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

Shaw Communications Inc.

April 13, 2011 08:31 ET

Shaw Announces Second Quarter Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - April 12, 2011) - Shaw Communications Inc. (TSX:SJR.B) (NYSE:SJR) announced results for the second quarter ended February 28, 2011. Consolidated revenue for the quarter and year-to-date of $1.20 billion and $2.28 billion, respectively, was up 29% and 24% over the comparable periods last year. Total operating income before amortization(1) of $495 million and $968 million, respectively, improved 16% and 8% over the same periods last year.

Free cash flow(1) for the three and six month periods was $167 million and $312 million, respectively, compared to $130 million and $295 million for the comparable periods last year. The current quarter increased over the prior period due to the addition of Shaw Media and higher free cash flow from the Cable division. The current six month period included free cash flow from Shaw Media, for the period October 27 to February 28, partially offset by the one-time CRTC Part II fee recovery last year.

Chief Executive Officer Brad Shaw said, "Our industry is transforming and competition in our core business continues. We have taken decisive and immediate steps to streamline our organizational structure. In this changing landscape managing costs and operating efficiently are essential. The recent actions taken, combined with our advanced delivery networks and leading portfolio of Media assets, ongoing innovation and technology enhancements position us for continued long term growth. None of these measures reduce in any way our commitment to an exceptional customer experience."

Approximately 550 employee positions were eliminated, including 150 at the management level. The restructuring cost estimate is $25 - $30 million and the expected annual savings, including other expense reductions identified to date, is in excess of $50 million.

Mr. Shaw continued "We are also evolving our service offerings in-step with our customers, responding to their desire for more choice, value and freedom to choose. We recently launched the Shaw Plan Personalizer, enabling customers to customize their core entertainment service needs and receive everyday value. We believe this will also have a positive impact on promotional activity and operating margins.

Net income of $167 million or $0.37 per share for the quarter ended February 28, 2011 compared to $139 million or $0.32 per share for the same period last year. Net income for the first six months of the year was $188 million or $0.41 per share compared to $253 million or $0.58 per share last year. All periods included non-operating items which are more fully detailed in Management's Discussions and Analysis (MD&A)(2). The current year-to-date period included a charge of $139 million for the discounted value of the $180 million CRTC benefit obligation related to the acquisition of Shaw Media, as well as business acquisition, integration and restructuring expenses of $61 million. The prior six month period included debt retirement costs and amounts related to financial instruments of $82 million and $46 million, respectively. Excluding the non-operating items, net income for the three and six month periods ended February 28, 2011 would have been $159 million and $318 million respectively, compared to $139 million and $320 million in the same periods last year.

Revenue in the Cable division was up 5% and 6% for the three and six month periods, respectively, to $769 million and $1.53 billion. The improvement was primarily driven by rate increases and growth. Operating income before amortization for the quarter of $364 million was up 3% over the comparable quarter. Excluding the one-time CRTC Part II fee recovery last year, operating income before amortization for the year-to-date period increased 4%.

Revenue in the Satellite division was $204 million and $410 million for the quarter and year-to-date periods, respectively, up 2% over each of the comparable periods. Operating income before amortization for the current three month period of $70 million was consistent with the same period last year. Excluding the one-time Part II fee recovery, operating income before amortization for the year-to-date period of $140 million improved 1% over the same period last year.

Quarterly revenue and operating income before amortization in the Media division was $244 million and $65 million, respectively. Revenue and operating income before amortization for the period from October 27, 2010 to February 28, 2011 was $369 million and $122 million, respectively. For informational purposes, on a comparative basis to last year, Media revenues for each of the three and full six month periods were up approximately 8%, and operating income before amortization, excluding the impact of the one-time Part II fee recovery last year, improved 16% and 18%, respectively.

On December 7, 2010 Shaw closed an offering of $900 million in senior unsecured notes, including $500 million principal amount of 5.50% notes due 2020, as well as an additional $400 million from its reopened offering of 6.75% notes due 2039. The net proceeds were used for repayment of debt incurred under Shaw's credit facility to complete the acquisition of the broadcasting assets of Canwest and effect the subsequent related debt refinancing.

On February 17, 2011 Shaw closed an offering of $400 million in senior unsecured notes from a further reopened offering of its 6.75% notes due 2039. The net proceeds were used for repayment of debt incurred under Shaw's credit facility to complete the acquisition of the broadcasting assets of Canwest and effect the subsequent related debt refinancing as well as for working capital and general corporate purposes.

"The competitive environment has moderated revenue growth this year in our core business and presented an increased level of risk to our forecast. The recent initiatives undertaken to drive efficiencies through focused cost containment and reductions currently have us on track to achieve our financial guidance including consolidated fiscal 2011 free cash flow of approximately $600 million. We plan to continue to make adjustments in our business as necessary to meet the changing circumstances." said Mr. Shaw.

Mr. Shaw continued, "With the rapid development of wireless technology, including long-term evolution ("LTE") options, and the dynamics within the wireless industry evolving at a swift pace, we are currently evaluating technology and strategic alternatives with respect to our wireless initiatives. We plan to slow our wireless build activities as we carefully consider all options in advance of the launch of a wireless service. We continue to focus heavily on the strength of our core business and intend to make important investments in new technology platforms, digital reclamation and broadband capacity in order to ensure we maintain our technological leadership. We are building Shaw for the future and are closely monitoring the business and regulatory environment. We are flexible and will continue to meet challenges and seize opportunities in this dynamic environment."

Shaw Communications Inc. is a diversified communications and media company, providing consumers with broadband cable television, High-Speed Internet, Home Phone, telecommunications services (through Shaw Business), satellite direct-to-home services (through Shaw Direct) and engaging programming content (through Shaw Media). Shaw serves 3.4 million customers, through a reliable and extensive fibre network. Shaw Media operates one of the largest conventional television networks in Canada, Global Television, and 19 specialty networks including HGTV Canada, Food Network Canada, History Television and Showcase. Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 Index (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) See reconciliation of Net Income in Consolidated Overview in MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS

FEBRUARY 28, 2011

April 13, 2011

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, 2010 Annual Report including the Consolidated Financial Statements and the Notes thereto and the unaudited interim Consolidated Financial Statements and the Notes thereto of the current quarter.

CONSOLIDATED RESULTS OF OPERATIONS
SECOND QUARTER ENDING FEBRUARY 28, 2011
Selected Financial Highlights
                                             Three months ended February 28,
                                  ------------------------------------------
                                                                     Change
                                         2011           2010              %
----------------------------------------------------------------------------
($000's Cdn except per share
 amounts)
Operations:
 Revenue                            1,196,611        929,142           28.8
 Operating income before
  amortization (1)                    494,524        424,825           16.4
 Operating margin (1) (2) (3)            41.3%          45.7%          (4.4)
 Funds flow from operations (4)       382,957        358,206            6.9
 Net income                           167,299        138,712           20.6
Per share data:
 Earnings per share - basic and
  diluted                         $      0.37      $    0.32
 Weighted average participating
  shares outstanding during period
  (000's)                             434,425        432,960
----------------------------------------------------------------------------
                                               Six months ended February 28,
                                  ------------------------------------------
                                                                     Change
                                         2011           2010              %
----------------------------------------------------------------------------
($000's Cdn except per share
 amounts)
Operations:
 Revenue                            2,275,516      1,835,076           24.0
 Operating income before
  amortization (1)                    967,878        899,777            7.6
 Operating margin (1) (2) (3)            42.5%          44.9%          (2.4)
 Funds flow from operations (4)       647,337        697,158           (7.1)
 Net income                           187,631        252,941          (25.8)
Per share data:
 Earnings per share - basic and
  diluted                         $      0.41    $      0.58
 Weighted average participating
  shares outstanding during period
 (000's)                              434,107        432,733
----------------------------------------------------------------------------
(1) See definition under Key Performance Drivers in Management's Discussion
    and Analysis.
(2) Operating margin is adjusted to exclude the one-time CRTC Part II
    recovery for the six months ended February 28, 2010. Including the one-
    time CRTC Part II recovery, the operating margin would be 49.0%.
(3) Operating margin has declined in the three and six month periods
    compared to last year mainly due to the inclusion of the new Media
    segment.
(4) 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
                                                    Three
                                   Total     months ended  Six months ended
                             February 28,     February 28,      February 28,
                                    2011    2011     2010     2011     2010
----------------------------------------------------------------------------
Subscriber statistics:
 Basic cable customers         2,313,104 (13,662)  (1,055) (21,204)  (2,471)
 Digital customers             1,748,538  35,403   98,544   97,619  186,803
 Internet customers (including
  pending installs)            1,848,390  10,772   26,735   29,524   62,977
 Digital phone lines (including
  pending installs)            1,178,660  32,512   54,922   82,354  116,383
 DTH customers                   906,433   2,176    1,071      637    2,168
----------------------------------------------------------------------------

Additional Highlights

- Revenue of $1.20 billion and $2.28 billion for the three and six month periods improved 28.8% and 24.0% over the comparable periods last year.

- Free cash flow(1) for the quarter and year-to-date periods was $166.9 million and $312.0 million, respectively, compared to $129.5 million and $294.9 million for the same periods last year.

- On December 7, 2010 Shaw closed an offering of $900 million in senior unsecured notes, including $500 million principal amount of 5.50% notes due 2020, as well as an additional $400 million of its reopened offering of 6.75% notes due 2039.

- On January 13, 2011 the Board of Directors approved a 5% increase in the equivalent annual dividend rate to $0.92 on Shaw's Class B Non-Voting Participating shares and $0.9175 on Shaw's Class A Participating shares. This new rate was effective commencing with the monthly dividends paid on March 30, 2011.

- On February 17, 2011 Shaw closed an offering of $400 million in senior unsecured notes from a further reopened offering of 6.75% notes due 2039.

- In March 2011 Shaw implemented various cost saving initiatives including staff reductions and a review of overhead expenses to drive efficiencies and enhance competitiveness.

Consolidated Overview

Consolidated revenue of $1.20 billion and $2.28 billion for the three and six month periods, respectively, improved 28.8% and 24.0% over the same periods last year. The improvement was primarily due to the acquisition of Shaw Media, as well as rate increases and growth in the Cable and Satellite divisions.

Consolidated operating income before amortization for the three and six month periods of $494.5 million and $967.9 million, respectively, increased 16.4% and 7.6% over the same periods last year. Both periods benefitted from the acquisition of Shaw Media as well as core revenue related growth, partially offset by increased employee related, sales and marketing, and programming costs. The current year-to-date period also included the impact of the retroactive support structure rate increases. The prior year-to-date period benefitted from a one-time CRTC Part II fee recovery of $75.3 million.

Net income was $167.3 million and $187.6 million for the three and six months ended February 28, 2011, respectively, compared to $138.7 million and $252.9 million for the same periods last year. Non-operating items affected net income in both periods. The current year-to-date period included a charge of $139.1 million for the discounted value of the $180.0 million CRTC benefit obligation, net of incremental revenues, related to the Media acquisition, as well as business acquisition, integration and restructuring expenses of $60.9 million. The prior year-to-date period included debt retirement costs and amounts related to financial instruments of $81.6 million and $46.1 million, respectively. Outlined below are further details on these and other operating and non-operating components of net income for each period.

                                                Six months ended
                                               ------------------
                                                   Operating net       Non-
($000's Cdn)                    February 28, 2011    of interest  operating
----------------------------------------------------------------------------
Operating income                          595,905
 Amortization of financing costs
  - long-term debt                         (2,109)
 Interest expense - debt                 (153,932)
----------------------------------------------------------------------------
Operating income after interest           439,864        439,864          -
 Debt retirement costs                          -              -          -
 Gain on repurchase of debt                 9,981              -      9,981
 CRTC benefit obligation                 (139,098)             -   (139,098)
 Business acquisition,
  integration and restructuring
  expenses                                (60,882)             -    (60,882)
 Loss on derivative instruments           (22,764)             -    (22,764)
 Accretion of long-term
  liabilities                              (5,813)             -     (5,813)
 Foreign exchange gain on
  unhedged long-term debt                  22,585              -     22,585
 Other gains                                6,532              -      6,532
----------------------------------------------------------------------------
Income (loss) before income
 taxes                                    250,405        439,864   (189,459)
 Current income tax expense
  (recovery)                              111,850        126,200    (14,350)
 Future income tax expense
  (recovery)                              (35,242)        (4,384)   (30,858)
----------------------------------------------------------------------------
Income (loss) before following            173,797        318,048   (144,251)
 Equity income on investees                13,834              -     13,834
----------------------------------------------------------------------------
Net income (loss)                         187,631        318,048   (130,417)
----------------------------------------------------------------------------
                                                Six months ended
                                               ------------------
                                                   Operating net       Non-
($000's Cdn)                    February 28, 2010    of interest  operating
----------------------------------------------------------------------------
Operating income                          575,317
 Amortization of financing costs
  - long-term debt                         (2,053)
 Interest expense - debt                 (123,710)
----------------------------------------------------------------------------
Operating income after interest           449,554        449,554          -
 Debt retirement costs                    (81,585)             -    (81,585)
 Gain on repurchase of debt                     -              -          -
 CRTC benefit obligation                        -              -          -
 Business acquisition,
  integration and restructuring
  expenses                                      -              -          -
 Loss on derivative instruments           (45,296)             -    (45,296)
 Accretion of long-term
  liabilities                                (853)             -       (853)
 Foreign exchange gain on
  unhedged long-term debt                       -              -          -
 Other gains                                9,355              -      9,355
----------------------------------------------------------------------------
Income (loss) before income
 taxes                                    331,175        449,554   (118,379)
 Current income tax expense
  (recovery)                              105,281        117,004    (11,723)
 Future income tax expense
  (recovery)                              (27,047)        13,037    (40,084)
----------------------------------------------------------------------------
Income (loss) before following            252,941        319,513    (66,572)
 Equity income on investees                     -              -          -
----------------------------------------------------------------------------
Net income (loss)                         252,941        319,513    (66,572)
----------------------------------------------------------------------------
                                              Three months ended
                                             --------------------
                                                   Operating net       Non-
($000's Cdn)                    February 28, 2011    of interest  operating
----------------------------------------------------------------------------
Operating income                          303,293
 Amortization of financing
  costs - long-term debt                   (1,089)
 Interest expense - debt                  (85,237)
----------------------------------------------------------------------------
Operating income after
 interest                                 216,967        216,967          -
 Gain on repayment of debt                  9,981              -      9,981
 Business acquisition,
  integration and restructuring
  expenses                                 (2,778)             -     (2,778)
 Loss on derivative instruments           (21,353)             -    (21,353)
 Accretion of long-term
  liabilities                              (3,880)             -     (3,880)
 Foreign exchange gain on
  unhedged long-term debt                  19,267              -     19,267
 Other gains                                4,103              -      4,103
----------------------------------------------------------------------------
Income (loss) before income
 taxes                                    222,307        216,967      5,340
Current income tax expense
 (recovery)                                56,508         66,600    (10,092)
Future income tax expense
 (recovery)                                (1,291)        (8,450)     7,159
----------------------------------------------------------------------------
Income (loss) before following            167,090        158,817      8,273
 Equity income on investees                   209              -        209
----------------------------------------------------------------------------
Net income (loss)                         167,299        158,817      8,482
----------------------------------------------------------------------------
                                              Three months ended
                                             --------------------
                                                   Operating net       Non-
($000's Cdn)                    February 28, 2010    of interest  operating
----------------------------------------------------------------------------
Operating income                          259,463
 Amortization of financing
  costs - long-term debt                     (952)
 Interest expense - debt                  (61,646)
----------------------------------------------------------------------------
Operating income after
 interest                                 196,865        196,865          -
 Gain on repayment of debt                      -              -          -
 Business acquisition,
  integration and
  restructuring expenses                        -              -          -
 Loss on derivative instruments              (864)             -       (864)
 Accretion of long-term
  liabilities                                (640)             -       (640)
 Foreign exchange gain on
  unhedged long-term debt                       -              -          -
 Other gains                                  638              -        638
----------------------------------------------------------------------------
Income (loss) before income
 taxes                                    195,999        196,865       (866)
 Current income tax expense
  (recovery)                               10,703         49,998    (39,295)
 Future income tax expense
  (recovery)                               46,584          7,487     39,097
----------------------------------------------------------------------------
Income (loss) before following            138,712        139,380       (668)
 Equity income on investees                     -              -          -
----------------------------------------------------------------------------
Net income (loss)                         138,712        139,380       (668)
----------------------------------------------------------------------------
The changes in net income are outlined in the table below. 
                                  February 28, 2011 net income compared to:
                   ---------------------------------------------------------
                                 Three months ended        Six months ended
                   ---------------------------------------------------------
                    November 30, 2010  February 28, 2010  February 28, 2010
----------------------------------------------------------------------------
(000's Cdn)
Increased operating
 income before
 amortization                  21,170             69,699             68,101
Increased
 amortization                 (10,558)           (26,006)           (47,569)
Increased interest
 expense                      (16,542)           (23,591)           (30,222)
Change in net other
 costs and revenue(1)         186,723              6,415            (57,246)
Decreased (increased)
 income taxes                 (33,826)             2,070              1,626
----------------------------------------------------------------------------
                              146,967             28,587            (65,310)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Net other costs and revenue includes debt retirement costs, the CRTC
    benefit obligation, business acquisition, integration and restructuring
    expenses, loss on derivative instruments, accretion of long-term
    liabilities, foreign exchange gain on unhedged long-term debt, other
    gains and equity income on investees as detailed in the unaudited
    interim Consolidated Statements of Income and Retained Earnings.

