40-F

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 40-F

Check One

o Registration Statement Pursuant to Section 12 of the Securities Exchange Act of 1934

þ Annual Report Pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended August 31, 2006 Commission File Number: 001-14684

Shaw Communications Inc.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English (if applicable))

Alberta, Canada

(Province or other jurisdiction of incorporation or organization)

4841

(Primary Standard Industrial Classification Code Number (if applicable))

N/A

(I.R.S. Employer Identification Number (if applicable))

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

(Address and telephone number of Registrant’s principal executive offices)

CT Corporation System, 111 Eighth Avenue, 13^th Floor, New York, NY 10011 (212) 894-8940

(Name, address (including zip code) and telephone number (including area code of agent

for service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
Class B Non-Voting Participating Shares	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

8.54% Series B Capital Securities
8.25% Senior Notes due 2010
7.25% Senior Notes due 2011
7.20% Senior Notes due 2011
6.10% Senior Notes due 2012
7.5% Senior Notes due 2013
6.15% Senior Notes due 2016

(Title of Class)

For annual reports, indicate by check mark the information filed with this Form:

þ     Annual information form þ     Audited annual financial statements

     The following are the number of outstanding shares of each of the issuer’s classes of capital or common stock as of August 31, 2006:

Class A Participating Shares -	11,291,932 issued and outstanding
Class B Non-Voting Participating Shares -	203,649,904 issued and outstanding

     Indicate by check mark whether the Registrant by filing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). If “Yes” is marked, indicate the filing number assigned to the Registrant in connection with such Rule

Yes o            No þ

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes þ            No o

DISCLOSURE CONTROLS AND PROCEDURES

Shaw Communications Inc. (the “Corporation”) has designed disclosure controls and procedures to ensure that material information relating to the Corporation, including its consolidated subsidiaries, is made known to the Chief Executive Officer and Chief Financial Officer by others within the Corporation, including its consolidated subsidiaries, on a regular basis, including during the period in which the Corporation’s Annual Report on Form 40-F relating to financial results for the fiscal year ended August 31, 2006 is being prepared. The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer have concluded, as of that evaluation date, that the Corporation’s disclosure controls and procedures were effective to ensure that the material and information relating to the Corporation, including its consolidated subsidiaries, was made known to them by others within those entities during the period in which this report was being prepared.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROLS

See page 46 of Exhibit 1.

AUDITOR ATTESTATION

See page 48 of Exhibit 1.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the fiscal year ended August 31, 2006, there were no significant changes in the Corporation’s internal controls over financial reporting, or in other factors that could significantly affect such internal controls, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

IDENTIFICATION OF THE AUDIT COMMITTEE

The Corporation has a standing Audit Committee of the Board of Directors established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee consists of Michael W. O’Brien (Chair), George F. Galbraith, Harold A. Roozen and Carl E. Vogel. Each member of the Audit Committee is an independent director, as that term is defined by the New York Stock Exchange’s listing standards applicable to the Corporation.

AUDIT COMMITTEE FINANCIAL EXPERT

The board of directors of the Corporation has determined that it has two audit committee financial experts serving on its audit committee (the “Audit Committee”). Each of Michael W. O’Brien and Carl E. Vogel has been determined to be such an audit committee financial expert, within the meaning of Section 407 of the United States Sarbanes-Oxley Act of 2002. Each of Mr. O’Brien and Mr. Vogel is independent, as that term is defined by the New York Stock Exchange’s listing standards applicable to the Corporation. The Securities and Exchange Commission has indicated that the designation of Mr. O’Brien and Mr. Vogel as audit committee financial experts does not make either of Mr. O’Brien and Mr. Vogel an “expert” for any purpose, impose any duties, obligations or liability on either of Mr. O’Brien and Mr. Vogel that are greater than those imposed on members of the Audit Committee and board of directors of the Corporation who do not carry this designation, or affect the duties, obligations or liabilities of any other member of the Audit Committee.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The aggregate amounts paid or accrued by the Corporation with respect to fees payable to Ernst & Young LLP, the Corporation’s principal accountant, for audit (including separate audits of subsidiary entities, financings, regulatory reporting requirements and Sarbanes-Oxley Act-related services), audit-related, tax and other services in the fiscal years ended August 31, 2006 and 2005 were as set forth below (stated in Canadian dollars).

Type of Service	Fiscal 2006		Fiscal 2005
Audit Fees	$	2,213,961	$	2,056,213
Audit-related Fees		195,457		186,150
Tax Fees		436,736		232,859
All Other Fees		—		—
Total	$	2,846,154	$	2,475,222

Fees paid for audit-related services in fiscal 2006 and 2005 were in respect of the separate audit of a subsidiary that was not required by law. The tax fees paid in fiscal 2006 and 2005 were related to tax compliance and tax consultation on scientific research, exploration and development tax credits, commodity taxes, linear property taxes and transfer pricing.

The Audit Committee of the Corporation considered and agreed that the above fees are compatible with maintaining the independence of the Corporation’s auditors. Further, the Audit Committee determined that, in order to ensure the continued independence of the auditors, only limited non-audit related services will be provided to the Corporation by Ernst & Young LLP and in such case, only with the prior approval of the Audit Committee. The Chair of the Audit Committee has been delegated authority to approve the retainer of Ernst & Young LLP to provide non-audit services in extraordinary circumstances where it is not feasible or practical to convene a meeting of the Audit Committee, subject to an aggregate limit of $100,000 in fees payable to Ernst & Young LLP for such services per fiscal year of the Corporation. The Chair of the Audit Committee is required to report any such services approved by him to the Audit Committee.

For the fiscal year ended August 31, 2006, none of the services described above were approved by the Audit Committee pursuant to “de minimus exception” set forth in Rule 2-01, paragraph (c)(7)(i)(C) of Regulation S-X.

CODE OF ETHICS

The Corporation has adopted a code of ethics (the “Shaw Business Conduct Standards”) that applies to all employees and officers, including its Chief Executive Officer, Chief Financial Officer, principal accounting officer and persons performing similar functions. A copy of the Shaw Business Conduct Standards, as amended, is available on the Corporation’s website. To access the Shaw Business Conduct Standards, visit the Corporation’s website at www.shaw.ca and select “Investor Relations,” then select “Other Corporate Governance Information,” and then select “Business Conduct Standards”. Except for the Shaw Business Conduct Standards, no information contained on the Corporation’s website shall be incorporated by reference in this Form 40-F.

OFF-BALANCE SHEET ARRANGEMENTS

The Corporation has no off-balance sheet arrangements as defined in General Instruction B(11) to Form 40-F.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

See page 44 of Exhibit 1.

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

The Corporation undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

The Corporation has previously filed a Form F-X in connection with each class of securities to which the obligation to file this Form 40-F arises. Any change to the name and address of the agent for service of process shall be communicated promptly to the Commission by amendment to Form F-X.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Form 40-F to be signed on its behalf by the undersigned, thereto duly authorized.

SHAW COMMUNICATIONS INC.
By:	/s/ Steve Wilson
	Steve Wilson,
	Senior Vice President and Chief Financial Officer

Dated: November 29, 2006

EXHIBITS

The following documents are filed as exhibits to this Form 40-F:

Exhibit Number	Document
1.	Annual Report for the fiscal year ended August 31, 2006.
2.	Annual Information Form for the fiscal year ended August 31, 2006.
3.	Consent of Ernst & Young LLP.
4.	Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated November 29, 2006.
5.	Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated November 29, 2006.

EX-1

Shaw Communications

ANNUAL REPORT

August 31, 2006

SHAW COMMUNICATIONS INC.

ANNUAL REPORT

CONTENTS	Page
Report to Shareholders		1
Management’s Discussion and Analysis		4
Management’s Responsibility for Financial Statements and Report on Internal Control over Financial Reporting		46
Independent Auditors’ Reports		47
Consolidated Financial Statements		49
Notes to the Consolidated Financial Statements		52
Five Years in Review		96
Shareholders’ Information		97
Corporate Information		98

The Annual General Meeting of Shareholders will be held on January 11, 2007 at 11:00 am (Mountain Time) at the Shaw Barlow Trail Building, 2400 -32nd Avenue NE, Calgary, Alberta.

Shaw Communications Inc.

REPORT TO SHAREHOLDERS

August 31, 2006

Dear fellow shareholders:

During 2006, Shaw Communications has achieved continued customer growth across all product lines, implemented value-added improvements to existing products and services, expanded new products and services, and improved financial results. These achievements mark our business growth, strengthen our financial position and enhance your investment in Shaw Communications Inc.

FINANCIAL HIGHLIGHTS

This year our financial position continued to strengthen:

• Consolidated service revenue increased 11% over last year to $2.5 billion.

• Total consolidated service operating income before amortization¹ increased 10% over last year to $1.1 billion.

• Funds flow from operations² grew to $847 million.

• Capital investment totaled $558 million, up $120 million over last year.

• Despite increased capital investment, free cash flow¹ remained strong at $265 million.

Shaw Communications Inc. has chosen a balanced and prudent approach to reinvestment in growth strategies to build a stronger platform for the future.

A CUSTOMER-FOCUSED STRATEGY

Our strategy continues to focus on our customer and our vision underlines this focus;

“We the leading entertainment and communications company, deliver exceptional customer experience through outstanding people sharing Shaw values.”

As we pursue the daily delivery of superior customer experience, we build a company that also delivers to our shareholders through solid returns and improved shareholder value.

Our strategic focus continues to be to:

• improve and leverage our network infrastructure to offer customers a wider range of products and services – this year with particular emphasis on the expansion of Shaw Digital Phone,

• enhance our existing products and services to provide greater value for customers,

• continuously improve on our 24/7/365 service commitments,

• provide bundled product offers that enhance value for customers and shareholders, and

• sharpen our competitive edge with operational efficiencies and sound financial and resource management.

1

Shaw Communications Inc.

REPORT TO SHAREHOLDERS

August 31, 2006

THIS YEAR’S SUCCESSES

Customer growth is one of our continuing success stories. Over the year, basic cable customers grew by 41,000 to 2.2 million. Digital customers grew 71,000, which represents an increase of more than 10%, to 670,000. Internet customers grew by 12% or 139,000 to 1.3 million. Star Choice customers grew by 25,000 to 869,000 and our Digital Phone customer base grew to 213,000.

Digital Phone continued to roll-out across our market area with the service available at year end to approximately 2.0 million homes, representing 60% of homes passed. We enhanced the service this year by offering international calls within the packaged rate.

We have increased our Xtreme-I Internet speed to enhance internet usage and also upgraded our High-Speed Lite Internet package. Our cable content line-up offers more choice to cable viewers with additions such as Turner Classic Movies and American Movie Classics. Over the past two years, Star Choice has introduced many technical improvements, added twenty-five new channels of viewing for subscribers, and improved service levels.

Each innovation keeps Shaw competitive, allowing us to retain existing customers and steadily add new ones. We deliver high-quality customer service, simplicity and value to our customers through various bundled service offerings creating value for Shaw’s stakeholders through incremental penetration, operational efficiencies and reduced churn.

We have recently purchased several cable systems including Pemberton Cable, Saltspring Cablevision, Whistler Cable and Grand Forks, all in British Columbia, as well as Norcom Telecommunications Limited operating in Kenora, Ontario. These acquisitions complement our existing operations and open growing markets to our full range of products and services.

The successful completion of Shaw Tower in Vancouver, British Columbia has raised our profile in a key market in addition to being a commercial success. It houses our local branch operations, and is already a landmark structure in the area.

The company redeemed a line of preferred securities during the year, which lowers our cost of capital, and also reduced debt to strengthen our balance sheet.

We repurchased 5.1 million Class B Non-Voting shares for $147 million representing approximately 2.5% of the outstanding Class B Non-Voting shares on August 31, 2005. Our dividend payout has steadily increased over the past four years and our Board of Directors just recently increased the annual equivalent dividend rate for Class B Non-Voting shares to $1.00 per share payable in monthly installments. Over the past year Class B Non-Voting share values have increased by 32.6%

OUTLOOK FOR THE FUTURE

We compete and win in a change-driven, highly competitive industry.

Our strategic focus continues to be our customers, satisfying them with our superior level of product offerings and striving to exceed their expectations on value and service.

We will continue to carefully manage our capital and operational assets in order to improve the efficient use of these resources. We will manage our finances to ensure we have the flexibility to take advantage of market opportunities that will deliver real growth and reward.

2

Shaw Communications Inc.

