Edgar Filing: SHAW COMMUNICATIONS INC

Form 6-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934

For the month of October, 2003

Shaw Communications Inc.

(Translation of registrant’s name into English)

Suite 900, 630 – 3rd Avenue S.W., Calgary, Alberta T2P 4L4 (403) 750-4500

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:


Form 20-F o		Form 40-F þ

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.


Yes o		No þ

If “ Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

TABLE OF CONTENTS


SIGNATURE
NEWS RELEASE
SHAREHOLDERS REPORT
OPERATING HIGHLIGHTS
MANAGEMENT’S DISCUSSION AND ANALYSIS
Cable
	FINANCIAL HIGHLIGHTS
	HIGHLIGHTS FOR THE QUARTER
	SUBSCRIBER STATISTICS
COMBINED SATELLITE (DTH and Satellite services)
	FINANCIAL HIGHLIGHTS
DTH (Star Choice)
	FINANCIAL HIGHLIGHTS
	CUSTOMER STATISTICS
	HIGHLIGHTS FOR THE QUARTER
Satellite services
	FINANCIAL HIGHLIGHTS
OTHER INCOME ITEMS:
RISKS AND UNCERTAINTIES
FINANCIAL POSITION
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
CAUTION CONCERNING FORWARD LOOKING STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (DEFICIT)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, Shaw Communications Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	SHAW COMMUNICATIONS INC.

Date: October 22, 2003	By:	/s/ R.D. Rogers

		R.D. Rogers
		Sr. V.P., Chief Financial Officer
		Shaw Communications Inc.

(SHAW COMMUNICATIONS LOGO)

NEWS RELEASE

Shaw Communications Fourth Quarter Results – continued growth in Revenue,
Operating Income, Free Cash Flow and Customers.

Calgary, Alberta, October 22, 2003 — Shaw Communications today announced improved revenue, operating income before amortization, and free cash flow for the three months and full year ended August 31, 2003.

“In a quarter that historically has low or no growth, both customer growth and financial results were much greater than we expected,” said Jim Shaw, Chief Executive Officer of Shaw Communications Inc.

Consolidated revenue increased on a quarterly and annual basis by 4.4% and 8.5% respectively, while consolidated operating income before amortization improved by 21.4% and 29.7%. Excluding the US cable systems sold on June 30, 2003, consolidated revenue improved 6.6% and 9.1% for the quarter and year respectively, and consolidated operating income before amortization increased by 25.0% and 31.3%.

Quarterly and annual consolidated net free cash flow of $56.5 million and $96.8 million represent significant improvements from negative amounts of $37.5 million and $563.4 million for the respective periods last year.

Cash flow from operations for the quarter was $156.1 million or $0.63 per share compared to $107.3 million or $0.42 per share in the same quarter last year, an increase of 45.6%. On an annual basis the same amounts were $534.8 million or $2.13 per share compared to $332.1 million or $1.25 per share, representing an increase of 61.0%.

Earnings per share for the quarter improved to ($0.03) compared to ($0.36) for the same quarter last year and ($0.38) for the year compared to ($1.42) last year.

“A very capable and focused management team and the dedicated efforts of our 6,000 employees have delivered results that show we are on track to achieving our guidance for fiscal 2004,”, said Jim Shaw. “We were able to increase prices on some of our products, manage our capital expenditures more effectively, improve our balance sheet with the selective sale of non-core assets and implement several restructuring and staff consolidation programs to lower our costs and improve our efficiency.”

Shaw’s customer base increased on a quarterly and annual basis by 2,197 and 18,935 respectively in basic cable, 18,929 and 125,933 respectively in Internet, 4,158 and 39,813 respectively in digital and 4,010 and 48,502 respectively in satellite DTH subscribers.

“We continue to provide our customers with valued, reasonably-priced products from a strong technical platform and a high commitment to service in an increasingly competitive environment. This combination of value, products and service has been, and continues to be, a very successful strategy for our customers and our shareholders,” said Jim Shaw.

During the quarter, the cable division grew its Canadian basic cable customers by 2,197 compared to a loss of 29,497 last year, reflecting considerably reduced seasonal churn. Free cash flow was $73.0 million compared to $1.3 million last year. Internet and digital customer growth reflected strong consumer demand for value-based products in a competitive market.

“Our back-to-school programs, targeted market programs for non-video customers, bundling, HDTV, increased Video-on-Demand offerings and quality service for our customers all contributed to the fourth quarter success,” said Jim Shaw.

The satellite division continued to achieve its goals of improved operating income before amortization and generation of free cash flow. During the quarter the division improved its free cash flow by $22.3 million to negative $16.5 million compared to a negative $38.8 million for the same quarter last year. Operating income was $30.6 million, a 20% increase over the third quarter this year and a 170% improvement over the fourth quarter last year.

“Clearly we are making significant progress on achieving our satellite division’s primary goal of being cash flow positive sometime during fiscal 2004,” said Jim Shaw.

Shaw Communications Inc. is a diversified Canadian communications company whose core business is providing broadband cable television, Internet and satellite direct-to-home (“DTH”) services to approximately 2.9 million customers. 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)

-30-

For further information, please contact:

R.D. Rogers
Senior V.P., Chief Financial Officer
Shaw Communications Inc.
403-750-4500

(SHAW COMMUNICATIONS LOGO)

SHAREHOLDERS REPORT
FOURTH QUARTER ENDING AUGUST 31, 2003

SELECTED FINANCIAL HIGHLIGHTS
CONSOLIDATED RESULTS OF OPERATIONS
FOURTH QUARTER ENDING AUGUST 31, 2003


		Three months ended August 31,								Year ended August 31,

					Change								Change
($000's Cdn. except per share amounts)		2003			2002			%		2003			2002			%

Operations:
	Revenue		520,319			498,351			4.4		2,076,740			1,914,284			8.5
	Operating income before amortization⁽¹⁾		224,851			185,215			21.4		820,600			632,673			29.7
	Cash flow from operations		156,140			107,258			45.6		534,766			332,109			61.0
	Net income (loss)		4,144			(74,353	)		105.6		(47,828	)		(286,324	)		83.3
Per share data:⁽²⁾
	Cash flow per share — basic⁽³⁾	$	0.63		$	0.42				$	2.13		$	1.25
	Loss per share — basic and diluted	$	(0.03	)	$	(0.36	)			$	(0.38	)	$	(1.42	)
	Weighted average participating shares outstanding during period (000’s)		231,850			231,848					231,848			231,820

(1)		Operating income before amortization is presented because it is a widely accepted financial indicator of a company’s ability to service and/or incur debt. Operating income before amortization is not a measurement in accordance with Canadian or US GAAP and should not be considered as an alternative to net income or any other measure of performance required by Canadian or US GAAP.

(2)		After deducting entitlements on the equity instruments, net of income taxes, amounting to $10,135 or $0.04 per share [2002 — $9,977 or $0.04 per share] and $40,193 or $0.17 per share [2002 — $42,331 or $0.18 per share] for the quarter and year to date respectively.

(3)		Cash flow per share is presented because it provides a measure of the maximum potential distribution to shareholders on a per share basis. It is calculated by dividing cash flow from operations as presented in the Consolidated Statements of Cash Flows adjusted for (2) above, divided by the weighted average number of participating shares outstanding during the period. Cash flow per share is not a measurement in accordance with Canadian or US GAAP and should not be considered as an alternative to earnings per share or any other measure of performance as required by Canadian or US GAAP.

Shaw Communications Inc.

OPERATING HIGHLIGHTS

•

Consolidated net free cash flow was $56.5 million in the fourth quarter compared to negative net free cash flow of $37.5 million in the same period last year.

•

Cable division free cash flow was $73.0 million compared to $1.3 million in the same quarter last year.

•

Satellite division fourth quarter negative free cash flow improved to $16.5 million from $38.8 million in the same quarter of 2002.

•

Positive customer growth in digital of 4,158, Internet of 18,929 and DTH of 4,010 continued in the fourth quarter. Canadian basic cable growth was 2,197 versus a loss of 29,497 last year.

•

Shaw sold its US cable systems effective June 30, 2003 for gross proceeds of US $188.5 million and used a portion of the proceeds to redeem the US $150 million Senior secured notes of Star Choice, resulting in savings in interest of US $19.5 million. The US cable systems generated operating income before amortization of US $17 million based on annualized results to the date of sale.

•

In light of Shaw’s success over the past year, Shaw’s Board of Directors approved an increased annual dividend for holders of its Class A and Class B shares from their previous levels of $0.045 and $0.05 respectively to $0.12. The first quarterly dividend of $0.03 per share was paid on September 30, 2003.

Through disciplined management of capital and operational resources, concentration on steady and responsible growth of our customer base and services, Shaw has continued to make solid progress towards its goal of increasing sustainable free cash flow. With financial strength in hand, a quality technical platform and a growing customer base, Shaw stakeholders are well positioned to benefit from the creative and dedicated efforts of a focused management team and its dedicated 6,000 employees.


JR Shaw Executive Chair		Jim Shaw Chief Executive Officer

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS
AUGUST 31, 2003

Certain statements in this report 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. 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 the Management’s Discussion and Analysis included in the Company’s August 31, 2002 Annual Report and Financial Statements and the Notes thereto.

Consolidated Overview

Consolidated revenue increased 4.4% and 8.5% respectively over the comparative quarter and year. Excluding the US cable systems sold effective June 30, 2003, consolidated revenue improved by 6.6% and 9.1% for the quarter and year. The growth was due to increases in the customer base, rate increases, sale of additional digital services, the launch of high-definition television (“HDTV”), increased Video-on-Demand (“VOD”) offerings plus the effect of the Viewer’s Choice acquisition effective June 1, 2002.

