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

Shaw Communications Inc.

June 29, 2011 08:30 ET

Shaw Announces Third Quarter Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - June 29, 2011) - Shaw Communications Inc. (TSX:SJR.B) (NYSE:SJR) announced results for the third quarter ended May 31, 2011. Consolidated revenue for the quarter and year-to-date of $1.28 billion and $3.56 billion, respectively, was up 36% and 28% over the comparable periods last year. Total operating income before amortization(1) of $580 million and $1.55 billion, respectively, improved 33% and 16% over the same periods last year.

Free cash flow(1) for the three and nine month periods was $242 million and $554 million, respectively, compared to $151 million and $446 million for the comparable periods last year. The current quarter increased over the comparable period primarily due to the addition of Shaw Media and higher free cash flow from the Cable division. The current nine month period included free cash flow from Shaw Media, for the period October 27 to May 31, partially reduced by the one-time CRTC Part II fee recovery last year.

Chief Executive Officer Brad Shaw said, "Our third quarter financial results reflect a marked improvement over the second quarter and include a partial quarter of cost savings that resulted from the actions we undertook to streamline our organizational structure. Shaw continues to be one of North America's most successful cable operators and we are committed to delivering value to our shareholders."

Mr. Shaw continued "We remain focused on continuous innovation and product leadership to enhance the customer experience. During the quarter we increased internet speeds, upgrading all of our Extreme customers from 15 Mbps to 25 Mbps, and after consultations with our customers, announced new packaging and pricing of our Internet products providing customers with industry leading performance, choice, and greater value. We also launched the new Shaw Gateway television product, providing the next generation in television viewing with advanced features and home networking capability, bringing together the power of broadband and high-definition technology that will be the centre of a connected home."

The new Internet packages will be available in two phases with the second phase tied to a major upgrade of the network scheduled over the next 16 months. Phase 1 of the new offerings, available currently, allow for download speeds of up to 100Mbps and increased data limits including unlimited options. The second phase will allow higher download and upload speeds of 250Mbps and 15Mbps respectively.

During the quarter the Shaw Plan Personalizer ("SPP") was also launched, enabling customers to customize their core entertainment service needs by building their own Television, Internet and optional Personal Home Phone package at value pricing.

Net income of $203 million or $0.45 per share for the quarter ended May 31, 2011 compared to $158 million or $0.37 per share for the same period last year. Net income for the first nine months of the year was $390 million or $0.86 per share compared to $411 million or $0.95 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 $90 million. The prior nine 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 nine month periods ended May 31, 2011 would have been $223 million and $541 million respectively, compared to $162 million and $481 million in the same periods last year.

Revenue in the Cable division was up 5% and 6% for the three and nine month periods, respectively, to $785 million and $2.31 billion. The improvement was primarily driven by rate increases and growth. Operating income before amortization for the quarter of $388 million was up 7% 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 5%.

Revenue in the Satellite division was $210 million and $620 million for the quarter and year-to-date periods, respectively, up 3% over each of the comparable periods. Operating income before amortization for the current three month period of $76 million improved 4% over the same period last year. Excluding the one-time Part II fee recovery, operating income before amortization for the year-to-date period of $216 million improved 2% over the same period last year.

Quarterly revenue and operating income before amortization in the Media division was $312 million and $117 million, respectively. Revenue and operating income before amortization for the period from October 27, 2010 to May 31, 2011 was $681 million and $240 million, respectively. For informational purposes, on a comparative basis to last year, Media revenues for each of the three and full nine 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 17% and 19%, respectively.

On May 31, 2011 Shaw completed an offering of 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares resulting in gross proceeds of $300 million. The net proceeds will be used for working capital and general corporate purposes.

During the quarter approximately 550 employee positions were eliminated, including 150 at the management level. The restructuring costs were $29 million and the annual savings, including other expense reductions, are in excess of $50 million.

"Pricing consistent with product value and timely initiatives undertaken during the quarter to drive efficiencies through focused cost containment and reductions have us on track to achieve our financial guidance, including consolidated fiscal 2011 free cash flow of approximately $600 million." said Mr. Shaw.

In closing Mr. Shaw emphasized, "Shaw's strong management team and staff across the Company continue to execute on our strategy to maximize shareholder value through leveraging our network infrastructure, and offering our customers leading edge products and services that provide value to both Shaw and the customer. Our strategy has served our stakeholders well over the years and continues to drive us forward as a successful operator in this evolving and highly competitive landscape. "

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 18 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 (Symbol: TSX - SJR.B, NYSE - SJR).

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

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

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

MANAGEMENT'S DISCUSSION AND ANALYSIS

MAY 31, 2011

June 29, 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

THIRD QUARTER ENDING MAY 31, 2011

Selected Financial Highlights

                   Three months ended May 31,     Nine months ended May 31,
                  ----------------------------------------------------------
                                       Change                        Change
                       2011     2010        %       2011       2010       %
----------------------------------------------------------------------------
($000's Cdn
 except per share
 amounts)
Operations:
 Revenue          1,284,688  943,632     36.1  3,560,204  2,778,708    28.1
 Operating income
 before
 amortization (1)   579,575  435,822     33.0  1,547,453  1,335,599    15.9
 Operating margin
  (1) (2) (3)          45.1%    46.2%    (1.1)      43.5%      45.4%   (1.9)
 Funds flow from
  operations (4)    430,305  350,810     22.7  1,077,642  1,047,968     2.8
 Net income         202,670  158,216     28.1    390,301    411,157    (5.1)
Per share data:
 Earnings per
  share - basic and
  diluted             $0.45    $0.37               $0.86      $0.95
 Weighted average
  participating
  shares
  outstanding
  during period
  (000's)           434,816  432,323             434,346    432,595
----------------------------------------------------------------------------
(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 nine months ended May 31, 2010. Including the one-time
    CRTC Part II recovery, the operating margin would be 48.1%.
(3) Operating margin has declined in the three and nine 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

                                                    Growth
                                  ------------------------------------------
                                       Three months             Nine months
                            Total      ended May 31,           ended May 31,
----------------------------------------------------------------------------
                     May 31, 2011    2011      2010           2011     2010
----------------------------------------------------------------------------
Subscriber
 statistics:
 Basic cable
  customers             2,299,527 (13,577)    2,322        (34,781)    (149)
 Digital customers      1,767,740  19,202    87,092        116,821  273,895
 Internet customers
  (including pending
  installs)             1,859,555  11,165    25,661         40,689   88,638
 Digital phone lines
  (including pending
  installs)             1,210,064  31,404    66,123        113,758  182,506
 DTH customers            908,077   1,644     1,856          2,281    4,024
----------------------------------------------------------------------------

Additional Highlights

- Revenue of $1.28 billion and $3.56 billion for the three and nine month periods improved 36.1% and 28.1% over the comparable periods last year.

- Free cash flow for the quarter and year-to-date periods was $242.0 million and $554.0 million, respectively, compared to $150.9 million and $445.8 million for the same periods last year.

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

- In May 2011 Shaw commenced to issue from treasury Class B Shares distributed under its Dividend Reinvestment Plan ("DRIP") and is also offering a 2% discount under the DRIP.

- On May 31, 2011 Shaw completed an offering of 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares resulting in gross proceeds of $300 million.

Consolidated Overview

Consolidated revenue of $1.28 billion and $3.56 billion for the three and nine month periods, respectively, improved 36.1% and 28.1% 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 nine month periods of $579.6 million and $1.55 billion, respectively, increased 33.0% and 15.9% 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 sales and marketing, and programming costs. Employee related costs were up modestly over the prior period benefitting from the restructuring initiatives completed midway through the current quarter. 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 $202.7 million and $390.3 million for the three and nine months ended May 31, 2011, respectively, compared to $158.2 million and $411.2 million for the same periods last year. Non-operating items affected net income in all periods. The current quarter included $29.4 million in restructuring expenses related to the cost savings initiatives undertaken. 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 $90.2 million. The prior year-to-date period included debt retirement costs and amounts related to financial instruments of $81.6 million and $47.3 million, respectively. Outlined below are further details on these and other operating and non-operating components of net income for each period.


                                Nine months ended
                                                   Operating net       Non-
($000's Cdn)                         May 31, 2011    of interest  operating
----------------------------------------------------------------------------
Operating income                          996,911
 Amortization of financing
 costs - long-term
 debt                                      (3,206)
 Interest expense - debt                 (243,643)
----------------------------------------------------------------------------
Operating income after interest           750,062        750,062          -
 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                  (90,243)             -    (90,243)
 Loss on derivative instruments           (25,780)             -    (25,780)
 Accretion of long-term
  liabilities                             (10,862)             -    (10,862)
 Foreign exchange gain on
  unhedged long-term
  debt                                     23,376              -     23,376
 Other gains                                6,878              -      6,878
----------------------------------------------------------------------------
Income (loss) before income
 taxes                                    524,314        750,062   (225,748)
 Current income tax expense
  (recovery)                              160,278        193,616    (33,338)
 Future income tax expense
  (recovery)                              (12,176)        15,051    (27,227)
----------------------------------------------------------------------------
Income (loss) before following            376,212        541,395   (165,183)
 Equity income (loss) on
  investees                                14,089              -     14,089
----------------------------------------------------------------------------
Net income (loss)                         390,301        541,395   (151,094)
----------------------------------------------------------------------------