REPORT TO SHAREHOLDERS

August 31, 2006

Shaw shareholders are well positioned to continue to benefit from the dedicated efforts of our over 8,200 employees who are constantly improving our delivery of tangible value, new and improved products, and customer service that will drive our future success.

[Signed]	[Signed]
JR Shaw	Jim Shaw
Executive Chair	Chief Executive Officer
Shaw Communications Inc.	Shaw Communications Inc.

1	See definitions and discussion under Key performance drivers in Management’s Discussion and Analysis.
2	Funds flow from operations is presented before changes in non-cash working capital as presented in the Consolidated Statements of Cash Flows.

3

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

November 20, 2006

FORWARD

Tabular dollars are in thousands of Canadian dollars, except per share amounts or unless otherwise indicated. All per share amounts reflect common per share amounts, and are based on unrounded amounts. Percentage changes are based on rounded amounts. Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements.

This report includes various schedules and reconciliations. Figures for 2004 and 2005 may have been restated. Details of the restatement are included in the section “New accounting standards” included in this report.

INDEX

CONTENTS			Page
Outline
I.		INTRODUCTION TO THE BUSINESS	6
	A.	Company overview – core business and strategies	6
	B.	Seasonality	8
	C.	Key performance drivers	8
	D.	Critical accounting policies and estimates	10
	E.	Related party transactions	15
	F.	New accounting standards	16
	G.	Known events, trends, risks and uncertainties	18
II.		SUMMARY OF QUARTERLY RESULTS	25
III.		RESULTS OF OPERATIONS	27
IV.		FINANCIAL POSITION	39
V.		CONSOLIDATED CASH FLOW ANALYSIS	41
VI.		LIQUIDITY AND CAPITAL RESOURCES	42
VII.		ADDITIONAL INFORMATION	44
VIII.		COMPLIANCE WITH NYSE CORPORATE GOVERNANCE LISTING STANDARDS	45
IX.		CERTIFICATION	45

CAUTION CONCERNING FORWARD LOOKING STATEMENTS

Certain statements included in this Management’s Discussion and Analysis and annual 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. 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), 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

4

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

with the expectations and predictions of Shaw is subject to a number of risks and uncertainties described in the section “Known events, trends, risks and uncertainties” included in this report. These factors include 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 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, 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 Shaw 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 Shaw to predict what factors will arise or when. In addition, Shaw 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.

5

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

I.     INTRODUCTION TO THE BUSINESS

A.     Company overview – core business and strategies

i)     Shaw Communications Inc.

Shaw Communications Inc. (“Shaw” or “the Company”) is a diversified Canadian communications company whose core business is providing broadband cable television, Internet, Digital Phone, telecommunications services (through Shaw Business Solutions) and satellite direct-to-home services (through Star Choice) to approximately 3.2 million customers. It provides customers with high-quality entertainment, information and communications services, utilizing a variety of distribution technologies.

Shaw’s strategy is to maximize shareholder value through the generation of free cash flow¹. The key elements of this strategy include: leveraging its network infrastructure to offer customers a wider variety of products and services; enhancing existing products to provide greater value to customers; providing best-in-class 24/7/365 service; bundling product offerings to provide value to both Shaw and the customer; and focusing on sound capital management and operational efficiencies to maintain a competitive edge.

Shaw is organized into two business segments. The relative size of each of the segments as a percentage of consolidated service revenue in fiscal 2006 is as follows: Cable – 73.5%; Satellite – 26.5%.

ii)     Cable

Cable is comprised of Shaw’s cable television, Internet, Digital Phone and Business Solutions operations. Shaw is the largest cable television provider in Western Canada with almost 2.2 million cable television customers in five provinces (British Columbia, Alberta, Saskatchewan, Manitoba and northwestern Ontario), representing approximately 28% of the Canadian cable television market. Through its technologically advanced broadband network, Shaw had 1,306,991 Internet customers, 669,737 digital cable customers and 212,707 digital phone lines as at August 31, 2006. Shaw’s penetration of Internet is one of the highest in North America, at almost 60% of basic cable customers. Shaw Business Solutions develops and manages Shaw’s inter-city fiber network that serves as the primary Internet backbone for Shaw’s broadband Internet customers and provides Internet and data connectivity services to large businesses and other organizations.

Shaw’s strategy is to leverage its network by providing additional services beyond traditional cable. In past years, Shaw enhanced the quality, depth and capacity of its plant and network infrastructure through significant capital investments. The plant and network is now essentially fully digital and two-way capable. Over the past three years, Shaw has made capital investments in order to leverage its existing network to offer telephony services. These ongoing investments have enabled Shaw to expand its service offerings to include digital programming, Internet, Video-on-Demand (“VOD”), High Definition Television (“HDTV”), and Digital Phone.

In offering Digital Phone service, Shaw is utilizing PacketCable^tm technology and DOCSIS^tm specifications. The customers’ existing phone lines are connected into a modem usually installed at the location of the central wiring in the customer’s premise. The modem converts the voice conversation (waves) into digital IP packets that are carried to an IP based telephone switch (“softswitch”). At this point the packets are transformed again into analog signals and handed off to the public switched telephone network or may be routed through the IP network to the called party. Over the past fiscal year, Shaw invested $86.1 million of capital on the deployment of Digital Phone, which includes costs associated with customer premise equipment and installation, acquiring and operating softswitches, IP

¹  See definitions and discussion under Key performance drivers in Management’s Discussion and Analysis.

6

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

transport, network redundancy, network equipment and back-up powering, information technologies and systems integration. In total, Shaw has invested $148.7 million on the roll-out of Digital Phone to the end of 2006.

The entry into the triple play market of voice, video and data with the launch of Digital Phone in 2005 was a significant milestone for Shaw. As at August 31, 2006 Shaw Digital Phone service is available to approximately 60% of homes passed. In 2005 Shaw launched the Digital Phone service in Calgary, Edmonton and Winnipeg and during 2006, Shaw expanded its Digital Phone footprint to include Vancouver and Victoria and various other smaller centers. Shaw Digital Phone is a primary line telephone service that uses Shaw’s private managed broadband network, allowing the Company to ensure a consistent level of quality and reliability to its phone customers. The service combines local, long distance and the most popular calling features into a simple package for a fixed monthly fee. The service includes a local residential line, unlimited anytime long distance calling within Canada and the U.S., 1000 international calling minutes per month to Europe, the U.K. and Asia Pacific as well as six calling features: voicemail, call display, call forwarding, three-way calling, call return and call waiting. Professional installation, access to E-911, directory and operator services, and 24/7/365 customer support are all part of the Shaw Digital Phone service at no additional cost. Customers also have the option of keeping their current home phone number and the service works with existing telephones in a customer’s home so no purchase of additional equipment is required.

Shaw has deployed an advanced generation of cable modems based on the DOCSIS^tm 2.0 specifications. This advanced generation of cable modem technology enabled 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. As a result, the network has the ability to provide up to 30 megabit per second (Mbps) capacity in both directions. Shaw’s continued investment in plant infrastructure will accommodate further growth opportunities in digital programming, VOD, HDTV, and Internet, and will accelerate Digital Phone growth. The home entertainment experience continues to improve with on-demand and personalization of products and services and Shaw continues to ensure that its broadband network and interactive capabilities are being used to their full potential.

Shaw’s strategy of enhancing existing products to provide greater value to customers and providing exceptional customer service continued throughout 2006. Analog cable service was enhanced as part of the Company’s strategy to bring popular programming services to these cable customers, who represent almost 70% of Shaw’s basic subscribers. Digital, Shaw Pay Per View (“PPV”) and VOD offerings were expanded with new content and the High Definition (“HD”) channel line up was improved with the addition of several new channels. Internet saw increased speed as well as the introduction of Shaw Photo Share. Also in the year, the Company established a new call centre located in Winnipeg that serves as an overflow centre to handle customer calls and inquiries from across Western Canada. With the continued growth of the business, there was a need to increase support to ensure delivery on the commitment to provide exceptional customer service.

Shaw has a customer-centric strategy designed to deliver high-quality customer service, simplicity and value to its customers through various bundled service offerings. Delivering value to customers creates value for Shaw’s stakeholders through incremental penetration, operational efficiencies and reduced churn.

Finally, Shaw creates value through operating efficiencies. The Company continues to accomplish this through its “clustering” strategy, which involves geographical consolidation and re-alignment of its cable systems to take advantage of potential administrative, operating and marketing synergies that arise from larger, focused operations. Over a number of years, Shaw has acquired and divested various cable systems to complement its cable clusters. As a result, Shaw has consolidated its position as the dominant

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Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

provider of cable television services in Western Canada. During 2006 Shaw announced the acquisition of several cable systems including Pemberton Cable, Saltspring Cablevision, Whistler Cable and Grand Forks, all in British Columbia, as well as Norcom Telecommunications Limited operating in Kenora, Ontario. In 2004, Shaw acquired certain cable systems in Alberta and southern British Columbia from Monarch Cablesystems Ltd. (“Monarch”).

iii)    Satellite

Satellite is comprised of DTH (Star Choice) and Satellite Services. DTH distributes digital video and audio programming services via DTH satellite to Canadian residences and commercial establishments. It is one of two DTH satellite operators licensed by the Canadian Radio-television and Telecommunications Commission (“CRTC”) to deliver digital subscription video and audio programming services via satellite directly to subscribers’ homes and businesses. Satellite Services has two principal lines of business: (a) through Shaw Broadcast Services, redistributing television and radio signals via satellite to cable operators and other multi-channel system operators in Canada and the US, referred to as a satellite relay distribution undertaking (“SRDU”) and providing uplink and network management services for conventional, specialty and pay broadcasters on a contract basis; and b) through Shaw Tracking, providing mobile tracking and messaging services to approximately 550 companies in the long-haul trucking industry in Canada, with over 35,000 vehicles using its services.

Star Choice began the national roll-out of its digital DTH services in October 1997 and, at August 31, 2006, had 869,208 subscribers across Canada. Star Choice’s customer acquisition strategy has evolved from predominantly rural households not served by cable or underserved by cable (i.e. served by cable systems that offer fewer than 80 channels) to households that have access to a full range of cable services primarily in urban areas.

Star Choice and Satellite Services share a common satellite infrastructure. They each distribute largely the same digital video and audio signals to different markets (residential and business), thereby allowing Shaw to derive distinct revenue streams from different customers using a common platform.

B.     Seasonality

Although financial results of the business segments are generally not subject to significant seasonal fluctuations, subscriber activity may fluctuate from one quarter to another. For example, the Cable segment typically experiences the highest levels of subscriber growth during the first quarter as post-secondary students return to school, customers return from vacation or reconnect cable in anticipation of the new television season. Correspondingly, subscriber growth tends to be lower or negative in the third and fourth quarters as the school year ends, vacation period begins and the television season ends. Subscriber growth in the Satellite business segment is also affected by vacation schedules as customers reconnect and disconnect DTH services at summer homes. Further, “snowbirds” (customers who vacation in warmer climates during the winter months) may also connect and reconnect DTH or cable services on a seasonal basis. In addition, new subscriber activations may also be positively affected by the Christmas holiday season. While subscriber activity is subject to seasonal fluctuations, it may also be affected by competition and varying amounts of promotional activity undertaken by the Company.

C.     Key performance drivers

Shaw measures the success of its strategies using a number of key performance drivers which are outlined below, including a discussion as to their relevance, definitions, calculation methods and underlying assumptions.

8

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

FINANCIAL MEASURES:

i)     Service revenue

Service revenue is a measurement determined in accordance with Canadian and US generally accepted accounting principles (“GAAP”). It represents the inflow of cash, receivables or other consideration arising from the sale of products and services. Service revenue is net of items such as trade or volume discounts and certain excise and sales taxes. It is the base on which free cash flow, a key performance driver, is determined; therefore, it measures the potential to deliver free cash flow as well as indicating growth in a competitive market place.

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 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 financial performance and as an indicator of its ability to service debt and return cash to shareholders. These non-GAAP measures have not been presented as an alternative to net income or any other measure of performance or liquidity prescribed by Canadian or US GAAP. The following contains a listing of the Company’s use of non-GAAP financial measures and provides a reconciliation to the nearest GAAP measurement or provides a reference to such reconciliation.

ii) Service operating income before amortization and operating margin

Service operating income before amortization is calculated as service revenue less operating, general and administrative expenses and is presented as a sub-total line item in the Consolidated Statements of Income and Deficit. In the analysis of business segments, it excludes a certain litigation settlement in 2004 as detailed in Note 15 to the Consolidated Financial Statements. It is intended to indicate the Company’s ability to service and/or incur debt, and therefore it is calculated before amortization (a non-cash expense) and interest. Service operating income before amortization is also one of the measures used by the investing community to value the business. Operating margin is calculated by dividing service operating income before amortization by service revenue.