Operating income before amortization exceeded revenue growth with increases of 21.4% and 29.7% for the quarter and year respectively. Excluding the US cable systems, the respective increases were 25.0% and 31.3%. The growth resulted from rate increases, customer growth, new products and the positive impact of cost savings initiatives and restructuring in all divisions. Also, given a recent favorable ruling from the Supreme Court of Canada regarding access rights to public streets that municipalities may charge cable companies for the construction of their transmission lines, in the fourth quarter the Company reversed a $12 million litigation accrual. In management’s view, the Supreme Court of Canada ruling strongly supports Shaw’s position in respect of similar litigation which covers a period of ten years and therefore the litigation accrual is no longer required. In addition, the comparative year’s results also benefited from the elimination of the fee in December 2001. Cash flow from operations for the quarter and year increased by 45.6% and 61.0% respectively over the same periods last year primarily due to increased operating income before amortization.

In April 2002 the CRTC modified its structural separation requirements to allow Star Choice and Shaw to integrate accounting and other administrative functions subject to the establishment of procedures to protect confidential information. In light of this, the Satellite division developed a restructuring plan to streamline its operations. In respect of the restructuring plan, a $4.8 million provision was taken in the first quarter to cover severance costs of approximately $4 million in respect of 400 employees and $0.8 million of exit costs to centralize certain operational functions in Calgary. The restructuring should result in approximate annual savings of $6 million. As of August 2003, approximately $3.5 million of severance costs have been incurred in respect of the restructuring.

Shaw Communications Inc.

As part of the restructuring process implemented by the Company during the 2002 fiscal year, and consistent with its stated objectives to improve profitability and increase net free cash flow, the Company carried out a further review of its activities and operations at the corporate, cable and satellite locations. Based upon this review, it developed a restructuring plan which eliminated a further 350 positions. The plan, which was communicated to our employees in June 2003, will entail severance costs of approximately $4 million, and should result in annual savings of $15 million. The costs of the restructuring were recognized in the fourth quarter. As of August 2003, approximately $3.5 million of severance costs have been incurred in respect of this restructuring.

Change in net income (loss) for fiscal 2003


(In $millions Cdn)	Quarter			Year

Net income (loss) of August 31, 2003		4			(48	)
Net loss of August 31, 2002		(74	)		(286	)

2003 improvement in earnings over 2002		78			238

The improvement is comprised of the following:
Improvement in operating income after interest expense in 2003		44			183
Net write-down of investments in 2002		62			315
Net gain on redemption of SHELS in 2002		—			(99	)
Increase as a result of gain on unhedged long-term debt		—			34
Write-down and sale of assets in 2003		5			(125	)
Effect of debt restructuring in 2003		(11	)		(11	)
Other		5			3

Effect on earnings before tax		105			300
Tax effect of above		(27	)		(114	)
Decrease in equity losses on GT		—			52

2003 improvement in earnings over 2002		78			238

As the above table demonstrates, the improvement in earnings over the comparative quarter and year was caused by a number of items. With respect to the improvement in earnings of $78 million for the quarter, on an after-tax basis, approximately $28 million resulted from increased operating income after interest expense, whereas the remaining increase was due to one-time items such as a reduction in write-down of investments. With respect to the annual improvement of $238 million, on an after-tax basis, approximately half or $117 million was due to increased operating income after interest expense, whereas the remainder was due to changes in one-time items such as write-downs.

New Accounting Standards

An understanding of new accounting standards adopted in the current year is necessary for a complete analysis of our results, financial position, liquidity and trends. We focus your attention to Note 1 to the Consolidated Financial Statements which discusses the adoption of the new Canadian standards with respect to foreign currency translation and stock-based compensation and other stock-based payments.

Shaw Communications Inc.

With respect to the adoption of the amended standard on foreign currency translation, unrealized translation gains and losses on non-current monetary assets and liabilities which are not hedged are recognized in income immediately as opposed to being deferred and amortized over the life of the underlying non-current monetary instrument. The Canadian dollar has weakened against the US dollar by approximately $0.017 (1.3%) since May 31, 2003. This has resulted in a foreign exchange loss on unhedged long-term debt of $6.8 million in the current quarter. The $6.8 million loss includes the effect of foreign currency fluctuations on the US $150 million Star Choice Senior secured notes that were redeemed in August. Going forward, only US $57.2 million of Shaw’s credit facility is unhedged and subject to foreign currency fluctuations. As a result, a $0.01 change in the Canadian dollar versus the US dollar would result in a change in the foreign exchange gain or loss of approximately $0.6 million in future quarters.

There is no effect on the Company’s results with respect to the adoption of the new standard for stock based compensation and other stock-based payments. The new standard permits the Company to continue its current policy of not recording any compensation cost on the grant of stock options to employees.

Sarbanes-Oxley Act

As required by Section 302(a) of the Sarbanes-Oxley Act of 2002 (the “Act”), Shaw’s CEO and CFO will be certifying Shaw’s annual report. Shaw is actively engaged in ensuring that we meet and exceed various on-going requirements of the Act.

Shaw Communications Inc.

Cable

FINANCIAL HIGHLIGHTS


		Three months ended August 31									Year ended August 31

								Change									Change
($000's Cdn)		2003			2002			%			2003			2002			%

Revenue (third party)⁽¹⁾			368,556			366,047			0.7			1,486,322			1,393,287			6.7

Operating income before amortization, corporate restructuring charge and recovery of Cable litigation accrual⁽²⁾			186,277			173,883			7.1			727,458			608,916			19.5
Less:
	Interest		46,797			49,523			(5.5	)		190,002			196,120			(3.1	)
	Entitlements on equity instruments, net of current taxes		10,135			9,977			1.6			40,193			42,331			(5.1	)
	Cash taxes on net income		8,978			8,138			10.3			34,809			36,523			(4.7	)

Cash flow before the following			120,367			106,245			13.3			462,454			333,942			38.5

Capital expenditures and equipment subsidies:
	New housing development		11,441			30,302			(62.2	)		83,009			106,231			(21.9	)
	Success based		9,751			16,837			(42.1	)		71,301			182,760			(61.0	)
	Upgrades and enhancement		17,777			37,594			(52.7	)		62,133			270,033			(77.0	)
	Replacement		3,758			3,326			13.0			15,016			28,437			(47.2	)
	Buildings/other⁽³⁾		4,646			16,861			(72.4	)		25,817			95,864			(73.1	)

			47,373			104,920			(54.8	)		257,276			683,325			(62.3	)

Free cash flow⁽⁴⁾			72,994			1,325			5,409.0			205,178			(349,383	)		158.7

Operating margin			50.5	%		47.5	%		3.0			48.9	%		43.7	%		5.2

(1)		In order to be consistent with the approach taken for DTH equipment sales, during the current year the Company has retroactively changed the presentation of equipment revenue and cost of sales in respect of the sale of DCT and modem equipment at a subsidized cost. Revenue includes equipment revenue received on the sale of DCT and modem equipment of $5,877 [2002 — $3,741] and $26,489 [2002 — $25,724] for the quarter and year to date respectively, offset by an equal cost of sale. There is no impact on operating income or earnings as a result of this change.

(2)		Operating income before amortization is presented because it is a widely accepted financial indicator of a company’s ability to service and/or incur debt. Operating income before amortization is not a measurement in accordance with Canadian or US GAAP and should not be considered as an alternative to net income or any other measure of performance required by Canadian or US GAAP.

(3)		Excludes $3,656 and $10,976 for the quarter and year ended August 31, 2003 respectively of capital expenditures in respect of the Burrard Landing Lot 2 Holdings Partnership (“Partnership”) which the Company is required to proportionately consolidate (see Note 1 to the Company’s 2002 Consolidated Financial Statements). As the Partnership is financed by its own credit facility, this is a non-cash item for the Company.

(4)		Free cash flow is presented because it is an indicator of a company’s ability to repay debt. Free cash flow is not a measurement in accordance with Canadian or US GAAP and should not be considered as an alternative to net income or any other measure of performance required by Canadian or US GAAP.

Shaw Communications Inc.

HIGHLIGHTS FOR THE QUARTER

•		Shaw’s US cable systems were sold effective June 30, 2003. These systems generated US $17 million of annual operating income before amortization based upon annualized results to the date of the sale.

•		Cable generated free cash flow of $73.0 million in the fourth quarter compared to $1.3 million the same quarter last year.

•		Effective June 30, 2003, Shaw increased its monthly charge on its unbundled basic and full cable service (“FCS”) bundled packages. This affected approximately 1.1 million customers and generated additional monthly revenue of approximately $1.5 million when it was fully implemented by August 31, 2003.

•		Effective May 1, 2003, Shaw increased its monthly charge on certain packages affecting approximately 550,000 customers and generated additional monthly revenue of approximately $1 million when it was fully implemented by July 31, 2003.

Quarterly and annual cable revenue increased 0.7% and 6.7% respectively over the same periods last year. Cable revenue, excluding the US cable systems sold June 30, 2003, increased 4.0% and 7.6% respectively. This increase primarily represents organic growth generated from rate increases on Internet, tiers and bundled and non-bundled packages implemented at various times during 2002 and 2003 and customer growth in Internet and digital services.

Operating income before amortization increased by 7.1% and 19.5% over the comparable quarter and year. Excluding the US cable systems, operating income before amortization increased by 10.4% and 20.7% respectively. The improvements materialized from revenue increases, decreases in bandwidth costs and cost savings resulting from restructuring programs. Annual operating income before amortization also benefited from the elimination of the Excite@Home fees in December 2001.

