Telesat Canada 6-K Current report (foreign)

Exhibit 99.1

TELESAT CANADA

Quarterly Report

For the Three and Six Month Periods Ended June 30, 2009

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3. Quantitative and Qualitative Disclosures About Market Risk	50
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	53
Item 1A. Risk Factors	53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3. Defaults Upon Senior Securities	53
Item 4. Submission of Matter to a Vote of Securities Holders	53
Item 5. Other Information	53
Item 6. Exhibits	53

The dollar amounts presented in this Quarterly Report are in Canadian dollars unless otherwise specified. On June 30, 2009, the Bank of Canada noon rate was CDN$1 = USD$0.8602.

The financial information presented herein has been prepared on the basis of Canadian GAAP, which differs in certain respects from United States GAAP. For a summary of differences between Canadian and United States GAAP, please refer to note 25 to the audited consolidated financial statements of Telesat Holdings Inc. for the fiscal year ended December 31, 2008 filed as part of Telesat Canada’s final prospectus dated June 29, 2009 filed with the US Securities and Exchange Commission and to note 19 to the unaudited consolidated financial statements for the six months ended June 30, 2009 contained in this Quarterly Report.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TELESAT HOLDINGS INC.

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

FOR THE PERIOD ENDED JUNE 30		Three Months						Six Months
(in thousands of Canadian dollars) (unaudited)	Notes	2009			2008			2009			2008
Operating revenues
Service revenues			197,438			161,892			396,244			317,081
Equipment sales revenues			3,744			7,584			8,988			15,116
Operating revenues	(3)		201,182			169,476			405,232			332,197
Amortization			63,600			57,317			124,873			116,062
Operations and administration			59,259			59,564			117,498			119,052
Cost of equipment sales			4,034			5,879			8,416			11,915
Total operating expenses			126,893			122,760			250,787			247,029
Earnings from operations			74,289			46,716			154,445			85,168
Interest expense	(4)		66,729			55,699			137,799			121,037
Other expense (income)	(5)		(192,878	)		(39,051	)		(148,961	)		51,815
Earnings (loss) before income taxes			200,438			30,068			165,607			(87,684	)
Income tax expense	(6)		13,392			17,658			17,647			1,320
Net earnings (loss) applicable to common shares			187,046			12,410			147,960			(89,004	)

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TELESAT HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE PERIOD ENDED JUNE 30	Three Months					Six Months
(in thousands of Canadian dollars) (unaudited)	2009		2008			2009		2008
Net income (loss)		187,046		12,410			147,960		(89,004	)
Other comprehensive income (loss):
Unrealized gain (loss) on translation of financial statements of self sustaining foreign operations		3,253		1,130			2,778		(46	)
Related tax		468		(44	)		310		60
Comprehensive income (loss)		190,767		13,496			151,048		(88,990	)

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TELESAT HOLDINGS INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

												Total
												Accumulated
												Deficit And
									Accumulated			Accumulated
									Other			Other					Total
FOR THE PERIOD ENDED JUNE 30		Common		Preferred		Accumulated			Comprehensive			Comprehensive			Contributed		Shareholders’
(in thousands of Canadian dollars) (unaudited)	Notes	Shares		Shares		Deficit			Income (Loss)			Income (Loss)			Surplus		Equity
Balance at January 1, 2009			756,414		541,764		(826,452	)		(7,742	)		(834,194	)		5,448		469,432
Net earnings			—		—		147,960			—			147,960			—		147,960
Unrealized gains on translation of financial statements of self sustaining foreign operations			—		—		—			2,778			2,778			—		2,778
Related tax			—		—		—			310			310			—		310
Stock-based compensation	(15)		—		—		—			—			—			3,068		3,068
Balance at June 30, 2009			756,414		541,764		(678,492	)		(4,654	)		(683,146	)		8,516		623,548
Balance at January 1, 2008			756,414		541,764		(4,051	)		(599	)		(4,650	)		—		1,293,528
Net (loss)			—		—		(89,004	)		—			(89,004	)		—		(89,004	)
Unrealized losses on translation of financial statements of self sustaining foreign operations			—		—		—			(46	)		(46	)		—		(46	)
Related tax			—		—		—			60			60			—		60
Balance at June 30, 2008			756,414		541,764		(93,055	)		(585	)		(93,640	)		—		1,204,538

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TELESAT HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

		June 30,			December 31,
(in thousands of Canadian dollars) (unaudited)	Notes	2009			2008
Assets
Current assets
Cash and cash equivalents	(12)		80,796			98,539
Accounts receivable			54,532			61,933
Current future tax asset			2,559			2,581
Assets held for sale	(7)		44,569			—
Other current assets			35,376			49,187
Total current assets			217,832			212,240
Satellites, property and other equipment, net	(3), (8)		1,873,360			1,883,576
Other long-term assets			35,259			42,303
Intangible assets, net	(9)		544,218			582,035
Goodwill	(9)		2,446,603			2,446,603
Total assets			5,117,272			5,166,757
Liabilities
Current liabilities
Accounts payable and accrued liabilities			42,718			48,792
Other current liabilities			123,376			138,095
Debt due within one year	(10)		21,035			23,272
Total current liabilities			187,129			210,159
Debt financing	(10)		3,330,510			3,513,223
Future tax liability			286,355			266,372
Other long-term liabilities			548,295			566,136
Senior preferred shares			141,435			141,435
Total liabilities			4,493,724			4,697,325
Shareholders’ equity
Common shares (74,252,460 common shares issued and outstanding)			756,414			756,414
Preferred shares			541,764			541,764
			1,298,178			1,298,178
Accumulated deficit			(678,492	)		(826,452	)
Accumulated other comprehensive loss			(4,654	)		(7,742	)
			(683,146	)		(834,194	)
Contributed surplus			8,516			5,448
Total shareholders’ equity			623,548			469,432
Total liabilities and shareholders’ equity			5,117,272			5,166,757

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TELESAT HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIOD ENDED JUNE 30		Three Months						Six Months
(in thousands of Canadian dollars) (unaudited)	Notes	2009			2008			2009			2008
Cash flows from operating activities
Net earnings (loss)			187,046			12,410			147,960			(89,004	)
Adjustments to reconcile net earnings (loss) to cash flows from operating activities:
Amortization			63,600			57,317			124,873			116,062
Future income taxes			18,598			15,174			20,445			(2,814	)
Unrealized foreign exchange loss (gain)			(286,509	)		(25,214	)		(185,780	)		74,813
Unrealized loss (gain) on derivatives			96,890			(20,857	)		43,035			(40,214	)
Dividends on preferred shares			3,215			2,475			6,925			4,905
Stock-based compensation expense			1,492			—			3,068			—
Other			(4,745	)		(13,435	)		(14,654	)		(23,199	)
Customer prepayments on future satellite services			—			2,841			3,309			20,371
Operating assets and liabilities	(12)		(53,489	)		(14,139	)		(22,121	)		(12,651	)
			26,098			16,572			127,060			48,269
Cash flows used in investing activities
Satellite programs			(30,878	)		(75,766	)		(121,180	)		(121,747	)
Property additions			(1,418	)		(1,478	)		(3,032	)		(3,703	)
Insurance proceeds	(8)		—			4,006			—			4,006
Proceeds on disposals of assets			522			3,948			525			4,608
			(31,774	)		(69,290	)		(123,687	)		(116,836	)
Cash flows from (used in) financing activities
Debt financing and bank loans			23,880			61,475			23,880			132,558
Repayment of bank loans and debt financing			(29,706	)		(17,444	)		(38,461	)		(70,812	)
Capital lease payments			(1,078	)		(2,488	)		(3,514	)		(5,441	)
Satellite performance incentive payments			(1,765	)		(1,659	)		(2,987	)		(1,852	)
			(8,669	)		39,884			(21,082	)		54,453
Effect of changes in exchange rates on cash and cash equivalents			(633	)		(635	)		(34	)		878
Increase (decrease) in cash and cash equivalents			(14,978	)		(13,469	)		(17,743	)		(13,236	)
Cash and cash equivalents, beginning of period			95,774			42,436			98,539			42,203
Cash and cash equivalents, end of period	(12)		80,796			28,967			80,796			28,967
Supplemental disclosure of cash flow information
Interest paid			118,852			72,825			165,156			114,794
Income taxes paid			1,323			345			3,995			832
			120,175			73,170			169,151			115,626

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TELESAT HOLDINGS INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands of Canadian dollars, except number of shares and where noted)

The interim consolidated financial statements do not conform in all respects to the requirements of annual financial statements, and should be read in conjunction with Telesat Holdings Inc. (“Telesat” or the “Company”) consolidated financial statements for the year ended December 31, 2008.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company has prepared the consolidated financial statements in accordance with Canadian generally accepted accounting principles (“GAAP”) using the same basis of presentation and accounting policies as outlined in notes 1 and 2 to the consolidated financial statements for the year ended December 31, 2008, except as follows:

On January 1, 2009 the Company adopted the Canadian Institute of Chartered Accountants (“CICA”) handbook section 3064 “Goodwill and Intangible Assets” This standard applies to goodwill and intangible assets subsequent to the initial recognition in a business combination and establishes standards for the recognition, measurement, presentation and disclosure of intangible assets. The standard has no material impact on Telesat’s reporting.

In January 2009, the CICA’s Emerging Issues Committee (EIC) issued Abstract No. 173 “Credit Risk and the Fair Value of Financial Assets and Financial Liabilities”. EIC 173 requires an entity to take into account its own credit risk and that of the relevant counterparty(s) when determining the fair value of financial assets and financial liabilities, including derivative instruments. This EIC, which was effective for Telesat on January 1, 2009, had no impact on the Company’s Balance Sheet or on the Statement of Loss because the aforementioned credit risks had been incorporated into the valuation methodology before the EIC was issued.

2. BUSINESS ACQUISITIONS

On May 9, 2008, The SpaceConnection Inc. (“SpaceConnection”), a wholly-owned subsidiary of Telesat, completed the acquisition of the assets of Fifth Dimension Television, with the effective date of the agreement being April 1, 2008. The purchase price is based on a profit-sharing arrangement for a percentage of future monthly occasional use revenues collected, as well as a percentage of future margins on certain space only customer contracts, from the effective date of the acquisition until December 31, 2010, and will not exceed $0.8 million.

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3. SEGMENTED INFORMATION

Telesat operates in a single industry segment, in which it provides satellite-based services to broadcast, enterprise and consulting customers around the world.

Revenues are derived from the following service lines:

	Three Months				Six Months
	Ended June 30				Ended June 30
	2009		2008		2009		2008
Broadcast		102,944		81,534		208,895		160,539
Enterprise		91,392		80,396		181,895		159,015
Consulting and Other		6,846		7,546		14,442		12,643
Total operating revenues		201,182		169,476		405,232		332,197

	Three Months				Six Months
	Ended June 30				Ended June 30
Geographic Information	2009		2008		2009		2008
Revenues — Canada		98,883		84,785		201,273		167,565
Revenues — United States		65,159		56,750		133,443		112,453
Revenues — Europe, Middle East & Africa		16,518		11,257		31,848		20,904
Revenues — Asia & Australia		8,273		8,265		16,560		15,719
Revenues — Latin America & Caribbean		12,349		8,419		22,108		15,556
Total operating revenues		201,182		169,476		405,232		332,197

As at June 30, 2009 and December 31, 2008, the $2,446.6 million of goodwill was not allocated to geographic regions.

Satellites, property and other equipment by geographic region, based on the location of the asset, are allocated as follows:

	June 30,		December 31,
	2009		2008
Satellites, property and other equipment — Canada		1,425,799		1,431,145
Satellites, property and other equipment — United States		436,915		441,809
Satellites, property and other equipment — all others		10,646		10,622
Total satellites, property and other equipment		1,873,360		1,883,576

4. INTEREST EXPENSE

	Three Months						Six Months
	Ended June 30						Ended June 30
	2009			2008			2009			2008
Debt service costs		67,288			64,038			143,959			136,143
Dividends on senior preferred shares		3,215			2,475			6,925			4,905
Capitalized interest		(3,774	)		(10,814	)		(13,085	)		(20,011	)
		66,729			55,699			137,799			121,037

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5. OTHER EXPENSE (INCOME)

	Three Months						Six Months
	Ended June 30						Ended June 30
	2009			2008			2009			2008
Foreign exchange loss (gain)		(288,551	)		(20,580	)		(187,685	)		102,217
Loss (gain) on financial instruments		94,508			(18,506	)		36,581			(50,476	)
Interest income		(448	)		(334	)		(472	)		(784	)
Performance incentive payments and milestone interest expense		1,170			871			2,275			1,758
Other		443			(502	)		340			(900	)
		(192,878	)		(39,051	)		(148,961	)		51,815

In May 2009, Telesat Network Services Inc., a wholly-owned subsidiary of Telesat, sold the equipment at its Kapolei site and transferred the operating lease for the premises to the buyer of the equipment. Proceeds on this sale were $0.5 million and the resulting loss of $0.2 million is included in other.

In May 2008, Skynet Satellite Corporation, a wholly-owned subsidiary of Telesat, sold its Hawley facility. Proceeds on this sale were $4.1 million and the resulting gain on the sale of $0.1 million is included in other.

In February 2008, Infosat Communications Inc., a wholly-owned subsidiary of Telesat, sold its security division. Proceeds on this sale were $0.6 million and the resulting gain on the sale of $0.4 million is included in other.

6. INCOME TAX EXPENSE

A reconciliation of the statutory income tax rate, which is a composite of federal and provincial rates, to the effective income tax rate is as follows:

	Three Months						Six Months
	Ended June 30						Ended June 30
	2009			2008			2009			2008
Statutory income tax rate		32.5	%		33.0	%		32.5	%		33.0	%
Permanent differences		(11.9	%)		(4.1	%)		(9.3	%)		(9.0	%)
Effect of future tax rates on temporary differences		(2.7	%)		(11.3	%)		(3.1	%)		1.0	%
Change in valuation allowance		(14.7	%)		23.4	%		(14.3	%)		(19.0	%)
Other		3.5	%		17.7	%		4.9	%		(7.5	%)
Effective income tax rate		6.7	%		58.7	%		10.7	%		(1.5	%)

The components of the income tax expense are as follows:

	Three Months					Six Months
	Ended June 30					Ended June 30
	2009			2008		2009			2008
Current		(5,206	)		2,484		(2,798	)		4,134
Future		18,598			15,174		20,445			(2,814	)
Total income tax expense		13,392			17,658		17,647			1,320

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7. ASSETS HELD FOR SALE

On July 9, 2009, the Company announced the transfer of its leasehold interest in the Telstar 10 satellite along with certain customer contracts. The satellite and related revenue backlog and customer relationships were classified as assets held for sale in June 2009 with no amortization recorded in the month.

On February 13, 2008, an agreement was reached to sell the Hawley facility to a third party, along with most of the equipment located within the facility. The sale closed on May 1, 2008 with net proceeds of $4.1 million being received (see Note 5). As of October 31, 2007, these assets were no longer amortized.