Basic earnings per share were $0.37 and $0.41 for the quarter and six months, respectively compared to $0.32 and $0.58 in the same periods last year. The improvement in the quarter was primarily due to increased operating income before amortization of $69.7 million partially offset by higher amortization and interest expense of $26.0 million and $23.6 million, respectively. The year-to-date decrease was primarily due to higher net other costs and revenue of $57.2 million and increased amortization and interest of $47.6 million and $30.2 million, respectively, partially offset by improved operating before amortization of $68.1 million. The change in net other costs and revenue was primarily due to amounts related to the CRTC benefit obligation and various acquisition, integration and restructuring costs in the current period partially offset by debt retirement costs and amounts related to financial instruments associated with the early redemption of the three series of US senior notes in the prior year. The prior six month period operating income before amortization included a one-time CRTC Part II fee recovery of $75.3 million which was offset in the current period by amounts related to Shaw Media and growth in the Cable and Satellite divisions.

Net income in the current quarter increased $147.0 million compared to the first quarter of fiscal 2011 mainly due to decreased net other costs and revenue of $186.7 million resulting from the CRTC benefit obligation and various acquisition, integration and restructuring costs relating to the Media acquisition that were incurred in the prior quarter.

Free cash flow for the quarter and year-to-date periods of $166.9 million and $312.0 million, respectively, compared to $129.5 million and $294.9 million in the same periods last year. The improvement in the current quarter was mainly due to increased operating income before amortization related to the acquisition of the Media division as well as growth in the Cable division, partially reduced by higher interest and taxes. The year-to-date improvement was due to the Shaw Media acquisition and growth in the Cable and Satellite divisions, partially reduced by a one time Part II fee recovery last year. The Cable division generated $108.8 million of free cash flow for the quarter compared to $93.9 million in the comparable period. The Satellite division achieved free cash flow of $33.9 million for the three month period compared to $35.6 million last year. The Media division generated $24.2 million of free cash flow for the quarter.

On December 7, 2010 Shaw closed an offering of $900 million in senior unsecured notes, including $500 million principal amount of 5.50% notes due 2020, as well as an additional $400 million from its reopened offering of 6.75% notes due 2039. The net proceeds were used for repayment of debt incurred under Shaw's credit facility to complete the acquisition of the broadcasting assets of Canwest and effect the subsequent related debt refinancing.

On December 21, 2010 Shaw completed the repurchase of US $51.6 million of the 13.5% Senior Notes due 2015 (the "2015 Notes"). As a result of a change of control triggered due to the acquisition of the Media business, an offer to purchase all of the 2015 Notes outstanding was required (the "Change of Control Offer"). An aggregate of US $51.6 million face amount of the 2015 Notes was tendered to the Change of Control Offer and were purchased for cancellation for an aggregate price of approximately $60.0 million, including accrued interest. The Change of Control Offer expired on December 15, 2010 and no further purchases are required.

On February 17, 2011 Shaw closed an offering of $400 million in senior unsecured notes from a further reopened offering of 6.75% notes due 2039. The net proceeds were used for repayment of debt incurred under Shaw's credit facility to complete the acquisition of the broadcasting assets of Canwest and effect the subsequent related debt refinancing as well as for working capital and general corporate purposes.

In March 2011 Shaw implemented various cost saving initiatives including staff reductions and a review of overhead expenses to drive efficiencies and enhance competitiveness. Approximately 550 employee positions were eliminated, including 150 at the management level. The restructuring cost estimate for these initiatives is approximately $25 - $30 million and the expected annual savings is in excess of $50 million. The majority of the staff reductions were in the Cable division, representing approximately 5% of the divisions' employee workforce.

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.

Operating income before amortization and operating margin

Operating income before amortization is calculated as 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. 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. 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 operating income before amortization by 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 operating income before amortization, less interest, cash taxes paid or payable, capital expenditures (on an accrual basis and net of proceeds on capital dispositions) and equipment costs (net) and adjusted to exclude stock-based compensation expense.

Commencing in 2011 with respect to the new Media segment, free cash flow will be determined as detailed above and in addition, Shaw will deduct cash amounts associated with funding the new and assumed CRTC benefit obligation related to the acquisition of Shaw Media as well as exclude the non-controlling interest amounts that are consolidated in the operating income before amortization, capital expenditure and cash tax amounts.

Free cash flow is calculated as follows:
                                     Three months ended    Six months ended
                                            February 28,        February 28,
----------------------------------------------------------------------------
                                         2011    2010(2)     2011    2010(2)
----------------------------------------------------------------------------
($000's Cdn)
Cable free cash flow (1)              108,839    93,914   186,753   214,924
Combined satellite free cash flow (1)  33,940    35,606    61,032    80,024
Media free cash flow (1)               24,164         -    64,179         -
----------------------------------------------------------------------------
Free cash flow                        166,943   129,520   311,964   294,948
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Reconciliations of free cash flow for cable, satellite and media are
    provided under "Cable - Financial Highlights", "Satellite - Financial
    Highlights" and "Media - Financial Highlights".
(2) The presentation of segmented free cash flow has been adjusted to
    reflect on a gross basis to include intersegment transactions. As a
    result, Cable free cash flow has decreased and Combined satellite free
    cash flow has increased by $847 for the three month period and $1,697
    for the six month period.
CABLE
FINANCIAL HIGHLIGHTS
                                             Three months ended February 28,
                                     ---------------------------------------
                                                                     Change
                                         2011         2010(3)             %
----------------------------------------------------------------------------
($000's Cdn)
Revenue                               769,403        733,436            4.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income before
 amortization (1)                     363,710        354,473            2.6
Capital expenditures and equipment
 costs (net):
 New housing development               20,515         20,711           (0.9)
 Success based                         42,706         58,152          (26.6)
 Upgrades and enhancement              62,550         62,815           (0.4)
 Replacement                           11,016         13,732          (19.8)
 Buildings/other                       19,831         14,348           38.2
----------------------------------------------------------------------------
Total as per Note 2 to the unaudited
 interim
Consolidated Financial Statements     156,618        169,758           (7.7)
----------------------------------------------------------------------------
Free cash flow before the following   207,092        184,715           12.1
Less:
 Interest expense                     (57,900)       (54,752)           5.7
 Cash taxes                           (43,625)       (39,999)           9.1
Other adjustments:
Non-cash stock based compensation       3,272          3,950          (17.2)
----------------------------------------------------------------------------
Free cash flow (1)                    108,839         93,914           15.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating margin (2)                     47.3%          48.3%          (1.0)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                               Six months ended February 28,
                                     ---------------------------------------
                                                                     Change
                                         2011         2010(3)             %
----------------------------------------------------------------------------
($000's Cdn)
Revenue                             1,527,234      1,443,183            5.8
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income before
 amortization (1)                     711,565        734,725           (3.2)
Capital expenditures and equipment
 costs (net):
 New housing development               46,139         42,441            8.7
 Success based                        105,681        108,502           (2.6)
 Upgrades and enhancement             124,083        124,984           (0.7)
 Replacement                           22,755         26,310          (13.5)
 Buildings/other                       35,340         27,606           28.0
----------------------------------------------------------------------------
Total as per Note 2 to the
 unaudited interim
Consolidated Financial Statements     333,998        329,843            1.3
----------------------------------------------------------------------------
Free cash flow before the following   377,567        404,882           (6.7)
Less:
 Interest expense                    (108,847)      (109,918)          (1.0)
 Cash taxes                           (89,000)       (88,004)           1.1
Other adjustments:
Non-cash stock based compensation       7,033          7,964          (11.7)
----------------------------------------------------------------------------
Free cash flow (1)                    186,753        214,924          (13.1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating margin (2)                     46.6%          47.5%          (0.9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) See definitions and discussion under Key Performance Drivers in
    Management's Discussion and Analysis.
(2) Operating margin is adjusted to exclude the one-time CRTC Part II fee
    recovery in the six months ended February 28, 2010. Including the one-
    time CRTC Part II recovery, operating margin would be 50.9%.
(3) The presentation of segmented free cash flow has been adjusted to
    reflect on a gross basis to include intersegment transactions. As a
    result, for the three month period revenue has increased by $1,185 and
    operating income before amortization and free cash flow have decreased
    by $847, for the six month period revenue has increased by $2,422 and
    operating income before amortization and free cash flow have decreased
    by $1,697.

Operating Highlights

- Digital customers increased 35,403 during the quarter to 1,748,538. Shaw's Digital penetration of Basic is now 75.6%, up from 70.7% and 56.7% at August 31, 2010 and 2009, respectively.

- Digital Phone lines increased 32,512 during the three month period to 1,178,660 lines and Internet was up 10,772 to total 1,848,390 as at February 28, 2011. During the quarter Basic cable subscribers decreased 13,662.

Cable revenue for the three and six month periods of $769.4 million and $1.53 billion improved 4.9% and 5.8%, respectively over the comparable periods last year. The quarter and year-to-date growth was driven by rate increases and customer growth in Digital Phone and Internet partially offset by higher promotional activity.

Operating income before amortization of $363.7 million for the quarter improved 2.6% over the same period last year. The year-to-date amount of $711.6 million increased 3.7% over last year excluding the prior period one-time CRTC Part II fee recovery of $48.7 million. The revenue related growth in both periods was partially reduced by higher employee amounts, increased programming costs, and higher marketing and sales expenses. Both periods were also impacted by the CRTC decision approving a retroactive rate increase in support structure charges by ILECs with the year-to-date period including the impact of the retroactive increase and the current quarter reflecting the ongoing higher costs.

Revenue increased $11.6 million over the first quarter of fiscal 2011 primarily due to customer growth as well as higher demand for VOD movies and PPV events partially offset by increased promotional activity. Operating income before amortization improved $15.9 million over this same period primarily due to revenue related growth and lower marketing and sales costs partially offset by higher employee costs. The prior quarter also included the retroactive impact of the support structure rate increase.

Total capital investment of $156.6 million for the quarter decreased $13.1 million over the same period last year. Capital investment for the six month period of $334.0 million was $4.2 million higher than the same period last year.

Success based capital declined $15.4 million over the comparable three month period due to lower HDPVR rental activity and decreased spend on Digital Phone modems. Year-to-date success based capital is marginally lower than the same period last year as a result of reduced investment in Digital Phone modems partially offset by lower retail pricing for HDPVRs.

Investment in Upgrades and enhancement and Replacement categories combined decreased by $3.0 million and $4.5 million for the quarter and year-to-date periods, respectively, compared to the same periods last year. Both the current quarter and year-to-date investment included higher spending on fibre expansion and node segmentation offset by lower spending on Digital Phone equipment, bulk stock purchasing, and automotive.

Investment in Buildings and Other was up $5.5 million and $7.7 million for the comparable three and six month periods. The increases are mainly due to higher investment in various facilities projects and costs related to upgrading billing and provisioning systems. The year-to-date spend is partially offset by proceeds on the sale of certain redundant real estate assets in the first quarter of 2011.

Spending in new housing development increased $3.7 million over the comparable six months last year mainly due to higher activity.

As at February 28, 2011 Shaw had 1,848,390 Internet customers which represents a 79.9% penetration of Basic. During the quarter Shaw announced that it would conduct customer consultation sessions on the future of internet allowances and usage billing to obtain feedback to allow the Company to build pricing and packaging options that deliver choice, quality and value to all Shaw customers.

Recently, Shaw announced the launch of the Shaw Plan Personalizer enabling customers to customize their home entertainment service needs and receive everyday value. Customers can start with a core home entertainment and communications package that includes Extreme Internet, Personal TV, hardware options and Personal Home Phone Basic and then customize the plan to how they want it. Shaw is continuing to evolve to meet customers' needs.

During the quarter Shaw continued to grow its Digital customer base and Digital penetration of Basic at February 28, 2011 was 75.6%, up from 70.7% at August 31, 2010. Shaw now has approximately 835,000 HD capable customers who have access to over 120 HD channels and even greater choice through 1,200 HD titles through Shaw VOD.