Capital expenditures, including corporate, and equipment subsidies decreased by $57.5 million or 54.8% and $426.0 million or 62.3% over the comparative quarter and year. Upgrades and enhancements decreased $19.8 million and $207.9 million on a respective basis as a result of the completion of the second Internet Data Center in the fourth quarter last year and the completion of the two-way network upgrade last year. Success based spending decreased by $7.1 million and $111.5 million respectively mainly as a result of reduced Internet and digital activations compared to last year. Expenditures for buildings and other decreased by $12.2 million and $70.0 million respectively as a result of the completion of major projects last year. The remaining decreases are a result of a more focused program of managing capital spending. The decline in capital expenditures has not impaired our customer growth as evidenced by the subscriber gains achieved in the current year.

During the quarter, Shaw took a number of steps to strengthen its competitive advantage with the offering of new services and products to its customers, such as the introduction of the next generation of cable modems and increased VOD and Pay-Per-View (“PPV”) content. These

Shaw Communications Inc.

product enhancements will enable Shaw to offer unique-to-cable type services to our customers and further increases the value and attractiveness of the Shaw Cable-Internet bundle.

Shaw intends to further strengthen its leadership in the high-speed data market by deploying an advanced generation of cable modems based on the DOCSIS™ 2.0 specifications. Initial deployments will take place in Calgary and Vancouver beginning in the Fall of 2003. This advanced generation of cable modem technology will enable Shaw to increase the capabilities and reliability of its high-speed data network by increasing the capacity and throughput in both the upstream and downstream portions of the cable plant creating a network that has up to 30 megabit per second (Mbps) capacity in both directions, representing an approximate 400% increase over the capacity of current cable modem systems. This next generation of cable modem technology will give Shaw the ability to offer our residential and business customers a whole new spectrum of advanced IP based cable services such as dedicated bandwidth, guaranteed levels of services, peer-to-peer communications and video conferencing applications. Shaw will be the first Canadian cable provider to adopt this leading-edge technology and develop new services on this platform.

Shaw reached long-term agreements with two major Hollywood studios, Twentieth Century Fox and Universal Studios, to provide movies and other programming content for Shaw’s VOD and PPV services. This represents a significant expansion in the variety and quality of content available to Shaw’s VOD customers from two of Hollywood’s leading studios. Shaw’s VOD service gives customers the ability to view a program for a period of up to 24 hours with full DVD-like functionality, including pause, rewind and fast forward features.

Shaw Communications Inc.

SUBSCRIBER STATISTICS


								Three months ended						Year ended

		August 31,			August 31,						Change						Change
		2003			2002⁽¹⁾			Growth			%			Growth			%

CABLE:
Basic service:
	Actual		2,051,919			2,032,984			2,197			0.1			18,935			0.9
	Penetration as % of homes passed		68.2	%		69.2	%

Full cable service:
	Tier 1		1,639,187			1,651,383			(6,968	)		(0.4	)		(12,196	)		(0.7	)
	Penetration as % of basic		79.9	%		81.2	%

	Tier II		1,565,041			1,559,678			(3,034	)		(0.2	)		5,363			0.3
	Penetration as % of basic		76.3	%		76.7	%

	Tier III		1,398,450			1,344,993			6,457			0.5			53,457			4.0
	Penetration as % of basic		68.2	%		66.2	%

Digital terminals			527,256			470,163			7,870			1.5			57,093			12.1
Digital customers			473,870			434,057			4,158			0.9			39,813			9.2

INTERNET:
Connected and scheduled installations			886,220			760,287			18,929			2.2			125,933			16.6
Penetration as % of basic			43.2	%		37.4	%
Stand-alone Internet not included in basic cable			102,708			90,234			(551	)		(0.5	)		12,474			13.8

(1)

August 31, 2002 statistics restated for comparative purposes to adjust subscribers as if the sale of the US cable systems had occurred on August 31, 2002.

Shaw gained 2,197 Canadian basic cable subscribers compared to a loss of 29,497 in the same quarter last year. Shaw continued its successful campaign of offering promotional analogue basic services packages to stand-alone Internet customers and households that recently disconnected their cable service or that had never been a Shaw customer. The intent of the offer is that these customers will develop viewing habits that enable them to recognize the value of a monthly cable subscription and therefore continue as customers after the end of the promotional period. At August 31, 2003 approximately 22,000 customers were participating in this program compared to 8,600 at May 31, 2003.

During the quarter, Shaw added 4,158 and 18,929 digital and Internet customers respectively. This represents a marked improvement compared to last year’s comparative quarter loss of 1,836 and gain of 11,505 respectively. A driving factor in Shaw’s success in retaining and building its customer base is its bundling strategy. Approximately 38% of Shaw customers subscribe to bundled services compared to 28% last year. In addition, the introduction of new services such as HDTV plus the unique service of VOD creates extra value for the Shaw customer. This is evidenced by Shaw’s reduction in its churn rate as follows:


	Three months ended August 31,						Year ended August 31,

Churn⁽¹⁾	2003			2002			2003			2002

Digital equipment		5.8	%		7.3	%		22.1	%		31.4	%
Internet customers		4.3	%		5.7	%		15.9	%		30.2	%

(1)

Calculated as the number of new equipment/customer activations less the net gain of equipment/customers during the period divided by the average of the opening and closing equipment/customers for the applicable period.

Shaw Communications Inc.

COMBINED SATELLITE (DTH and Satellite services)

FINANCIAL HIGHLIGHTS


		Three months ended August 31,									Year ended August 31,

								Change									Change
($000s Cdn)		2003			2002			%			2003			2002			%

Revenue (third party)			151,763			132,304			14.7			590,418			520,997			13.3

Operating income before amortization restructuring charge and inventory write-down⁽¹⁾			30,574			11,332			169.8			94,392			28,357			232.9
Less:
	Interest		16,146			18,587			(13.1	)		69,700			71,203			(2.1	)
	Cash taxes on net income		190			194			(2.1	)		897			801			12.0

Cash flow before the following			14,238			(7,449	)		291.1			23,795			(43,647	)		154.5

Less capital expenditures and equipment subsidies:
	Success based		29,596			30,213			(2.0	)		126,862			133,981			(5.3	)
	Transponders		—			—			—			—			14,400			(100.0	)
	Other		1,156			1,126			2.7			5,336			21,961			(75.7	)

			30,752			31,339			(1.9	)		132,198			170,342			(22.4	)

Free cash flow⁽²⁾			(16,514	)		(38,788	)		57.4			(108,403	)		(213,989	)		49.3

(1)		Operating income before amortization is presented because it is a widely accepted financial indicator of a company’s ability to service and/or incur debt. Operating income before amortization is not a measurement in accordance with Canadian or US GAAP and should not be considered as an alternative to net income or any other measure of performance required by Canadian or US GAAP.

(2)		Free cash flow is presented because it represents a company’s ability to repay debt. Free cash flow is not a measurement in accordance with Canadian or US GAAP and should not be considered as an alternative to net income or any other measure of performance required by Canadian or US GAAP.

The Satellite division delivered continued improvements in free cash flow. In the quarter, negative cash flow improved to $16.5 million versus negative $38.8 million the same quarter last year. On an annual basis, negative free cash flow improved to $108.4 million versus negative $214.0 million last year.

Shaw Communications Inc.

DTH (Star Choice)

FINANCIAL HIGHLIGHTS


	Three months ended August 31,								Year ended August 31,

							Change								Change
($000s Cdn)	2003			2002			%		2003			2002			%

Revenue (third party)⁽¹⁾		129,271			106,393			21.5		491,637			415,551			18.3
Operating income (loss) before amortization		20,256			2,264			794.7		52,814			(14,103	)		474.5
Operating margin		15.7	%		2.1	%		13.6		10.7	%		(3.4	%)		14.1

(1)

Includes equipment revenue on sale of DTH equipment of $9,880 [2002 - $9,400] and $41,461 [2002 — $54,435] for the quarter and year ended respectively.

CUSTOMER STATISTICS


					Three months ended				Year ended

	August 31,		August 31,
	2003		2002		Growth		%		Growth		%

Star Choice customers⁽¹⁾		808,526		760,024		4,010		0.5		48,502		6.4

(1)

Including seasonal customers who temporarily suspend their service.

Three months ended August 31,

Year ended August 31,

Churn⁽²⁾

2003

2002

2003

2002

Star Choice customers

4.2

5.9

17.2

14.4

(2)

Calculated as the number of new customer activations less the net gain of customers during the period divided by the average of the opening and closing customers for the applicable period.

HIGHLIGHTS FOR THE QUARTER

•		Operating income before amortization for the quarter improved 35.0% over the third quarter of 2003 and almost ten times over the comparative quarter last year.

•		Effective June 1, 2003, Star Choice implemented a rate increase of $3.00 affecting the majority of customers, which will generate revenues of approximately $2.0 million per month when fully implemented.

Subscriber growth and rate increases implemented throughout the period grew revenue by 21.5% and 18.3% over the comparative quarter and year respectively. These same factors, combined with the positive impact of cost reduction initiatives, increased operating income before amortization to $20.3 million in the current quarter from $2.3 million for the same period last year and from $15.0 million in the third quarter. On an annual basis, operating income before amortization was $52.8 million compared to an operating loss before amortization of $14.1 million. Star Choice continued to benefit from increased economies of scale on its larger DTH subscriber base and from synergies realized on the integration of its accounting and other administrative functions with Shaw as a result of the modified structural separation requirements issued by the CRTC in April 2002.

Shaw Communications Inc.

In an effort to further expand its service offerings to its customers, during the quarter, Star Choice announced the introduction of its new Integrated High-Definition (“HD”) receiver, the Motorola DSR 500. The receiver provides integrated HD decoding and an advanced on-screen program guide. The receiver has been introduced at a net price of $399 (after program credits). In support of its HD platform, Star Choice now offers six HD channels.

Customer growth for the quarter was 4,010 or 0.5 % compared to 27,568 the same quarter last year. The decline in growth is partially reflective of the “black market”, competition from cable and a maturing growth cycle. Current quarter churn improved compared to the same quarter last year as a result of a new system for billing and customer care performing to expectations. Annual churn increased over last year due to transitional issues incurred during the implementation of the new billing system as outlined in previous quarterly reports.