8. SATELLITES, PROPERTY AND OTHER EQUIPMENT

			Accumulated			Net Book
June 30, 2009	Cost		Amortization			Value
Satellites		1,747,953		(240,813	)		1,507,140
Earth stations		142,485		(27,151	)		115,334
Transponders under capital lease		31,771		(6,624	)		25,147
Office buildings and other		35,585		(9,259	)		26,326
Construction in progress		199,413		—			199,413
		2,157,207		(283,847	)		1,873,360

			Accumulated			Net Book
December 31, 2008	Cost		Amortization			Value
Satellites		1,544,396		( 177,768	)		1,366,628
Earth stations		139,227		( 19,012	)		120,215
Transponders under capital lease		34,189		( 4,943	)		29,246
Office buildings and other		36,248		( 8,555	)		27,693
Construction in progress		339,794		—			339,794
		2,093,854		( 210,278	)		1,883,576

In April 2008, SpaceConnection renegotiated the terms of two of its capital leases. The result was a reduction to the cost of transponders under capital lease of $13.8 million and a reduction to capital lease liabilities of $14.6 million, and a gain of $0.5 million reflected in other income (see Note 5).

During the second quarter of 2008 Telesat received $4.0 million of insurance proceeds on Anik F3. These proceeds reduced the cost of the satellite.

The Telstar 11N satellite was launched in February 2009, and was transferred out of construction in progress to satellites in March 2009.

A no claims bonus of $2.3 million was received in January 2009 on the Nimiq 4 satellite, and a no claims bonus of $2.8 million was received in June 2009 on the T11N satellite. The proceeds reduced the cost of the satellites.

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9. GOODWILL AND INTANGIBLE ASSETS

			Accumulated			Net Book
June 30, 2009	Cost		Amortization			Value
Finite life intangible assets:
Revenue backlog		266,508		(57,940	)		208,568
Customer relationships		197,920		(19,480	)		178,440
Favourable leases		4,725		(2,562	)		2,163
Concession right		1,375		(46	)		1,329
Transponder rights		28,497		(5,180	)		23,317
Patents		59		(5	)		54
		499,084		(85,213	)		413,871
Indefinite life intangible assets:
Orbital slots		113,347		—			113,347
Trade name		17,000		—			17,000
Intangible assets		629,431		(85,213	)		544,218
Goodwill		2,446,603		—			2,446,603
Goodwill and intangible assets		3,076,034		(85,213	)		2,990,821

			Accumulated			Net Book
December 31, 2008	Cost		Amortization			Value
Finite life intangible assets:
Revenue backlog		274,487		(44,988	)		229,499
Customer relationships		207,704		(14,500	)		193,204
Favourable leases		4,816		(1,987	)		2,829
Concession right		1,230		—			1,230
Transponder right		28,497		(3,626	)		24,871
Patents		59		(4	)		55
		516,793		(65,105	)		451,688
Indefinite life intangible assets:
Orbital slots		113,347		—			113,347
Trade name		17,000		—			17,000
Intangible assets		647,140		(65,105	)		582,035
Goodwill		2,446,603		—			2,446,603
Goodwill and intangible assets		3,093,743		(65,105	)		3,028,638

Telesat continues to monitor whether the impact of the current uncertain economic times results in a requirement to test its balance of goodwill more frequently than on an annual basis. Currently no such trigger events have been identified which would require such a test.

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10. DEBT FINANCING

	June 30,			December 31,
	2009			2008
Senior secured credit facilities:
Revolving facility		—			—
The Canadian term loan facility		190,000			195,000
The U.S. term loan facility		1,972,037			2,087,010
The U.S. term loan II facility		169,220			179,207
Senior notes		777,070			818,620
Senior subordinated notes		243,215			256,400
Other debt financing		3			258
		3,351,545			3,536,495
Current portion		(21,035	)		( 23,272	)
Long term portion		3,330,510			3,513,223

The outstanding debt balances above, with the exception of the revolving credit facility and the Canadian term loan, are shown net of related debt issuance costs. The debt issuance costs related to the revolving credit facility and the Canadian term loan are included in other assets and are amortized to interest expense on a straight-line basis. All other debt issuance costs are amortized to interest expense using the effective interest method.

The senior secured credit facilities are secured by substantially all of Telesat’s assets. The senior notes and Senior subordinated notes are denominated in U.S. dollars.

11. RESTRUCTURING LIABILITIES

In connection with the acquisition of Telesat Canada and substantially all of the assets of Loral Skynet, restructuring liabilities were recorded on the date of the acquisition for severance amounts to be paid to employees as part of the restructuring. At December 31, 2008, the outstanding restructuring liabilities were $2.0 million and are expected to be paid by January 2010. During the first six months of 2009, payments of $1.6 million were made and a $0.8 million provision was added. In June 2009 a new restructuring liability of $3.1 million was recorded resulting in total outstanding liabilities of $4.3 million included in accounts payable and accrued liabilities as at June 30, 2009.

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12. CASH FLOW INFORMATION

	June 30,		June 30,
	2009		2008
Cash and cash equivalents is comprised of:
Cash		36,018		25,948
Short term investments, original maturity 90 days or less		44,778		3,019
		80,796		28,967

	Three Months						Six Months
	Ended June 30						Ended June 30
	2009			2008			2009			2008
Changes in operating assets and liabilities are comprised of:
Accounts and notes receivable		(8,023	)		(2,970	)		4,016			1,292
Other assets		12,348			(8,351	)		6,382			(702	)
Accounts payable and accrued liabilities		(49,953	)		(14,307	)		(16,726	)		(42,340	)
Income tax payable		723			1,798			(3,840	)		2,532
Other liabilities		(8,584	)		9,691			(11,953	)		26,567
		(53,489	)		(14,139	)		(22,121	)		(12,651	)
Non-cash investing and financing activities are comprised of:
Purchase of satellites, property and other equipment		651			2,296			1,706			8,202

13. CAPITAL DISCLOSURES

Telesat Holdings Inc. is a privately held company. The Company’s financial strategy is designed to maintain compliance with its financial covenants under its senior secured credit facility, and to provide adequate returns to its shareholders and other stakeholders. Telesat meets these objectives through its monitoring of its financial covenants and operating results on a quarterly basis.

The Company defines its capital as follows:

	June 30,
	2009
Shareholders’ equity, excluding accumulated other comprehensive loss		628,202
Debt financing		3,351,545
Cash and cash equivalents		80,796

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Telesat manages its capital by measuring the financial covenant ratios contained in its senior secured credit agreement (the “credit agreement”), dated October 31, 2007 and which terminates in October 2014. As of June 30, 2009, the Company was subject to two financial covenant compliance tests: a maximum Consolidated Total Debt to Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) for covenant purposes ratio test and a minimum Consolidated EBITDA for covenant purposes to Consolidated Interest Expense ratio test. Compliance with financial covenants is measured on a quarterly basis.

As of June 30, 2009, Telesat’s Consolidated Total Debt to Consolidated EBITDA for covenant purposes ratio, for credit agreement purposes, was 6.22:1, which was less than the maximum test ratio of 9.00:1. The Consolidated EBITDA for covenant purposes to Consolidated Interest Expense ratio, for credit agreement compliance purposes, was 1.89:1, which was greater than the minimum test ratio of 1.25:1.

For the quarter ending September 30, 2009, the Consolidated Total Debt to Consolidated EBITDA for covenant purposes ratio test becomes 8.50:1, and the ratio test generally becomes more restrictive over the life of the credit agreement, such that for the period beginning October 1, 2013, the ratio test is a maximum of 5.50:1. For the quarter ending December 31, 2009, the minimum Consolidated EBITDA for covenant purposes to Consolidated Interest Expense ratio becomes 1.30:1, and the ratio test generally becomes more restrictive over the life of the credit agreement, such that for the quarter ending September 30, 2014, the minimum test ratio is 1.95:1.

As part of the on-going monitoring of Telesat’s compliance with its financial covenants, interest rate risk due to variable interest rate debt is managed through the use of interest rate swaps (note 14), and foreign exchange risk exposure arising from principal and interest payments on Telesat’s debt is partially managed through a cross currency basis swap (note 14). In addition, operating expenses are tracked against budget on a monthly basis, and this analysis is reviewed by senior management.

14. FINANCIAL INSTRUMENTS

Fair value

At June 30, 2009 and December 31, 2008, the fair value of the debt financing is equal to the market value derived from transactions and quotations from third parties excluding financing charges considering market interest rates.

The carrying amounts and fair values of financial instruments were as follows as at:

	Carrying Value
June 30, 2009	Held for		Available for		Loans &
Financial assets	Trading		Sale		Receivables		Total		Fair Value
Cash and cash equivalents		80,796		—		—		80,796		80,796
Accounts receivable		—		—		54,532		54,532		54,532
Derivative financial instruments		2,604		—		—		2,604		2,604
Other assets		8,425		637		1,399		10,461		10,461
		91,825		637		55,931		148,393		148,393

	Carrying Value
June 30, 2009	Held for
Financial liabilities	Trading		Other		Total		Fair Value
Accounts payable and accrued liabilities		—		42,718		42,718		42,718
Debt		—		3,351,545		3,351,545		3,283,132
Derivative financial instruments		95,502		—		95,502		95,502
Other liabilities		—		268,356		268,356		271,155
		95,502		3,662,619		3,758,121		3,692,507

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	Carrying Value
December 31, 2008	Held for		Available for		Loans &
Financial assets	Trading		Sale		Receivables		Total		Fair Value
Cash and cash equivalents		98,539		—		—		98,539		98,539
Accounts receivable		—		—		61,933		61,933		61,933
Derivative financial instruments		19,602		—		—		19,602		19,602
Other assets		14,936		637		2,202		17,775		17,775
		133,077		637		64,135		197,849		197,849

	Carrying Value
December 31, 2008	Held for
Financial liabilities	Trading		Other		Total		Fair Value
Accounts payable and accrued liabilities		—		48,764		48,764		48,764
Debt		—		3,536,237		3,536,237		2,371,014
Derivative financial instruments		82,255		—		82,255		82,255
Other liabilities		—		288,236		288,236		191,837
		82,255		3,873,237		3,955,492		2,693,870

The Company, through its financial assets and liabilities, is exposed to various risks. The following analysis provides a measurement of risks as at the balance sheet date of June 30, 2009.

Credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, short term investments, derivative assets, other assets and accounts receivable. At June 30, 2009, the maximum exposure to credit risk is equal to the carrying value of the Company’s financial assets, $148.4 million (December 31, 2008 — $197.8 million), as listed above.

At June 30, 2009, North American and International customers made up 50% and 50% of the outstanding trade receivables balance, respectively.

Anticipated bad debt losses have been provided for in the allowance for doubtful accounts. The allowance for doubtful accounts at June 30, 2009 was $7.1 million (December 31, 2008 — $5.4 million). A reconciliation of the allowance for doubtful accounts is as follows:

	June 30,
	2009
Balance, April 1, 2009		5,729
Provision for receivables impairment		1,623
Receivables written off during the period as uncollectible		(225	)
Balance, June 30, 2009		7,127

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Foreign exchange risk

The Company’s operating results are subject to fluctuations as a result of exchange rate variations to the extent that transactions are made in currencies other than Canadian dollars. The most significant impact of variations in the exchange rate is on the US dollar denominated debt financing. At June 30, 2009, approximately $3,240 million of the total debt financing before the netting of debt issuance costs is the Canadian dollar equivalent of the US dollar denominated portion of the debt.

Telesat uses forward contracts to hedge foreign currency risk on anticipated transactions, mainly related to the construction of satellites. At June 30, 2009, the Company had $22.0 million of outstanding foreign exchange contracts which require the Company to pay Canadian dollars to receive US $21.2 million for future capital expenditures. At June 30, 2009, the fair value of these derivative contracts was an unrealized gain of $2.6 million (December 31, 2008 — unrealized gain of $10.8 million). This non-cash gain will remain unrealized until the contracts are settled. These forward contracts are due between July 2, 2009 and December 1, 2009.

The Company has also entered into a cross currency basis swap to hedge the foreign currency risk on a portion of its US dollar denominated debt. Telesat uses natural hedges to manage the foreign exchange risk on operating cash flows. At June 30, 2009, the Company had a cross currency basis swap of $1,205.9 million which requires the Company to pay Canadian dollars to receive US $1,038.2 million. At June 30, 2009, the fair value of this derivative contract was an unrealized loss of $34.1 million (December 31, 2008 — unrealized gain of $8.8 million). This non-cash loss will remain unrealized until the contract is settled. This contract is due on October 31, 2014.

The Company’s main currency exposures as at June 30, 2009 lie in its US dollar denominated cash and cash equivalents, accounts receivable, accounts payable and debt financing.

A five percent weakening of the Canadian dollar against the US dollar at June 30, 2009 would have decreased the net income and increased other comprehensive income for the three months ended June 30, 2009 by $170.9 million and $0.1 million, respectively. A five percent strengthening of the Canadian dollar against the US dollar at June 30, 2009 would have increased the net income and decreased other comprehensive income for the three months ended June 30, 2009 by $170.9 million and $0.1 million, respectively. This analysis assumes that all other variables, in particular interest rates, remain constant.

Interest rate risk

The Company is exposed to interest rate risk on its cash and cash equivalents and its long term debt which is primarily variable rate financing. Changes in the interest rates could impact the amount of interest Telesat is required to pay. Telesat uses interest rate swaps to hedge the interest rate risk related to variable rate debt financing. At June 30, 2009, the fair value of these derivative contract liabilities was an unrealized loss of $61.3 million (December 31, 2008 - unrealized loss of $82.3 million). This non-cash loss will remain unrealized until the contracts are settled. These contracts are due between January 31, 2010 and November 30, 2011.

If the interest rates on the unhedged variable rate debt change by 0.25% this would result in a change in the net income of approximately $0.7 million and $1.3 million for the three months and six months ended June 30, 2009, respectively.

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Liquidity risk

The Company maintains credit facilities to ensure it has sufficient available funds to meet current and foreseeable financial requirements. The following are the contractual maturities of financial liabilities as at June 30, 2009:

	Carrying		Contractual
	Amount		Cash Flows		2009		2010		2011		2012		2013		Thereafter
Accounts payable and accrued liabilities		42,718		42,718		42,718		—		—		—		—		—
Customer and other deposits		6,183		6,183		3,885		2,298		—		—		—		—
Other liabilities		120,724		120,724		33,902		33,936		4,326		3,574		3,797		41,189
Derivative financial instruments		95,502		95,502		—		13,604		47,727		—		—		34,171
Long term debt		3,351,545		3,430,065		16,073		37,149		112,145		102,146		22,145		3,140,407
		3,616,672		3,695,192		96,578		86,987		164,198		105,720		25,942		3,215,767

15. STOCK-BASED COMPENSATION PLANS

BCE stock options

There were no outstanding options at June 30, 2009 under the BCE stock option programs. All previously outstanding options expired on April 30, 2008.

Telesat Holdings stock options

On September 19, 2008, Telesat adopted a stock incentive plan for certain key employees of the Company and its subsidiaries. The plan provides for the grant of up to 8,824,646 options to purchase non-voting participating preferred shares of Telesat Holdings Inc., convertible into common shares.

Two different types of stock options can be granted under the plan: time-vesting options and performance-vesting options. The time-vesting options generally become vested and exercisable over a five year period by 20% increments on each October 31^st starting in 2008. The vesting amount is prorated for optionees whose employment with the Company or its subsidiaries started after October 31, 2007. The performance-vesting options become vested and exercisable over a five year period starting for the next part on March 31, 2009, provided that the Company has achieved or exceeded an annual or cumulative target consolidated EBITDA established and communicated on the grant date by the Board of Directors.