Subscriber Statistics
                                                      February 28, 2011
                                            --------------------------------
                                               Three months      Six months
                                                      ended           ended
                                            --------------------------------
                    February 28, August 31,          Change          Change
                           2011     2010(1)   Growth      %   Growth      %
----------------------------------------------------------------------------
CABLE:
Basic service:
 Actual               2,313,104  2,334,308   (13,662)  (0.6) (21,204)  (0.9)
 Penetration as % of
  homes passed             60.3%      61.4%
Digital customers     1,748,538  1,650,919    35,403    2.1   97,619    5.9
----------------------------------------------------------------------------
INTERNET:
Connected and
 scheduled            1,848,390  1,818,866    10,772    0.6   29,524    1.6
Penetration as % of
 basic                     79.9%      77.9%
Standalone Internet
 not included in
 basic cable            216,886    233,426    (8,192)  (3.6) (16,540)  (7.1)
DIGITAL PHONE:
Number of lines (2)   1,178,660  1,096,306    32,512    2.8   82,354    7.5
----------------------------------------------------------------------------
(1) August 31, 2010 figures are restated for comparative purposes as if the
    acquisition of the Lake Broadcasting cable system in British Columbia
    had occurred on that date.
(2) Represents primary and secondary lines on billing plus pending installs.
SATELLITE (DTH and Satellite Services) FINANCIAL HIGHLIGHTS
                                             Three months ended February 28,
                                      --------------------------------------
                                                                     Change
                                         2011        2010(5)              %
                                      --------------------------------------
($000's Cdn)
Revenue
 DTH (Shaw Direct)                    184,174        179,602            2.5
 Satellite Services                    19,789         20,666           (4.2)
----------------------------------------------------------------------------
                                      203,963        200,268            1.8
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income before
 amortization (1)
 DTH (Shaw Direct)                     60,055         59,735            0.5
 Satellite Services                    10,160         10,617           (4.3)
----------------------------------------------------------------------------
                                       70,215         70,352           (0.2)
Capital expenditures and equipment
 costs (net):
 Success based (3)                     16,622         17,343           (4.2)
 Buildings and other                      713          1,239          (42.5)
----------------------------------------------------------------------------
Total as per Note 2 to the unaudited
 interim
Consolidated Financial Statements      17,335         18,582           (6.7)
----------------------------------------------------------------------------
Free cash flow before the following    52,880         51,770            2.1
Less:
 Interest expense (2)                  (6,562)        (6,562)             -
 Cash taxes                           (12,775)        (9,999)          27.8
Other adjustments:
Non-cash stock option expense             397            397              -
----------------------------------------------------------------------------
Free cash flow (1)                     33,940         35,606           (4.7)
----------------------------------------------------------------------------
Operating Margin (4)                     34.4%          35.1%          (0.7)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                               Six months ended February 28,
                                      --------------------------------------
                                                                     Change
                                         2011        2010(5)              %
                                      --------------------------------------
($000's Cdn)
Revenue
 DTH (Shaw Direct)                    369,553        359,366            2.8
 Satellite Services                    40,583         41,613           (2.5)
----------------------------------------------------------------------------
                                      410,136        400,979            2.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income before
 amortization (1)
 DTH (Shaw Direct)                    119,128        143,461          (17.0)
 Satellite Services                    20,596         21,591           (4.6)
----------------------------------------------------------------------------
                                      139,724        165,052          (15.3)
Capital expenditures and equipment
 costs (net):
 Success based (3)                     40,174         40,383           (0.5)
 Buildings and other                    1,501          3,323          (54.8)
----------------------------------------------------------------------------
Total as per Note 2 to the unaudited
 interim Consolidated Financial
 Statements                            41,675         43,706           (4.6)
----------------------------------------------------------------------------
Free cash flow before the following    98,049        121,346          (19.2)
Less:
 Interest expense (2)                 (12,827)       (13,125)          (2.3)
 Cash taxes                           (25,000)       (29,000)         (13.8)
Other adjustments:
Non-cash stock option expense             810            803            0.9
----------------------------------------------------------------------------
Free cash flow (1)                     61,032         80,024          (23.7)
----------------------------------------------------------------------------
Operating Margin (4)                     34.1%          34.5%          (0.4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 cost of
    debt incurred by the Company to repay Satellite debt and to fund
    accumulated cash deficits of Shaw Satellite Services and Shaw Direct.
(3) Net of the profit on the sale of satellite equipment as it is viewed as
    a recovery of expenditures on customer premise equipment.
(4) Operating margin is adjusted to exclude the one-time CRTC Part II fee
    recovery in the six months ended February 28, 2011. Including the one-
    time CRTC Part II fee recovery, operating margin would be 41.2%.
(5) The presentation of segmented free cash flow has been adjusted to
    reflect on a gross basis to include intersegment transactions. As a
    result, for the three month period revenue has decreased by $3,377 and
    operating income before amortization and free cash flow have increased
    by $847, for the six month period revenue has decreased by $6,664 and
    operating income before amortization and free cash flow have increased
    by $1,697.

Operating Highlights

- During the quarter Shaw Direct added 2,176 customers and as at February 28, 2011 DTH customers total 906,433.

- Free cash flow for the quarter of $33.9 million compares to $35.6 million in the same period last year.

Revenue of $204.0 million and $410.1 million for the three and six month periods, respectively, was up 1.8% and 2.3% over the same periods last year. The improvement was primarily due to rate increases partially reduced by higher promotional activity. Operating income before amortization for the quarter of $70.2 million compared to the same quarter last year. The revenue related growth in the quarter was offset by higher programming costs. For the year-to-date period, excluding the one-time Part II fee recovery of $26.6 million, operating income before amortization improved 0.9%.

Compared to the first quarter, operating income before amortization improved $0.7 million primarily due to customer rate increases.

Total capital investment of $17.3 million for the quarter declined modestly compared to $18.6 million in the same period last year. The year-to-date investment of $41.7 million decreased over the prior year spend of $43.7 million. Buildings and other was lower mainly due to expenditures in the prior year related to call centre expansion.

During the quarter Shaw Direct added the HGTV HD channel in addition to the 13 HD channels added in the first quarter and now offers 79 HD channels to over 430,000 HD capable customers.

Recently, Shaw Direct announced the launch of its new online VOD library accessible anywhere in Canada that allows customers to watch hundreds of movies and TV shows on-the-go on their computer.

Subscriber Statistics
                                                 February 28, 2011
                                             -------------------------------
                                               Three months      Six months
                                                      ended           ended
                                             -------------------------------
                    February 28, August 31,          Change          Change
                           2011       2010    Growth      %   Growth      %
                   ---------------------------------------------------------
DTH customers (1)       906,433    905,796     2,176    0.2      637      -
----------------------------------------------------------------------------
(1) Including seasonal customers who temporarily suspend their service.
MEDIA
FINANCIAL HIGHLIGHTS
                                Three months ended      October 27, 2010 to
($000's Cdn)                     February 28, 2011        February 28, 2011
Revenue                                    243,931                  369,328
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income before
 amortization (1)                           65,475                  122,247
Capital expenditures:
 Broadcast and transmission                  2,079                    3,161
 Buildings/other                             3,200                    4,242
----------------------------------------------------------------------------
Total as per Note 2 to the
 unaudited interim Consolidated
 Financial Statements                        5,279                    7,403
----------------------------------------------------------------------------
Free cash flow before the
 following                                  60,196                  114,844
Less:
 Interest expense (2)                      (15,337)                 (21,821)
 Cash taxes                                (10,200)                 (12,200)
 Other adjustments:
 Non-cash stock based
  compensation                                 243                      243
 CRTC benefit obligation
  funding                                   (4,718)                  (7,026)
 Non-controlling interests                  (6,020)                  (9,861)
----------------------------------------------------------------------------
Free cash flow (1)                          24,164                   64,179
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating margin                              26.8%                    33.1%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) See definitions and discussion under Key Performance Drivers in
    Management's Discussion and Analysis.
(2) Interest includes an allocation to the Media division based on the cost
    of debt incurred by the Company to repay Media debt.

Operating Highlights

Revenue in the Media division for the second quarter was $243.9 million and operating income before amortization was $65.5 million. Advertising revenue in the quarter was driven by strength in the Automotive, Retail and Entertainment Equipment sectors. For informational purposes, on a comparative basis to Q2 last year, Media revenues for the three months were up approximately 8% and operating income before amortization improved 16%. The current period saw strong advertiser demand for inventory as ad dollars displaced by last year's Olympics returned. The 53rd Annual Grammy Awards were also a success with ad revenues up approximately 50% over last year.

During the quarter Shaw Media experienced continued success with the innovative Global iPad application which has consistently ranked in the top 5 in the Free Entertainment Category, offering viewers an exciting way to access the network's library of premium content.

Capital investment in the quarter continued on various projects including the Digital TV transition, which is on track for the analog to digital upgrade in the CTRC mandated markets by August 31, 2011, as well as upgrades of aging production equipment and certain new infrastructure to allow migration off platforms previously shared with the former Canwest Publishing division. The integration of various back-office infrastructure is also underway and is expected to be fully transitioned over the next 6 months.

During the quarter management continued to work through the alignment of Shaw Media with the broader Shaw organization. The organizational alignment is now substantially complete and the Shaw Media team has emerged re-focused and energized.

WIRELESS
FINANCIAL HIGHLIGHTS
                                                    February 28, 2011
                                    ----------------------------------------
                                     Three months ended    Six months ended
                                    ----------------------------------------
($000's Cdn)
Operating expenditures                            4,876               5,658
Interest expense (1)                              5,114               9,787
Capital expenditures (as per Note 2
 to the unaudited interim
 Consolidated Financial Statements)              32,109              55,450
----------------------------------------------------------------------------
Total expenditures on Wireless
 infrastructure build                            42,099              70,895
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Interest is allocated to the Wireless division based on the Company's
    average cost of borrowing to fund the capital expenditures and operating
    costs.

- During the quarter the Company continued its Wireless infrastructure build and invested $42.1 million on this strategic initiative.

During the six month period Shaw continued equipment purchasing, site acquisition and physical construction of cell sites.

OTHER INCOME AND EXPENSE ITEMS
Amortization
                                             Three months ended February 28,
                                  ------------------------------------------
                                                                     Change
                                         2011           2010              %
----------------------------------------------------------------------------
($000's Cdn)
Amortization revenue (expense) -
 Deferred IRU revenue                   3,136          3,136              -
 Deferred equipment revenue            25,715         30,482          (15.6)
 Deferred equipment costs             (49,892)       (58,140)         (14.2)
 Deferred charges                        (256)          (256)             -
 Property, plant and equipment       (157,866)      (131,741)          19.8
 Other intangibles                    (12,068)        (8,843)          36.5
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                               Six months ended February 28,
                                  ------------------------------------------
                                                                     Change
                                         2011           2010              %
----------------------------------------------------------------------------
($000's Cdn)
Amortization revenue (expense) -
 Deferred IRU revenue                   6,273          6,273              -
 Deferred equipment revenue            53,033         61,743          (14.1)
 Deferred equipment costs            (101,998)      (117,649)         (13.3)
 Deferred charges                        (512)          (512)             -
 Property, plant and equipment       (306,695)      (256,380)          19.6
 Other intangibles                    (22,074)       (17,935)          23.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Amortization of deferred equipment revenue and deferred equipment costs decreased over the comparative periods due to the sales mix of equipment, changes in customer pricing on certain equipment and the impact of equipment rental programs.

Amortization of property, plant and equipment and other intangibles increased over the comparable periods as the amortization of capital expenditures exceeded the impact of assets that became fully depreciated and the effect of Shaw Media in the current year.

Amortization of financing costs and Interest expense
                                             Three months ended February 28,
                                      --------------------------------------
                                                                     Change
                                         2011           2010              %
----------------------------------------------------------------------------
($000's Cdn)
Amortization of financing costs -
 long-term debt                         1,089            952           14.4
Interest expense                       85,237         61,646           38.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                               Six months ended February 28,
                                      --------------------------------------
                                                                     Change
                                         2011           2010              %
----------------------------------------------------------------------------
($000's Cdn)
Amortization of financing costs -
 long-term debt                         2,109          2,053            2.7
Interest expense                      153,932        123,710           24.4
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Interest expense increased over the comparative periods as a result of the Canwest broadcasting business acquisition. Approximately $1 billion was required to complete the transaction including repayment of the CW Media term loan and breakage of related currency swaps. In addition, US $338.3 million 13.5% senior unsecured notes were assumed as part of the acquisition.

Debt retirement costs

During the first quarter of the prior year, the Company redeemed all of its outstanding US $440 million 8.25% senior notes due April 11, 2010, US $225 million 7.25% senior notes due April 6, 2011 and US $300 million 7.20% senior notes due December 15, 2011. In connection with the early redemption, the Company incurred costs of $79.5 million and wrote-off the remaining discount and finance costs of $2.1 million. The Company used proceeds from its $1.25 billion senior notes issuance in early October 2009 to fund the cash requirements for the redemptions.

Gain on repurchase of debt

As a result of a change of control triggered on the acquisition of the Media business, an offer to purchase all of the US $338.3 million 13.5% senior unsecured notes at a cash price equal to 101% was required. An aggregate US $51.6 million face amount was tendered under the offer and purchased by the Company for cancellation during the second quarter. As a result, the Company recorded a gain of $10 million in respect of the purchase and cancellation. The gain resulted from recognizing the remaining unamortized acquisition date fair value adjustment of $10.5 million in respect of the US $51.6 million net of the 1% repurchase premium of $0.5 million. The Change of Control Offer expired on December 15, 2010 and no further purchases are required.

CRTC benefit obligation

As part of the CRTC decision approving the Media acquisition, the Company is required to contribute approximately $180 million in new benefits to the Canadian broadcasting system over the next seven years. Most of this contribution will be used to create new programming on Shaw Media services, construct digital transmission towers and provide a satellite solution for over-the-air viewers whose local television stations do not convert to digital. The fair value of the obligation on the acquisition date of $139.1 million was determined by discounting future net cash flows using a 5.75% discount rate and has been recorded in the income statement.

Business acquisition, integration and restructuring expenses

The Company incurred costs in respect of the acquisition of the broadcasting businesses of Canwest and organizational restructuring which amounted to $2.8 million and $60.9 million for the three and six months ended February 28, 2011, respectively. Amounts include acquisition related costs to effect the acquisition, such as professional fees paid to lawyers and consultants. The integration and restructuring costs relate to integrating the new businesses and increasing organizational effectiveness for future growth as well as package costs for the former CEO.

Loss on derivative instruments

For derivative instruments where hedge accounting is not permissible or derivatives are not designated in a hedging relationship, the Company records changes in the fair value of derivative instruments in the income statement. In addition, the Media senior unsecured notes have a variable prepayment option which represents an embedded derivative that is accounted for separately at fair value. The total loss recorded in respect of all such derivative instruments was $21.4 million and $22.8 million for the three and six months ended February 28, 2011, respectively, compared to $0.9 million and $45.3 million in the same periods last year. The comparative period also included a loss of $50.1 million which was reclassified from accumulated other comprehensive loss in respect of the cross-currency interest rate exchange agreements that no longer qualified as cash flow hedges when the US senior notes were redeemed in October 2009.

Accretion of long-term liabilities

The Company records accretion expense in respect of the discounting of certain long-term liabilities which are accreted to their estimated value over their respective terms. The expense is primarily in respect of CRTC benefit obligations as well as the liability which arose in 2010 when the Company entered into amended agreements with the counterparties to certain cross-currency agreements to fix the settlement of the principal portion of the swaps in December 2011.

