Shaw Communications Inc.
NYSE : SJR
TSX : SJR.B

Shaw Communications Inc.

June 27, 2008 08:00 ET

Shaw Announces Continued Strong Third Quarter Results

CALGARY, ALBERTA--(Marketwire - June 27, 2008) - Shaw Communications Inc. (TSX:SJR.B) (NYSE:SJR) today announced results for the third quarter ended May 31, 2008. Consolidated service revenue for the three and nine month periods of $792 million and $2.30 billion, respectively, improved 13% and 12% over the same periods last year. Total service operating income before amortization(1) of $356 million and $1.04 billion was up 15% and 14%, respectively, over the comparable periods. Funds flow from operations(2) increased to $311 million and $902 million for the quarter and year-to-date, respectively, compared to $259 million and $756 million in the same periods last year.

Jim Shaw, Chief Executive Officer, commented "Success in executing on all elements of our strategy drives our exceptional continued growth. The variety, strength, and value of our products, high quality customer service, and effective operational and financial management by Shaw's strong leadership team continues to produce solid results for our shareholders."

During the quarter Digital Phone lines grew by 57,700 to 549,932. Digital and Internet customers increased by 32,658 to 883,300 and 23,185 to 1,541,177, respectively, and Basic cable subscribers were up by 2,495 to 2,243,998. DTH customers increased 4,686 to 890,792.

"We are pleased with the growth in all of our products, and particularly Digital Phone. In just over three years since the launch of this product, penetration of Digital Phone lines now stands at 28% of Basic customers who have the service available to them. Our Digital Phone footprint continues to grow and the service is available to over 90% of homes passed. We also recently expanded the product offering and now have three levels of service to appeal to an even larger customer base", said Mr. Shaw.

Free cash flow(1) for the quarter was $81 million bringing the year-to-date amount to $309 million. This compares to $104 million and $280 million for the same periods last year. The quarterly decline was due to increased capital investment in the current quarter mainly due to a purchase of land and buildings to support growth. The improvement in free cash flow on a year-to-date basis was achieved through higher service operating income before amortization and after increased capital investment.

Net income of $128 million or $0.30 per share for the quarter ended May 31, 2008 compared to $92 million or $0.21 per share for the same quarter last year. Net income for the first nine months of the year was $539 million or $1.25 per share compared to $253 million and $0.58 per share last year. The current and comparable three and nine month periods included non-operating items which are more fully detailed in Management's Discussions and Analysis (MD&A). The current nine month period included a tax recovery of approximately $199 million primarily related to reductions in enacted income tax rates. Excluding the non-operating items, net income for the current three and nine month periods would have been $117 million and $327 million compared to $86 million and $246 million in the same periods last year.

Service revenue in the Cable division was up 15% and 14% for the three and nine month periods to $608 million and $1.76 billion. The improvement was primarily driven by customer growth and rate increases. Service operating income before amortization improved 19% to $294 million for the quarter and was up almost 17% on a year-to-date basis to $851 million.

Service revenue in the Satellite division was $184 million and $544 million for the three and nine month periods, up 5% over the comparable periods last year. The improvement was primarily due to rate increases and customer growth. Service operating income before amortization for the three month period was $62 million compared to $64 million last year. The year-to-date service operating income before amortization was up 2% to $188 million.

Mr. Shaw stated, "In accordance with the rules of the AWS spectrum auction, which is still ongoing, we are not able to comment on wireless at this time."

In closing, Mr. Shaw summarized: "We remain on track to achieve our free cash flow guidance of approximately $450 million. During the fourth quarter we will continue to grow the business through the dedicated efforts of our employees who serve the interests of our shareholders and customers on a daily basis with pride and passion."

Shaw Communications Inc. is a diversified communications company whose core business is providing broadband cable television, High-Speed Internet, Digital Phone, telecommunications services (through Shaw Business Solutions) and satellite direct-to-home services (through Star Choice). The Company serves over 3.3 million customers, including 1.5 million Internet and 500,000 residential Digital Phone customers, through a reliable and extensive network, which comprises over 600,000 kilometres of fibre. Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 Index (Symbol: TSX - SJR.B, NYSE - SJR).

The accompanying Management's Discussion and Analysis forms part of this news release and the "Caution Concerning Forward Looking Statements" applies to all forward-looking statements made in this news release.

(1) See definitions and discussion under Key Performance Drivers in MD&A.

(2) Funds flow from operations is before changes in non-cash working capital balances related to operations as presented in the unaudited interim Consolidated Statements of Cash Flows.

(3) See reconciliation of Net Income in Consolidated Overview in MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS

MAY 31, 2008

June 26, 2008

Certain statements in this report may constitute forward-looking statements. Included herein is a "Caution Concerning Forward-Looking Statements" section which should be read in conjunction with this report.

The following should also be read in conjunction with Management's Discussion and Analysis included in the Company's August 31, 2007 Annual Report and the Consolidated Financial Statements and the Notes thereto and the unaudited interim Consolidated Financial Statements and the Notes thereto of the current quarter.

Applicable share and per share amounts for the comparative periods have been retroactively adjusted to reflect the two-for-one split of the Company's Class A Shares and Class B Non-Voting Shares that was effective on July 30, 2007.



CONSOLIDATED RESULTS OF OPERATIONS
THIRD QUARTER ENDING MAY 31, 2008
Selected Financial Highlights

Three months ended May 31, Nine months ended May 31,
change change
2008 2007 % 2008 2007 %
---------------------------------------------------------------------------
($000's Cdn
except per
share amounts)
Operations:
Service
revenue 792,149 702,238 12.8 2,299,159 2,058,974 11.7
Service operating
income before
amortization (1) 356,089 310,748 14.6 1,038,709 913,573 13.7
Funds flow from
operations (2) 310,984 259,470 19.9 901,619 755,818 19.3
Net income 128,113 91,658 39.8 539,184 252,547 113.5
Per share data:
Earnings per
share - basic $0.30 $0.21 $1.25 $0.58
- diluted $0.30 $0.21 $1.24 $0.58

Weighted average
participating
shares outstanding
during period
(000's) 431,010 434,036 431,533 432,030
----------------------------------------------------------------------------

(1) See definition under Key Performance Drivers in Management's Discussion
and Analysis.
(2) Funds flow from operations is before changes in non-cash working capital
balances related to operations as presented in the unaudited interim
Consolidated Statements of Cash Flows.


Subscriber Highlights

Growth
---------------------------------
Three months Nine months
Total ended May 31, ended May 31,
-------------- ---------------- ----------------
May 31, 2008 2008 2007 2008 2007
----------------------------------------------------------------------------
Subscriber statistics:
Basic cable customers 2,243,998 2,495 3,289 17,157 22,578
Digital customers 883,300 32,658 20,875 120,160 74,847
Internet customers
(including pending installs) 1,541,177 23,185 27,873 89,421 104,444
DTH customers 890,792 4,686 5,337 11,207 8,691
Digital phone lines
(including pending installs) 549,932 57,700 51,128 164,575 131,046
----------------------------------------------------------------------------


Additional Highlights

- Consolidated service revenue of $792.1 million and $2.30 billion for the three and nine month periods, respectively, improved 12.8% and 11.7% over the comparable periods last year. Total service operating income before amortization of $356.1 million and $1.04 billion increased by 14.6% and 13.7% respectively over the same periods.

- Customer growth continued across all business lines in the third quarter. Digital Phone lines grew by 57,700 to 549,932. Digital and Internet customers increased by 32,658 to 883,300 and 23,185 to 1,541,177, respectively, and Basic cable subscribers were up by 2,495 to 2,243,998. DTH customers increased 4,686 to 890,792.

- Internet and Digital penetration of Basic cable subscribers currently stands at 68.7% and 39.4%, respectively, up from 65.2% and 34.3% at August 31, 2007. Digital Phone penetration of Basic customers who have the service available to them is 27.8% compared to 22.0% at August 31, 2007.

- Consolidated free cash flow(1) of $81.2 million and $309.3 million for the three and nine month periods, respectively, compares to $103.6 million and $280.1 million in the same periods last year.

Consolidated Overview

Consolidated service revenue of $792.1 million and $2.30 billion for the quarter and year-to-date periods, respectively, improved by 12.8% and 11.7% over the same periods last year. The improvement was primarily due to customer growth and rate increases. Consolidated service operating income before amortization for the three and nine month periods improved 14.6% and 13.7%, respectively, over the comparable periods to $356.1 million and $1.04 billion. The increase was driven by the revenue improvements partially offset by higher employee and other costs related to growth. The current quarter also includes a charge of approximately $16.0 million for CRTC Part II fees covering the period October 2007 to May 2008 as a result of the decision recently issued by the Federal Court of Appeal ruling, in the CRTC's favor, that the fees are a valid charge under the Regulations. The Company has recorded Part II fees in the current quarter that cover the period noted and will continue to record the fees on a prospective basis.

Net income was $128.1 million and $539.2 million for the quarter and year-to-date periods, respectively, compared to $91.7 million and $252.5 million for the same periods last year. Non-operating items affected net income in all periods. Each of the current periods benefitted from tax recoveries. The current quarter includes a tax recovery of $11.1 million related to the resolution of certain income tax matters, while the year-to-date recovery of approximately $199.1 million is primarily related to reductions in enacted income tax rates. Outlined below are further details on these and other operating and non-operating components of net income for each quarter.

(1) See definitions and discussion under Key Performance Drivers in Management's Discussion and Analysis.



