competitors. Those operators offer their services through evolving technologies such as FTTH, mobile high speed Internet services (including 4G and 5G), fixed-wireless services which allow for lower deployment costs in rural areas, and traditional satellite-based services primarily for video services. In addition to traditional competitors, other companies are developing new delivery models such as, Internet through low earth orbit satellites for hard to reach areas.

Over recent years, Internet resellers have gained significant market share in the Canadian territories where we offer our services, namely in Ontario. A favorable regulated wholesale regime, which does not require resellers to invest in network construction and low wholesale rates have enabled resellers to offer services at competitive price points. While resellers are primarily focussed on Internet services, some are also offering video and phone services.

In addition, certain Canadian municipalities plan to or have entered into public/private partnership arrangements to build and operate their own broadband networks, entering into competition with the Corporation in some of its service areas.

Some of the large integrated communications service providers we compete with in Canada also own broadcast content assets.

Some of the large integrated communications service providers we compete with in Canada own broadcast television content assets. This vertical integration could result in content being withheld from us or being made available to us at inflated prices or unattractive terms. In order to limit the power of vertically integrated entities on the public’s access to diverse and quality programming services, the Canadian Radiotelevision and Telecommunications Commission ("CRTC") adopted in 2015 a Wholesale Code which applies to all broadcasting distribution undertakings ("BDU") and licensed programming undertakings. The Code prohibits a number of commercially unreasonable practices and sets out a dispute resolution mechanism for the renewal of affiliation agreements in situations where both the BDU and the programming undertaking intend to renew the agreement but are unable to agree on terms.

Intensifying competition in the American Broadband services segment of Cogeco Communications.

The market in the United States continues to converge with mergers and acquisitions consolidating the industry. Similar to Canada, our main source of competition is traditional service providers with increasing competition for our video services from phone companies with fiber networks. Our telephony services face competition from the incumbent local exchange carriers ("ILEC"), as well as other providers such as mobile wireless and VoIP providers. We are also facing intensified competition from overbuild strategies in our Florida, Connecticut and New Hampshire markets.

Faced with increasing competition and customer demands, providers are enhancing the value they offer customers. Some are looking to disrupt the cable bundle by offering more choice to subscribers through personalized and tailored services that would eliminate contracts and bundling, others are expanding their service offering to include complementary services such as cybersecurity and home security to provide customers with a whole home experience while others still are launching a next version of WiFi to deliver faster speeds and better coverage throughout the home.

We face competition in both the Canadian and American Broadband services segments of Cogeco Communications from streaming services.

Cogeco Connexion and Atlantic Broadband face increasing competition from streaming services offered not only from over-the-top ("OTT") video content providers such as Netflix but also from content owners launching or acquiring a streaming service of their own (e.g. Disney+). A majority of households already subscribe to streaming services as a complement to traditional video services. The streaming trend is expected to increase and we could be materially adversely affected if, as a result, a significant number of video customers disconnected their services or reduced their video spending and we may not be able to make up for the loss of revenue associated with this shift in customer preference.

Some of our main video competitors have entered the streaming sphere with their own streaming services. Additionally, several programming networks distributed by the Corporation offer direct-to-consumer products, such as Sportsnet in Canada or HBO Now, CBS All Access and Showtime Anytime in the United States. The Corporation enables the delivery of certain streaming services on its set top boxes, but does not own any streaming platform.

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An increased number of consumers are switching from landline telephony to mobile wireless and IP based phone services.

An increased number of fixed phone customers are replacing fixed lines with mobile wireless and IP based phone services. This trend is largely the result of the increasing mobile wireless penetration rate in North America and the various unlimited offers launched by mobile wireless operators. We do not currently offer mobile wireless services and, therefore, further erosion of fixed phone customers could have a material adverse effect on our business, financial condition, prospects and results of operations.

We do not currently offer "four play" bundles that include mobile wireless communications.

Although we provide "double play" and "triple play" bundled services in Canada and the United States, with various combinations of Internet, video and landline telephony services being offered at bundled prices, we do not offer "four play" bundled services which include mobile wireless communications.

We remain interested in offering mobile wireless services to complement our service offerings to customers within our current footprint and grow our share of our customers' telecommunications spending. We believe that the model that is most likely achievable, while satisfying our profitability requirements is a hybrid model that would consist of segments where we would rely on our facilities and others on the incumbent’s networks. We have started devoting relatively small amounts of capital towards accumulating spectrum to cover part of our territory, which we may use in such a hybrid MNO model or for fixed-wireless access services. However, we may not be able to secure on a timely basis the appropriate arrangements required to launch a mobile wireless operation. Also, launching a mobile wireless operation may result in downward pressure on adjusted EBITDA margins and free cash flow.

Our business services face competition from a variety of service providers.

Cogeco Connexion and Atlantic Broadband offer video, Internet and telephony services to businesses across their served areas, mainly to small to medium-sized businesses. Our business services in Canada and the United States face competition from a variety of service providers which generally offer a wider product offering. Our results of operations could be materially adversely affected to the extent that we are unable to retain our existing customers and grow our business customer base.

13.2 BUSINESS RISKS

STRATEGIC PLAN AND BUSINESS STRATEGIES

Our ability to successfully implement our business strategies described above in section "Corporate objectives and strategies" of this report in a timely and coordinated manner and to realize their anticipated benefits could be adversely affected by a number of factors beyond our control, including operating difficulties, increased ongoing operating expenses, regulatory developments, general economic conditions, increased competition, technological changes and the other factors described in this "Uncertainties and Main Risk Factors" section. Failure to successfully implement and execute our strategic plan and business strategies in a timely and coordinated manner could have a material adverse effect on our reputation, business, financial condition, prospects and results of operations and on our ability to meet our obligations, including our ability to service our Indebtedness.

PROGRAMMING COSTS

The financial performance of our businesses depends in large part on our ability to sustain and increase adjusted EBITDA by tightly controlling operating expenses. One of the largest drivers of such operating expenses is the programming license fees we pay to television programming service suppliers. The programming license fees of certain television programming services have increased significantly in Canada and in the United States in recent years, particularly for sports programming. Future increases in programming license fees could have a material adverse effect on our business and results of operations.

In Canada, the market for video content services is characterized by high levels of supplier concentration and vertical integration. Our largest programming supplier is Bell, with approximately 38% of our overall programming costs. Bell is vertically integrated and is also our largest competitor. While we have generally been able to obtain satisfactory distribution agreements with programming service suppliers in Canada to date, we may not be able to maintain our current arrangements, or conclude new arrangements that are economically viable; therefore the number of video channels may change from year to year.

Certain affiliation agreements with some of our major programming suppliers have expired and the terms and conditions for their renewal have not yet been fully concluded. We may be subject in upcoming Canadian programming services renewals to regulatory dispute resolution proceedings which could either help us obtain reasonable affiliation terms or compel us to pay increased programming license fees or otherwise subject us to adverse competitive conditions.