Foreign exchange gain on unhedged long-term debt

In conjunction with the acquisition of the broadcasting businesses of Canwest, the Company assumed a US $389.6 million term loan and US $338.3 million senior unsecured notes. Shortly after closing the acquisition, the Company repaid the term loan including breakage of the related cross currency interest rate swaps. During the second quarter, the Company repurchased and cancelled US $51.6 million face amount of the senior secured notes. As a result of fluctuations of the Canadian dollar relative to the US dollar, a foreign exchange gain of $19.3 million and $22.6 million was recorded for the three and six months ended February 28, 2011, respectively.

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").

Income taxes

Income taxes were comparable to the same periods last year as the impact of lower net income before income taxes in the current period was offset by an income tax recovery of $17.6 million related to reductions in corporate income tax rates recorded in the first quarter of 2010.

Equity income on investees

During the first quarter, the Company recorded income of $13.4 million in respect of its 49.9% equity interest in CW Media for the period September 1 to October 26, 2010. On October 27, 2010, the Company acquired the remaining equity interest in CW Media as part of its purchase of all the broadcasting assets of Canwest. Results of operations are consolidated effective October 27, 2010. The equity income was comprised of approximately $19.6 million of operating income before amortization partially offset by interest expense of $4.5 million and other net costs of $1.7 million. The remaining equity income on investees is in respect of interests in several specialty channels.

RISKS AND UNCERTAINTIES

The significant risks and uncertainties affecting the Company and its business are discussed in the Company's August 31, 2010 Annual Report under the Introduction to the Business - Known Events, Trends, Risks and Uncertainties in Management's Discussion and Analysis. Developments of note since then are as follows:

Access rights - Support Structure Rates

On December 2, 2010 the CRTC issued its decision on rates for third party use of telecommunication carrier support structures and generally approved rate increases, retroactive to July 2009, for the majority of the ILECs that participated.

FINANCIAL POSITION

Total assets at February 28, 2011 were $12.5 billion compared to $10.2 billion at August 31, 2010. Following is a discussion of significant changes in the consolidated balance sheet since August 31, 2010.

Current assets increased by $688.6 million primarily due to increases in cash and cash equivalents of $122.2 million, accounts receivable of $287.0 million, inventories of $36.2 million and prepaids and other of $234.9 million. Cash and cash equivalents increased as the net funds provided by operating and financing activities, including proceeds from the issuance of $1.3 billion of senior notes, exceeded the cash outlay on capital expenditures and the Canwest broadcasting business acquisition. Accounts receivable and prepaids and other increased primarily as a result of the Media acquisition while inventories were higher due to timing of equipment purchases.

The derivative instrument of $8.5 million is in respect of the senior unsecured notes assumed by the Company as part of the Media acquisition. The notes are due in 2015 and have a variable prepayment option at a premium of 106.75 in August 2011 which declines on a straight-line basis to par in 2013.

Investments and other assets decreased by $725.8 million due to the acquisition of remaining equity interest in CW Media which is now consolidated as a 100% owned subsidiary and expensing of acquisition related costs partially offset by investments in several specialty channels purchased in the Media acquisition.

Property, plant and equipment and other intangibles increased by $169.8 million and $87.2 million, respectively as current year capital investment and amounts acquired on the Media acquisition exceeded amortization.

Deferred charges increased by $12.7 million due to higher deferred equipment costs and prepaid maintenance and support contracts.

Broadcast rights and licenses, and goodwill increased $1.4 billion and $671.6 million, respectively, due to the acquisition of the Canwest broadcasting businesses.

Program rights and advances of $96.0 million arose on the acquisition of the Canwest broadcasting businesses.

Current liabilities were up $135.6 million due to increases in accounts payable of $97.1 million, other liability of $160.0 million and derivative instruments of $20.5 million partially offset by a decrease in income taxes payable of $144.5 million. Accounts payable and accrued liabilities increased primarily due to the impact of the Media acquisition partially offset by a reduction in trade and other payables mainly in respect of timing of payment of capital expenditures. Income taxes payable decreased due to funding income tax amounts partially offset by current year tax expense and amounts assumed on the Media acquisition. Derivative instruments increased by $20.5 million due to new US currency forward purchase contracts entered into during the current year as well as reclassifying amounts from non-current liabilities based on settlement dates. The other liability is the obligation in respect of the principal component of the US $300 million amended cross-currency interest rate agreements which has been reclassified from noncurrent liabilities as it settles in December 2011.

Long-term debt increased $1.7 billion primarily as a result of the Canwest broadcasting business acquisition. Approximately $1 billion was required to complete the acquisition, including repayment of the CW Media term loan and breakage of related currency swaps. The acquisition was initially funded by borrowings under the Company's revolving credit facility, the majority of which was repaid with the net proceeds from the $900 million senior notes offerings in December. As part of the acquisition, the Company assumed CW Media's US $338.3 million 13.5% senior unsecured notes and subsequently repurchased and cancelled US $51.6 million face amount. In addition, the Company issued $400 million senior notes in February 2011.

Other long-term liabilities increased by $77.1 million mainly due to the non-current portion of CRTC benefit obligations as well as benefit plans as a result of the Media acquisition partially offset by the aforementioned reclassification of the obligation in respect of the principal component of the US $300 million amended cross-currency interest rate agreements.

Derivatives decreased by $6.5 million as amounts have been reclassified to current liabilities based on settlement dates.

Future income taxes increased $259.6 million due to the Media acquisition partially offset by current year tax recovery.

Share capital increased $26.4 million due to the issuance of 1,430,629 Class B Non-Voting Shares under the Company's option plan. As of March 31, 2011, share capital is as reported at February 28, 2011 with the exception of the issuance of 206,985 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. Accumulated other comprehensive income decreased due settlement of the forward purchase contracts in respect of the closing of the acquisition of the Canwest broadcasting businesses. Non-controlling interests arose in the first quarter due to a number of non-wholly owned specialty channels acquired as part of the Media acquisition.

LIQUIDITY AND CAPITAL RESOURCES

In the current year, the Company generated $312 million of free cash flow. Shaw used its free cash flow along with net proceeds of $1.27 billion from its three senior notes issuances, revolving credit facility borrowings of $75 million, proceeds on issuance of Class B Non-Voting Shares of $24.2 million and other net items of $50.3 million to pay $981.2 million to complete the Canwest broadcasting business acquisition including repayment of the CW Media term loan and breakage of related currency swaps, fund the net change in working capital requirements and inventory of approximately $389.0 million, pay common share dividends of $191.0 million, fund $70.9 million of Wireless expenditures, pay $56.4 million to repurchase and cancel a portion of the Media senior unsecured notes, purchase the Lake Broadcasting cable system for $3.5 million and increase cash and cash equivalents by $39.1 million.

Within thirty days of closing of the Media acquisition, a subsidiary of CW Media was required to make a change of control offer at a cash price equal to 101% of the obligations under the US 13.5% senior unsecured notes due 2015 issued by it in accordance with a related indenture dated as of July 3, 2008. As a result, on November 15, 2010, an offer was made to purchase all of the notes for an effective purchase price of US $1,145.58 for each US $1,000 face amount. An aggregate of US $51.6 million face amount was tendered under the offer and purchased by the Company for cancellation for an aggregate price of approximately $60 million, including accrued interest. The change of control offer expired on December 15, 2010 and no further purchases are required.

To allow for timely access to capital markets, the Company filed a short form base shelf prospectus with securities regulators in Canada and the U.S. on November 18, 2010. The shelf prospectus allows for the issue of up to an aggregate $4 billion of debt and equity securities over a 25 month period. Pursuant to this shelf prospectus, the Company completed three senior notes offerings in the second quarter totalling $1.3 billion as follows:

- On December 7, 2010 the Company issued $500 million senior notes at a rate of 5.5% due December 7, 2020 and issued an additional $400 million under the reopened 6.75% senior notes due November 9, 2039. The effective rate on the $500 million senior notes and $400 million senior notes is 5.548% and 6.963%, respectively, due to discounts on the issuances. The net proceeds from the notes issuances were used to repay borrowings under the Company's $1 billion revolving credit facility. In conjunction with the senior notes issuances, the unsecured $500 million revolving credit facility was cancelled. No amounts had been drawn under this facility.

- On February 17, 2011 the Company issued an additional $400 million under the reopened 6.75% senior notes due November 9, 2039. The effective rate is 6.961% due to the discount on issuance. The net proceeds were used for working capital and general corporate purposes as well as to partially repay borrowings under the revolving credit facility while excess funds are being held in cash and cash equivalents.

On November 25, 2010 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 37,000,000 Class B Non-Voting Shares during the period December 1, 2010 to November 30, 2011.

At February 28, 2011, the Company held $339 million in cash and cash equivalents and had access to $974 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 February 28,
                                     ---------------------------------------
                                                                     Change
                                         2011           2010              %
----------------------------------------------------------------------------
($000's Cdn)
Funds flow from operations            382,957        358,206            6.9
Net decrease (increase) in non-cash                                 greater
 working capital balances related to                                   than
 operations                           (48,167)        21,382         (100.0)
----------------------------------------------------------------------------
                                      334,790        379,588          (11.8)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Activities
                                     Six months ended February 28,
                                                                     Change
                                         2011           2010              %
----------------------------------------------------------------------------
($000's Cdn)
Funds flow from operations            647,337        697,158           (7.1)
Net decrease (increase) in non-cash                                 greater
 working capital balances related to                                   than
 operations                          (250,660)        15,989         (100.0)
----------------------------------------------------------------------------
                                      396,677        713,147          (44.4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Funds flow from operations increased over the comparative quarter due to the combined impact of higher operating income before amortization adjusted for non-cash program rights expenses partially offset by higher interest expense and current income taxes. Funds flow from operations decreased over the comparative six month period as the impact of the aforementioned items was more than offset by the realized loss on the mark-to-market payments to terminate the cross-currency interest rate exchange agreements in conjunction with repayment of the CW Media term loan and the acquisition, integration and restructuring costs in the current year. The net change in non-cash working capital balances over the comparable periods is primarily due to funding of income tax amounts in the current year, the timing of payment of various trade and other payables and the seasonal advertising impact of the new Media division on accounts receivable.

Investing Activities
                                             Three months ended February 28,
                                     ---------------------------------------
                                         2011          2010        Increase
----------------------------------------------------------------------------
($000's Cdn)
Cash flow used in investing
 activities                          (231,848)     (196,007)         35,841
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                               Six months ended February 28,
                                     ---------------------------------------
                                         2011          2010        Increase
----------------------------------------------------------------------------
($000's Cdn)
Cash flow used in investing
 activities                          (995,538)     (715,905)        279,633
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The cash used in investing activities increased over the comparable quarter due to higher capital expenditures and increased cash requirements for inventories. The current six month period was impacted by the aforementioned items as well as amounts paid to complete the acquisition of the broadcasting businesses of Canwest partially offset by the cash outlay in the comparative period for the Mountain Cablevision acquisition and investing certain excess funds in a Government of Canada bond.

Financing Activities
The changes in financing activities during the comparative periods were as
follows:
                                     Three months ended    Six months ended
                                            February 28,        February 28,
                                         2011      2010      2011      2010
----------------------------------------------------------------------------
(In $millions Cdn)
Bank loans - net borrowings
 (repayments)                          (925.0)        -      75.0         -
Issuance of Cdn $500 million 5.50%
 senior notes                           498.2         -     498.2         -
Issuance of Cdn $800 million 6.75%
 senior notes                           778.9         -     778.9         -
Issuance of Cdn $1.25 billion 5.65%
 senior notes                               -         -         -   1,246.0
Issuance of Cdn $650 million 6.75%
 senior notes                               -         -         -     645.6
Senior notes issuance costs              (7.5)     (0.9)     (7.5)     (9.9)
Repayment of CW Media US $389.6
 million term loan                          -              (394.9)        -
Repurchase US $51.6 million of CW
 Media 13.5% senior notes               (56.4)        -     (56.4)        -
Redemption of US $440 million 8.25%
 senior notes                               -         -         -    (465.5)
Redemption of US $225 million 7.25%
 senior notes                               -         -         -    (238.1)
Redemption of US $300 million 7.20%
 senior notes                               -         -         -    (312.6)
Payments on cross-currency agreements       -         -         -    (291.9)
Debt retirement costs                       -         -         -     (79.5)
Senior notes repurchase premium          (0.6)        -      (0.6)        -
Dividends paid to common shareholders   (95.6)    (90.9)   (191.0)   (181.8)
Dividends paid to non-controlling
 interests                               (4.5)        -      (4.5)        -
Repayment of Partnership debt            (0.2)     (0.2)     (0.3)     (0.3)
Issue of Class B Non-Voting Shares        6.6      17.6      24.2      25.5
Purchase of Class B Non-Voting Shares
 for cancellation                           -     (90.2)        -    (118.1)
----------------------------------------------------------------------------
                                        193.9    (164.6)    721.1     219.4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION
                                                         Basic
                                                           and
                                                       diluted
                                  Operating           earnings        Funds 
                              income before        Net     per    flow from
                    Revenue  amortization(1)  income(3)  share operations(2)
----------------------------------------------------------------------------
($000's Cdn 
 except per 
 share amounts)
2011
Second            1,196,611         494,524    167,299    0.37      382,957
First             1,078,905         473,354     20,332    0.04      264,380
2010
Fourth              938,872         423,152    121,575    0.28      327,435
Third               943,632         435,822    158,216    0.37      350,810
Second              929,142         424,825    138,712    0.32      358,206
First               905,934         474,952    114,229    0.26      338,952
2009
Fourth              872,919         394,900    124,265    0.29      321,319
Third               861,382         395,547    132,151    0.31      356,046
----------------------------------------------------------------------------
(1) See definition and discussion under Key Performance Drivers in
    Management's Discussion and Analysis.
(2) 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.
(3) Net income attributable to common shareholders is the same as net income
    except in 2011 where it is $16,642 and $161,490 for the first and second
    quarters, respectively.

Generally, revenue and operating income before amortization have grown quarter-over-quarter mainly due to customer growth and rate increases with the exception of the second and fourth quarters of 2010. In the fourth quarter of 2010, revenue and operating income before amortization declined by $4.8 million and $12.7 million, respectively, due to customer growth offset by timing of On-Demand events, increased promotional activity and timing of certain expenses including maintenance and costs related to customer growth. Operating income before amortization decreased by $50.1 million in the second quarter of 2010 due to the impact of the one-time Part II fee recovery of $75.3 million recorded in the previous quarter.