                                Nine months ended
                                                   Operating net       Non-
($000's Cdn)                         May 31, 2010    of interest  operating
----------------------------------------------------------------------------
Operating income                          852,597
 Amortization of financing
  costs - long-term
  debt                                     (3,015)
 Interest expense - debt                 (185,507)
----------------------------------------------------------------------------
Operating income after interest           664,075        664,075          -
 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           (45,783)             -    (45,783)
 Accretion of long-term
  liabilities                              (1,497)             -     (1,497)
 Foreign exchange gain on
  unhedged long-term
  debt                                          -              -          -
 Other gains                                8,342              -      8,342
----------------------------------------------------------------------------
Income (loss) before income
 taxes                                    543,552        664,075   (120,523)
 Current income tax expense
  (recovery)                              127,332        157,005    (29,673)
 Future income tax expense
  (recovery)                                2,363         26,037    (23,674)
----------------------------------------------------------------------------
Income (loss) before following            413,857        481,033    (67,176)
 Equity income (loss) on
  investees                                (2,700)             -     (2,700)
----------------------------------------------------------------------------
Net income (loss)                         411,157        481,033    (69,876)
----------------------------------------------------------------------------


                                Three months ended
                                                    Operating net      Non-
($000's Cdn)                          May 31, 2011    of interest operating
----------------------------------------------------------------------------
Operating income                           401,006
 Amortization of financing
  costs - long-term
  debt                                      (1,097)
 Interest expense - debt                   (89,711)
----------------------------------------------------------------------------
Operating income after interest            310,198        310,198         -
 Gain on repayment of debt                       -              -         -
 Business acquisition,
  integration and
  restructuring expenses                   (29,361)             -   (29,361)
 Loss on derivative instruments             (3,016)             -    (3,016)
 Accretion of long-term
  liabilities                               (5,049)             -    (5,049)
 Foreign exchange gain on
  unhedged long-term
  debt                                         791              -       791
 Other gains (losses)                          346              -       346
----------------------------------------------------------------------------
Income (loss) before income
 taxes                                     273,909        310,198   (36,289)
 Current income tax expense
  (recovery)                                48,428         67,416   (18,988)
 Future income tax expense
  (recovery)                                23,066         19,435     3,631
----------------------------------------------------------------------------
Income (loss) before following             202,415        223,347   (20,932)
 Equity income on investees                    255              -       255
----------------------------------------------------------------------------
Net income (loss)                          202,670        223,347   (20,677)
----------------------------------------------------------------------------

                                Three months ended
                                                    Operating net      Non-
($000's Cdn)                          May 31, 2010    of interest operating
----------------------------------------------------------------------------
Operating income                           277,280
 Amortization of financing
  costs - long-term
  debt                                        (962)
 Interest expense - debt                   (61,797)
----------------------------------------------------------------------------
Operating income after interest            214,521        214,521         -
 Gain on repayment of debt                       -              -         -
 Business acquisition,
  integration and
  restructuring expenses                         -              -         -
 Loss on derivative instruments               (487)             -      (487)
 Accretion of long-term
  liabilities                                 (644)             -      (644)
 Foreign exchange gain on
  unhedged long-term
  debt                                           -              -         -
 Other gains (losses)                       (1,013)             -    (1,013)
----------------------------------------------------------------------------
Income (loss) before income
 taxes                                     212,377        214,521    (2,144)
 Current income tax expense
  (recovery)                                22,051         40,001   (17,950)
 Future income tax expense
  (recovery)                                29,410         13,000    16,410
----------------------------------------------------------------------------
Income (loss) before following             160,916        161,520      (604)
 Equity income on investees                 (2,700)             -    (2,700)
----------------------------------------------------------------------------
Net income (loss)                          158,216        161,520    (3,304)
----------------------------------------------------------------------------

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

                                       May 31, 2011 net income compared to:
                        ----------------------------------------------------
                                      Three months ended  Nine months ended
                        ----------------------------------------------------
                         February 28, 2011  May 31, 2010       May 31, 2010
----------------------------------------------------------------------------
(000's Cdn)

Increased operating
income before
 amortization                       85,051       143,753            211,854
Decreased (increased)
 amortization                       12,654       (20,162)           (67,731)
Increased interest
 expense                            (4,474)      (27,914)           (58,136)
Change in net other
 costs and revenue (1)             (41,583)      (31,190)           (88,436)
Increased income taxes             (16,277)      (20,033)           (18,407)
----------------------------------------------------------------------------
                                    35,371        44,454            (20,856)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Net other costs and revenue includes debt retirement costs, gain on
    repurchase of debt, 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 (loss) on investees as
    detailed in the unaudited interim Consolidated Statements of Income and
    Retained Earnings.

Basic earnings per share were $0.45 and $0.86 for the quarter and nine months, respectively compared to $0.37 and $0.95 in the same periods last year. The improvement in the quarter was primarily due to increased operating income before amortization of $143.8 million partially offset by higher net other costs and revenue of $31.2 million and increased interest, amortization and income taxes of $27.9 million, $20.2 million and $20.0 million, respectively. The change in net other costs and revenue was primarily due to restructuring costs in the current period. The year-to-date decrease was primarily due to higher net other costs and revenue of $88.4 million and increased amortization, interest and taxes of $67.7 million, $58.1 million and $18.4 million, respectively, partially offset by improved operating before amortization of $211.9 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 nine 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 $35.4 million compared to the second quarter of fiscal 2011 mainly due to improved operating income before amortization of $85.1 million and lower amortization of $12.7 million partially offset by higher other costs and revenue and income taxes of $41.6 million and $16.3 million, respectively. The change in net other costs and revenue was primarily due to restructuring costs in the current period.

Free cash flow for the quarter and year-to-date periods of $242.0 million and $554.0 million, respectively, compared to $150.9 million and $445.8 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 $132.4 million of free cash flow for the quarter compared to $112.8 million in the comparable period. The Satellite division achieved free cash flow of $41.0 million for the three month period compared to $38.1 million last year. The Media division generated $68.6 million of free cash flow for the quarter.

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 costs incurred in the quarter were $29.4 million and the annual savings is in excess of $50 million. The majority of the staff reductions were in the Cable division, representing approximately 5% of the division's employee workforce.

In May 2011 Shaw commenced to issue from treasury Class B Shares distributed under its DRIP and also started offering a 2% discount under the DRIP. Effective with the May 2011 dividend payment shareholders holding approximately 30% of the common shares outstanding were registered under the DRIP automatically reinvesting their dividends to increase their investment in the Company.

On May 31, 2011 Shaw completed an offering of 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares, Series A ("Series A Shares") resulting in gross proceeds of $300 million. The net proceeds will be used for working capital and general corporate purposes. The Series A Shares are listed on the Toronto Stock Exchange under the ticker symbol SJR.PR.A.

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  Nine months ended
                                                  May 31,            May 31,
----------------------------------------------------------------------------
                                           2011  2010 (2)     2011  2010 (2)
----------------------------------------------------------------------------
($000's Cdn)
Cable free cash flow (1)                132,410  112,773   319,163  327,697
Combined satellite free cash flow (1)    41,030   38,097   102,062  118,121
Media free cash flow (1)                 68,586        -   132,765        -
----------------------------------------------------------------------------
Free cash flow                          242,026  150,870   553,990  445,818
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 $843 for the three month period and $2,540
    for the nine month period.


CABLE
FINANCIAL HIGHLIGHTS

                  Three months ended May 31,      Nine months ended May 31,
----------------------------------------------------------------------------
                                      Change                         Change
                     2011   2010 (3)       %       2011    2010 (3)       %
----------------------------------------------------------------------------
($000's Cdn)
Revenue           784,671   746,322      5.1  2,311,905  2,189,505      5.6
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income
 before
 amortization (1) 387,751   363,096      6.8  1,099,316  1,097,821      0.1

Capital
 expenditures and
 equipment costs
 (net):
 New housing
  development      19,170    20,172     (5.0)    65,309     62,613      4.3
 Success based     43,060    51,150    (15.8)   148,741    159,652     (6.8)
 Upgrades and
  enhancement      61,786    59,034      4.7    185,869    184,018      1.0
 Replacement       10,266    15,838    (35.2)    33,021     42,148    (21.7)
 Buildings/other   17,660    25,305    (30.2)    53,000     52,911      0.2
----------------------------------------------------------------------------
Total as per
 Note 2 to the
 unaudited
 interim
 Consolidated
 Financial
 Statements       151,942   171,499    (11.4)   485,940    501,342     (3.1)
----------------------------------------------------------------------------
Free cash flow
 before the
 following        235,809   191,597     23.1    613,376    596,479      2.8
Less:
 Interest
  expense         (61,570)  (51,849)    18.7   (170,417)  (161,767)     5.3
 Cash taxes       (45,100)  (31,001)    45.5   (134,100)  (119,005)    12.7

Other
 adjustments:
Non-cash stock
 based
 compensation       3,271     4,026    (18.8)    10,304     11,990    (14.1)
----------------------------------------------------------------------------
Free cash flow
 (1)              132,410   112,773     17.4    319,163    327,697     (2.6)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Operating margin
 (1) (2)             49.4%     48.7%     0.7       47.6%      47.9%    (0.3)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 nine months ended May 31, 2010. Including the one-time
    CRTC Part II recovery, operating margin would be 50.1%.
(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 $1,111 and
    operating income before amortization and free cash flow have decreased
    by $843, for the nine month period revenue has increased by $3,533 and
    operating income before amortization and free cash flow have decreased
    by $2,540.

Operating Highlights

- Digital customers increased 19,202 during the quarter to 1,767,740. Shaw's Digital penetration of Basic is now 76.9%, up from 70.7% and 56.7% at August 31, 2010 and 2009, respectively.