Relative increases period over period in service operating income before amortization and in operating margin are indicative of the Company’s success in delivering valued products and services to its customers in a cost-effective manner.

iii)    Free cash flow

The Company uses free cash flow as a measure of the Company’s ability to repay debt and return cash to shareholders. Consolidated free cash flow is calculated as follows:

	2006		2005		2004
($000’s Cdn)
Cable free cash flow(1)		193,398		228,617		272,250
Satellite free cash flow(2)		72,047		48,702		6,631
Consolidated free cash flow		265,445		277,319		278,881

(1)	The reconciliation of free cash flow for cable is provided on page 32.
(2)	The reconciliation of free cash flow for satellite is provided on page 37.

Free cash flow for cable and satellite is calculated as service operating income before amortization, less interest, cash taxes on net income, capital expenditures (on an accrual basis) and equipment costs (net).

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All of the line items used in the free cash flow calculation, are as reported on a segmented basis in the Company’s Note 15 to the Consolidated Financial Statements. Therefore, segmented capital expenditures and equipment costs (net) exclude capital expenditures in respect of the Burrard Landing Lot 2 Partnership (the “Partnership”). The Partnership, which the Company is required to proportionately consolidate, is financed by 25 year secured mortgage bonds with no recourse to the Company. Segmented service operating income before amortization, which is the starting point of the free cash flow calculation, excludes prepayments on an indefeasible right to use (“IRU”) certain specifically identified fibers and the profit from satellite services equipment, both of which are recognized as amortization line elements in the income statement. As a result, prepayments on IRUs in amounts not exceeding the cost to build those fibers and equipment profit from satellite services are subtracted from the calculation of segmented capital expenditures and equipment costs (net).

STATISTICAL MEASURES:

i)     Subscriber counts, including penetration and bundled customers

The Company measures the count of its customers in Cable and DTH (Star Choice). Basic cable subscribers include residential customers, multiple dwelling units (“MDUs”) and commercial customers. A residential subscriber who receives at a minimum, basic cable service, is counted as one subscriber. In the case of MDUs, such as apartment buildings, each tenant with a minimum of basic cable service is counted as one subscriber, regardless of whether invoiced individually or having services included in his or her rent. Each building site of a commercial customer (e.g. hospitals, hotels or retail franchises) that is receiving at a minimum, basic cable service, is counted as one subscriber. Digital customers include the count of basic subscribers with one or more active DCTs. Internet customers include all modems on billing plus pending installations and Digital Phone lines includes all phone lines on billing plus scheduled installations due to the growth nature of these products. All subscriber counts exclude complimentary accounts but include promotional accounts.

Cable measures penetration for basic services as a percentage of homes passed and, in the case of all other services, as a percentage of basic customers.

Star Choice measures its count of subscribers in the same manner as cable counts its basic customers, except that it also includes seasonal customers who have indicated their intention to reconnect within 180 days of disconnection.

Subscriber counts and penetration statistics measure market share and also indicate the success of bundling and pricing strategies.

ii)     Customer churn

Customer churn is 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 of calculation. Churn provides a measure of customer satisfaction and preferences.

D.     Critical accounting policies and estimates

The Company prepared its Consolidated Financial Statements in accordance with Canadian GAAP. An understanding of the Company’s accounting policies is necessary for a complete analysis of results, financial position, liquidity and trends. Refer to Note 1 to the Consolidated Financial Statements for additional information on accounting policies. The following section discusses key estimates and assumptions that management has made under GAAP and how they affect the amounts reported in the Consolidated Financial Statements and notes. It also describes significant accounting policies where alternatives exist. In addition, within the critical accounting policies and estimates, Canadian-US GAAP

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differences are identified where they exist. Refer to Note 21 to the Consolidated Financial Statements for a complete reconciliation of Canadian-US GAAP differences. Following is a discussion of the Company’s critical accounting policies:

i)     Revenue and expense recognition

Revenue is considered earned as services are performed, provided that at the time of performance, ultimate collection is reasonably assured. Such performance is regarded as having been achieved when reasonable assurance exists regarding the measurement of the consideration that will be derived from rendering the service. Revenue from cable, Internet, Digital Phone and DTH customers includes subscriber service revenue when earned. The revenue is considered earned as the period of service relating to the customer billing elapses.

The Company has multiple deliverable arrangements comprised of upfront fees (subscriber connection fee revenue and/or customer premise equipment revenue) and related subscription revenue. The Company determined that the upfront fees charged to customers do not constitute separate units of accounting; therefore, these revenue streams are assessed as an integrated package. Subscriber connection fees and amounts charged on customer premise equipment that have no utility to the customer separate and independent of the Company providing additional subscription services, must be deferred and recognized systematically over the periods that the subscription services are earned. As the equipment sales and the related subscription revenue are considered one transaction, recognition of the DCT, modem and DTH equipment revenue commences once the subscriber service is activated. In the case of connection fee revenue and equipment revenue from DCTs, DTH equipment and modems, there is no specified term for which the customer will receive the related subscription revenue; therefore the Company considered its customer churn rate and other factors, such as competition from new entrants in the video and Internet markets, to arrive at a period of deferral of two years. In the case of revenue from truck tracking equipment sales, revenue is recognized over the period of the related service contract for airtime, which is generally five years. The Company also receives installation revenues in its Shaw Business Solutions operation on contracts with commercial customers. This revenue is deferred and recognized as service revenue on a straight-line basis over the related service contract, which generally span two to ten years. Direct and incremental costs associated with the service contract, in an amount not exceeding the upfront installation revenue, are deferred and recognized as an operating expense on a straight-line basis over the same period.

In conjunction with these up-front fees, the Company also incurs incremental direct costs which include, in the case of equipment revenue, the cost of the equipment and related installation costs, and in the case of connection fee revenue, certain customer acquisition costs such as selling, administrative and reconnection costs. There are two alternatives to account for these incremental direct costs. The first alternative is to expense the costs immediately. The second alternative, as permitted by primary sources of GAAP, is to defer and amortize incremental costs directly related to the upfront revenue. Emerging Issues Committee (“EIC”) abstract 141, “Revenue Recognition” states that the costs incurred related to the acquisition or origination of a customer contract should be accounted for on a basis similar to the three criteria set forth in EIC-27, “Revenues and Expenditures during the Pre-operating Period.” The Company has determined that the aforementioned incremental costs identified above meet the criteria for deferral. First, the costs, such as the equipment and installation, are directly related to obtaining the equipment revenue or connection fee revenue from the new customer. Second, the costs are incremental in nature. Third, the costs are recoverable from the related revenues. Historically, the Company has determined that the excess cost of the equipment over the upfront equipment revenue is recoverable from the related revenues of the ongoing subscription revenue.

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The Company has chosen to defer and amortize the related costs over the same period as the deferred revenue. This provides the best matching of the costs of the equipment and subscriber connection with the related up-front revenue and future revenue stream of subscription services. It is also consistent with the Canadian accounting standard “Financial Statement Concepts,” which recognizes that expenses that are linked to revenue-generating activities in a cause and effect relationship are normally matched with the revenue in the accounting period in which the revenue is recognized.

The cost of equipment and installation costs associated with DCTs, DTH equipment and modems generally exceeds the amounts received from customers on the sale of equipment; i.e. the equipment is sold to the customer at a subsidized price. The Company defers the entire cost of the equipment, including the subsidy portion, as it has determined that this excess cost will be recovered from future subscription revenues and that the investment by the customer in the equipment creates value through increased retention. Under US GAAP, the Company is required to expense this excess immediately.

The Company has limited its deferral of certain customer acquisition costs to the amount of related deferred connection fee revenue due to the non-tangible nature of these costs. Under US GAAP, subscriber connection fees are recognized as revenue when the connection is completed as it is considered a partial recovery of initial selling expenses and related administrative expenses.

Income statement classification

In connection with the adoption of EIC 141 in 2004, the Company changed its income statement presentation to distinguish amortization of deferred equipment revenue and deferred equipment costs from the revenue and expenses recognized from ongoing service activities on its income statement. Equipment revenue and costs are deferred and recognized over the anticipated term of the related future revenue (i.e., the monthly service revenue) with the period of recognition spanning two to five years. As a result, the amortization of deferred equipment revenue and deferred equipment cost are non-cash items on the income statement, similar to the Company’s amortization of deferred IRU revenue, which the Company has always segregated from ongoing revenue. Further, within the lifecycle of a customer relationship, the customer generally purchases customer premise equipment only once, at the beginning of that relationship, whereas the subscription revenue represents a continuous revenue stream throughout that customer relationship. Therefore, the segregated presentation provides a clearer distinction within the income statement between cash and non-cash activities and between up-front and continuous revenue streams, which assists financial statement readers to predict future cash flows from operations.

Subscriber connection and installation costs

The costs of physically connecting a new home are capitalized as part of the Company’s distribution system as the service potential of the distribution system is enhanced by the ability to generate future subscriber revenue. Costs of disconnections are expensed as incurred as the activity does not generate future revenue.

ii)     Allowance for doubtful accounts

The majority of the Company’s revenues are earned from selling on credit to individual subscribers. Because there are some customers who do not pay their debts, selling on credit necessarily involves credit losses. The Company is required to make an estimate of an appropriate allowance for doubtful accounts on its receivables. In determining its estimate, the Company considers factors such as the number of days the subscriber account is past due, whether or not the customer continues to receive service, the Company’s past collection history and changes in business circumstances. The estimated allowance required is a matter of judgement and the actual loss eventually sustained may be more or less than the estimate, depending on events which have yet to occur and which cannot be foretold, such as

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August 31, 2006

future business, personal and economic conditions. Conditions causing deterioration or improvement in the aging of subscriber accounts and collections will increase or decrease bad debt expense.

iii)    Property, plant and equipment – capitalization of direct labour and overhead

As outlined in the recommendations of the Canadian Institute of Chartered Accountants (“CICA”), the cost of property, plant and equipment includes direct construction or development costs (such as materials and labour) and overhead costs directly attributable to the construction or development activity. The Company capitalizes direct labour and direct overhead incurred to construct new assets, upgrade existing assets and connect new subscribers. These costs are capitalized as they include the construction costs directly attributable to the acquisition, construction, development or betterment of plant through either increased service capacity or lowered associated operating costs. Repairs and maintenance expenditures are charged to operating expenses as incurred.

Direct labour and overhead costs are capitalized in three principal areas:

1.	Corporate departments such as engineering and information technology. Engineering is primarily involved in overall planning and development of the cable/ Internet/ Digital Phone infrastructure. Labour and overhead costs directly related to this activity are capitalized as the activities directly relate to the planning and design of the construction of the distribution system. In fiscal 2006, 2005 and 2004, the information technology department has devoted considerable efforts towards the development of systems to support Digital Phone. Labour costs directly related to this and other projects were capitalized.
2.	Cable regional construction departments, which are principally involved in constructing, rebuilding and upgrading the cable/ Internet infrastructure. Labour and overhead costs directly related to the construction activity are capitalized as the activities directly relate to the construction or upgrade of the distribution system. Capital projects include, but are not limited to, projects such as new subdivision builds, increasing network capacity for internet, Digital Phone and VOD by reducing the number of homes fed from each node, and upgrades of the plant to 860 MHz capacity.
3.	Subscriber-related activities such as installation of new drops and Internet services. The labour and overhead directly related to the installation of new services are capitalized as the activity involves the installation of capital assets (e.g. wiring, filters, software, etc.) which enhance the service potential of the distribution system through the ability to earn future service revenues. Costs associated with service calls, collections, disconnects and reconnects that do not involve the installation of a capital asset are expensed.

Amounts of direct labour and direct overhead capitalized fluctuate from year to year depending on the level of customer growth and plant upgrades for new services. In addition, the level of capitalization fluctuates depending on the proportion of internal labour versus external contractors used in construction projects.

The percentage of direct labour capitalized in many cases is determined by the nature of employment in a specific department. For example, almost all labour and direct overhead of the cable regional construction departments is capitalized as a result of the nature of the activity performed by those departments. Capitalization is also based on piece rate work performed by unit-based employees (“UBEs”) which is tracked directly. In some cases, the amount of capitalization depends on the level of maintenance versus capital activity that a department performs. In these cases, an analysis of work activity is applied to determine this percentage split; however, such analysis is subject to overall reasonability checks on the percentage capitalization based on known capital projects and customer growth.