Shaw Communications Inc.
Nine months ended
-------------------
Operating net Non-
($000's Cdn) May 31, 2008 of interest operating
----------------------------------------------------------------------------
Operating income 661,265
Amortization of financing costs
long-term debt (2,745)
Interest expense - debt (174,025)
----------------------------------------------------------------------------
Operating income after interest 484,495 484,495 -
Gain on sale of investment - - -
Debt retirement costs (5,264) - (5,264)
Other gains 25,751 - 25,751
----------------------------------------------------------------------------
Income before income taxes 504,982 484,495 20,487
Income tax expense (recovery) (34,208) 157,959 (192,167)
----------------------------------------------------------------------------
Income before the following 539,190 326,536 212,654
Equity income (loss) on investee (6) - (6)
----------------------------------------------------------------------------
Net income 539,184 326,536 212,648
----------------------------------------------------------------------------

Nine months ended
-------------------
Operating net Non-
($000's Cdn) May 31, 2007 of interest operating
----------------------------------------------------------------------------
Operating income 561,031
Amortization of financing costs
long-term debt -
Interest expense - debt (184,656)
----------------------------------------------------------------------------
Operating income after interest 376,375 376,375 -
Gain on sale of investment 415 415
Debt retirement costs - - -
Other gains 8,525 - 8,525
----------------------------------------------------------------------------
Income before income taxes 385,315 376,375 8,940
Income tax expense (recovery) 132,874 130,189 2,685
----------------------------------------------------------------------------
Income before the following 252,441 246,186 6,255
Equity income (loss) on investee 106 - 106
----------------------------------------------------------------------------
Net income 252,547 246,186 6,361
----------------------------------------------------------------------------

Three months ended
-------------------
Operating net Non-
($000's Cdn) May 31, 2008 of interest operating
----------------------------------------------------------------------------
Operating income 231,242
Amortization of financing costs
long-term debt (882)
Interest expense - debt (56,798)
----------------------------------------------------------------------------
Operating income after interest 173,562 173,562 -
Other gains 233 - 233
----------------------------------------------------------------------------
Income before income taxes 173,795 173,562 233
Income tax expense (recovery) 45,612 56,636 (11,024)
----------------------------------------------------------------------------
Income before the following 128,183 116,926 11,257
Equity loss on investee (70) - (70)
----------------------------------------------------------------------------
Net income 128,113 116,926 11,187
----------------------------------------------------------------------------

Three months ended
--------------------
Operating net Non-
($000's Cdn) May 31, 2007 of interest operating
----------------------------------------------------------------------------
Operating income 193,526
Amortization of financing costs
long-term debt
Interest expense - debt (61,218)
----------------------------------------------------------------------------
Operating income after interest 132,308 132,308 -
Other gains 7,963 - 7,963
----------------------------------------------------------------------------
Income before income taxes 140,271 132,308 7,963
Income tax expense (recovery) 48,518 46,069 2,449
----------------------------------------------------------------------------
Income before the following 91,753 86,239 5,514
Equity loss on investee (95) - (95)
----------------------------------------------------------------------------
Net income 91,658 86,239 5,419
----------------------------------------------------------------------------


The changes in net income are outlined in the table below.

Increase (decrease) of May 31, 2008
net income compared to:
---------------------------------------------
Three months ended Nine months ended
-------------------------------- ---------------------
February 29, 2008 May 31, 2007 May 31, 2007
-------------------------------- ---------------------

----------------------------------------------------------------------------
(000's Cdn)
Increased service
operating income
before amortization 6,378 45,341 125,136
Decreased (increased)
amortization 724 (8,507) (27,647)
Decreased interest expense 713 4,420 10,631
Change in net other
costs and revenue (1) 3,464 (7,705) 11,435
Decreased (increased)
income taxes (182,014) 2,906 167,082
----------------------------------------------------------------------------
(170,735) 36,455 286,637
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Net other costs and revenue include: gain on sale of investment, debt
retirement costs, other gains and equity income (loss) on investee as
detailed in the unaudited interim Consolidated Statements of Income and
Retained Earnings (Deficit).


Basic earnings per share for the current three and nine month periods were $0.30 and $1.25, respectively, which represents a $0.09 and $0.67 improvement over the same periods last year. Each of the current three and nine month periods benefitted from improved service operating income before amortization of $45.3 million and $125.1 million, respectively, as well as reduced interest costs of $4.4 million and $10.6 million, in the respective periods. Both periods also included future tax recoveries of $11.1 million and $199.1 million, respectively, partially offset by higher income taxes on the increased service operating income before amortization. The current nine month period also benefitted from improved net other costs and revenue due to a $22.3 million net duty recovery related to satellite receiver importations reflected in the first quarter. These improvements to net income were partially offset by increased amortization in each of the current periods of $8.5 million and $27.6 million, respectively, while the comparable quarter last year reflected improved net other costs and revenue primarily related to a gain reported on the sale of certain corporate assets.

Net income in the current quarter declined $170.7 million from the second quarter of fiscal 2008 primarily due to the income tax recovery of $188.0 million reflected in the prior quarter related to reductions in corporate income tax rates partially offset by a tax recovery in the current quarter of $11.1 million.

Funds flow from operations was $311.0 million in the third quarter compared to $259.5 million in the comparable quarter, and on a year-to-date basis was $901.6 million compared to $755.8 million last year. The improvement over the comparative periods was principally due to increased service operating income before amortization and reduced interest expense.

Consolidated free cash flow for the quarter and year-to-date periods of $81.2 million and $309.3 million, respectively, compare to $103.6 million and $280.1 million in the same periods last year. The quarterly decline was due to increased capital investment in the current quarter mainly due to facilities expansion. The growth in free cash flow on a year-to-date basis was principally due to improved service operating income before amortization of $125.1 million partially offset by increased capital investment of $106.5 million. The Cable division generated $44.4 million of free cash flow for the quarter compared to $68.3 million in the comparable period. The Satellite division achieved free cash flow of $36.7 million for the quarter compared to free cash flow of $35.4 million in the same period last year.

In November, 2007 Shaw received approval from the TSX to renew its normal course issuer bid to purchase its Class B Non-Voting Shares for a further one year period. The Company's normal course issuer bid will expire on November 18, 2008 and Shaw is authorized to repurchase up to 35,600,000 Class B Non-Voting Shares. In the nine months ended May 31, 2008 the Company has repurchased 1,722,800 Class B Non-Voting Shares for $32.0 million.

Key Performance Drivers

The Company's continuous disclosure documents may provide discussion and analysis of non-GAAP financial measures. These financial measures do not have standard definitions prescribed by Canadian GAAP or US GAAP and therefore may not be comparable to similar measures disclosed by other companies. The Company utilizes these measures in making operating decisions and assessing its performance. Certain investors, analysts and others, utilize these measures in assessing the Company's operational and financial performance and as an indicator of its ability to service debt and return cash to shareholders. These non-GAAP financial measures have not been presented as an alternative to net income or any other measure of performance required by Canadian or US GAAP.

The following contains a listing of non-GAAP financial measures used by the Company and provides a reconciliation to the nearest GAAP measurement or provides a reference to such reconciliation.

Service operating income before amortization and operating margin

Service operating income before amortization is calculated as service revenue less operating, general and administrative expenses and is presented as a sub-total line item in the Company's unaudited interim Consolidated Statements of Income and Retained Earnings (Deficit). It is intended to indicate the Company's ability to service and/or incur debt, and therefore it is calculated before amortization (a non-cash expense) and interest. Service operating income before amortization is also one of the measures used by the investing community to value the business. Operating margin is calculated by dividing service operating income before amortization by service revenue.

Free cash flow

The Company utilizes this measurement as it measures the Company's ability to repay debt and return cash to shareholders. Free cash flow for cable and satellite is calculated as service operating income before amortization, less interest, cash taxes paid or payable on net income, capital expenditures (on an accrual basis) and equipment costs (net). Consolidated free cash flow is calculated as follows:



Three months Nine months
ended May 31, ended May 31,
--------------- ---------------
2008 2007 2008 2007
----------------------------------------------------------------------------
($000's Cdn)
Cable free cash flow (1) 44,411 68,255 202,813 183,315
Combined satellite free cash flow (1) 36,749 35,381 106,534 96,808
----------------------------------------------------------------------------
Consolidated 81,160 103,636 309,347 280,123
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Reconciliations of free cash flow for both cable and satellite are
provided under "Cable - Financial Highlights" and "Satellite - Financial
Highlights".


CABLE
FINANCIAL HIGHLIGHTS

Three months ended May 31, Nine months ended May 31,
----------------------------------------------------------
Change Change
2008 2007 % 2008 2007 %
----------------------------------------------------------

($000's Cdn)
Service revenue
(third party) 607,849 526,870 15.4 1,755,176 1,540,481 13.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Service operating
income before
amortization (1) 294,341 247,177 19.1 851,108 729,110 16.7
Less:
Interest expense 49,231 51,151 (3.8) 149,943 154,006 (2.6)
----------------------------------------------------------------------------
Cash flow before
the following: 245,110 196,026 25.0 701,165 575,104 21.9
----------------------------------------------------------------------------
Capital
expenditures and
equipment costs
(net):
New housing
development 21,478 21,786 (1.4) 70,761 66,911 5.8
Success based 29,102 21,559 35.0 72,550 59,475 22.0
Upgrades and
enhancement 64,181 51,546 24.5 204,044 189,745 7.5
Replacement 15,038 11,490 30.9 44,388 29,979 48.1
Buildings/other 70,900 21,390 231.5 106,609 45,679 133.4
----------------------------------------------------------------------------
Total as per Note
2 to the unaudited
interim
Consolidated
Financial
Statements 200,699 127,771 57.1 498,352 391,789 27.2
----------------------------------------------------------------------------
Free cash flow (1) 44,411 68,255 (34.9) 202,813 183,315 10.6
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Operating margin 48.4% 46.9% 1.5 48.5% 47.3% 1.2
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) See definitions and discussion under Key Performance Drivers in
Management's Discussion and Analysis.


Operating Highlights

- The Digital Phone footprint grew in the quarter with launches in Prince Albert and Swift Current, both in Saskatchewan; Banff, Alberta; as well as continued expansion on Vancouver Island, British Columbia. The service is now available to over 90% of homes passed.

- Digital Phone lines were up 57,700 increasing to 549,932. In just over three years since the launch of this product, Digital Phone line penetration stands at 28% of Basic customers who have the service available to them. Basic cable subscribers increased during the quarter by 2,495 to 2,243,998, and Digital customers grew by 32,658 to 883,300.

- During the quarter Shaw added 23,185 Internet customers to total 1,541,177 as at May 31, 2008. Internet penetration of Basic now stands at 68.7% up from 65.2% at August 31, 2007.

Cable service revenue for the three and nine month periods of $607.8 million and $1.76 billion, respectively, improved 15.4% and 13.9% over the same periods last year. Customer growth and rate increases accounted for the increase. During the current quarter rate increases were implemented on most stand-alone cable services, packages and specialty channels. The increases, which were partially implemented in April, are expected to generate additional revenues of approximately $6.5 million per month. Service operating income before amortization of $294.3 million and $851.1 million, respectively, was up 19.1% and 16.7% over the comparable three and nine month periods. The increases were driven by revenue related growth and continued Digital Phone margin improvement. These were partially offset by higher employee related costs and other expenses related to business growth, including equipment maintenance and support. The current quarter also included a charge for CRTC Part II fees covering the period October 2007 to May 2008 as a result of the recent Federal Court of Appeal decision in the CRTC's favor.