- Digital Phone lines increased 31,404 during the three month period to 1,210,064 lines and Internet was up 11,165 to total 1,859,555 as at May 31, 2011. During the quarter Basic cable subscribers decreased 13,577.

Cable revenue for the three and nine month periods of $784.7 million and $2.31 billion improved 5.1% and 5.6%, 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 and lower Basic subscribers.

Operating income before amortization of $387.8 million for the quarter improved 6.8% over the same period last year. The year-to-date amount of $1.10 billion increased 4.8% over last year excluding the prior period one-time CRTC Part II fee recovery of $48.7 million. The revenue related growth in the quarter was partially reduced by higher programming costs, and marketing and sales related expenses. Employee related costs were up modestly over the comparable period reflecting the benefit of the restructuring initiatives completed midway through the current quarter. The year-to-date improvement was driven by the revenue related growth partially offset by employee related costs, higher programming, marketing and sales expenses. Both current 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 $15.3 million over the second quarter of fiscal 2011 primarily due to rate increases, lower promotional activity, customer growth in Internet and Digital Phone, partially offset by lower Basic subscribers. Operating income before amortization improved $24.0 million over this same period primarily due to the revenue related growth and lower employee related costs due to the restructuring initiatives undertaken in the quarter partially offset by higher marketing and sales costs.

Total capital investment of $151.9 million and $485.9 million for the quarter and year-to-date decreased $19.6 million and $15.4 million, respectively, over the comparable periods last year. Success based capital declined $8.1 million and $10.9 million over the comparable three and nine month periods mainly due to lower digital set top rental deployment. Year-to-date success based spend also benefitted from reduced purchasing of Digital Phone customer premise equipment mainly due to bulk purchasing done at the end of the prior year.

Investment in Upgrades and enhancement and Replacement categories combined decreased by $2.8 million and $7.3 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, node segmentation, and internet growth and capacity enhancements which was more than offset by lower spending in the current periods on Digital Phone infrastructure, back office monitoring equipment, and automotive.

Buildings and Other decreased $7.6 million compared to the three month period last year mainly due to reduced investment in various facilities projects as well as lower spend related to back office and customer support systems. The year-to-date spend was comparable to the prior year.

Spending in new housing development increased $2.7 million over the comparable nine month period last year mainly due to higher activity.

As at May 31, 2011 Shaw had 1,859,555 Internet customers which represents an 80.9% penetration of Basic. During the quarter Shaw announced new market leading internet packages in response to the Company's customer consultation sessions held earlier this year. The new packages provide higher download speeds including 100Mbps packaging, and increase data limits including unlimited options. As part of this new model of Internet services the Company announced a major upgrade to its network over the next 16 months which will allow even higher download and upload speeds of 250Mbps and 15Mbps respectively. The Company also implemented an automatic upgrade for all of its Extreme customers from 15 Mbps to 25Mbps.

During the quarter Shaw continued to grow its Digital customer base and Digital penetration of Basic at May 31, 2011 was 76.9%, up from 70.7% at August 31, 2010. Shaw now has approximately 875,000 HD capable customers who have access to over 120 HD channels and even greater choice through 1,200 HD titles through Shaw VOD.

As part of the new Internet offerings, Shaw is undergoing a major network upgrade in converting the television analog tiers to digital over the next 16 months. The network upgrade will significantly increase the Digital customer footprint and provide increased capacity for HD and On Demand programming. During the quarter the Company also launched the Shaw Gateway, the new standard in connected entertainment that combines the delivery of shared PVR, On Demand entertainment and home networking capability that will allow customers to share pictures and content from their computer onto their television.


Subscriber Statistics

                                                       May 31, 2011
                                        ------------------------------------
                                           Three months         Nine months
                                                  ended               ended
                     May 31, August 31,          Change              Change
                       2011     2010(1) Growth        %   Growth          %
----------------------------------------------------------------------------
CABLE:
Basic service:
Actual                        
                  2,299,527  2,334,308 (13,577)    (0.6) (34,781)      (1.5)
Penetration as
% of homes
 passed                59.7%      61.4%
Digital
 customers        1,767,740  1,650,919  19,202      1.1  116,821        7.1
----------------------------------------------------------------------------

INTERNET:
Connected and
 scheduled        1,859,555  1,818,866  11,165      0.6   40,689        2.2
Penetration as
 % of basic            80.9%      77.9%
Standalone
 Internet not
 included in
 basic cable        221,184    233,426   4,298      2.0  (12,242)      (5.2)

DIGITAL PHONE:
Number of
 lines (2)        1,210,064  1,096,306  31,404      2.7  113,758       10.4
----------------------------------------------------------------------------
(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 May 31,    Nine months ended May 31,
                   ---------------------------------------------------------
                                        Change                       Change
                      2011    2010 (5)       %     2011     2010 (5)      %
                   ---------------------------------------------------------
($000's Cdn)
Revenue
 DTH (Shaw Direct) 188,291    181,962      3.5  557,844    541,328      3.1
 Satellite Services 21,411     20,595      4.0   61,994     62,208     (0.3)
----------------------------------------------------------------------------
                   209,702    202,557      3.5  619,838    603,536      2.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income
 before
 amortization (1)
 DTH (Shaw Direct)  64,639     62,530      3.4  183,767    205,991    (10.8)
 Satellite Services 11,243     10,286      9.3   31,839     31,877     (0.1)
----------------------------------------------------------------------------
                    75,882     72,816      4.2  215,606    237,868     (9.4)

Capital
 expenditures and
 equipment costs
 (net):
 Success based (3)  14,573     16,989    (14.2)  54,747     57,372     (4.6)
Buildings and
 other               1,644      2,571    (36.1)   3,145      5,894    (46.6)
----------------------------------------------------------------------------
Total as per Note
 2 to the unaudited
 interim
 Consolidated
 Financial
 Statements         16,217     19,560    (17.1)  57,892     63,266     (8.5)
----------------------------------------------------------------------------
Free cash flow
 before the
 following          59,665     53,256     12.0  157,714    174,602     (9.7)
Less:
 Interest expense
  (2)               (6,563)    (6,563)       -  (19,390)   (19,688)    (1.5)
 Cash taxes        (12,316)    (9,000)    36.8  (37,316)   (38,000)    (1.8)

Other adjustments:
Non-cash stock
 option expense        244        404    (39.6)   1,054      1,207    (12.7)
----------------------------------------------------------------------------
Free cash flow (1)  41,030     38,097      7.7  102,062    118,121    (13.6)
----------------------------------------------------------------------------
Operating Margin
 (4)                  36.2%      35.9%     0.3     34.8%      35.0%    (0.2)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 nine months ended May 31, 2010. Including the one-time
    CRTC Part II fee recovery, operating margin would be 39.4%.
(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 increased by $4,136 and
    operating income before amortization and free cash flow have increased
    by $843, for the nine month period revenue has increased by $10,800 and
    operating income before amortization and free cash flow have increased
    by $2,540.

Operating Highlights

- During the quarter Shaw Direct added 1,644 customers and as at May 31, 2011 DTH customers total 908,077.

- Free cash flow for the quarter of $41.0 million compares to $38.1 million in the same period last year.

Revenue of $209.7 million and $619.8 million for the three and nine month periods, respectively, was up 3.5% and 2.7% 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 $75.9 million was up 4.2% over the same quarter last year. The revenue related growth was partially 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 2.0%.

Compared to the second quarter, operating income before amortization improved $5.7 million primarily due to customer rate increases and growth.

Total capital investment of $16.2 million for the quarter declined modestly compared to $19.6 million in the same period last year. The year-to-date investment of $57.9 million decreased over the prior year spend of $63.3 million. Buildings and other was lower mainly due to expenditures in the prior year related to call centre expansion and network equipment. Success based spend was lower mainly due to reduced supplier pricing on new models of customer premise equipment.

During the quarter, development work was completed on a new entry level HD receiver that will be available in July 2011. With this addition, all new receivers will be HD MPEG-4 capable and with current technology, increased satellite capacity will be available. Also, in the third quarter, work was completed on the development of new outdoor equipment which will be capable of receiving signals from three satellites, including Anik G1 which is expected to be available in November 2012, increasing Shaw Direct's satellite capacity by 30%. The new outdoor equipment will start to be deployed in customer satellite dishes during the fourth quarter.


Subscriber Statistics

                                                      May 31, 2011
                                        ------------------------------------
                                             Three months       Nine months
                                                    ended             ended
                                        ------------------------------------
                    May 31,  August 31,            Change            Change
                      2011        2010    Growth        %    Growth       %
----------------------------------------------------------------------------

DTH customers (1)  908,077     905,796     1,644      0.2     2,281     0.3
----------------------------------------------------------------------------

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


MEDIA
FINANCIAL HIGHLIGHTS

                                    Three months ended  October 27, 2010 to
                                          May 31, 2011      May 31, 2011 (3)
                                   -----------------------------------------

($000's Cdn)
Revenue                                        312,131              681,459
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income before
 amortization (1)                              117,430              239,677

Capital expenditures:
 Broadcast and transmission                      4,110                7,271
 Buildings/other                                 2,993                7,235
----------------------------------------------------------------------------
Total as per Note 2 to the
 unaudited interim Consolidated
 Financial Statements                            7,103               14,506
----------------------------------------------------------------------------
Free cash flow before the following            110,327              225,171
Less:
 Interest expense (2)                          (15,774)             (37,595)
 Cash taxes                                    (10,000)             (22,200)

 Other adjustments:
 Non-cash stock based compensation                 302                  545
 CRTC benefit obligation funding                (8,317)             (15,343)
 Non-controlling interests                      (7,952)             (17,813)
----------------------------------------------------------------------------
Free cash flow (1)                              68,586              132,765
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Operating margin                                  37.6%                35.2%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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.
(3) On October 27, 2010, the Company completed the acquisition of 100% of
    the broadcasting businesses of Canwest Global Communications Corp
    ("Canwest"). The acquisition included all of the over-the-air channels
    and the specialty television business, including Canwest's equity
    interest in CW Investments Co. ("CW Media").