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iv)    Property, plant and equipment – capitalization of interest

As permitted by Canadian GAAP, the cost of an item of property, plant and equipment that is acquired, constructed, or developed over time may include carrying costs, such as interest, which is directly attributable to such activity. Shaw does not capitalize interest on the construction of its own assets, with the exception of the Partnership’s construction of the office/residential tower in Vancouver. The interest is capitalized on the tower as the construction of it has taken place over a significant period of time and the interest on the Partnership construction facility is directly attributable to such activity. Capitalization of interest ceased in 2005 when the tower was substantially completed and was ready for occupancy. The alternative accounting policy is to expense interest on construction immediately, which would have resulted in additional interest expense of $0.7 million and $1.4 million in 2005 and 2004, respectively.

v) Depreciation policies and useful lives

The Company depreciates the cost of property, plant and equipment over the estimated useful service lives of the items. These estimates of useful lives involve considerable judgment. In determining these estimates, the Company takes into account industry trends and company-specific factors, including changing technologies and expectations for the in-service period of these assets. On an annual basis, the Company reassesses its existing estimates of useful lives to ensure they match the anticipated life of the technology from a revenue-producing perspective. If technological change happens more quickly or in a different way than the Company has anticipated, the Company might have to shorten the estimated life of certain property, plant and equipment which could result in higher depreciation expense in future periods or an impairment charge to write down the value of property, plant and equipment.

vi) Asset impairment

The valuations of all long-lived assets, including deferred charges, broadcast licenses, goodwill, investments in unconsolidated entities and property, plant and equipment are subject to annual review for impairment. The Company compares the carrying value of long-lived assets excluding investment in unconsolidated entities (“Capital Assets”) to valuations using unlevered discounted cash flow analysis. A two-step process determines impairment of these Capital Assets. The first step determines when impairment is recognized and compares the carrying value of the Capital Assets to the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If the carrying value exceeds this sum, a second step is performed which measures the amount of the impairment as the difference between the carrying value of these Capital Assets and their fair value calculated using quoted market price or discounted cash flows. Investments are compared to quoted market values (where available) or estimated net realizable value, and are reviewed to determine whether such impairment is other than temporary. An impaired asset is written down to its estimated fair market value based on the information available at that time. Considerable management judgment is necessary to estimate discounted cash flows. Assumptions used in these cash flows are consistent with internal forecasts and are compared for reasonability to forecasts prepared by external analysts. Changes in assumptions with respect to the competitive environment could result in impairment of assets.

vii) Employment benefit plans

Shaw has a defined benefit pension plan for key senior executives. The amounts reported in the financial statements relating to the defined benefit pension plan are determined using actuarial valuations that are based on several assumptions. The valuation uses management’s assumptions for the discount rate, rate of compensation increase, and expected average remaining years of service of employees. While the Company believes these assumptions are reasonable, differences in actual results or changes in assumptions could affect employee benefit obligations and the related income statement impact. The Company accounts for differences between actual and assumed results by recognizing differences in

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August 31, 2006

benefit obligations and plan performance over the working lives of the employees who benefit from the plan. The most significant assumption used to calculate the net employee benefit plan expense is the discount rate. The discount rate is the interest rate used to determine the present value of the future cash flows that is expected will be needed to settle employee benefit obligations. It is usually based on the yield on long-term, high-quality corporate fixed income investments and is determined at the end of every year. The following table illustrates the increase on the accrued benefit obligation and pension expense of a 1% decrease in the discount rate:

		Accrued Benefit
		Obligation at		Pension Expense
		End of Fiscal 2006		Fiscal 2006
($000’s Cdn)
Discount Rate			5.25%		5.00%
	Impact of: 1% decrease		22,168		747

viii) Future income taxes

The Company has recognized future income tax assets in respect of its losses and losses of certain of Shaw’s subsidiaries. Realization of future income tax assets is dependent upon generating sufficient taxable income during the period in which the temporary differences are deductible. The Company has evaluated the likelihood of realization of future income tax assets based on forecasts of taxable income of future years and based on the ability to reorganize its corporate structure to accommodate use of taxable losses in future years. Assumptions used in these taxable income forecasts are consistent with internal forecasts and are compared for reasonability to forecasts prepared by external analysts. Significant changes in assumptions with respect to internal forecasts or the inability to implement tax planning strategies could result in future impairment of these assets.

ix)    Commitments and contingencies

The Company is subject to various claims and contingencies related to lawsuits, taxes and commitments under contractual and other commercial obligations. Contingent losses are recognized by a charge to income when it is likely that a future event will confirm that an asset has been impaired or a liability incurred at the date of the financial statements and the amount can be reasonably estimated. Contractual and other commercial obligations primarily relate to network fees and operating lease agreements for use of transmission facilities, including maintenance of satellite transponders and lease of premises in the normal course of business. Significant changes in assumptions as to the likelihood and estimates of the amount of a loss could result in recognition of additional liabilities.

E.     Related party transactions

Related party transactions are reviewed by Shaw’s Corporate Governance and Nominating Committee, comprised of independent directors. The following sets forth certain transactions in which the Company is involved.

Normal course transactions

The Company has entered into certain transactions and agreements in the normal course of business with certain of its related parties.

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Corus Entertainment Inc. (“Corus”)

The Company and Corus are subject to common voting control. During the year, network, advertising and programming fees were paid to various Corus subsidiaries. The Company provided cable system distribution access, administrative services, uplinking of television signals and Internet services to various Corus subsidiaries. In addition, the Company provided Corus with television advertising spots in return for radio and television advertising.

Burrard Landing Lot 2 Holdings Partnership

The Company has a 33.33% interest in the Partnership. During the current year, the Company paid the Partnership for lease of office space in Shaw Tower. Shaw Tower, located in Vancouver, B.C., is the Company’s headquarters for its Lower Mainland operations.

Other transactions

The Company has entered into the following transaction with Corus:

During 2005, the Company sold the cable television advertising business, originally acquired as part of the purchase of the Monarch cable systems to Corus.

F.     New accounting standards

Shaw has adopted or will adopt a number of new accounting policies as a result of recent changes in Canadian accounting pronouncements. The ensuing discussion provides additional information as to the date that Shaw is or was required to adopt the new standards, the methods of adoption permitted by the standards, the method chosen by Shaw, and the effect on the financial statements as a result of adopting the new policy. The adoption or future adoption of these accounting policies has not and is not expected to result in changes to the Company’s current business practices. Shaw adopted the following policies in 2006:

(i)     Equity Instruments

In 2006, the Company retroactively adopted the amended Canadian Standard Section 3860, Financial Instruments – Disclosure and Presentation, which requires obligations that may be settled at the issuer’s option by a variable number of the issuer’s own shares to be presented as liabilities, which is consistent with US standards. As a result, the Company’s Canadian Originated Preferred Securities (“COPrS”) and the Zero Coupon Loan have been classified as debt instead of equity and the entitlements thereon are treated as interest expense instead of dividends. In addition, such US denominated instruments are translated at period-end exchange rates and to the extent they are unhedged, the resulting gains and losses included in the Consolidated Statements of Income and Deficit. The impact on the Consolidated

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Balance Sheets as at August 31, 2006 and 2005 and on the Consolidated Statements of Income and Cash Flows for each of the years in the three year period ended August 31, 2006 is as follows:

	Increase (decrease)
	2006			2005
	$			$
($000’s Cdn)
Consolidated balance sheets:
Deferred charges		793			13,247
Long-term debt		100,000			454,775
Future income taxes		267			14,033
Share capital		(98,467	)		(498,194	)
Deficit		1,007			(42,633	)
Decrease in deficit:
Adjusted for change in accounting policy		(42,633	)		(36,403	)
Decrease in equity entitlements (net of income taxes)		(16,788	)		(31,318	)
Decrease in gain on redemption of COPrS		40,484			12,803
Decrease in gain on settlement of Zero Coupon Loan		–			4,921
Decrease in net income		19,944			7,364
		1,007			(42,633	)

	Increase (decrease)
	in net income
	2006			2005			2004
	$			$			$
($000’s Cdn except per share amounts)
Consolidated statements of income:
Increase in amortization		(206	)		(258	)		(312	)
Increase in interest		(25,341	)		(48,541	)		(62,302	)
Increase in foreign exchange gain on unhedged long-term debt		2,881			34,258			24,559
Increase in debt retirement costs		(12,248	)		(6,311	)		–
Decrease in fair value loss on foreign currency forward contract		2,415			–			–
Decrease in income tax expense		12,555			13,488			18,016
Decrease in net income		(19,944	)		(7,364	)		(20,039	)
Increase (decrease) in earnings per share:		(0.01	)		0.03			0.09

	Increase (decrease)
	2006			2005			2004
	$			$			$
($000’s Cdn)
Statement of cash flows:
Operating activities		(20,724	)		(41,468	)		(38,343	)
Financing activities		20,724			41,468			38,343

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(ii) Non-monetary Transactions

In 2006, the Company prospectively adopted the new Canadian standard, Non-monetary Transactions, which requires application of fair value measurement to non-monetary transactions determined by a number of tests. The new standard is consistent with recently amended US standards. The application of these recommendations had no impact on the Company’s consolidated financial statements.

The following policies will be adopted in future fiscal periods:

(iii) Financial Instruments

In January 2005, the CICA issued Handbook Section 3855 “Financial Instruments — Recognition and Measurement”, Handbook Section 3865 “Hedges” and Handbook Section 1530 “Comprehensive Income”. These new standards will be required to be implemented by the Company in 2008 and will harmonize Canadian and US GAAP. The Company is currently assessing the impact of these new standards.

G.    Known events, trends, risks and uncertainties

The Company is subject to a number of risks and uncertainties which could have a material adverse effect on its future profitability. Included herein is a “Caution Concerning Forward-Looking Statements” section which should be read in conjunction with this report.

The risks and uncertainties discussed below highlight the more important and relevant factors that could significantly affect the Company’s operations. They do not represent an exhaustive list of all potential issues that could affect the financial results of the Company. The principal risks include:

• Competition and technological change, including change in regulatory risks

• Interest rate, foreign exchange, market value and capital market risks

• Contingencies

• Uninsured risks of loss

• Reliance on suppliers

• Holding Company structure

• Control of Shaw by the Shaw family

• Information systems and internal business processes

• Dividend payments

i) Competition and technological change

Cable providers operate in an open and competitive marketplace. Shaw’s businesses currently face competition from regulated entities utilizing existing or new communications technologies and from currently unregulated and illegal services. In addition, Shaw may face competition in the future from other technologies being developed or to be developed.

CABLE TELEVISION AND DTH

Shaw’s cable television systems compete with the direct reception by antenna of unencrypted over-the-air local and regional broadcast television signals. Shaw also either currently competes or may in the future compete with other distributors of video and audio signals, including DTH satellite services, satellite master antenna systems, multipoint distribution systems (“MDS”), other competitive cable television undertakings and telephone companies offering video service.

The Star Choice DTH business faces the same competitive environment as cable television companies. Competitors include Bell ExpressVu (the only other licensed DTH satellite service currently operating

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in Canada), cable television companies, grey and black market satellite service providers and other competitors such as wireless operators, telephone companies and off-air television broadcasters.

DTH delivers programming via signals sent directly to receiving dishes from medium and high-powered satellites, as opposed to via broadcast, cable delivery or lower powered transmissions. DTH services presently provide more channels than some of Shaw’s cable systems and are fully digital. Two licensed operators, Star Choice (a subsidiary of Shaw) and Bell ExpressVu, are currently providing DTH services in Canada. These DTH operators have achieved considerable customer growth and currently provide service to approximately 2.6 million Canadian households. In addition, grey and black market DTH providers (i.e., providers of US-based digital DTH programming services available in Canada without authorization from the CRTC or from the US DTH providers) also constitute competitive services. The Supreme Court of Canada has ruled that grey and black market DTH providers are violating the Radiocommunication Act (Canada), and are therefore providing an illegal service.

MDS delivers television programming by unobstructed line-of-sight microwave transmission to subscribers equipped with special antennae. Since 1995, the CRTC has approved MDS applications of distributors competing with cable television service in given service areas. In particular, the CRTC has granted licenses to Craig Wireless International Inc. (formerly Skycable Inc.) with respect to certain areas of Manitoba and British Columbia, and to Image Wireless Communications Inc. with respect to certain areas of Alberta and Saskatchewan. The CRTC has also issued a license to Look Communications Inc. to operate MDS undertakings in southern and eastern Ontario and in Quebec.

Other competitive cable television undertakings are licensed to operate within the authorized service areas of incumbent cable licensees. Novus Entertainment Inc., one of these licensed providers, operates within one of Shaw’s licensed service areas in Vancouver.