While the programming costs in the United States showed some signs of stabilization in the last two years, our ability to access content at reasonable rates, terms and conditions could still be negatively impacted by the changing content landscape resulting from the increasing number of company mergers such as AT&T and Time Warner, Disney and 21st Century Fox, Sinclair’s purchase of Fox Regional Sports Networks and Viacom and CBS. This ongoing consolidation activity could enable combined companies to leverage popular content and negotiate better terms with us in the future or require that we carry their less popular services, thus further increasing costs. In addition to the increase in programming costs, most of our programming agreements require us to meet certain penetration thresholds, which limit our ability to offer smaller tiers and packages. Many of these same programmers are simultaneously launching their own direct-to-consumer products to effectively compete with programming distributors. While this adds marketplace confusion, it also presents alternative content sources for consumers, which could enable the rationalization of certain content and the reduction of wholesale cost.

We are also subject in the United States to increasing financial and other demands by broadcasters to obtain the required consent for the transmission of local broadcast programming to our customers. Federal law prohibits cable operators from carrying local broadcast stations without consent. Under federal "must-carry" regulations, local broadcast stations may require cable operators to carry such stations without

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compensation. Alternatively, local broadcast stations may require cable operators to engage in “retransmission consent” negotiations, pursuant to which broadcast stations require significant payments and other concessions, in exchange for the right to carry such stations. We expect to continue to be subject to significant increases in fees by broadcasters in exchange for their required consent for the retransmission of local broadcast programming to customers. Failure to reach an agreement with a broadcaster could result in the loss of popular programming from our video services.

The inability to acquire and provide content to our customers that meets their expectations in terms of quality, format, variety of programming choices, packages and platforms at competitive rates which customers can afford to pay, could have a material adverse effect on our businesses as well as on our adjusted EBITDA should we fail to pass on the incremental increase in costs of programming to our customers.

ACCESS TO SUPPORT STRUCTURES AND MUNICIPAL RIGHTS OF WAYS FOR OUR BROADBAND OPERATIONS

Our business requires the execution of contracts with utilities in order to obtain access to utility support structures (such as utility poles) and with municipalities to obtain access to public rights-of-ways. Access to the support structures of telephone companies in Canada is provided on a tariff basis approved by the CRTC. In the case of Canadian provincial and municipal electric utilities, access to those support structures is subject to provincial and municipal requirements, and the terms for access to these structures may need to be obtained through provincial and municipal authorities. Where access to municipal rights-of-ways in our Canadian footprint cannot be secured, we may apply to the CRTC to obtain a right of access under the Telecommunications Act . In the United States, the Communications Act requires telephone companies and ‑ other utilities (other than those owned by municipalities or cooperatives) to provide cable systems with non discriminatory access to any pole or ‑ rights-of ways controlled by the utility. The rates that utilities may charge, together with certain terms and conditions for such access are regulated by the Federal Communications Commission ("FCC"), or, alternatively, by states that certify to the FCC that they regulate pole attachments.

Make ready work, which is the strengthening of the poles and/or relocation of other facilities on the poles to accommodate additional attachments, often takes several months to years to complete, which delays the company’s network expansion. If we have to support increasing costs in securing access to support structures needed for our broadband network or are unable to secure such agreements, we may not be able to implement our business strategies and our businesses, financial condition, results of operations, reputation and prospects could be materially adversely affected.

CUSTOMER EXPERIENCE

The Corporation strives to maintain respectful and transparent relationships with its customers by providing a superior customer experience and through honest marketing of its products. The loyalty of our customers and their retention depend on our ability to provide a service experience that meets or exceeds their expectations. The Corporation firmly believes that customer experience represents a key differentiator and has enacted various programs and actions at its different business units to constantly improve the customer experience and build upon this reputational capital.

With increased demand for digital capabilities, a failure to keep pace with customer demands could result in loss of customer base and difficulty in attracting potential new customers. In fiscal 2020, the Corporation accelerated its digital transformation efforts in response to the COVID-19 crisis and increased customer demands. Self-install capabilities and self-serve features were implemented to enable customers to manage their telecommunication service relationship online, and contact-free care options and virtual technical support were enabled. It is now possible for consumers to experience a simple end-to-end online customer journey. In addition, feedback on customer satisfaction and trends on new ways in which consumers wish to engage are measured, and advanced survey tools collect information at every point of contact, all in real time. Failure to evolve our customer experience in line with customer demands could adversely affect our business, financial results, reputation and brand value.

MEETING CUSTOMER EXPECTATIONS

Rising OTT fragmentation is also triggering a consumer call for aggregation of OTT offerings on a common platform. The Corporation has various on-going initiatives in place to evolve its products and service offerings, in the digital space, in line with customer expectations. Failure to anticipate and respond in a timely manner to changing customer expectations, changes in consumer behavior, technology trends and new market conditions may result in an outdated product/services portfolio, thus impairing our ability to retain current customers and attract new ones.

MARKETING AND SALES

The evolution of technology has enabled more targeted marketing approaches, initiatives and campaigns, thus changing the dynamics of the competitive environment. The Corporation is evolving its marketing and sales approach to align with customer preferences powered by data analytics and automated marketing platforms based on a highly segmented outreach. Furthermore, in the current market, transparency in pricing, easy to understand promotions and high value product packaging will be critical for both the acquisition and retention of customers.

The failure to achieve sales growth targets as a result of inadequate marketing and/or sales strategies, a deficient execution of said strategies or operating difficulties could have a material adverse effect on our business, financial condition and results of operations.

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RELIANCE ON THIRD PARTIES

We currently offer video services to our customers in our Canadian and American footprint through a combination of equipment from various suppliers and depend on long-term agreements with suppliers for the provision of our telephony services to our residential and business customers. All these suppliers may experience business difficulties, restructure their operations, discontinue products or sell their operations to other suppliers, which could affect the availability and future development of our products and services. The inability to meet product or service delivery objectives or having to incur increased costs as a result of a failure in supply from third-party suppliers or change in suppliers could have a material adverse effect on our business, financial condition and results of operations.

MERGERS/ACQUISITIONS, DIVESTITURES AND REORGANIZATIONS

The Corporation has grown through acquisitions and will continue to seek attractive acquisition opportunities in the future. Achieving the expected benefits of acquisitions depends in part on successfully consolidating functions, integrating operations, procedures and personnel in a timely and efficient manner and realizing revenue, synergies and other growth opportunities from combining acquired businesses with ours. There is no assurance that the integration of acquisitions will be successful and will deliver the anticipated benefits and results. The integration process after an acquisition may lead to greater than expected operating expenses, financial leverage, capital costs, customer losses, asset write-offs, business disruption of our other businesses and management’s diversion of time and resources. We may also be required to make capital expenditures or other investments, which may affect our ability to implement our business strategies to the extent we are unable to secure additional financing on acceptable terms or generate sufficient funds internally to cover these requirements. In addition, an acquired business could have liabilities that we fail or are unable to uncover and for which the Corporation may be responsible. Depending on the circumstances, pursuing acquisitions may also require that we raise additional capital, through debt or equity, and establish relationships with new financing partners, or use cash that would otherwise have been available to support our existing business operations. Also, we generally face competition in acquisition processes from strategic players and private equity funds, which can result in having to pay high acquisition prices or not be the ultimate buyers of the companies being sold. Any failure by Cogeco Communications to successfully integrate or address the risks associated with acquisitions or to take advantage of future strategic opportunities could materially adversely affect our financial position, financial performance, cash flows, business or reputation.