The exercise periods of the share options expire ten years from the grant date. The exercise price of each share underlying the options will be the higher of a fixed price, established by the Board of Directors on the grant date, and the fair market value of a non-voting participating preferred share on the grant date.

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	Performance Vesting Options					Time Vesting Options
				Weighted-					Weighted-
				Average					Average
	Number			Exercise		Number			Exercise
	of Options			Price ($)		of Options			Price ($)
Outstanding, January 1, 2009		894,441			11.07		6,846,035			11.07
Granted		743,457			11.07		608,283			11.07
Exercised		—			—		—			—
Forfeited		(159,474	)		11.07		(130,479	)		11.07
Expired		—			—		—			—
Outstanding June 30, 2009		1,478,424			11.07		7,323,839			11.07
Options exercisable at June 30, 2009		164,552					1,334,433

The assumptions used to determine the stock-based compensation expense under the Black-Scholes option pricing model for options granted during the period were as follows:

	Three Months			Six Months
	Ended June 30			Ended June 30
Compensation cost (credited to contributed surplus)		1,492			3,068
Number of stock options granted		289,953			1,351,740
Weighted-average fair value per option granted ($)		8.04			4.73
Assumptions:
Dividend yield		—	%		—	%
Expected volatility		32.9	%		30.0	%
Risk-free interest rate		3.68	%		2.97	%
Expected life (years)		10			10

16. EMPLOYEE BENEFIT PLANS

The net benefit expense included:

	Three Months Ended June 30
	Telesat Canada										Skynet
	Pension Benefits						Other Benefits				Other Benefits
	2009			2008			2009		2008		2009		2008
Current service cost		491			981			65		108		—		—
Interest cost		2,367			2,318			234		215		158		130
Expected return on plan assets		(2,503	)		(3,171	)		—		—		—		—
Net benefit plans cost		355			128			299		323		158		130

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	Six Months Ended June 30
	Telesat Canada										Skynet
	Pension Benefits						Other Benefits				Other Benefits
	2009			2008			2009		2008		2009		2008
Current service cost		982			1,963			130		216		—		—
Interest cost		4,735			4,636			468		431		323		262
Expected return on plan assets		(5,006	)		(6,343	)		—		—		—		—
Net benefit plans cost		711			256			598		647		323		262

17. RELATED PARTY TRANSACTIONS

One of the related party transactions disclosed at December 31, 2008, was an option agreement with Loral Space and Communications Inc. (“Loral”), whereby Telesat has the option to cause Loral to assign to Telesat their rights and obligations with respect to a portion of the ViaSat-1 satellite payload providing coverage into Canada. This option expires on October 31, 2009. This related party transaction is not in the normal course of operations and has been accounted for at carrying value. The carrying value of the orbital slot license is nominal and therefore no value has been assigned to Telesat’s option. At June 30, 2009, Telesat had not exercised this option.

18. COMMITMENTS AND CONTINGENCIES

Off balance sheet commitments include operating leases, commitments for future capital expenditures and other future purchases.

	2009		2010		2011		2012		2013		Thereafter		Total
Off balance sheet commitments		94,058		36,937		19,927		14,149		11,897		38,318		215,286

Certain of the Company’s satellite transponders, offices, warehouses, earth stations, vehicles, and office equipment are leased under various terms. Minimum annual commitments under operating leases determined as at June 30, 2009 are: $13.6 million in 2009, $24.8 million in 2010, $19.1 million in 2011, $13.2 million in 2012, $10.9 million in 2013, and $22.2 million thereafter.

Telesat has non-satellite purchase commitments of CAD $4.1 million or US $3.5 million, with various suppliers at June 30, 2009 (December 31, 2008 CAD $4.1 million or US $3.4 million). The total outstanding commitments at June 30, 2009 are in US dollars.

Telesat has entered into contracts for the construction and launch of Nimiq 5 (targeted for launch in 2009), and Telstar 11N (launched in February 2009). The outstanding commitments at June 30, 2009 on the Nimiq 5 contracts are CAD $93.0 million or US $80.0 million (December 31, 2008 — CAD $200.1 million or US $163.4 million for both Nimiq 5 and Telstar 11N). The total outstanding commitments at June 30, 2009 are in US dollars. In July 2009, Telesat entered into a contract with Space Systems/Loral for the construction of Telstar 14R, and a contract with International Launch Services for the satellite’s launch into geostationary orbit.

Telesat has agreements with various customers for prepaid revenues on several satellites which take effect on final acceptance of the spacecraft. Telesat is responsible for operating and controlling these satellites. Deposits of $331.4 million (December 31, 2008 — $341.3 million), refundable under certain circumstances, are reflected in other liabilities, both current and long-term.

In the normal course of business, Telesat has executed agreements that provide for indemnification and guarantees to counterparties in various transactions. These indemnification undertakings and guarantees may require Telesat to

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compensate the counterparties for costs and losses incurred as a result of certain events including, without limitation, loss or damage to property, change in the interpretation of laws and regulations (including tax legislation), claims that may arise while providing services, or as a result of litigation that may be suffered by the counterparties.

Certain indemnification undertakings can extend for an unlimited period and may not provide for any limit on the maximum potential amount, although certain agreements do contain specified maximum potential exposure representing a cumulative amount of approximately $20.1 million (December 31, 2008 — $20.7 million). The nature of substantially all of the indemnification undertakings prevents the Company from making a reasonable estimate of the maximum potential amount Telesat could be required to pay counterparties as the agreements do not specify a maximum amount and the amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. Historically, Telesat has not made any significant payments under such indemnifications.

Telesat and Loral have entered into an indemnification agreement whereby Loral will indemnify Telesat for any tax liabilities for taxation years prior to 2007. Likewise, Telesat will indemnify Loral for the settlement of any tax receivables for taxation years prior to 2007.

In August 2001, Boeing, the manufacturer of the Anik F1 satellite, advised Telesat of a gradual decrease in available power on-board the satellite. Telesat filed an insurance claim with its insurers on December 19, 2002, and in March 2004 reached a final settlement agreement. The settlement calls for an initial payment in 2004 of US$136.2 million and an additional payment of US$49.1 million in 2007 if the power level on Anik F1 degrades as predicted by the manufacturer. In the event that the power level on Anik F1 is better than predicted, the amount of the payment(s) will be adjusted by applying a formula which is included in the settlement documentation and could result in either a pro-rated payment to Telesat of the additional US$49.1 million or a pro-rated repayment of up to a maximum of US$36.1 million to be made by Telesat to the insurers. The initial payment has been received. During December 2005, a number of insurers elected to pay a discounted amount of the proceeds due in 2007. A discounted value of US$26.2 million was received from a number of insurance underwriters in December 2005 with US$20.0 million to be paid by a few insurers in 2007. Telesat submitted its final claim in the fourth quarter of 2007. In January, 2008, certain insurance underwriters indicated disagreement with Telesat’s determination of the available power such that the final payment, in the insurers’ view, would be approximately US$2.4 million. In July 2008, Telesat received a final settlement of $2.0 million from certain insurers. Claims with other insurers, for a value of US$18.0 million, remain unresolved. On July 30, 2009, Telesat served its claim in accordance with the procedural rules governing the arbitration. No date for the hearing has yet been set. At June 30, 2009, Telesat has not recorded any receivable related to this claim.

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19. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (“U.S. GAAP”)

Telesat has prepared these consolidated financial statements according to Canadian GAAP. The following tables are a reconciliation of differences relating to the statement of earnings (loss), comprehensive earnings (loss), accumulated other comprehensive loss and total shareholders’ equity reported according to Canadian GAAP and U.S. GAAP.

	Three Months						Six Months
	Ended June 30						Ended June 30
Reconciliation of net earnings (loss)	2009			2008			2009			2008
Canadian GAAP — Net earnings (loss)		187,046			12,410			147,960			(89,004	)
(Loss) Gains on embedded derivatives(a)		(21,538	)		1,777			(20,483	)		4,297
Sales type lease — operating lease for U.S. GAAP(b)		—			4,280			1,514			8,473
Capital lease — operating lease for U.S. GAAP(b)		—			(2,558			(1,567	)		(4,067	)
Lease amendments(c)		83			(669	)		100			(669	)
Dividends on senior preferred shares(d)		3,215			2,475			6,925			4,905
Tax effect of above adjustments(e)		6,066			(4,346	)		5,796			(2,891	)
Uncertainty in income taxes(f)		(2,530	)		1,551			(6,742	)		1,440
Tax difference — enacted for US GAAP(e)		—			—			—			(582	)
U.S. GAAP — Net earnings (loss)		172,342			14,920			133,503			(78,098	)
Other comprehensive earnings (loss) items:
Change in currency translation adjustment		3,721			1,087			3,088			15
Net benefit plans cost(g)
Net actuarial (losses) gains		(34	)		—			2,269			—
U.S. GAAP — Comprehensive earnings (loss)		176,029			16,007			138,860			(78,083	)

	June 30,			December 31,
Accumulated other comprehensive loss	2009			2008
Cumulative translation adjustment, net of tax		(4,654	)		(7,742	)
Net benefit plans cost(g)
Net actuarial gains (losses)		1,100			(1,169	)
Accumulated other comprehensive loss		(3,554	)		(8,911	)

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	June 30,			December 31,
Reconciliation of total shareholders’ equity	2009			2008
Canadian GAAP		623,548			469,432
Adjustments
Gains on embedded derivatives(a)		409			20,892
Net actuarial gains (losses)(g)		1,100			(1,169	)
Sales type lease — operating lease for U.S. GAAP(b)		23,070			21,556
Capital lease — operating lease for U.S. GAAP(b)		(9,229	)		(7,662	)
Lease amendment(c)		(1,133	)		(1,233	)
Tax effect of above adjustments(e)		(2,690	)		(8,486	)
Uncertainty in income taxes(f)		(16,266	)		(9,523	)
U.S. GAAP		618,809			483,807

Description of United States GAAP adjustments:

(a)	Derivatives and embedded derivatives
	Embedded derivatives
	The accounting for derivative instruments and hedging activities under Canadian GAAP is now substantially harmonized with U.S. GAAP, with the exception of the accounting for certain embedded derivatives. Under U.S. GAAP an embedded foreign currency derivative in a host contract that is not a financial instrument must be separated and recorded on the balance sheet unless the currency in which payments are to be paid or received is: i) either the functional currency of either party to the contract or ii) the currency that the price of the related good or service is routinely denominated in commercial transactions around the world (typically referring to a traded commodity). The same applies to an embedded foreign currency derivative in a host contract under Canadian GAAP except that the entity has the option, as a matter of accounting policy, to account for the embedded foreign currency derivative in a host contract as a single instrument providing certain criteria are met. One of these criteria is that the payments to be paid or received are in a currency that is commonly used in contracts to purchase or sell such non-financial items in the economic environment in which the transaction takes place. This option under Canadian GAAP results in embedded derivatives that must be recorded separately under U.S. GAAP to not have to be separately recorded and disclosed under Canadian GAAP. The additional option loosens the more stringent U.S. GAAP requirement that the currency be one in which such commercial transactions are denominated around the world to be one that is commonly used in the economic environment in which the transaction takes place.
	In accordance with U.S. GAAP, all derivative instruments embedded in contracts are recorded on the balance sheet at fair value. The Company denominates many of its long-term international purchase contracts in U.S. dollars resulting in embedded derivatives. This exposure to the U.S. dollar is partially offset by revenue contracts that are also denominated in U.S. dollars. For Canadian GAAP, the Company has elected to account for such contracts as single instruments (as explained above), resulting in a U.S. GAAP reconciling item. At June 30, 2009, the estimated fair value of assets resulting from embedded derivatives is $35.0 million (December 31, 2008 — $55.4 million).
	The impact on the statement of earnings of changes in the fair value of these embedded derivatives is reflected as a loss in the U.S. GAAP reconciliation note of $21.5 million and $20.5 million, respectively, for the three and six months ended June 30, 2009 and as a gain of $1.8 million and $4.3 million, respectively, for the three and six months ended June 30, 2008.

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(b)	Sales-type and capital leases
	Under U.S. GAAP, if the beginning of a lease term falls within the last 25% of a leased asset’s total estimated economic life, then it can only be classified as a capital lease if the lease transfers ownership at the end of the lease term or there is a bargain purchase option. This exception does not exist under Canadian GAAP; therefore certain leases are reported as a capital lease and sales-type lease respectively under Canadian GAAP, and as operating leases for U.S. GAAP.
(c)	Lease amendments
	Under Canadian GAAP, when amendments to the provisions of a capital lease agreement result in a change in lease classification from a capital lease to an operating lease, the gain or loss that results from removing the capital lease from the balance sheet is immediately recognized in the statement of earnings. Under U.S. GAAP, if removing the capital lease from the balance sheet results in a loss it is recognized over the remaining term of the lease. Therefore, an adjustment has been made to defer the gain that has been recognized under Canadian GAAP.
(d)	Senior preferred shares
	In accordance with U.S. GAAP, the senior preferred shares are classified outside of permanent equity as they are redeemable at the option of the holder. These senior preferred shares are classified as liabilities under Canadian GAAP. This results in a U.S. GAAP reconciling item to reflect the different classification.
(e)	Income taxes
	The income tax adjustment reflects the impact the US GAAP adjustments described above have on income taxes. The impact on the statement of operations of the income tax adjustment for the three and six months ended June 30, 2009 is a recovery of $6.1 million and $5.8 million, respectively. For the three and six months ended June 30, 2008, the impact was an expense of $4.3 million and $2.9 million, respectively. Included in these figures is the effect of tax rate changes applied to the accumulated gains and losses on embedded derivatives and to certain lease transactions classified as operating leases as discussed above. The impact on the statement of operations of the tax rate changes for the three and six month periods ended June 30, 2009 was $nil and for the three and six month periods ended June 30, 2008 was an expense of $nil and $0.6 million, respectively.
(f)	Uncertainty in income taxes
	In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FAS 109, effective for fiscal years beginning after December 15, 2006. FIN 48 provides specific guidance on the recognition, de-recognition and measurement of income tax positions in financial statements, including the accrual of related interest and penalties recorded in interest expense. An income tax position is recognized when it is more likely than not that it will be sustained upon examination based on its technical merits, and is measured as the largest amount that is greater than 50% likely of being realized upon ultimate settlement. Under Canadian GAAP, significant differences may arise as Telesat recognizes and measures income tax positions, based on the best estimate of the amount that is more likely than not of being realized.
(g)	Net benefit plans cost
	Effective December 31, 2006, the Company adopted the recognition requirements of Statement of Financial Accounting Standards (SFAS) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans, on a prospective basis.
	This standard requires that the Company recognize the funded status of benefit plans on the balance sheet as well as recognize as a component of other comprehensive income, net of tax, the actuarial losses and transitional asset and obligation. Amounts recognized in accumulated other comprehensive income are adjusted as they are subsequently recognized as components of net periodic benefit cost.
	At June 30, 2009, the balance sheet was adjusted such that actuarial losses and the transitional asset and obligation that have not yet been included in net benefit plans cost at December 31, 2008 were recognized as components of accumulated other comprehensive loss, net of tax. The adjustment at June 30, 2009 resulted in a decrease of $1.1 million in accumulated other comprehensive loss, net of tax of $0.9 million (December 31, 2008 — an increase of $1.2 million in accumulated other comprehensive loss, net of tax of $0.4 million).