Canadian telephone companies are also licensed as broadcast distribution undertakings to provide standard and interactive television services, including in some cases, VOD. Telus Corporation currently offers Telus TV in select parts of Alberta and British Columbia; SaskTel offers Max TV in Saskatchewan; Manitoba Telecom Services Inc. (“MTS”) offers viewers a competitive choice with MTS TV in Manitoba; Bell Canada offers services in parts of Ontario and Quebec; Télébec offers services in Quebec; and Aliant Telecom Inc. offers services in Atlantic Canada. SaskTel launched its service in September 2002, and as of December 31, 2005 had over 42,000 customers. MTS launched its service in January 2003, and as of June 30, 2006 had approximately 56,000 customers.

To date, none of these competitors has had a material impact on Shaw’s overall cable television operations. Almost all of Shaw’s cable systems are concentrated in major urban markets, having favourable demographics and growth potential, with most of the remainder in smaller clusters, linked via fiber optic distribution systems either to each other or to larger markets. Through this clustering strategy, Shaw maximizes the benefits of operating efficiencies, enabling it to be a low-cost service provider, which is a necessary component in strengthening its competitive position. In addition, Shaw plans to continue to deploy new technologies to increase channel capacity, to expand the range and quality of its services, and to enhance its programming and communication service offerings including, for example, VOD, interactive television, full digital line-ups, HDTV, and Digital Phone. The Company expects that competition will continue to increase and there can be no assurance that increased competition will not have a material adverse effect on Shaw’s results of operations.

INTERNET

There are a number of different types of Internet service providers (“ISPs”) offering residential and business Internet access services that compete with Shaw’s Internet services. These include on-line

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service and content providers (such as AOL Canada), independent basic access service providers (both national and regional), incumbent telephone companies and wireless communications companies.

Many ISPs provide telephone dial-up Internet access services with typical access speeds of up to 56 kbps. Such services are provided by incumbent telephone companies and independent ISPs (mainly through the use of the telephone companies’ facilities and services). According to a report from the CRTC dated October 2005, approximately 27% of all Internet subscribers in Canada used low-speed dial-up access services, while the other 73% used high-speed services.

High-speed Internet access services are principally provided through cable modem and digital subscriber line (“DSL”) technology. High-speed services enable users to transmit and receive text, video, voice and data in digital form at significantly faster access speeds than dial-up access through a regular telephone line. Internet access services through cable modem technology are primarily provided by cable companies, although the CRTC has also authorized third-party ISPs to access cable companies’ facilities to deliver high-speed Internet services. DSL services are principally offered by incumbent telephone companies such as BCE Inc., Telus Corporation, MTS, and SaskTel.

The ISPs have access to cable companies’ facilities to deliver competing Internet access service. Currently, competing ISP’s have access to high-speed access services of Shaw pursuant to a third party Internet access tariff that came into effect on November 2, 2004 and was subsequently updated on March 20, 2006. Such third party access services are available in Vancouver, Victoria, Calgary, Edmonton, Saskatoon and Winnipeg. Currently only one ISP has subscribed to the tariff. Until such time as an ISP subscribes to the tariff, or in areas where Shaw’s third party Internet access services are not available, Shaw has been directed by the CRTC to allow ISPs to resell cable Internet services at a 25% discount from the retail rate. Currently, there are three ISPs using Shaw’s resale services at the resale discount rate.

Although operating in a competitive environment, Shaw expects that consumer desire for Internet access services, generally, and for bandwidth-intensive applications on the Internet (including streaming video, digital downloading and interactive gaming), in particular, will lead to continued growth for high speed Internet services, such as Shaw High-Speed Internet.

SATELLITE SERVICES

In its Canadian SRDU business, Satellite Services faces competition principally from Bell ExpressVu, which received an SRDU license from the CRTC in 1999. At present, Satellite Services and Bell ExpressVu are the only licensed SRDU operators in Canada. Satellite Services also faces competition from the expansion of fiber distribution systems into territories previously served only by SRDU operators. This expansion permits delivery of distant US and Canadian conventional television stations to more remote locations without the use of satellite transmission.

INTERNET INFRASTRUCTURE

Through its Shaw Business Solutions subsidiaries, Shaw competes with other telecommunications carriers in providing high-speed broadband communications services (data and video transport and Internet connectivity services) to businesses, ISPs and other telecommunications providers. The telecommunications services industry in Canada is highly competitive, rapidly evolving and subject to constant change. Shaw Business Solutions competitors include incumbent local exchange carriers (such as Telus Corporation and Bell Canada), competitive access providers, competitive local exchange carriers, ISPs, private networks built by large end users and other telecommunications companies. In addition, the development and implementation of new technologies by others could give rise to significant new competitors.

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DIGITAL PHONE

The competitors of Shaw Digital Phone include incumbent telephone companies (“ILECs”)(such as Telus Corporation, SaskTel, MTS, and subsidiaries or affiliates of BCE Inc.), competitive local exchange carriers (“CLECs”) (such as Rogers Telecom Inc., formerly Sprint Canada Inc.) and non-facilities-based Voice over Internet Protocol (“VoIP”) providers (such as Primus Telecommunications Canada Inc. and Vonage Holdings Corp.). As the market for VoIP services develops and as VoIP technology evolves, new competitors (such as IT providers, network vendors and system integrators) may emerge from companies that have not offered voice solutions in the past.

The ILECs currently control the vast majority of the local telephone services market in Canada. Several of such competitors have larger operational and financial resources than the Corporation and are well established with residential customers in their respective markets. The CRTC’s decisions continue to demonstrate a strong commitment to ensuring sustainable facilities-based competition. Nevertheless, both the CRTC and the Ministry of Industry are emphasizing a greater reliance on market forces as the preferred mechanism for regulating the market. For example, the CRTC determined that Internet-based local exchange voice services (VoIP) offered by the ILECs were local services and would be regulated as such by the CRTC. On September 1, 2006, the CRTC reaffirmed its decision following a request from the Federal Cabinet to reconsider this matter. However, on November 15, 2006 the Government announced its intent to vary the decision in order to have the CRTC treat certain Internet-based VoIP services as distinct from other local services and have these ILEC VoIP services regulated in the same manner as comparable CLEC VoIP services. On November 16, 2006, the CRTC issued a circular giving immediate effect to this direction. Also in 2006, the CRTC rendered its decision on the forbearance criteria the ILECs must meet in order to have their local exchange service deregulated. The forbearance framework approved by the CRTC required a 25% market share loss threshold by the ILECs as well as several requirements and performance thresholds relating to their provision of wholesale services. The forbearance decision has been appealed by the ILECs to the Federal Cabinet. The CRTC also initiated further reviews on two aspects of the framework: first, whether to include wireless-only households in market share calculations: and second, whether to alter the market share loss threshold from the 25% requirement. Decisions on the appeal and these reviews are not expected before the spring of 2007.

In April 2005, the Minister of Industry appointed a three person panel to make recommendations on the major issues and priorities for telecommunications policy and regulatory reform with a view of modernizing Canada’s telecommunications framework to the benefit of all Canadians. In March 2006, the panel issued its report. This report, which included 127 specific recommendations, called for a significant reduction in the role of the CRTC and greater reliance on market forces in the telecommunications sector. The Minister of Industry continues to deliberate on the recommendations contained in the report. As partial response to one of the recommendations, the Minister tabled before Parliament a draft policy direction to the CRTC that would require it to rely on market forces to the maximum extent feasible. These developments may negatively affect the business and prospects of Shaw Digital Phone.

IMPACT OF REGULATION

Substantially all of the Corporation’s business activities are subject to regulations and policies established under various Acts (Broadcasting Act, Telecommunication Act and Radiocommunications Act). These regulations and policies are generally administered by the CRTC under the supervision of the Federal Departments of Industry and Canadian Heritage. Accordingly, the Corporation’s results of operations are affected by changes in regulations and decisions by regulators. Changes in the regulation of Shaw’s business activities, including decisions by regulators affecting the Corporation’s operations (such as the granting or renewal of licenses; decisions concerning the regulation of ILECs in the

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August 31, 2006

provision of local services; the granting of additional distribution, broadcasting or programming licenses to competitors in the Corporation’s markets; or the introduction of new copyright liabilities) or changes in interpretations of existing regulations by courts or regulators, could adversely affect the Corporation’s results of operations. The Corporation’s CRTC licenses must be renewed from time to time and cannot be transferred without regulatory approval.

ii) Interest rate, foreign exchange, market value and capital market risks

Shaw manages its exposure to floating interest rates and US dollar foreign exchange fluctuation through the use of interest rate and cross-currency exchange agreements or “swaps”. In order to minimize the risk of counterparty default under its swap agreements, Shaw assesses the creditworthiness of its swap counterparties. Currently 100% of the total swap portfolio is held by financial institutions with Standard & Poor’s (or equivalent) ratings ranging from AA- to A-1.

As at August 31, 2006 Shaw has the following financial exposures at risk in its day-to-day operations:

(a) Interest rates: Due to the capital-intensive nature of Shaw’s operations, the Company utilizes long-term financing extensively in its capital structure. The primary components of this structure are:

1.	Banking facilities as more fully described in Note 9 to the Consolidated Financial Statements.
2.	Various Canadian and US denominated senior notes and debentures with varying maturities issued in the public and private markets as more fully described in Note 9 to the Consolidated Financial Statements.
3.	Canadian Originated Preferred Securities (“COPrS”) issued in Canadian dollars with an original term of 30 years as more fully described in Note 9 to the Consolidated Financial Statements.

Interest on bank indebtedness is based on floating rates, while the senior notes, debentures and COPrS are fixed-rate obligations. Shaw utilizes its credit facility to finance day-to-day operations and, depending on market conditions, periodically converts the bank loans to fixed-rate instruments through public market debt issues. Shaw also uses interest rate swap transactions to fix the interest rates on a portion of its bank debt. At August 31, 2006 Shaw had “swapped out” $59.0 million of its $280.0 million Canadian floating-rate bank indebtedness by means of a Canadian interest rate swap transaction entered into with a major Canadian chartered bank. The swap fixes interest on a notional amount of bank debt of $59.0 million at an effective rate, which at August 31, 2006 was 8.89%. The interest rate swap fully terminates on April 30, 2007.

As at August 31, 2006, approximately 93% of Shaw’s consolidated long-term debt was fixed with respect to interest rates. Based on the variable rate debt outstanding at August 31, 2006, a 1% increase in interest rates would result in an annual increase in interest expense of approximately $2.2 million.

(b) Foreign exchange: As the Company has grown it has accessed US capital markets for a portion of its borrowings. Since Shaw’s revenues and assets are primarily denominated in Canadian dollars, it faces significant potential foreign exchange risks in respect of the servicing of the interest and principal components of its US dollar denominated debt. In view of this, the Company’s policy with respect to US debt is that at least 70% of the amounts maturing within the next ten years be hedged to protect against exchange fluctuations, and at August 31, 2006, 100% of such maturities were hedged. The Company

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utilizes cross-currency swaps, where appropriate, to hedge its exposures on US dollar denominated bank and debenture indebtedness.

In addition, some of the Company’s capital expenditures are incurred in US dollars, while its revenue is primarily denominated in Canadian dollars. Decreases in the value of the Canadian dollar relative to the US dollar could have a material adverse effect on the Company’s cash flows. To mitigate some of the uncertainty in respect to capital expenditures, the Company regularly enters into forward contracts in respect of US dollar commitments. In respect of 2006, the Company entered into forward contracts providing for monthly or quarterly US dollar purchases under which the Company purchased approximately US $83 million at an average exchange rate of 1.2146 Cdn. With respect to 2007, the Company has entered into forward contracts to purchase approximately US $129 million over a period of 12 months commencing in September 2006 at an average exchange rate 1.1426 Cdn.

Further information concerning the policy and use of derivative financial instruments is contained in Note 1 to the Consolidated Financial Statements.

(c) Market value: The Company has $18.0 million of investments of which $9.4 million represents publicly traded securities. The value of the Company’s investments is subject to market risk. The market value of publicly traded investments at August 31, 2006 is $9.6 million.