FOREIGN OPERATIONS

Our American broadband services activities are carried out by Atlantic Broadband in 11 states along the East Coast from Maine to Florida and represent 44.2% of the consolidated revenue of the Corporation. There are significant complexities and risks involved with carrying foreign operations, such as differences in political, legal, regulatory and taxation regimes or fluctuations in relative currency values against the Canadian dollar, all of which could have a material adverse effect on our operating and financial results.

TALENT MANAGEMENT AND SUCCESSION PLANNING

The fast pace of technological advancements and the digitization within the industry and the workplace have created a shortage of digital skills as industry players compete for the same resources. In addition, employees’ expectations are evolving requiring comprehensive employee experiences to attract and retain talent. For this reason, the Corporation is actively engaged in fully participating in its employees' professional development through a variety of programs that promote continuous education, a healthy and safe work environment as well as diversity and inclusion and by offering competitive working conditions. Our success is substantially dependent on our capacity to attract new talent and our ability to retain existing talent and foster continued performance of our employees and executive officers. Many of these employees and executive officers are uniquely qualified in their areas of expertise, making it difficult to replace their services. Retaining key employees and executive officers is especially important to our business in order to keep pace with technological change and to avoid losing critical knowledge in the context of the organization’s continued expansion. The loss of the services of key executives and/or employees in critical roles or inadequate processes designed to attract, develop, motivate and retain productive and engaged employees could impact our ability to deliver on organizational goals and have a material adverse effect on our growth, business and profitability.

LABOUR RELATIONS

Collective bargaining agreements are in place with some of our employees that are renewed from time to time in the normal course of business. The Corporation has been successful to date in negotiating satisfactory collective agreements with unions without significant labor disruption. While the Corporation’s labor relations have been satisfactory in the past, we can neither predict the outcome of current or future negotiations relating to labor disputes, union representation or renewal of collective bargaining agreements, nor be able to avoid future work stoppages, strikes or other forms of labor protests pending the outcome of any current or future negotiations. A prolonged work stoppage, strike or other form of labor protest could have a material adverse effect on our businesses, operations and reputation. Although we have not experienced strikes or other forms of labour protests in recent years, the outcome of labor negotiations could adversely affect our businesses and results of operations. In addition, our ability to make short-term adjustments to control compensation and benefits costs is limited by the terms of our collective bargaining agreements.

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13.3 REGULATORY RISKS

REGULATORY RISKS - CANADIAN AND AMERICAN BROADBAND SERVICES SEGMENT OF COGECO COMMUNICATIONS

Our Canadian and American broadband operations are subject to extensive and evolving laws, regulations and policies at the federal, provincial, state and local levels. Cogeco Connexion is primarily regulated respectively under the Broadcasting Act and the Telecommunications Act and regulations thereunder while Atlantic Broadband is regulated mainly by the Communications Act. In addition, they are both subject to other laws relating to copyright and intellectual property, data protection, privacy of personal information, spam, e-commerce, direct marketing and digital advertising which have become more prevalent in recent years. Changes to existing laws and regulations, the adoption of new laws and regulations as well as periodic reviews of copyright royalties payable in relation to the use by the Corporation of protected content could have negative financial, operational or competitive consequences on our business, financial condition, prospects and results of operations by increasing our costs, limiting our revenues and/or imposing additional restrictions on our operations.

Several recent and on-going legislative reviews, regulatory proceedings of the CRTC in Canada and the FCC in the United States or judicial hearings could have a material adverse effect on our business and results of operations depending on outcome. We describe below some of these legislative, judicial and regulatory developments in Canada and the United States.

Canada

Review of the Broadcasting Act, the Radiocommunication Act and Telecommunications Act

On June 5, 2018, the Government of Canada announced a joint review of the Telecommunications Act , the Broadcasting Act and the Radiocommunication Act (the "Acts"). This review was led by a panel of 7 external experts in the telecommunications and broadcast industry. The panel issued on January 29, 2020 its report entitled "Canada’s Communications Future: Time to Act", which included 97 recommendations. It is difficult to predict how the Acts will be amended, and if so, when these changes will be implemented or how they will be construed by the relevant courts or the extent to which any changes might adversely affect.

Internet Wholesale Rates

The outcome of proceedings and the resulting wholesale rates applicable to Internet resellers could have a material adverse effect on our business, financial condition and results of operations. Please refer to the "Commitment, contingencies and guarantees" subsection for a description of the CRTC's wholesale Internet services 2019 costing decision.

Mobile Wireless Review

On February 28, 2019, the CRTC initiated a public consultation to review mobile wireless services in Canada. In this proceeding, the CRTC has considered three areas for review: (i) competition in the retail mobile wireless market, (ii) the current wholesale mobile wireless service regulatory framework, with a focus on wholesale MVNO access, and (iii) the future of mobile wireless services in Canada, with a focus on reducing barriers to infrastructure deployment. The CRTC is concerned that the mobile wireless market continues to demonstrate a high degree of market concentration. To protect the interest of users and further the policy objectives of the Telecommunications Act , the CRTC has determined as a preliminary view in this Notice of Consultation, that it would be appropriate to mandate the national mobile wireless carriers in Canada (Bell Mobility, Rogers Communications and Telus Communications) to provide wholesale MVNO access as an outcome of the proceeding. The CRTC received initial submissions on May 15, 2019 followed by a public hearing that started on February 18, 2020. Final comments were filed by participants on July 15, 2020. A decision is expected in late-2020.

Wholesale Code

On June 18, 2019, the FCA granted to Québecor the right to appeal a decision issued by the CRTC compelling TVA Group Inc. to continue providing its programming service, TVA Sports, to Bell TV customers until they can reach an agreement concerning the carriage and distribution terms of TVA Sports or until the CRTC renders a decision on matters not resolved by agreement. This order is commonly referred to as a "standstill" order and is made to enforce the "standstill" rule in the Discretionary Services Regulations. Québecor is arguing that the CRTC does not have the jurisdiction pursuant to the Broadcasting Act to interfere in commercial relations and force a party to maintain the distribution of a television signal during a dispute and that the standstill rule conflicts with the Copyright Act. Should the court confirm Québecor’s position, this decision would have negative consequences for the Corporation as it would eliminate negotiation safeguards to ensure that BDUs are not threatened with the withdrawal of popular programming services or forced to accept unreasonable terms and conditions while disputes are pending before the CRTC. The Corporation has obtained the right to intervene before the Federal Court of Appeal on September 26, 2019 and will seek to have the court declare that the "standstill" rule is within the jurisdiction of the CRTC and does not conflict with the Copyright Act. In the absence of such negotiation safeguards, contained in Discretionary Services Regulations and in the Wholesale Code adopted in 2016 to govern the commercial arrangements between BDUs and programming services and in conditions of license of licensees, there is a risk that vertically integrated competitors may abuse their market power and impose anticompetitive terms for the distribution of their programming services or attempt to withhold content from us.