Satellite services

FINANCIAL HIGHLIGHTS


	Three months ended August 31,									Year ended August 31,

							Change									Change
($000's Cdn)	2003			2002			%			2003			2002			%

Revenue (third party)		22,492			25,911			(13.2	)		98,781			105,446			(6.3	)
Operating income before amortization		10,318			9,068			13.8			41,578			42,460			(2.1	)
Operating margin		45.9	%		35.0	%		10.9			42.1	%		40.3	%		1.8

Satellite services revenue, consisting of Broadcast, Truck Tracking and Business Television, decreased over the comparative periods above primarily as a result of the sale of the satellite relay distribution undertaking (“SRDU”) and uplink business in the Caribbean in May, 2002, and the sale of the Business Television division effective March 21, 2003.

Despite the decline in revenue, operating income before amortization increased 13.8% over the same quarter last year due in large part to improvements in the Truck Tracking division. Annual operating income before amortization decreased 2.1% over fiscal 2002 primarily as the result of the sale of Business Television and the SRDU and uplink business in the Caribbean.

Shaw Communications Inc.

OTHER INCOME ITEMS:

Investment activity gains and losses


	Three months ended August 31,										Year ended August 31,

($000s Cdn)	2003		2002			Increase (decrease) in income		2003			2002			Increase (decrease) in income

Gain (loss) on sale of investments		729		(283	)		1,012		1,957			2,321			(364	)
Write-down of investments		—		(61,538	)		61,538		(15,000	)		(330,466	)		315,466
Gain on redemption of SHELS		—		—			—		119,521			218,327			(98,806	)
Dilution loss on issuance of stock by investee		—		—			—		—			(571	)		571

In 2003, the gain on sale of investments primarily related to the sale of 1,100,000 Cogeco shares and the sale of a minority interest in a small cable company in British Columbia. Last year the gain on sale of investments of $2.3 million primarily related to the sale of approximately 673,000 Terayon Communications Systems (“Terayon”) shares.

During the third quarter, Shaw reviewed the carrying value of its privately and publicly held investments and recorded a $15.0 million write-down. In 2002, the write-down of investments of $330.5 million primarily related to GT Group Telecom Inc. (“GT”).

In the third quarter, the Liberate Technologies (“Liberate”) shares were surrendered to settle the SHELS III and IV equity linked debentures, resulting in a gain of $75.3 million ($61.8 million after-tax). In the second quarter, the Terayon shares were surrendered to settle the SHELS V equity linked debentures, which resulted in a gain of $44.2 million ($36.2 million after-tax) for a total gain on redemption of SHELS of $119.5 million. The settlement of the three series of SHELS will improve annual cash flow by approximately $3.5 million (before-tax) with the elimination of the annual dividend entitlements. Last year, the At Home Corporation shares were surrendered to settle the SHELS I and II equity linked debentures, which resulted in a gain of $218.3 million.

The dilution loss of $0.6 million in 2002 arose in connection with Shaw’s previous investment in GT.

Shaw Communications Inc.

Loss on sale of satellite assets

In the current year, the Company sold its Business Television division for $6.5 million which resulted in a $3.8 million loss. The loss in the prior year relates to the sale of the SRDU and uplink business in the Caribbean.

Foreign exchange gain (loss) on unhedged long-term debt

Shaw records foreign exchange gains and losses on the translation of its foreign denominated unhedged long-term debt, which included US $57.2 million of bank debt and until August 2003, the Star Choice US $150 million Senior secured notes. Due to the strengthening of the Cdn $ relative to the US $, the Company recorded a $32.6 million foreign exchange gain. Next year the impact of fluctuations of the US $ relative to the Cdn $ should lessen, as foreign exchange gains or losses should only arise in respect of the Company’s translation of US $57.2 million of bank debt. In the prior year, the foreign exchange loss arose due to the weakening Cdn $ relative to the US $.

Provision for loss on sale and write-down of assets

Effective June 30, 2003, the US cable systems were sold for net proceeds of $257.4 million. In previous quarters, the Company recorded a loss provision of $80.0 million on the pending sale. Due to a slight recovery of the US $ relative to the Cdn $, the actual loss was $74.7 million resulting in a $5.3 million gain on the sale this quarter.

In addition, during the third quarter the Company performed its annual valuation of intangible assets using discounted cash flow analysis and recorded a downward adjustment of $50.0 million to the carrying value of goodwill.

Debt restructuring costs

In August 2003, the Company redeemed the Star Choice US $150 million Senior secured notes with part of the proceeds from the sale of the US cable systems. In connection with the redemption, the Company incurred $10.6 million in costs including early redemption premiums of US $9.8 million and the purchase of outstanding Star Choice warrants for US $2.4 million. These costs were partially offset by the reversal of a mark-to-market credit in respect of the notes. The Senior secured notes, which were due December 15, 2005 bore interest at 13% or US $19.5 million per annum.

Shaw Communications Inc.

Fixed Charges


		Three months ended August 31,									Year ended August 31,

								Change									Change
($000s Cdn)		2003			2002			%			2003			2002			%

Amortization —
	Property, plant and equipment		93,277			103,365			(9.8	)		413,381			409,335			1.0
	Deferred charges		52,928			41,606			27.2			184,808			175,996			5.0

Total amortization			146,205			144,971			0.8			598,189			585,331			2.2
Amortization of deferred IRU revenue			(3,126	)		(3,189	)		(2.0	)		(11,984	)		(11,517	)		4.1
Interest			62,943			68,110			(7.6	)		259,702			267,323			(2.9	)

Amortization on property, plant and equipment increased over the comparative year due to the high level of cable and Internet capital expenditures in 2002 and prior years and decreased over the comparative quarter as a result of assets becoming fully amortized during the quarter and due to the sale of the US cable systems. Amortization of deferred charges increased over the comparative periods due primarily to deferred equipment subsidies, which included a full year amortization of equipment subsidies resulting from the Modem Purchase program introduced in June 2002 and amortization of equipment subsidies on DTH satellite dishes commencing January 2003. From September 2001 to January 2003, as part of the Simple Satellite promotional program, Star Choice retained ownership of the DTH satellite dishes, and therefore the dishes were previously capitalized as part of plant, property and equipment as opposed to equipment subsidies.

Interest decreased over the same periods last year due to reduced consolidated debt levels which resulted primarily in the latter portion of 2003 when Shaw began generating positive free cash flow on a consolidated basis and on repayment of debt with the sale of the US cable systems on June 30, 2003. In addition, Shaw’s weighted average cost of borrowing decreased from 7.69% as at August 31, 2002 to 7.37% as at August 31, 2003 due to restructuring of its debt including the repayment of the US $150 million Senior secured notes of Star Choice, the Cancom credit facility and the Cancom subordinated credit facility.

Equity income (loss) on investees

Three months ended August 31,

Year ended August 31,

Increase

($000s Cdn)

2003

2002

in income

2003

2002

in income

Total

(697

)

717

(1,921

)

(53,487

)

51,566

The equity income (loss) on investees in the current year is in respect of Shaw’s interest in specialty channels while the equity loss in the prior year is primarily in respect of its previous investment in GT. Pursuant to a reorganization of GT in 2003, Shaw no longer has an ownership interest in the company.

Shaw Communications Inc.

RISKS AND UNCERTAINTIES

There have been no material changes in any risks or uncertainties facing the Company since the year ended August 31, 2002.

Further to our disclosure in our first quarter release dated January 15, 2003 concerning the status of the Anik F1 satellite, Telesat has provided the following update in its press release of February 4, 2003:

“Telesat announced today that it has signed a contract with Astrium, Europe’s largest space company, for a new satellite targeted for launch in 2005 to replace the Anik F1 satellite and ensure continuity of service for its customers. The new satellite, Anik F1R, will carry telecommunications, broadcasting and Internet services.”

Based on the foregoing, we do not anticipate any incremental cost to the Company or disruption to our DTH and satellite services customers.

Further to our disclosure in our Fourth Quarter 2002 Release, dated October 17, 2002, concerning the possible launch of a new Mexican satellite (operated by Satmex), we have learned that the Governments of Canada and Mexico intend to conclude a new Satellite Coordination Agreement to accommodate the operation of a new Mexican satellite network according to the terms and parameters included in the 2000 Coordination Agreement. This would ensure that the operation of a new Mexican satellite will not interfere with the Anik satellites used by Star Choice. As a result, Shaw no longer considers this issue as a significant potential risk to Star Choice’s DTH operations.

FINANCIAL POSITION

Overview

Total assets at August 31, 2003 were $7.6 billion compared to $8.5 billion at August 31, 2002. The following discussion describes the significant changes in the balance sheet since August 31, 2002.

Current assets decreased by $87.0 million principally due to a $57.0 million reduction in accounts receivable and $47.0 million decrease in inventories offset by increased cash of $20.8 million. The decrease in accounts receivables is primarily due to collection of miscellaneous receivables, payment received on the Access Communications Inc. promissory note and a decrease in subscriber receivables as a result of the sale of the US cable systems. Inventories decreased as the result of improved management of supply and demand and lower levels of customer activations.

Investments decreased by $84.2 million principally due to the third quarter write-down of $15.0 million and due to the removal of $74.6 million of net book value on the sale of Cogeco shares and the surrender of the Liberate and Terayon shares on the settlement of the SHELS.

Shaw Communications Inc.

Property, plant and equipment decreased by $362.0 million due mainly to the disposal of approximately $132 million of plant, property and equipment on the US cable systems dispositions and due to current year amortization being in excess of capital expenditures.