Service revenue was up 4.5% or $26.0 million over the second quarter of fiscal 2008 primarily due to customer growth and rate increases. Service operating income before amortization improved 3.6% or $10.3 million over this same period primarily due to the revenue related growth partially offset by the charge for CRTC Part II fees covering the period October 2007 to May 2008.

Total capital investment of $200.7 million and $498.4 million for the quarter and year-to-date respectively, increased $72.9 million and $106.6 million over the same periods last year.

Investment in Buildings and Other was up $49.5 million and $60.9 million for the quarter and year-to-date, respectively, over the same periods last year. The increase was primarily due to investments in various facilities projects to support growth including a purchase of land and buildings in the current quarter, while the year-to-date period also includes new facilities construction, and building renovations.

The Replacement and Upgrades and enhancement categories combined were up $16.2 million and $28.7 million for the three and nine month periods, respectively, over the same periods last year. These increased investments continue to expand plant capacity to support customer growth and demand.

Success-based capital increased over the comparable three and nine month periods by $7.5 million and $13.1 million, respectively. Digital and Internet success-based capital was up in both periods as a result of reduced pricing on modems and certain digital equipment as well as increased sales volume of digital equipment. Digital Phone success-based capital also increased in the current quarter mainly due to customer growth.

During the quarter the Company launched Shaw Digital Phone Basic to capture the market segment with limited requirements for phone features and long distance. Shaw now offers three Digital Phone products appealing to a larger customer base.

In the third quarter the Company expanded the HD channel line-up to include TLC and Encore Avenue and also added three additional PPV channels for PPV movies, sports and events in HD. Digital customer penetration of Basic customers is now 39.4% compared to 34.3% at August 31, 2007. Shaw has over 880,000 Digital customers including 300,000 with HD capabilities.



Subscriber Statistics

May 31, 2008
----------------------------------
Three months Nine months
ended ended
----------------------------------
May 31, August 31, Change Change
2008 2007 Growth % Growth %
----------------------------------------------------------------------------
CABLE:
Basic service:
Actual 2,243,998 2,226,841 2,495 0.1 17,157 0.8
Penetration as % of
homes passed 64.0% 64.6%
Digital terminals 1,179,446 1,016,564 40,081 3.5 162,882 16.0
Digital customers 883,300 763,140 32,658 3.8 120,160 15.7
----------------------------------------------------------------------------

INTERNET:
Connected and
scheduled 1,541,177 1,451,756 23,185 1.5 89,421 6.2
Penetration as %
of basic 68.7% 65.2%
Standalone Internet
not included in
basic cable 210,745 182,569 4,631 2.2 28,176 15.4

DIGITAL PHONE:
Number of lines(1) 549,932 385,357 57,700 11.7 164,575 42.7
----------------------------------------------------------------------------

(1) Represents primary and secondary lines on billing plus pending installs.


SATELLITE (DTH and Satellite Services)
Financial Highlights

Three months ended May 31, Nine months ended May 31,
----------------------------------------------------------
Change Change
2008 2007 % 2008 2007 %
----------------------------------------------------------

($000's Cdn)
Service revenue
(third party)
DTH (Star Choice) 161,619 153,200 5.5 477,182 453,685 5.2
Satellite Services 22,681 22,168 2.3 66,801 64,808 3.1
----------------------------------------------------------------------------
184,300 175,368 5.1 543,983 518,493 4.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Service operating
income before
amortization (1)
DTH (Star Choice) 49,531 51,095 (3.1) 151,003 148,356 1.8
Satellite Services 12,217 12,476 (2.1) 36,598 36,107 1.4
----------------------------------------------------------------------------
61,748 63,571 (2.9) 187,601 184,463 1.7
Less:
Interest
expense (2) 7,220 9,714 (25.7) 23,037 29,584 (22.1)
----------------------------------------------------------------------------
Cash flow before
the following: 54,528 53,857 1.2 164,564 154,879 6.3
----------------------------------------------------------------------------
Capital
expenditures and
equipment costs
(net):
Success based (3) 16,134 16,476 (2.1) 53,988 48,837 10.5
Transponders and
other 1,645 2,000 (17.8) 4,042 9,234 (56.2)
----------------------------------------------------------------------------
Total as per Note
2 to the unaudited
interim
Consolidated
Financial
Statements 17,779 18,476 (3.8) 58,030 58,071 (0.1)
----------------------------------------------------------------------------
Free cash flow (1) 36,749 35,381 3.9 106,534 96,808 10.0
----------------------------------------------------------------------------
Operating Margin 33.5% 36.3% (2.8) 34.5% 35.6% (1.1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) See definitions and discussion under Key Performance Drivers in
Management's Discussion and Analysis.
(2) Interest is allocated to the Satellite division based on the actual cost
of debt incurred by the Company to repay Satellite debt and to fund
accumulated cash deficits of Shaw Satellite Services and Star Choice.
(3) Net of the profit on the sale of satellite equipment as it is viewed as
a recovery of expenditures on customer premise equipment.


Operating Highlights

- Free cash flow of $36.7 million for the quarter compares to $35.4 million in the same period last year.

- During the quarter Star Choice added 4,686 customers and as at May 31, 2008 customers now total 890,792.

Service revenue for the three and nine month periods of $184.3 million and $544.0 million, respectively, improved 5.1% and 4.9% over the same periods last year. The improvement was primarily due to rate increases and customer growth. Service operating income before amortization of $61.7 million and $187.6 million for the quarter and year-to-date periods, respectively, compares to $63.6 million and $184.5 million in the same periods last year. The revenue related growth in the current quarter was offset by a charge for CRTC Part II fees covering the period October 2007 to May 2008 and higher employee related and other costs to support continued growth. The increase on a year-to-date basis was mainly due to the revenue related improvement partially offset by higher employee related and other costs to support growth. The comparative nine month period also benefitted from the recovery of provisions related to certain contractual matters.

Service revenue increased 1.6% over the second quarter of fiscal 2008 primarily due to customer growth and rate increases implemented in January. Service operating income before amortization of $61.7 million compares to $65.7 million in the second quarter. The decline is due to the revenue related growth more than offset by the charge for CRTC Part II fees covering the period October 2007 to May 2008.

Total capital investment of $17.8 million and $58.0 million for the quarter and year-to-date respectively, compare to $18.5 million and $58.1 million for the same periods last year. Year-to-date success based capital increased $5.1 million over the comparable period last year, while spending in Transponders and other declined $5.2 million for the nine month period.

Success-based capital was up in the current nine month period primarily due to increased activations and certain equipment promotions the total of which was partially offset by a duty recovery received in the first quarter.

The year-to-date decline in Transponders and other was primarily due to investments made in the comparable period to upgrade certain Satellite Service technology and office equipment to support call centre expansions.

During the quarter Star Choice added additional HD channels including TLC HD and Encore Avenue HD and now carries a total of 38 HD channels that are available to over 220,000 HD capable customers.



Subscriber Statistics

May 31, 2008
----------------------------------
Three months Nine months
ended ended
----------------------------------
May 31, August 31, Change Change
2008 2007 Growth % Growth %
------------------------------------------------------

Star Choice
customers (1) 890,792 879,585 4,686 0.5 11,207 1.3
----------------------------------------------------------------------------

(1) Including seasonal customers who temporarily suspend their service.

OTHER INCOME AND EXPENSE ITEMS:

Amortization

Three months ended May 31, Nine months ended May 31,
----------------------------------------------------------
Change Change
2008 2007 % 2008 2007 %
----------------------------------------------------------------------------
($000's Cdn)
Amortization
revenue (expense)
Deferred IRU
revenue 3,137 3,137 - 9,410 9,410 -
Deferred
equipment
revenue 32,463 27,600 17.6 93,567 76,589 22.2
Deferred
equipment costs (57,210) (51,454) 11.2 (169,549) (150,590) 12.6
Deferred charges (256) (1,365) (81.2) (768) (3,838) (80.0)
Property, plant
and equipment (102,981) (95,140) 8.2 (310,104) (284,113) 9.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The increase in amortization of deferred equipment revenue and deferred equipment costs over the comparative periods is primarily due to continued growth in higher priced HD digital equipment as well as the price increases implemented by Shaw on this equipment in the latter part of 2006.

Amortization of deferred charges decreased as a result of the adoption of CICA Handbook Section 3855, "Financial Instruments - Recognition and Measurement". The Company previously recorded debt issuance costs as deferred charges and amortized them on a straight-line basis over the term of the related debt. Under the new standard, transaction and financing costs associated with issuance of debt securities are now netted against the related debt instrument and amortized into income using the effective interest rate method. The Company records the amortization of such transaction costs as amortization of financing costs as shown below.

Amortization of property, plant and equipment increased over the comparable periods as the amortization of capital expenditures incurred in fiscal 2007 and 2008 exceeded the impact of assets that became fully depreciated.



Amortization of financing costs and Interest expense

Three months ended Nine months ended
May 31, May 31,
------------------------ -----------------------
2008 2007 Change 2008 2007 Change
% %
----------------------------------------------------------------------------
($000's Cdn)
Amortization of financing
costs - long-term debt 882 - - 2,745 - -
Interest expense - debt 56,798 61,218 (7.2) 174,025 184,656 (5.8)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Amortization of financing costs on long-term debt arises on the adoption of the aforementioned accounting standard for financial instruments.

Interest expense decreased over the comparative periods as a result of lower average debt levels and a lower average cost of borrowing.

Debt retirement costs

On January 30, 2008, the Company redeemed its Cdn $100 million 8.54% COPrS. In connection with the early redemption, the Company incurred costs of $4,272 and wrote-off the remaining deferred financing charges of $992.

Other gains

This category generally includes realized and unrealized foreign exchange gains and losses on US dollar denominated current assets and liabilities, gains and losses on disposal of property, plant and equipment and the Company's share of the operations of Burrard Landing Lot 2 Holdings Partnership ("the Partnership"). In the first quarter of the current year, other gains also includes a net customs duty recovery of $22.3 million related to satellite receiver importations in prior years.