United States

Regulation of Internet

In 2017, the FCC classified broadband Internet access service as an information service, rather than a telecommunications service under Title II of the Communications Act (which would subject such service to more onerous regulations). In 2019, the U.S. Court of Appeals for the District of Columbia upheld the FCC’s classification, but it vacated the FCC’s directive preventing state and local governments from adopting any requirements inconsistent with the FCC’s decision, which will likely empower state and local governments to adopt legislation regulating Internet service. Several states have passed or proposed legislation that imposes open internet requirements. Some federal and state legislators have advocated for increased regulation of broadband service, especially in light of COVID-19, during which broadband service has been

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deemed to be an essential service. Some legislators have even advocated for the creation of public broadband Internet service providers. Any such legislation could reduce our revenues and restrict the way we offer products and services, as well as increase competition from publiclyfunded service providers. The presidential election and certain congressional elections in November 2020 could result in a change in power in the executive, legislative and regulatory branches of government. This could result in increased regulation of broadband and other services provided by the Corporation.

Television Viewer Protection Act

As mandated by the STELA Reauthorization Act of 2014 ("STELARA"), certain sections of the Copyright Act and the Communications Act relating to cable and/or DBS retransmission of broadcast signals were scheduled to expire at the end of 2019. One such section required that broadcasters and multichannel video programming distributors ("MVPDs") negotiate retransmission consent agreements in good faith. On December 20, 2019, the President signed into law a permanent extension of the good faith retransmission consent negotiation requirements. The Television Viewer Protection Act, also includes customer transparency provisions which state information which must be provided by MVPDs to customers. The new transparency rules were scheduled to go into effect June 20, 2020, but the FCC extended the deadline to December 20, 2020.

13.4 TECHNOLOGY RISKS

NETWORK FAILURE

The Corporation manages network failure risks through a business continuity planning program as well as through a Disaster Recovery Policy and related procedures. Operational risk assessments are also conducted on an annual basis minimally to consider anticipated and unanticipated events (including climate-related incidents) in order to protect the viability of all critical business processes.

In Canada, Cogeco Connexion has a backup system for retransmission through another headend or a mobile headend if one of our headends fails. In the United States, Atlantic Broadband also has emergency backup or replacement sites, including several interconnects with adjacent cable operators to be able to use their signals as a backup. In addition, headends located in high risk areas (e.g. flood zone) are relocated as deemed necessary.

A failure in our headends could prevent us from delivering some of our services through a portion of our network until we have implemented backup solutions or resolved the failure and result in significant customer dissatisfaction, loss of revenue and potential litigation, depending on the severity of the outage condition.

MAINTENANCE OF OUR NETWORK, INFRASTRUCTURE AND IT SYSTEMS

We continuously maintain, upgrade or replace our network, infrastructure and IT systems in order to optimize our networks and systems, increase the speed of our Internet service and improve and provide new or enhanced services that meet the needs and expectations of our customers. If we are unable to do so because of capital or other constraints, this may materially adversely affect our ability to compete and negatively impact business and financial performance.

DEPENDENCE ON TECHNOLOGY SYSTEMS

Our daily operations are highly dependent on information technology systems and software, including those provided by certain third party suppliers. Our business is dependent on our payroll, customer billing, service provisioning, financial, accounting and other data processing systems. We rely on these systems to process, on a daily basis, a large number of transactions. An inability to maintain and enhance our existing information technology systems or obtain new systems to support additional customer growth or new products and services could have a material adverse effect on our ability to acquire new customers, retain existing customers, produce accurate and timely billing, generate revenue growth and manage operating expenses, or comply with regulatory requirements, all of which could materially adversely affect our operational results and financial position. Any future difficulties from system replacements or upgrades could damage our brand and reputation and have a material adverse effect on our results of operations, compliance with regulatory requirements, financial performance and future business prospects.

CYBER THREATS

Cybersecurity threats have grown in frequency and complexity over recent years in the public and private sectors. Security measures are in place to protect Cogeco and its subsidiaires against such threats. We continue to enhance our cyber resilience posture, the overall governance over information security and the security awareness of our employees through continuous training and continuous improvement efforts surrounding the security of our IT systems, the controls within our IT systems and our business processes. During fiscal 2020, the Corporation did not experience any major cybersecurity breach.

There can however be no certainty that future cybersecurity threats such as data theft, unauthorized usage and disclosure, viruses, ransomware and sabotage will not occur and have an adverse effect on our brand and reputation as well as entail significant legal and financial exposure.

DATA PROTECTION

We do not disclose our customers' personal information without their consent, unless otherwise required or authorized by law, or in accordance with the Privacy Policy of each subsidiary. We do not sell, trade, exchange that information either. In the course of our business, we collect, use and manage various data about our customers, including sensitive personal information but policies, procedures, guidelines, business rules and safeguards are in place to ensure that this information is protected and treated appropriately under applicable privacy laws. Each subsidiary within the Corporation has implemented security measures that are designed to safeguard personal information against unauthorized access,

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such as firewalls, endpoint protection, vulnerability management, security site monitoring and intrusion detection systems. Personal information will be retained only as long as necessary for the fulfillment of the purposes for which it was collected and for which consent was received. The Corporation is committed to providing transparency to its customers with respect to the Corporation's practices in handling their information, and has a legal obligation to provide access thereto to individuals to whom this information belongs.

Each year, our employees must agree to abide by the rules of our Code of Ethics and the Information and Cybersecurity Policy and are required to certify in writing that they will comply with them. Privacy training is provided on a regular basis, taking into consideration risks and needs. Existing and proposed privacy legislation and regulations, including changes in the manner in which such legislation and regulations are interpreted by courts in Canada and the United States may impose limits on our collection, use and disclosure of certain kinds of information.

Any malfunction of our systems or security breaches resulting in unauthorized access to, loss, use or disclosure of, customer and employee personal information could result in the potential loss of business, damage to our market reputation, litigation, regulatory scrutiny and penalties.

13.5 FINANCIAL RISKS

CAPITAL COMMITMENTS, LIQUIDITY AND DEBT

Cogeco and Cogeco Communications rely on their free cash flow generated by operations to fund their capital expenditures program and on capital markets to refinance their indebtedness and further grow their business through acquisitions. Capital markets are volatile and Cogeco and Cogeco Communications may not be able to access them at reasonable conditions if their credit profile and general economic conditions deteriorate. Such conditions could lead to higher cost of funding, deteriorating financial position and liquidity, and more restrictions on Cogeco and Cogeco Communications’ operations.

We may be unable to generate sufficient cash flow and maintain an adequate liquidity position to ensure and preserve the Corporation’s financial stability/solvency and fund strategic imperatives as well as operational and financial obligations of the business.

CURRENCY AND INTEREST RATES

Our financial results are reported in Canadian dollars and a significant portion of our revenue, operating expenses and capital expenditures are realized in US dollars. For the purposes of financial reporting, any change in the value of the Canadian dollar against the US dollar during a given financial reporting period would result in variations on our operating results and financial condition. Although a significant portion of our indebtedness, which is denominated in US dollars, serves as hedges of net investments in foreign operations, our revenue, adjusted EBITDA and indebtedness could fluctuate materially as a result of foreign exchange rate fluctuations.

Interest rate volatility can also impact interest cost on floating interest rate instruments and have a material adverse effect on our financial results.

CREDIT RATINGS

Credit ratings issued by rating agencies can affect the availability and terms of Cogeco Communications' debt particularly, a downgrade below investment grade of secured debt currently rated as investment grade, could materially adversely affect our cost of capital and access to capital.