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Transaction costs on long-term debt

Under Canadian GAAP, transaction costs of $78.5 million ($83.6 million at December 31, 2008) related to the issuance of long-term debt are netted against the long-term debt. Under U.S. GAAP these costs are recognized as deferred charges. This results in a U.S. GAAP reconciling item to reflect the different classification on the balance sheet.

Statement of cash flows

There are no material differences in the consolidated statement of cash flows under U.S. GAAP.

NOTE 20: CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The 11.0% Senior notes and the 12.5% Senior subordinated notes were co-issued by Telesat LLC and Telesat Canada, which are 100% owned subsidiaries of Telesat Holdings, and were guaranteed fully and unconditionally, on a joint and several basis, by Telesat Holdings and certain of its subsidiaries.

The condensed consolidating financial information below for the six and three months ended June 30, 2009 and the six and three months ended June 30, 2008 is presented pursuant to Article 3-10(d) of Regulation S-X. The information presented consists of the operations of Telesat Holdings. Telesat Holdings primarily holds investments in subsidiaries and equity. Telesat LLC is a financing subsidiary that has no assets, liabilities or operations.

The condensed consolidating financial information reflects the investments of Telesat Holdings in the Issuers, of the Issuers in their respective Guarantor and Non-Guarantor subsidiaries and of the Guarantors in their Non-Guarantor subsidiaries using the equity method.

23

Condensed Consolidating Statement of Earnings (Loss)
For the six months ended June 30, 2009

												Non-
	Telesat			Telesat		Telesat			Guarantor			Guarantor
	Holdings			LLC		Canada			Subsidiaries			Subsidiaries			Adjustments			Consolidated
Operating revenues
Service revenues		—			—		365,328			31,206			32,275			(32,565	)		396,244
Equipment sales revenues		—			—		3,632			5,356			—			—			8,988
Operating revenues		—			—		368,960			36,562			32,275			(32,565	)		405,232
Amortization		—			—		93,712			22,134			9,027			—			124,873
Operations and administration		—			—		103,873			29,948			16,242			(32,565	)		117,498
Cost of equipment sales		—			—		3,834			4,582			—			—			8,416
Total operating expenses		—			—		201,419			56,664			25,269			(32,565	)		250,787
Earnings from operations		—			—		167,541			(20,102	)		7,006			—			154,445
Loss (income) from equity investments		(154,885	)		—		12,837			2,443			—			139,605			—
Interest expense		6,925			—		129,160			513			1,201			—			137,799
Other expense		—			—		(145,411	)		(7,124	)		3,574			—			(148,961	)
Earnings (loss) before income taxes		147,960			—		170,955			(15,934	)		2,231			(139,605	)		165,607
Income tax expense/(recovery)		—			—		16,070			1,522			55			—			17,647
Net earnings (loss)		147,960			—		154,885			(17,456	)		2,176			(139,605	)		147,960
Reconciliation to U.S. GAAP is as follows:
Income (loss) from equity investments		(21,382	)		—		39			29			—			21,314			—
Gains (losses) on embedded derivatives		—			—		(20,483	)		—			—			—			(20,483	)
Sales type lease — operating lease for U.S. GAAP		—			—		1,514			—			—			—			1,514
Capital lease — operating lease for U.S. GAAP		—			—		(1,567	)		—			—			—			(1,567	)
Lease amendments		—			—		—			—			100			—			100
Dividends on senior preferred shares		6,925			—		—			—			—			—			6,925
Tax effect of above adjustments		—			—		5,857			—			(61	)		—			5,796
Uncertainty in income taxes		—			—		(6,742	)		—			—			—			(6,742	)
U.S. GAAP net earnings (loss)		133,503			—		133,503			(17,427	)		2,215			(118,291	)		133,503

24

Condensed Consolidating Statement of Earnings (Loss)
For the six months ended June 30, 2008

												Non-
	Telesat			Telesat		Telesat			Guarantor			Guarantor
	Holdings			LLC		Canada			Subsidiaries			Subsidiaries			Adjustments			Consolidated
Operating revenues
Service revenues		—			—		284,162			39,564			27,566			(34,211	)		317,081
Equipment sales revenues		—			—		5,758			9,545			—			(187	)		15,116
Operating revenues		—			—		289,920			49,109			27,566			(34,398	)		332,197
Amortization		—			—		88,128			17,862			10,072			—			116,062
Operations and administration		—			—		90,795			50,258			12,211			(34,212	)		119,052
Cost of equipment sales		—			—		4,587			7,391			123			(186	)		11,915
Total operating expenses		—			—		183,510			75,511			22,406			(34,398	)		247,029
Earnings from operations		—			—		106,410			(26,402	)		5,160			—			85,168
Loss (income) from equity investments		84,099			—		16,960			2,579			—			(103,638	)		—
Interest expense		4,905			—		122,235			(7,211	)		1,108			—			121,037
Other expense		—			—		52,372			1,166			(1,723	)		—			51,815
Earnings (loss) before income taxes		(89,004	)		—		(85,157	)		(22,936	)		5,775			103,638			(87,684	)
Income tax (recovery)/expense		—			—		(1,058	)		2,457			(79	)		—			1,320
Net earnings (loss)		(89,004	)		—		(84,099	)		(25,393	)		5,854			103,638			(89,004	)
Reconciliation to U.S. GAAP is as follows:
Income (loss) from equity investments		6,001			—		(479	)		—			—			(5,522	)		—
Gains (losses) on embedded derivatives		—			—		4,297			—			—			—			4,297
Sales type lease — operating lease for U.S. GAAP		—			—		8,473			—			—			—			8,473
Capital lease — operating lease for U.S. GAAP		—			—		(4,067	)		—			—			—			(4,067	)
Lease amendments		—			—		—			—			(669	)		—			(669	)
Dividends on senior preferred shares		4,905			—		—			—			—			—			4,905
Tax effect of above adjustments		—			—		(3,081	)		—			190			—			(2,891	)
Uncertainty in income taxes		—			—		1,440			—			—			—			1,440
Tax difference — enacted for US GAAP		—			—		(582	)		—			—			—			(582	)
U.S. GAAP net earnings (loss)		(78,098	)		—		(78,098	)		(25,393	)		5,375			98,116			(78,098	)

25

Condensed Consolidating Statement of Earnings (Loss)
For the three months ended June 30, 2009

												Non-
	Telesat			Telesat		Telesat			Guarantor			Guarantor
	Holdings			LLC		Canada			Subsidiaries			Subsidiaries			Adjustments			Consolidated
Operating revenues
Service revenues		—			—		186,466			7,690			15,320			(12,038	)		197,438
Equipment sales revenues		—			—		1,488			2,242			—			14			3,744
Operating revenues		—			—		187,954			9,932			15,320			(12,024	)		201,182
Amortization		—			—		46,620			13,163			3,817			—			63,600
Operations and administration		—			—		58,149			6,436			6,745			(12,071	)		59,259
Cost of equipment sales		—			—		1,820			2,167			—			47			4,034
Total operating expenses		—			—		106,589			21,766			10,562			(12,024	)		126,893
Earnings from operations		—			—		81,365			(11,834	)		4,758			—			74,289
Loss (income) from equity investments		(190,261	)		—		2,565			1,389			—			186,307			—
Interest expense		3,215			—		62,688			248			578			—			66,729
Other expense		—			—		(187,303	)		(10,855	)		5,280			—			(192,878	)
Earnings (loss) before income taxes		187,046			—		203,415			(2,616	)		(1,100	)		(186,307	)		200,438
Income tax (recovery)/expense		—			—		13,154			170			68			—			13,392
Net earnings (loss)		187,046			—		190,261			(2,786	)		(1,168	)		(186,307	)		187,046
Reconciliation to U.S. GAAP is as follows:
Income (loss) from equity investments		(17,919	)		—		29			29			—			17,861			—
Gains (losses) on embedded derivatives		—			—		(21,538	)		—			—			—			(21,538	)
Lease amendments		—			—		—			—			83			—			83
Dividends on senior preferred shares		3,215			—		—			—			—			—			3,215
Tax effect of above adjustments		—			—		6,120			—			(54	)		—			6,066
Uncertainty in income taxes		—			—		(2,530	)		—			—			—			(2,530	)
U.S. GAAP net earnings (loss)		172,342			—		172,342			(2,757	)		(1,139	)		(168,446	)		172,342

26

Condensed Consolidating Statement of Earnings (Loss)
For the three months ended June 30, 2008

												Non-
	Telesat			Telesat		Telesat			Guarantor			Guarantor
	Holdings			LLC		Canada			Subsidiaries			Subsidiaries			Adjustments			Consolidated
Operating revenues
Service revenues		—			—		146,400			18,920			14,383			(17,811	)		161,892
Equipment sales revenues		—			—		3,452			3,945			—			187			7,584
Operating revenues		—			—		149,852			22,865			14,383			(17,624	)		169,476
Amortization		—			—		43,868			8,925			4,524			—			57,317
Operations and administration		—			—		47,002			23,612			6,552			(17,602	)		59,564
Cost of equipment sales		—			—		2,916			2,864			121			(22	)		5,879
Total operating expenses		—			—		93,786			35,401			11,197			(17,624	)		122,760
Earnings from operations		—			—		56,066			(12,536	)		3,186			—			46,716
Loss (income) from equity investments		(14,885	)		—		2,926			1,360			—			10,599			—
Interest expense		2,475			—		60,823			(7,825	)		226			—			55,699
Other expense		—			—		(38,565	)		(230	)		(256	)		—			(39,051	)
Earnings (loss) before income taxes		12,410			—		30,882			(5,841	)		3,216			(10,599	)		30,068
Income tax (recovery)/expense		—			—		15,997			1,267			394			—			17,658
Net earnings (loss)		12,410			—		14,885			(7,108	)		2,822			(10,599	)		12,410
Reconciliation to U.S. GAAP is as follows:
Income (loss) from equity investments		35			—		(479	)		—			—			444			—
Gains (losses) on embedded derivatives		—			—		1,777			—			—			—			1,777
Sales type lease — operating lease for U.S. GAAP		—			—		4,280			—			—			—			4,280
Capital lease — operating lease for U.S. GAAP		—			—		(2,558	)		—			—			—			(2,558	)
Lease amendments(c)		—			—		—			—			(669	)		—			(669	)
Dividends on senior preferred shares		2,475			—		—			—			—			—			2,475
Tax effect of above adjustments		—			—		(4,536	)		—			190			—			(4,346	)
Uncertainty in income taxes		—			—		1,551			—			—			—			1,551
U.S. GAAP net earnings (loss)		14,920			—		14,920			(7,108	)		2,343			(10,155	)		14,920

27

Condensed Consolidating Balance Sheet
As of June 30, 2009

									Non-
	Telesat		Telesat		Telesat		Guarantor		Guarantor
	Holdings		LLC		Canada		Subsidiaries		Subsidiaries		Adjustments			Consolidated
Assets
Current assets
Cash and cash equivalents		—		—		64,564		14,299		1,933		—			80,796
Accounts receivable		—		—		37,202		12,890		4,440		—			54,532
Current future tax asset		—		—		987		565		1,007		—			2,559
Assets held for sale		—		—		12,063		—		32,506		—			44,569
Intercompany receivable		—		—		620,602		26,770		114,482		(761,854	)		—
Other current assets		—		—		17,074		9,662		8,640		—			35,376
Total current assets		—		—		752,492		64,186		163,008		(761,854	)		217,832
Satellites, property, and other equipment, net		—		—		1,431,888		413,513		27,959		—			1,873,360
Other long-term assets		—		—		27,016		7,483		760		—			35,259
Intangible assets, net		—		—		525,245		18,463		510		—			544,218
Investment in affiliates		783,459		—		1,676,176		1,480,386		261		(3,940,282	)		—
Goodwill		—		—		2,005,843		343,876		96,884		—			2,446,603
Total assets		783,459		—		6,418,660		2,327,907		289,382		(4,702,136	)		5,117,272
Liabilities
Current liabilities
Accounts payable and accrued liabilities		—		—		22,453		15,050		5,215		—			42,718
Other current liabilities		—		—		104,600		14,370		4,245		161			123,376
Intercompany payable		—		—		506,528		215,903		39,334		(761,765	)		—
Debt due within one year		—		—		21,031		4		—		—			21,035
Total current liabilities		—		—		654,612		245,327		48,794		(761,604	)		187,129
Debt financing		—		—		3,330,510		—		—		—			3,330,510
Future tax liability		—		—		276,365		197		9,793		—			286,355
Other long-term liabilities		18,476		—		486,589		21,247		22,110		(127	)		548,295
Senior preferred shares		141,435		—		—		—		—		—			141,435
Total liabilities		159,911		—		4,748,076		266,771		80,697		(761,731	)		4,493,724

28

												Non-
	Telesat			Telesat		Telesat			Guarantor			Guarantor
	Holdings			LLC		Canada			Subsidiaries			Subsidiaries		Adjustments			Consolidated
Shareholders’ equity
Common shares		756,414			—		2,257,247			1,896,596			104,434		(4,258,277	)		756,414
Preferred shares		541,764			—		—			—			—		—			541,764
Accumulated deficit		(678,492	)		—		(656,833	)		236,047			99,050		321,736			(678,492	)
Accumulated other comprehensive loss		(4,654	)		—		63			(9,918	)		5,201		4,654			(4,654	)
Contributed surplus		8,516			—		70,107			(61,589	)		—		(8,518	)		8,516
Total shareholders’ equity		623,548			—		1,670,584			2,061,136			208,685		(3,940,405	)		623,548
Total liabilities and shareholders’ equity		783,459			—		6,418,660			2,327,907			289,382		(4,702,136	)		5,117,272

												Non-
Reconciliation to U.S. GAAP of total	Telesat			Telesat		Telesat			Guarantor			Guarantor
shareholders’ equity is as follows:	Holdings			LLC		Canada			Subsidiaries			Subsidiaries			Adjustments			Consolidated
Canadian GAAP		623,548			—		1,670,584			2,061,136			208,685			(3,940,405	)		623,548
Underlying differences in the income (loss) from equity investments		(4,739	)		—		(709	)		(709	)		—			6,157			—
Gains (losses) on embedded derivatives		—			—		409			—			—			—			409
Net actuarial losses		—			—		1,100			—			—			—			1,100
Sales type lease — operating lease for U.S. GAAP		—			—		23,070			—			—			—			23,070
Capital lease — operating lease for U.S. GAAP		—			—		(9,229	)		—			—			—			(9,229	)
Lease amendments		—			—		—			—			(1,133	)		—			(1,133	)
Tax effect of above adjustments		—			—		(3,114	)		—			424			—			(2,690	)
Uncertainty in income taxes		—			—		(16,266	)		—			—			—			(16,266	)
U.S. GAAP shareholders’ equity		618,809			—		1,665,845			2,060,427			207,976			(3,934,248	)		618,809