Future income taxes

Future income taxes decreased over the comparative periods primarily due to the impact of income tax recoveries partially offset by increased taxes on higher pre-tax income. In the second quarter of the current year, the Company recorded a future tax recovery of $188.0 million in respect of reductions in corporate income tax rates.

RISKS AND UNCERTAINTIES

There have been no material changes in any risks or uncertainties facing the Company since August 31, 2007. A discussion of risks affecting the Company and its business is set forth in the Company's August 31, 2007 Annual Report under the Introduction to the Business - Known Events, Trends, Risks and Uncertainties in Management's Discussion and Analysis.

FINANCIAL POSITION

Total assets at May 31, 2008 were $8.1 billion compared to $8.2 billion at August 31, 2007. Following is a discussion of significant changes in the consolidated balance sheet since August 31, 2007.

Current assets declined $211.3 million due to decreases in cash and cash equivalents of $165.3 million and future income taxes of $65.0 million which were partially offset by an increase in accounts receivable of $20.9 million. Cash and cash equivalents decreased as short-term deposits were used towards the repayment of the 7.4% senior unsecured notes at maturity and future income taxes declined due to the use of non-capital loss carryforwards. Accounts receivable increased primarily due to subscriber growth and rate increases.

Property, plant and equipment increased $161.1 million as current year capital expenditures exceeded amortization.

Deferred charges decreased $7.4 million primarily due to a reduction of $30.7 million upon adoption of a new accounting standard for financial instruments partially offset by an increase in deferred equipment costs of $22.8 million. Under the new accounting standard, transaction and financing costs associated with issuance of debt securities are now netted against the related debt instrument. Previously, such costs were recorded as deferred charges.

Current liabilities (excluding current portion of long-term debt and derivative instruments) increased $76.2 million due to increases in bank indebtedness of $39.2 million, accounts payable of $29.7 million and unearned revenue of $7.4 million. Accounts payable increased due to the liability for current year CRTC Part II fees arising from the recent Federal Court of Appeal decision, short-term financing for certain capital expenditures, and increased network fees associated with subscriber growth, new services and network rate increases. Unearned revenue increased due to customer growth and rate increases.

Total long-term debt decreased $433.9 million as a result of the repayment of the $296.8 million senior unsecured notes at maturity, redemption of the $100.0 million 8.54% Series B COPrS, a decrease of $61.0 million relating to the translation of hedged US denominated debt and a decrease of $25.8 million in respect of the adoption of the aforementioned accounting standard for financial instruments, all of which were partially offset by a net increase in bank borrowings of $50.0 million.

Other long-term liability increased due to the current year defined benefit pension plan expense.

Derivative instruments (including current portion) of $596.8 million arise on adoption of a new accounting standard for financial instruments which requires all derivative instruments be recorded at fair value in the balance sheet. This resulted in an increase of $526.7 million of which, $456.1 million was a reclassification from deferred credits in respect of cross-currency interest rate swaps and is the difference between the value of US denominated debt translated at the August 31, 2007 period end exchange rate and hedge rates. The remaining $70.6 million, net of tax, was charged to opening accumulated other comprehensive income. During the nine months ended May 31, 2008, an additional $70.1 million was recorded, of which $61.0 million was in respect of the foreign exchange loss on the notional amounts of the derivatives relating to hedges on long-term debt.

Deferred credits decreased by $455.5 million primarily due to a $459.7 million decrease on adoption of the aforementioned accounting standard for financial instruments and amortization of deferred IRU rental revenue of $9.4 million, both of which were partially offset by an increase in deferred equipment revenue of $13.3 million. Future income taxes decreased by $112.3 million due to the income tax recoveries primarily related to reductions in corporate income tax rates partially offset by the future income tax expense recorded in the current year.

Share capital increased by $18.7 million primarily due to the issuance of 1,577,629 Class B Non-Voting Shares under the Company's option plans for $25.5 million and the repurchase of 1,722,800 Class B Non-Voting Shares for $32.0 million of which $8.7 million reduced stated share capital and $23.3 million was charged to the deficit. As of June 15, 2008, share capital is as reported at May 31, 2008 with the exception of the issuance of 59,700 Class B Non-Voting Shares upon exercise of options subsequent to the quarter end. Contributed surplus increased due to stock-based compensation expense recorded in the current year.

LIQUIDITY AND CAPITAL RESOURCES

In the current year, the Company generated $309.3 million of consolidated free cash flow. Shaw used its free cash flow along with cash and cash equivalents of $165.3 million, proceeds on issuance of Class B Non-Voting Shares of $25.5 million, the net increase in debt and bank indebtedness of $89.2 million, refunds received on a net customs duty recovery of $22.3 million, net change in working capital cash requirements related to capital expenditures of $17.8 million, and other net items of $25.9 million to redeem the $100.0 million 8.54% COPrS, repay the $296.8 million 7.4% senior unsecured notes at maturity, purchase $32.0 million of Class B Non-Voting Shares for cancellation and pay common share dividends of $226.5 million.

On November 15, 2007, Shaw received the approval of the TSX to renew its normal course issuer bid to purchase its Class B Non-Voting Shares for a further one year period. The Company is authorized to acquire up to 35,600,000 Class B Non-Voting Shares, representing approximately 10% of the public float of Class B Non-Voting Shares, during the period November 19, 2007 to November 18, 2008. In the second quarter, the Company repurchased 1,722,800 Class B Non-Voting Shares for $32.0 million.

At May 31, 2008, Shaw had access to $559.6 million of available credit facilities. Based on available credit facilities and forecasted free cash flow, the Company expects to have sufficient liquidity to fund operations and obligations during the current fiscal year. On a longer-term basis, Shaw expects to generate free cash flow and have borrowing capacity sufficient to finance foreseeable future business plans and refinance maturing debt.



CASH FLOW

Operating Activities

Three months ended May 31, Nine months ended May 31,
---------------------------- --------------------------
Change Change
2008 2007 % 2008 2007 %
----------------------------------------------------------------------------
($000's Cdn)
Funds flow from
operations 310,984 259,470 19.9 901,619 755,818 19.3
Net decrease
(increase) in
non-cash
working capital
balances related to
operations (2,763) (28,075) 90.2 (6,489) (51,430) 87.4
----------------------------------------------------------------------------
308,221 231,395 33.2 895,130 704,388 27.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Funds flow from operations increased over comparative quarter primarily due to growth in service operating income before amortization and lower interest expense. The net change in non-cash working capital balances over the comparative periods is due to timing of payment of accounts payable and accrued liabilities and increases in accounts receivable due to subscriber growth and rate increases.



Investing Activities

Three months ended May 31, Nine months ended May 31,
---------------------------- --------------------------
2008 2007 Increase 2008 2007 Decrease
----------------------------------------------------------------------------
($000's Cdn)
Cash flow used in
investing
activities (216,852) (156,410) (60,442) (515,199) (525,010) 9,811
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The fluctuation in cash used in investing activities over the comparative periods is due to a higher cash outlay for capital expenditures and equipment costs in the current year offset by the impact of cash requirements for cable business acquisitions in the prior year.

Financing Activities

The changes in financing activities during the comparative periods were as follows:



Three months Nine months
ended May 31, ended May 31,
------------------ ---------------
2008 2007 2008 2007
----------------------------------------------------------------------------
(In $millions Cdn)
Bank loans and bank indebtedness
- net borrowings (repayments) (18.5) (227.2) 89.2 (300.4)
Proceeds on $400 million senior
unsecured notes - 400.0 - 400.0
Repayment of senior unsecured notes - - (296.8)
Redemption of Cdn 8.54%
Series B COPrS - - (100.0) -
Dividends (77.6) (54.2) (226.5) (140.4)
Repayment of Partnership debt (0.1) (0.1) (0.3) (0.3)
Debt retirement costs - - (4.3) -
Issue of Class B Non-Voting Shares 4.8 17.7 25.5 72.9
Purchase of Class B Non-Voting Shares
for cancellation - - (32.0) -
Proceeds on bond forward - 0.2 - 0.2
Cost to terminate forward contract - (0.4) - (0.4)
----------------------------------------------------------------------------
(91.4) 136.0 (545.2) 31.6
----------------------------------------------------------------------------
----------------------------------------------------------------------------


SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION

Service
operating Funds
income Basic flow
before earnings from
Service amortization Net per share operations
revenue (1) income (2) (3)
----------------------------------------------------------------------------
($000's Cdn
except per
share amounts)
2008
Third 792,149 356,089 128,113 0.30 310,984
Second 763,182 349,711 298,848 0.69 304,293
First 743,828 332,909 112,223 0.26 286,342
----------------------------------------------------------------------------
2007
Fourth 715,471 326,052 135,932 0.31 272,545
Third 702,238 310,748 91,658 0.21 259,470
Second 685,730 303,038 79,751 0.18 252,412
First 671,006 299,787 81,138 0.19 243,936
----------------------------------------------------------------------------
2006
Fourth 631,888 275,127 210,369 0.49 220,617
----------------------------------------------------------------------------

(1) See definition and discussion under Key Performance Drivers in
Management's Discussion and Analysis.

(2) Diluted earnings per share equals basic earnings per share except in
the fourth quarter of 2006 where diluted earnings per share is $0.48.

(3) Funds flow from operations is presented before changes in net non-cash
working capital balances related to operations as presented in the
unaudited interim Consolidated Statements of Cash Flows.


Generally, service revenue and service operating income before amortization have grown quarter-over-quarter mainly due to customer growth and rate increases. Net income has generally trended positively quarter-over-quarter as a result of the growth in service operating income before amortization described above, reductions of interest expense as a result of debt repayment and retirement, the impact of the net change in non-operating items such as other gains, debt retirement costs and the impact of corporate income tax rate reductions. The exceptions to the consecutive quarter-over-quarter increases in net income are the first and second quarters of 2007 and first and third quarters of 2008. Net income declined by $129.2 million in the first quarter of 2007, by $23.7 million in the first quarter of 2008 and by $170.7 million in the third quarter of 2008 due to income tax recoveries primarily related to reductions in corporate income tax rates which contributed $150.0 million, $35.5 million and $188.0 to net income in the fourth quarters of 2006 and 2007 and second quarter of 2008, respectively. The decline related to income taxes in the first quarter of 2008 was partially offset by a net customs duty recovery of $22.3 million in respect of satellite receiver importations in prior years. The decline in net income in the second quarter of 2007 was marginal. As a result of the aforementioned changes in net income, basic and diluted earnings per share have trended accordingly.

