Canadian Helicopters reports Q2 2007 results



    /NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
    DISSEMINATION IN THE UNITED STATES/

    Highlights

    - Revenue +8.0% over Q2 2006; EBITDA +38% over same period
    - Six-month revenue +5.5% over 2006: EBITDA +117% over same period

    MONTREAL, Aug. 7 /CNW Telbec/ - Canadian Helicopters Income Fund
(TSX: CHL.UN), the largest helicopter transportation services company
operating in Canada, today announced record financial and operating results
for the three- and six-month periods ended June 30, 2007.
    "As expected, the Canadian market for helicopter services is showing very
solid seasonal demand, particularly in both rates and utilization of aircraft
in resource-rich parts of Canada," said Jean-Pierre Blais, President, Canadian
Helicopters. "As a result, we have seen record results in both flying hours
and revenues, which have contributed to EBITDA growth over the comparable
period in 2006. A busy third quarter is now underway, taking advantage of
expanded seasonal flying hours."
    For the second quarter ended June 30, 2007, Canadian Helicopters flying
activities increased by 4.7 per cent per cent to 22,419 hours from 21,411 in
the comparable period in 2006. Revenue increased by 8.0 per cent or
$2.9 million to $39.2 million compared to $36.3 million for the same period in
2006. This variation is primarily explained by an increase of $2.7 million in
VFR revenue from resource based activity, an increase of $1.0 million in VFR
revenue from Oil and Gas activity in western Canada and a decrease of
$0.8 million in ancillary revenue including the Canadian Forces Contracted
Flying Training ("CFTS") contract.
    As fuel costs are passed through to customers, increases in fuel prices
do not materially affect Canadian Helicopters' financial performance. As a net
buyer of U.S. dollars, Canadian Helicopters also insulates itself against
currency fluctuations primarily on aircraft parts and insurance expenses
through hedging.
    EBITDA for three months ended June 30, 2007 advanced 38 per cent or
$3.0 million to $10.8 million from $7.8 million for the same period in 2006.
"This is due to improvement in our fleet rate and utilization and lower
maintenance expenses arising from timing differences and lower insurance
costs," said Blais.
    For the quarter ended June 30, 2007, the Fund distributed $0.2625 per
unit compared with $0.7644 of Distributable Cash per unit. In the second
quarter of 2006, $0.2625 per unit was distributed compared with $0.5259 in
Distributable Cash per unit.
    "Given the seasonal nature of the Fund's operations, it is important to
view Distributable Cash on an annual basis," said Blais. "In the past year,
Canadian Helicopters generated strong operating results and a healthy cash
position. Combined with low debt levels and significant credit facilities,
this positions us well as we have completed a strong Q2 and have entered the
peak Q3 operating season."

    2007 Six-month results

    Canadian Helicopters flying activities in the six-month period ended
June 30, 2007 increased 3.3 per cent to 33,774 hours from 32,688 hours over
the comparable period last year.
    In the six-month period ended June 30, 2007, revenue advanced
5.5 per cent or $3.3 million to $63.5 million from $60.2 million in the same
period last year. This variation is primarily explained by an increase of
$3.4 million in VFR revenue due to increased resource based activity and a
decrease of $0.1 million in ancillary revenue including the CFTS contract.

    EBITDA

    EBITDA for the six months ended June 30, 2007 advanced 117 per cent or
$4.9 million to $9.1 million when compared with EBITDA of $4.2 million for the
same period in 2006. "The rise in EBITDA in the six-month period is primarily
explained by a combination of factors that also produced an increase in EBITDA
in the second quarter of 2007," added Blais.

    Conference call:

    The Canadian Helicopters Income Fund financial results conference call
will take place Wednesday, August 8 at 11:00 a.m. EDT. To participate in this
conference call, please dial one of the following numbers approximately five
minutes prior to the commencement.

    
            Local number:            416-644-3424 (Toronto)
            Toll free number:        800-594-3615

    Please state that you are participating in the Canadian Helicopters Income
Fund call. Should you be unable to participate, an instant replay will be
available until August 15, 2007 by dialing:

            Local number:            416-640-1917 (Toronto)
            Toll free number:        877-289-8525
            Access code:             21241400 followed by #

    Forward-Looking Statements

    This press release contains forward-looking statements relating to the
future performance of the Fund. Forward-looking statements, specifically those
concerning future performance, are subject to certain risks and uncertainties,
and actual results may differ materially. Consequently, readers should not
place any undue reliance on such forward-looking statements. In addition,
these forward-looking statements relate to the date on which they were made.
The Fund disclaims any intention or obligation to update or revise any
forward-looking statement, whether as a result of new information, future
events or otherwise unless being required by applicable laws.

    Definition of EBITDA, Adjusted EBITDA, Distributable Cash and Non-GAAP
    Measures

    References to "EBITDA" are to Earnings (loss) before interest, income
taxes, depreciation and amortization, gain on disposal of property, plant and
equipment, change in operating lease credit and non-controlling interest.
References to "Adjusted EBITDA" are to EBITDA adjusted for the effects of a
non-recurring item, which represents a non-recurring employee compensation
costs associated with the purchase for cancellation of employee stock options
outstanding under the former corporate structure which was completed in
connection with the initial public offering.
    Management views Distributable Cash as an operating performance measure,
as it is a measure generally used by Canadian income funds as an indicator of
financial performance. Distributable Cash is defined as cash flows related to
operating activities plus the net change in non-cash working capital balances
less the net maintenance capital expenditures. Distributable Cash is important
as it summarizes the funds available for distribution to Unitholders. As the
Fund will distribute a significant portion of its cash on an on-going basis
and since EBITDA and Adjusted EBITDA are metrics used by many investors to
compare issuers on the basis of the ability to generate cash from operations,
management believes that, in addition to net earnings or loss, EBITDA and
Adjusted EBITDA are useful supplementary measures from which to make
adjustments to determine Distributable Cash.
    EBITDA, Adjusted EBITDA and Distributable Cash are not earnings measures
recognized under GAAP and do not have standardized meanings prescribed by
GAAP. Therefore, EBITDA, Adjusted EBITDA and Distributable Cash may not be
comparable with similar measures presented by other entities. Investors are
cautioned that EBITDA, Adjusted EBITDA and Distributable Cash should not be
construed as an alternative to net earnings (loss) determined in accordance
with GAAP as indicators of the Fund's performance, or to cash flows from
operating, investing and financing activities as measures of liquidity and
cash flows.

    Profile

    Through Canadian Helicopters Limited, Canadian Helicopters Income Fund is
the largest helicopter transportation services company operating in Canada and
one of the largest in the world based on the size of its fleet. From over
40 bases across Canada, and more than 120 aircraft operating across Canada,
Canadian Helicopters provides helicopter services to a broad range of sectors,
including emergency medical services, infrastructure maintenance, utilities,
oil and gas, forestry, mining and construction. In addition to helicopter
transportation services, Canadian Helicopters operates three flight schools
and provides third party repair and maintenance services. With 60 years of
experience, Canadian Helicopters is an industry leader in establishing safety
standards and operating procedures.