Operating Highlights

Revenue in the Media division for the third quarter was $312.1 million and operating income before amortization was $117.4 million. Advertising revenue in the quarter was driven by strength in the automotive and entertainment equipment sectors and also benefitted from the federal election. For informational purposes, on a comparative basis to the third quarter last year, Media revenues were up approximately 8% and operating income before amortization improved 19%. This was fuelled by strong advertiser demand as a result of the general improvement in the advertising market and solid audience levels across Global and Media's Specialty channels.

At the recent US network screenings in LA, Shaw Media secured key elements of the program schedules for fiscal 2012. The Global fall schedule includes established, returning favorites including Survivor and Glee plus several new dramas. The Specialty schedules include over 35 brand new series as well as new seasons of key programming including Top Chef Canada and Real Housewives. During the quarter Shaw Media launched 'Shaw360', a new offering which enables advertisers to place advertisements on its top programs across platforms, including linear television, online streaming, mobile applications and Video-On-Demand.

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 CRTC mandated markets by August 31, 2011, as well as upgrades of aging production equipment. The integration of various back-office infrastructure has progressed during the quarter and is expected to be fully transitioned over the next 3 months.


WIRELESS
FINANCIAL HIGHLIGHTS

                                      Three months ended  Nine Months ended
                                                  May 31             May 31,
($000's Cdn)                             2011       2010    2011       2010
                                     ---------------------------------------
Operating expenditures                  1,488         90   7,146         90
Interest expense (1)                    5,482      3,055  15,269      3,055
Capital expenditures (as per Note 2
 to the unaudited interim
 Consolidated Financial Statements)    15,394      9,178  70,844      9,178
----------------------------------------------------------------------------
Total expenditures on Wireless
 infrastructure build                  22,364     12,323  93,259     12,323
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 slowed its Wireless infrastructure build to fully review this strategic initiative. Capital investment in the quarter and year-to-date periods includes equipment, site acquisition and physical construction of cell sites.


OTHER INCOME AND EXPENSE ITEMS

Amortization

                      Three months ended May 31,   Nine months ended May 31,
                       -----------------------------------------------------
                                         Change                      Change
                        2011      2010        %     2011      2010        %
----------------------------------------------------------------------------
($000's Cdn)
Amortization revenue
 (expense) -
 Deferred IRU
  revenue               3,137     3,137       -     9,410     9,410       -
 Deferred equipment
  revenue              26,340    29,865   (11.8)   79,373    91,608   (13.4)
 Deferred equipment
  costs               (50,758)  (56,497)  (10.2) (152,756) (174,146)  (12.3)
 Deferred charges        (256)     (256)      -      (768)     (768)      -
 Property, plant and
  equipment          (146,045) (128,348)   13.8  (452,740) (384,728)   17.7
 Other intangibles    (10,987)   (6,443)   70.5   (33,061)  (24,378)   35.6
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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 and the effect of Shaw Media in the current year exceeded the impact of assets that became fully depreciated.


Amortization of financing costs and Interest expense

                                Three months ended        Nine months ended 
                                            May 31,                  May 31,
                             -----------------------------------------------
                                            Change                   Change
                               2011   2010       %    2011    2010        %
----------------------------------------------------------------------------
($000's Cdn)
Amortization of financing
 costs - long-term debt       1,097    962    14.0    3,206   3,015     6.3
Interest expense             89,711 61,797    45.2  243,643 185,507    31.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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 5.65% 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 $29.4 million and $90.2 million for the three and nine months ended May 31, 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 of Shaw. 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.

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 $3.0 million and $25.8 million for the three and nine months ended May 31, 2011, respectively, compared to $0.5 million and $45.8 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 $0.8 million and $23.4 million was recorded for the three and nine months ended May 31, 2011, respectively.

Other gains (losses)

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 increased over the same periods last year due to fluctuations in net income before income taxes and the impact of 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 (loss) 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. The $2.7 million loss in the prior year was in respect of the 49.9% equity interest in CW Media for the period May 3 to May 31, 2010. The loss was comprised of approximately $7.5 million of operating income before amortization offset by interest expense of $2.7 million and other costs of $7.6 million, the majority of which were fair value adjustments on derivative instruments and foreign exchange losses on US denominated long-term debt.

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.

FINANCIAL POSITION

Total assets at May 31, 2011 were $12.8 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 $941.3 million primarily due to increases in cash and cash equivalents of $416.2 million, accounts receivable of $332.1 million, inventories of $25.9 million and prepaids and other of $234.7 million, all of which were partially offset by a decrease in derivative instruments of $66.7 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 and $300.0 million preferred shares, exceeded the cash outlay on capital expenditures and the Canwest broadcasting business acquisition. Accounts receivable and prepaids and other were up primarily as a result of the Media acquisition while inventories were higher due to increased equipment purchases. Derivative instruments decreased due to settlement of the contracts.

The derivative instrument of $6.8 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 $723.9 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 $174.1 million and $93.7 million, respectively as current year capital investment and amounts acquired on the Media acquisition exceeded amortization.

Deferred charges increased by $15.7 million due to higher deferred equipment costs and prepaid maintenance and support contracts.

Broadcast rights and licenses, and goodwill increased $1.4 billion and $641.7 million, respectively, due to the acquisition of the Canwest broadcasting businesses.

Program rights and advances of $71.4 million arose on the acquisition of the Canwest broadcasting businesses.

Current liabilities were up $46.9 million due to increases in accounts payable of $85.5 million and other liability of $160.6 million partially offset by decreases in income taxes payable of $151.7 million and derivative instruments of $54.3 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 decreased due to the end of swap notional exchange relating to an outstanding cross-currency interest rate agreement partially offset by 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 $1.6 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 which were subsequently repaid primarily 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 $60.1 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 $244.4 million due to the Media acquisition partially offset by current year tax recovery.

Share capital increased $338.1 million due to the issuance of 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares, Series A ("preferred shares") for net proceeds of $291.1 million as well as issuance of 2,395,035 Class B Non-Voting Shares under the Company's option plan and Dividend Reinvestment Plan ("DRIP") for $44.8 million. As of June 15, 2011, share capital is as reported at May 31, 2011 with the exception of the issuance of 111,469 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 $554.0 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, net proceeds of $291.1 million from its preferred share issuance, proceeds on issuance of Class B Non-Voting Shares of $32.4 million and other net items of $38.3 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 of approximately $435.8 million, pay common share dividends of $281.4 million, fund $93.3 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 $333.1 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 issued $300.0 million of preferred shares during the third quarter and completed three senior notes offerings in the second quarter totalling $1.3 billion as follows:

- On May 31, 2011 the Company issued 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares, Series A ("Preferred Shares") at a price of $25.00 per Preferred Share for aggregate gross proceeds of $300.0 million. The net proceeds were used for working capital and general corporate purposes while excess funds are being held in cash and cash equivalents. Holders of the Preferred Shares are entitled to receive, as and when declared by the Company's board of directors, a cumulative quarterly fixed dividend yielding 4.50% annually for the initial period ending June 30, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the then current 5-year Government of Canada bond yield plus 2.00%. Holders of Preferred Shares will have the right, at their option, to convert their shares into Cumulative Redeemable Floating Rate Preferred Shares, Series B (the "Series B Preferred Shares"), subject to certain conditions, on June 30, 2016 and on June 30 every five years thereafter. Holders of the Series B Preferred Shares will be entitled to receive cumulative quarterly dividends, as and when declared by the Company's board of directors, at a rate set quarterly equal to the then current three-month Government of Canada Treasury Bill yield plus 2.00%.

- 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.

The Company's DRIP allows holders of Class A Shares and Class B Non-Voting Shares who are residents of Canada to automatically reinvest monthly cash dividends to acquire additional Class B Non-Voting Shares. During the current quarter, the Company announced that the Class B Non-Voting Shares distributed under its DRIP would be new shares issued from treasury at a 2% discount from the 5 day weighted average market price immediately preceding the applicable dividend payment date. Previously, the Class B Non-Voting Shares were acquired on the open market at prevailing market prices. The change was effective for the May 30, 2011 dividend payment and resulted in cash savings and incremental Class B Non-Voting Shares of $9.5 million.

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. No shares have been repurchased during the current year.

At May 31, 2011, the Company held $633 million in cash and cash equivalents and had access to $1 billion 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 remainder of the current fiscal year. On a longer-term basis, Shaw expects to generate free cash flow and have borrowing capacity sufficient to finance foreseeable future business plans and refinance maturing debt.


CASH FLOW

Operating Activities

                   Three months ended May 31,      Nine months ended May 31,
                  ----------------------------------------------------------
                                      Change                         Change
                    2011     2010          %       2011       2010        %
----------------------------------------------------------------------------
($000's Cdn)
Funds flow from
 operations      430,305  350,810       22.7  1,077,642  1,047,968      2.8
Net increase in                                              
 non-cash working                               
 capital balances                    greater                        greater
 related to                             than                           than
 operations      (63,189) (22,266)     100.0   (313,849)    (6,277)   100.0
----------------------------------------------------------------------------
                 367,116  328,544       11.7    763,793  1,041,691    (26.7)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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, current income taxes and the acquisition, integration and restructuring costs in the current year. Funds flow from operations increased over the comparative nine month period due to the aforementioned items partially 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. 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 trade and other payables and the seasonal advertising impact of the new Media division on accounts receivable.