ACCOUNTING STANDARDS

Update to critical accounting policies and estimates

The Management's Discussion and Analysis ("MD&A") included in the Company's August 31, 2007 Annual Report outlined critical accounting policies including key estimates and assumptions that management has made under these policies and how they affect the amounts reported in the Consolidated Financial Statements. The MD&A also describes significant accounting policies where alternatives exist. Also described therein were several new accounting policies that the Company was required to adopt in fiscal 2008 as a result of changes in Canadian accounting pronouncements. The unaudited interim Consolidated Financial Statements follow the same accounting policies and methods of application as the most recent annual consolidated financial statements other than as set out below.

Financial instruments

The Company has adopted CICA Handbook Sections 3855, "Financial Instruments - Recognition and Measurement", 3861, "Financial Instruments - Disclosure and Presentation", 3865, "Hedges", 1530, "Comprehensive Income" and 3251, "Equity". These new standards address when a company should recognize a financial instrument on its balance sheet and how the instrument should be measured once recognized.

Adoption of these standards was effective September 1, 2007 on a retrospective basis without restatement of prior periods, except for the reclassification of equity balances to reflect Accumulated Other Comprehensive Income which included foreign currency translation adjustments.

On adoption of Section 1530, a new statement entitled "Consolidated Statements of Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)" was added to the Company's consolidated financial statements. Comprehensive income (loss) includes net income (loss) as well as other comprehensive income (loss). Other comprehensive income (loss) is comprised of changes in the fair value of derivative instruments designated as cash flow hedges and the net unrealized foreign currency translation gain (loss) from self sustaining foreign operations, which was previously classified as a separate component of shareholders' equity. Accumulated other comprehensive income (loss) forms part of shareholders' equity.

In addition, the Company classified all financial instruments into one of the following five categories: 1) "loans and receivables", 2) "assets held-to-maturity", 3) "assets available-for-sale", 4) "financial liabilities", and 5) "held-for-trading". None of the Company's financial instruments have been classified as held-to-maturity or held-for-trading. Financial instruments designated as "available-for-sale" are carried at their fair value while financial instruments such as "loans and receivables" and "financial liabilities" will be carried at amortized cost. Certain private investments where market value is not readily determinable will continue to be carried at cost.

All derivatives, including embedded derivatives that must be separately accounted for, are measured at fair value in the balance sheet. The transition date for the assessment of embedded derivatives was September 1, 2002. The changes in fair value of cash flow hedging derivatives are recorded in other comprehensive income (loss), to the extent effective, until the variability of cash flows relating to the hedged asset or liability is recognized in the consolidated statements of income. Any hedge ineffectiveness will be recognized in net income (loss) immediately.

Transaction and financing costs associated with issuance of debt securities are now netted against the related debt instrument and amortized to income using the effective interest rate method. Accordingly, long-term debt, net of issue costs, accretes over time to the principal amount that will be owing at maturity. The Company previously recorded debt issuance costs as deferred charges and amortized them on a straight-line basis over the term of the related debt.

The impact on the Consolidated Balance Sheets as at September 1, 2007 and May 31, 2008 and on the Consolidated Statements of Income and Retained Earnings (Deficit) for three and nine months ended May 31, 2008 is as follows:



Increase (decrease)
----------------------------
May 31, September 1,
2008 2007
$ $
----------------------------------------------------------------------------
($000's Cdn)
Consolidated balance sheets:
Deferred charges (26,122) (30,746)
Current portion of derivative
instruments 2,382 5,119
Long-term debt (25,766) (29,681)
Derivative instruments 594,390 521,560
Deferred credits (519,877) (459,656)
Future income taxes (13,151) (12,615)
Deficit (1,705) (1,754)
Accumulated other comprehensive loss 65,805 57,227
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Increase (decrease) in deficit:
Adjusted for adoption of new
accounting policy (1,754) (1,754)
Decrease in net income 49 -
----------------------------------------------------------------------------
(1,705) (1,754)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Increase (decrease) in net income
May 31, 2008
---------------------------------------
Three months Nine months
ended ended
($000's Cdn except per share amount) $ $
----------------------------------------------------------------------------
Consolidated statement of income:
Decrease in amortization of deferred
charges 929 2,898
Increase in amortization of financing
costs - long-term debt (881) (2,744)
Decrease in interest expense - debt 52 39
Increase in debt retirement costs - (252)
Decrease (increase) in income tax
expense (22) 10
----------------------------------------------------------------------------
Increase (decrease) in net income 78 (49)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Increase (decrease) in earnings per
share: - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------


2008 GUIDANCE

Shaw continues to expect that it will achieve free cash flow of approximately $450 million for fiscal 2008. The Company remains of the view that service operating income before amortization for fiscal 2008 will grow in an approximate range of 13% - 15%. This reflects the reinstatement of the CRTC Part II fee charges. Capital expenditures are still forecasted to exceed $700 million as Shaw has accelerated certain major facilities projects.

Certain important assumptions for 2008 guidance purposes include: customer growth continuing generally in line with historical trends; stable pricing environment for Shaw's products relative to today's rates; no significant market disruption or other significant changes in competition or regulation that would have a material impact; no cash income taxes to be paid or payable in 2008; no significant deterioration in economic conditions; and a stable regulatory fee and rate environment, with CRTC Part II fees payable.

The cost to purchase any licenses in the upcoming Auction of Spectrum Licenses for Advanced Wireless Services is still to be determined. The purchase of such licenses will be funded by the Company's free cash flow and, as may be required, the existing bank credit facility. Free cash flow will be used this year to pay dividends, repurchase shares and fund this strategic acquisition. Debt may increase depending on the amount of spending on this initiative.

See the section below entitled "Caution Concerning Forward-Looking Statements".

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements included and incorporated by reference herein may constitute forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used, the words "anticipate", "believe", "expect", "plan", "intend", "target", "guideline", "goal", and similar expressions generally identify forward-looking statements. These forward-looking statements include, but are not limited to, references to future capital expenditures (including the amount and nature thereof), financial guidance for future performance, business strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of Shaw's business and operations, plans and references to the future success of Shaw. These forward-looking statements are based on certain assumptions, some of which are noted above, and analyses made by Shaw in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances as of the current date. These assumptions include but are not limited to general economic and industry growth rates, currency exchange rates, technology deployment, content and equipment costs, and industry structure and stability.

Whether actual results and developments will conform with expectations and predictions of the Company is subject to a number of factors including, but not limited to, general economic, market or business conditions; the opportunities that may be available to Shaw; Shaw's ability to execute its strategic plans; changes in the competitive environment in the markets in which Shaw operates and from the development of new markets for emerging technologies; changes in laws, regulations and decisions by regulators that affect Shaw or the markets in which it operates in both Canada and the United States; Shaw's status as a holding company with separate operating subsidiaries; changing conditions in the entertainment, information and communications industries; risks associated with the economic, political and regulatory policies of local governments and laws and policies of Canada and the United States; and other factors, many of which are beyond the control of Shaw. The foregoing is not an exhaustive list of all possible factors. Should one or more of these risks materialize or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those as described herein. Consequently, all of the forward-looking statements made in this report and the documents incorporated by reference herein are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Shaw will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.

You should not place undue reliance on any such forward-looking statements. The Company utilizes forward-looking statements in assessing its performance. Certain investors, analysts and others, utilize the Company's financial guidance and other forward-looking information in order to assess the Company's expected operational and financial performance and as an indicator of its ability to service debt and return cash to shareholders. The Company's financial guidance may not be appropriate for other purposes.

Any forward-looking statement (and such risks, uncertainties and other factors) speaks only as of the date on which it was originally made and the Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained in this document to reflect any change in expectations with regard to those statements or any other change in events, conditions or circumstances on which any such statement is based, except as required by law. New factors affecting the Company emerge from time to time, and it is not possible for the Company to predict what factors will arise or when. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any particular factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.



CONSOLIDATED BALANCE SHEETS
(Unaudited)
May 31, August
(thousands of Canadian dollars) 2008 31, 2007
----------------------------------------------------------------------------

ASSETS
Current
Cash and cash equivalents - 165,310
Accounts receivable 176,383 155,499
Inventories 57,235 60,601
Prepaids and other 25,297 23,834
Future income taxes 120,000 185,000
----------------------------------------------------------------------------
378,915 590,244
Investments and other assets 7,909 7,881
Property, plant and equipment 2,584,046 2,422,900
Deferred charges 271,143 278,525
Intangibles
Broadcast rights 4,776,078 4,776,078
Goodwill 88,111 88,111
----------------------------------------------------------------------------
8,106,202 8,163,739
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (note 3) 39,191 -
Accounts payable and accrued liabilities 471,168 441,444
Income taxes payable 4,250 4,304
Unearned revenue 126,270 118,915
Current portion of long-term debt (note 3) 501 297,238
Current portion of derivative instruments (note 1) 2,382 -
----------------------------------------------------------------------------
643,762 861,901
Long-term debt (note 3) 2,634,181 2,771,316
Other long-term liability (note 8) 73,395 56,844
Derivative instruments (note 1) 594,390 -
Deferred credits 696,268 1,151,724
Future income taxes 1,215,603 1,327,914
----------------------------------------------------------------------------
5,857,599 6,169,699
----------------------------------------------------------------------------
Contingencies (note 9)

Shareholders' equity
Share capital (note 4) 2,071,869 2,053,160
Contributed surplus (note 4) 19,307 8,700
Retained earnings (deficit) 222,948 (68,132)
Accumulated other comprehensive income (loss) (note 6) (65,521) 312
----------------------------------------------------------------------------
2,248,603 1,994,040
----------------------------------------------------------------------------
8,106,202 8,163,739
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes


CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(DEFICIT)
(Unaudited)

Three months ended Nine months ended
--------------------- ---------------------
(thousands of Canadian dollars May 31, May 31, May 31, May 31,
except per share amounts) 2008 2007 2008 2007
----------------------------------------------------------------------------