Deferred charges decreased by $50.9 million due to a $43.3 million decrease in foreign exchange losses on the translation of hedged US dollar denominated debt as a result of the strengthening of the Canadian dollar since August 31, 2002, amortization of financing and other costs of $21.2 million, a net increase in unamortized equipment subsidies of $8.6 million and an increase in other deferred charges of $5.1 million.

Broadcast licenses decreased by $249.5 million primarily due to the removal of $253.2 million of net book value in respect of the US cable systems which were sold in 2003. Goodwill decreased by $66.9 million due to $16.9 million on the sale of Business Television and the $50.0 million write-down of goodwill during the third quarter.

Current liabilities (excluding current portion of long-term debt) decreased by $89.8 million primarily due to a reduction in accounts payable and accrued liabilities of $97.4 million resulting from the payment of August 2002 accrued capital expenditures, repayments under the Star Choice vendor financing facility and lower interest accruals resulting from a decreased debt level. The increase in unearned revenue is primarily due to an increase in prepayments from retailers on DTH equipment.

Long-term debt (including current portion) decreased by $552.6 million due to the net repayment of the Company’s debt of $352.9 million and a decrease of $199.7 million relating to the translation of the US dollar denominated debt.

Deferred credits increased by $102.1 million primarily due to a $123.8 million increase in foreign exchange gains on the translation of hedged US dollar denominated debt which was offset by $12.0 million in amortization of prepaid IRU rental revenue and a $6.5 million mark-to-market credit removed as part of the Star Choice US $150 million Senior secured note redemption.

Future incomes taxes have decreased $76.3 million primarily due to the sale of the US cable systems.

Share capital decreased by $183.5 million as a result of the settlement of the SHELS III, IV and V equity linked debentures by delivery of the underlying Liberate and Terayon shares.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s financial condition continues to be a significant strength for Shaw. Our future liquidity depends on three factors: free cash flow from operations, access to available credit facilities and sale of non-strategic assets.

First, we grew free cash flow in the cable division from negative $349.4 million last year to positive $205.2 million this year. Further, the satellite division, including satellite services and

Shaw Communications Inc.

DTH, reduced its cash requirements by $105.6 million over last year, and is making substantial progress towards becoming free cash flow positive. As we continue growing free cash flow, it will become an increasing source of liquidity.

Second, Shaw has access to over $1 billion of available credit facilities from its existing bank syndicate. These facilities are available to re-finance debt or to fund other corporate requirements or opportunities that may arise.

And finally, with respect to the sale of non-strategic assets to increase liquidity, Shaw sold its US cable assets with approximately 75,000 subscribers for gross proceeds of Cdn. $260 million. In addition, a number of redundant properties and other non-strategic assets were sold, resulting in proceeds of approximately $22.5 million.

A number of steps were taken during 2003 to improve the Company’s existing debt structure which will result in lower interest costs in the future. During the second quarter, Cancom’s credit facility was re-financed through a $350 million term loan obtained by Shaw from a new syndicate of banks, which includes a number of banks that are part of Shaw’s main banking syndicate. The interest on this loan was fixed via hedges at rates which range from 4.9525% to 7.0775% depending on debt to cash flow ratios. At August 31, 2003 the rate was 5.9525%. In addition, Shaw repaid and cancelled Cancom’s $40 million subordinated credit facility. These changes to Cancom’s debt will, based on current rates, generate interest savings of approximately $7 million next year. Finally, utilizing a portion of the proceeds from the sale of the Florida and Texas cable systems, the Company redeemed the Star Choice US $150 million Senior secured notes in August 2003. These notes had an interest rate of 13% and were due December 15, 2005. The early redemption entailed redemption premium and other costs amounting to $10.6 million; however, this will be more than offset by interest savings resulting from the redemption.

With existing and anticipated strong growth in cash flow from operations and access to over $1 billion of available credit facilities, Shaw is in an excellent position to finance its growth and at the same time improve its debt to cash flow ratios.

CASH FLOW

Operating Activities


	Three months ended August 31,								Year ended August 31,

($000s Cdn)	2003			2002		%			2003		2002		%

Cash flow from operations		156,140			107,258		45.6			534,766		332,109		61.0
Net change in non-cash working capital balances related to operations		(5,354	)		56,974		(109.4	)		3,675		3,303		11.3

		150,786			164,232		(8.2	)		538,441		335,412		60.5

Cash flow from operations increased mainly as a result of the strong growth in profitability in the cable and Star Choice divisions and due to decreased interest expense of $5.2 million and $7.6

Shaw Communications Inc.

million over the comparative quarter and year respectively. Cash flow from working capital fluctuates primarily with the timing of accounts payable and accrued liabilities payments.

Investing Activities

Three months ended August 31,

Year ended August 31,

($000s Cdn)

2003

2002

Increase

2003

2002

Increase

Cash flow provided by (used in) investing activities

175,009

(124,086

)

299,095

(95,037

)

(825,558

)

730,521

The cash from investing activities was $299.1 million higher than the August 2002 quarter primarily due to the proceeds of $257.4 million received on sale of the US cable systems. The cash outlay required for investing activities was $730.5 million lower than the year ended August 2002 due to a $485.9 million reduction in capital expenditures and the proceeds on the sale of the US cable systems.

Financing Activities

The changes in financing activities during the period were as follows:


	Three months ended August 31,						Year ended August 31,

(In millions Cdn)	2003			2002			2003			2002

Star Choice note redemption, including restructuring costs		(228.2	)		—			(228.2	)		—
Bank loans — net repayments		(79.8	)		(45.6	)		(141.8	)		(15.9	)
Dividends		(14.2	)		(13.4	)		(50.6	)		(53.2	)
Other		0.3			2.3			(2.0	)		(8.1	)
Issue of Shels V		—			—			—			90.5
Issue of US $300 million notes		—			—			—			476.8

Cash flow provided by (used in) financing activities		321.9			(56.7	)		(422.6	)		490.1

CAUTION CONCERNING FORWARD LOOKING STATEMENTS

Certain statements included and incorporated by reference herein constitute forward-looking statements. When used, the words “anticipate”, “believe”, “expect”, “plan”, intend”, “target”, “guideline”, “goal”, and similar expressions are intended to 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), 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 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. However, whether actual results and developments will conform with the expectations and predictions of Shaw is subject to a number of risks and uncertainties, including, but not limited to, general economic, market or business conditions; the opportunities (or lack thereof) that may be presented to and pursued by Shaw; increased competition in the markets in which Shaw operates

Shaw Communications Inc.

and from the development of new markets for emerging technologies; changes in laws, regulations and decisions by regulators in Shaw’s industries 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. Should one or more of these risks materialize, or should assumptions underlying the forward-looking statements prove incorrect, our 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, Shaw.

You should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement (and such risks, uncertainties and other factors) speak only as of the date on which it was originally made and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained in this document to reflect any change in our 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 emerge from time to time, and it is not possible for us predict what factors will arise or when. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Shaw Communications Inc.

CONSOLIDATED BALANCE SHEETS


			August 31,			August 31,
[thousands of Canadian dollars]			2003			2002

			(Unaudited)			(Audited)
						(Restated – note 1)
ASSETS
Current
	Cash and term deposits			20,753			—
	Accounts receivable			140,998			197,963
	Inventories			81,787			128,811
	Prepaids and other			16,783			20,588

				260,321			347,362
	Investments and other assets			49,415			133,602
	Property, plant and equipment			2,415,662			2,777,697
	Deferred charges			169,045			219,916
	Intangibles [note 3] —
		Broadcast licenses		4,627,728			4,877,256
		Goodwill		78,948			145,865

				7,601,119			8,501,698

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
	Bank indebtedness			—			2,303
	Accounts payable and accrued liabilities			413,712			511,106
	Income taxes payable			15,725			10,631
	Unearned revenue			95,918			91,095
	Current portion of long-term debt [note 4]			271,520			—

				796,875			615,135
	Long-term debt [note 4]			2,645,548			3,469,637
	Deferred credits			735,353			633,259
	Future income taxes			928,277			1,004,559

				5,106,053			5,722,590

Shareholders’ equity
	Share capital [note 5]			2,834,878			3,018,332
	Deficit			(340,294	)		(240,737	)
	Cumulative translation adjustment			482			1,513

				2,495,066			2,779,108

				7,601,119			8,501,698

See accompanying notes

Shaw Communications Inc.

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


		Three months ended						Year ended
		August 31,						August 31,

[thousands of Canadian dollars except per share amounts]		2003			2002			2003			2002

		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
					(Restated – note 1)						(Restated – note 1)
Revenue [note 2]			520,319			498,351			2,076,740			1,914,284
Operating, general and administrative expenses			295,468			313,136			1,256,140			1,281,611

Operating income before amortization [note 2]			224,851			185,215			820,600			632,673
	Amortization of deferred charges and property, plant and equipment [note 1]		146,205			144,971			598,189			585,331
	Amortization of deferred IRU revenue		(3,126	)		(3,189	)		(11,984	)		(11,517	)

Operating income			81,772			43,433			234,395			58,859
	Interest		62,943			68,110			259,702			267,323

			18,829			(24,677	)		(25,307	)		(208,464	)
	Gain (loss) on sale of investments		729			(283	)		1,957			2,321
	Write-down of investments		—			(61,538	)		(15,000	)		(330,466	)
	Gain on redemption of SHELS [note 5]		—			—			119,521			218,327
	Dilution loss on issuance of stock by equity investee		—			—			—			(571	)
	Loss on sale of satellite assets [note 3]		—			—			(3,800	)		(1,281	)
	Foreign exchange gain (loss) on unhedged long-term debt		(6,819	)		(6,383	)		32,617			(1,658	)
	Provision for loss on sale and write-down of assets [note 3]		5,326			—			(124,674	)		—
	Debt restructuring costs		(10,634	)		—			(10,634	)		—
	Other revenue (expense) [note 8]		4,068			(686	)		9,338			6,048