Investing Activities

                  Three months ended May 31,       Nine months ended May 31,
               -------------------------------------------------------------
                   2011      2010  Decrease       2011        2010 Decrease
----------------------------------------------------------------------------
($000's Cdn)
Cash flow used
 in investing
 activities    (196,812) (922,163)  725,351 (1,192,350) (1,638,068) 445,718
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The cash used in investing activities decreased over the comparable quarter due to the cash outlay of $741.7 million in the prior year in respect of the Company's initial investment in CW Media. The nine month period was also impacted by the Mountain Cablevision acquisition and investing certain excess funds in a Government of Canada bond in the prior year partially offset by amounts paid to complete the acquisition of the broadcasting businesses of Canwest and higher capital expenditures and inventories in the current year.


Financing Activities

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

                                      Three months ended  Nine months ended
                                                  May 31,            May 31,
                                      --------------------------------------
                                         2011       2010    2011       2010
----------------------------------------------------------------------------
(In $millions Cdn)
Bank loans - net borrowings
 (repayments)                           (75.0)       5.3       -        5.3
Issuance of Cdn $500 million 5.50%
 senior notes                               -          -   498.2          -
Issuance of Cdn $800 million 6.75%
 senior notes                               -          -   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
Issuance of preferred shares            300.0          -   300.0          -
Senior notes and preferred shares
 issuance costs                          (9.1)      (0.2)  (16.6)     (10.1)
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)         -
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)         -
Dividends paid to common shareholders   (90.5)     (95.1) (281.4)    (276.9)
Distributions paid to non-controlling
 interests                               (9.8)         -   (14.4)         -
Repayment of Partnership debt            (0.1)      (0.1)   (0.4)      (0.4)
Issue of Class B Non-Voting Shares        8.2       13.8    32.4       39.3
Purchase of Class B Non-Voting Shares
 for cancellation                           -          -       -     (118.1)
----------------------------------------------------------------------------
                                        123.7      (76.3)  844.8      143.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------


SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION

                          Operating                    Basic          Funds
                             income              and diluted           flow
                             before           Net   earnings           from
                       amortization        income        per     operations
               Revenue           (1)           (3)     share             (2)
----------------------------------------------------------------------------
($000's Cdn
 except per 
 share amounts)
2011
Third        1,284,688      579,575       202,670        0.45       430,305
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
----------------------------------------------------------------------------
(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, $161,490 and $194,860 for the first,
    second and third 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 and the impact of the net change in non-operating items. 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. During the third quarter of 2011, net income increased by $35.4 million due to higher operating income before amortization and a lower loss on derivative instruments partially offset by increased income taxes, a lower of foreign exchange gain on unhedged long-term debt and the impact of the restructuring activities undertaken by the Company. 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. 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 employees
(IFRS 2)                   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 for
(IAS 12)                   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 ventures
                           interests, the recently issued IFRS
                           11 "Joint Arrangements" requires joint
                           arrangements classified as joint ventures 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 recognition
Liabilities and            of a contingent liability that could impact the
Contingent Assets          timing of when a provision may be recorded.
(IAS 37)
----------------------------------------------------------------------------
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. Including the new Media assets (for the 10 month period during fiscal 2011) 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)               May 31, 2011  August 31, 2010
----------------------------------------------------------------------------

ASSETS
Current
 Cash and cash equivalents                         632,961          216,735
 Accounts receivable                               528,537          196,415
 Inventories                                        79,758           53,815
 Prepaids and other                                268,577           33,844
 Derivative instruments                                  -           66,718
 Future income taxes                                27,024           27,996
----------------------------------------------------------------------------
                                                 1,536,857          595,523
Derivative instrument                                6,847                -
Investments and other assets                        19,329          743,273
Property, plant and equipment                    3,178,764        3,004,649
Deferred charges                                   248,496          232,843
Intangibles
 Broadcast rights and licenses (note 3)          6,446,369        5,061,153
 Program rights and advances                        71,435                -
 Spectrum licenses                                 190,912          190,912
 Goodwill (note 3)                                 810,807          169,143
 Other intangibles                                 250,211          156,469
----------------------------------------------------------------------------
                                                12,760,027       10,153,965
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
 Accounts payable and accrued liabilities          708,595          623,070
 Income taxes payable                              18,922          170,581
 Unearned revenue                                  152,190          145,491
 Current portion of long-term debt (note 4)            584              557
 Current portion of derivative instruments          25,394           79,740
 Other liability (note 9)                          160,616                -
----------------------------------------------------------------------------
                                                 1,066,301        1,019,439
 Long-term debt (note 4)                         5,574,181        3,981,671
 Other long-term liabilities (note 9)              351,584          291,500
 Derivative instruments                                  -            6,482
 Deferred credits                                  632,517          632,482
 Future income taxes                             1,696,255        1,451,859
----------------------------------------------------------------------------
                                                 9,320,838        7,383,433
----------------------------------------------------------------------------

Shareholders' equity
 Share capital (note 5)                          2,588,622        2,250,498
 Contributed surplus (note 5)                       63,507           53,330
 Retained earnings                                 539,743          457,728
 Accumulated other comprehensive income (loss)
  (note 7)                                          (1,306)           8,976
 Non-controlling interests                         248,623                -
----------------------------------------------------------------------------
                                                 3,439,189        2,770,532
----------------------------------------------------------------------------
                                                12,760,027       10,153,965
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes


CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)

                                   Three months ended     Nine months ended
                                               May 31,               May 31,
----------------------------------------------------------------------------
(thousands of Canadian dollars
 except per share amounts)            2011       2010       2011       2010
----------------------------------------------------------------------------
Revenue (note 2)                 1,284,688    943,632  3,560,204  2,778,708
Operating, general and
 administrative expenses           705,113    507,810  2,012,751  1,443,109
----------------------------------------------------------------------------
Operating income before
 amortization (note 2)             579,575    435,822  1,547,453  1,335,599
 Amortization:
  Deferred IRU revenue               3,137      3,137      9,410      9,410
  Deferred equipment revenue        26,340     29,865     79,373     91,608
  Deferred equipment costs         (50,758)   (56,497)  (152,756)  (174,146)
  Deferred charges                    (256)      (256)      (768)      (768)
  Property, plant and equipment   (146,045)  (128,348)  (452,740)  (384,728)
  Other intangibles                (10,987)    (6,443)   (33,061)   (24,378)
----------------------------------------------------------------------------
Operating income                   401,006    277,280    996,911    852,597
 Amortization of financing
  costs - long-term debt            (1,097)      (962)    (3,206)    (3,015)
 Interest expense (note 2)         (89,711)   (61,797)  (243,643)  (185,507)
----------------------------------------------------------------------------
                                   310,198    214,521    750,062    664,075
  Debt retirement costs                  -          -          -    (81,585)
  Gain on repurchase of debt
   (note 4)                              -          -      9,981          -
  CRTC benefit obligation (note 3)       -          -   (139,098)         -
  Business acquisition,
   integration and restructuring
   expenses (notes 3 and 10)       (29,361)         -    (90,243)         -
  Loss on derivative instruments    (3,016)      (487)   (25,780)   (45,783)
  Accretion of long-term
   liabilities                      (5,049)      (644)   (10,862)    (1,497)
  Foreign exchange gain on
   unhedged long-term debt             791          -     23,376          -
  Other gains (losses)                 346     (1,013)     6,878      8,342
----------------------------------------------------------------------------
Income before income taxes         273,909    212,377    524,314    543,552
 Current income tax expense
  (note 2)                          48,428     22,051    160,278    127,332
 Future income tax expense
  (recovery)                        23,066     29,410    (12,176)     2,363
----------------------------------------------------------------------------
Income before the following        202,415    160,916    376,212    413,857
 Equity income (loss) on
  investees                            255     (2,700)    14,089     (2,700)
----------------------------------------------------------------------------
Net income                         202,670    158,216    390,301    411,157
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net income attributable to:
Common shareholders                194,860    158,216    372,992    411,157
Non-controlling interests            7,810          -     17,309          -
----------------------------------------------------------------------------
                                   202,670    158,216    390,301    411,157
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Retained earnings, beginning
 of period                         444,875    368,264    457,728    382,227
Net income attributable to
 common shareholders               194,860    158,216    372,992    411,157
Reduction on Class B
 Non-Voting Shares purchased
 for cancellation                        -          -          -    (85,143)
Dividends - Class A Shares and
 Class B Non-Voting Shares         (99,992)   (95,100)  (290,977)  (276,861)
----------------------------------------------------------------------------
Retained earnings, end of
 period                            539,743    431,380    539,743    431,380
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings per share (note 6)
 Basic and diluted                    0.45       0.37       0.86       0.95
----------------------------------------------------------------------------
(thousands of shares)
 Weighted average participating
  shares outstanding during
  period                           434,816    432,323    434,346    432,595
 Participating shares
  outstanding, end of period       435,537    432,672    435,537    432,672
----------------------------------------------------------------------------
See accompanying notes


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

                                     Three months ended   Nine months ended
                                                 May 31,             May 31,
                                   -----------------------------------------
(thousands of Canadian dollars)         2011       2010     2011       2010
----------------------------------------------------------------------------