Service revenue (note 2) 792,149 702,238 2,299,159 2,058,974
Operating, general and
administrative expenses 436,060 391,490 1,260,450 1,145,401
----------------------------------------------------------------------------
Service operating income before
amortization (note 2) 356,089 310,748 1,038,709 913,573
Amortization:
Deferred IRU revenue 3,137 3,137 9,410 9,410
Deferred equipment revenue 32,463 27,600 93,567 76,589
Deferred equipment costs (57,210) (51,454) (169,549) (150,590)
Deferred charges (256) (1,365) (768) (3,838)
Property, plant and equipment (102,981) (95,140) (310,104) (284,113)
----------------------------------------------------------------------------
Operating income 231,242 193,526 661,265 561,031
Amortization of financing costs
- long-term debt (882) - (2,745) -
Interest expense - debt (note 2) (56,798) (61,218) (174,025) (184,656)
----------------------------------------------------------------------------
173,562 132,308 484,495 376,375
Gain on sale of investment - - - 415
Debt retirement costs - - (5,264) -
Other gains 233 7,963 25,751 8,525
----------------------------------------------------------------------------
Income before income taxes 173,795 140,271 504,982 385,315
Future income tax expense
(recovery) 45,612 48,518 (34,208) 132,874
----------------------------------------------------------------------------
Income before the following 128,183 91,753 539,190 252,441
Equity income (loss) on investee (70) (95) (6) 106
----------------------------------------------------------------------------
Net income 128,113 91,658 539,184 252,547
Retained earnings (deficit),
beginning of period 172,403 (98,021) (68,132) (172,701)
Adjustment for adoption of new
accounting policy (note 1) - 1,754 -
Reduction on Class B Non-Voting
Shares purchased for cancellation
(note 4) - - (23,336) -
Dividends - Class A Shares and
Class B Non-Voting Shares (77,568) (54,238) (226,522) (140,447)
----------------------------------------------------------------------------
Retained earnings (deficit),
end of period 222,948 (60,601) 222,948 (60,601)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share (note 5)
Basic 0.30 0.21 1.25 0.58
Diluted 0.30 0.21 1.24 0.58
----------------------------------------------------------------------------
(thousands of shares)
Weighted average participating
shares outstanding during period 431,010 434,036 431,533 432,030
Participating shares
outstanding, end of period 431,189 434,564 431,189 434,564
----------------------------------------------------------------------------

See accompanying notes


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Unaudited)

Three months Nine months
ended May 31, ended May 31,
--------------------- ---------------------
2008 2007 2008 2007
----------------------------------------------------------------------------
Net income 128,113 91,658 539,184 252,547

Other comprehensive income
(loss) (note 6)
Change in unrealized fair value
of derivatives designated as
cash flow hedges (17,186) - (94,896) -
Adjustment for hedged items
recognized in the period 12,862 - 34,052 -
Reclassification of foreign
exchange (gain)/loss on
hedging derivatives to income
to offset foreign exchange
adjustments on US denominated
debt (7,112) - 52,266 -
Unrealized foreign exchange gain
(loss) on translation of self
sustaining foreign operations 4 (38) (28) (12)
----------------------------------------------------------------------------
(11,432) (38) (8,606) (12)
----------------------------------------------------------------------------
Comprehensive income 116,681 91,620 530,578 252,535

Accumulated other comprehensive
income (loss), beginning of
period (54,089) 356 312 330
Adjustment for adoption of new
accounting policy (note 1) - - (57,227) -
Other comprehensive income (11,432) (38) (8,606) (12)
----------------------------------------------------------------------------
Accumulated other comprehensive
income (loss), end of period (65,521) 318 (65,521) 318
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes


CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three months Nine months
ended May 31, ended May 31,
--------------------- ---------------------
(thousands of Canadian dollars) 2008 2007 2008 2007
----------------------------------------------------------------------------

OPERATING ACTIVITIES (note 7)
Funds flow from operations 310,984 259,470 901,619 755,818
Net decrease (increase) in
non-cash working capital
balances related to operations (2,763) (28,075) (6,489) (51,430)
----------------------------------------------------------------------------
308,221 231,395 895,130 704,388
----------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to property, plant
and equipment (note 2) (192,965) (124,153) (453,763) (395,403)
Additions to equipment costs
(net) (note 2) (29,981) (22,424) (87,464) (61,236)
Net customs duty recovery on
equipment costs - - 22,267 -
Net addition to inventories 6,060 9,261 3,366 (6,309)
Cable business acquisitions - (19,307) - (72,225)
Proceeds on sale of investments
and other assets 34 5,534 395 15,849
Additions to deferred charges - (5,321) - (5,686)
----------------------------------------------------------------------------
(216,852) (156,410) (515,199) (525,010)
----------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase (decrease) in bank
indebtedness 1,561 (42,163) 39,191 (20,362)
Increase in long-term debt 50,000 400,000 220,000 460,000
Long-term debt repayments (70,121) (185,113) (567,116) (340,334)
Cost to terminate forward
contracts - (370) - (370)
Debt retirement costs - - (4,272) -
Issue of Class B Non-Voting
Shares, net of after-tax expenses 4,756 17,732 25,543 72,947
Proceeds on bond forwards - 190 - 190
Purchase of Class B Non-Voting
Shares for cancellation - - (32,038) -
Dividends paid on Class A Shares
and Class B Non-Voting Shares (77,568) (54,238) (226,522) (140,447)
----------------------------------------------------------------------------
(91,372) 136,038 (545,214) 31,624
----------------------------------------------------------------------------
Effect of currency translation
on cash balances and cash flows 3 (37) (27) (16)
----------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents - 210,986 (165,310) 210,986
Cash and cash equivalents,
beginning of the period - - 165,310 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents, end
of the period - 210,986 - 210,986
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash includes cash and term deposits

See accompanying notes


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

May 31, 2008 and 2007

(all amounts in thousands of Canadian dollars, except per share amounts)


1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The unaudited interim Consolidated Financial Statements include the accounts of Shaw Communications Inc. and its subsidiaries (collectively the "Company"). The notes presented in these unaudited interim Consolidated Financial Statements include only significant events and transactions occurring since the Company's last fiscal year end and are not fully inclusive of all matters required to be disclosed in the Company's annual audited consolidated financial statements. As a result, these unaudited interim Consolidated Financial Statements should be read in conjunction with the Company's consolidated financial statements for the year ended August 31, 2007.

Applicable share, per share and option amounts for the comparative periods have been retroactively adjusted to reflect the two-for-one stock split of the Company's Class A Shares and Class B Non-Voting Shares effective July 30, 2007.

The unaudited interim Consolidated Financial Statements follow the same accounting policies and methods of application as the most recent annual consolidated financial statements except as noted below.

Adoption of recent accounting pronouncements

Financial instruments

The Company has adopted CICA Handbook Sections 3855, "Financial Instruments - Recognition and Measurement", 3861, "Financial Instruments - Disclosure and Presentation", 3865, "Hedges", 1530, "Comprehensive Income" and 3251, "Equity". These new standards address when a company should recognize a financial instrument on its balance sheet and how the instrument should be measured once recognized.

Adoption of these standards was effective September 1, 2007 on a retrospective basis without restatement of prior periods, except for the reclassification of equity balances to reflect Accumulated Other Comprehensive Income which included foreign currency translation adjustments.

On adoption of Section 1530, a new statement entitled "Consolidated Statements of Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)" was added to the Company's consolidated financial statements. Comprehensive income (loss) includes net income (loss) as well as other comprehensive income (loss). Other comprehensive income (loss) is comprised of changes in the fair value of derivative instruments designated as cash flow hedges and the net unrealized foreign currency translation gain (loss) from self sustaining foreign operations, which was previously classified as a separate component of shareholders' equity. Accumulated other comprehensive income (loss) forms part of shareholders' equity.

In addition, the Company classified all financial instruments into one of the following five categories: 1) "loans and receivables", 2) "assets held-to-maturity", 3) "assets available-for-sale", 4) "financial liabilities", and 5) "held-for-trading". None of the Company's financial instruments have been classified as held-to-maturity or held-for-trading. Financial instruments designated as "available-for-sale" are carried at their fair value while financial instruments such as "loans and receivables" and "financial liabilities" are carried at amortized cost. Certain private investments where market value is not readily determinable will continue to be carried at cost.

All derivatives, including embedded derivatives that must be separately accounted for, are measured at fair value in the balance sheet. The transition date for the assessment of embedded derivatives was September 1, 2002. The changes in fair value of cash flow hedging derivatives are recorded in other comprehensive income (loss), to the extent effective, until the variability of cash flows relating to the hedged asset or liability is recognized in the consolidated statements of income. Any hedge ineffectiveness will be recognized in net income (loss) immediately.

Transaction and financing costs associated with issuance of debt securities are now netted against the related debt instrument and amortized to income using the effective interest rate method. Accordingly, long-term debt, net of issue costs, accretes over time to the principal amount that will be owing at maturity. The Company previously recorded debt issuance costs as deferred charges and amortized them on a straight-line basis over the term of the related debt.

The impact on the Consolidated Balance Sheets as at September 1, 2007 and May 31, 2008 and on the Consolidated Statements of Income and Retained Earnings (Deficit) for three and nine months ended May 31, 2008 is as follows:



Increase (decrease)
--------------------------
May 31, September 1,
2008 2007
$ $
----------------------------------------------------------------------------

Consolidated balance sheets:
Deferred charges (26,122) (30,746)
Current portion of derivative instruments 2,382 5,119
Long-term debt (25,766) (29,681)
Derivative instruments 594,390 521,560
Deferred credits (519,877) (459,656)
Future income taxes (13,151) (12,615)
Deficit (1,705) (1,754)
Accumulated other comprehensive loss 65,805 57,227
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Increase (decrease) in deficit:
Adjustment for adoption of new accounting policy (1,754) (1,754)
Decrease in net income 49 -
----------------------------------------------------------------------------
(1,705) (1,754)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Increase (decrease) in net income
May 31, 2008
-----------------------------------
Three months Nine months
ended ended
$ $
----------------------------------------------------------------------------

Consolidated statement of income:
Decrease in amortization of deferred
charges 929 2,898
Increase in amortization of financing
costs - long-term debt (881) (2,744)
Decrease in interest expense - debt 52 39
Increase in debt retirement costs - (252)
Decrease (increase) in income tax expense (22) 10
----------------------------------------------------------------------------
Increase (decrease) in net income 78 (49)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Increase (decrease) in earnings per share: - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Recent accounting pronouncements

Inventories

In fiscal 2009, the Company will adopt CICA Handbook Section 3031, "Inventories", which provides more guidance on measurement and disclosure requirements. The Company is currently assessing the impact of adoption of this new accounting standard.