Net income has fluctuated quarter-over-quarter primarily as a result of the growth in operating income before amortization described above, the impact of the net change in non-operating items such as debt retirement costs and loss on derivative instruments, and the impact of corporate income tax rate reductions. The first quarter of the current year was also impacted by the acquisition of the Canwest broadcasting businesses. As a result, net income declined by $101.2 million in the first quarter of 2011 as the higher operating income before amortization of $50.2 million due to the contribution from the new Media division and lower income taxes of $32.1 million were offset by the CRTC benefit obligation of $139.1 million and acquisition, integration and restructuring costs of $58.1 million. Net income increased by $147.0 million in the second quarter of 2011 due to the impact of the Canwest broadcasting business acquisition in the immediately preceding quarter and higher operating income before amortization and foreign exchange gain on unhedged long-term debt, the total of which was partially offset by increases in interest expense, loss on derivative instruments and income tax expense. Net income declined by $10.0 million in the first quarter of 2010 mainly due to debt retirement costs of $81.6 million in respect of the US senior note redemptions, the loss on derivative instruments of $44.4 million, the total of which was partially offset by higher operating income before amortization of $80.1 million (which includes the impact of the one-time Part II fee recovery of $75.3 million) and lower income taxes of $28.9 million. The lower income taxes were due to lower net income before taxes and an income tax recovery of $17.6 million related to reductions in corporate income tax rates in the first quarter of 2010. Net income increased by $24.5 million in the second quarter of 2010 due to the aforementioned items recorded in the previous quarter and the impact of customer growth, the Mountain Cablevision acquisition and lower costs including employee related and marketing expenses all of which were partially offset by increased taxes on higher net income before taxes. During the third quarter of 2010, net income increased by $19.5 million mainly due to higher operating income before amortization and lower amortization. Net income declined by $36.6 million in the fourth quarter of 2010 due to lower operating income before amortization of $12.7 million and higher amortization expense of $14.7 million. The decline in net income in the fourth quarter of 2009 of $7.9 million is mainly due to an increase in amortization expense. 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, 2010 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. 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 as follows.

Adoption of accounting policies for Shaw Media

The following accounting policies have been adopted for the Company's new television broadcasting operations (Shaw Media).

Revenue

Subscriber revenue is recognized monthly based on subscriber levels. Advertising revenues are recognized in the period in which the advertisements are broadcast and recorded net of agency commissions as these amounts are paid directly to the agency or advertiser. When a sales arrangement includes multiple advertising spots, the proceeds are allocated to individual advertising spots under the arrangement based on relative fair values.

Program Rights and Advances

Program rights represent licensed rights acquired to broadcast television programs on the Company's conventional and specialty television channels and program advances are in respect of payments for programming prior to the window license start date. For licensed rights, the Company records a liability for program rights and corresponding asset when the license period has commenced and all of the following conditions have been met: (i) the cost of the program is known or reasonably determinable, (ii) the program material has been accepted by the Company in accordance with the license agreement and (iii) the material is available to the Company for telecast. Program rights are expensed on a systematic basis over the estimated exhibition period as the programs are aired and are included in operating, general and administrative expenses. If program rights are not scheduled, they are considered impaired and are written off.

CRTC Benefit Obligations

The fair value of CRTC benefit obligations committed as part of business acquisitions are initially recorded, on a discounted basis, at the present value of amounts to be paid net of any expected incremental cash inflows. The obligation is subsequently adjusted for the incurrence of related expenditures, the passage of time and for revisions to the timing of the cash flows. Changes in the obligation due to the passage of time are recorded as accretion of long-term liabilities in the income statement.

Asset Retirement Obligations

The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred, on a discounted basis, with a corresponding increase to the carrying amount of property and equipment. This cost is amortized on the same basis as the related asset. The liability is subsequently increased for the passage of time and the accretion is recorded in the income statement as accretion of long-term liabilities. Revisions due to the estimated timing of cash flows or the amount required to settle the obligation may result in an increase or decrease in the liability. Actual costs incurred upon settlement of the obligation are charged against the liability to the extent recorded.

Embedded Derivative Instruments

Derivatives embedded in other financial instruments or contracts are separated from their host contracts and separately accounted for as derivatives when their economic characteristics and risks are not closely related to the host contract, they meet the definition of a derivative and the combined instrument or contract is not measured at fair value. The Company records embedded derivatives at fair value with changes recognized in the income statement as loss/gain on derivative instruments.

Adoption of recent accounting pronouncements

Business Combinations

Effective September 1, 2010, the Company early adopted CICA Handbook Section 1582 "Business Combinations", which replaces Section 1581 "Business Combinations". The differences which arise from the new accounting standard relate to details in applying the acquisition method. The significant changes that result include (i) a change in the measurement date for equity instruments issued by the acquirer from a few days before and after the announcement date to the acquisition date, (ii) contingent consideration is recognized at fair value and subsequently remeasured at each reporting date until settled, (iii) future adjustments to income tax estimates are recorded in income whereas previously, certain changes were recorded in goodwill, (iv) acquisition related costs, other than costs to issue debt or equity instruments, and acquisition related restructuring costs must be expensed, (v) for business combinations completed in stages, identifiable net assets are recognized at fair value when control is obtained and a gain or loss is recognized for the difference in fair value and carrying value of the previously held equity interests, (vi) the fair value of identifiable assets and liabilities attributable to non-controlling interests must be recognized, and (vii) non-controlling interests are recorded at either fair value or their proportionate share of the fair value of identifiable net assets acquired.

Consolidated Financial Statements and Non-controlling Interests

Effective September 1, 2010, the Company early adopted CICA Handbook Section 1601 "Consolidated Financial Statements" and Section 1602 "Non-controlling Interests" which replace Section 1600 "Consolidated Financial Statements". The new standards provide guidance for the preparation of financial statements and accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. For presentation and disclosure purposes, non-controlling interests are classified as a separate component of shareholders' equity. In addition, net income and comprehensive income is attributed to the Company's shareholders and to non-controlling interests rather than reflecting the non-controlling interests as a deduction to arrive at net income and comprehensive income.

Recent accounting pronouncements:

International Financial Reporting Standards (IFRS)

In February 2008, the CICA Accounting Standards Board (AScB) confirmed that Canadian publicly accountable enterprises will be required to adopt International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), for fiscal periods beginning on or after January 1, 2011. These standards require the Company to begin reporting under IFRS in the first quarter of fiscal 2012 with comparative data for the prior year. The table below outlines the phases involved in the changeover to IFRS.

----------------------------------------------------------------------------
Phase                         Description and status
----------------------------------------------------------------------------
Impact assessment and         This phase includes establishment of a project
planning                      team and high-level review to determine
                              potential significant differences under IFRS
                              as compared to Canadian GAAP. This phase has  
                              been completed and as a result, the Company 
                              has developed a transition plan and a
                              preliminary timeline to comply with the
                              changeover date while recognizing that project
                              activities and timelines may change as a
                              result of unexpected developments.
----------------------------------------------------------------------------
Design and development -      This phase includes (i) an in-depth review to
key elements                  identify and assess accounting and reporting
                              differences, (ii) evaluation and selection
                              of accounting policies, (iii) assessment of
                              impact on information systems, internal
                              controls, and business activities, and (iv)
                              training and communication with key
                              stakeholders.
                              During 2009, the Company completed its
                              preliminary identification and assessment of
                              accounting and reporting differences. In
                              addition, training was provided to certain 
                              key employees involved in or directly 
                              impacted by the conversion process.
                              During 2010, the assessment of the impact on
                              information systems and design phase of system
                              changes have been completed and the 
                              implementation phase has commenced. The 
                              Company has completed further in-depth
                              evaluations of those areas initially
                              identified as being potential accounting and
                              reporting differences, as well as the 
                              evaluation of IFRS 1 elections/exemptions 
                              which are discussed below.
----------------------------------------------------------------------------
Implementation                This phase includes integration of solutions
                              into processes and financial systems that are
                              required for the conversion to IFRS and
                              parallel reporting during the year prior to
                              transition including proforma financial
                              statements and note disclosures. Process
                              solutions will incorporate required revisions
                              to internal controls during the changeover and
                              on an on-going basis.
----------------------------------------------------------------------------

In the period leading up to the changeover, the AcSB will continue to issue accounting standards that are converged with IFRS, thus mitigating the impact of the adoption of IFRS at the changeover date. The International Accounting Standards Board ("IASB") will also continue to issue new accounting standards during the conversion period and, as a result, the final impact of IFRS on the Company's consolidated financial statements will only be measured once all IFRS applicable at the conversion date are known.

The Company's adoption of IFRS will require the application of IFRS 1, First-Time Adoption of International Financial Reporting Standards ("IFRS 1"), which provides guidance for an entity's initial adoption of IFRS. IFRS 1 generally requires that an entity apply all IFRS effective at the end of its first IFRS reporting period retrospectively. However, IFRS 1 does include certain mandatory exceptions and limited optional exemptions in specified areas of certain standards from this general requirement. Management is assessing the exemptions available under IFRS 1 and their impact on the Company's future financial position. On adoption of IFRS, the significant optional exemptions being considered by the Company are as follows:

----------------------------------------------------------------------------
Exemption                     Application of exemption
----------------------------------------------------------------------------
Business combinations         The Company expects to apply IFRS 3  
                              prospectively from its transition date and 
                              elect not to restate any business combinations
                              that occurred prior to September 1, 2010.
----------------------------------------------------------------------------
Employee benefits             The Company expects to elect to recognize
                              cumulative actuarial gains and losses arising
                              from all of its defined benefit plans as at
                              September 1, 2010 in opening retained 
                              earnings.
----------------------------------------------------------------------------
Borrowing costs               The Company expects to elect to apply IAS 23
                              "Borrowing Costs" prospectively from September
                              1, 2010.
----------------------------------------------------------------------------

Management is in the process of quantifying the expected material differences between IFRS and the current accounting treatment under Canadian GAAP. Set out below are the key areas where changes in accounting policies are expected that may impact the Company's consolidated financial statements. The list and comments should not be regarded as a complete list of changes that will result from the transition to IFRS. It is intended to highlight those areas management believes to be most significant. However, the IASB has significant ongoing projects that could affect the ultimate differences between Canadian GAAP and IFRS and their impact on the Company's consolidated financial statements. Consequently, management's analysis of changes and policy decisions have been made based on its expectations regarding the accounting standards that we anticipate will be effective at the time of transition. The future impacts of IFRS will also depend on the particular circumstances prevailing in those years. At this stage, management is not able to reliably quantify the impacts expected on the Company's consolidated financial statements for these differences. Please see the section entitled "Cautionary statement regarding forward-looking statements".

The following significant differences between Canadian GAAP and IFRS have been identified that are expected to impact the Company's financial statements. This is not an exhaustive list of all of the changes that could occur during the transition to IFRS. At this time, the comprehensive impact of the changeover on the Company's future financial position and results of operations is not yet determinable.

The Company continues to monitor and assess the impact of evolving differences between Canadian GAAP and IFRS, since the IASB is expected to continue to issue new accounting standards during the transition period. As a result, the final impact of IFRS on the Company's consolidated financial statements can only be measured once all the applicable IFRS at the conversion date are known.

Differences with respect to recognition, measurement, presentation and disclosure of financial information are expected to be in the following key accounting areas:

----------------------------------------------------------------------------
Key accounting area           Differences from Canadian GAAP, with potential
                              impact for the Company
----------------------------------------------------------------------------
Presentation of Financial     IAS 1 requires additional disclosures in the
Statements (IAS 1)            notes to financial statements.
----------------------------------------------------------------------------
Share-based Payments          IFRS 2 requires cash-settled awards to 
(IFRS 2)                      employees be measured at fair value at the
                              initial grant date and re-measured at fair 
                              value at the end of each reporting period.
                              IFRS 2 also requires the fair value of stock-
                              based compensation awards to be recognized 
                              using a graded vesting method based on the
                              vesting period of the options.
----------------------------------------------------------------------------
Income Taxes                  IAS 12 recognition and measurement criteria 
(IAS 12)                      for deferred tax assets and liabilities may
                              differ.
----------------------------------------------------------------------------
Employee Benefits             IAS 19 requires past service costs of defined
(IAS 19)                      benefit plans to be expensed on an accelerated
                              basis, with vested past service costs 
                              immediately expensed and unvested past service
                              costs amortized on a straight line basis until
                              benefits become vested.
                              IAS 19 has an accounting policy choice that
                              allows the Company to recognize actuarial 
                              gains and losses using one of the following
                              methods:
                              - in net income using the corridor approach
                                amortized over the expected average 
                                remaining working lives,
                              - in net income on a systematic basis for 
                                faster recognition, including immediate
                                recognition of all actuarial gains and 
                                losses, or
                              - to recognize them in other comprehensive
                                income, as they occur.
                              The Company is currently reviewing the impact
                              of the accounting policy choice for 
                              recognition of actuarial gains and losses.
----------------------------------------------------------------------------
Interests in Joint            Although IAS 31 currently permits the use of
Ventures (IAS 31)             proportionate consolidation for joint venture
                              interests, proposed changes are expected to be
                              finalized prior to transition to require joint
                              venture interests to be accounted for using 
                              the equity method.
----------------------------------------------------------------------------
Impairment of Assets          IAS 36 uses a one-step approach for the  
(IAS 36)                      identification and measurement of impairment 
                              of assets. The carrying value of assets is
                              compared to the greater of its fair value less
                              costs to sell and value in use, which is based
                              on the net present value of future cash flows.
                              Impairment of assets, other than goodwill, is
                              reversed in a subsequent period if 
                              circumstances change such that the previously
                              determined impairment is reduced or 
                              eliminated.
----------------------------------------------------------------------------
Provisions, Contingent        IAS 37 uses a different threshold for  
Liabilities and               recognition of a contingent
Contingent Assets             liability that could impact the timing of when
(IAS 37)                      a provision may be recorded.
----------------------------------------------------------------------------
Intangible Assets             IAS 38 prohibits the amortization of 
(IAS 38)                      indefinite-lived intangibles and 
                              reinstatement of previous amortization is
                              required.
----------------------------------------------------------------------------

2011 GUIDANCE

With respect to 2011 guidance, the Company expects continued growth in the core Cable and Satellite business and on a preliminary basis, expects that the growth rate of core consolidated operating income before amortization will decline modestly compared to last year's organic growth rate of approximately 7.5% as a result of competitive market pressures and higher programming costs. Capital investment is expected to decline and cash taxes are estimated to increase.

Overall, preliminary 2011 free cash flow guidance of approximately $550 million provided on October 22, 2010 for the core Cable and Satellite business has not changed. The competitive environment has moderated revenue growth this year in the core business and presented an increased level of risk to the guidance. The recent initiatives undertaken to drive efficiencies through focused cost containment and reductions currently have the Company on track to meet guidance.

As previously provided on January 13, 2011 it is expected that the new Media assets will generate approximately $75 million of free cash flow for the 10 month period of inclusion during fiscal 2011, before considering cash funding of the CRTC benefit obligation amounts. Over the next 7 years the benefit obligation funding is approximately $275 million comprising $180 million from the Shaw acquisition and $95 million remaining from the Canwest acquisition of the Specialty services in 2007. After considering the estimated 2011 CRTC benefit obligation cash funding, Media is expected to contribute approximately $50 million of free cash flow and consolidated fiscal 2011 free cash flow is estimated to approximate $600 million.

The investment associated with the Wireless build is being tracked and reported separately from the free cash flow generated from ongoing operations.

Certain important assumptions for 2011 guidance purposes include: continued overall customer growth; 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; stable advertising demand and rates; cash income taxes to be paid or payable in 2011; and a stable regulatory environment.