(d) Capital Markets: The Company requires ongoing access to capital markets to support its operations. Changes in capital market conditions, including significant changes in market interest rates or lending practices, may have a material adverse effect on the Company’s ability to raise or refinance short-term or long-term debt, and thus on its financial position and ability to operate.

iii)    Contingencies

The Company and its subsidiaries are involved in litigation matters arising in the ordinary course and conduct of its business. Although such proceedings cannot be predicted with certainty, management does not expect that the outcome of these matters will have a material adverse effect on the corporation.

iv)    Uninsured risks of loss

Business interruption insurance covering damage or loss to one or more of the satellites that the Company uses in its DTH and Satellite Services business is not economically viable. In the event of a complete satellite failure, subject to Telesat’s recovery of insurance proceeds and Shaw’s continued contribution to the cost of Telesat’s insurance premiums, Shaw is entitled to receive certain compensation payments derived through Telesat’s underlying in-orbit insurance policy. Such payments are to be applied as a credit toward future transponder capacity services to be provided by Telesat. The Company purchased transponders on Anik F1 and Anik F2 from Telesat on an unprotected, non-preemptible service level basis, and Shaw has priority access to spare transponders on each satellite in the case of interruption, although there is no assurance that such transponders would be available. During 2005 Shaw moved the services on the Anik F1 satellite to the newly-launched, state-of-the-art Anik F1R. The new Anik F1R satellite is expected to have increased power over what would have been otherwise available on Anik F1, resulting in improved reliability and stability for DTH customers. Shaw has a service arrangement with Telesat for the capacity on Anik F1R which has the same substantive benefits and obligations as on Anik F1. The F1R service arrangement expires in February 2016, which was the originally expected end-of-service life for Anik F1. In the event of satellite failure, service will

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August 31, 2006

only be restored as additional capacity becomes available. Restoration of satellite service on a US satellite may require repositioning or re-pointing of customers’ receiving dishes. As a result, the customers’ level of service may be diminished or they may require a larger dish. Satellite failure could cause customers to deactivate their DTH subscriptions or otherwise have a material adverse effect on business and results of operations.

Network failures caused by damage by fire, natural disaster, power loss, hacking, computer viruses, disabling devices, acts of war or terrorism and other events could have a material adverse affect, including customer relationships and operating results. The Company protects its network through a number of measures including physical security, ongoing maintenance and placement of insurance on its network equipment and data centers. The Company self-insures the plant in the cable and Internet distribution system as the cost of insurance is generally prohibitive. The risk of loss is however mitigated as most of the cable plant is located underground. In addition, it is likely that damages caused by any one incident would be limited to a localized geographic area and therefore resulting business interruption and financial damages would be limited. Further, the Company has back-up disaster recovery plans in the event of plant failure and redundant capacity with respect to certain portions of the system. In the past, it has successfully recovered from damages caused by natural disasters without significant cost or disruption of service. Although the Company has taken steps to reduce this risk, there can be no assurance that major disruptions will not occur.

v)     Reliance on suppliers

Shaw’s distribution and call center network is connected or relies on other telecommunication carriers and certain utility companies. Any of the events described in the preceding paragraph, as well as labour strikes and other work disruptions, bankruptcies, technical difficulties or other events affecting these carriers or utilities could also hurt business, including customer relationships and operating results.

The Company sources its customer premise and capital equipment and capital builds from certain key suppliers. While the Company has alternate sources for most of its purchases, the loss of a key supplier could adversely affect the Company in the short term.

vi)    Holding company structure

Substantially all of Shaw’s business activities are operated by its subsidiaries. As a holding company, the Company’s ability to meet its financial obligations is dependent primarily upon the receipt of interest and principal payments on intercompany advances, management fees, cash dividends and other payments from its subsidiaries together with proceeds raised by the Company through the issuance of equity and the incurrence of debt, and from the proceeds from the sale of assets. The payment of dividends and the making of loans, advances and other payments to the Company by its subsidiaries may be subject to statutory or contractual restrictions, are contingent upon the earnings of those subsidiaries and are subject to various business and other considerations.

vii)    Control of Shaw by the Shaw family

As at November 20, 2006, JR Shaw and members of his family and the corporations owned and/or controlled by JR Shaw and members of his family (the “JR Shaw Group”) own approximately 78.7% of the outstanding Class A Shares of the Company. The Class A Shares are the only shares entitled to vote in all shareholder matters. All of the Class A Shares held by the JR Shaw Group are subject to a voting trust agreement entered into by such persons. The voting rights with respect to such Class A Shares are exercised by the representative of a committee of five trustees. Accordingly, the JR Shaw Group is, and as long as it owns a majority of the Class A Shares will continue to be, able to elect a

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August 31, 2006

majority of the Board of Directors of the Company and to control the vote on matters submitted to a vote of the Company’s Class A shareholders.

viii)   Information systems and internal business processes

Many aspects of our business depend to a large extent on various IT systems and software and internal business processes. The company is subject to risk as a result of potential failures of, or deficiencies in, these systems or processes. Although the Company has taken steps to reduce this risk, there can be no assurance that losses may not occur.

ix)    Dividend payments

The Company currently pays monthly dividends in amounts approved on a quarterly basis by the Board of Directors. At the current approved dividend amount, the Company anticipates it will pay approximately $190 million in dividends during 2007. While the Company expects to generate sufficient free cash flow in 2007 to fund these dividend payments, if actual results are different from expectations there can be no assurance that the Company will continue dividend payments at the current level.

II.    SUMMARY OF QUARTERLY RESULTS

			Service				Basic
			operating income				earnings		Funds flow
	Service		before				per		from
Quarter	revenue		amortization(1)		Net income		share(2)		operations(3)
(In $000’s Cdn except per share amounts)
2006
Fourth		631,888		275,127		210,369		0.97		220,617
Third		626,654		279,544		126,410		0.58		221,099
Second		611,197		267,924		45,790		0.21		208,273
First		589,545		255,322		75,681		0.35		197,208
Total		2,459,284		1,077,917		458,250		2.11		847,197
2005
Fourth		562,958		250,759		69,959		0.31		191,507
Third		559,883		252,899		32,836		0.14		190,144
Second		549,919		244,311		5,721		0.02		176,557
First		537,050		234,024		44,705		0.19		170,316
Total		2,209,810		981,993		153,221		0.67		728,524

(1)	See Key performance drivers on page 8.
(2)	Diluted earnings per share equals basic earnings per share except in 2006 where diluted earnings per share is $0.96 and $2.09 for the fourth quarter and year, respectively.
(3)	Funds flow from operations is presented before changes in net non-cash working capital as presented in the Consolidated Statement of Cash Flows.

Generally, service revenue has grown quarter-over-quarter as a result of customer growth and rate increases. Service operating income before amortization has also generally grown with a decline noted in the fourth quarters of each of 2006 and 2005 due to growth in expenditures exceeding the growth in revenues. The increased expenses in 2006 were mainly due to costs related to employee growth, maintenance related service costs for software and equipment as well as increased marketing costs. The

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August 31, 2006

increased expenses in 2005 were costs primarily incurred to support continued growth, to prepare for increased competition and to launch digital phone.

Net income has generally trended positively quarter-over-quarter as a result of a number of factors including the growth in service operating income before amortization and during the first, third and fourth quarters of 2006 the Company recorded future tax recoveries primarily related to a reduction in corporate income tax rates which contributed $31.4 million, $23.4 million and $150.0 million, respectively, to net income. Also, during the third quarter of fiscal 2006 the Company reported a gain on the sale of a portfolio investment which contributed $37.3 million on an after-tax basis. The fourth quarter of 2005 benefited from a $21.7 million after-tax gain recorded on the settlement of the equity forward sale contract in respect of the investment in Motorola Inc. (“Motorola”). Net income declined by $29.9 million in the second quarter of 2006 due to the tax recovery recorded in the first quarter. Net income declined in the second quarter of 2005 as a result of foreign exchange gains and losses recognized on unhedged long term debt. A gain of $49.3 million was recorded in the first quarter of 2005 and a loss of $19.2 million was recorded in the second quarter.

The following factors further assist in explaining the trend of quarterly service revenue and service operating income before amortization:

Growth in subscriber statistics as follows:

	2006								2005
Subscriber Statistics	First		Second		Third		Fourth		First			Second			Third		Fourth
Basic cable customers		29,429		6,838		2,248		2,766		17,109			(1,707	)		1,338		3,733
Digital customers		28,296		18,594		14,733		9,630		21,501			15,517			9,764		11,167
Internet customers		54,724		36,296		21,654		25,907		47,748			32,539			27,034		39,804
Digital Phone Lines		34,088		28,018		50,294		43,744		N/A			3,512			18,938		34,113
DTH		10,199		6,843		4,283		3,221		(3,068	)		4,815			6,252		8,760

Significant acquisitions and divestitures:

• The acquisition of cable systems serving approximately 40,000 customers was completed effective March 31, 2004. In 2005, these systems generated service operating income of approximately $3.5 million and $3.7 million in the first and second quarter respectively, and in the third quarter generated an additional $1.8 million over the amounts reported in the third quarter of 2004.

New Product Launch:

• The initial product launch of Shaw Digital Phone service was in Calgary on February 14, 2005. During 2005 the Company did additional launches in Edmonton and Winnipeg and in 2006 added Victoria, Vancouver and Fort McMurray and other smaller areas including the surrounding areas of Calgary and Edmonton.

• During 2005 the Company launched on-screen ordering of VOD content in Calgary, Edmonton, Winnipeg, Saskatoon, Red Deer, Fort McMurray and Vancouver and during 2006 launched the service on Vancouver Island.

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Shaw Communications Inc.

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August 31, 2006

III.   RESULTS OF OPERATIONS

OVERVIEW OF FISCAL 2006 CONSOLIDATED RESULTS

								Change
								2006			2005
		2006		2005		2004		%			%
(In $000’s Cdn except per share amounts)
Operations:
	Service revenue		2,459,284		2,209,810		2,079,749		11.3			6.3
	Service operating income before amortization (1)		1,077,917		981,993		925,935		9.8			6.1
	Service operating margin		43.8%		44.4%		44.5%
	Funds flow from operations(2)		847,197		728,524		654,585		16.3			11.3
	Net income		458,250		153,221		70,870		199.1			116.2
	Free cash flow(1)		265,445		277,319		278,881		(4.3	)		(0.6	)
Balance sheet:
	Total assets		7,522,543		7,430,185		7,576,720
	Long-term financial liabilities (including current portion of long-term debt)		2,996,385		3,199,542		3,344,258
Per share data:
	Income per share – basic	$	2.11	$	0.67	$	0.31
	Income per share – diluted	$	2.09	$	0.67	$	0.31
	Weighted average number of participating shares outstanding during period (000’s)		217,666		228,210		231,605
Cash dividends paid per share
	Class A		0.470		0.305		0.155
	Class B		0.475		0.310		0.160

(1)	See Key performance drivers on page 8.
(2)	Funds flow from operations is presented before changes in non-cash working capital as presented in the Consolidated Statements of Cash Flows.

Highlights

• Net income was $458.3 million for the year compared to income of $153.2 million in 2005 and $70.9 million in 2004.

• Earnings per share were $2.11 compared to $0.67 in 2005 and $0.31 in 2004.

• Service revenue for the year improved to $2.5 billion from $2.2 billion last year and $2.1 billion in 2004.

• Service operating income before amortization of $1.08 billion was up over last year’s amount of $982.0 million in 2005 and $925.9 million in 2004.

• Consolidated free cash flow was $265.4 million compared to $277.3 million in 2005 and $278.9 million in 2004.

• The footprint of Digital Phone continued to expand with the Company adding Victoria, Vancouver and Fort McMurray and other smaller areas, including the surrounding areas of Calgary and Edmonton. At August 31, 2006, the number of Digital Phone lines, including pending installations, was 212,707.

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August 31, 2006

• The Shaw customer base continued to grow with increases of 41,281 for basic cable (2005 – 20,473); 71,253 for digital (2005 – 57,949); 138,581 for Internet (2005 – 147,125); and 24,546 (2005 – 16,759) for DTH.

• In November, 2005 the Company closed a $450 million offering of 6.1% senior unsecured notes due November 16, 2012 and in May, 2006 closed a $300 million offering of 6.15% senior unsecured notes due May 9, 2016. During 2006 the Company redeemed two series of Canadian Originated Preferred Securities (COPrS) including the Series B US$172.5 million 8.5% COPrS and the Cdn. $150.0 million 8.875% COPrS.

• Dividends paid in 2006 increased 55% over 2005 and the Company has increased the equivalent annual dividend rate on its Class A Participating Share and Class B Non-Voting Participating Shares by $0.40 to $0.995 and $1.00, respectively.

• The Company repurchased 5,119,900 Class B Non-Voting Shares for cancellation, pursuant to a normal course issuer bid for $146.6 million ($28.64 per share) during 2006.