Net income                           202,670    158,216  390,301    411,157

Other comprehensive income (loss)
 (note 7)
Change in unrealized fair value of
 derivatives designated as
 cash flow hedges                       (315)      (589) (12,867)   (52,222)
Adjustment for hedged items
 recognized in the period              1,727      1,730    2,589     12,643
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           (54)      (786)      (1)      (496)
Unrealized foreign exchange loss
 on translation of a self-sustaining
 foreign operation                         -         (1)      (3)        (2)
----------------------------------------------------------------------------
                                       1,358        354  (10,282)    37,521
----------------------------------------------------------------------------
Comprehensive income                 204,028    158,570  380,019    448,678
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Comprehensive income attributable
 to:
Common shareholders                  196,218    158,570  362,710    448,678
Non-controlling interests              7,810          -   17,309          -
----------------------------------------------------------------------------
                                     204,028    158,570  380,019    448,678
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated other comprehensive
 income (loss), beginning of period   (2,664)    (1,467)   8,976    (38,634)
Other comprehensive income (loss)      1,358        354  (10,282)    37,521
----------------------------------------------------------------------------
Accumulated other comprehensive
 loss, end of period                  (1,306)    (1,113)  (1,306)    (1,113)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes


CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
                                 Three months ended       Nine months ended 
(thousands of Canadian                       May 31,                 May 31,
 dollars)                           2011       2010        2011        2010
----------------------------------------------------------------------------

OPERATING ACTIVITIES (note 8)
Funds flow from operations       430,305    350,810   1,077,642   1,047,968
Net increase in non-cash
 working capital balances
 related
 to operations                   (63,189)   (22,266)   (313,849)     (6,277)
----------------------------------------------------------------------------
                                 367,116    328,544     763,793   1,041,691
----------------------------------------------------------------------------
INVESTING ACTIVITIES
 Additions to property, plant
  and equipment (note 2)        (158,176)  (150,733)   (593,069)   (481,290)
 Additions to equipment costs
  (net) (note 2)                 (32,436)   (20,733)    (86,912)    (72,221)
 Additions to other intangibles
  (note 2)                       (21,082)   (11,079)    (80,568)    (25,859)
 Net reduction (addition) to
  inventories                     10,220      5,015     (25,943)        535
 Business acquisitions (note 3)       (8)    (3,111)   (420,450)   (158,805)
 Purchase of Government of
 Canada bond                           -          -           -    (158,968)
 Proceeds on disposal of
  property, plant and equipment
  (note 2)                           469        150       7,268         261
 Proceeds from (addition to)
  investments and other assets     4,201   (741,672)      7,324    (741,721)
----------------------------------------------------------------------------
                                (196,812)  (922,163) (1,192,350) (1,638,068)
----------------------------------------------------------------------------
FINANCING ACTIVITIES
 Increase in bank indebtedness         -      5,262           -       5,262
 Increase in long-term debt,
  net of discounts                     -          -   2,352,115   1,891,656
 Senior notes and preferred
  shares issuance costs           (9,068)      (159)    (16,592)    (10,077)
 Senior notes repurchase and
  repayments                           -          -     (56,420)          -
 Other debt repayments           (75,145)      (136) (1,470,363) (1,016,572)
 Payments on cross-currency
  agreements                           -          -           -    (291,920)
 Senior notes repurchase
  premium                              -          -        (564)          -
 Debt retirement costs                 -          -           -     (79,488)
 Issue of Class B Non-Voting
  Shares, net of after-tax
  expenses (note 5)                8,226     13,803      32,449      39,291
 Issue of preferred shares
  (note 5)                       300,000          -     300,000           -
 Purchase of Class B Non-Voting
  Shares for cancellation              -          -           -    (118,150)
 Dividends paid on Class A
  Shares and Class B Non-Voting
  Shares                         (90,457)   (95,100)   (281,442)   (276,861)
 Distributions paid to
  non-controlling interests       (9,850)         -     (14,400)          -
----------------------------------------------------------------------------
                                 123,706    (76,330)    844,783     143,141
----------------------------------------------------------------------------
Effect of currency translation
 on cash balances and cash flows       -          -           -          (1)
----------------------------------------------------------------------------
 Increase (decrease) in cash     294,010   (669,949)    416,226    (453,237)
 Cash, beginning of the period   338,951    669,949     216,735     453,237
----------------------------------------------------------------------------
 Cash, end of the period         632,961          -     632,961           -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash includes cash and cash equivalents

See accompanying notes

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

May 31, 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 and selection of accounting policies as well as quantification of the expected differences between IFRS and Canadian GAAP are 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  Nine months ended May
                                       May 31,                 31,         
                                --------------------------------------------
                                     2011        2010      2011        2010
                                        $           $         $           $
----------------------------------------------------------------------------
Revenue                                                                    
  Cable                           784,671     746,322 2,311,905   2,189,505
  DTH                             188,291     181,962   557,844     541,328
  Satellite Services               21,411      20,595    61,994      62,208
  Media                           312,131           -   681,459           -
----------------------------------------------------------------------------
                                1,306,504     948,879 3,613,202   2,793,041
Intersegment eliminations         (21,816)     (5,247)  (52,998)    (14,333)
----------------------------------------------------------------------------
                                1,284,688     943,632 3,560,204   2,778,708
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income (expenditures)                                            
 before amortization (1) (4)                                               
  Cable                           387,751     363,096 1,099,316   1,097,821
  DTH                              64,639      62,530   183,767     205,991
  Satellite Services               11,243      10,286    31,839      31,877
  Media                           117,430           -   239,677           -
  Wireless                         (1,488)        (90)   (7,146)        (90)
----------------------------------------------------------------------------
                                  579,575     435,822 1,547,453   1,335,599
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest (2)                                                               
  Cable                            61,570      51,849   170,417     161,767
  DTH and Satellite Services        6,563       6,563    19,390      19,688
  Media                            15,774           -    37,595           -
  Wireless                          5,482       3,055    15,269       3,055
  Burrard Landing Lot 2 Holdings                                           
   Partnership                        322         330       972         997
----------------------------------------------------------------------------
                                   89,711      61,797   243,643     185,507
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash taxes (3)                                                             
  Cable                            45,100      31,001   134,100     119,005
  DTH and Satellite Services       12,316       9,000    37,316      38,000
  Media                            10,000           -    22,200           -
  Other/non-operating             (18,988)    (17,950)  (33,338)    (29,673)
----------------------------------------------------------------------------
                                   48,428      22,051   160,278     127,332
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) The nine months ended May 31, 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
    $843 and $32, respectively and increased by $875 for Satellite Services,
    and for the nine months ended operating income before amortization for
    Cable and DTH have decreased by $2,540 and $85, respectively and
    increased by $2,625 for Satellite Services. 

Capital expenditures


                                 Three months ending    Nine months ending 
                                       May 31,               May 31,       
                                --------------------------------------------
                                     2011        2010      2011        2010
                                        $           $         $           $
----------------------------------------------------------------------------
Capital expenditures accrual                                               
 basis                                                                     
  Cable (including corporate)     142,898     168,441   461,074     488,463
  Satellite (net of equipment                                              
   profit)                          1,376       1,885     4,397       3,924
  Media                             7,103           -    14,506           -
  Wireless                         15,394       9,178    70,844       9,178
----------------------------------------------------------------------------
                                  166,771     179,504   550,821     501,565
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equipment costs (net of                                                    
 revenue)                                                                  
  Cable                             9,044       3,058    24,866      12,879
  Satellite                        14,841      17,675    53,495      59,342
----------------------------------------------------------------------------
                                   23,885      20,733    78,361      72,221
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures and                                                   
 equipment costs (net)                                                     
  Cable                           151,942     171,499   485,940     501,342
  Satellite                        16,217      19,560    57,892      63,266
  Media                             7,103           -    14,506           -
  Wireless                         15,394       9,178    70,844       9,178
----------------------------------------------------------------------------
                                  190,656     200,237   629,182     573,786
----------------------------------------------------------------------------
Reconciliation to Consolidated                                             
 Statements of Cash Flows                                                  
  Additions to property, plant                                             
   and equipment                  158,176     150,733   593,069     481,290
  Additions to equipment costs                                             
   (net)                           32,436      20,733    86,912      72,221
  Additions to other                                                       
   intangibles                     21,082      11,079    80,568      25,859
----------------------------------------------------------------------------
  Total of capital expenditures                                            
   and equipment costs (net)                                               
   per                                                                     
   Consolidated Statements of                                               
   Cash Flows                                                              
                                  211,694     182,545   760,549     579,370
  Increase (decrease) in                                                   
   working capital related to                                              
   capital expenditures and                                                
   equipment costs (net)          (19,812)      18,620 (121,985)     (3,095)
  Less: Proceeds on disposal of                                            
   property, plant and                                                     
   equipment                         (469)       (150)   (7,268)       (261)
  Less: Satellite equipment                                                
   profit (1)                        (757)       (778)   (2,114)     (2,228)
----------------------------------------------------------------------------
  Total capital expenditures                                               
   and equipment costs (net)                                               
   reported by segments           190,656     200,237   629,182     573,786
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(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


                                May 31, 2011                                
                ------------------------------------------------------------
                                  Satellite                                
                    Cable     DTH  Services     Media Wireless        Total 
                        $       $         $         $        $            $
----------------------------------------------------------------------------
Segment assets  7,132,622 850,315   477,021 2,890,389  359,333   11,709,680 
----------------------------------------------------------------            
Corporate assets                                                  1,050,347 
                                                                ------------
Total assets                                                     12,760,027 
                                                                ------------