See the following section 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)
(thousands of Canadian dollars)                  February 28,     August 31,
                                                        2011           2010
----------------------------------------------------------------------------
ASSETS
Current
 Cash and cash equivalents                           338,951        216,735
 Accounts receivable                                 483,367        196,415
 Inventories                                          89,978         53,815
 Prepaids and other                                  268,703         33,844
 Derivative instruments                               68,402         66,718
 Future income taxes                                  34,769         27,996
----------------------------------------------------------------------------
                                                   1,284,170        595,523
Derivative instrument                                  8,502              -
Investments and other assets                          17,516        743,273
Property, plant and equipment                      3,174,416      3,004,649
Deferred charges                                     245,545        232,843
Intangibles
 Broadcast rights and licenses (note 3)            6,446,369      5,061,153
 Program rights and advances                          95,986              -
 Spectrum licenses                                   190,912        190,912
 Goodwill (note 3)                                   840,760        169,143
 Other intangibles                                   243,620        156,469
----------------------------------------------------------------------------
                                                  12,547,796     10,153,965
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
 Accounts payable and accrued liabilities            720,145        623,070
 Income taxes payable                                 26,034        170,581
 Unearned revenue                                    148,104        145,491
 Current portion of long-term debt (note 4)              575            557
 Current portion of derivative instruments           100,228         79,740
 Other liability (note 9)                            159,961              -
----------------------------------------------------------------------------
                                                   1,155,047      1,019,439
 Long-term debt (note 4)                           5,651,081      3,981,671
 Other long-term liabilities (note 9)                368,580        291,500
 Derivative instruments                                    -          6,482
 Deferred credits                                    631,143        632,482
 Future income taxes                               1,711,414      1,451,859
----------------------------------------------------------------------------
                                                   9,517,265      7,383,433
----------------------------------------------------------------------------
Shareholders' equity
 Share capital (note 5)                            2,276,889      2,250,498
 Contributed surplus (note 5)                         60,768         53,330
 Retained earnings                                   444,875        457,728
 Accumulated other comprehensive income
  (loss) (note 7)                                     (2,664)         8,976
 Non-controlling interests                           250,663              -
----------------------------------------------------------------------------
                                                   3,030,531      2,770,532
----------------------------------------------------------------------------
                                                  12,547,796     10,153,965
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)
                                     Three months ended    Six months ended
                                            February 28,        February 28,
                                   -----------------------------------------
(thousands of Canadian dollars
 except per share amounts)               2011      2010      2011      2010
----------------------------------------------------------------------------
Revenue (note 2)                    1,196,611   929,142 2,275,516 1,835,076
Operating, general and
 administrative expenses              702,087   504,317 1,307,638   935,299
----------------------------------------------------------------------------
Operating income before
 amortization (note 2)                494,524   424,825   967,878   899,777
 Amortization:
  Deferred IRU revenue                  3,136     3,136     6,273     6,273
  Deferred equipment revenue           25,715    30,482    53,033    61,743
  Deferred equipment costs            (49,892)  (58,140) (101,998) (117,649)
  Deferred charges                       (256)     (256)     (512)     (512)
  Property, plant and equipment      (157,866) (131,741) (306,695) (256,380)
  Other intangibles                   (12,068)   (8,843)  (22,074)  (17,935)
----------------------------------------------------------------------------
Operating income                      303,293   259,463   595,905   575,317
  Amortization of financing costs -
   long-term debt                      (1,089)     (952)   (2,109)   (2,053)
  Interest expense (note 2)           (85,237)  (61,646) (153,932) (123,710)
----------------------------------------------------------------------------
                                      216,967   196,865   439,864   449,554
  Debt retirement costs                     -         -         -   (81,585)
  Gain on repurchase of debt (note 4)   9,981         -     9,981         -
  CRTC benefit obligation (note 3)          -         -  (139,098)        -
  Business acquisition, integration
   and restructuring expenses 
   (note 3)                            (2,778)        -   (60,882)        -
  Loss on derivative instruments      (21,353)     (864)  (22,764)  (45,296)
  Accretion of long-term liabilities   (3,880)     (640)   (5,813)     (853)
  Foreign exchange gain on unhedged
   long-term debt                      19,267         -    22,585         -
  Other gains                           4,103       638     6,532     9,355
----------------------------------------------------------------------------
Income before income taxes            222,307   195,999   250,405   331,175
  Current income tax expense 
   (note 2)                            56,508    10,703   111,850   105,281
  Future income tax expense
   (recovery)                          (1,291)   46,584   (35,242)  (27,047)
----------------------------------------------------------------------------
Income before the following           167,090   138,712   173,797   252,941
  Equity income on investees              209         -    13,834         -
----------------------------------------------------------------------------
Net income                            167,299   138,712   187,631   252,941
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income attributable to:
Common shareholders                   161,490   138,712   178,132   252,941
Non-controlling interests               5,809         -     9,499         -
----------------------------------------------------------------------------
                                      167,299   138,712   187,631   252,941
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Retained earnings, beginning of
 period                               378,945   385,852   457,728   382,227
Net income attributable to common
 shareholders                         161,490   138,712   178,132   252,941
Reduction on Class B Non-Voting
 Shares purchased for cancellation          -   (65,354)        -   (85,143)
Dividends - Class A Shares and
 Class B Non-Voting Shares            (95,560)  (90,946) (190,985) (181,761)
----------------------------------------------------------------------------
Retained earnings, end of period      444,875   368,264   444,875   368,264
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share (note 6)
 Basic and diluted                        0.37      0.32      0.41     0.58
----------------------------------------------------------------------------
(thousands of shares)
Weighted average participating
 shares outstanding during 
 period                                434,425   432,960   434,107  432,733
Participating shares outstanding,
 end of period                         434,573   431,838   434,573  431,838
----------------------------------------------------------------------------
See accompanying notes
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS) 
(unaudited)
                                     Three months ended    Six months ended
                                            February 28,        February 28,
                                   -----------------------------------------
(thousands of Canadian dollars)          2011      2010      2011      2010
----------------------------------------------------------------------------
Net income                            167,299   138,712   187,631   252,941
Other comprehensive income (loss)
 (note 7)
Change in unrealized fair value of
 derivatives designated as
 cash flow hedges                      (4,354)     (198)  (12,552)  (51,633)
Adjustment for hedged items
 recognized in the period                 653     1,469       862    10,913
Reclassification of foreign exchange
 loss on hedging derivatives to income 
 to offset foreign exchange adjustments
 on US denominated debt                     -         -         -    34,940
Reclassification of remaining losses
 on hedging derivatives to income upon
 early redemption of hedged US 
 denominated debt                           -         -         -    42,658
Unrealized gain on available-for-sale
 investment                                 -      (140)       53       290
Unrealized foreign exchange loss on
 translation of a self-sustaining
 foreign operation                         (2)        -        (3)       (1)
----------------------------------------------------------------------------
                                       (3,703)    1,131   (11,640)   37,167
----------------------------------------------------------------------------
Comprehensive income                  163,596   139,843   175,991   290,108
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Comprehensive income attributable to:
Common shareholders                   157,787   139,843   166,492   290,108
Non-controlling interests               5,809         -     9,499         -
----------------------------------------------------------------------------
                                      163,596   139,843   175,991   290,108
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated other comprehensive
 income (loss), beginning of period     1,039    (2,598)    8,976   (38,634)
Other comprehensive income (loss)      (3,703)    1,131   (11,640)   37,167
----------------------------------------------------------------------------
Accumulated other comprehensive loss,
 end of period                         (2,664)   (1,467)   (2,664)   (1,467)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(unaudited)
                                 Three months ended        Six months ended
                                        February 28,            February 28,
                                ------------------------------------------
(thousands of Canadian dollars)      2011      2010        2011        2010
----------------------------------------------------------------------------
OPERATING ACTIVITIES (note 8)
Funds flow from operations        382,957   358,206     647,337     697,158
Net decrease in non-cash working
 capital balances related
 to operations                    (48,167)   21,382    (250,660)     15,989
----------------------------------------------------------------------------
                                  334,790   379,588     396,677     713,147
----------------------------------------------------------------------------
INVESTING ACTIVITIES
  Additions to property, plant 
   and equipment (note 2)        (176,835) (171,737)   (434,893)   (330,557)
  Additions to equipment costs
   (net) (note 2)                 (25,939)  (23,728)    (54,476)    (51,488)
  Additions to other intangibles
   (note 2)                       (23,358)   (5,252)    (59,486)    (14,780)
  Net reduction (addition) to
   inventories                     (9,519)    5,075     (36,163)     (4,480)
  Business acquisitions (note 3)        -      (360)   (420,442)   (155,694)
  Purchase of Government of
   Canada bond                          -         -           -    (158,968)
  Proceeds on disposal of
   property, plant and
   equipment (note 2)                 203        44       6,799         111
  Proceeds from (addition to)
   investments and other assets     3,600       (49)      3,123         (49)
----------------------------------------------------------------------------
                                 (231,848) (196,007)   (995,538)   (715,905)
----------------------------------------------------------------------------
FINANCING ACTIVITIES
  Increase in long-term debt, 
   net of discounts             1,352,115         -   2,352,115   1,891,656
  Senior notes issuance costs      (7,524)     (861)     (7,524)     (9,918)
  Senior notes repurchase and
   repayments                     (56,420)        -     (56,420) (1,016,170)
  Other debt repayments        (1,000,142)     (134) (1,395,218)       (266)
  Payments on cross-currency
   agreements                           -         -           -    (291,920)
  Senior notes repurchase
   premium                           (564)        -        (564)          -
  Debt retirement costs                 -         -           -     (79,488)
  Issue of Class B Non-Voting
   Shares, net of after-tax
   expenses (note 5)                6,589    17,618      24,223      25,488
  Purchase of Class B Non-Voting
   Shares for cancellation              -   (90,258)          -    (118,150)
  Dividends paid on Class A 
   Shares and Class B Non-Voting 
   Shares                         (95,560)  (90,946)   (190,985)   (181,761)
  Dividends paid to non-
   controlling interests           (4,550)        -      (4,550)          -
----------------------------------------------------------------------------
                                  193,944  (164,581)    721,077     219,471
----------------------------------------------------------------------------
Effect of currency translation 
 on cash balances and cash flows        -        (1)          -          (1)
----------------------------------------------------------------------------
Increase in cash                  296,886    18,999     122,216     216,712
Cash, beginning of the period      42,065   650,950     216,735     453,237
----------------------------------------------------------------------------
Cash, end of the period           338,951   669,949     338,951     669,949
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash includes cash and cash equivalents
See accompanying notes

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

February 28, 2011 and 2010

(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, 2010.

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 accounting policies for Shaw Media

The following accounting policies have been adopted for the Company's new television broadcasting operations (Shaw Media).

Revenue

Subscriber revenue is recognized monthly based on subscriber levels. Advertising revenues are recognized in the period in which the advertisements are broadcast and recorded net of agency commissions as these amounts are paid directly to the agency or advertiser. When a sales arrangement includes multiple advertising spots, the proceeds are allocated to individual advertising spots under the arrangement based on relative fair values.

Program Rights and Advances

Program rights represent licensed rights acquired to broadcast television programs on the Company's conventional and specialty television channels and program advances are in respect of payments for programming prior to the window license start date. For licensed rights, the Company records a liability for program rights and corresponding asset when the license period has commenced and all of the following conditions have been met: (i) the cost of the program is known or reasonably determinable, (ii) the program material has been accepted by the Company in accordance with the license agreement and (iii) the material is available to the Company for telecast. Program rights are expensed on a systematic basis over the estimated exhibition period as the programs are aired and are included in operating, general and administrative expenses. If program rights are not scheduled, they are considered impaired and are written off.

CRTC Benefit Obligations

The fair value of CRTC benefit obligations committed as part of business acquisitions are initially recorded, on a discounted basis, at the present value of amounts to be paid net of any expected incremental cash inflows. The obligation is subsequently adjusted for the incurrence of related expenditures, the passage of time and for revisions to the timing of the cash flows. Changes in the obligation due to the passage of time are recorded as accretion of long-term liabilities in the income statement.

Asset Retirement Obligations

The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred, on a discounted basis, with a corresponding increase to the carrying amount of property and equipment. This cost is amortized on the same basis as the related asset. The liability is subsequently increased for the passage of time and the accretion is recorded in the income statement as accretion of long-term liabilities. Revisions due to the estimated timing of cash flows or the amount required to settle the obligation may result in an increase or decrease in the liability. Actual costs incurred upon settlement of the obligation are charged against the liability to the extent recorded.

Embedded Derivative Instruments

Derivatives embedded in other financial instruments or contracts are separated from their host contracts and separately accounted for as derivatives when their economic characteristics and risks are not closely related to the host contract, they meet the definition of a derivative and the combined instrument or contract is not measured at fair value. The Company records embedded derivatives at fair value with changes recognized in the income statement as loss/gain on derivative instruments.

Adoption of recent accounting pronouncements

Business Combinations

Effective September 1, 2010, the Company early adopted CICA Handbook Section 1582 "Business Combinations", which replaces Section 1581 "Business Combinations". The differences which arise from the new accounting standard relate to details in applying the acquisition method. The significant changes that result include (i) a change in the measurement date for equity instruments issued by the acquirer from a few days before and after the announcement date to the acquisition date, (ii) contingent consideration is recognized at fair value and subsequently remeasured at each reporting date until settled, (iii) future adjustments to income tax estimates are recorded in income whereas previously, certain changes were recorded in goodwill, (iv) acquisition related costs, other than costs to issue debt or equity instruments, and acquisition related restructuring costs must be expensed, (v) for business combinations completed in stages, identifiable net assets are recognized at fair value when control is obtained and a gain or loss is recognized for the difference in fair value and carrying value of the previously held equity interests, (vi) the fair value of identifiable assets and liabilities attributable to non-controlling interests must be recognized, and (vii) non-controlling interests are recorded at either fair value or their proportionate share of the fair value of identifiable net assets acquired.

Consolidated Financial Statements and Non-controlling Interests

Effective September 1, 2010, the Company early adopted CICA Handbook Section 1601 "Consolidated Financial Statements" and Section 1602 "Non-controlling Interests" which replace Section 1600 "Consolidated Financial Statements". The new standards provide guidance for the preparation of financial statements and accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. For presentation and disclosure purposes, non-controlling interests are classified as a separate component of shareholders' equity. In addition, net income and comprehensive income is attributed to the Company's shareholders and to non-controlling interests rather than reflecting the non-controlling interests as a deduction to arrive at net income and comprehensive income.

Recent accounting pronouncements

International Financial Reporting Standards (IFRS)

In February 2008, the CICA Accounting Standards Board (AScB) confirmed that Canadian publicly accountable enterprises will be required to adopt International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), for fiscal periods beginning on or after January 1, 2011. These standards require the Company to begin reporting under IFRS in the first quarter of fiscal 2012 with comparative data for the prior year. The Company has developed its plan and has completed the preliminary identification and assessment of the accounting and reporting differences under IFRS as compared to Canadian GAAP. Evaluation of accounting policies is in progress; however, at this time, the full impact of adopting IFRS is not reasonably estimable or determinable.