Revenue and operating expenses

2006 vs. 2005

Consolidated service revenue of $2.5 billion for the year improved 11.3% over the prior year. The increase was primarily due to customer growth and rate increases. Consolidated service operating income before amortization for the year increased 9.8% over 2005 to $1.08 billion. The improvement over the comparative period was primarily due to overall revenue growth and reduced costs in the satellite division. These improvements were partially offset by increased costs in the cable division, including expenditures incurred to support continued growth, deliver high quality customer service and to launch Digital Phone in new markets.

The Shaw Digital Phone service is now available to approximately 2,000,000 homes, which represents 60% of homes passed. During the year, Shaw expanded its Digital Phone footprint to include Victoria, Vancouver, Fort McMurray and other smaller areas, including the surrounding areas of Calgary and Edmonton.

2005 vs. 2004

In 2005 revenue increased 6.3% primarily due to customer growth, rate increases, the inclusion of a full year of revenue resulting from the acquisition of Monarch cable systems effective March 31, 2004 and the change in mix of promotional activities.

On February 14, 2005 Shaw entered the triple play market of voice, video and data with the launch of Digital Phone and as at August 31, 2005 offered a primary line Digital Phone service across certain of its cable services areas including Calgary, Edmonton and Winnipeg.

Consolidated service operating income before amortization increased 6.1% to $982.0 million. The improvements were due to overall revenue growth and reduced costs in the satellite division, while 2005 also benefited from a $6.5 million settlement of litigation deducted in the prior year. These improvements were partly offset by increased costs in the cable division, including expenditures incurred to support continued growth, to prepare for increased competition and to launch Digital Phone.

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August 31, 2006

Amortization

											Change
											2006			2005
		2006			2005			2004			%			%
(In $000’s Cdn)
Amortization revenue (expense) –
	Deferred IRU revenue		12,546			12,999			12,098			(3.5	)		7.4
	Deferred equipment revenue		80,256			71,677			82,711			12.0			(13.3	)
	Deferred equipment costs		(200,218	)		(210,477	)		(229,013	)		(4.9	)		(8.1	)
	Deferred charges		(5,328	)		(6,595	)		(8,108	)		(19.2	)		(18.7	)
	Property, plant and equipment		(385,607	)		(408,866	)		(403,395	)		(5.7	)		1.4

The increase in amortization of deferred equipment revenue of 12% in 2006 is primarily due to growth in sales of higher priced HD digital equipment commencing in fiscal 2005. The 2005 decrease in amortization of deferred equipment revenue of 13.3% is primarily the result of lower DTH equipment sales as well as the impact in 2005 of the reduction in the selling price of DTH equipment. Declining DTH equipment sales, combined with the strengthening of the Canadian dollar relative to the US dollar and decreases in the cost of customer equipment, caused the majority of the 4.9% and 8.1% decrease in amortization of deferred equipment costs in 2006 and 2005, respectively.

Amortization of property, plant and equipment decreased in 2006 as the impact of assets becoming fully depreciated exceeded the amortization on new capital purchases.

Interest on long-term debt

							Change
							2006			2005
	2006		2005		2004		%			%
(In $000’s Cdn)
Interest		254,303		262,949		281,774		(3.3	)		(6.7	)

Interest charges decreased year over year as a result of lower average cost of borrowing mainly resulting from changes in the various components of long-term debt.

Investment activity gains and losses

										Increase (decrease)
										in income
	2006			2005			2004			2006		2005
(In $000’s Cdn)
Gain on sale of investments		50,315			32,163			356			18,152		31,807
Write-down of investments		(519	)		(1,937	)		(651	)		1,418		(1,286	)

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Shaw Communications Inc.

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August 31, 2006

Gain on sale of investments

The gain on sale of investments primarily resulted from the sale of the investment in Canadian Hydro Developers, Inc. (“Canadian Hydro”) in 2006; the settlement of the forward sale contract in respect of the Motorola investment in 2005; and, sale of a minority interest in a small cable company in British Columbia in 2004.

Write-down of investments

The write-down of investments are in respect of minor interests in private companies and an equity interest in a speciality channel network.

Other income and expenses

										Increase (decrease)
										in income
	2006			2005			2004			2006			2005
(In $000’s Cdn)
Debt retirement costs		(12,248	)		(6,311	)		(2,598	)		(5,937	)		(3,713	)
Foreign exchange gain on unhedged long-term debt		5,369			40,518			28,522			(35,149	)		11,996
Fair value loss on forward currency forward contracts		(360	)		(19,342	)		–			18,982			(19,342	)
Other gains		6,724			11,016			3,753			(4,292	)		7,263

The debt retirement costs in 2006 and 2005 arise on the write-off of the remaining deferred financing charges associated with the redemption of the US $172.5 million COPrS and $150.0 million COPrS in the current year and the US $142.5 million COPrS in the prior year.

In 2004, the Company incurred $2.6 million in debt retirement costs primarily related to the repayment of its $350 million credit facility due February 10, 2006.

Shaw recorded foreign exchange gains on the translation of its foreign denominated unhedged long-term debt which included US dollar denominated bank loans, COPrS and a Zero Coupon Loan. Due to the strengthening of the Canadian dollar relative to the US dollar and repayment of the US denominated debt during 2005 and 2006, the Company recorded foreign exchange gains of $5.4 million, $40.5 million and $28.5 million in 2006, 2005 and 2004 respectively. As of June 2006, the Company no longer has any foreign denominated unhedged long-term debt and therefore, does not anticipate recording any further exchange gains and losses.

The Company had a forward purchase contract which provided US funds required for the quarterly interest payments on the US denominated COPrS. This forward purchase contract was not designated as a hedge. Accordingly, the carrying value of this financial instrument was adjusted to reflect the current market value, which resulted in losses of $0.4 million and $23.6 million in 2006 and 2005, respectively. In addition, the forward purchase contract entered into by the Company to purchase the US funds required to redeem the Series A COPrS in February 2005 was not eligible for hedge accounting. As a result, the forward purchase contract was fair valued and resulted in a gain of $4.3 million on settlement.

The year-over-year change in other gains was in respect of amounts reported on the sale of residential units of Shaw Tower by the Partnership of $1.7 million in 2006 and $6.2 million in 2005.

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Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

Income tax expense

The income tax expense was calculated using current statutory income tax rates of 33.75%, 35.5% and 35.5% for the years 2006, 2005 and 2004, respectively, and was adjusted for the reconciling items identified in Note 14 to the Consolidated Financial Statements. Future income tax recoveries of $175.8 million and $14.1 million related to reductions in corporate income tax rates were recorded in 2006 and 2004, respectively.

Equity income (loss) on investees

The equity losses on investees were $0.3 million in both 2005 and 2004.

Investment in Burrard Landing Lot 2 Holdings Partnership

As described in Note 1 to the Consolidated Financial Statements, Shaw proportionately consolidates the assets, liabilities, revenues and expenses of its interest in the Partnership. During construction, all costs, including interest were capitalized to the cost of the building. The commercial construction of the building was completed in the fall of 2004, at which time Shaw began to record revenue and expenses in respect of the commercial activities which had a nominal impact on net income. Residential construction was completed in the second quarter of 2006. Shaw has recorded gains on the sale of residential units of $1.7 million (2005 – $6.2 million).

Net income per share

							Change
							2006			2005
	2006		2005		2004		%			%
(In $000’s Cdn except per share amounts)
Net income		458,250		153,221		70,870		199.1			116.2
Divided by weighted average number of participating shares outstanding during period (000’s)		217,666		228,210		231,605		(4.6	)		(1.5	)
Income per share – basic		$2.11		$0.67		$0.31		214.9			116.1
Income per share – diluted		$2.09		$0.67		$0.31		211.9			116.1

The percentage improvements in earnings per share in 2006 is higher than the respective percentage improvement in earnings because of the decrease in the weighted average number of outstanding shares due to ongoing share repurchases.

Net income

Net income was $458.3 million in 2006 compared to $153.2 million in 2005 and $70.9 million in 2004. The year-over-year changes are summarized in the table below. The fluctuations in other net costs and revenue from 2005 to 2006 is mainly due to lower foreign exchange gains on unhedged long-term debt and increased debt retirement costs on the redemption of two series of COPrS in 2006 versus one series in 2005 partially offset by a higher gain on sale of investments due to sale of Canadian Hydro and decreased fair value loss on forward currency forward contracts. The fluctuation in other net costs and revenue from 2004 to 2005 is due to the gain recorded on the settlement of a forward sale contact of the Motorola investment.

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Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

	2006			2005
(In $millions Cdn)
Increased service operating income before amortization		95.9			56.1
Decreased amortization of deferred net equipment cost and revenue and IRU revenue		18.4			8.4
Decreased (increased) amortization of deferred charges and property, plant and equipment		24.5			(4.0	)
Decreased interest expense		8.6			18.8
Change in other net costs and revenue(1)		(6.4	)		26.7
Decreased (increased) income taxes		164.0			(23.7	)
		305.0			82.3

(1) Other net costs and revenue include gain on sale of investments, write-down of investments, debt retirement costs, foreign exchange gain on unhedged long-term debt, fair value loss on foreign currency forward contracts, equity income (loss) on investees and other gains as detailed in the Consolidated Statements of Income and Deficit.

SEGMENTED OPERATIONS REVIEW

CABLE

FINANCIAL HIGHLIGHTS

								Change
								2006			2005
		2006		2005		2004		%			%
($000’s Cdn)
Service revenue (third party)			1,808,583		1,598,369		1,491,569		13.2			7.2
Service operating income before amortization (1)			857,466		797,583		779,579		7.5			2.3
Less:
	Interest		210,758		220,388		237,290		(4.4	)		(7.1	)
	Cash taxes on net income		1,761		5,410		2,926		(67.4	)		(84.9	)
Cash flow before the following:			644,947		571,785		539,363		12.8			6.0
Capital expenditures and equipment subsidies			451,549		343,168		267,113		31.6			28.5
Free cash flow(1)			193,398		228,617		272,250		(15.4	)		(16.0	)
Operating margin(1)			47.4%		49.9%		52.3%		(2.5	)		(2.4	)

(1) See Key performance drivers on page 8.

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Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

2006 vs. 2005

OPERATING HIGHLIGHTS

• During the year the Company added 43,744 Digital Phone lines and at August 31, 2006, the number of Digital Phone lines, including pending installations, was 212,707. The expansion of Shaw’s Digital Phone footprint continued with the service rolled out during the year in Victoria, Vancouver, Fort McMurray and other smaller areas including the surrounding areas of Calgary and Edmonton.

• Internet penetration of basic is now at almost 60%, up from 54.5% at August 31, 2005. Shaw has in excess of 1.3 million Internet customers having added 138,581 in the year. Digital subscribers were up 71,253 in the year and Basic cable posted a 41,281 increase.

• Commencing in October 2005, Shaw introduced rate increases on most stand-alone services, packages, and on specialty services. The increases generated additional revenue of approximately $3.8 million per month once fully implemented in November 2005.

• Shaw announced the acquisition of several cable systems that complement existing operations including Pemberton Cable, Saltspring Cablevision, Whistler Cable, and Grand Forks, all operating in British Columbia as well as Norcom Telecommunications Limited operating in Kenora, Ontario. These cable systems provide synergies with existing operations and represent growing markets.

Cable service revenue improved 13.2% over last year. The increase was primarily driven by customer growth and rate increases. Service operating income before amortization increased 7.5% over the comparable year. The investment in people and services to support ongoing service and product enhancements, as well as increased marketing and maintenance related to service costs for software and equipment contributed to this reduced pace of growth.

The Shaw Digital Phone service is now available to approximately 2.0 million, representing 60% of homes passed. During the year Shaw expanded its Digital Phone footprint to Victoria, Vancouver, Fort McMurray and other smaller areas including the surrounding areas of Calgary and Edmonton. During 2007, the Company plans to continue the roll-outs when it anticipates the service will be available to over 80% of homes passed. In 2006 the Company enhanced the digital phone service to offer its customers a competitive international long distance calling plan. In addition to unlimited anytime long distance calling within Canada and the U.S., Shaw Digital Phone now includes 1,000 international long distance minutes per month. Shaw Digital Phone customers can direct dial a variety of countries in Europe, the U.K. and Asia Pacific for no additional costs. Shaw is now completing over 3.6 million telephone calls per day on its private managed broadband network (not the public internet) allowing Shaw to ensure customers receive a superior level of quality and reliability. The Company continues to expand the product offering and plans to launch a business voice service during 2007.