    Attachments:

    - Q2 Financial Statements
    - Management's Discussion and Analysis of Financial Condition and Results
      of Operations



    Interim Consolidated Financial Statements

    Canadian Helicopters Income Fund
    Unaudited
    June 30, 2007


    Canadian Helicopters Income Fund

                     INTERIM CONSOLIDATED BALANCE SHEETS
    (unaudited)
    As at
                                                       June 30,  December 31,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                        4,908,591     9,988,849
    Accounts receivable                             25,077,070    12,277,351
    Inventory                                       15,852,295    14,946,409
    Prepaid expenses                                   944,671       909,423
    -------------------------------------------------------------------------
    Total current assets                            46,782,627    38,122,032
    -------------------------------------------------------------------------
    Property, plant and equipment                  123,309,172   123,762,406
    Derivative financial instruments (note 2)          492,000             -
    Intangible assets                               22,733,625    23,164,875
    Goodwill                                        23,500,000    23,500,000
    -------------------------------------------------------------------------
                                                   216,817,424   208,549,313
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities        19,659,223    19,583,541
    Distributions payable                            1,162,000     1,162,000
    Advance payments from customers                  4,662,765     3,052,276
    -------------------------------------------------------------------------
    Total current liabilities                       25,483,988    23,797,817
    -------------------------------------------------------------------------
    Long-term debt (note 3)                         25,943,070    18,918,671
    Derivative financial instruments (note 2)        1,297,000             -
    Future income taxes liabilities                 31,536,908    32,145,530
    Non-controlling interest (note 4)               27,806,671    27,723,741
    -------------------------------------------------------------------------

    Unitholders' equity
    Fund units (note 4)                            104,012,290   104,012,290
    Purchased and held in trust under the long-term
     incentive plan: 81,825 units                     (910,046)            -
    Contributed surplus                                278,070             -
    Retained earnings                                2,221,473     1,951,264
    Accumulated other comprehensive income (loss)
     (notes 2 and 6)                                  (852,000)            -
    -------------------------------------------------------------------------
                                                   104,749,787   105,963,554
    -------------------------------------------------------------------------
                                                   216,817,424   208,549,313
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    Canadian Helicopters Income Fund

                     INTERIM CONSOLIDATED STATEMENTS OF
                       EARNINGS AND RETAINED EARNINGS

    (Unaudited)
                       Three-month   Three-month     Six-month     Six-month
                      period ended  period ended  period ended  period ended
                           June 30,      June 30,      June 30,      June 30,
                              2007          2006          2007          2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    Revenue             39,219,906    36,332,436    63,545,825    60,189,876
    Operating expenses  28,411,098    28,553,038    54,466,930    56,002,011
    -------------------------------------------------------------------------
    Earnings before
     undernoted items   10,808,808     7,779,398     9,078,895     4,187,865
    -------------------------------------------------------------------------
    Amortization of
     property, plant
     and equipment         810,411       794,590     1,617,249     1,583,462
    Amortization of
     intangible assets     215,625       215,625       431,250       431,250
    Loss (gain) on
     disposal of
     property, plant
     and equipment        (145,602)       20,432      (164,030)      (51,467)
    Net financing
     charges (income)
     (note 3)             (225,327)      390,847       (66,526)      694,711
    Foreign exchange
     loss (gain)            27,659       (55,054)       14,180        (3,434)
    -------------------------------------------------------------------------
                           682,766     1,366,440     1,832,123     2,654,522
    -------------------------------------------------------------------------
    Earnings before
     income taxes and
     non-controlling
     interest           10,126,042     6,412,958     7,246,772     1,533,343
    -------------------------------------------------------------------------
    Income taxes
     expense (recovery)
      Current               85,255        62,435        85,255       133,386
      Future             1,581,641    (1,545,934)     (163,622)   (4,155,340)
    -------------------------------------------------------------------------
                         1,666,896    (1,483,499)      (78,367)   (4,021,954)
    -------------------------------------------------------------------------
    Earnings before
     non-controlling
     interest            8,459,146     7,896,457     7,325,139     5,555,297
    Non-controlling
     interest           (1,754,995)   (1,629,715)   (1,527,568)   (1,160,489)
    -------------------------------------------------------------------------
    Net earnings for
     the period          6,704,151     6,266,742     5,797,571     4,394,808
    Retained earnings
     (Deficit),
     beginning of
     period             (1,718,997)   (6,924,125)    1,951,264    (2,288,510)
    Distribution
     declared           (2,763,681)   (2,763,681)   (5,527,362)   (5,527,362)
    -------------------------------------------------------------------------
    Retained earnings
     (Deficit), end
     of period           2,221,473    (3,421,064)    2,221,473    (3,421,064)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted
     earnings per Unit      0.6368        0.5952        0.5507        0.4174
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     number of Units
     outstanding        10,528,311    10,528,311    10,528,311    10,528,311
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    Canadian Helicopters Income Fund

                     INTERIM CONSOLIDATED STATEMENTS OF
                                 CASH FLOWS

    (Unaudited)
                       Three-month   Three-month     Six-month     Six-month
                      period ended  period ended  period ended  period ended
                           June 30,      June 30,      June 30,      June 30,
                              2007          2006          2007          2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net earnings for
     the period          6,704,151     6,266,742     5,797,571     4,394,808
    Items not
     affecting cash:
      Non-controlling
       interest          1,754,995     1,629,715     1,527,568     1,160,489
      Compensation
       expense under
       the long-term
       incentive plan      202,232             -       278,070             -
      Gain on derivative
       financial
       instruments        (492,000)            -      (492,000)            -
      Amortization of
       property, plant
       and equipment       810,411       794,590     1,617,249     1,583,462
      Amortization of
       intangible
       assets              215,625       215,625       431,250       431,250
      Amortization of
       deferred
       financing costs      12,200        12,200        24,399        24,399
      Loss (gain) on
       disposal of
       property, plant
       and equipment      (145,602)       20,432      (164,030)      (51,467)
      Future income
       taxes expense
       (recovery)        1,581,641    (1,545,934)     (163,622)   (4,155,340)
    -------------------------------------------------------------------------
                        10,643,653     7,393,370     8,856,455     3,387,601
    Net change in
     non-cash working
     capital balances  (10,420,768)   (8,985,513)  (12,054,682)   (9,556,572)
    -------------------------------------------------------------------------
    Cash flows related
     to operating
     activities            222,885    (1,592,143)   (3,198,227)   (6,168,971)
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Additions to
     property, plant
     and equipment        (872,280)     (458,291)   (1,653,823)     (809,773)
    Proceeds from
     disposal of
     property, plant
     and equipment         378,838        49,567       653,838       604,250
    -------------------------------------------------------------------------
    Cash flows related
     to investing
     activities           (493,442)     (408,724)     (999,985)     (205,523)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Increase in
     long-term debt      6,000,000     4,000,000     7,000,000     9,000,000
    Purchase of units
     under the
     long-term
     incentive plan       (910,046)            -      (910,046)            -
    Distributions paid
     on Fund Units      (2,763,681)   (2,763,681)   (5,527,362)   (5,527,362)
    Distributions paid
     on Class B LP
     Units                (722,319)     (722,319)   (1,444,638)   (1,444,638)
    -------------------------------------------------------------------------
    Cash flows related
     to financing
     activities          1,603,954       514,000      (882,046)    2,028,000
    -------------------------------------------------------------------------
    Net increase
     (decrease) in
     cash and cash
     equivalents         1,333,397    (1,486,867)   (5,080,258)   (4,346,494)
    Cash and cash
     equivalents,
     beginning of
     period              3,575,194       510,926     9,988,849     3,370,553
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     ending of period    4,908,591      (975,941)    4,908,591      (975,941)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental
     information
    Interest paid          254,472       378,647       575,345       670,312
    Income taxes paid       85,255        62,435        85,255       133,386
    -------------------------------------------------------------------------