Income (loss) before income taxes			11,499			(93,567	)		(15,982	)		(315,744	)
	Income tax expense (recovery)		7,375			(19,911	)		29,925			(82,907	)

Income (loss) before the following			4,124			(73,656	)		(45,907	)		(232,837	)
	Equity income (loss) on investees		20			(697	)		(1,921	)		(53,487	)

Net income (loss)			4,144			(74,353	)		(47,828	)		(286,324	)
Retained earnings (deficit) beginning of period as previously reported			(328,535	)		(143,936	)		(230,327	)		111,830
Adjustment for change in accounting policy [note 1]			—			(6,704	)		(10,410	)		(12,378	)

Retained earnings (deficit), beginning of period restated			(328,535	)		(150,640	)		(240,737	)		99,452
Dividends —
	Class A and Class B Non-Voting Shares		(5,768	)		(5,767	)		(11,536	)		(11,534	)
	Equity instruments (net of income taxes)		(10,135	)		(9,977	)		(40,193	)		(42,331	)

Deficit, end of period			(340,294	)		(240,737	)		(340,294	)		(240,737	)

Loss per share [note 6]
	Basic and diluted		(0.03	)		(0.36	)		(0.38	)		(1.42	)

[thousands of shares]
Weighted average participating shares outstanding during period			231,850			231,848			231,848			231,820
Participating shares outstanding, end of period			231,857			231,848			231,857			231,848

See accompanying notes

Shaw Communications Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS


			Three months ended						Year ended
			August 31,						August 31,

[thousands of Canadian dollars]			2003			2002			2003			2002

			(Unaudited)			(Unaudited)			(Unaudited)			(Audited)
						(Restated – note 1)						(Restated – note 1)
OPERATING ACTIVITIES [note 7]
Cash flow from operations				156,140			107,258			534,766			332,109
Net change in non-cash working capital balances related to operations				(5,354	)		56,974			3,675			3,303

				150,786			164,232			538,441			335,412

INVESTING ACTIVITIES
	Additions to property, plant and equipment [note 2]			(54,302	)		(79,845	)		(257,683	)		(743,568	)
	Additions to equipment subsidies [note 2]			(33,680	)		(22,655	)		(162,876	)		(121,654	)
	Net reduction to inventories			15,125			14,289			59,708			15,397
	Proceeds on sale of US cable systems [note 3]			257,435			—			257,435			—
	Cable systems acquisitions [note 3]			(1,508	)		(34,606	)		(3,634	)		(40,454	)
	Proceeds (costs) on sale of satellite assets			—			245			6,461			(631	)
	Proceeds on sale of investments and other assets			2,368			5,836			22,469			18,489
	Costs on redemption of SHELS			—			—			(2,113	)		(3,134	)
	Acquisition of investments			(7,313	)		(6,845	)		(9,662	)		(28,158	)
	Proceeds received on assets held for sale			—			—			—			89,500
	Additions to deferred charges			(3,116	)		(505	)		(5,142	)		(11,345	)

				175,009			(124,086	)		(95,037	)		(825,558	)

FINANCING ACTIVITIES
	Increase (decrease) in bank indebtedness			—			2,303			(2,303	)		514
	Proceeds on pre-payment of IRU			235			—			235			—
	Payment to terminate interest rate swaps			—			—			—			(9,400	)
	Increase in long-term debt			3,640			35,000			505,599			1,049,520
	Long-term debt repayments			(294,510	)		(80,644	)		(858,510	)		(588,644	)
	Debt restructuring costs			(17,134	)		—			(17,134	)		—
	Issue of equity instruments, net of after-tax expenses			—			(2	)		—			90,481
	Issue of Class B Non-Voting Shares, net of after-tax expenses			95			—			95			792
	Dividends paid —
		Class A and Class B Non-Voting Shares		(5,768	)		(5,767	)		(11,536	)		(11,534	)
		Equity instruments, net of current taxes		(8,475	)		(7,637	)		(39,084	)		(41,618	)

				(321,917	)		(56,747	)		(422,638	)		490,111

Effect of currency translation on cash balances and cash flows				89			96			(13	)		35

Increase (decrease) in cash				3,967			(16,505	)		20,753			—
Cash, beginning of the period				16,786			16,505			—			—

Cash, end of the period				20,753			—			20,753			—

Cash includes cash and term deposits

See accompanying notes

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003

[all amounts in thousands of Canadian dollars, except per share amounts]

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The interim consolidated financial statements include the accounts of Shaw Communications Inc. and its subsidiaries (collectively the “Company”). The notes presented in these interim consolidated financial statements include only significant events and transactions occurring since the Company’s last fiscal year and are not fully inclusive of all matters normally disclosed in the Company’s annual audited consolidated financial statements. As a result, these interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended August 31, 2002.

The interim consolidated financial statements follow the same accounting policies and methods of application as the most recent annual consolidated financial statements except as noted in the following changes.

Adoption of recent Canadian accounting pronouncements

(i) Foreign currency translation

Commencing September 1, 2002, the Company retroactively adopted the amended Canadian standard for foreign currency translation which is consistent with US standards and eliminates the deferral and amortization method of accounting for unrealized translation gains and losses on non-current monetary assets and liabilities that are not hedged and requires exchange gains and losses to be included in net income in the period they are incurred. Upon adoption of this amended standard September 1, 2002, deferred unamortized foreign exchange losses net of gains amounting to $12,378 (net of taxes) were eliminated and charged against the opening retained earnings as at September 1, 2001. As prior years were restated upon adoption, the Company’s net loss increased by $3,706 ($0.01 per share) and decreased by $1,968 ($0.01 per share) for the prior year quarter and year to date respectively.

(ii) Stock-based compensation and other stock-based payments

Commencing September 1, 2002, the Company adopted the new Canadian standard for stock-based compensation and other stock-based payments which requires that all stock-based awards granted to non-employees be accounted for at fair value. With limited exceptions relating to direct awards of stock, awards required or expected to be settled in cash and stock appreciation rights, the new standard permits the Company to continue its current policy of not recording any compensation cost on the grant of stock options to employees. No restatement of prior periods was required as a result of the adoption of the new standard. See note 5 for full disclosure as required by this standard.

Reclassification

To be consistent with other practices throughout the Company, in fiscal 2003 the Company retroactively changed the presentation of equipment revenue and cost of sales in respect of sale of DCT and modem equipment at a subsidized cost to cable and Internet subscribers. Prior to fiscal 2003, Shaw accounted for the price charged to the subscriber for a DCT or modem as a cost recovery on the equipment provided as part of the service connection process. The price charged to the subscriber for a DCT or modem is now recorded as equipment revenue offset by an equal cost of sale. As a result of the change in accounting presentation, cable revenue and expenses have increased by $5,877 (2002 — $3,741) and $26,489 (2002 — $25,724) respectively for the quarter and year ended August 2003.

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

2. BUSINESS SEGMENT INFORMATION

The Company provides cable television services, high-speed Internet access and Internet infrastructure services (Big Pipe) (“Cable”); DTH (Star Choice) satellite services; and, satellite distribution services. All of these operations are located in Canada except for two small cable television systems located in the United States which were sold effective June 30, 2003. Information on operations by segment is as follows:

Operating revenue and income (loss) before amortization


		Three months ended						Year ended
		August 31,						August 31,

		2003			2002			2003			2002
		$			$			$			$

Revenue
	Cable		369,197			366,626			1,488,929			1,395,103
	DTH		130,519			107,823			496,804			416,981
	Satellite services		26,976			29,314			116,782			119,774

			526,692			503,763			2,102,515			1,931,858
Inter segment —
	Cable		(641	)		(579	)		(2,607	)		(1,816	)
	DTH		(1,248	)		(1,430	)		(5,167	)		(1,430	)
	Satellite services		(4,484	)		(3,403	)		(18,001	)		(14,328	)

			520,319			498,351			2,076,740			1,914,284

Operating income (loss) before amortization⁽¹⁾
	Cable		186,277			173,883			727,458			608,916
	DTH		20,256			2,264			52,814			(14,103	)
	Satellite services		10,318			9,068			41,578			42,460
	Satellite restructuring		—			—			(4,850	)		—
	DTH write-down of inventory		—			—			(4,400	)		—
	Corporate restructuring		(4,000	)		—			(4,000	)		(4,600	)
	Recovery of Cable litigation accrual		12,000			—			12,000			—

			224,851			185,215			820,600			632,673

(1)

Operating income (loss) before amortization is presented because it is a widely accepted financial indicator of a company’s ability to service and/or incur debt. Operating income (loss) before amortization is not a measurement in accordance with Canadian or US GAAP and should not be considered as an alternative to net income or any other measure of performance required by Canadian or US GAAP.

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

Capital expenditures


		Three months ended					Year ended
		August 31,					August 31,

		2003		2002			2003		2002
		$		$			$		$

Capital expenditures accrual basis
	Cable		35,600		75,935			163,835		543,760
	Corporate⁽¹⁾		8,296		17,977			36,789		87,119

	Sub-total Cable including corporate		43,896		93,912			200,624		630,879

	DTH		4,181		19,481			35,038		80,558
	Satellite services		24		211			1,912		20,576

	Sub-total Satellite		4,205		19,692			36,950		101,134

Total capital expenditures accrual basis			48,101		113,604			237,574		732,013
Change in working capital related to capital expenditures			6,201		(33,759	)		20,109		11,555

Capital expenditures cash flow			54,302		79,845			257,683		743,568

Equipment subsidies
	Cable		7,133		11,008			67,628		52,446
	Satellite		26,547		11,647			95,248		69,208

			33,680		22,655			162,876		121,654

Total capital expenditures on an accrual basis including equipment subsidies
	Cable		51,029		104,920			268,252		683,325
	Satellite		30,752		31,339			132,198		170,342

			81,781		136,259			400,450		853,667

(1)

Includes the Company’s 38.3% proportionate share or $3,656 and $10,976 for the quarter and year ended respectively, of capital expenditures in respect of the Burrard Landing Lot 2 Holdings Partnership (“Partnership”) which the Company is required to proportionately consolidate (see Note 1 to the Company’s 2002 Consolidated Financial Statements.) As the Partnership is financed by its own credit facility, this is a non-cash item for the Company.