29

Condensed Consolidating Balance Sheet
As of December 31, 2008

												Non-
	Telesat			Telesat		Telesat			Guarantor			Guarantor
	Holdings			LLC		Canada			Subsidiaries			Subsidiaries		Adjustments			Consolidated
Assets
Current assets
Cash and cash equivalents		—			—		83,089			12,056			3,393		1			98,539
Accounts receivable		—			—		39,153			19,680			3,100		—			61,933
Current future tax asset		—			—		928			596			1,057		—			2,581
Intercompany receivable		—			—		605,331			59,234			103,133		(767,698	)		—
Other current assets		—			—		31,283			9,202			8,983		(281	)		49,187
Total current assets		—			—		759,784			100,768			119,666		(767,978	)		212,240
Satellites, property, and other equipment, net		—			—		1,437,490			374,436			71,650		—			1,883,576
Other long-term assets		—			—		39,176			2,325			755		47			42,303
Intangible assets, net		—			—		562,434			18,967			635		(1	)		582,035
Investment in affiliates		622,417			—		1,668,986			1,476,399			261		(3,768,063	)		—
Goodwill		—			—		2,005,842			343,876			96,885		—			2,446,603
Total assets		622,417			—		6,473,712			2,316,771			289,852		(4,535,995	)		5,166,757
Liabilities
Current liabilities
Accounts payable and accrued liabilities		—			—		28,316			16,622			3,840		14			48,792
Other current liabilities		—			—		120,085			14,084			4,163		(237	)		138,095
Intercompany payable		—			—		518,247			211,174			38,317		(767,738	)		—
Debt due within one year		—			—		23,260			11			—		1			23,272
Total current liabilities		—			—		689,908			241,891			46,320		(767,960	)		210,159
Debt financing		—			—		3,513,223			—			—		—			3,513,223
Future tax liability		—			—		255,893			267			10,212		—			266,372
Other long-term liabilities		11,550			—		505,328			24,099			25,159		—			566,136
Senior preferred shares		141,435			—		—			—			—		—			141,435
Total liabilities		152,985			—		4,964,352			266,257			81,691		(767,960	)		4,697,325
Shareholders’ equity
Common shares		756,414			—		2,320,730			1,823,370			104,434		(4,248,534	)		756,414
Preferred shares		541,764			—		—			—			—		—			541,764
Accumulated deficit		(826,452	)		—		(816,679	)		241,559			96,915		478,205			(826,452	)
Accumulated other comprehensive loss		(7,742	)		—		63			(14,617	)		6,812		7,742			(7,742	)
Contributed surplus		5,448			—		5,246			202			—		(5,448	)		5,448
Total shareholders’ equity		469,432			—		1,509,360			2,050,514			208,161		(3,768,035	)		469,432
Total liabilities and shareholders’ equity		622,417			—		6,473,712			2,316,771			289,852		(4,535,995	)		5,166,757

30

										Non-
Reconciliation to U.S. GAAP of total	Telesat		Telesat		Telesat			Guarantor		Guarantor
shareholders’ equity is as follows:	Holdings		LLC		Canada			Subsidiaries		Subsidiaries			Adjustments			Consolidated
Canadian GAAP		469,432		—		1,509,360			2,050,514		208,161			(3,768,035	)		469,432
Underlying differences in the income (loss) from equity investments		14,375		—		(742	)		—		—			(13,633	)		—
Gains (losses) on embedded derivatives		—		—		20,892			—		—			—			20,892
Net actuarial losses		—		—		(1,169	)		—		—			—			(1,169	)
Sales type lease — operating lease for U.S. GAAP		—		—		21,556			—		—			—			21,556
Capital lease — operating lease for U.S. GAAP		—		—		(7,662	)		—		—			—			(7,662	)
Lease amendments		—		—					—		(1,233	)		—			(1,233	)
Tax effect of above adjustments		—		—		(8,977	)		—		491			—			(8,486	)
Uncertainty in income taxes		—		—		(9,523	)		—		—			—			(9,523	)
U.S. GAAP		483,807		—		1,523,735			2,050,514		207,419			(3,781,668	)		483,807

31

The reconciliation of the condensed consolidating balance sheet captions is as follows:

June 30, 2009

Telesat Canada
	Canadian
	GAAP			Adjustments			U.S. GAAP
Current assets		752,492			3,464			755,956
Other assets		27,016			110,020			137,036
Goodwill		2,005,843			(12,692	)		1,993,151
Current liabilities		654,612			11,114			665,726
Debt financing		3,330,510			67,407			3,397,917
Future tax liability		276,365			10,379			286,744
Other long-term liabilities		486,589			15,922			502,511
Accumulated deficit		(656,833	)		(5,130	)		(661,963	)
Accumulated other comprehensive loss		63			1,100			1,163

Non-Guarantor Subsidiaries
	Canadian
	GAAP		Adjustments			U.S. GAAP
Current liabilities		48,794		178			48,972
Future tax liability		9,793		(424	)		9,369
Other long-term liabilities		22,110		885			22,995
Accumulated deficit		99,050		(682	)		98,368

December 31, 2008

Telesat Canada
	Canadian
	GAAP			Adjustments			U.S. GAAP
Current assets		759,784			6,864			766,648
Other long-term assets		39,176			130,775			169,951
Goodwill		2,005,842			(12,692	)		1,993,150
Current liabilities		689,908			8,880			698,788
Debt financing		3,513,223			73,259			3,586,482
Future tax liability		255,893			15,339			271,232
Other long-term liabilities		505,328			12,354			517,682
Accumulated deficit		(816,679	)		16,284			(800,395	)
Accumulated other comprehensive loss		63			(1,169	)		(1,106	)

Non-Guarantor Subsidiaries
	Canadian
	GAAP		Adjustments			U.S. GAAP
Current liabilities		46,320		205			46,525
Future tax liability		10,212		(491	)		9,721
Other long-term liabilities		25,159		1,027			26,186
Accumulated deficit		96,915		(741	)		96,174

32

Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2009

												Non-
	Telesat			Telesat		Telesat			Guarantor			Guarantor
	Holdings			LLC		Canada			Subsidiaries			Subsidiaries			Adjustments			Consolidated
Cash flows from operating activities
Net earnings (loss)		147,960			—		154,885			(17,456	)		2,176			(139,605	)		147,960
Adjustments to reconcile net earnings (loss) to cash flows from operating activities:
Amortization		—			—		93,712			22,134			9,027			—			124,873
Future income taxes		—			—		20,413			1			31			—			20,445
Unrealized foreign exchange loss (gain)		—			—		(177,075	)		(10,090	)		1,385			—			(185,780	)
Unrealized loss (gain) on derivatives		—			—		43,036			(1	)		—			—			43,035
Dividends on preferred shares		6,925			—		—			—			—			—			6,925
Stock-based compensation expense		—			—		2,729			339			—			—			3,068
Loss (income) from equity investments		(154,885	)		—		12,837			2,443			—			139,605			—
Other		—			—		(18,921	)		2,536			1,731			—			(14,654	)
Customer prepayments on future satellite services		—			—		3,309			—			—			—			3,309
Operating assets and liabilities		—			—		(70,259	)		62,087			(13,949	)		—			(22,121	)
		—			—		64,666			61,993			401			—			127,060
Cash flows from investing activities
Satellite programs		—			—		(60,072	)		(61,108	)		—			—			(121,180	)
Property additions		—			—		(2,643	)		(358	)		(31	)		—			(3,032	)
Business acquisitions		—			—		(1,128	)		1,128			—			—			—
Proceeds on disposal of assets		—			—		60			465			—			—			525
Insurance proceeds		—			—		—			—			—			—			—
		—			—		(63,783	)		(59,873	)		(31	)		—			(123,687	)
Cash flows from financing activities
Debt financing and bank loans		—			—		23,880			—			—			—			23,880
Repayment of bank loans and debt financing		—			—		(38,460	)		(1	)		—			—			(38,461	)
Capital lease payments		—			—		(1,841	)		(7	)		(1,666	)		—			(3,514	)
Satellite performance incentive payments		—			—		(2,987	)		—			—			—			(2,987	)
Preferred dividends paid		—			—		—			—			—			—			—
		—			—		(19,408	)		(8	)		(1,666	)		—			(21,082	)
Effect of changes in exchange rates on cash and cash equivalents		—			—		—			131			(165	)		—			(34	)
Increase (decrease) in cash and cash equivalents		—			—		(18,525	)		2,243			(1,461	)		—			(17,743	)
Cash and cash equivalents, beginning of period		—			—		83,089			12,056			3,394			—			98,539
Cash and cash equivalents, end of period		—			—		64,564			14,299			1,933			—			80,796

33

Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2008

												Non-
	Telesat			Telesat		Telesat			Guarantor			Guarantor
	Holdings			LLC		Canada			Subsidiaries			Subsidiaries			Adjustments			Consolidated
Cash flows from operating activities
Net earnings (loss)		(89,004	)		—		(84,099	)		(25,393	)		5,854			103,638			(89,004	)
Adjustments to reconcile net earnings (loss) to cash flows from operating activities:
Amortization		—			—		88,128			17,862			10,072			—			116,062
Future income taxes		—			—		(2,005	)		(106	)		(703	)		—			(2,814	)
Unrealized foreign exchange loss		—			—		74,813			—			—			—			74,813
Unrealized gain on derivatives		—			—		(40,214	)		—			—			—			(40,214	)
Dividends on preferred shares		4,905			—		—			—			—			—			4,905
Loss (income) from equity investments		84,099			—		16,960			2,579			—			(103,638	)		—
Other		—			—		(19,636	)		(1,051	)		(2,512	)		—			(23,199	)
Customer prepayments on future satellite services		—			—		20,309			62			—			—			20,371
Operating assets and liabilities		—			—		(52,330	)		49,988			(10,309	)		—			(12,651	)
		—			—		1,926			43,941			2,402			—			48,269
Cash flows from investing activities
Satellite programs		—			—		(74,984	)		(46,763	)		—			—			(121,747	)
Property additions		—			—		(3,095	)		(567	)		(41	)		—			(3,703	)
Business acquisitions		—			—		—			—			—			—			—
Proceeds on disposal of assets		—			—		27			4,581			—			—			4,608
Insurance proceeds		—			—		4,006			—			—			—			4,006
		—			—		(74,046	)		(42,749	)		(41	)		—			(116,836	)
Cash flows from financing activities						��
Debt financing and bank loans		—			—		132,558			—			—			—			132,558
Repayment of bank loans and debt financing		—			—		(70,793	)		(19	)		—			—			(70,812	)
Capital lease payments		—			—		(3,914	)		—			(1,527	)		—			(5,441	)
Satellite performance incentive payments		—			—		(1,852	)		—			—			—			(1,852	)
		—			—		55,999			(19	)		(1,527	)		—			54,453
Effect of changes in exchange rates on cash and cash equivalents		—			—		—			1,373			(495	)		—			878
Increase (decrease) in cash and cash equivalents		—			—		(16,121	)		2,546			339			—			(13,236	)
Cash and cash equivalents, beginning of period		—			—		27,308			11,200			3,695			—			42,203
Cash and cash equivalents, end of period		—			—		11,187			13,746			4,034			—			28,967

34

Condensed Consolidating Statement of Cash Flows
For the three months ended June 30, 2009

												Non-
	Telesat			Telesat		Telesat			Guarantor			Guarantor
	Holdings			LLC		Canada			Subsidiaries			Subsidiaries			Adjustments			Consolidated
Cash flows from operating activities
Net earnings (loss)		187,046			—		190,261			(2,786	)		(1,168	)		(186,307	)		187,046
Adjustments to reconcile net earnings (loss) to cash flows from operating activities:
Amortization		—			—		46,620			13,163			3,817			—			63,600
Future income taxes		—			—		18,535			1			62			—			18,598
Unrealized foreign exchange loss (gain)		—			—		(274,528	)		(14,982	)		3,001			—			(286,509	)
Unrealized loss (gain) on derivatives		—			—		96,891			(1	)		—			—			96,890
Dividends on preferred shares		3,215			—		—			—			—			—			3,215
Stock-based compensation expense		—			—		(6,361	)		7,853			—			—			1,492
Loss (Income) from equity investments		(190,261	)		—		2,565			1,389			—			186,307			—
Other		—			—		(8,736	)		2,229			1,762			—			(4,745	)
Operating assets and liabilities		—			—		(53,653	)		7,699			(7,535	)		—			(53,489	)
		—			—		11,594			14,565			(61	)		—			26,098
Cash flows from investing activities
Satellite programs		—			—		(23,077	)		(7,801	)		—			—			(30,878	)
Property additions		—			—		(1,288	)		(148	)		18			—			(1,418	)
Business acquisitions		—			—		6,625			(6,625	)		—			—			—
Proceeds on disposal of assets		—			—		57			465			—			—			522
		—			—		(17,683	)		(14,109	)		18			—			(31,774	)
Cash flows from financing activities
Debt financing and bank loans		—			—		23,880			—			—			—			23,880
Repayment of bank loans and debt financing		—			—		(29,710	)		4			—			—			(29,706	)
Capital lease payments		—			—		(249	)		(7	)		(822	)		—			(1,078	)
Satellite performance incentive payments		—			—		(1,765	)		—			—			—			(1,765	)
		—			—		(7,844	)		(3	)		(822	)		—			(8,669	)
Effect of changes in exchange rates on cash and cash equivalents		—			—		—			(382	)		(251	)		—			(633	)
Increase (decrease) in cash and cash equivalents		—			—		(13,933	)		71			(1,116	)		—			(14,978	)
Cash and cash equivalents, beginning of period		—			—		78,497			14,228			3,049			—			95,774
Cash and cash equivalents, end of period		—			—		64,564			14,299			1,933			—			80,796

35

Condensed Consolidating Statement of Cash Flows
For the three months ended June 30, 2008

													Non-
	Telesat			Telesat			Telesat			Guarantor			Guarantor
	Holdings			LLC			Canada			Subsidiaries			Subsidiaries			Adjustments			Consolidated
Cash flows from operating activities
Net earnings (loss)		12,410			—			14,885			(7,108	)		2,822			(10,599	)		12,410
Adjustments to reconcile net earnings (loss) to cash flows from operating activities:
Amortization		—			—			43,868			8,925			4,524			—			57,317
Future income taxes		—			—			15,347			—			(173	)		—			15,174
Unrealized foreign exchange loss (gain)		—			—	��		(25,214	)		—			—			—			(25,214	)
Unrealized loss (gain) on derivatives		—			—			(20,857	)		—			—			—			(20,857	)
Dividends on preferred shares		2,475			—			—			—			—			—			2,475
Loss (income) from equity investments		(14,885	)		—			2,926			1,360			—			10,599			—
Other		—			—			(10,733	)		(499	)		(2,203	)		—			(13,435	)
Customer prepayments on future satellite services		—			—			2,777			64			—			—			2,841
Operating assets and liabilities		—			—			(41,122	)		30,315			(3,332	)		—			(14,139	)
		—			—			(18,123	)		33,057			1,638			—			16,572
Cash flows from investing activities
Satellite programs		—			—			(40,567	)		(35,199	)		—			—			(75,766	)
Property additions		—			—			(1,217	)		(232	)		(29	)		—			(1,478	)
Business acquisitions		—			—			1,000			(1,000	)		—			—			—
Insurance proceeds		—			—			4,006			—			—			—			4,006
Proceeds on disposal of assets		—			—			—			3,948			—			—			3,948
		—			—			(36,778	)		(32,483	)		(29	)		—			(69,290	)
Cash flows from financing activities
Debt financing and bank loans		—			—			61,475			—			—			—			61,475
Repayment of bank loans and debt financing		—			—			(17,435	)		(9	)		—			—			(17,444	)
Capital lease payments		—			—			(1,971	)		(16	)		(501	)		—			(2,488	)
Satellite performance incentive payments		—			—			(1,659	)		—			—			—			(1,659	)
		—			—			40,410			(25	)		(501	)		—			39,884
Effect of changes in exchange rates on cash and cash equivalents		—			—			—			9			(644	)		—			(635	)
Increase (decrease) in cash and cash equivalents		—			—			(14,491	)		558			464			—			(13,469	)
Cash and cash equivalents, beginning of period		—			—			25,678			13,188			3,570			—			42,436
Cash and cash equivalents, end of period		—			—			11,187			13,746			4,034			—			28,967

36

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with Telesat Holdings’ unaudited consolidated financial statements beginning at Page 1 of this Quarterly Report. As used in this management’s discussion and analysis of financial condition and results of operations (“MD&A”), unless the context states or requires otherwise, references to “Telesat”, “we”, “our” and “us” refer to Telesat Holdings Inc. and its subsidiaries. Unless the context states or requires otherwise, reference herein to “the consolidated financial statements” or “the financial statements” or similar terms refer to the unaudited consolidated financial statements of Telesat Holdings Inc. included herein.