    See accompanying notes



    Canadian Helicopters Income Fund

                     INTERIM CONSOLIDATED STATEMENTS OF
                             COMPREHENSIVE INCOME

    (Unaudited)
                       Three-month   Three-month     Six-month     Six-month
                      period ended  period ended  period ended  period ended
                           June 30,      June 30,      June 30,      June 30,
                              2007          2006          2007          2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    Net earnings for
     the period          6,704,151     6,266,742     5,797,571     4,394,808
    Other comprehensive
     loss                                      -                           -
    Change in fair
     value of
     derivatives
     designated as cash
     flow hedges, net
     of income taxes of
     $539,000 and
     $578,000 for the
     periods of three
     and six months
     ended June 30,
     2007,
     respectively.      (1,032,000)            -    (1,105,459)            -
    -------------------------------------------------------------------------
    Comprehensive
     income for the
     period              5,672,151     6,266,742     4,692,112     4,394,808
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Canadian Helicopters Income Fund

                        NOTES TO INTERIM CONSOLIDATED
                             FINANCIAL STATEMENTS

    June 30, 2007
    (Unaudited)

    1. BASIS OF PRESENTATION

    The unaudited interim consolidated financial statements include the
accounts of the Fund and its subsidiaries and have been prepared by management
in accordance with Canadian generally accepted accounting principles. Certain
information and disclosures normally required to be included in the notes to
the audited annual financial statements have been omitted or condensed. The
accounting principles applied are consistent with those as set out in the
Fund's annual financial statements for the period ended December 31, 2006,
except for the new accounting policies described in note 2. These interim
consolidated financial statements and the notes thereto should be read in
conjunction with the audited consolidated financial statements of the Fund for
period ended December 31, 2006 as contained in the Fund's 2006 audited annual
consolidated financial statements.
    The business of Canadian Helicopters follows a seasonal pattern with the
lowest revenue occurring from November to April. In addition, repairs and
maintenance on flying assets are not incurred evenly during a year and the
timing of such expenses within a year may vary from one year to another.
Therefore, the Fund's results for the interim period covered are not
necessarily indicative of the results that may be expected for a full year.

    2. NEW ACCOUNTING POLICIES

    On January 1, 2007, the Fund adopted the following new accounting
standards issued by the Canadian Institute of Chartered Accountants (CICA):

    Section 1530, Comprehensive Income, introduces a new financial statement
which shows the change in equity of an enterprise from transactions and other
events and circumstances from non-owner sources.
    Section 3855, Financial Instruments - Recognition and Measurement,
establishes standards for recognizing and measuring financial instruments,
namely financial assets, financial liabilities and derivatives.
    The new standard lays out how financial instruments are to be recognized
depending on their classification. Depending on financial instruments'
classification, changes in subsequent measurements are recognized in net
income or comprehensive income.

    The Fund has implemented the following classification:

    - Cash and cash equivalents are classified as "Assets held for trading".
      These financial assets are marked-to-market through net income at each
      period end.
    - Accounts receivable are classified as "Loans and receivables". After
      their initial fair value measurement, they are measured at amortized
      cost using the effective interest rate method. For the Fund, the
      measured amount generally corresponds to cost.
    - Accounts payable and accrued liabilities, distributions payable and
      long-term debt are classified as "Other financial liabilities". After
      their initial fair value measurement, they are measured at amortized
      cost using the effective interest rate method. For the Fund, the
      measured amount generally corresponds to cost.

    Section 3865, Hedges, whose application is optional, establishes how hedge
accounting may be applied. The Fund, in keeping with its risk management
strategy, has decided to apply hedge accounting to its interest rate swap and
its foreign exchange and collar contracts and treat them as cash flow hedges.
These derivatives are marked-to-market at each period end and resulting
gains/losses are recognized in comprehensive income to the extent the hedging
relationship is effective. Any ineffective portion is recognized in net
income. The amounts recognized in other comprehensive income are reclassified
in income when the hedged items affect income.
    These new standards have to be applied retroactively without restatement
of prior period amounts. Upon initial application all adjustments to the
carrying amount of financial assets and liabilities shall be recognized as an
adjustment to the opening balance of the deficit or accumulated other
comprehensive income, depending on the classification of existing financial
assets or financial liabilities. As at January 1, 2007, the Fund has
recognized a $253,459 adjustment to the opening balance of accumulated other
comprehensive income with respect to the unrealized gains on the interest rate
swap and the foreign exchange and collar contracts designated as cash flow
hedges. Finally, the deferred financing costs previously shown in the
long-term assets have been reclassified on a comparative basis as a reduction
of the long-term debt.
    During the second quarter of 2007, the Fund discontinued hedge accounting
on its interest-rate swap agreements when the hedging relationship ceased to
satisfy the conditions for hedge accounting. Subsequently, changes in the fair
value of the interest-rate swap agreements are being recorded in income.
Previously recorded gains or losses included in other comprehensive income on
these derivatives which amounted to $323,000 (net of income taxes of $169,000)
were reclassified in income, under the caption "net financing charges
(income)", since they are not expected to be recovered in future periods.

    3. SECURED CREDIT FACILITIES

    The Fund has senior secured credit facilities consisting of a revolving
operating credit facility of up to $15 million and a revolving term credit
facility of up to $35 million. Both facilities bear interest at a floating
rate based on the Canadian dollar prime rate, U.S. base rate, LIBOR or
bankers' acceptance rates plus an applicable margin to those rates. As at
June 30, 2007 the floating interest on the term credit facility was 4.38%. The
Fund entered into an interest swap agreement for its term debt to pay a fixed
rate ranging between 4.67% and 5.17% which was 4.67% as at June 30, 2007.
    The revolving operating credit facility may be used for general corporate
purposes, including the payment of distributions required due to cash flow
fluctuations, has a 364 day term expiring in September 2007 and may be renewed
at the lender's discretion. The revolving term credit facility is a three year
term facility which matures in September 2008. Interest is paid monthly and
there are no scheduled repayments of principal required prior to maturity.

    Amounts drawn under the revolving operating and term credit facilities are
as follows:

                                                       June 30,  December 31,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------

    Operating credit facility                                -             -
    Term credit facility                            26,000,000    19,000,000
    Deferred financing costs, net                      (56,930)      (81,329)
    -------------------------------------------------------------------------
                                                    25,943,070    18,918,671
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Under the terms of these facilities, the Fund is required, amongst other
conditions, to meet certain covenants. The Fund was in compliance with these
covenants as at June 30, 2007.
    The credit facilities are collateralized by a hypothec and a security
interest covering all present and future assets of the Fund and its
subsidiaries.

    Net financing charges (income)

                       Three-month   Three-month     Six-month     Six-month
                      period ended  period ended  period ended  period ended
                           June 30,      June 30,      June 30,      June 30,
                              2007          2006          2007          2006
                                 $             $             $             $
    -------------------------------------------------------------------------

    Interest on
     long-term debt        304,331       357,057       536,826       646,512
    Other interest
     expense (income)      (49,858)       21,590      (135,751)       23,800
    Amortization of
     deferred
     financing costs        12,200        12,200        24,399        24,399
    Gain on derivative
     financial
     instruments          (492,000)            -      (492,000)            -
    -------------------------------------------------------------------------
                          (225,327)      390,847       (66,526)      694,711
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    4. UNITHOLDERs' EQUITY

    Fund units

    The Fund Declaration of Trust provides that an unlimited number of Units
and an unlimited number of Special Voting Units of the Fund may be issued.
Each Unit is transferable and represents an equal undivided beneficial
interest in any distributions of the Fund and in the net assets of the Fund.
All Units have equal rights and privileges. Each Unit entitles the holder to
participate equally in all allocations and distributions and to one vote at
all meetings of Unitholders for each whole Unit held. The Special Voting Units
are only to be issued in connection with Canadian Helicopters Exchangeable
Class B LP units (the "Exchangeable Units") for the sole purpose of providing
voting rights at the Fund level to the holder of such securities. The Special
Voting Units entitle the holder to one vote per unit and do not participate to
any interest or share in the Fund. The Fund units are redeemable at any time
at the option of the holder at amounts related to market prices at the time to
a maximum of $50,000 in cash redemptions by the Fund in any particular month.
This limitation may be waived at the discretion of the Trustees of the Fund.
Redemptions in excess of this amount, assuming no waiving of the limitation,
shall be paid by way of a distribution in specie of Series 1 Trust Notes,
Series 2 Trust Notes and Series 3 Trust Notes.