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

Assets

August 31, 2003

Cable

DTH

Satellite services

Total

Segment assets

5,771,952

965,510

556,844

7,294,306

Corporate assets

306,813

Total assets

7,601,119


	August 31, 2002

	Cable		DTH		Satellite services		Total
	$		$		$		$

Segment assets		6,520,696		999,372		637,371		8,157,439

Corporate assets								344,259

Total assets								8,501,698

3. INTANGIBLES

The changes in the carrying amount of intangibles for the year ended August 31, 2003 are as follows:


	Broadcast licenses			Goodwill
	$			$

Balance as of September 1, 2002		4,877,256			145,865
Business acquisition		3,634			—
Business divestitures		(173,162	)		(16,917	)
Write-down		(80,000	)		(50,000	)

Balance as of August 31, 2003		4,627,728			78,948

Divestitures

Effective June 30, 2003 the Company sold its US cable systems comprised of approximately 75,000 basic cable subscribers and 13,000 Internet subscribers in Texas and Florida for $257.4 million. Prior to the sale, the Company wrote-down the value of its US cable systems by $80.0 million. A significant portion of the write-down was in respect of the strengthening Cdn $ impacting the translated net proceeds. Due to a slight recovery of the US$ in the fourth quarter, the actual loss was $74.7 million resulting in a $5.3 million gain on the sale this quarter.

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

4. LONG-TERM DEBT⁽¹⁾


				August 31,
		Effective
		Interest rates		2003		2002
		%		$		$

Corporate
Bank loans		Fixed and variable			606,798		425,106
Senior notes —
	Due April 11, 2005		7.05		275,000		275,000
	Due October 17, 2007		7.40		300,000		300,000
	US $440 million due April 11, 2010		7.88		609,708		685,872
	US $225 million due April 6, 2011		7.68		311,783		350,729
	US $300 million due December 15, 2011		7.61		415,710		467,640

					2,518,999		2,504,347

Cancom
Bank loans⁽²⁾		Variable			—		253,800
Subordinated credit facility		Variable			—		40,000
Structured Note, due December 15, 2003			7.00		250,000		250,000

					250,000		543,800

Star Choice
US $150 million Senior secured notes			13.00		—		233,820

Other subsidiaries
Videon CableSystems Inc. 8.15% Senior Debentures Series “A” due April 26, 2010			7.63		130,000		130,000
Big Pipe Ventures, L.P.		Variable			—		50,000
Burrard Landing Lot 2 Holdings Partnership		Variable			18,069		7,670

					148,069		187,670

Total consolidated debt					2,917,068		3,469,637
Less current portion⁽³⁾					271,520		—

					2,645,548		3,469,637

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003 [all amounts in thousands of Canadian dollars, except per share amounts]

(1)

Availabilities under banking facilities are as follows at August 31, 2003:


	Total		Operating		Revolving		Term *		Term⁽²⁾
	$		$		$		$		$

Total facilities		1,775,198		60,000		1,150,000		215,198		350,000
Amount drawn (excluding letters of credit)		606,798		—		41,600		215,198		350,000

		1,168,400		60,000		1,108,400		—		—

The amount available under the revolving facility amortizes such that the facility expires April 30, 2007 as follows:


Date	Amount Available		%

August 31, 2003	$	1,150,000		100
October 31, 2003		1,092,500		95
April 30, 2004		1,035,000		90
October 31, 2004		948,750		82.5
April 30, 2005		862,500		75
October 31, 2005		718,750		62.5
April 30, 2006		575,000		50
October 31, 2006		287,500		25
April 30, 2007		—		0

Amortizes on the same basis as the revolving facility.

(2)		A syndicate of banks has provided the Company with an unsecured term loan in the amount of $350,000 due February 10, 2006. The proceeds of the loan were invested in preferred shares of Cancom, which in turn used the proceeds to repay in full the amounts outstanding under its $350,000 senior credit facility. Cancom’s credit facility was then cancelled. The loan is subject to essentially the same terms and conditions as the Company’s existing unsecured credit facility. During the prior quarter, the Company entered into interest rate hedges to fix interest for the duration of the loan at a rate that ranges from 4.9525% to 7.0775% depending on debt to cash flow ratios. At August 31, 2003 the rate was 5.9525%.

(3)		Current portion of long-term debt includes the Cancom Structured Note and current portion of the term facilities.

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

5. SHARE CAPITAL

Issued and outstanding


Number of Securities
August 31,						August 31,

2003		2002			2003 $		2002 $

	11,360,432		11,373,972	Class A Shares		2,491		2,493
	220,496,092		220,473,552	Class B Non-Voting Shares		2,107,464		2,107,367

	231,856,524		231,847,524			2,109,955		2,109,860

				EQUITY INSTRUMENTS
				COPrS —
	5,700,000		5,700,000	8.45% Series A US $142.5 million due Sept. 30, 2046		192,871		192,871
	100,000		100,000	8.54% Series B due Sept. 30, 2027		98,467		98,467
	6,900,000		6,900,000	8.50% Series US $172.5 million due Sept. 30, 2097		252,525		252,525
	6,000,000		6,000,000	8.875% Series due Sept. 28, 2049		147,202		147,202

						691,065		691,065

				SHELS —
	—		33,923	Series III — US $33.9 million		—		50,342
	—		28,853	Series IV — US $28.9 million		—		42,726
	—		57,583	Series V — US $57.6 million		—		90,481

						—		183,549

				Zero Coupon Loan — US $22.8 million		33,858		33,858

						2,834,878		3,018,332

The Series V SHELS were redeemed on February 28, 2003 by delivering the underlying security of 5,326,827 Terayon shares. The proceeds on the surrender of the Terayon shares were recorded using the SHELS historical cost which resulted in a gain of $44,179 on redemption of the SHELS.

The Series III and IV SHELS were redeemed on May 31, 2003 by delivering the underlying security of 1,452,506 Liberate shares. The proceeds on the surrender of the Liberate shares were recorded using the SHELS historical cost which resulted in a gain of $44,561 and $30,781 on redemption of the SHELS III and IV, respectively.

Stock option plan

Under a stock option plan, directors, officers, employees and consultants of the Company are eligible to receive stock options to acquire Class B Non-Voting Shares with terms not to exceed 10 years from the date of grant. Twenty-five percent of the options are exercisable on each of the first four anniversary dates from the date of the original grant. The options must be issued at not less than their fair market value of the Class B Non-Voting Shares at the date of grant. The maximum number of Class B Non-Voting Shares issuable under this plan and the warrant plan described below may not exceed 16,000,000.

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

The changes in options for the year ended August 31, 2003 are as follows:


				Weighted average
				exercise price
	Shares			$

Outstanding at August 31, 2002		8,303,000			32.58
Granted		1,093,250			32.62
Exercised		—			—
Forfeited		(1,788,750	)		32.64

Outstanding at August 31, 2003		7,607,500			32.58

The following table summarizes information about the options outstanding at August 31, 2003:

Number

Weighted average

Number exercisable

outstanding at

remaining

Weighted average

at August 31,

Weighted average

Range of prices

August 31, 2003

contractual life

exercise price

2003

exercise price

29.70 – 34.08

7,607,500

7.7

32.58

3,336,486

32.36

For common share options granted to employees, had the Company determined compensation costs based on the fair values at grant dates of the common share options consistent with the method prescribed under CICA Handbook Section 3870, the Company’s loss per share would have been reported as the proforma amounts indicated below:


	August 31, 2003

	Three months ended			Year ended

Net income (loss) for the period		4,144			(47,828	)
Proforma net loss for the period		(990	)		(68,664	)
Proforma loss per share		(0.05	)		(0.47	)

The weighted average estimated fair value at the date of the grant for common share options granted for the year ended August 31, 2003 was $1.23 per share. 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:


	August 31, 2003

	Three months ended		Year ended

Dividend yield		0.30%		0.33%
Risk-free interest rate		3.69%		3.19%
Expected life of options		4 years		4 years
Expected volatility factor of the future expected market price of Class B Non-Voting Shares		36.5%		40.4%

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

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

Other stock options

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

At August 31, 2003, there were 78,002 Cancom options outstanding with exercise prices between $7.75 and $23.25 and a weighted average price of $12.89. The weighted average remaining contractual life of the Cancom options is 3.6 years. At August 31, 2003, 65,002 Cancom options were exercisable into 58,502 Class B Non-Voting Shares of the Company at a weighted average price of $14.13 per Class B Non-Voting Share.

Warrants

Prior to the Company’s acquisition and consolidation of Cancom effective July 1, 2000, Cancom and its subsidiary Star Choice had established a plan to grant warrants to acquire Cancom common shares at a price of $22.50 per share to distributors and dealers. The Company provided for this obligation (using $25 per equivalent Shaw Class B Non-Voting Share) in assigning fair values to the assets and liabilities in the purchase equation on consolidation based on the market price of the Shaw Class B Non-Voting Shares at that time. Accordingly, the issue of the warrants under the plan had no impact on the earnings of the Company.

A total of 262,807 warrants remain outstanding under the plan and vest evenly over a four year period. At August 31, 2003, 122,929 of these warrants had vested.