TAXATION MATTERS

Our business operations are subject to various tax laws and regulations. These tax laws and regulations are subject to frequent changes and evolving interpretation. While we believe we have adequately provided for all taxes based on the information available to us, the calculation of taxes requires significant judgment in interpreting laws and regulations. A failure to accurately assess and record taxes could result in material changes to tax amounts recorded and an assessment of interest and penalties having a material adverse effect on our financial results.

Changes to Canadian and foreign tax policies in the tax jurisdictions where we are present may also have a material adverse effect on our current financial structure and the level of our future tax costs and liabilities.

13.6 ECONOMIC CONDITIONS

We are affected by general economic conditions, consumer confidence and spending, and the demand for our products and services. Adverse general economic conditions, such as economic downturns or recessions leading to a declining level of retail and commercial activity could have a negative impact on the demand for our products and services. More specifically, adverse general economic conditions could result in customers delaying or reducing purchases of our products and services or discontinuing using them, and a decline in the creditworthiness of our customers could increase our bad debt expense.

60 COGECO INC. 2020 ANNUAL REPORT MD&A

13.7 HUMAN-CAUSED AND NATURAL THREATS TO OUR NETWORK, INFRASTRUCTURE AND SYSTEMS

In the event of natural disasters, terrorist acts or other catastrophic occurrence, either natural or man-made, our ability to protect our network, infrastructure, including customer data, and to maintain ongoing operations could be significantly impaired. Although we have business continuity and disaster recovery plans and strategies in place, they may not be successful in mitigating the effects of a natural disaster, terrorist act or catastrophic occurrence which could have a material adverse effect on our business, prospects, financial condition and results of operations. Moreover, we have limited insurance coverage against the losses resulting from natural disasters affecting our networks.

CLIMATE CHANGE

The effects of global climate change are increasing the severity and frequency of natural threats on our business, such as weather-related events, and may result in increased operational and capital costs. Certain of our facilities are located in areas more prone to weather-related events such as Atlantic Broadband’s operations in Florida. Some of the more significant climate-related risks that were identified include: 1) increased operational costs due to increase in fuel and energy prices coming from carbon taxes and cap and trade programs; 2) increased operational and capital costs as a result of damage to facilities and/or equipment because of extreme weather events or increased variability in weather patterns and 3) increased operational and capital costs due to longer term shifts in climate patterns such as sea-level rise or chronic heat waves. For example, increased temperatures could impact our network equipment which could entail the need for additional cooling devices and could reduce equipment lifespan. Ice storms or extreme precipitations could have a negative impact on the physical network infrastructure which could affect the delivery of service to our customers. Hurricanes and cyclones could impact or destroy the facilities or portions of the network and could also impact our insurance-related expenses. Impacts to our supply chain would adversely affect the ability of suppliers to supply required products and services and increased capital expenditures could result from the substitution of existing products and services with lower emissions options.

Climate-related risks are mitigated through business continuity and disaster recovery plans and strategies as well as through the implementation of energy efficiency initiatives that will contribute to the reduction of operational costs (refer to the "Corporate Social Responsibility" section). The magnitude of the effects of climate change could be unpredictable and therefore, our plans may not successfully mitigate the consequences of a natural disaster. This could have a material adverse effect on our business, prospects, financial condition and results of operations.

13.8 COMMUNITY ACCEPTANCE RISKS

The Corporation is committed to taking part in developing communities. Our markets cover many rural areas and smaller centres. By bringing affordable broadband services to underserved markets, we make an important contribution to their economic and social development. The availability of broadband services at competitive prices promotes job creation by local businesses by helping them become more competitive. Moreover, our network investments help companies establish operations, expand and diversify. While call centres are often outsourced in our industry, we are committed to providing our customers with local customer service agents from the communities where we operate. In addition, the Corporation has developed community-focused initiatives, reflecting the particular needs of their communities. In 2020, the Corporation contributed $12.6 million in cash and in-kind through donations and sponsorships, mostly contributing to culture, education, health and wellbeing. Lastly, YourTV/NousTV, our unique community television channels, are a powerful complement to our donations and sponsorship activities by providing broad visibility to local community activities and interests. YourTV/NousTV stations are dedicated to in-depth coverage of local people, places, events and issues of interest to each of the communities we serve and are funded by a regulated percentage of our gross video revenues.

Failure to maintain our community acceptance may affect our capacity to attract and retain customers therefore impacting our revenue generation and growth prospects. Furthermore, it may result in losing our social license to operate and our capacity to remain competitive in the market.

13.9 ETHICAL BEHAVIOR RISKS

Maintaining high ethical practices throughout the Corporation is particularly important in the context of the Corporation’s continued expansion. The Corporation’s Ethics Steering Committee, comprised of representatives from Human Resources, Legal, Finance and Internal Audit functions, provides executive oversight of our overall Ethics program, including the review of our Code of Ethics and related policies. Besides having a comprehensive Code of Ethics, the Corporation has an anonymous and confidential Ethics Line which allows employees and other individuals to report any perceived or actual instances of violations to the Corporation's Code of Ethics and employees are also encouraged to use this tool to seek advice about ethical and lawful behavior. In order to increase employee's awareness on ethics, a formal online training on the Code of Ethics is mandatory for all new employees and Board members and must be completed by employees every two years subsequently. Furthermore, articles on various topics related to ethics are published throughout the year to all employees. Despite these efforts, the Corporation may experience ethics breaches which could not only adversely affect our reputation, but may also cause the Corporation to incur extraordinary expenses related to penalties and fines.

COGECO INC. 2020 ANNUAL REPORT MD&A 61

13.10 OWNERSHIP RISKS

We are controlled by Gestion Audem Inc., a company controlled by the members of the family of the late Henri and Marie-Jeanne Audet (the "Audet Family"), through its ownership of Cogeco’s multiple voting and subordinate voting shares. Both Cogeco Communications Inc. and Cogeco Inc. are reporting issuers in Canada with subordinate voting shares listed on the Toronto Stock Exchange. Pursuant to the Conflicts Agreement in effect between Cogeco Communications Inc. and Cogeco Inc., all cable television undertakings must be owned or controlled by Cogeco Communications Inc. Cogeco Inc. is otherwise free to own and operate any other business or to invest as it deems appropriate. It is possible that situations could arise where the respective interests of the Audet Family and shareholders or other stakeholders of Cogeco Inc. and of the shareholders or other stakeholders of Cogeco Communications Inc. could differ and that the interests of these shareholders or stakeholders be adversely affected by such situations.

13.11 LITIGATION RISKS

We are involved in various litigation matters arising in the course of our business. The outcome of these claims or litigations is uncertain and may adversely affect our reputation, results of operation, liquidity or financial condition. Based on information currently known to us, we do not expect any of these claims and proceedings, individually or in total, to the extent not provided for through insurance or otherwise, to have a material adverse effect on our business, results of operations or financial condition.