    Fund units

                                June 30, 2007             December 31, 2006
                        -------------------------   -------------------------
                            Number        Amount        Number        Amount
                                               $                           $
    -------------------------------------------------------------------------

    Fund units
    Balances, beginning
     of period          10,528,311   104,012,290    10,528,311   104,012,290
    -------------------------------------------------------------------------
    Balances, end of
     period             10,528,311   104,012,290    10,528,311   104,012,290
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Exchangeable Class B LP Units

    As part of the creation of the Fund, 2,751,689 Exchangeable Class B LP
Units were issued from a subsidiary of the Fund as partial consideration for
the acquisition of Canadian Helicopters. The Exchangeable Units are classified
as non-controlling interest in the consolidated financial statements of the
Fund. The non-controlling interest is as follows:

                        Three-month period ended      Six-month period ended
                                June 30, 2007               June 30, 2007
                        -------------------------   -------------------------
                            Number        Amount        Number        Amount
                                               $                           $
    -------------------------------------------------------------------------
    Balances, beginning
     of period           2,751,689    26,773,995     2,751,689    27,723,741
    Share of net income
     for the period                    1,754,995                   1,527,568
    Distributions
     declared                           (722,319)                 (1,444,638)
    -------------------------------------------------------------------------
    Balances, ending
     of period           2,751,689    27,806,671     2,751,689    27,806,671
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions on exchangeable Class B LP units coincide in amount per unit
and timing with the Fund Units.

    5. DISTRIBUTION

    The Fund makes monthly distribution to Unitholders of record on the last
business day of each month, payable on or about the 15th day of the following
month. Distributions to Unitholders are recorded on an accrual basis. The
June 2007 distribution in the amount of $921,227 was declared and accrued in
June 2007 and paid to Unitholders on July 13, 2007. Distributions for the six-
month period are as follows:

                                                                      Distri-
                                                                      bution
                                                         Per Unit     Amount
    Period                Record date       Payment date        $          $
    -------------------------------------------------------------------------
    January 2007     January 31, 2007  February 15, 2007   0.0875    921,227
    February 2007   February 28, 2007     March 15, 2007   0.0875    921,227
    March 2007         March 30, 2007     April 13, 2007   0.0875    921,227
    April 2007         April 30, 2007       May 15, 2007   0.0875    921,227
    May 2007             May 31, 2007      June 15, 2007   0.0875    921,227
    June 2007           June 29, 2007      July 13, 2007   0.0875    921,227
    -------------------------------------------------------------------------
    Total                                                  0.5250  5,527,362
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

    The changes to the Accumulated Other Comprehensive Income (Loss) that
occurred during the six-month periods were as follows:

                                                     Six-month     Six-month
                                                  period ended  period ended
                                                       June 30,      June 30,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------

    Adjusted opening balance due to the new
     accounting policies adopted regarding
     financial instruments, net of income
     taxes of $133,000 (note 2)                        253,459             -
    Other comprehensive loss                        (1,105,459)            -
    -------------------------------------------------------------------------
    Balance - end of period                           (852,000)            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Unrealized losses of $752,000 included in the Accumulated Other
Comprehensive Income (Loss) will be reclassified into income in the next
twelve months.

    7. ECONOMIC DEPENDENCE

    For the three and six-month period ended June 30, 2007, 29.6% and 34.4%
respectively (2006 - 31.6% and 37.6%) of total revenue was earned from two
customers.

    8. EMPLOYEE DEFINED CONTRIBUTION PLAN

    The Fund's contribution to the defined contribution plan for the three and
six-month period ended June 30, 2007 was $266,366 and $515,420 respectively
(2006 - $235,094 and $453,546).

    9. SEGMENTED INFORMATION

    The Fund's activities are comprised of three segments which consist of
Canadian onshore helicopter transportation services, helicopters repairs and
maintenance business and flight training. The repairs and maintenance business
and the flight training represent each less than 10% of the Fund's overall
activities. No assets are held outside of Canada.


         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
       AND RESULTS OF OPERATIONS - FOR THE THREE AND SIX- MONTH PERIODS
                             ENDED JUNE 30, 2007

    The following Management's Discussion and Analysis ("MD&A") of financial
condition and results of operations, dated August 7, 2007, of Canadian
Helicopters Income Fund (the "Fund") should be read together with the audited
consolidated financial statements and related notes for the year ended
December 31, 2006 and the unaudited interim consolidated financial statements
and related notes for the three and six month-periods ended June 30, 2007 as
well as the MD&A contained in the Fund's 2006 Annual Report. The financial
statements of the Fund are prepared in accordance with accounting principles
generally accepted in Canada ("GAAP"). The fiscal year of the Fund ends on
December 31. The Fund's reporting currency is the Canadian dollar. Per unit
amounts are calculated using the weighted average number of units outstanding
for the three and six-month periods ended June 30, 2007.
    This MD&A contains forward-looking statements. Please see "Forward-Looking
Statements" for a discussion of the risks, uncertainties and assumptions
relating to these statements. This MD&A also makes reference to certain
non-GAAP measures to assist in assessing the Fund's financial performance.
Non-GAAP earnings measures do not have any standard meaning prescribed by GAAP
and are therefore unlikely to be comparable to similar measures presented by
other issuers. See "Definition of EBITDA, Adjusted EBITDA, Distributable Cash
and Non-GAAP Measures" and "Selected Consolidated Financial Information", for
the reconciliation of EBITDA to net earnings or loss.

    The Fund

    The Fund is an unincorporated, open-ended, limited purpose trust
established under the laws of the Province of Québec, pursuant to a
Declaration of Trust dated July 25, 2005, as amended and restated. The Fund
was created to indirectly acquire and hold a limited partnership interest in
Canadian Helicopters Limited Partnership ("Canadian Helicopters LP"). Canadian
Helicopters LP holds all of the outstanding shares of Canadian Helicopters
Limited ("Canadian Helicopters"). The Fund holds a 79.3% indirect interest in
Canadian Helicopters.
    The Fund's units trade on the Toronto Stock Exchange under the symbol
CHL.UN.
    The Fund is entirely dependant on distributions from Canadian Helicopters
to make its own distributions.

    Business Overview

    Canadian Helicopters, the largest helicopter transportation services
company operating in Canada, is also one of the largest in the world based on
the size of its fleet. With over 40 bases operating across Canada and in
excess of 120 aircraft, Canadian Helicopters provides helicopter services to a
broad range of sectors, including emergency medical services ("EMS"),
infrastructure maintenance, utilities, oil and gas, forestry, mining and
construction. In addition to helicopter transportation services, Canadian
Helicopters operates three flight schools and provides third party repair and
maintenance services. With 60 years of experience, Canadian Helicopters is an
industry leader in establishing safety standards and operating procedures.