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

6. LOSS PER SHARE

Loss per share calculations are as follows:


	August 31,

	Three months ended						Year ended

	2003			2002			2003			2002
	$			$			$			$

Net income (loss)		4,144			(74,353	)		(47,828	)		(286,324	)
Equity entitlements, net of income tax		(10,135	)		(9,977	)		(40,193	)		(42,331	)

		(5,991	)		(84,330	)		(88,021	)		(328,655	)

Loss per share — basic and diluted		(0.03	)		(0.36	)		(0.38	)		(1.42	)

Weighted average number of Class A and B Non-Voting Shares used as denominator in above calculations (thousands of shares)		231,850			231,848			231,848			231,820

Class B Non-Voting Shares issuable under the terms of the Company’s stock option plans are anti-dilutive (decrease loss per share) and are therefore not included in calculating diluted loss per share.

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

7. STATEMENTS OF CASH FLOWS

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

(i)

Cash flow from operations


		August 31,

		Three months ended						Year ended

		2003			2002			2003			2002
		$			$			$			$

Net income (loss)			4,144			(74,353	)		(47,828	)		(286,324	)
Non-cash items:
	Amortization of deferred charges and property, plant and equipment		146,205			144,971			598,189			585,331
	Amortization of deferred IRU revenue		(3,126	)		(3,189	)		(11,984	)		(11,517	)
	Future income tax recovery		(1,793	)		(28,243	)		(5,781	)		(120,231	)
	Loss (gain) on sale of investments		(729	)		283			(1,957	)		(2,321	)
	Write-down of investments		—			61,538			15,000			330,466
	Gain on redemption of SHELS		—			—			(119,521	)		(218,327	)
	Dilution loss on issuance of stock by equity investee		—			—			—			571
	Loss on sale of satellite assets		—			—			3,800			1,281
	Foreign exchange loss (gain) on unhedged long-term debt		6,819			6,383			(32,617	)		1,658
	Provision for loss on sale and write-down of assets		(5,326	)		—			124,674			—
	Debt restructuring costs		10,634			—			10,634			—
	Equity (income) loss on investees		(20	)		697			1,921			53,487
	Other		(668	)		(829	)		236			(1,965	)

Cash flow from operations			156,140			107,258			534,766			332,109

(ii)

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


	August 31,

	Three months ended						Year ended

	2003			2002			2003			2002
	$			$			$			$

Accounts receivable		19,676			(22,380	)		49,864			6,082
Prepaids and other		(3,087	)		516			3,369			1,568
Accounts payable and accrued liabilities		(26,365	)		63,263			(67,085	)		(38,682	)
Income taxes payable		6,693			9,150			8,655			18,737
Unearned revenue		(2,271	)		6,425			8,872			15,598

		(5,354	)		56,974			3,675			3,303

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

(iii)

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


				August 31,

	Three months ended						Year ended

	2003			2002			2003		2002
	$			$			$		$

Interest		58,119			50,853			272,110		257,609
Income taxes		(1,922	)		(5,526	)		3,151		(10,443	)

8. OTHER REVENUE (EXPENSE)

Included in other revenue (expense) are foreign exchange gains (losses) on the translation of current assets and liabilities of $2,426 (2002 — ($753)) and $8,032 (2002 — $667) for the quarter and year respectively.

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

9. UNITED STATES ACCOUNTING PRINCIPLES

The consolidated financial statements of the Company are prepared in Canadian dollars in accordance with accounting principles generally accepted in Canada (“Canadian GAAP”). The following adjustments and disclosures would be required in order to present these consolidated financial statements in accordance with accounting principles generally accepted in the United States (“US GAAP”).


		August 31,

		Three months ended						Year ended

		2003			2002			2003			2002
		$			$			$			$

Reported income (loss) using Canadian GAAP			4,144			(74,353	)		(47,828	)		(286,324	)
	Add (deduct) adjustments for:
	Deferred charges (2)		10,187			20,688			(9,849	)		35,594
	Foreign exchange gains (losses) (3)		(5,418	)		(39,423	)		54,527			1,370
	Equity in loss of investees (4)		—			113			2,001			(19,901	)
	Entitlement payments on equity instruments (8)		(15,552	)		(16,626	)		(64,827	)		(70,551	)
	Adjustment to write-down of GT Group Telecom Inc. (11)		—			—			—			28,374
	Income tax effect of adjustments		2,724			6,208			18,005			13,631

Net loss using US GAAP			(3,915	)		(103,393	)		(47,971	)		(297,807	)

Unrealized foreign exchange loss on translation of self-sustaining foreign operations			17,731			3,040			(1,031	)		1,513
Unrealized gains on available-for-sale securities, net of tax (7)
	Unrealized holding gains arising during the period		1,316			24,200			1,361			59,406
	Less: reclassification adjustments for gains included in net income		—			—			(95,879	)		(180,425	)

			19,047			27,240			(95,549	)		(119,506	)
Adjustment to fair value of derivatives (9)			(43,619	)		80,732			(224,341	)		53,293
Foreign exchange gains (losses) on hedged long-term debt (10)			(13,610	)		—			136,975			—

			(38,182	)		107,972			(182,916	)		(66,213	)

Comprehensive income (loss) using US GAAP			(42,097	)		4,579			(230,886	)		(364,020	)

Net loss per share using US GAAP			(0.02	)		(0.45	)		(0.21	)		(1.28	)
Comprehensive income (loss) per share using US GAAP			(0.18	)		0.02			(1.00	)		(1.57	)

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

Balance sheet items using US GAAP


	August 31,				August 31,
	2003				2002

	Canadian		US		Canadian		US
	GAAP		GAAP		GAAP		GAAP
	$		$		$		$

Investments and other assets (7)		49,415		74,758		133,602		280,231
Derivative instruments asset (9)		—		—		—		110,096
Deferred charges (2)(10)		169,045		42,068		219,916		59,532
Broadcast licenses (1)(5)(6)		4,627,728		4,602,494		4,877,256		4,852,022
Deferred credits (3)(10)		735,353		597,246		633,259		618,941
Derivative instruments liability (9)		—		168,757		—		—
Future income taxes		928,277		892,442		1,004,559		1,007,287
Long-term debt (8)		2,645,548		3,363,685		3,469,637		4,433,869
Shareholders’ equity		2,495,066		1,655,246		2,779,108		1,897,573

The cumulative effect of these adjustments on consolidated shareholders’ equity is as follows:


	August 31,			August 31,
	2003			2002
	$			$

Shareholders’ equity using Canadian GAAP		2,495,066			2,779,108
Amortization of intangible assets (1)		(123,542	)		(123,542	)
Deferred charges (2)		(34,130	)		(29,579	)
Equity in loss of investees (4)		(36,202	)		(37,843	)
Gain on sale of subsidiary (5)		13,822			13,822
Gain on sale of cable television systems (6)		47,501			47,501
Equity instruments (8)		(709,540	)		(942,848	)
Accumulated other comprehensive income		2,753			192,467
Cumulative translation adjustment		(482	)		(1,513	)

Shareholders’ equity using US GAAP		1,655,246			1,897,573


	August 31,			August 31,
	2003			2002
	$			$

Accumulated other comprehensive income
Unrealized foreign exchange gain on translation of self-sustaining foreign operations		482			1,513
Unrealized gains on investments (7)		20,721			122,038
Fair value of derivatives (9)		(131,698	)		92,643
Foreign exchange gains (losses) on hedged long-term debt (10)		113,248			(23,727	)

		2,753			192,467

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

Areas of material difference between accounting principles generally accepted in Canada and the United States and their impact on the consolidated financial statements are as follows:

(1)		Amortization of intangibles prior to September 1, 2001 is required on a straight-line basis for US GAAP purposes, instead of an increasing charge method.

(2)		US GAAP requires all costs associated with launch and start-up activities and equipment subsidies to be expensed as incurred instead of being deferred and amortized.

(3)		US GAAP requires exchange gains (losses) on translation of equity instruments treated as debt as described in item 8 below, to be included in income or expense.

(4)		Equity in loss of investees has been adjusted to reflect US GAAP.

(5)		Gain on a sale of a subsidiary that was not permitted to be recognized under Canadian GAAP was required to be recognized under US GAAP.

(6)		Gain on an exchange of cable systems was required to be recorded under US GAAP but may not be recorded under Canadian GAAP.

(7)		US GAAP requires equity securities included in investments to be carried at fair value rather than cost as required by Canadian GAAP.

(8)		US GAAP treats equity instruments classified as equity under Canadian GAAP as debt and the related interest as an expense rather than a dividend.

(9)		Under US GAAP, all derivatives are recognized in the balance sheet at fair value with gains and losses recorded in income or comprehensive income. Under Canadian GAAP, derivatives are not recognized in the balance sheet.

(10)		Foreign exchange gains (losses) on translation of hedged long-term debt are deferred under Canadian GAAP but included in comprehensive income (loss) for US GAAP.

(11)		Write-down of GT Group Telecom Inc. has been adjusted due to a lower investment carrying value under US GAAP.

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

August 31, 2003
[all amounts in thousands of Canadian dollars, except per share amounts]

10. SUBSEQUENT EVENTS AND PENDING TRANSACTIONS

The Company agreed to acquire certain cable systems of Monarch Cablesystems Ltd. (“Monarch”) for $90 million including $25 million of either cash or assumption of debt and the balance through the issuance of Class B Non-Voting Shares of Shaw at $17.39 per share. The cable systems serve approximately 35,000 basic subscribers in the Medicine Hat (Medicine Hat, Taber, Brooks), Canmore (Canmore, Banff, Lake Louise) and southern B.C. (Hope, Fernie, Kimberley) regions. The transaction is subject to approval by the CRTC and the Toronto Stock Exchange. Monarch is controlled by a Director of the Company. The transaction was reviewed and approved by an independent committee of the Board of Directors.