14. CONTROLS AND PROCEDURES

Internal control over financial reporting ("ICFR") is a process designed to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and of the preparation of financial statements for external purposes in accordance with IFRS. The President and Chief Executive Officer ("CEO") and the Senior Vice President and Chief Financial Officer ("CFO"), together with Management, are responsible for establishing and maintaining adequate disclosure controls and procedures ("DC&P") and ICFR, as defined in National Instrument 52-109. Cogeco's internal control framework is based on the criteria published in the updated version released in May 2013 of the report Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission .

The CEO and CFO, supported by Management, evaluated the overall design and effectiveness of the Corporation's DC&P and ICFR at August 31, 2020, and concluded that they were effective.

15. ACCOUNTING POLICIES

15.1 CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Preparation of the consolidated financial statements in accordance with IFRS requires management to adopt accounting policies and to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities and revenue and expenses during the reporting year. A summary of the Corporation's significant accounting policies is presented in note 2 of the consolidated financial statements. The following accounting policies were identified as critical to Cogeco's business operations.

REVENUE RECOGNITION

Revenue is measured based on the consideration received or receivable from a customer, net of returns and discounts. The Corporation recognizes revenue from the sale of products or the rendering of services when it transfers control to the customer.

Revenue is recognized applying the following five steps:

Identify the contract with a customer;
Identify the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; and
Recognize revenue when (or as) the Corporation satisfies a performance obligation.

The Corporation's principal sources of revenue are recognized as follows:

Residential

Monthly subscription revenue (net of any discounts, rebates, refunds and credits) for Internet, video and telephony services and rental of equipment is recognized on a monthly basis, as the services are provided;
Revenue from data services, long-distance and other pay-per-use services is recognized on a monthly basis, as the services are provided; and
Revenue generated from the sale of customer premise equipment or other equipment is recognized when the customer accepts the delivery of the equipment.

62 COGECO INC. 2020 ANNUAL REPORT MD&A

Commercial

Monthly subscription revenue (net of any discounts, rebates, refunds and credits) for Internet, video and telephony services and rental of equipment is recognized on a straight-line basis over the contractual period arrangement;
Revenue generated from the sale of customer premise equipment or other equipment is recognized when the customer accepts the delivery of the equipment; and
Revenue from colocation, network connectivity, hosting, cloud and managed services is recognized on a straight-line basis over the contractual period arrangement (pertaining to Cogeco Peer 1 discontinued operations).

Other

Revenue mainly from advertising, which is recognized as the services are provided.

BUSINESS COMBINATIONS

Fair value of assets acquired and liabilities assumed in a business combination is estimated based on information available at the date of acquisition and involves considerable judgment in determining the fair values assigned to the identifiable assets acquired and liabilities assumed on acquisition. Among other things, the determination of these fair values involves the use of discounted cash flow analyses, estimated future margins and estimated future customer counts.

CAPITALIZATION OF PROPERTY, PLANT AND EQUIPMENT

During construction of new assets, direct costs plus overhead costs directly attributable to the asset are capitalized. Borrowing costs directly attributable to the acquisition or construction of qualifying assets, which require a substantial amount of time to get ready for their intended use or sale, are capitalized until such time the assets are substantially ready for their intended use or sale. All other borrowing costs are recorded as financial expense in the period in which they are incurred.

The cost of replacing a part of property, plant and equipment that is ready for its intended use is added to the carrying amount of the property, plant and equipment or recognized as a separate component if applicable, only if it is probable that the economic benefits associated with the cost will flow to the Corporation and the cost can be measured reliably. The carrying amount of the replaced part is derecognized. All other dayto-day maintenance costs are recognized in profit or loss in the period in which they are incurred.

PROVISIONS

Management's judgment is used to determine the timing, likelihood and the amount of expected cash outflows as well as the discount rate.

CONTINGENCIES

Contingencies such as lawsuits, taxes, impact of regulatory decisions, and commitments under contractual and other commercial obligations are estimated based on applying significant judgement in determining if a loss is probable and in determining the estimated outflow of economic resources. Such contingencies are estimated based on the information available to the Corporation.

MEASUREMENT OF NON-FINANCIAL ASSETS

The measurement of non-financial assets requires the use of management judgment to identify the existence of impairment indicators and the determination of cash-generating units ("CGUs"). Furthermore, when determining the recoverable amount of a CGU or an asset, the Corporation uses significant estimates such as the estimation of future cash flows and discount rates applicable. Any significant modification of market conditions could translate into an inability to recover the carrying amounts of non-financial assets.

DEFERRED TAXES

Deferred tax assets and liabilities require estimates about the nature and timing of future permanent and temporary differences, the expected timing of reversals of those temporary differences and the future tax rates that will apply to those differences.

15.2 ADOPTION OF NEW ACCOUNTING STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS

IFRS 16

Effective September 1, 2019, the Corporation adopted IFRS 16, Leases using the modified retrospective approach whereby the financial statements of prior periods presented are not restated and the cumulative effect of the initial application is adjusted to opening retained earnings. IFRS 16 replaces previous accounting standards for leases, including IAS 17, Leases and IFRIC 4, Determining whether an arrangement contains a lease, and establishes a comprehensive model for the identification of lease arrangements, their recognition, measurement, presentation and disclosure in the financial statements of the lessees and lessors.

IFRS 16 eliminates the distinction between operating and finance leases for lessees, requiring instead the recognition on the statement of financial position of a right-of-use ("ROU") asset (representing the right to use the underlying asset) and a lease liability (representing the obligation to make the lease payments) for all leases at lease commencement, with certain exceptions permitted through elections and practical

COGECO INC. 2020 ANNUAL REPORT MD&A 63

expedients. The accounting treatment for lessors and for leases previously classified as finance leases remains largely the same as under IAS 17.

As a result of adopting IFRS 16, the Corporation has recognized an increase to both assets and liabilities on the consolidated statement of financial position, stemming from the recognition of the ROU assets and the corresponding lease liabilities. Lease liabilities at transition have been measured at the present value of remaining future lease payments discounted at the related incremental borrowing rate as at September 1, 2019. ROU assets at transition have been measured at an amount equal to the lease liability, adjusted for any prepaid or accrued rent related to that lease. The ROU assets are presented within Property, plant and equipment and the lease liabilities within Long-term debt.

The total lease expenses over the lease term remain unchanged, however the timing of recognition of these expenses are effected. The impact upon adoption of IFRS 16, relative to leases that have previously been accounted for as operating leases, represents a decrease in Operating expenses (due to the removal of rent expense), an increase in Depreciation and amortization (due to the depreciation of the ROU assets) and an increase in Financial expense (due to the accretion of the lease liabilities), on the consolidated statement of profit or loss.

Although the actual cash flows relative to leases that have previously been accounted for as operating leases are uneffected, the impact on the Corporation's consolidated statement of cash flows represents an increase in cash flows from operating activities and a decrease in cash flows from financing activities. This is the result of the presentation of the payment of the principal component of these leases as a cash flow use within the financing activities under the new standard, versus previously presented as an operating activities cash flow use.

As permitted by IFRS 16, the Corporation has elected to apply certain practical expedients, most notably:

Not separating non-lease components from lease components for certain classes of underlying assets;
Applying a single discount rate to a portfolio of leases with similar characteristics;
Excluding initial direct costs from measuring the right-of-use assets as at September 1, 2019;
Using hindsight in determining the lease term where the contract contains extension or termination options;
Electing not to recognize lease liabilities and right-of-use assets for short-term leases or low-value leases; and
Electing to exclude intangible assets from the application of IFRS 16.