    Distributions

    The Fund makes monthly distributions to holders ("Unitholders") of trust
units (the "Units") and, through Canadian Helicopters LP, to holders of Class
B Limited Partnership units (the "Class B LP Units") of record on the last
business day of each month, payable on or about the 15th day of the following
month. The current estimated distribution rate per unit is $0.0875 per month.
The June 2007 distribution in the amount of $1,162,000 was declared in July
2007 and paid to Unitholders and holders of Class B LP Units on July 13, 2007.
    Distributions declared on Units from January 1, 2007 to June 30, 2007,
were as follows:


                                                    Distribution Amount
                                              -------------------------------
                                        Per       Unit-   Class B
                 Record    Payment     Unit    holders         LP      Total
    Period         date       date        $          $          $          $
    -------------------------------------------------------------------------

    January     January   February
     2007      31, 2007   15, 2007   0.0875    921,227    240,773  1,162,000
    February   February      March
     2007      28, 2007   15, 2007   0.0875    921,227    240,773  1,162,000
    March         March      April
     2007      30, 2007   13, 2007   0.0875    921,227    240,773  1,162,000
    April         April        May
     2007      30, 2007   15, 2007   0.0875    921,227    240,773  1,162,000
    May             May       June
     2007      31, 2007   15, 2007   0.0875    921,227    240,773  1,162,000
    June           June       July
     2007      29, 2007   13, 2007   0.0875    921,227    240,773  1,162,000
    -------------------------------------------------------------------------
    Total                            0.5250  5,527,362  1,444,638  6,972,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Class B LP Units were issued by Canadian Helicopters LP to former
shareholders of Canadian Helicopters upon the acquisition of all the shares of
Canadian Helicopters and are classified as non-controlling interest in the
consolidated financial statements. Distributions on such Class B LP Units
coincide in amount per unit and timing with distribution on the Units.
    The source of funding for distributions made in the current period was
from existing cash balances and credit facilities.

    Definition of EBITDA, Adjusted EBITDA, Distributable Cash and Non-GAAP
    Measures

    References to "EBITDA" are to earnings (loss) before interest, income
taxes, depreciation and amortization, gain or loss on disposal of property,
plant and equipment, change in operating lease credit and non-controlling
interest. References to "Adjusted EBITDA" are to EBITDA adjusted for the
effects of a non-recurring item, which represents non-recurring employee
compensation costs associated with the purchase for cancellation of employee
stock options outstanding under the former corporate structure which was
completed in connection with the initial public offering.
    Management views Distributable Cash as an operating performance measure,
as it is a measure generally used by Canadian income funds as an indicator of
financial performance. Distributable Cash is defined as cash flows related to
operating activities plus the net change in non-cash working capital balances
less the net maintenance capital expenditures.. Distributable Cash is
important as it summarizes the funds available for distribution to
Unitholders. As the Fund will distribute a significant portion of its cash on
an on-going basis and since EBITDA and Adjusted EBITDA are metrics used by
many investors to compare issuers on the basis of the ability to generate cash
from operations, management believes that, in addition to net earnings or
loss, EBITDA and Adjusted EBITDA are useful supplementary measures from which
to make adjustments to determine Distributable Cash.
    EBITDA, Adjusted EBITDA and Distributable Cash are not earnings measures
recognized under GAAP and do not have standardized meanings prescribed by
GAAP. Therefore, EBITDA, Adjusted EBITDA and Distributable Cash may not be
comparable with similar measures presented by other entities. Investors are
cautioned that EBITDA, Adjusted EBITDA and Distributable Cash should not be
construed as an alternative to net earnings (loss) determined in accordance
with GAAP as indicators of the Fund's performance, or to cash flows from
operating, investing and financing activities as measures of liquidity and
cash flows.

    Distributable Cash

    Distributable Cash for the three and six-month periods ended June 30, 2007
and 2006 are calculated as follows:

                              Three months ended           Six months ended
                                   June 30,                     June 30,
    ($000's except for
     units and per unit
     amounts)                 2007          2006          2007          2006
    -------------------------------------------------------------------------
    Cash flows related to
     operating activities      223        (1,592)       (3,198)       (6,169)
    Net change in non-cash
     working capital(1)     10,421         8,985        12,055         9,557
    Net maintenance
     capital expenditures     (493)         (409)       (1,000)         (206)
    -------------------------------------------------------------------------
    Distributable Cash
     (Units and Class B
     LP Units)              10,151         6,984         7,857         3,182
    -------------------------------------------------------------------------
    Distributions declared   3,486         3,486         6,972         6,972
    Weighted average
     number of Units
     and Class B LP
     Units              13,280,000    13,280,000    13,280,000    13,280,000
    Distributable Cash
      per Unit and
      Class B LP Unit       0.7644        0.5259        0.5916        0.2396
    Distributions
     declared per Unit
     and Class B LP
     Unit                   0.2625        0.2625        0.5250        0.5250
    Payout ratio              34.3%         49.9%         88.7%        219.1%
    -------------------------------------------------------------------------

    (1) The Fund has excluded the impact of the net change in non-cash
        working capital balances as the changes in non-cash working capital
        components are often temporary by nature and due to the Fund's
        seasonality and can be financed, if needed, with the Fund's operating
        line of credit, which is available up to a maximum of $15 million.

    For the quarter ended June 30, 2007, the Fund distributed $0.2625 per Unit
compared with $0.7644 of Distributable Cash per Unit per the above
calculation. This difference reflects the Fund's seasonal fluctuation in
earnings since the Fund generates the majority of its Distributable Cash in
the second and third quarters. Given the seasonal nature of the Fund's
operations, it is important to view Distributable Cash on an annual basis.

    Summary of Revenue and Operating Expenses

    Revenue

    Canadian Helicopters' revenue is primarily generated from its helicopter
transportation services. Canadian Helicopters also provides ancillary
services, such as flight training and third party repair and maintenance
services. For the three and six-month periods ended June 30, 2007, 89.8% and
87.7% respectively of Canadian Helicopters' revenue were derived from
helicopter transportation services, with the remainder derived from ancillary
services. Canadian Helicopters operates IFR (helicopters services operated
under instrument flight rules) and VFR (helicopters services operated under
visual flight rules) helicopters, which respectively accounted for 39.5% and
60.5% of helicopter transportation services revenue for the period of three
months ended June 30, 2007 (41% and 59% respectively for the three months
ended June 30, 2006) and 45.8% and 54.2% for the six months ended June 30,
2007 (48.8% and 51.2% respectively for the six months ended June 30, 2006).
    IFR helicopters operate with the aid of instruments and they are capable
of operating in poor visibility environment. IFR helicopters are used
primarily to provide EMS and infrastructure support to governmental and
quasi-governmental entities. Contracts are usually longer-term in nature and
revenues are, to a large extent, earned evenly throughout the year. The most
significant IFR contracts include those with Ornge, an organization providing
EMS in Ontario, and the United States Air Force ("USAF"), accounting together
for 29.6% and 34.4% of Canadian Helicopters' total revenue for the periods of
three and six months ended June 30, 2007, respectively (31.6% and 37.6% for
the periods of three and six months ended June 30, 2006, respectively).
    VFR helicopters are primarily used to provide services to utility
companies and resource-based industries. Contracts are usually for a short
period or a season. Revenues from VFR operations are influenced by weather and
daylight hours and are significantly reduced from November through April.