                              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


                                May 31, 2011                                
                                                     Cumulative             
                                                         equity             
                                           Cash (1)      income        Total
                                                 $            $            $
----------------------------------------------------------------------------
Television broadcasting businesses (i)   1,208,112        2,180    1,210,292
Cable system (ii)                            3,472            -        3,472
----------------------------------------------------------------------------
                                         1,211,584        2,180    1,213,764
----------------------------------------------------------------------------

(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 $681,459 of revenue and
    $239,677 of operating income before amortization for the period from
    October 27 to May 31, 2011. If the acquisition had closed on September
    1, 2010, the Media revenue and operating income before amortization for
    the nine month period would have been approximately $865,000 and
    $312,000, 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)                                           236,898 
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)                               641,664 
---------------------------------------------------------------------------
                                                                 3,024,842 
Current liabilities (1)                                           (284,293) 
Current debt (4)                                                  (399,065) 
Derivative instruments (4)                                         (81,975) 
Non-current liabilities                                           (104,864) 
Future income taxes                                               (287,006) 
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 $495 of revenue and $145 of
    operating income before amortization for the period October 1 to May 31,
    2011. 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                                             (28) 
---------------------------------------------------------------------------
                                                                     3,472 
---------------------------------------------------------------------------
---------------------------------------------------------------------------

4. LONG-TERM DEBT


                         May 31, 2011                 August 31, 2010       
                             Adjust-                                        
                                ment                                        
                                 for                                        
                             finance     Long-     Long-               Long-
                    Long-      costs      term      term                term
                     term        and      debt      debt   Adjust-      debt
          Effec      debt       fair    repay-        at      ment    repay-
           tive  at amor-      value      able    amort-       for      able
          inter     tized    adjust-        at      ized   finance        at
            est      cost       ment      mat-      cost     costs      mat-
          rates        (1)        (1)    urity        (1)       (1)    urity
              %         $          $         $         $         $         $
----------------------------------------------------------------------------
Corporate                                                                   
Senior                                                                      
 notes-                                                                     
 Bank     Varia                                                             
  loans     ble        -          -         -          -         -         -
 Cdn                                                                        
  $600,000                                                                  
  6.50%                                                                     
  due June                                                                  
  2, 2014  6.56  595,863      4,137   600,000    594,941     5,059   600,000
 Cdn                                                                        
  $400,000                                                                  
  5.70%                                                                     
  due                                                                       
  March 2,                                                                  
  2017     5.72  396,503      3,497   400,000    396,124     3,876   400,000
 Cdn                                                                        
  $450,000                                                                  
  6.10%                                                                     
  due                                                                       
  November                                                                  
  16, 2012 6.11  448,495      1,505   450,000    447,749     2,251   450,000
 Cdn                                                                        
  $300,000                                                                  
  6.15%                                                                     
  due May                                                                   
  9, 2016  6.34  293,772      6,228   300,000    292,978     7,022   300,000
 Cdn                                                                        
  $1,250,0                                                                  
  00 5.65%                                                                  
  due                                                                       
  October                                                                   
  1, 2019  5.69 1,241,275     8,725  1,250,000 1,240,673     9,327 1,250,000
 Cdn                                                                        
  $1,450,0                                                                  
  00 6.75%                                                                  
  due                                                                       
  November                                                                  
  9, 2039                                                                   
  (3)      6.89 1,415,692    34,308  1,450,000   641,684     8,316   650,000
 Cdn                                                                        
  $350,000                                                                  
  7.50%                                                                     
  due                                                                       
  November                                                                  
  20, 2013 7.50  347,736      2,264   350,000    347,129     2,871   350,000
 Cdn                                                                        
  $500,000                                                                  
  5.50%                                                                     
  due                                                                       
  December                                                                  
  7, 2020                                                                   
  (4)      5.55  495,242      4,758   500,000          -         -         -
----------------------------------------------------------------------------
               5,234,578     65,422  5,300,000 3,961,278    38,722 4,000,000
----------------------------------------------------------------------------
Other                                                                       
 subsidiar                                                                  
 ies and                                                                    
 entities                                                                   
Burrard                                                                     
 Landing                                                                    
 Lot 2                                                                      
 Holdings                                                                   
 Partnersh                                                                  
 ip        6.31   20,536         69    20,605     20,950        83    21,033
Shaw Media                                                                  
 Inc.                                                                       
 13.50% US                                                                  
 senior                                                                     
 unsecured                                                                  
 notes due                                                                  
 August                                                                     
 15, 2015                                                                   
 (2)       8.56  319,651    (46,183)   273,468          -         -        -
----------------------------------------------------------------------------
Total                                                                       
 consolida                                                                  
 ted debt       5,574,765    19,308  5,594,073 3,982,228    38,805 4,021,033
Less                                                                        
 current                                                                    
 portion                                                                    
 (5)                 584         19       603        557        19       576
----------------------------------------------------------------------------
                5,574,181    19,289  5,593,470 3,981,671    38,786 4,020,457
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Long-term debt, excluding bank loans, is presented net of unamortized discounts, finance costs and bond forward proceeds of $65,491 (August 31, 2010 - $38,805) and a fair value adjustment of $46,183 (US $47,670 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. The US $312,000 senior unsecured notes were originally issued 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 May 31, 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 share capital during the nine months ended May 31, 2011 are as follows:


                                    Class B Non-Voting                      
                  Class A Shares          Shares          Preferred Shares  
                ------------------------------------------------------------
                    Number       $      Number         $    Number        $
----------------------------------------------------------------------------
August 31, 2010 22,520,064   2,468 410,622,001 2,248,030         -        -
Issued upon                                                                 
 stock option                                                               
 plan exercises          -       -   1,920,048    35,275         -        -
Issued pursuant                                                             
 to dividend                                                                
 reinvestment                                                               
 plan                    -       -     474,987     9,535         -        -
Issued pursuant                                                             
 to prospectus                                                              
 supplement              -       -           -         -12,000,000  300,000
Share issue                                                                 
 costs, net of                                                              
 tax                     -       -           -         -         -   (6,686)
----------------------------------------------------------------------------
May 31, 2011    22,520,064   2,468 413,017,036 2,292,84012,000,000   293,314
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Preferred shares

On May 31, 2011, the Company issued 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares, Series A ("Preferred Shares") at a price of $25.00 per Preferred Share for aggregate gross proceeds of $300,000. The Preferred Shares were offered by way of prospectus supplement to the short form base shelf prospectus dated November 18, 2010.

Holders of the Preferred Shares are entitled to receive, as and when declared by the Company's board of directors, a cumulative quarterly fixed dividend yielding 4.50% annually for the initial period ending June 30, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the then current 5-year Government of Canada bond yield plus 2.00%. Holders of Preferred Shares will have the right, at their option, to convert their shares into Cumulative Redeemable Floating Rate Preferred Shares, Series B (the "Series B Preferred Shares"), subject to certain conditions, on June 30, 2016 and on June 30 every five years thereafter. Holders of the Series B Preferred Shares will be entitled to receive cumulative quarterly dividends, as and when declared by the Company's board of directors, at a rate set quarterly equal to the then current three-month Government of Canada Treasury Bill yield plus 2.00%.

Preferred shares are classified as equity since redemption is at the Company's option and payment of dividends is at the Company's discretion.

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 May 31, 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 16,024,633 Class B Non-Voting Shares have been issued under the plan. During the nine months ended May 31, 2011, 1,920,048 options were exercised for $32,449.

The changes in options for the nine months ended May 31, 2011 are as follows:


                                                                   Weighted
                                                                    average
                                                                   exercise
                                                                      price
                                                    Number               $ 
---------------------------------------------------------------------------
Outstanding, beginning of period                23,993,150            20.48 
Granted                                          2,939,000            20.89 
Forfeited                                       (1,983,152)           20.59 
Exercised                                       (1,920,048)           16.90 
---------------------------------------------------------------------------
Outstanding, end of period                      23,028,950           20.82 
---------------------------------------------------------------------------
---------------------------------------------------------------------------

The following table summarizes information about the options outstanding at May 31, 2011:


                                Weighted                                   
                                 average                                   
                               remaining  Weighted                 Weighted
                              contractua   average                  average
                        Number         l  exercise         Number  exercise
Range of prices    outstanding      life     price    exercisable     price
---------------------------------------------------------------------------
$ 8.69                  20,000      2.39    $ 8.69         20,000    $ 8.69
$14.85 - $22.27     15,376,450      7.23    $19.02      6,692,200    $17.95
$22.28 - $26.20      7,632,500      6.26    $24.48      5,960,125    $24.48
---------------------------------------------------------------------------
---------------------------------------------------------------------------

The weighted average estimated fair value at the date of the grant for common share options granted was $3.16 per option (2010 - $3.05 per option) and $3.12 per option (2010 - $3.12 per option) for the three and nine 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 Nine months ending May
                                        May 31,                 31,         
                                --------------------------------------------
                                      2011        2010      2011        2010
----------------------------------------------------------------------------
Dividend yield                      4.45 %      4.41 %    4.31 %      4.31 %
Risk-free interest rate             2.58 %      2.31 %    2.18 %      2.37 %
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                      25.7 %      26.1 %    25.8 %      26.4 %
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Contributed surplus

The changes in contributed surplus are as follows:


                                                          Nine months ended
                                                               May 31, 2011
                                                                          $
----------------------------------------------------------------------------
Balance, beginning of period                                         53,330
Stock-based compensation                                             13,003
Stock options exercised                                              (2,826)
----------------------------------------------------------------------------
Balance, end of period                                               63,507
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Dividend reinvestment plan

The Company has a Dividend Reinvestment Plan ("DRIP") that allows holders of Class A Shares and Class B Non-Voting Shares who are residents of Canada to automatically reinvest monthly cash dividends to acquire additional Class B Non-Voting Shares. During the current quarter, the Company announced that the Class B Non-Voting Shares distributed under its DRIP would be new shares issued from treasury at a 2% discount from the 5 day weighted average market price immediately preceding the applicable dividend payment date. Previously, the Class B Non-Voting Shares were acquired in the open market at prevailing market prices. The change was effective for the May 30, 2011 dividend payment.