Good will and intangible assets

In fiscal 2010, the Company will adopt CICA Handbook Section 3064, "Goodwill and intangible assets", which replaces Sections 3062, "Goodwill and other intangible assets", and 3450, "Research and development costs". Section 3064 establishes standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. The Company is currently assessing the impact of adoption of this new accounting standard.

2. BUSINESS SEGMENT INFORMATION

The Company provides cable television services, high-speed Internet access, Digital Phone and Internet infrastructure services ("Cable"); DTH satellite services (Star Choice); and, satellite distribution services ("Satellite Services"). All of these operations are located in Canada. Information on operations by segment is as follows:



Operating information

Three months Nine months
ended May 31, ended May 31,
--------------------- ---------------------
2008 2007 2008 2007
$ $ $ $
----------------------------------------------------------------------------
Service revenue
Cable 608,802 527,687 1,757,996 1,542,950
DTH 164,812 155,074 484,870 458,756
Satellite Services 23,556 23,043 69,426 67,433
----------------------------------------------------------------------------
Inter segment - 797,170 705,804 2,312,292 2,069,139
Cable (953) (817) (2,820) (2,469)
DTH (3,193) (1,874) (7,688) (5,071)
Satellite Services (875) (875) (2,625) (2,625)
----------------------------------------------------------------------------
792,149 702,238 2,299,159 2,058,974
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Service operating income before
amortization
Cable 294,341 247,177 851,108 729,110
DTH 49,531 51,095 151,003 148,356
Satellite Services 12,217 12,476 36,598 36,107
----------------------------------------------------------------------------
356,089 310,748 1,038,709 913,573
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest (1)
Cable 49,231 51,151 149,943 154,006
DTH and Satellite Services 7,220 9,714 23,037 29,584
Burrard Landing Lot 2 Holdings
Partnership 347 353 1,045 1,066
----------------------------------------------------------------------------
56,798 61,218 174,025 184,656
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Company reports interest on a segmented basis for Cable and combined
satellite only. It does not report interest on a segmented basis for DTH
and Satellite Services.


Capital expenditures

Three months Nine months
ended May 31, ended May 31,
--------------------- ---------------------
2008 2007 2008 2007
--------------------- ---------------------
$ $ $ $
----------------------------------------------------------------------------
Capital expenditures accrual
basis
Cable 123,403 107,032 382,551 349,079
Corporate 64,307 15,686 84,879 32,847
----------------------------------------------------------------------------
Sub-total Cable including
corporate 187,710 122,718 467,430 381,926
Satellite (net of equipment
profit) 787 1,105 1,488 6,698
----------------------------------------------------------------------------
188,497 123,823 468,918 388,624
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Equipment costs (net of revenue
received)
Cable 12,989 5,053 30,922 9,863
Satellite 16,992 17,371 56,542 51,373
----------------------------------------------------------------------------
29,981 22,424 87,464 61,236
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures and
equipment costs (net)
Cable 200,699 127,771 498,352 391,789
Satellite 17,779 18,476 58,030 58,071
----------------------------------------------------------------------------
218,478 146,247 556,382 449,860
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Reconciliation to Consolidated
Statements of Cash Flows
Additions to property, plant and
equipment 192,965 124,153 453,763 395,403
Additions to equipment costs
(net) 29,981 22,424 87,464 61,236
----------------------------------------------------------------------------
Total of capital expenditures
and equipment costs (net) per
Consolidated Statements of Cash
Flows 222,946 146,577 541,227 456,639
Decrease in working capital
related to capital expenditures (3,548) 591 17,809 (4,142)
Less: IRU prepayments (1) - - - (7)
Less: Satellite equipment profit
(2) (920) (921) (2,654) (2,630)
----------------------------------------------------------------------------
Total capital expenditures and
equipment costs (net)
reported by segments 218,478 146,247 556,382 449,860
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Prepayments on indefeasible rights to use ("IRUs") certain specifically
identified fibres in amounts not exceeding the costs to build the fiber
subject to the IRUs are subtracted from the calculation of segmented
capital expenditures and equipment costs (net).

(2) The profit from the sale of satellite equipment is subtracted from the
calculation of segmented capital expenditures and equipment costs (net)
as the Company views the profit on sale as a recovery of expenditures on
customer premise equipment.


Assets

May 31, 2008
-----------------------------------------------------------
Satellite
Cable DTH Services Total
$ $ $ $
----------------------------------------------------------------------------
Segment assets 6,393,762 883,694 526,350 7,803,806
------------------------------------------------------------------
------------------------------------------------------------------
Corporate assets 302,396
-----------
Total assets 8,106,202
-----------
-----------


August 31, 2007
-----------------------------------------------------------
Satellite
Cable DTH Services Total
$ $ $ $
----------------------------------------------------------------------------
Segment assets 6,300,834 894,893 529,411 7,725,138
------------------------------------------------------------------
------------------------------------------------------------------
Corporate assets 438,601
-----------
Total assets 8,163,739
-----------
-----------

3. LONG-TERM DEBT

May 31, 2008
----------------------------------------------
Translated
Effective at period
interest end Adjustment Translated
rates exchange for hedged at hedged
% rate (1) debt (2) rate
----------------------------------------------------------------------------
$ $ $
Corporate
Bank loans (3) Variable 50,000 - 50,000
Senior notes-
Cdn $400,000 5.70% due
March 2, 2017 5.72 395,090 - 395,090
Cdn $450,000 6.10% due
November 16, 2012 6.11 445,808 - 445,808
Cdn $300,000 6.15% due
May 9, 2016 6.34 290,841 - 290,841
Cdn $296,760 7.4% due
October 17, 2007 7.40 - - -
US $440,000 8.25% due
April 11, 2010 7.88 435,129 205,700 640,829
US $225,000 7.25% due
April 6, 2011 7.68 222,156 132,414 354,570
US $300,000 7.20% due
December 15, 2011 7.61 296,432 178,950 475,382
Cdn $350,000 7.50% due
November 20, 2013 7.50 345,523 - 345,523
COPrS -
Cdn $100,000 due
September 30, 2027 (4) 8.54 - - -
----------------------------------------------------------------------------
2,480,979 517,064 2,998,043
----------------------------------------------------------------------------

Other subsidiaries and
entities
Videon CableSystems Inc. -
Cdn $130,000 Senior Debentures
Series "A" 8.15% due
April 26, 2010 7.63 131,623 - 131,623

Burrard Landing Lot 2 Holdings
Partnership 6.31 22,080 - 22,080
----------------------------------------------------------------------------
153,703 - 153,703
----------------------------------------------------------------------------
Total consolidated debt 2,634,682 517,064 3,151,746
Less current portion (5) 501 - 501
----------------------------------------------------------------------------
2,634,181 517,064 3,151,245
----------------------------------------------------------------------------
----------------------------------------------------------------------------


August 31, 2007
---------------------------------------
Translated
at year
end Adjustment Translated
exchange for hedged at hedged
rate debt (2) rate
----------------------------------------------------------------------------
$ $ $
Corporate
Bank loans (3) - - -
Senior notes-
Cdn $400,000 5.70% due March 2, 2017 400,000 - 400,000
Cdn $450,000 6.10% due November 16, 2012 450,000 - 450,000
Cdn $300,000 6.15% due May 9, 2016 300,000 - 300,000
Cdn $296,760 7.4% due October 17, 2007 296,760 - 296,760
US $440,000 8.25% due April 11, 2010 464,728 177,892 642,620
US $225,000 7.25% due April 6, 2011 237,645 118,193 355,838
US $300,000 7.20% due December 15, 2011 316,860 159,990 476,850
Cdn $350,000 7.50% due November 20, 2013 350,000 - 350,000
COPrS -
Cdn $100,000 due September 30, 2027 (4) 100,000 - 100,000
----------------------------------------------------------------------------
2,915,993 456,075 3,372,068
----------------------------------------------------------------------------
Other subsidiaries and
entities
Videon CableSystems Inc. -
Cdn $130,000 Senior Debentures
Series "A" 8.15% due
April 26, 2010 130,000 - 130,000
Burrard Landing Lot 2 Holdings
Partnership 22,561 - 22,561
----------------------------------------------------------------------------
152,561 - 152,561
----------------------------------------------------------------------------
Total consolidated debt 3,068,554 456,075 3,524,629
Less current portion (5) 297,238 - 297,238
----------------------------------------------------------------------------
2,771,316 456,075 3,227,391
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Long-term debt, excluding bank loans, are presented net of unamortized
discounts and finance costs of $25,766.

(2) Foreign denominated long-term debt is translated at the period-end
foreign exchange rates. Because the Company follows hedge accounting,
the resulting exchange gains and losses on translating hedged long-term
debt are deferred and offset by foreign exchange gains and losses
arising on the related cross-currency interest rate agreements. If the
rate of translation was adjusted to reflect the hedged rates of the
Company's cross-currency interest rate agreements (which fix the
liability for interest and principal), long-term debt would increase by
$517,064 (August 31, 2007 - $456,075) representing a corresponding
amount in derivative instruments. The hedged rates on the Senior notes
of US $440,000, US $225,000 and US $300,000 are 1.4605, 1.5815 and
1.5895, respectively.

(3) Availabilities under banking facilities are as follows at May 31, 2008:

Operating
credit
Bank loans facilities
Total (a) (b) (a)
$ $ $
------------------------------------
Total facilities 1,050,000 1,000,000 50,000
Amount drawn (excluding letters of
credit of $401,178) 89,191 50,000 39,191
------------------------------------
960,809 950,000 10,809
------------------------------------
------------------------------------

(a) Bank loans represent liabilities classified as long-term debt. Operating
credit facilities are for terms less than one year and accordingly are
classified as bank indebtedness.

(b) The $1 billion revolving credit facility is due May 31, 2012 and is
unsecured and ranks pari passu with the senior unsecured notes.

(4) On January 30, 2008, the Company redeemed the $100,000 8.54% COPrS.

(5) Current portion of long-term debt is the amount due within one year on
the Partnership's mortgage bonds.