The dollar amounts presented in this Quarterly Report are in Canadian dollars unless otherwise specified. On June 30, 2009, the Bank of Canada noon rate was CDN$1 = USD$0.8602.

The financial information presented herein has been prepared on the basis of Canadian GAAP, which differs in certain respects from United States GAAP. For a summary of differences between Canadian and United States GAAP, please refer to note 25 to our audited consolidated financial statements for the fiscal year ended December 31, 2008 filed as part of Telesat Canada’s final prospectus dated June 29, 2009 filed with the US Securities and Exchange Commission and to note 19 to the unaudited consolidated financial statements for the six months ended June 30, 2009 contained in this Quarterly Report.

Forward-Looking Statements Safe Harbor

This Quarterly Report contains statements that are not based on historical fact and are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report, the words “believes”, “expects”, “plans”, “may”, “will”, “would”, “could”, “should”, “anticipates”, “estimates”, “project”, “intend” or “outlook” or other variations of these words or other similar expressions are intended to identify forward-looking statements and information. Actual results may differ materially from the expectations expressed or implied in the forward-looking statements as a result of known and unknown risks and uncertainties. Detailed information about some of the known risks and uncertainties is included in the “Risk Factors” section of Telesat Canada’s final prospectus filed with the United States Securities and Exchange Commission (SEC) on June 29, 2009. Readers are specifically referred to that document, as well as Telesat Canada’s other filings with the SEC which can be obtained on the SEC’s website at http://www.sec.gov. Known risks and uncertainties include but are not limited to: (1) financial risks, including economic downturns, restrictions imposed by covenants contained in the agreements governing Telesat’s debt, Telesat’s leverage, volatility in exchange rates, and Telesat’s dependence on a few large customers for a significant proportion of its revenue; (2) risks associated with operating satellites and providing satellite services, including satellite construction or launch delays, launch failures, in-orbit failures or impaired satellite performance, the ability to obtain or renew satellite insurance at all or on reasonable terms, and competition from other providers of telecommunications services; (3) risks associated with domestic and foreign government regulation; and (4) other risks, including potential conflicts of interest with Telesat’s significant shareholders, litigation, and market risks. The foregoing list of important factors is not exclusive. The information contained in this Quarterly Report reflects Telesat’s beliefs, assumptions, intentions, plans and expectations as of the date of this report. Telesat disclaims any obligation or undertaking to update or revise the information herein.

Overview

We are the fourth largest fixed satellite services operator, with offices and facilities around the world. We provide our satellite and communication services from a fleet of satellites that occupy Canadian and other orbital locations. We are organized into one operating segment, the satellite services business; however, we provide our services through three business categories: Broadcast, Enterprise and Consulting & Other.

The satellite services business is capital intensive and the build-out of a satellite fleet requires substantial time and investment. Once these investments are made, however, the incremental costs to maintain and operate the fleet are relatively low with the exception of in-orbit insurance. After nearly forty years of operation, Telesat Canada has established collaborative relationships with its customers. We have been able to generate a large contracted revenue backlog by entering into long-term contracts with some of our customers for all or substantially all of a satellite’s service life. Historically, this has resulted in revenues from the satellite services business being fairly predictable.

37

Competition in the satellite services market has been intense in recent years due to a number of factors, including transponder over-capacity for some frequency bands in certain geographic regions, and increased competition from terrestrial-based communication networks.

At June 30, 2009, we had 12 in-orbit satellites. Our fleet of 11 owned in-orbit satellites had, as of June 30, 2009, an average of approximately 56.1% service life remaining, with an average service life remaining of approximately 8.1 years. We calculate these figures using, for each satellite, the lesser of its manufacturers’ design service life or its expected end-of-service life. Nimiq 3, a leased satellite, was removed from commercial service on June 1, 2009. We currently have two additional satellites under construction: Nimiq 5, which we anticipate will be operational in late 2009, and Telstar 14R/Estrela do Sul 2, which we anticipate will be operational in the second half of 2011. We have contracted for the sale of all of the capacity on Nimiq 5 for 15 years or such later date as the customer may request.

Telesat Canada and its affiliates are authorized by governments, including those of Canada, the United States and Brazil, to access and use certain geostationary orbital locations and associated spectrum resources. The use of these orbital locations, as well as our other operations, is subject to a variety of Canadian and international regulations.

Recent Developments

On July 9, 2009, we terminated our leasehold interest in the Telstar 10 satellite and transferred certain related customer contracts to the satellite’s owner in exchange for a total price of approximately US$69 million. As previously reported, we remain in discussions regarding the potential sale of our interests in one of our international satellites and related assets. Any potential transaction is subject to further due diligence and other conditions and we cannot at this time assess the probability of concluding any transaction under discussion or under what terms, including price, these assets may be sold.

On July 16, 2009, we announced our decision to procure a replacement for the Telstar 14/Estrela do Sul satellite at its current 63 degrees West orbital location. The new high powered Ku-band satellite will be known as Telstar 14R in most service regions and Estrela do Sul 2 in Brazil, and will have 58 transponder equivalents (36 MHz). We anticipate the new satellite will be operational in the second half of 2011. We have selected Space Systems/Loral as the manufacturer for Telstar 14R and International Launch Services for the satellite’s launch into geostationary orbit.

On August 3, 2009, Telesat Canada completed an offer to exchange (1) any and all of its approximately US$693 million outstanding principal amount of restricted 11.0% Senior Notes due 2015 for an equal amount of registered 11.0% Senior Notes due 2015 and (2) any and all of its approximately US$217 million outstanding principal amount of restricted 12.5% Senior Subordinated Notes due 2017 for an equal amount of registered 12.5% Senior Subordinated Notes due 2017. Holders of approximately US$683 million outstanding principal amount of the 11.0% Senior Notes due 2015 and all of the 12.5% Senior Subordinated Notes due 2017 exchanged their restricted notes for registered notes. Telesat LLC is the co-issuer of the notes.

June 30, 2009 Compared with June 30, 2008

The following compares our consolidated results of operations for the three and six months ended June 30, 2009 and 2008.

Revenue

	Three Months				Six Months				% Increase / Decrease
	Ended June 30,				Ended June 30,				Three Months			Six Months
	2009		2008		2009		2008		2009 vs. 2008			2009 vs. 2008
	(in CAD$ millions except percentages)
Broadcast		103		81		209		160		26	%		30	%
Enterprise		91		80		182		159		14	%		14	%
Consulting and other		7		8		14		13		(9	)%		14	%
Total revenue		201		169		405		332		19	%		22	%

38

Revenues from Broadcast increased by $22 million for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, and by $49 million for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. The increases in both periods are primarily due to new services on Nimiq 4 (a satellite which only entered into commercial service in October 2008), the impact of the stronger U.S. dollar used to convert the U.S. dollar denominated revenues into Canadian dollars, and new space segment sales. These increases were partially offset by the scheduled turndown of certain transponders on Nimiq 2, the removal from service of Nimiq 4iR on January 30, 2009 and the removal from service of Nimiq 3 on June 1, 2009.

Revenues from Enterprise increased by $11 million for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, and by $23 million for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. The increases in both periods are primarily due to new services on Telstar 11N (a satellite which came into service in the second quarter of 2009), to the impact of the stronger U.S. dollar used to convert the U.S. dollar denominated revenues into Canadian dollars and to new services.

Consulting and other decreased by $1 million for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008 due to decreases in a number of consulting programs. Consulting and other increased by $1 million for the six months ended June 30, 2009 as compared to the same period in 2008. Consulting contracts by nature are generally one-time contracts in specific periods and do not normally recur year-over-year.

The impact of the stronger U.S. dollar in 2009 on total revenues was an increase of $13.2 million for the three months ended June 30, 2009 and an increase of $32.0 million for the six months ended June 30, 2009. The average exchange rate during the second quarter of 2009 for the translation of revenue items was 1USD = 1.182 CAD, whereas the average rate for the second quarter of 2008 was 1USD = 1.0087 CAD. The average exchange rate for the six month period in 2009 for the translation of revenue items was 1USD = 1.2114 CAD and compared to 1USD = 1.0018 CAD in 2008.

Operating Expenses

	Three Months				Six Months				% Increase / Decrease
	Ended June 30,				Ended June 30,				Three Months			Six Months
	2009		2008		2009		2008		2009 vs. 2008			2009 vs. 2008
	(in CAD$ millions except percentages)
Amortization		64		57		125		116		11	%		8	%
Operations and administration		59		60		118		119					1	%
Cost of equipment sales		4		6		8		12		(31	)%		(29	)%
Total operating expenses		127		123		251		247		3	%		2	%

Amortization expense increased by $7 million for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008 due to the additional expense for Nimiq 4 and Telstar 11N in the 2009 period. The increase was partially offset by lower amortization on Telstar 10 due to its classification as assets held for sale in June 2009. Nimiq 4 went into service on October 6, 2008 and Telstar 11N went into service on March 31, 2009; therefore, there was no corresponding expense in the second quarter of 2008.

Amortization expense increased by $9 million for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. The increase is due to six months of amortization for Nimiq 4 and three months for Telstar 11N with no corresponding expense in 2008. The increase was partially offset by one month less amortization expense for Telstar 10.

Operations and administration expenses decreased by $1 million for the three and six month periods ended June 30, 2009 as compared to the same periods in 2008. This is mainly due to cost reductions partially offset by increases for the foreign exchange impact of U.S. dollar denominated expenses, the 2009 stock option expense and certain non-recurring expenses. The stock option plan was introduced in September 2008 and the first expense under the plan was recorded during the fourth quarter of 2008, following the completion of a valuation of the stock options.

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Cost of equipment sales decreased by $2 million for the three months ended June 30, 2009 and by $4 million for the six months ended June 30, 2009 as compared to the same periods in 2008. The decreases are the result of fewer equipment sales, notably in the oil and gas industry and to the end of the amortization into income of prior period Ka-band equipment sales to resellers. The second quarter of 2008 also included a one-time equipment sale to a Broadcast customer. The negative equipment sale margin in the second quarter of 2009 is due to expensing $1 million for deferred charges incurred in 2008 and an inventory write-down.

Interest Expense

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
	(in CAD$ millions)
Debt service costs		68			64			144			136
Dividends on senior preferred shares		3			3			7			5
Capitalized interest		(4	)		(11	)		(13	)		(20	)
Total interest expense		67			56			138			121

Debt service costs increased $4 million for the quarter ended June 30, 2009 as compared to the same quarter in 2008, and increased $8 million for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. These increases are both due to the impact of the stronger U.S. dollar in 2009 on the U.S. dollar denominated debt, partially offset by a lower weighted average interest rate in 2009 for the Canadian dollar denominated debt.

Other Expense (Income)

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
	(in CAD$ millions)
Foreign exchange loss (gain)		(289	)		(21	)		(188	)		102
Loss (gain) on financial instruments		95			(18	)		37			(50	)
Interest income		—			—			—			(1	)
Performance incentive payments and milestone interest expense		1			1			2			2
Other		—			(1	)		—			(1	)
Total other expense (income)		(193	)		(39	)		(149	)		52

The foreign exchange gain for the three months ended June 30, 2009 increased by $268 million compared to the three month period ended June 30, 2008. Although the U.S. dollar was stronger throughout 2009 compared to 2008, the Canadian dollar actually strengthened during the second quarters of both years (by 8% during the second quarter of 2009 and by 1% for the same quarter of 2008). The resulting impact of this movement on our U.S. dollar denominated debt is a gain in both periods from the balance reported at March 31. The foreign exchange gain for the six months ended June 30, 2009 increased by $290 million compared to the same period in 2008, as the Canadian dollar strengthened relative to its position at December 31, 2008 by 5%, whereas the Canadian dollar weakened by 3% in the same period of 2008. The impact of a stronger Canadian dollar on the U.S. dollar denominated debt results in a gain, as opposed to the loss in the first six months of 2008 due to the weaker Canadian dollar in that timeframe.

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The losses and gains on financial instruments result from the impact of the variations in exchange rates and interest rates on the market value of the derivative instruments: foreign currency forward contracts, cross-currency basis swap and interest rate swaps.

Income Taxes

The income tax expense for the three months ended June 30, 2009 was $13 million, a decrease of $5 million compared to the expense for the three months ended June 30, 2008 mainly due to the successful resolution to an appeal concerning Anik F1 and F1R deductions. The income tax expense for the six months ended June 30, 2009 was $18 million, a $16 million increase over the same period in 2008, mainly due to the impact on future taxes of the foreign exchange gains, partially offset by the appeal proceeds.

Backlog

Contracted revenue backlog represents our expected future revenues (without discounting for present value) under all current contractual service agreements, including any deferred revenues that we will recognize in the future in respect of cash already received. The significant majority of this contractual backlog is in respect of service or other agreements for satellite capacity. Our contracted backlog is comprised of all amounts due under a contract through the expiration date. We do not assume a given contract will be renewed beyond its stated expiration date. Contracted backlog is attributable both to satellites currently in orbit and to one satellite, Nimiq 5, currently under construction and scheduled for launch in late 2009. As of June 30, 2009, our contracted backlog, including the Nimiq 5 satellite, was approximately $5.1 billion. This amount includes approximately $357 million of customer prepayments that Telesat has already received.

We expect our backlog to be recognized as follows:

Balance of 2009	2010		2011		2012		2013		2014 and thereafter
(in CAD$ millions)
330		646		574		488		425		2,619

Liquidity and Capital Resources

Cash and Available Credit

As of June 30, 2009, we had $81 million of cash and short-term investments as well as approximately $153 million of borrowing availability under our Revolving Facility. Subsequent to June 30, 2009, we received approximately US$60 million as an initial payment for the Telstar 10 transaction with the remainder of the purchase price, subject to adjustment, to be paid on or before July 9, 2010. We believe that cash and short-term investments as of June 30, 2009, net cash provided by operating activities, cash flow from customer prepayments, the proceeds from the Telstar 10 transaction, and drawings on the available lines of credit under the Credit Facility (as defined below) will be adequate to meet our expected cash requirement for activities in the normal course of business, including interest and required principal payments on debt as well as planned capital expenditures for the next twelve months.