    Operating Expenses

    Operating expenses consist of fixed and variable expenses, including:  
(i) crew, maintenance and cost of goods sold, (ii) selling, general and
administrative expenses and (iii) other expenses.
    Crew and maintenance costs are the largest expense categories,
representing in the aggregate 48.9% and 58.3% of revenue for the periods of
three and six months ended June 30, 2007, respectively (52.2% and 63.4% for
the periods of three and six months ended June 30, 2006, respectively). Crew
costs are comprised of wages, benefits and training for pilots, engineers and,
in 2006 the paramedics. While a significant portion of these costs are fixed,
a portion of pilots' and engineers' compensation is based on flight hours. In
addition, due to the seasonality of Canadian Helicopters' VFR & IFR
operations, additional crews are hired on a contractual basis to ensure that
summer operational requirements are met. Maintenance costs consist of repair
of engine, major components, airframes and accessories, which are normally
replaced based on their calendar lives or number of flight hours. As such,
Canadian Helicopters has been able to estimate its annual maintenance costs
based on the expected number of flight hours. Canadian Helicopters' Mid-Time
Policy(1) has historically resulted in fairly stable annual maintenance
expenses, although significant variability occurs on a quarterly basis.
However, as Canadian Helicopters attempts to perform most airframe repair and
refurbishment during the slower season, variations in maintenance costs within
a year do not depend solely on flight hours. Cost of goods sold consists of
cost associated with revenues from third party repairs and maintenance
contracts and miscellaneous parts sales.

    ---------------------------------
    (1) "Mid-Time Policy" means the policy of Canadian Helicopters to
        maintain its flying assets, on a group basis, at any given moment in
        time, at least at the mid-time of the useful life of such assets.

    Selling, general and administrative expenses represented in the aggregate
17.7% and 20.8% of revenue for the periods of three and six months ended
June 30, 2007, respectively (18.9% and 22% for the periods of three and six
months ended June 30, 2006, respectively). Selling, general and administrative
expenses are mainly comprised of wages, base costs, insurance costs and other
overhead costs. Base costs, which include base facility costs, travel, meals
and accommodations, contain a fixed and variable portion, while insurance
costs are negotiated annually and are fixed through the term.

    Summary of Selected Consolidated Financial Information

                              Three-month period           Six-month period
                                 ended June 30,              ended June 30,
                        -------------------------   -------------------------
    ($000's except for
     Units and per Unit
     amounts)                 2007          2006          2007          2006
    -------------------------------------------------------------------------
    Revenue                 39,220        36,332        63,546        60,190
    Operating expenses      28,411        28,553        54,467        56,002
    Foreign exchange
     loss (gain)                28           (55)           14            (3)
    -------------------------------------------------------------------------
    EBITDA(1)               10,781         7,834         9,065         4,191
    -------------------------------------------------------------------------
    - Amortization           1,026         1,010         2,049         2,014
    - Loss (gain) on
       disposal of
       property, plant
       and equipment          (146)           20          (164)          (51)
    - Net financing
       charges (income)       (225)          391           (67)          695
    -------------------------------------------------------------------------
    Earnings before
     income taxes and
     non-controlling
     interest               10,126         6,413         7,247         1,533
    -------------------------------------------------------------------------
    Net earnings             6,704         6,267         5,798         4,394
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per Unit
     basic and diluted      0.6368        0.5952        0.5507        0.4174
    Distributions
     declared per Unit      0.2625        0.2625        0.5250        0.5250
    Total assets           216,817       209,312       216,817       209,312
    Term credit facility    26,000        30,000        26,000        30,000
    -------------------------------------------------------------------------

    (1) See "Definition of EBITDA, Adjusted EBITDA, Distributable Cash and
        Non-GAAP Measures". EBITDA is not a recognized measure under GAAP and
        does not have a standardized meaning prescribed by GAAP. EBITDA may
        not be comparable to similar measures presented by other issuers.

    Summary of Quarterly Results

    Certain of Canadian Helicopters' operations are subject to seasonal
fluctuations due to variations in daylight hours and changes in weather
conditions, with the highest demand generally occurring from May to October.
While some of Canadian Helicopters' operations are dependent on flight hours
and are managed to mitigate the impact of seasonality, a significant portion
of operating costs are associated with its crew and fleet and are fixed.
Canadian Helicopters takes advantage of the off-season period to conduct
repairs and maintenance on its helicopters and provide training to its crews
in order to minimize downtime during the peak season. This strategy,
necessitated by seasonality, significantly reduces profits during the quarters
ending December 31 and March 31 and has historically resulted in losses.
Therefore, results for any single quarter may not be indicative of the results
that may be expected for the full year.
    The following table presents a summary of operating results of the Fund
and Canadian Helicopters on a quarterly basis from July 1, 2005 to June 30,
2007.

     (in thousand of dollars except for per unit amounts)

                June   March     Dec     Sep    June     Mar     Dec     Sep
                  30,     31,     31,     30,     30,     31,     31,     30,
                2007    2007    2006    2006    2006    2006    2005    2005
    -------------------------------------------------------------------------
                                                                          (1)

    Revenues  39,220  24,326  24,167  51,310  36,332  23,857  26,926  44,265
    EBITDA
     (loss)
     (2)      10,781  (1,716) (1,237) 20,511   7,834  (3,643)   (792) 15,268
    Adjusted
     EBITDA
     (loss)
     (2)      10,781  (1,716) (1,237) 20,511   7,834  (3,643)   (792) 17,148
    Net
     earnings
     (loss)    6,704    (907)   (579) 11,479   6,267  (1,872)   (748)    n/a
    Net
     earnings
     (loss)
     per Unit
     basic
     and
     diluted  0.6368 (0.0861)(0.0550) 1.0903  0.5952 (0.1778)(0.0710)    n/a
    -------------------------------------------------------------------------

    Notes:

    (1) Derived from the unaudited interim consolidated results of Canadian
        Helicopters for the period from July 1, 2005 to September 8, 2005.

    (2) See "Definition of EBITDA, Adjusted EBITDA, Distributable Cash and
        other Non-GAAP Measures". EBITDA and Adjusted EBITDA are not
        recognized measures under GAAP and do not have standardized meanings
        prescribed by GAAP. EBITDA and Adjusted EBITDA may not be comparable
        to similar measures presented by other issuers.

    Earnings or losses before non-controlling interest and net earnings or
losses have not been presented for each of the quarter prior to the indirect
acquisition of Canadian Helicopters by the Fund as they are not comparable due
to the change to the capital structure of Canadian Helicopters and the Fund in
connection with the initial public offering completed on September 9, 2005.

    Results of Operations

    Three months ended June 30, 2007 compared to three months ended June 30,
    2006.

    Revenue

    Canadian Helicopters flew 22,419 hours over the three months ended
June 30, 2007 compared to 21,411 hours in the same period in 2006,
representing an increase of 1,008 hours or 4.7%. Revenue was $39.2 million
compared to $36.3 million for the comparative period in 2006, representing an
increase of $2.9 million or 8.0%. This variation is primarily explained by an
increase of $2.7 million in VFR revenue from resource based activity, an
increase of $1.0 million in VFR revenue from Oil and Gas activity in western
Canada and a decrease of $0.8 million in ancillary revenue including the
Canadian Forces Contracted Flying Training ("CFTS") contract.

    Operating Expenses

    Operating expenses amounted to $28.4 million for the three months ended
June 30, 2007 compared to $28.6 million in the comparative period in 2006,
representing a decrease of $0.2 million or 0.7%.
    Maintenance costs decreased by $0.9 million over the comparative period in
2006. Repairs and maintenance on flying assets are not incurred evenly during
a year and the timing of such expenses within a year may vary from one year to
another as a result of timing differences and is not representative of all
quarters throughout the year. Costs associated with ancillary revenues,
including repair and maintenance contracts, decreased in connection with the
lower revenues earned during the quarter. Finally, crew costs for the period
of three months ended June 30, 2007 increased by $1.1 million over the
comparative period in 2006 primarily due to salary escalation.
    Selling, general and administrative expenses increased by $0.1 million in
the three months ended June 30, 2007 compared to the same period in 2006. This
increase is primarily due to increased employee compensation, partially offset
by a decrease in insurance premiums.
    Expenses related to operating leases amounted to $0.6 million in the three
months ended June 30, 2007 compared to $0.5 million for the comparative period
in 2006.