The table below shows the impact of adopting IFRS 16 on the September 1, 2019 consolidated statement of financial position:

	August 31, 2019 September 1, 2019 As reported IFRS 16 impact Upon adoption of IFRS 16 $ $ $
Property, plant and equipment Current portion of long-term debt(1) Long-term debt Trade and other payables Contract liabilities and other liabilities	2,024,173 61,525 2,085,698
	22,624 5,882 28,506
	3,439,399 60,578 3,499,977 276,782 (2,612) 274,170 14,450 (2,323) 12,127

(1) Excluding Balance due on business combinations .

The difference between operating lease commitments of $191 million at August 31, 2019 and lease liabilities of $66.5 million recognized upon adoption of IFRS 16 on September 1, 2019 was mainly the result of:

The exclusion of approximately $89 million of lease payments related to agreements that do not meet the criteria set out in IFRS 16, most notably for rent of support structures;
The exclusion of approximately $43 million of certain costs contractually committed under lease contracts, which do not qualify to be accounted for as lease liabilities, such as variable lease payments not tied to an index or rate;
The diminishing effect of discounting the minimum lease payments, using the weighted average incremental borrowing rate of 3.86% at September 1, 2019, of approximately $23 million; and
The inclusion of approximately $35 million of lease payments related to reasonably certain renewal periods or extension options that had not been exercised at August 31, 2019.

Amendment to IFRS 16

In May 2020, the IASB amended IFRS 16, Leases to include a practical expedient which permits lessees not to assess whether rent concessions that occur as a direct consequence of the COVID-19 pandemic are lease modifications and, instead, account for those rent concessions as if they were not lease modifications. The amendments are effective for annual reporting periods beginning on or after June 1, 2020, with earlier application permitted. The Corporation adopted these amendments on June 1, 2020 and elected to apply the practical expedient to all eligible rent concessions. The adoption of these amendments had no impact on the consolidated financial statements.

Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate Benchmark Reform (Phase 1)

In September 2019, the IASB amended IFRS 9, Financial instruments , IAS 39, Financial instruments: recognition and measurement , and IFRS 7, Financial instruments: disclosures , to provide temporary exceptions from applying specific hedge accounting requirements during the period of uncertainty arising from the interest rate benchmark reform. In addition, the amendments to IFRS 7 provide specific disclosure requirements regarding the uncertainty arising from the interest rate benchmark reform. The amendments modify some specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the IBOR reform. In addition, the amendments require companies to provide additional information to investors about their hedging relationships which are directly affected by these uncertainties. The amendments are effective for annual periods beginning on or after January 1, 2020, with earlier application permitted. The Corporation early adopted these amendments for its fiscal year beginning September 1, 2019. The adoption of these amendments had no material impact on the Corporation's consolidated financial statements.

64 COGECO INC. 2020 ANNUAL REPORT MD&A

IFRIC 23

IFRIC 23, Uncertainty over income tax treatments clarifies the application of recognition and measurement requirements in IAS 12, Income Taxes when there is uncertainty over income tax treatments. It specifically addresses whether an entity considers uncertain tax treatments separately or as a group, the assumptions an entity makes about the examination of tax treatments by taxation authorities, how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates and how an entity considers changes in facts and circumstances. The interpretation is effective for annual periods beginning on or after January 1, 2019, with earlier application permitted. The Corporation adopted this interpretation for the annual period beginning on September 1, 2019. The adoption of this interpretation had no impact on the consolidated financial statements.

15.3 NEW ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE

New standards, interpretations and amendments to existing standards were issued by the IASB that are mandatory but not yet effective for the year ended August 31, 2020, and have not been applied in preparing these consolidated financial statements. The following amendments to standards may have an impact on future consolidated financial statements of the Corporation:

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS
16 - Interest Rate Benchmark Reform (Phase 2)

In August 2020, the IASB issued_Interest Rate Benchmark Reform - Phase 2_, which
amends IFRS 9,Financial instruments, IAS 39,Financial instruments: recognition
and measurement, IFRS 7,Financial instruments: disclosures, IFRS 4,Insurance
contracts_and IFRS 16,_Leases. The Phase 2 amendments address issues that might
affect financial reporting after the reform of an interest rate benchmark, including its
replacement with alternative benchmark rates. These amendments complement those
issued in 2019 and focus on issues that might affect financial reporting during the
reform of an interest rate benchmark, including the effects of changes to contractual
cash flows or hedging relationships arising from the replacement of an interest rate
benchmark with an alternative benchmark rate (replacement issues). The
amendments are effective for annual periods beginning on or after January 1, 2021,
with earlier application permitted. The Corporation is in the process of determining
the extent of the impact of this change on its consolidated financial statements.

Amendments to IFRS 3

In October 2018, the IASB amended IFRS 3,_Business combinations_to clarify the
definition of a business, with the objective of assisting entities in determining
whether a transaction should be accounted for as a business combination or as an
asset acquisition. The amendments are applicable to transactions for which the
acquisition date is on or after the beginning of the first annual reporting period
beginning on or after January 1, 2020, with earlier application permitted. The
effects, if any, of these amendments, will be dependent on the facts and
circumstances of any future business combinations.

COGECO INC. 2020 ANNUAL REPORT MD&A 65

16. NON-IFRS FINANCIAL MEASURES

This section describes non-IFRS financial measures used by Cogeco throughout this MD&A. These financial measures are reviewed in assessing the performance of the Corporation and used in the decision-making process with regards to our business units. Reconciliations between "free cash flow" and "adjusted EBITDA" and the most comparable IFRS financial measures are also provided. These financial measures do not have standard definitions prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies.

This MD&A also makes reference to key performance indicators on a constant currency basis, including revenue, "adjusted EBITDA", acquisition of property, plant and equipment and "free cash flow". Measures on a constant currency basis are considered non-IFRS financial measures and do not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similarly measures presented by other companies.

			Most comparable
Non-IFRS financial			IFRS financial
measures	Application	Calculation	measures
Adjusted EBITDA	Adjusted EBITDA is a key measure commonly	Adjusted EBITDA:	Profit for the
	reported and used in the telecommunications industry, as it allows comparisons between companies that have different capital structures	- Profit for the year from continuing operations add:	year from continuing operations
	and is a more current measure since it excludes the impact of historical investments in assets. Adjusted EBITDA is one of the key metrics employed by the financial community to value a	- Income taxes; - Financial expense; - Depreciation and amortization; and
	business and its financial strength.	- Integration, restructuring and acquisition costs.
	Adjusted EBITDA for Cogeco's business units is
	equal to the segment profit reported in note 6 of
	the consolidated financial statements.
Free cash flow(1)	Management and investors use free cash flow to	Free cash flow(1):	Cash flows from
	measure Cogeco's ability to repay debt, distribute capital to its shareholders and finance its growth.	- Adjusted EBITDA add:	operating activities
		- Amortization of deferred transaction costs and
		discounts on long-term debt;
		- Share-based payment;
		- Loss (gain) on disposals and write-offs of
		property, plant and equipment;
		- Defined benefit plans expense, net of
		contributions;
		deduct:
		- Integration, restructuring and acquisition costs;
		- Financial expense(2);
		- Current income taxes;
		- Acquisition of property, plant and equipment(3);
		and
		- Repayment of lease liabilities.
Constant currency	Revenue, operating expenses, adjusted EBITDA,	Constant currency basis is obtained by translating	No comparable
basis	acquisition of property, plant and equipment and	financial results from the current periods	IFRS financial
	free cash flow are measures presented on a	denominated in US dollars at the foreign exchange	measure
	constant currency basis to enable an improved	rates of the comparable periods of the prior year.
	understanding of the Corporation's underlying
	financial performance, undistorted by the effects	The average foreign exchange rate during the three-
	of changes in foreign exchange rates.	month period and year ended August 31, 2019
		were 1.3222 USD/CDN and 1.3255 USD/CDN,
		respectively.