We believe we have adopted conservative policies relating to and governing the investment of our surplus cash. The investment policy does not permit us to engage in speculative or leveraged transactions, nor does it permit us to hold or issue financial instruments for trading purposes. The investment policy was designed to preserve capital and safeguard principal, to meet all of our liquidity requirements and to provide a competitive rate of return. The investment policy addresses dealer qualifications, lists approved securities, establishes minimum acceptable credit ratings, sets concentration limits, defines a maturity structure, requires all firms to safe keep securities, requires certain mandatory reporting activity and discusses review of the portfolio. We operate our investment program under the guidelines of our investment policy.

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Cash Flows From Operating Activities

Cash provided by operating activities for the six months ended June 30, 2009 was $127 million. This amount consists of net earnings after adjustment for non-cash items of $146 million, customer prepayments of $3 million and a decrease in cash flows from operating assets and liabilities of $22 million. The net earnings after adjustment for non-cash items of $146 million resulted from the net earnings of $148 million increased by the amortization of $125 million, the future income tax expense of $20 million, the unrealized gain on derivatives of $43 million, the unpaid dividends on preferred shares of $7 million and stock-based compensation of $3 million, partially offset by the unrealized foreign exchange gain of $186 million and other items of $15 million, primarily resulting from the recognition of deferred revenues.

Cash provided by operating activities for the six months ended June 30, 2008 was $48 million. This amount consists of net earnings after adjustment for non-cash items of $41 million, customer prepayments of $20 million and a decrease in cash flows from operating assets and liabilities of $13 million. The net earnings after adjustment for non-cash items of $41 million include the net loss of $89 million, the future income tax recovery of $3 million, the unrealized gain on derivatives of $40 million and other items of $23 million, primarily resulting from the recognition of deferred revenues. These items are completely offset by the amortization of $116 million, the unrealized foreign exchange loss of $75 million and the unpaid dividends on preferred shares of $5 million.

Cash Flows Used in Investing Activities

Cash used in investing activities for the six months ended June 30, 2009 was $124 million, primarily for capital expenditures for the construction of the Nimiq 5 and Telstar 11N satellites.

Cash used in investing activities for the six months ended June 30, 2008 was $117 million, and was for capital expenditures of $125 million, partially offset by the receipt of insurance proceeds of $4 million and for proceeds on the disposal of assets of $5 million. The capital expenditures were primarily for the construction of the Nimiq 4 (launched in September 2008), Telstar 11N (launched in February 2009) and Nimiq 5 satellites. In addition, there were capital expenditures for satellite control facilities for these satellites.

Cash Flows From (Used in) Financing Activities

Cash used in financing activities for the six months ended June 30, 2009 was $21 million, and consists of the repayment of bank loans and debt financing of $38 million, capital leases payments of $4 million and satellite performance incentive payments of $3 million, partially offset by the proceeds from borrowings of $24 million.

Cash provided by financing activities for the six months ended June 30, 2008 was $54 million, and results from the proceeds of borrowings of $132 million, partially offset by repayments of bank loans and debt financing of $71 million, capital lease payments of $5 million and satellite performance incentive payments of $2 million.

Liquidity

The Telesat Canada purchase price of $3.25 billion as well as transaction fees and expenses, the repayment of existing Loral Skynet debt and preferred stock, and Telesat Canada debt were funded by cash from Loral and PSP as well as borrowings by Telesat Canada.

A large portion of our annual cash receipts are reasonably predictable because they are primarily derived from an existing backlog of long-term customer contracts and high contract renewal rates. We believe our cash flow from operations will be sufficient to provide for our capital requirements and to fund our interest and debt payment obligations for the next twelve months.

Two of our satellites — Anik F1 and Telstar 14 — have expected end-of-commercial service lives between 2011 and 2013. The planned replacement of Telstar 14 and the potential replacement of Anik F1 will require significant capital expenditures during the 2010-2013 period. Where economically feasible, we may choose to invest in new satellites to utilize available orbital slots and further grow our business. Cash required for current and future satellite construction programs will be funded from some or all of the following: cash and short-term investments, cash flow from operations, cash flow from customer prepayments or through borrowings on available lines of credit under the Credit Facility. In addition, we may sell certain satellite assets, and in accordance with the terms and conditions of our Credit Facility, reinvest the proceeds in replacement satellites or pay down indebtedness under that senior Credit Facility. Subject to market conditions, and subject to compliance with the terms and conditions of our Credit Facility and the financial leverage covenant tests therein, we may also have the ability to obtain additional secured or unsecured financing to fund replacement or additional satellites. However, our ability to access these sources of funding is not guaranteed and, therefore, we may not be able to fully fund replacement and new satellite construction programs.

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We maintain a target of approximately $25 million in cash and cash equivalents within our subsidiary operating entities for the management of our liquidity. Our intention is to maintain at least this level of cash and cash equivalents to assist with the day-to-day management of our cash flows. We may typically transfer funds between subsidiary entities without restriction. Exceptions, where restrictions apply, include transfers to and from unrestricted subsidiaries, as defined in borrowing arrangements. Transfers across international boundaries may be subject to withholding taxes or local legal restrictions, including foreign exchange controls or solvency tests governing dividends.

Debt

In connection with the Telesat Canada acquisition, we entered into agreements with a syndicate of banks to provide Telesat Canada with, in each case as described below, senior secured credit facilities (the “Credit Facility”), a senior bridge loan facility (the “Senior Bridge Loan”) and a senior subordinated bridge loan facility (the “Senior Subordinated Bridge Loan”) (together the “Facilities”). The Facilities are also guaranteed by Telesat Holdings and certain Telesat Canada subsidiaries.

Senior Secured Credit Facilities

The Credit Facility is secured by substantially all of our assets. Under the terms of the Credit Facility, we are required to comply with certain covenants which are usual and customary for highly leveraged transactions, including financial reporting, maintenance of certain financial covenant ratios for leverage and interest coverage, a requirement to maintain minimum levels of satellite insurance, restrictions on capital expenditures, a restriction on fundamental business changes or the creation of subsidiaries, restrictions on investments, restrictions on dividend payments, restrictions on the incurrence of additional debt, restrictions on asset dispositions and restrictions on transactions with affiliates. We were also required to enter into swap agreements that will effectively fix or cap the interest rates on at least 50% of our funded debt for a three year period ending October 31, 2010. Each tranche of the Credit Facility is subject to mandatory principal repayment requirements, which, in the initial years, are generally 1/4 of 1% of the initial aggregate principal amount.

The Credit Facility consists of several tranches, which are described below.

Revolving Facility

The Revolving Facility is a $153 million loan facility with a maturity date of October 31, 2012. Loans under the Revolving Facility currently bear interest at a floating rate of the Bankers Acceptance borrowing rate plus an applicable margin of 275 basis points. The applicable margin is subject to a leverage pricing grid. The Revolving Facility currently has an unused commitment fee of 50 bps that is subject to adjustment based upon a leverage pricing grid. As of June 30, 2009, other than approximately $0.4 million in drawings related to letters of credit, there were no borrowings under this facility.

Canadian Term Loan Facility

The Canadian Term Loan Facility is a $200 million loan with a maturity date of October 31, 2012. As of June 30, 2009, $190 million of the facility was drawn. The Canadian Term Loan Facility bears interest at a floating rate of the Bankers Acceptance borrowing rate plus an applicable margin of 275 basis points. The required repayments on the Canadian term loan facility were $5 million for the year ended December 31, 2008 and will be $10 million for the year ended December 31, 2009.

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U.S. Term Loan Facility

The U.S. Term Loan Facility is a US$1.905 billion ($2.215 billion) loan facility denominated in U.S. dollars with a final maturity date of October 31, 2014. As of June 30, 2009, US$1,728.7 billion ($1,972.0 billion) was drawn. The U.S. Term Loan Facility is made up of two facilities, a US$1.755 billion U.S. Term Loan I Facility and a US$150 million U.S. Term Loan II Facility that was a 12 month delayed draw facility for satellite capital expenditures. The U.S. Term Loan Facility bears interest at LIBOR plus an applicable margin of 300 basis points.

The U.S. Term Loan II Facility has an unused commitment fee of 1/2 the applicable margin which is 150 basis points. We drew the full amount of this facility during the 12 month availability period. As of June 30, 2009, US$148.5 million of the facility was drawn.

In order to hedge our currency risk both at closing and over the life of the loans, Loral Skynet entered into a currency basis swap to synthetically convert US$1.054 billion of U.S. dollar commitment to $1.224 billion and transferred the benefit of the basis swap to Telesat Canada prior to closing. This currency basis swap is being amortized on a quarterly basis at¹/4 of 1% of the original amount. As of June 30, 2009, the balance of this swap was $1.2059 billion and bears interest at a floating rate of Bankers Acceptance plus an applicable margin of approximately 382 basis points.

Senior Bridge Loan and Senior Notes

The Senior Bridge Loan was a US$692.8 million senior unsecured loan facility denominated in U.S. dollars advanced on the closing date. The Senior Bridge Loan had a maturity of October 31, 2008 and an initial interest rate per annum equal to the greater of 9% or three-month LIBOR plus the applicable margin. The applicable margin increased over time subject to an interest rate cap of 11%. The Senior Bridge Loan was subject to a securities demand on or after April 28, 2008.

On June 30, 2008, we exchanged the outstanding US$692.8 million Senior Bridge Loan for US$692.8 million Senior Notes ($873.1 million at March 31, 2009). The Senior Notes bear interest at an annual rate of 11.0% and are due November 1, 2015. The Senior Notes include covenants or terms that restrict our ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) modify or cancel our satellite insurance, (vi) effect mergers with another entity, and (vii) redeem the Senior notes prior to May 1, 2012, in each case subject to exceptions provided in the Senior Notes indenture.

On August 3, 2009, we completed an offer to exchange any and all of the US$692.8 million outstanding principal amount of restricted 11.0% Senior Notes due 2015 for an equal amount of registered 11.0% Senior Notes due 2015. Holders of US$682.8 million outstanding principal amount of the 11.0% Senior Notes due 2015 exchanged their restricted notes for registered notes.

Senior Subordinated Bridge Loan and Senior Subordinated Notes

The Senior Subordinated Bridge Loan was a US$217.2 million senior subordinated unsecured loan facility denominated in U.S. dollars advanced on the closing date. The Senior Subordinated Bridge Loan had a maturity of October 31, 2008 and an initial interest rate per annum equal to the greater of 10.5% or three-month LIBOR plus the applicable margin. The applicable margin increased over time subject to an interest rate cap of 12.5%. The Senior Subordinated Bridge Loan was subject to a securities demand on or after April 28, 2008.

On June 30, 2008, we also exchanged the outstanding US$217.2 million Senior Subordinated Bridge Loan for US$217.2 million Senior Subordinated notes ($273.7 million at March 31, 2009). The Senior Subordinated notes bear interest at a rate of 12.5% and are due November 1, 2017. The Senior Subordinated notes include covenants or terms that restrict our ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) modify or cancel our satellite insurance, (vi) effect mergers with another entity, and (vii) redeem the Senior Subordinated notes prior to May 1, 2013, in each case subject to exceptions provided in the Senior Subordinated notes indenture.

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On August 3, 2009, we completed an offer to exchange any and all of the US$217.2 million outstanding principal amount of restricted 12.5% Senior Subordinated Notes due 2017 for an equal amount of registered 12.5% Senior Subordinated Notes due 2017. Holders of all of the 12.5% Senior Subordinated Notes due 2017 exchanged their restricted notes for registered notes.

As of June 30, 2009, we were in compliance with the financial covenants of our Credit Facility and the indentures governing our 11% Senior Notes due 2015 and 12.5% Senior Subordinated Notes due 2017.

Debt Service Cost

An estimate of the debt service cost on the Facilities is based upon assumptions of LIBOR and Bankers Acceptance rates and the applicable margin for the Credit Facility, the Senior Bridge Loan and the Senior Subordinated Bridge Loan. Our estimated debt service cost for 2009 is approximately $288 million.

Derivatives

We have used interest rate and currency derivatives to hedge our exposure to changes in interest rates and changes in foreign exchange rates.

We use forward contracts to hedge our foreign currency risk on anticipated transactions, mainly related to the construction of satellites. At June 30, 2009, we had outstanding foreign exchange contracts which require us to pay Canadian dollars ($22.0 million) to receive US$21.2 million for future capital expenditures. The fair value of these derivative contract liabilities was an unrealized gain of $2.6 million as of June 30, 2009. These forward contracts are due between July 2, 2009 and December 1, 2009.

In order to hedge our currency risk, both at closing and over the life of the loans, Loral Skynet entered into a currency basis swap to synthetically convert US$1.054 billion of the U.S. Term Loan Facility debt into $1.224 billion of debt. Loral Skynet transferred the currency basis swap to Telesat Canada prior to closing. The fair value of this derivative contract, which at June 30, 2009 had a balance of $1,205.9 million (US$1,038.2 million), resulted in an unrealized loss of $34.1 million. This non-cash loss will remain unrealized until this contract is settled. The contract is due October 31, 2014.

On November 30, 2007, we entered into a series of five interest rate swaps to fix interest rates on US$600 million of U.S. dollar denominated debt and $630 million of Canadian dollar denominated debt for an average term of 3.2 years. As of June 30, 2009, the fair value of these derivative contract liabilities was an unrealized loss of CAD$61.3 million. This non-cash loss will remain unrealized until the contracts are settled. With these transactions, we met our requirement under the Credit Facility to effectively fix or cap at least 50% of our funded debt for a three year period from October 31, 2007. These contracts are due between January 31, 2010 and November 28, 2011.

Non-GAAP Measures

Adjusted EBITDA and Adjusted EBITDA margin

The common definition of EBITDA is “Earnings Before Interest, Taxes, Depreciation and Amortization”. In evaluating financial performance, we use revenues and deduct certain operating expenses (including making adjustments to operating expenses for stock based compensation expense and unusual and non-recurring items, including restructuring related expenses) to obtain operating loss/income before depreciation and amortization (“Adjusted EBITDA”) and Adjusted EBITDA margin (defined as the ratio of Adjusted EBITDA to operating revenues) as measures of our operating performance.

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Adjusted EBITDA allows us and investors to compare our operating results with that of competitors exclusive of depreciation and amortization, interest and investment income, interest expense, and other expense. Financial results of competitors in our industry have significant variations that can result from timing of capital expenditures, the amount of intangible assets recorded, the differences in assets’ lives, the timing and amount of investments, the effects of other income (expense), and unusual and non-recurring items. The use of Adjusted EBITDA allows us and investors to compare operating results exclusive of these items. Competitors in our industry have significantly different capital structures. The use of Adjusted EBITDA facilitates comparability of performance by excluding interest expense.

We believe the use of Adjusted EBITDA and Adjusted EBITDA margin along with GAAP financial measures enhances the understanding of our operating results and is useful to us and investors in comparing performance with competitors, estimating enterprise value and making investment decisions. Adjusted EBITDA as used here may not be comparable to similarly titled measures reported by competitors. Adjusted EBITDA should be used in conjunction with GAAP financial measures and is not presented as an alternative to cash flow from operations as a measure of our liquidity or as an alternative to net income as an indicator of our operating performance.