    EBITDA

    As a result of the changes described above, EBITDA for three months ended
June 30, 2007 was $10.8 million which is higher by $3.0 million or 38.5% over
EBITDA of $7.8 million for the same period in 2006.

    Net Financing Charges (Income)

    Net financing income amounted to $0.2 million for the three months ended
June 30, 2007 compared to a charge of $0.4 million in the 2006 comparative
period, representing a variation of $0.6 million. This reduction was due to a
decrease in average outstanding long-term debt when compared to the last year
first quarter and the recognition of the gain on the interest-rate swap
agreements in the amount of $0.5 million.

    Other Items

    The aggregate amortization expense for the three-month periods ended June
30, 2007 and June 30, 2006 amounted to $1.0 million.

    Earnings Before Income Taxes and Non-Controlling Interest

    Due to the changes in revenue and expenses described herein, earnings
before income taxes and non-controlling interest increased by $3.7 million
from the comparable period in 2006. Earnings before income taxes and
non-controlling interest was $10.1 million for the three months ended June 30,
2007.

    Income Taxes

    For the three-month period ended June 30, 2007, the Fund recorded an
income tax expense of $1.7 million ($1.5 million income tax recovery for the
comparative period in 2006). This variance is primarily attributable to
changes in income tax rates which were substantively enacted in the second
quarters of 2007 and 2006 and which resulted in income tax recoveries of
$0.7 million and $2.8 million for the three months periods ended June 30, 2007
and June 30, 2006, respectively. Consequently, the Fund's average effective
tax rate, before the impact of the interest income earned by the Fund and paid
by Canadian Helicopters, was 30.95% for the three months ended June 30, 2007
compared to 31.7% for the comparative period in 2006. The impact of interest
income earned by the Fund and paid by Canadian Helicopters is a decrease of
future income tax expense by $1.0 million for the three-month period ended
June 30, 2007 ($0.9 million for the comparative period in 2006).

    Net Earnings

    As a result of the above, net earnings for the three-month period ended
June 30, 2007 was $6.7 million compared to $6.3 million for the same
comparative period, representing an increase of $0.4 million or 6.3%.

    Six months ended June 30, 2007 compared to six months ended June 30,
    2006.

    Revenue

    Canadian Helicopters flew 33,774 hours over the six months ended June 30,
2007 compared to 32,688 hours in the same period in 2006, representing an
increase of 1,086 hours or 3.3%. Revenue was $63.5 million compared to
$60.2 million for the comparative period in 2006, representing an increase of
$3.3 million or 5.5 %. This variation is primarily explained by an increase of
$3.4 million in VFR revenue due to increased resource based activity and a
decrease of $0.1 million in ancillary revenue including the CFTS contract.

    Operating Expenses

    Operating expenses amounted to $54.5 million for the six months ended June
30, 2007 compared to $56.0 million for the comparable period in 2006,
representing a decrease of $1.5 million or 2.7%.
    Maintenance costs decreased by $2.2 million over the comparative period in
2006. Repairs and maintenance on flying assets are not incurred evenly during
a year and the timing of such expenses within a year may vary from one year to
another as a result of timing differences and is not representative of all
quarters throughout the year. Costs associated with ancillary revenues,
including repair and maintenance contracts, decreased in connection with the
lower revenues earned during the period. Finally, crew costs increased by
$1.1 million in the six months ended June 30, 2007 over the comparative period
in 2006, primarily due to salary escalation.
    Selling, general and administrative expenses remain at the same level as
for the comparative period in 2006 as inflationary increases for the six
months ended June 30, 2007 were offset by a reduction in insurance premiums.
    Expenses related to operating leases during the six-month periods ending
June 30, 2007 and June 30, 2006, remain at the same level of $0.9 million.

    EBITDA

    As a result of the changes described above, EBITDA for six months ended
June 30, 2007 was $9.1 million which increased by $4.9 million or 116.7% over
EBITDA of $4.2 million for the same period in 2006.

    Net Financing Charges (Income)

    Net financing income amounted to $0.1 million for the six months ended
June 30, 2007 compared to charges of $0.7 million in the 2006 comparative
period, representing a variation of $0.8 million. This variation was due to a
decrease in the average outstanding long-term debt balance when compared to
the last year's first quarter and the recognition of the gain on the
interest-rate swap agreements in the amount of $0.5 million.

    Other Items

    The aggregate amortization expense for the six months ended June 30, 2007
and June 30, 2006 amounted to $2.0 million.

    Earnings Before Income Taxes and Non-Controlling Interest

    Due to the changes in revenue and expenses described herein, earnings
before income taxes and non-controlling interest increased by $5.7 million
over the comparable six-month period. The earnings before income taxes and
non-controlling interest were $7.2 million for the six months ended June 30,
2007.

    Income Taxes

    For the six-month period ended June 30, 2007, the Fund recorded an income
tax expense of $0.1 million ($4.0 million income tax recovery for the
comparative period in 2006). This variance is primarily attributable to
changes in income tax rates (both Federal and Provincial) which were
substantively enacted in the second quarters of 2007 and 2006 as explained
earlier. Consequently, the Fund's average effective tax rate, before the
impact of the interest income earned by the Fund and paid by Canadian
Helicopters, was 30.95% for the six months ended June 30, 2007 compared to
31.7% for the comparative period in 2006. The impact of interest income earned
by the Fund and paid by Canadian Helicopters was to decrease future income tax
expense by $2.0 million for the six-month period ended June 30, 2007
($1.8 million for the comparative period in 2006).

    Earnings Before Non-Controlling Interest and Net Earnings

    As a result of the above, earnings before non-controlling interest for the
six months ended June 30, 2007 was $7.3 million while net earnings for the six
months ended June 30, 2007 was $5.8 million.

    Economic Dependence

    For the three months ended June 30, 2007, 29.6% of total revenue was
earned from two customers compared to 31.6% for the comparative period of
2006. For the six months ended June 30, 2007, 34.4% of total revenue was
earned from two customers compared to 37.6% for the comparative period of
2006.

    Segmented Information

    The Fund's activities are divided into three segments: helicopter
transportation services; helicopter repair and maintenance services and flight
training. The repair and maintenance and flight training services each
represent less than 10% of the Fund's overall activities on an annual basis.
No assets are held outside of Canada.

    Liquidity and Financial Resources

    For the three-month period ended June 30, 2007, cash and cash equivalents
increased by $1.3 million, after the draw down of $6.0 million on the
revolving term debt facility. For the six-month period ended June 30, 2007,
cash decreased by $5.1 million, after the drawdown of $7.0 million on the
revolving term debt facility. This is mainly attributable to the cash flows
related to operating activities during the corresponding period.

    Operating Activities

    Cash flows related to operating activities (before net change in non-cash
working capital balances) were $10.6 million and $8.9 million for the three
and six-month periods ended June 30, 2007, respectively ($7.4 million and
$3.4 million, respectively for the comparative periods in 2006). The variances
of $3.2 million and $5.5 million for the three and six month periods ended
June 30, 2007, when compared to the corresponding periods in 2006, were mainly
due to the increased earnings before income taxes and non-controlling interest
for the periods.