6. EARNINGS PER SHARE

Earnings per share calculations are as follows:


                                     Three months ending Nine months ending 
                                           May 31,             May 31,      
                                    ----------------------------------------
                                         2011       2010     2011       2010
----------------------------------------------------------------------------
Numerator for basic and diluted                                             
 earnings per share ($)                                                     
Net income attributable to common                                           
 shareholders                         194,860    158,216  372,992    411,157
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Denominator (thousands of shares)                                           
Weighted average number of Class A                                          
 Shares and Class B Non-Voting                                              
 Shares for basic earnings per share  434,816    432,323  434,346    432,595
Effect of dilutive securities             817      1,058    1,117      1,236
----------------------------------------------------------------------------
Weighted average number of Class A                                          
 Shares and Class B Non-Voting                                              
 Shares for diluted earnings per                                            
 share                                435,633    433,381  435,463    433,831
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings per share ($)                                                      
Basic and diluted                        0.45       0.37     0.86       0.95
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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

Components of other comprehensive income (loss) and the related income tax effects for the nine months ended May 31, 2011 are as follows:


                                                           Income          
                                              Amount        taxes      Net  
                                                   $            $        $  
----------------------------------------------------------------------------
Change in unrealized fair value of                                          
 derivatives designated as                                                  
 cash flow hedges                             (15,835)      2,968  (12,867)
Adjustment for hedged items recognized in                                   
 the period                                     3,556        (967)   2,589  
Unrealized loss on available-for-sale                                       
 investment                                        (1)          -       (1)
Unrealized foreign exchange loss on                                         
 translation of a                                                           
 self-sustaining foreign operation                 (3)          -       (3)
----------------------------------------------------------------------------
                                              (12,283)      2,001  (10,282)
----------------------------------------------------------------------------

Components of other comprehensive income (loss) and the related income tax effects for the three months ended May 31, 2011 are as follows:


                                                             Income         
                                                    Amount   taxes     Net  
                                                         $       $       $  
----------------------------------------------------------------------------
Change in unrealized fair value of derivatives                              
 designated as cash flow hedges                       (434)   119    (315)
Adjustment for hedged items recognized in the period 2,382   (655)  1,727  
Unrealized loss on available-for-sale investment       (62)     8     (54)
----------------------------------------------------------------------------
                                                     1,886   (528)  1,358  
----------------------------------------------------------------------------

Components of other comprehensive income (loss) and the related income tax effects for the nine months ended May 31, 2010 are as follows:


                                                            Income          
                                                  Amount     taxes      Net 
                                                       $         $        $ 
----------------------------------------------------------------------------
Change in unrealized fair value of derivatives                              
 designated as cash flow hedges                  (63,086)   10,864  (52,222)
Adjustment for hedged items recognized in the                               
 period                                           18,068    (5,425)  12,643 
Reclassification of foreign exchange loss on                                
 hedging derivatives to income to offset                                    
 foreign exchange gain on US dominated 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 loss on available-for-sale                                       
 investment                                         (570)       74     (496)
Unrealized foreign exchange loss on                                         
 translation of a self-sustaining foreign                                   
 operation                                            (2)        -       (2)
----------------------------------------------------------------------------
                                                  45,036    (7,515)  37,521 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Components of other comprehensive income (loss) and the related income tax effects for the three months ended May 31, 2010 are as follows:


                                                            Income          
                                                Amount     taxes        Net 
                                                     $         $          $ 
----------------------------------------------------------------------------
Change in unrealized fair value of derivatives                              
 designated as cash flow hedges                    (966)      377      (589)
Adjustment for hedged items recognized in the                               
 period                                           2,784    (1,054)    1,730 
Unrealized loss on available-for-sale                                       
 investment                                        (903)      117      (786)
Unrealized foreign exchange loss on                                         
 translation of a self-sustaining foreign                                   
 operation                                           (1)        -        (1)
----------------------------------------------------------------------------
                                                    914      (560)      354 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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


                                                         May 31,  August 31,
                                                           2011        2010
                                                              $           $
----------------------------------------------------------------------------
Unrealized foreign exchange gain on translation of a                        
 self-sustaining foreign operation                          346         349
Fair value of derivatives                                (1,651)      8,627
Unrealized loss on available-for-sale investment             (1)          -
----------------------------------------------------------------------------
                                                         (1,306)      8,976
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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 May Nine months ended May
                                         31,                   31,         
                               ---------------------------------------------
                                     2011        2010      2011        2010
                                        $           $         $           $
----------------------------------------------------------------------------

Net income                        202,670     158,216   390,301     411,157
Adjustments to reconcile net                                               
 income to funds flow from                                                 
 operations:                                                               
  Amortization                                                             
  Deferred IRU revenue             (3,137)     (3,137)   (9,410)     (9,410)
  Deferred equipment revenue      (26,340)    (29,865)  (79,373)    (91,608)
  Deferred equipment costs         50,758      56,497   152,756     174,146
  Deferred charges                    256         256       768         768
  Property, plant and equipment   146,045     128,348   452,740     384,728
  Other intangibles                10,987       6,443    33,061      24,378
  Financing costs - long-term                                              
   debt                             1,097         962     3,206       3,015
  Program rights                   22,668           -    65,244           -
  Future income tax expense                                                
   (recovery)                      23,066      29,410   (12,176)      2,363
  Equity loss (income) on                                                  
   investees                         (255)      2,700   (14,089)      2,700
  Debt retirement costs                 -           -         -      81,585
  Gain on repurchase of debt                                               
   (note 4)                             -           -    (9,981)          -
  CRTC benefit obligation (note                                            
   3)                                   -           -   139,098           -
  CRTC benefit obligation                                                  
   funding                         (8,317)          -   (15,343)          -
  Business acquisition,                                                    
   integration and                                                         
   restructuring expenses               -           -    37,196           -
  Stock-based compensation          3,187       4,430    11,273      13,197
  Defined benefit pension plan      7,585       6,969    24,243      20,906
  Loss on derivative                                                       
   instruments                      3,016         487    25,780      45,783
  Realized loss on settlement                                              
   of financial instruments        (5,846)    (12,649)  (19,116)    (19,324)
  Payments on cross-currency                                               
   agreements (note 3)                  -           -   (86,109)          -
  Foreign exchange gain on                                                 
   unhedged long-term debt          (791)           -   (23,376)          -
  Accretion of long-term                                                   
   liabilities                      5,049         644    10,862       1,497
  Other                            (1,393)      1,099        87       2,087
----------------------------------------------------------------------------
Funds flow from operations        430,305     350,810 1,077,642   1,047,968
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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

                             Three months ended May   Nine months ended May
                                                31,                     31,
                           -------------------------------------------------
                                  2011         2010       2011         2010
                                     $            $          $            $
----------------------------------------------------------------------------
Accounts receivable            (42,453)      25,246    (32,723)      (5,155)
Prepaids and other               1,767        2,964    (15,008)       2,356
Accounts payable and                                                       
 accrued liabilities           (19,345)     (73,579)   (77,775)    (122,966)
Income taxes payable            (7,112)      21,486   (194,390)     116,369
Unearned revenue                 3,954        1,617      6,047        3,119
----------------------------------------------------------------------------
                               (63,189)     (22,266)  (313,849)      (6,277)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

iii.Interest and income taxes paid and classified as operating activities
    are as follows: 

                                    Three months ended   Nine months ended 
                                          May 31,             May 31,      
                                   ----------------------------------------
                                        2011       2010     2011       2010
                                           $          $        $          $
---------------------------------------------------------------------------
Interest                             131,464    103,873  280,139    218,393
Income taxes                          51,379        860  348,046      4,189
---------------------------------------------------------------------------
---------------------------------------------------------------------------

iv. Non-cash transactions: 

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


                                    Three months ended   Nine months ended 
                                          May 31,             May 31,      
                                   ----------------------------------------
                                        2011       2010     2011       2010
                                           $          $        $          $
---------------------------------------------------------------------------
Issuance of Class B Non-Voting                                             
 Shares:                                                                   
Dividend reinvestment plan             9,535          -    9,535          -
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 $180,387, the non-current portion of CRTC benefit obligations, including the amount assumed on acquisition, of $150,429 and other liabilities totaling $20,768. The total benefit costs expensed under the Company's defined benefit pension plans were $10,572 (2010 - $7,331) and $31,067 (2010 - $21,992) for the three and nine months ended May 31, 2011, respectively.

10. RESTRUCTURING EXPENSES

During the third quarter the Company recorded $29,361 in respect of its restructuring activities to streamline operations, drive efficiencies and enhance competiveness. The restructuring included elimination of approximately 550 employee positions, management relocations and facilities consolidation. A total of $22,498 was paid during the quarter. The majority of the remaining employee related costs are expected to be paid within the next six months while facilities consolidation costs are expected to be incurred through fiscal 2017 as lease payments are made.

11. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

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

Contact Information