For the quarter ended June 30, 2009, Adjusted EBITDA margin improved to 71%, compared to 62% in the same quarter in 2008.

Reconciliation of Adjusted EBITDA to Net Earnings:

FOR THE PERIOD ENDED JUNE 30	Three Months						Six Months
(in millions of Canadian dollars) (unaudited)	2009			2008			2009			2008
Net earnings (loss) applicable to common shares		187.1			12.4			148.0			(89.0	)
Income tax expense		13.4			17.7			17.6			1.3
Other expense (income)		(192.9	)		(39.1	)		(149.0	)		51.8
Interest expense		66.7			55.7			137.8			121.0
Amortization		63.6			57.3			124.9			116.1
Unusual & Non-recurring items		3.1			0.5			3.9			1.7
Non cash expense related to stock compensation		1.5			—			3.1			—
Adjusted EBITDA		142.5			104.5			286.3			202.9
Operating Revenues		201.3			169.6			405.3			332.3
Adjusted EBITDA Margin		71	%		62	%		71	%		61	%

Note: Unusual & non-recurring items are restructuring related expenses.

Consolidated EBITDA for Covenant Purposes

Under the terms of our Credit Facility, we are required to comply with certain financial ratio maintenance covenants.

Telesat’s Consolidated EBITDA for Covenant Purposes is defined as income (loss) before the deduction of income taxes for Telesat Holdings and Restricted Subsidiaries plus interest expense, depreciation expense, amortization expense, extraordinary losses and unusual and non-recurring charges, non cash charges, losses on asset dispositions, any expenses or charges incurred in connection with any issuance of debt, any impairment charges or asset write off, foreign withholding taxes paid or accrued, non-cash charges related to stock compensation expense, consulting fees payable to Loral in mezzanine securities, plus, until March 31, 2009, projected cost savings expected to be achieved following the closure of the Telesat Canada acquisition. Additional sums which may be added include collections on sales type leases, and further adjustments made by made for revenues which may have been earned by satellites which have been subject to an insured loss. Deductions which are made in calculating Telesat’s Consolidated EBITDA for Covenant Purposes include extraordinary and non-recurring gains, non-cash gains, gains on asset sales and gains on sales-type leases, unless collected during the period. Further adjustments are made to account for income from Unrestricted Subsidiaries, and currency gains and losses (including gains or losses on derivative contracts).

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Consolidated EBITDA for Covenant Purposes is not a presentation made in accordance with GAAP, is not a measure of financial condition or profitability, and should not be considered as an alternative to (1) net income (loss) determined in accordance with GAAP or (2) operating cash flows determined in accordance with GAAP. Additionally, Consolidated EBITDA for Covenant Purposes is not intended to be a measure of free cash flow for management’s discretionary use as it does not include certain cash requirements for such as interest payments, tax payments and debt service requirements. We believe that the inclusion of Consolidated EBITDA for Covenant Purposes herein is appropriate to provide additional information concerning the calculation of certain financial covenants in the Credit Facility and the indentures governing the Senior Notes and Senior Subordinated Notes. Consolidated EBITDA for Covenant Purposes is a material component of these covenants. Non-compliance with the financial ratio maintenance covenants contained in our Credit Facility could result in the requirement to immediately repay all amounts outstanding, while non-compliance with the debt incurrence ratio contained in the indentures governing the Notes would prohibit us from being able to incur additional indebtedness other than pursuant to specific exceptions. Because not all companies use identical calculations, this presentation of Consolidated EBITDA for Covenant Purposes may not be comparable to other similarly titled measures of other companies. We believe the disclosure of the calculation of Consolidated EBITDA for Covenant Purposes provides information that is useful to an investor’s understanding of our liquidity and financial flexibility.

The following is a reconciliation of earnings (loss) before income taxes, which is a GAAP measure of our operating results, to Consolidated EBITDA for Covenant Purposes, as defined in our indentures and Credit Facility agreements (our “debt agreements”) and the calculation of the ratio of net debt to Consolidated EBITDA for Covenant Purposes, and interest expense to Consolidated EBITDA for Covenant Purposes as defined in our debt agreements. The terms and related calculations are defined in our debt agreements, copies of which are publicly available.

	Three			Three			Twelve			Twelve
	Months			Months			Months			Months
	Ended June 30,			Ended June 30,			Ended December 31,			Ended June 30,
(in CAD$ millions)	2008			2009			2008			2009
(Loss) earnings before income taxes		30.1			200.4			(987.3	)		(734.0	)
Less: impact of unrestricted subsidiary		(1.2	)		0.1			(0.4	)		0.9
Consolidated earnings for Covenant Purposes		28.9			200.5			(987.7	)		(733.1	)
Plus:
Interest expense		55.5			66.2			255.5			272.2
Depreciation expense		44.9			51.7			184.4			195.0
Any impairment charge or asset write-off and amortization of intangibles arising pursuant to FASB No. 141		11.6			10.7			531.7			529.8
Other		27.2			44.7			47.0			69.9
Less:
Any income from the early extinguishment of indebtedness or hedging obligations on other derivative instruments		(18.5	)		57.9			(251.7	)		(201.2	)
Currency transaction losses (gains)		(20.6	)		(288.5	)		697.9			408.0
Other		—			0.2			(1.2	)		(0.3	)
Consolidated EBITDA For Covenant Purposes		129.0			143.4			475.9			540.3

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As of June 30, 2009, Telesat’s Consolidated Total Debt to Consolidated EBITDA for Covenant Purposes ratio, for credit agreement purposes, was 6.22:1, which was less than the maximum test ratio of 9.00:1. The Consolidated EBITDA for Covenant Purposes to Consolidated Interest Expense ratio, for credit agreement compliance purposes, was 1.89:1, which was greater than the minimum test ratio of 1.25:1.

The following is a reconciliation of our Consolidated Total Debt for Covenant Purposes to Debt Financing:

Debt
(in millions of dollars)

	Three Months Ended			Year Ended
($ millions)	June 30, 2009			December 31, 2008
U.S. dollar denominated debt
U.S. Term Loan I (USD$)		1,728.7			1,737.5
U.S. Term Loan II (USD$)		148.5			149.2
Senior Notes (USD$)		692.8			692.8
Senior Subordinated Notes (USD$)		217.2			217.2
		2,787.2			2,796.7
Foreign exchange adjustment		452.9			628.1
Subtotal (CAD$)		3,240.1			3,424.8
Debt issue expenses		(78.6	)		(83.6	)
CAD denominated debt
Canadian Term Loan		190.0			195.0
Revolving facility		—			—
Other debt financing		—			0.3
Debt financing		3,351.5			3,536.5

	Three Months Ended			Year Ended
(in CAD$ millions)	June 30, 2009			December 31, 2008
Debt financing		3,351.5			3,536.5
Adjustments for Covenant Purposes:
Unrestricted subsidiary		(24.7	)		(25.4	)
Debt issue expenses		78.6			83.6
Capital leases		35.1			39.9
Cross currency basis swap adjustment		(1.0	)		(65.9	)
Other		0.2			0.2
Cash (adjusted for unrestricted subsidiaries)		(79.6	)		(98.5	)
Consolidated Total Debt for covenant purposes		3,360.1			3,470.4

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The following is a reconciliation of our consolidated interest expense for covenant purposes to interest expense:

	Twelve Months Ended			Year Ended
(in CAD$ millions)	June 30, 2009			December 31, 2008
Interest expense		274.4			257.6
Adjustments for Covenant Purposes:
Capitalized interest		32.1			39.0
Dividends on preferred shares (non-cash)		(11.9	)		(9.9	)
Amortization of financing costs		(11.0	)		(9.8	)
Cash interest income		(1.1	)		(1.5	)
Other		5.4			—
Effect of unrestricted subsidiary		(2.2	)		(2.1	)
Interest expense for Covenant Purposes		285.6			273.4

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Credit Risk Related to Financial Instruments

Financial instruments that potentially subject us to a concentration of credit risk consist of cash and cash equivalents and short-term investments. Investment of these funds is done with high quality financial institutions and is governed by our corporate investment policy, which aims to reduce credit risk by restricting investments to high-grade U.S. dollar and Canadian dollar denominated investments.

We are exposed to credit risk if counterparties to our derivative instruments are unable to meet their obligations. It is expected that these counterparties will be able to meet their obligations as they are institutions with strong credit ratings which have generally received support from national governments. We regularly monitor their credit risk and credit exposure.

Foreign Exchange Risk

Our operating results are subject to fluctuations as a result of exchange rate variations to the extent that transactions are made in currencies other than Canadian dollars. The most significant impact of variations in the exchange rate is on the US dollar denominated debt financing. We are also exposed to foreign currency risk on anticipated transactions, such as the costs of satellite construction and acquisition.

Our main currency exposures as at June 30, 2009 lie in our US dollar denominated cash and cash equivalents, accounts receivable, accounts payable and debt financing.

Approximately 45% of our revenues for the quarter ended June 30, 2009, certain of our expenses and a substantial portion of our indebtedness and capital expenditures are denominated in US$. As a result, the volatility of United States currency may expose us to foreign exchange risks. In the second quarter of 2009, as a result of a significant increase in the value of the Canadian dollar, we recorded foreign exchange gains of approximately $289 million, prior to any loss on hedging instruments.

Interest Rate Risk

We are exposed to interest rate risk on our cash and cash equivalents and our long term debt which is primarily variable rate financing. Changes in the interest rates could impact the amount of interest we are required to pay.

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Derivative Financial Instruments

We use derivative instruments to manage our exposure to foreign currency and interest rate risk. Our policy is that we do not use derivative instruments for speculative purposes.

We use the following instruments:

• forward currency contracts to hedge foreign currency risk on anticipated transactions, mainly related to the construction of satellites;

• a cross-currency basis swap to hedge the foreign currency risk on a portion of our US dollar denominated debt; and

• interest rate swaps to hedge the interest rate risk related to debt financing which is primarily variable rate financing.

Fair value is the amount that willing parties would accept to exchange a financial instrument based on the current market for instruments with the same risk, principal and remaining maturity. Fair values are based on estimates using present value and other valuation methods.

These estimates are affected significantly by the assumptions for the amount and timing of estimated future cash flows and discount rates, which all reflect varying degrees of risk. Potential income taxes and other expenses that would be incurred on disposition of these financial instruments are not reflected in the fair values. As a result, the fair values are not necessarily the net amounts that would be realized if these instruments were actually settled.

The table below provides information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations, and our derivate instruments and other financial instruments that are sensitive to changes in foreign exchange rates, including currency forwards and our cross-currency basis swap. The information is reported in Canadian dollar equivalents, which is our reporting currency.

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Interest Rate Sensitivity

June 30, 2009	Expected Maturity Date
(CAD Equivalent in millions)	2009			2010			2011			2012			2013			Thereafter			Total			Fair Value
Liabilities
Long-term Debt
Variable rate (CAD denominated)		5.0			15.0			90.0			80.0			—			—			190.0			173.9
Average interest rate		3.19	%		3.29	%		3.97	%		4.64	%		—			—
Variable rate (USD denominated)		11.1			22.1			22.1			22.1			22.1			2,082.5			2,182.2			2,040.3
Average interest rate		3.41	%		3.54	%		4.22	%		4.89	%		5.33	%		5.67	%
Fixed rate (USD denominated)		—			—			—			—			—			1,057.9			1,057.9			1,068.9
Average interest rate		—			—			—			—			—			11.36	%		11.36	%

	Expected Maturity Date
	2009		2010			2011			2012		2013		Thereafter		Total		Fair Value
Interest Rate Derivatives
Interest Rate Swaps
Variable to Fixed (CAD notional)		—		330.0			300.0			—		—		—		630.0		(27.1	)
Average pay rate		—		4.30	%		4.40	%		—		—		—
Average receive rate				0.54	%		1.22	%
Variable to Fixed (USD notional)		—		116.3			581.3			—		—		—		697.5		(34.2	)
Average pay rate		—		3.79	%		3.99	%		—		—		—
Average receive rate				0.54	%		1.22	%

Exchange Rate Sensitivity

June 30, 2009	Expected Maturity Date
(CAD Equivalent in millions)	2009			2010			2011			2012			2013			Thereafter			Total			Fair Value
On-Balance Sheet Financial Instruments
USD Functional Currency
Assets
Derivative Assets (Cross currency basis swap)		6.1			12.2			12.2			12.2			12.2			1,150.8			1,205.9			(34.1	)
Liabilities
USD denominated long-term debt
Variable rate (USD denominated)		11.1			22.1			22.1			22.1			22.1			2,082.5			2,182.2			2,040.3
Average interest rate		3.41	%		3.54	%		4.22	%		4.89	%		5.33	%		5.67	%
Fixed rate (USD denominated)		—			—			—			—			—			1,057.9			1,057.9			1,068.9
Average interest rate		—			—			—			—			—			11.36	%		11.36	%		—

	Expected Maturity Date
	2009		2010		2011		2012		2013		Thereafter		Total		Fair Value
Anticipated Transactions and Related Derivatives
USD Functional Currency
Firmly Committed Transactions:
Forward Exchange Agreements (Receive USD/Pay CAD)
Contract Amount		22.0		—		—		—		—		—		22.0		2.6
Average Contractual		1.0387		—		—		—		—		—		1.0387
Exchange Rate

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We discuss certain legal proceedings in Telesat Canada’s final prospectus dated June 29, 2009 filed with the US Securities and Exchange Commission in the section titled “Legal Proceedings”. We refer the reader to that discussion for information concerning those proceedings.

In that final prospectus, we describe a dispute between Telesat Canada and its insurers relating to a claim made by Telesat Canada for losses suffered as a result of a power loss on the Anik F1 satellite. The amount in dispute is approximately US$18 million, and we reported having advised the insurers of Telesat Canada’s intention to proceed with arbitration of the dispute. On July 30, 2009, Telesat Canada served its claim in accordance with the procedural rules governing the arbitration. No date for the hearing has yet been set.

Item 1A. Risk Factors

Our business and operations are subject to a significant number of known and unknown risks and uncertainties.

The most significant of the known risks are summarized in, and the reader’s attention is directed to, the section titled “Risk Factors” of Telesat Canada’s final prospectus dated June 29, 2009 filed with the US Securities and Exchange Commission. There are no material changes to those risk factors. However, in the final prospectus under “Risks Related to Our Business” we identify one such risk as “Our in-orbit satellites may fail to operate as expected due to operational anomalies resulting in lost revenues, increased costs and/or termination of contracts”. On July 14, 2009, a satellite manufacturer, Boeing, announced that all of its 702 series of satellites are at risk of a failure of solar array groups (or circuits); resulting in a reduction of available power. These failures reduce the output power of the solar array. Our Anik F1 and F2 satellites are part of the Boeing 702 series. While Anik F1 and F2 have not experienced this anomaly to date, other satellite operators with 702 series satellites have experienced such failures. The presence of this anomaly in 702 series satellites may limit our ability to insure Anik F2 against any future failures which result from the 702 series anomaly or increase our costs to insure Anik F2 (Anik F1 solar arrays are not insured against any failure). Furthermore, if Anik F1 or F2 should experience this anomaly, it could result in lost revenues, other increased costs or termination of contracts by our customers.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matter to a Vote of Securities Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits

Not applicable.

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