    Investing Activities

    Cash flows related to investing activities were ($0.5) million and
($1.0) million for the three and six-month periods ended June 30, 2007,
respectively (($0.4) million and ($0.2) million respectively for the
comparative periods in 2006). The variances of $0.1 million and $0.8 million
for the three and six month periods ended June 30, 2007, when compared to the
corresponding periods in 2006, are mainly due to the net additions of
property, plant and equipment.

    Financing Activities

    Cash flows related to financing activities were $1.6 million and
$(0.9) million for the three and six-month periods ended June 30, 2007,
respectively ($0.5 million and $2.0 million respectively for the comparative
periods in 2006). This primarily represents the distributions paid on Units
partially offset by the proceeds received from the draw down on the revolving
term debt facility.
    The variance of $1.1 million for the six months ended June 30, 2007 when
compared to the six months ended June 30, 2006 is attributable to the proceeds
received from the draw down on the revolving term debt facility less the
payment of $0.9 million for the purchase of Units for the benefit of certain
executives of the Fund under the Long Term Incentive Plan (LTIP).

    Financial Condition and Capitalization

                                                       June 30,  December 31,
                                                          2007          2006
    (in thousands of dollars)                                $             $
    -------------------------------------------------------------------------
    Working capital                                     21,299        14,324
    Total assets                                       216,817       208,549
    -------------------------------------------------------------------------
    Total long-term debt                                25,943        18,919
    -------------------------------------------------------------------------
    Unitholders' equity                                104,750       105,964
    -------------------------------------------------------------------------
    Long-term debt to equity ratio                        24.8%         17.9%
    -------------------------------------------------------------------------

    The Fund's long-term debt to equity ratio has increased since December
2006 due to the revenue seasonality of the operations.
    As at August 7, 2007, the Fund had 10,528,311 Units outstanding
representing a 79.3% indirect interest in Canadian Helicopters LP and
2,751,689 Special Voting Units outstanding.
    Each Unit is transferable and represents an equal undivided beneficial
interest in any distributions of the Fund and in the assets of the Fund. All
Units have equal rights and privileges.
    Each Unit entitles the holder to participate equally in all allocations
and distributions and to one vote at all meetings of Unitholders of the Fund
for each whole Unit. The Special Voting Units are not entitled to any interest
or share in the Fund, in any distributions from the Fund or in the net Fund
property. Each Special Voting Unit is issued in conjunction with the Class B
LP Units of Canadian Helicopters LP and is entitled to one vote at all
meetings of Unitholders of the Fund.
    Each Class B LP Unit entitles the holder to participate equally in all
allocations and distributions from Canadian Helicopters LP but does not
entitle the holder to any votes. Each Class B LP Unit may be exchanged for a
Unit, at which time the associated Special Voting Unit will be simultaneously
cancelled. The Canadian Helicopters Class B LP Units are classified as
non-controlling interest in the interim consolidated financial statements of
the Fund.

    Off-Balance Sheet Arrangements

    Operating lease commitments have been disclosed in the Funds' audited
consolidated financial statements as at December 31, 2006 and did not
significantly change since that date.

    New Accounting Policies

    On January 1, 2007, the Fund has adopted three new accounting standards
issued by the Canadian Institute of Chartered Accountants (CICA): section
1530, Comprehensive Income; section 3855, Financial Instruments - Recognition
and Measurement; and section 3865, Hedges. These new standards establish
standards for recognizing and measuring financial instruments, namely
financial assets, financial liabilities and derivatives. Certain changes in
the value of these financial instruments are presented in a new financial
statement, Comprehensive Income. The application of these new standards had a
negligible effect on the Fund's financial statements and financial position.
    The Fund refers the readers to note 2 of the interim consolidated
financial statements for the second quarter ended June 30, 2007 for further
details regarding the adoption of the new standards.

    Recent Events

    In April 2007, The Fund acquired 81,825 of its units in the secondary
market for an amount of $910,046 for certain of its executives under the
Fund's long-term incentive plan earned in 2006.
    On May 30, 2007, the Fund entered into an amending agreement with Ornge,
an organization providing EMS in Ontario, to extend the two EMS contracts it
holds for approximately six additional months to expire on March 31, 2009. The
extension has been agreed to under similar terms and conditions as the
existing contracts and is not expected to have a material impact on the Fund's
financial results.
    Proposed legislation first introduced in October 2006 included a provision
to eliminate the deduction of distributions from taxable income for certain
forms of publicly traded income trusts and partnerships that meet the
definition of a Specified Investment Flow-Through Entity or "SIFT" under the
proposed legislation. However, amounts distributed will be taxed at the SIFT
rate rather than the full trust tax rate. This proposed legislation, with
certain modifications, passed third reading in the House of Commons on June
12, 2007 and is considered substantially enacted during the Fund's second
quarter of 2007. For the Fund, the proposals are not intended to apply to
taxation years ending prior to 2011. The impact of these proposals is not
expected to have a significant impact on the Fund's financial condition and
earnings.
    On July 12, 2007, the Fund declared the distribution for the period from
July 1, 2007 to July 31, 2007 on Units and Class B LP Units, in the amount of
$1.162 million or $0.0875 per unit, for registered Unitholders and Class B LP
Units holders on July 31, 2007. This distribution will be paid on August 15,
2007.
    On August 7, 2007, the Fund declared the distribution for the period from
August 1, 2007 to August 31, 2007 on Units and Class B LP Units, in the amount
of $1.162 million or $0.0875 per unit, for registered Unitholders and Class B
LP Units holders on August 31, 2007. This distribution will be paid on
September 14, 2007.

    Controls and Procedures

    The Fund's President and Chief Executive Officer and the Fund's Chief
Financial Officer have evaluated whether there were changes to the Internal
Controls over Financial Reporting ("ICFR") during the three-month period ended
June 30, 2007. There were no changes in the Fund's ICFR during the most recent
interim period that have materially affected, or are reasonably likely to
materially affect, the Fund's ICFR.

    Risk Factors

    As a result of operations, business prospects and financial condition, the
Fund is subject to a number of risks and uncertainties, and is affected by a
number of factors outside the control of the its management. Details are
provided in the "Risk Factors" section of the Fund's Annual Information Form,
dated March 28, 2007 (which can be found at www.sedar.com).

    Forward-Looking Statements

    Certain statements in this management's discussion and analysis contain
"forward looking" statements that involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Fund or Canadian Helicopters to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. When used in this MD&A, such statements use
such words as "may," "will," "intend," "should," "expect," "believe," "plan,"
"anticipate," "estimate," "predict," "potential," "continue," the negative of
these terms or other similar terminology. These statements reflect current
expectations regarding future events and operating performance and speak only
as of the date of this MD&A. Forward-looking statements involve significant
risks and uncertainties, should not be read as guarantees of future
performance or results, and will not necessarily be accurate indications of
whether or not such results will be achieved. A number of factors could cause
actual results to differ materially from the results discussed in the
forward-looking statements, including, but not limited to, customer
concentration, reliance on suppliers and other risks described in the Fund's
Annual Information Form. These forward-looking statements contained in this
MD&A are made as of the date of release of this MD&A, and the Fund does not
assume any obligation to update or revise them to reflect new events or
circumstances unless being required by applicable laws.

    Additional Information

    Additional information relating to the Fund and Canadian Helicopters,
including the Fund's Annual Information Form, is available on SEDAR at
www.sedar.com.
    
    %SEDAR: 00022513EF




For further information:

For further information: Canadian Helicopters Limited: Jean-Pierre
Blais, Président, (450) 452-3007; Don Wall, Senior Executive Vice President,
(780) 429-6919


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