4. SHARE CAPITAL

Issued and outstanding

Changes in Class A Share and Class B Non-Voting Share capital during the nine months ended May 31, 2008 are as follows:



Class B
Class A Shares Non-Voting Shares
----------------------------------------------
Number $ Number $
----------------------------------------------------------------------------
August 31, 2007 22,563,064 2,473 408,770,759 2,050,687
Class A Share conversions (5,000) (1) 5,000 1
Issued upon stock option plan
exercises - - 1,577,629 27,411
Purchase of shares for
cancellation - - (1,722,800) (8,702)
----------------------------------------------------------------------------
May 31, 2008 22,558,064 2,472 408,630,588 2,069,397
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Purchase of shares for cancellation

During the nine months ended May 31, 2008, the Company purchased 1,722,800 Class B Non-Voting Shares for cancellation for $32,038 of which $8,702 reduced the stated capital of the Class B Non-Voting Shares and $23,336 was charged to the deficit.

Stock option plan

Under a stock option plan, directors, officers, employees and consultants of the Company are eligible to receive stock options to acquire Class B Non-Voting Shares with terms not to exceed 10 years from the date of grant. Twenty-five percent of the options are exercisable on each of the first four anniversary dates from the date of the original grant. The options must be issued at not less than the fair market value of the Class B Non-Voting Shares at the date of grant. The maximum number of Class B Non-Voting Shares issuable under this plan and a former warrant plan may not exceed 32,000,000. To date 7,333,922 Class B Non-Voting Shares have been issued under these plans. During the nine months ended May 31, 2008, 1,544,027 options were exercised for $25,398.



The changes in options for the nine months ended May 31, 2008 are as
follows:

Weighted average
exercise price
Number $
----------------------------------------------------------------------------
Outstanding at beginning of period 17,574,801 17.08
Granted 8,990,500 24.24
Forfeited (1,637,688) 20.00
Exercised (1,544,027) 16.45
----------------------------------------------------------------------------
Outstanding at end of period 23,383,586 19.67
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The following table summarizes information about the options outstanding at
May 31, 2008:

Number Weighted Number
outstanding average Weighted exercisable Weighted
at remaining average at average
Range of May 31, contractual exercise May 31, exercise
prices 2008 life price 2008 price
----------------------------------------------------------------------------
$ 8.69 20,000 5.39 $ 8.69 20,000 $ 8.69
$14.85 - $22.27 14,688,086 5.59 $16.87 8,880,364 $16.48
$22.28 - $26.20 8,675,500 9.26 $24.43 - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------


For all common share options granted to employees up to August 2003, had the Company determined compensation costs based on the fair values at grant dates of the common share options consistent with the method prescribed under CICA Handbook Section 3870, the Company's net income and earnings per share would have been reported as the pro forma amounts indicated below:



Three months ended Nine months ended
--------------------------------------
May 31, 2007 May 31, 2007
$ $
----------------------------------------------------------------------------
Net income for the period 91,658 252,547
Fair value of stock option grants 29 89
----------------------------------------------------------------------------
Pro forma net income for the period 91,629 252,458
Pro forma basic and diluted earnings
per share 0.21 0.58
----------------------------------------------------------------------------
----------------------------------------------------------------------------


For the purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period on a straight-line basis.

The weighted average estimated fair value at the date of the grant for common share options granted was $3.27 per option (2007 - $3.63 per option) and $5.26 per option (2007 - $3.60) for the quarter and year-to-date, respectively. The fair value of each option granted was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:



Three months ended Nine months ended
May 31, May 31,
---------------------------------------
2008 2007 2008 2007
----------------------------------------------------------------------------
Dividend yield 3.76% 2.75% 2.80% 2.88%
Risk-free interest rate 3.59% 3.99% 4.40% 4.09%
Expected life of options 5 years 4 years 5 years 4 years
Expected volatility factor of the
future expected market price of
Class B Non-Voting Shares 23.8% 24.1% 24.5% 26.8%
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Other stock options

In conjunction with the acquisition of Satellite Services, holders of Satellite Services options elected to receive 0.9 of a Shaw Class B Non-Voting Share in lieu of one Satellite Services share which would have been received upon the exercise of an option under the Satellite Services plan.

During the current quarter, the remaining 37,336 Satellite Services options were exercised into 33,602 Class B Non-Voting Shares for $145.

Contributed surplus

The changes in contributed surplus are as follows:



May 31, 2008
$
----------------------------------------------------------------------------
Balance, beginning of period 8,700
Stock-based compensation 12,475
Stock options exercised (1,868)
----------------------------------------------------------------------------
Balance, end of period 19,307
----------------------------------------------------------------------------
----------------------------------------------------------------------------


5. EARNINGS PER SHARE

Earnings per share calculations are as follows:

Three months Nine months
ended May 31, ended May 31,
---------------------------------------
2008 2007 2008 2007
----------------------------------------------------------------------------
Numerator for basic and diluted
earnings per share ($)
Net income 128,113 91,658 539,184 252,547
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Denominator (thousands of shares)
Weighted average number of Class A
Shares and Class B Non-Voting Shares
for basic earnings per share 431,010 434,036 431,533 432,030
Effect of dilutive securities 1,854 3,480 2,848 2,349
----------------------------------------------------------------------------
Weighted average number of Class A
Shares and Class B Non-Voting Shares
for diluted earnings per share 432,864 437,516 434,381 434,379
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings per share ($)
Basic 0.30 0.21 1.25 0.58
Diluted 0.30 0.21 1.24 0.58
----------------------------------------------------------------------------
----------------------------------------------------------------------------


6. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Components of other comprehensive income (loss) and the related income tax effects for the nine months ended May 31, 2008 are as follows:



Income
Amount taxes Net
$ $ $
----------------------------------------------------------------------------
Changes in unrealized fair value of derivatives
designated as cash flow hedges (112,138) 17,242 (94,896)
Adjustment for hedged items recognized in the
period 42,045 (7,993) 34,052
Reclassification of foreign exchange loss on
hedging derivatives to income to offset
foreign exchange gain on US denominated debt 60,989 (8,723) 52,266
Unrealized foreign exchange loss on translation
of self-sustaining foreign operations (28) - (28)
----------------------------------------------------------------------------
(9,132) 526 (8,606)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Components of other comprehensive income (loss) and the related income tax
effects for the three months ended May 31, 2008 are as follows:

Income
Amount taxes Net
$ $ $
----------------------------------------------------------------------------
Changes in unrealized fair value of derivatives
designated as cash flow hedges (19,938) 2,752 (17,186)
Adjustment for hedged items recognized in the
period 15,703 (2,841) 12,862
Reclassification of foreign exchange gain on
hedging derivatives to income to offset
foreign exchange loss on US denominated debt (8,299) 1,187 (7,112)
Unrealized foreign exchange loss on translation
of self-sustaining foreign operations 4 - 4
----------------------------------------------------------------------------
(12,530) 1,098 (11,432)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated other comprehensive income (loss) is comprised of the following:

May 31, August 31,
2008 2007
$ $
----------------------------------------------------------------------------
Accumulated other comprehensive income (loss)
Unrealized foreign exchange gain on translation
of self-sustaining foreign operations 284 312
Fair value of derivatives (65,805) -
----------------------------------------------------------------------------
(65,521) 312
----------------------------------------------------------------------------
----------------------------------------------------------------------------


7. STATEMENTS OF CASH FLOWS

Disclosures with respect to the Consolidated Statements of Cash Flows are as follows:



(i) Funds flow from operations

Three months ended Nine months ended
-------------------- -------------------
May 31, May 31, May 31, May 31,
2008 2007 2008 2007
$ $ $ $
----------------------------------------------------------------------------
Net income 128,113 91,658 539,184 252,547
Non-cash items:
Amortization
Deferred IRU revenue (3,137) (3,137) (9,410) (9,410)
Deferred equipment revenue (32,463) (27,600) (93,567) (76,589)
Deferred equipment costs 57,210 51,454 169,549 150,590
Deferred charges 256 1,365 768 3,838
Property, plant and equipment 102,981 95,140 310,104 284,113
Financing costs - long-term debt 882 - 2,745 -
Future income tax expense (recovery) 45,612 48,518 (34,208) 132,874
Gain on sale of investment - - - (415)
Equity loss (income) on investee 70 95 6 (106)
Debt retirement costs - - 5,264 -
Stock-based compensation 4,256 2,213 12,475 4,840
Defined benefit pension plan 5,517 3,651 16,551 15,507
Net customs duty recovery on
equipment costs - - (22,267) -
Other 1,687 (3,887) 4,425 (1,971)
----------------------------------------------------------------------------
Funds flow from operations 310,984 259,470 901,619 755,818
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(ii) Changes in non-cash working capital balances related to operations
include the following:

Three months ended Nine months ended
May 31, May 31,
-------------------- -------------------
2008 2007 2008 2007
$ $ $ $
----------------------------------------------------------------------------
Accounts receivable (3,084) 8,868 (20,884) (11,927)
Prepaids and other (3,015) 138 (4,815) (7,259)
Accounts payable and accrued
liabilities (711) (41,806) 11,909 (41,806)
Income taxes payable 61 1,326 (54) 726
Unearned revenue 3,986 3,399 7,355 8,836
----------------------------------------------------------------------------
(2,763) (28,075) (6,489) (51,430)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


(iii) Interest and income taxes paid (recovered) and classified as operating
activities are as follows:

Three months ended Nine months ended
May 31, May 31,
-------------------- -------------------
2008 2007 2008 2007
$ $ $ $
----------------------------------------------------------------------------
Interest 92,946 91,802 221,980 213,178
Income taxes (62) (1,315) 59 (723)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(iv) Non-cash transaction:

The Consolidated Statements of Cash Flows exclude the following non-cash
transaction:

Nine months ended May 31,
----------------------------
2008 2007
$ $
----------------------------------------------------------------------------
Issuance of Class B Non-Voting Shares on a
cable system acquisition - 3,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------


8. OTHER LONG-TERM LIABILITY

Other long-term liability is the long-term portion of the Company's defined benefit pension plan. The total benefit costs expensed under the Company's defined benefit pension were $5,879 (2007 - $4,013) and $17,637 (2007 - $16,834) for the three and nine months ended May 31, 2008, respectively.

9. CONTINGENCIES

During the first quarter, the Company ceased accruing for Part II fees charged under the Broadcasting License Fee Regulations as it had sought and obtained Intervenor status in connection with a pending Federal Court of Appeal decision. During the third quarter, the Federal Court of Appeal ruled, in the CRTC's favor, that the Part II fees were a valid charge under the Regulations. As a result, during the third quarter, the Company accrued Part II fees of approximately $16,000 for the period October 2007 to May 2008.

Contact Information