(1) During the second quarter of fiscal 2020, the Corporation modified the calculation method of its free cash flow in order to reflect how the Corporation analyzes and makes projections of its free cash flow. This modification has no impact on the result under the current and former calculation, and therefore free cash flow for the comparable periods were not affected by this change.

(2) Excludes the non-cash gain on debt modification.

(3) Excludes the acquisition of right-of-use assets and the purchases of spectrum licenses.

66 COGECO INC. 2020 ANNUAL REPORT MD&A

16.1 ADJUSTED EBITDA RECONCILIATION

The reconciliation of adjusted EBITDA to the most comparable IFRS financial measure is as follows:

	Three months	ended	Years	ended
	August 31,	August 31,	August 31,	August 31,
	2020	2019 (1)	2020	2019 (1)
(in thousands of Canadian dollars)	$	$	$	$
Profit for the period from continuing operations	96,737	95,193	401,833	368,165
Income taxes	30,613	21,340	114,928	88,608
Financial expense	40,539	41,292	136,207	178,380
Depreciation and amortization	126,024	122,317	503,957	483,976
Integration, restructuringand acquisition costs	6,012	839	11,562	12,851
Adjusted EBITDA	299,925	280,981	1,168,487	1,131,980

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

16.2 FREE CASH FLOW RECONCILIATION

The reconciliation of free cash flow to the most comparable IFRS financial measure is as follows:

	Three months	ended	Years	ended
	August 31,	August 31,	August 31,	August 31,
	2020	2019 (1)	2020	2019 (1)
(in thousands of Canadian dollars)	$	$	$	$
Cash flows from operating activities	262,365	314,905	941,628	890,077
Amortization of deferred transaction costs and discounts on long-term debt	2,363	2,961	9,582	9,531
Changes in non-cash operating activities	(6,286)	(79,137)	47,011	22,664
Income taxes paid (received)	(7,411)	13,047	22,151	53,289
Current income taxes	(13,276)	(12,269)	(59,432)	(57,623)
Financial expense paid	45,480	35,995	155,816	168,652
Financial expense(2)	(40,539)	(41,292)	(159,105)	(178,380)
Acquisition of property, plant and equipment	(130,210)	(146,599)	(487,240)	(439,055)
Repayment of lease liabilities	(1,474)	—	(6,286)	—
Free cash flow	111,012	87,611	464,125	469,155

(1) IFRS 16 was adopted by the Corporation on September 1, 2019. Under the transition method chosen, fiscal 2019 was not restated.

(2) Excludes the $22.9 million non-cash gain on debt modification recognized in the second quarter of fiscal 2020.

COGECO INC. 2020 ANNUAL REPORT MD&A 67

AI assistant

Cogeco Inc — Management Reports 2020

42892_rns_2020-10-27_48a7648f-379d-4069-b7e9-aa955173644c.pdf

MANAGEMENT’S DISCUSSION AND ANALYSIS ("MD&A")

MD&A

1. FORWARD-LOOKING STATEMENTS

2. OVERVIEW OF THE BUSINESS

2.1 COMMUNICATIONS SEGMENT

2.3 COMMUNICATIONS SEGMENT NETWORKS AND INFRASTRUCTURE

BROADBAND OPERATIONS

2.4 UPDATE ON THE IMPACT OF THE COVID-19 PANDEMIC ON OPERATIONS AND RESULTS

CONSOLIDATED

COMMUNICATIONS SEGMENT

2.5 BUSINESS DEVELOPMENTS

Acquisition of DERYtelecom

CRTC's wholesale Internet services 2019 costing decision

Altice USA, Inc. and Rogers Communications Inc.'s proposal

Other business developments

COMMUNICATIONS SEGMENT

MEDIA ACTIVITIES

ANTICIPATED RESULTS OF THE CORPORATION'S STRATEGIES

2.7 KEY PERFORMANCE INDICATORS AND PERFORMANCE HIGHLIGHTS

REVENUE

ADJUSTED EBITDA[(1)]

FREE CASH FLOW[(1)]

2.8 THREE-YEAR ANNUAL FINANCIAL HIGHLIGHTS

3. OPERATING AND FINANCIAL RESULTS

3.1 OPERATING RESULTS

REVENUE

OPERATING EXPENSES

ADJUSTED EBITDA

3.2 INTEGRATION, RESTRUCTURING AND ACQUISITION COSTS

3.3 DEPRECIATION AND AMORTIZATION

3.4 FINANCIAL EXPENSE

3.5 INCOME TAXES

3.6 PROFIT FOR THE YEAR

4. RELATED PARTY TRANSACTIONS

5. CASH FLOW ANALYSIS

5.1 OPERATING ACTIVITIES

5.2 INVESTING ACTIVITIES

BUSINESS COMBINATIONS IN FISCAL 2020

Acquisition of Thames Valley Communications

Acquisition of iTéract

BUSINESS COMBINATION IN FISCAL 2019

Acquisition of 10 regional radio stations

ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT

5.3 FINANCING ACTIVITIES

ISSUANCE AND REPAYMENT OF DEBT

DIVIDENDS

NORMAL COURSE ISSUER BID ("NCIB") - Cogeco Inc.

NCIB - Cogeco Communications Inc.

5.4 FREE CASH FLOW

6. COMMUNICATIONS SEGMENT

6.1 OPERATING RESULTS

REVENUE

OPERATING EXPENSES

MANAGEMENT FEES

ADJUSTED EBITDA

ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT

6.2 PRIMARY SERVICE UNIT STATISTICS

INTERNET

VIDEO

TELEPHONY

7. FINANCIAL POSITION

7.1 WORKING CAPITAL

7.2 OTHER SIGNIFICANT CHANGES

8. CAPITAL RESOURCES AND LIQUIDITY

8.1 CAPITAL STRUCTURE

COMMUNICATIONS SEGMENT

8.2 OUTSTANDING SHARE DATA

8.3 FINANCING

8.4 COGECO COMMUNICATIONS CREDIT RATINGS

NR : Not rated

8.5 FINANCIAL RISK MANAGEMENT

Liquidity risk

Interest rate risk

Foreign exchange risk

Market risk

8.6 FOREIGN CURRENCY

8.7 CONTRACTUAL OBLIGATIONS, CONTINGENCIES AND GUARANTEES

Cogeco Inc Management Reports 2020