2. BUSINESS SEGMENT INFORMATION

The Company provides cable television services, high-speed Internet access, Digital Phone and Internet infrastructure services ("Cable"); television broadcasting (Shaw Media); DTH satellite services (Shaw Direct); and, satellite distribution services ("Satellite Services"). Shaw Media's operating results are affected by seasonality and fluctuate throughout the year due to a number of factors including seasonal advertising and viewing patterns. As such, operating results for an interim period should not be considered indicative of full fiscal year performance. In general, advertising revenues are higher during the first quarter and lower during the fourth quarter and expenses are incurred more evenly throughout the year. All of these operations are substantially located in Canada. Information on operations by segment is as follows:

Operating information
                                   Three months ended      Six months ended
                                          February 28,          February 28,
                                  ------------------------------------------
                                       2011      2010       2011       2010
                                          $         $          $          $
----------------------------------------------------------------------------
Revenue
 Cable                              769,403   733,436  1,527,234  1,443,183
 DTH                                184,174   179,602    369,553    359,366
 Satellite Services                  19,789    20,666     40,583     41,613
 Media                              243,931         -    369,328          -
----------------------------------------------------------------------------
                                  1,217,297   933,704  2,306,698  1,844,162
Intersegment eliminations           (20,686)   (4,562)   (31,182)    (9,086)
----------------------------------------------------------------------------
                                  1,196,611   929,142  2,275,516  1,835,076
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income (expenditures)
 before amortization (1) (4)
 Cable                              363,710   354,473    711,565    734,725
 DTH                                 60,055    59,735    119,128    143,461
 Satellite Services                  10,160    10,617     20,596     21,591
 Media                               65,475         -    122,247          -
 Wireless                            (4,876)        -     (5,658)         -
----------------------------------------------------------------------------
                                    494,524   424,825    967,878    899,777
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest (2)
 Cable                               57,900    54,752    108,847    109,918
 DTH and Satellite Services           6,562     6,562     12,827     13,125
 Media                               15,337         -     21,821          -
 Wireless                             5,114         -      9,787          -
 Burrard Landing Lot 2 Holdings
  Partnership                           324       332        650        667
----------------------------------------------------------------------------
                                     85,237    61,646    153,932    123,710
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash taxes (3)
 Cable                               43,625    39,999     89,000     88,004
 DTH and Satellite Services          12,775     9,999     25,000     29,000
 Media                               10,200         -     12,200          - 
Other/non-operating                 (10,092)  (39,295)   (14,350)   (11,723)
----------------------------------------------------------------------------
                                     56,508    10,703    111,850    105,281
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The six months ended February 28, 2010 includes the impact of a one-time
    CRTC Part II fee recovery of $48,662 for Cable and $26,570 for combined
    satellite.
(2) The Company reports interest on a segmented basis for Cable, Media,
    Wireless and combined satellite only. It does not report interest on a
    segmented basis for DTH and Satellite Services. Interest is allocated to
    the Wireless division based on the Company's average cost of borrowing
    to fund the capital expenditures and operating costs.
(3) The Company reports cash taxes on a segmented basis for Cable, Media and
    combined satellite only. It does not report cash taxes on a segmented
    basis for DTH and Satellite Services.
(4) The presentation of segmented operating income (expenditures) before
    amortization has been adjusted to reflect on a gross basis to include
    intersegment transactions. As a result, for the three months ended
    operating income before amortization for Cable and DTH have decreased by
    $847 and $28, respectively and increased by $875 for Satellite Services,
    and for the six months ended operating income before amortization for
    Cable and DTH have decreased by $1,697 and $53, respectively and
    increased by $1,750 for Satellite Services.
Capital expenditures
                                    Three month sending   Six months ending
                                            February 28,        February 28,
                                   -----------------------------------------
                                         2011      2010      2011      2010
                                            $         $         $         $
----------------------------------------------------------------------------
Capital expenditures accrual basis
 Cable (including corporate)          147,557   163,991   318,176   320,022
 Satellite (net of equipment profit)      457       621     3,021     2,039
 Media                                  5,279         -     7,403         -
 Wireless                              32,109         -    55,450         -
----------------------------------------------------------------------------
                                      185,402   164,612   384,050   322,061
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equipment costs (net of revenue
 received)
 Cable                                  9,061     5,767    15,822     9,821
 Satellite                             16,878    17,961    38,654    41,667
----------------------------------------------------------------------------
                                       25,939    23,728    54,476    51,488
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures and equipment
 costs (net)
 Cable                                156,618   169,758   333,998   329,843
 Satellite                             17,335    18,582    41,675    43,706
 Media                                  5,279         -     7,403         -
 Wireless                              32,109         -    55,450         -
----------------------------------------------------------------------------
                                      211,341   188,340   438,526   373,549
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reconciliation to Consolidated
 Statements of Cash Flows
 Additions to property, plant and
  equipment                           176,835   171,737   434,893   330,557
 Additions to equipment costs (net)    25,939    23,728    54,476    51,488
 Additions to other intangibles        23,358     5,252    59,486    14,780
----------------------------------------------------------------------------
 Total of capital expenditures and
  equipment costs (net) per
  Consolidated Statements of Cash
  Flows                               226,132   200,717   548,855   396,825
 Decrease in working capital related
  to capital expenditures             (13,886)  (11,588) (102,173)  (21,715)
 Less: Proceeds on disposal of
  property, plant and equipment          (203)      (44)   (6,799)     (111)
 Less: Satellite equipment profit(1)     (702)     (745)   (1,357)   (1,450)
----------------------------------------------------------------------------
 Total capital expenditures and
  equipment costs (net)
  reported by segments                211,341   188,340   438,526   373,549
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) 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
                                   February 28, 2011
                ------------------------------------------------------------
                                    Satellite
                     Cable     DTH   Services     Media Wireless      Total
                         $       $          $         $        $          $
----------------------------------------------------------------------------
Segment assets   7,149,610 860,625    475,855 2,892,722  344,435 11,723,247
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Corporate assets                                                    824,549
Total assets                                                     12,547,796
                                    August 31, 2010
----------------------------------------------------------------------------
                                    Satellite
                     Cable     DTH   Services     Media Wireless      Total
                         $       $          $         $        $          $
----------------------------------------------------------------------------
Segment assets   7,111,526 844,502    483,404   739,125  287,626  9,466,183
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Corporate assets                                                    687,782
Total assets                                                     10,153,965
3. BUSINESS ACQUISITIONS
                                              February 28, 2011
                                  ------------------------------------------
                                                  Cumulative
                                                      equity
                                      Cash (1)        income          Total
                                            $              $              $
----------------------------------------------------------------------------
Television broadcasting
 businesses (i)                     1,208,112          2,180      1,210,292
Cable system (ii)                       3,464              -          3,464
----------------------------------------------------------------------------
                                    1,211,576          2,180      1,213,756
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The cash consideration includes $708,000 paid in 2010 for the Company's
    initial equity investment in CW Media and an option to acquire an
    additional equity interest. The acquisition-date fair value of the
    Company's initial equity investment approximated $549,000 compared to
    its carrying value of $558,500 under the equity method of accounting
    which resulted in an amount of approximately $9,500 related to
    transaction costs which are included in business acquisition,
    integration and restructuring expenses in the income statement.

(i) On May 3, 2010 the Company announced that it had entered into agreements to acquire 100% of the broadcasting businesses of Canwest Global Communications Corp. ("Canwest"). The acquisition includes all of the over-the-air channels, which were in creditor protection, and the specialty television business of Canwest, including Canwest's equity interest in CW Investments Co. ("CW Media"), the company that owns the portfolio of specialty channels acquired from Alliance Atlantis Communications Inc. in 2007. During the third quarter of 2010, the Company completed certain portions of the acquisition including acquiring a 49.9% equity interest, a 29.9% voting interest, and an option to acquire an additional 14.8% equity interest and 3.4% voting interest in CW Media. On October 22, 2010, the CRTC approved the transaction and the Company closed the purchase on October 27, 2010. Certain of the subsidiary specialty channels continue to have non-controlling interests. The purpose of the acquisition is to combine programming content with the Company's cable and satellite distribution network, and future wireless service, to create a vertically integrated entertainment and communications company.

The transaction has been accounted for using the acquisition method and results of operations have been included commencing October 27, 2010. These broadcasting businesses have contributed $369,328 of revenue and $122,247 of operating income before amortization for the period from October 27 to February 28, 2011. If the acquisition had closed on September 1, 2010, the Media revenue and operating income before amortization for the six month period would have been approximately $553,000 and $195,000, respectively. Net income is not determinable due to emergence of certain portions of the business from bankruptcy protection.

In the current year, acquisition related costs of $60,882 have been expensed and include amounts incurred to effect the transaction, such as professional fees paid to lawyers and consultants, as well as restructuring costs to integrate the new businesses and increase organizational effectiveness for future growth as well as senior leadership reorganization.

As part of the CRTC decision approving the transaction, the Company is required to contribute approximately $180,000 in new benefits to the Canadian broadcasting system over the next seven years. Most of this contribution will be used to create new programming on Canwest services, construct digital transmission towers and provide a satellite solution for over-the-air viewers whose local television stations do not convert to digital. The obligation has been recorded in the income statement at fair value, being the sum of the discounted future net cash flows using a 5.75% discount rate. In addition, the Company assumed the CRTC benefit obligation from Canwest's acquisition of Specialty services in 2007 which was a remaining commitment of approximately $95,000 on acquisition.

The purchase price allocation is preliminary pending finalization of valuation of the net assets acquired. A summary of net assets acquired and preliminary allocation is as follows:

                                                                          $
----------------------------------------------------------------------------
Net assets acquired at assigned fair values
Cash and cash equivalents                                            83,134
Receivables                                                         296,665
Other current assets (1)                                            236,705
Future income taxes                                                  26,882
Derivative instrument                                                15,765
Investments and other assets                                         15,958
Property, plant and equipment                                       140,617
Intangibles (2)                                                   1,567,259
Goodwill, not deductible for tax (3)                                671,617
----------------------------------------------------------------------------
                                                                  3,054,602
Current liabilities (1)                                            (285,303)
Current debt (4)                                                   (399,065)
Derivative instruments (4)                                          (81,975)
Non-current liabilities                                            (104,864)
Future income taxes                                                (315,756)
Long-term debt (5)                                                 (411,633)
Non-controlling interests (6)                                      (245,714)
----------------------------------------------------------------------------
                                                                  1,210,292
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Company acquired a remaining tax indemnity amount of $25,906 as part
    of the acquisition. The indemnity arose in 2007 as part of Canwest's
    acquisition of Specialty services where a wholly-owned subsidiary of CW
    Media entered into an agreement pursuant to which certain of the parties
    agreed to indemnify the company in respect of certain tax liabilities. A
    corresponding income tax liability was also assumed which according to
    the terms of the agreement, will be recovered from other parties to the
    agreement if and when the liabilities are settled.
(2) Intangibles includes broadcast licenses, brands, program rights, a
    trademark and software assets.
(3) Goodwill comprises the value of expected efficiencies from combining
    programming content and distribution businesses into vertically
    integrated operations, growth expectations and an assembled workforce.
(4) Current debt is comprised of a US $389,636 term loan. Shortly after 
    closing the acquisition, the Company repaid the term loan including
    breakage of the related currency swaps.
(5) Within 30 days of closing the transaction, a subsidiary of CW Media was
    required to make a change of control offer at a cash price equal to 101%
    of the obligations under the US $338,306 13.5% senior unsecured notes
    due 2015 issued by it in accordance with a related indenture dated as of
    July 3, 2008. As a result, on November 15, 2010, an offer was made to
    purchase all of the notes for an effective purchase price of US
    $1,145.58 for each US $1,000 face amount. An aggregate of US $51,620
    face amount was tendered under the offer and purchased by the Company
    during the second quarter for cancellation for an aggregate price of
    approximately US $59,135, including accrued interest. The change of
    control offer expired on December 15, 2010 and no further purchases are
    required.
(6) Non-controlling interests in certain of the subsidiary specialty
    channels were assumed as part of the acquisition and are recorded at
    their proportionate share of the fair value of identifiable net assets
    acquired.

(ii) During the first quarter, the Company purchased the assets of the Lake Broadcasting cable system serving approximately 1,000 basic subscribers in the interior of British Columbia. These assets were purchased as they compliment the Company's existing surrounding cable systems. The transaction has been accounted for using the acquisition method and results of operations have been included commencing October 1, 2010. These assets have contributed approximately $300 of revenue and $100 of operating income before amortization for the period October 1 to February 28, 2011. The purchase price may be impacted by settlement of final closing adjustments for working capital. A summary of net assets acquired is as follows:

                                                                          $
----------------------------------------------------------------------------
Identifiable net assets acquired at assigned fair values
Property, plant and equipment                                           584
Broadcast rights                                                      2,916
----------------------------------------------------------------------------
                                                                      3,500
Working capital deficiency                                              (36)
----------------------------------------------------------------------------
                                                                      3,464
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4. LONG-TERM DEBT
                                     February 28, 2011
                                  -----------------------
                                                    Adjustment
                                                           for
                                                       finance    Long-term
                                       Long-term         costs         debt
                           Effective     debt at      and fair    repayable
                            interest   amortized         value           at
                               rates     cost (1) adjustment(1)    maturity
                                   %           $             $            $
----------------------------------------------------------------------------
Corporate
Senior notes-
 Bank loans                 Variable      75,000             -       75,000
 Cdn $600,000 6.50% due 
  June 2, 2014                  6.56     595,555         4,445      600,000
 Cdn $400,000 5.70% due 
  March 2, 2017                 5.72     396,377         3,623      400,000
 Cdn $450,000 6.10% due
  November 16, 2012             6.11     448,247         1,753      450,000
 Cdn $300,000 6.15% due 
  May 9, 2016                   6.34     293,507         6,493      300,000
 Cdn $1,250,000 5.65% due
  October 1, 2019               5.69   1,241,077         8,923    1,250,000
 Cdn $1,450,000 6.75% due
  November 9, 2039 (3)          6.89   1,415,638        34,362    1,450,000
 Cdn $350,000 7.50% due
  November 20, 2013             7.50     347,534         2,466      350,000
 Cdn $500,000 5.50% due
  December 7, 2020 (4)          5.55     495,191         4,809      500,000
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                                       5,308,126        66,874    5,375,000
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Other subsidiaries and
 entities
Burrard Landing Lot 2 
 Holdings Partnership           6.31      20,676            74       20,750
CW Media Holdings Inc. 13.50%
 US senior unsecured notes 
 due August 15, 2015 (2)        8.56     322,854       (48,595)     274,259
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Total consolidated debt                5,651,656        18,353    5,670,009
Less current portion (5)                     575            19          594
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                                       5,651,081        18,334    5,669,415
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                                             August 31, 2010
                                          -----------------------
                                    Long-term                     Long-term
                                      debt at     Adjustment           debt
                                    amortized    for finance      repayable
                                      cost (1)      costs (1)   at maturity
                                            $              $              $
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Corporate
Senior notes-
 Bank loans                                 -              -              -
 Cdn $600,000 6.50% due 
  June 2, 2014                        594,941          5,059        600,000
 Cdn $400,000 5.70% due 
  March 2, 2017                       396,124          3,876        400,000
 Cdn $450,000 6.10% due
  November 16, 2012                   447,749          2,251        450,000
 Cdn $300,000 6.15% due 
  May 9, 2016                         292,978          7,022        300,000
 Cdn $1,250,000 5.65% due
  October 1, 2019                   1,240,673          9,327      1,250,000
 Cdn $1,450,000 6.75% due
  November 9, 2039 (3)                641,684          8,316        650,000
 Cdn $350,000 7.50% due
  November 20, 2013                   347,129          2,871        350,000
 Cdn $500,000 5.50% due
  December 7, 2020 (4)                      -              -              -
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                                    3,961,278         38,722      4,000,000
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Other subsidiaries and
 entities
Burrard Landing Lot 2 Holdings
 Partnership                           20,950             83         21,033
CW Media Holdings Inc. 13.50%
 US senior unsecured notes due
 August 15, 2015 (2)                        -              -              -
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Total consolidated debt             3,982,228         38,805      4,021,033
Less current portion (5)                  557             19            576
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                                    3,981,671         38,786      4,020,457
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(1) Long-term debt, excluding bank loans, is presented net of unamortized
    discounts, finance costs and bond forward proceeds of $66,948 (August 
    31, 2010 - $38,805) and a fair value adjustment of $48,595 (US $50,026)
    in respect of the US senior unsecured notes assumed on the acquisition
    of CW Media.
(2) The US $338,306 senior unsecured notes, which were assumed on 
    acquisition of the Canwest broadcasting business, are translated at 
    the period end foreign exchange rate. During the second quarter, US
    $51,620 face amount was tendered under a change of control offer and 
    purchased by the Company for cancellation (see note 3) which resulted
    in a gain of $9,981. The gain resulted from recognizing the remaining
    unamortized acquisition date fair value adjustment of $10,545 in respect
    of the US $51,620 face amount net of the 1% repurchase premium of $564.
    After giving effect to the aforementioned repurchase, US $260,380 face
    amount remains outstanding. CW Media Holdings Inc. originally issued US
    $312,000 senior unsecured notes on July 3, 2008 at 13.5% per annum,
    compounded semi-annually. For periods up to August 15, 2011 (the "cash
    interest date"), interest is accrued, however is not payable until
    maturity unless the Company elects to pay interest in cash with respect
    to any period before the cash interest date. At February 28, 2011 US
    $21,953 of accrued interest remains outstanding and included in the
    principal debt balance with respect to the period of July 3, 2008 to
    February 15, 2009. Interest for all periods subsequent to February 15,
    2009 has been paid in cash. After August 15, 2011, interest is payable
    in cash commencing February 15, 2012. The senior unsecured notes have a
    variable prepayment option at a premium of 106.75 in 2011 which 
    declines on a straight-line basis to par in 2013. The prepayment option
    represents an embedded derivative that is accounted for separately at
    fair value.
(3) On each of December 7, 2010 and February 17, 2011, the Company issued an
    additional $400,000 under the reopened 6.75% senior unsecured notes due
    2039. The effective interest rate on the aggregate $1,450,000 senior
    notes is 6.89% due to discounts on the issuances.
(4) On December 7, 2010, the Company issued $500,000 senior notes at a rate
    of 5.50% due December 7, 2020. The effective rate is 5.55% due to the
    discount on the issuance. The senior notes are unsecured obligations
    that rank equally and ratably with all existing and future senior
    unsecured indebtedness. The notes are redeemable at the Company's option
    at any time, in whole or in part, prior to maturity at 100% of the
    principal plus a make-whole premium. In conjunction with the senior
    notes issuances in December 2010, the unsecured $500,000 revolving
    credit facility was cancelled.
(5) Current portion of long-term debt is the amount due within one year on
    the Partnership's mortgage bonds.
5. SHARE CAPITAL
Issued and outstanding
Changes in Class A Share and Class B Non-Voting Share capital during the six
months ended February 28, 2011 are as follows:
                                                                    Class B
                                   Class A Shares         Non-Voting Shares
                            ------------------------------------------------
                                   Number       $        Number           $
----------------------------------------------------------------------------
August 31, 2010                22,520,064   2,468   410,622,001   2,248,030
Issued upon stock option 
 plan exercises                         -       -     1,430,629      26,391
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                               22,520,064   2,468   412,052,630   2,274,421
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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. Options granted up to February 28, 2011 vest evenly on the anniversary dates from the original grant at either 25% per year over four years or 20% per year over five years. 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 the plan may not exceed 52,000,000. To date 15,535,214 Class B Non-Voting Shares have been issued under the plan. During the six months ended February 28, 2011, 1,430,629 options were exercised for $24,223.

The changes in options for the six months ended February 28, 2011 are as
follows:
                                                                   Weighted
                                                                    average
                                                                   exercise
                                                                      price
                                                      Number              $
----------------------------------------------------------------------------
Outstanding, beginning of period                  23,993,150          20.48
Granted                                            2,841,000          20.90
Forfeited                                         (1,075,000)         20.68
Exercised                                         (1,430,629)         16.93
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Outstanding, end of period                        24,328,521          20.73
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The following table summarizes information about the options outstanding at
February 28, 2011:
                                  Weighted
                                   average  Weighted               Weighted
                                 remaining   average                average
                       Number  contractual  exercise       Number  exercise
Range of prices   outstanding         life     price  exercisable     price
----------------------------------------------------------------------------
$ 8.69                 20,000         2.64    $ 8.69       20,000    $ 8.69
$ 14.85 - $22.27   16,510,271         7.39    $18.97    6,958,271    $17.78
$ 22.28 - $26.20    7,798,250         6.52    $24.48    5,994,125    $24.48
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The weighted average estimated fair value at the date of the grant for common share options granted was $3.13 per option (2010 - $3.31 per option) and $3.16 per option (2010 - $3.13 per option) for the three and six months ended, 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 ending   Six months ending
                                            February 28,        February 28,
                                   -----------------------------------------
                                         2011      2010      2011      2010
----------------------------------------------------------------------------
Dividend yield                           4.35%     4.12%     4.31%     4.29%
Risk-free interest rate                  2.22%     2.36%     2.22%     2.38%
Expected life of options              5 years   5 years   5 years   5 years
Expected volatility factor of the
 future expected market price of
 Class B Non-Voting Shares               25.8%     26.4%     25.8%     26.5%
----------------------------------------------------------------------------
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Contributed surplus
The changes in contributed surplus are as follows:
                                                           Six months ended
                                                          February 28, 2011
                                                                          $
----------------------------------------------------------------------------
Balance, beginning of period                                         53,330
Stock-based compensation                                              9,606
Stock options exercised                                              (2,168)
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Balance, end of period                                               60,768
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6. EARNINGS PER SHARE
Earnings per share calculations are as follows:
                                    Three months ending   Six months ending
                                            February 28         February 28,
                                         2011      2010      2011      2010
----------------------------------------------------------------------------
Numerator for basic and diluted
 earnings per share ($)
Net income attributable to common
 shareholders                         161,490   138,712   178,132   252,941
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Denominator (thousands of shares)
Weighted average number of Class A
 Shares and Class B Non-Voting
 Shares for basic earnings per share  434,425   432,960   434,107   432,733
Effect of dilutive securities           1,039     1,415     1,223     1,333
----------------------------------------------------------------------------
Weighted average number of Class A
 Shares and Class B Non-Voting
 Shares for diluted earnings per
 share                                435,464   434,375   435,330   434,066
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share ($)
Basic and diluted                        0.37      0.32      0.41      0.58
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7. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
                                       Amount   Income taxes            Net
                                            $              $              $
----------------------------------------------------------------------------
Change in unrealized fair value
 of derivatives designated as
 cash flow hedges                     (15,401)         2,849        (12,552)
Adjustment for hedged items
 recognized in the period               1,174           (312)           862
Unrealized gain on
 available-for-sale investment             61             (8)            53
Unrealized foreign exchange
 loss on translation of a
 self-sustaining foreign
 operation                                 (3)             -             (3)
----------------------------------------------------------------------------
                                      (14,169)         2,529        (11,640)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Components of other comprehensive income (loss) and the related income tax
effects for the three months ended February 28, 2011 are as follows:
                                       Amount   Income taxes            Net
                                            $              $              $
----------------------------------------------------------------------------
Change in unrealized fair value
 of derivatives designated as
 cash flow hedges                      (5,855)         1,501         (4,354)
Adjustment for hedged items
 recognized in the period                 900           (247)           653
Unrealized foreign exchange
 loss on translation of a
 self-sustaining foreign
 operation                                 (2)             -             (2)
----------------------------------------------------------------------------
                                       (4,957)         1,254         (3,703)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Components of other comprehensive income (loss) and the related income tax
effects for the six months ended February 28, 2010 are as follows:
                                       Amount   Income taxes            Net
                                            $              $              $
----------------------------------------------------------------------------
Change in unrealized fair value
 of derivatives designated as
 cash flow hedges                     (62,120)        10,487        (51,633)
Adjustment for hedged items
 recognized in the period              15,284         (4,371)        10,913
Reclassification of foreign
 exchange loss on hedging
 derivatives to income to offset
 foreign exchange gain on US
 denominated debt                      40,505         (5,565)        34,940
Reclassification of remaining
 losses on hedging derivatives
 to income upon early
 redemption of hedged US
 denominated debt                      50,121         (7,463)        42,658
Unrealized gain on
 available-for-sale investment            333            (43)           290
Unrealized foreign exchange
 loss on translation of a
 self-sustaining foreign
 operation                                 (1)             -             (1)
----------------------------------------------------------------------------
                                       44,122         (6,955)        37,167
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Components of other comprehensive income (loss) and the related income tax
effects for the three months ended February 28, 2010 are as follows:
                                       Amount   Income taxes            Net
                                            $              $              $
----------------------------------------------------------------------------
Change in unrealized fair value
 of derivatives designated as
 cash flow hedges                        (300)           102           (198)
Adjustment for hedged items
 recognized in the period               2,088           (619)         1,469
Unrealized loss on
 available-for-sale investment           (162)            22           (140)
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                                        1,626           (495)         1,131
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----------------------------------------------------------------------------
Accumulated other comprehensive income (loss) is comprised of the following:
                                                 February 28,     August 31,
                                                        2011           2010
                                                           $              $
----------------------------------------------------------------------------
Unrealized foreign exchange gain on
 translation of a self-sustaining
 foreign operation                                       346            349
Fair value of derivatives                             (3,063)         8,627
Unrealized gain on available-for-sale
 investment                                               53              -
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                                                      (2,664)         8,976
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8. 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    Six months ended
                                            February 28,        February 28,
                                    ----------------------------------------
                                         2011      2010      2011      2010
                                            $         $         $         $
----------------------------------------------------------------------------
Net income                            167,299   138,712   187,631   252,941
Adjustments to reconcile net income
 to funds flow from operations:
 Amortization
  Deferred IRU revenue                 (3,136)   (3,136)   (6,273)   (6,273)
  Deferred equipment revenue          (25,715)  (30,482)  (53,033)  (61,743)
  Deferred equipment costs             49,892    58,140   101,998   117,649
  Deferred charges                        256       256       512       512
  Property, plant and equipment       157,866   131,741   306,695   256,380
  Other intangibles                    12,068     8,843    22,074    17,935
  Financing costs - long-term debt      1,089       952     2,109     2,053
 Program rights                        28,992         -    42,576         -
 Future income tax expense
  (recovery)                           (1,291)   46,584   (35,242)  (27,047)
 Equity income on investees              (209)        -   (13,834)        -
 Debt retirement costs                      -         -         -    81,585
 Gain on repurchase of debt (note 4)   (9,981)             (9,981)
 CRTC benefit obligation (note 3)           -         -   139,098         -
 CRTC benefit obligation funding       (4,718)        -    (7,026)        -
 Business acquisition, integration
  and restructuring expenses            1,100         -    37,196         -
 Stock-based compensation               3,912     4,347     8,086     8,767
 Defined benefit pension plan           7,645     6,968    16,658    13,937
 Loss on derivative instruments        21,353       864    22,764    45,296
 Realized loss on settlement of
  financial instruments                (7,822)   (6,675)  (13,270)   (6,675)
 Payments on cross-currency
  agreements (note 3)                       -         -   (86,109)        -
 Foreign exchange gain on unhedged
  long-term debt                      (19,267)        -   (22,585)        -
 Accretion of long-term liabilities     3,880       640     5,813       853
 Other                                   (256)      452     1,480       988
----------------------------------------------------------------------------
Funds flow from operations            382,957   358,206   647,337   697,158
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(ii) Changes in non-cash working capital balances related to operations
include the following:
                                     Three months ended    Six months ended
                                            February 28,        February 28,
                                    ----------------------------------------
                                         2011      2010      2011      2010
                                            $         $         $         $
----------------------------------------------------------------------------
Accounts receivable                    47,708   (11,835)    9,730   (30,401)
Prepaids and other                     (7,083)      642   (16,775)     (608)
Accounts payable and accrued
 liabilities                          (82,422)   28,371   (58,430)  (49,387)
Income taxes payable                   (3,271)    7,581  (187,278)   94,883
Unearned revenue                       (3,099)   (3,377)    2,093     1,502
----------------------------------------------------------------------------
                                      (48,167)   21,382  (250,660)   15,989
----------------------------------------------------------------------------
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(iii) Interest and income taxes paid and classified as operating activities
are as follows:
                                     Three months ended    Six months ended
                                            February 28,        February 28,
                                    ----------------------------------------
                                         2011      2010      2011      2010
                                            $         $         $         $
----------------------------------------------------------------------------
Interest                               42,139    19,473   148,675   114,520
Income taxes                           59,285     3,273   296,667     3,328
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(iv) Non-cash transaction:
The Consolidated Statements of Cash Flows exclude the following non-cash
transaction:
                                               Six months ended February 28,
                                                        2011           2010
                                                           $              $
----------------------------------------------------------------------------
Issuance of Class B Non-Voting Shares on a
 cable system acquisition                                  -        120,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------

9. OTHER LIABILITIES

Other current liability is the obligation which arose in fiscal 2010 with respect to the principal components of the US $300,000 amended cross-currency interest rate agreements. Other long-term liabilities include the long-term portion of the Company's employee benefit plans of $172,951, the non-current portion of CRTC benefit obligations, including the amount assumed on acquisition, of $174,078 and other liabilities totaling $21,551. The total benefit costs expensed under the Company's defined benefit pension plans were $10,632 (2010 - $7,330) and $20,495 (2010 - $14,661) for the three and six months ended February 28, 2011, respectively.

10. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

Certain of the comparative figures have been reclassified to conform to the presentation adopted in the current year.

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