A number of customer service initiatives and enhancements were completed during the year. Analog cable service was enhanced with the new channel launches of Turner Classic Movies, American Movie Classics (AMC) as well as the addition of Encore Avenue. This is part of the Company’s strategy to bring popular programming services to analog cable customers who represent almost 70% of Shaw’s basic subscribers. High-speed Internet was enhanced with the introduction of Shaw Photo Share and the Company increased the speed of its premier Internet service, High-Speed Xtreme-I, by over 40%. The High-Speed Xtreme-I service now allows customers to download Internet files at an enhanced speed of up to 10Mb per second. Shaw has also added value and variety for digital customers by adding the NFL Network at no additional cost and carrying NHL hockey on Shaw Pay Per View (“PPV”). VOD offerings were expanded during the year with the addition of content from Warner Bros. International and Eurocinema. Vancouver Island was added to the VOD footprint and during 2006 over 2.4 million

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Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

VOD sessions were ordered by customers. Shaw also announced the expansion of its High Definition (“HD”) offering adding TSN HD, CBC HD, Discovery HD, A&E HD and CTV HD. Over 90,000 cable customers are now HD capable, having purchased an HD receiver from Shaw. With the continued growth of the business, the Company increased support to ensure delivery on its commitment to provide exceptional customer service through the establishment of a new call centre located in Winnipeg. This new call centre serves as an overflow facility to handle customer calls and inquiries from across Western Canada.

2005 vs. 2004

OPERATING HIGHLIGHTS

• Shaw launched Digital Phone in Calgary, Edmonton and Winnipeg and as at August 31, 2005 pending and installed Digital Phone lines totaled 56,563.

• Customer base grew across all products and penetration of customers who subscribe to bundled services increased to 48.2% up from 42.4% in 2004.

• Effective November 26, 2004, Shaw introduced rate increases of approximately $1 per month on most of its packages. The increases generated additional monthly revenue of approximately $2.0 million per month when they were fully implemented at the end of January 2005.

Annual cable service revenue improved 7.2% over 2004. The increase was primarily driven by customer growth including Shaw’s entry into the telephony market, rate increases and a full year of revenue from the Monarch cable systems acquired in the third quarter of fiscal 2004.

Fiscal 2005 was an exciting year for cable with the launch of Shaw Digital Phone in three major markets. At the same time, Shaw continued to invest in value added services and product improvements, including Shaw Video Mail, Shaw Secure, Shaw Messenger and increased speed of connectivity to its Internet product. As a result, Shaw’s Internet suite includes a comprehensive security package, a complete online messaging service and the ability to send video email up to two minutes in length to multiple recipients all at increased speeds of up to 40% on high-speed Internet products. In addition, cable continued to roll out on-screen ordering of VOD content and to enhance customer support. The required investment in people and services to support these initiatives, plus increased network fees, premise and compliance costs contributed to the lower growth rate of service operating income before amortization of 2.3% for the year.

The cable division has experienced increased competition with video competitors, such as MTS and SaskTel in Winnipeg and Saskatoon, respectively. MTS entered the video market in 2004 and SaskTel in 2003. In addition, Telus, which operates in Shaw’s Alberta and British Columbia service areas, was granted a broadcasting distribution license in 2003 to enter the market and Shaw anticipates additional competition when Telus launches their video service. In response, Shaw continues to solidify its strong customer relationships through initiatives such as same day/next day service, enhancing the attractiveness of its current products with new features and launching Digital Phone. While these required investments have exerted pressure on cable margins, which were 49.9% compared to 52.3% in 2004, they are expected to position the Company for future growth as the roll out of Digital Phone continues.

34

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

CAPITAL EXPENDITURES AND EQUIPMENT SUBSIDIES – CABLE

								Change
								2006			2005
		2006		2005		2004		%			%
(In $000’s Cdn)
Capital expenditures and equipment subsidies:
	New housing development(1)		79,230		79,656		63,906		(0.5	)		24.7
	Success-based(2)		87,365		60,320		54,540		44.8			10.6
	Upgrades and enhancement(3)		192,875		140,776		112,223		37.0			25.4
	Replacement(4)		38,807		30,181		16,070		28.6			87.8
	Buildings and other		53,272		32,235		20,374		65.3			58.2
			451,549		343,168		267,113		31.6			28.5

Capital expenditure categories listed above include:

(1)	Build out of mainline cable and the addition of drops in new subdivisions.
(2)	Capital and equipment subsidies related to the acquisition of new customers, including installation of modems, digital cable terminals (“DCTs”), filters and commercial drops for Shaw Business Solutions customers.
(3)	Upgrades to the plant from 550 MHz to 750 MHz in 2003 and 750 MHz to 860 MHz in 2004, build out of fiber backbone to reduce use of leased circuits and costs to decrease node sizes and Digital Phone capital in 2004, 2005 and 2006.
(4)	Normal replacement of aged assets such as drops, vehicles and other equipment.

2006 vs. 2005

Capital investment increased $108.4 million over 2005 as the Company undertook various projects to support growth and improvements. During 2006, Shaw invested $86.1 million of capital on Digital Phone deployment. Total spending to date on Digital Phone is now $148.7 million. Success-based capital was up $27.0 million over the prior year due to Digital Phone customer growth. The increase over 2005 of $60.7 million in the Upgrades and Enhancements and Replacements categories combined is primarily due to spending to maintain a leading network. During the year the Company invested in fibre projects, node and channel expansion projects to support digital phone and internet growth, as well as headend expenditures to support VOD and digital cable improvements. The current year also included higher new vehicle purchases and increased spending on office equipment to support call centre expansions. Spending in Buildings and Other increased $21.0 million over the comparable period primarily due to spending on a new customer management and billing system and increased facilities projects.

2005 vs. 2004

During 2005, Shaw increased certain capital expenditures to ensure that its network could support additional customer demand, and to accelerate the rollout of Digital Phone and other new products and services. As a result, capital expenditures increased 28.5% or $76.1 million over 2004. Shaw invested $49.1 million of capital on the deployment of Digital Phone during the 2005 year (2004 – $14.0 million). The fixed capital portion of the Digital Phone investment, plus enhancements and replacements of amplifiers, power supplies, nodes and other network components, is reflected in higher annual spending of upgrades/ enhancements and replacement capital, which combined, increased $42.7 million over 2004. The remaining increase in annual capital spending of $33.4 million is due to increased spending of $15.7 million on new housing development, $11.9 million on buildings and other and $5.8 million on success-based capital. The new housing development spending increased as a result

35

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

of increased construction, principally in Alberta and British Columbia, and recoveries of capital recorded in 2004. Buildings and other were up mainly due to investments in new and enhanced information systems and the purchase of certain software licenses. Success-based capital increased due to Digital Phone customer premise equipment and the related installation activity.

SUBSCRIBER STATISTICS

								2006				2005
										Change				Change
		2006		2005(1)		2004(1)		Growth		%		Growth		%
CABLE:
Basic subscribers			2,186,091		2,144,810		2,124,337		41,281		1.9		20,473		1.0
	Penetration as a % of homes passed		65.6%		66.1%		67.2%
Digital customers			669,787		598,534		540,585		71,253		11.9		57,949		10.7
Digital deployment (“DCTs”)			853,160		739,783		641,033		113,377		15.3		98,750		15.4
INTERNET:
Connected and scheduled installations			1,306,991		1,168,410		1,021,285		138,581		11.9		147,125		14.4
	Penetration as % of basic		59.8%		54.5%		48.1%
Stand-alone Internet not included in basic cable			156,018		135,697		114,884		20,231		15.6		20,813		18.1
DIGITAL PHONE
	Number of lines(2)		212,707		56,563		–		156,144		276.1		56,563		–

(1)	August 31, 2005 and 2004 are restated for comparative purposes as if the acquisition of the Salt Spring and Pemberton cable systems in British Columbia had occurred on that date.
(2)	Represents primary and secondary lines on billing plus pending installs.

Digital customers increased by 71,253 in 2006 compared to an increase of 57,949 in 2005. The Internet customer base grew by 138,581 in 2006, compared to 147,125 last year. Internet penetration as a percentage of basic was 59.8% compared to 54.5% last year. Shaw continues to be one of the leading North American cable operators in this regard.

Each new product and product enhancement keeps Shaw competitive allowing the Company to retain existing customers and steadily add new ones. Shaw delivers high-quality customer service, simplicity and value to its customers through various bundled service offerings creating value for Shaw’s customers. This also allows Shaw to benefit through incremental penetration and operational efficiencies.

Churn(1)	2006			2005			2004
Digital customers		14.7	%		15.1	%		15.5	%
Internet customers		14.9	%		15.1	%		17.7	%

(1) 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. See Key performance drivers page 8.

36

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

SATELLITE (DTH and Satellite Services)

FINANCIAL HIGHLIGHTS

								Change
								2006			2005
		2006		2005		2004		%			%
($000’s Cdn)
DTH (Star Choice)			567,807		530,729		505,637		7.0			5.0
Satellite Services			82,894		80,712		82,543		2.7			(2.2	)
Service revenue (third party)			650,701		611,441		588,180		6.4			4.0
Service operating income before amortization(1)
DTH (Star Choice)			175,401		141,687		111,150		23.8			27.5
Satellite Services			45,050		42,723		41,690		5.4			2.5
			220,451		184,410		152,840		19.5			20.7
Less:
	Interest(2)		42,100		41,384		44,484		1.7			(7.0	)
	Cash taxes on net income		98		334		1,692		(70.7	)		(80.3	)
Cash flow before the following			178,253		142,692		106,664		24.9			33.8
Less capital expenditures and equipment subsidies:
	Success-based		85,341		82,780		95,958		3.1			(13.7	)
	Transponders and other		20,865		11,210		4,075		86.1			175.1
			106,206		93,990		100,033		13.0			(6.0	)
Free cash flow(1)			72,047		48,702		6,631		47.9			634.5
Operating margin			33.8%		30.2%		26.0%		3.6			4.2

(1)	See Key performance drivers on page 8.
(2)	Interest is allocated to the Satellite division based on the actual cost of debt incurred by the Company to repay prior outstanding Satellite debt and to fund accumulated cash deficits of Satellite Services and Star Choice.

CUSTOMER STATISTICS

	2006		2005		2004
Star Choice Customers(1)		869,208		844,662		827,903

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

Churn(2)	2006		2005		2004
Star Choice customers		11.5%		14.6%		16.8%

(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. See Key performance drivers page 8.

37

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

SATELLITE (DTH and Satellite Services)

2006 vs. 2005

OPERATING HIGHLIGHTS

• Free cash flow for the year was $72.0 million compared to $48.7 million for the prior year.

• DTH added 24,546 customers in 2006 compared to 16,759 last year.

• Star Choice received the SQM Group Inc 2005 award for the highest customer satisfaction rating, for customer contact in a call centre, within the Telecommunications and TV Industry.

• Rate increases were implemented on most of DTH’s programming packages. The rate increases were effective September 1, 2005 for some package types and February 1, 2006 for others. Each of the September and February rate increases generated additional revenue of approximately $0.8 million per month effective in the month implemented.

• Customer churn decreased to 11.5% compared to 14.6% in 2005.

Service revenue improved 6.4% for the year as a result of rate increases and customer growth. Service operating income before amortization increased 19.5% to $220.5 million. The improvement was primarily due to the growth in service revenue, cost savings including reduced marketing and distribution related expenses, lower bad debt, and the recovery of provisions related to certain contractual matters.

Capital spending for the year of $106.2 million increased $12.2 million over the prior year. Spending in Transponders and Other was up $9.7 million primarily due to spending on facilities projects, uplink equipment and the purchase of a license for the Satellite Services business. Success based capital expenditures of $85.3 million increased $2.6 million over 2005 primarily due to increased shipment volumes to retailers and dealers.

During the year, Star Choice purchased two additional Ku-band transponders on the Anik F2 satellite from Telesat. This additional capacity was used to launch three new HD channels including TSN HD, CBC HD and CTV HD. Over the past few months it also recently expanded the HD offering adding Discovery HD, A&E HD and SRC HD. SRC HD is the first French HD channel to join the lineup. Subscribers are now able to view 18 HD channels, up from 11 at August 2005.

Throughout 2006, Star Choice continued to improve its service offerings and its overall customer service. Star Choice added a number of new video channels, including two French-language channels, PRISE 2 and Cinépop. Other popular channels added to its growing channel line up include Turner Classic Movies, The Fight Network, Drive-In Classics and AMC. During the year, Star Choice was recognized by SQM Group Inc. in receiving their 2005 award for the Highest Customer Satisfaction Rating within the Telecommunications and TV industry. SQM Group awards excellence in customer and employee satisfaction for the contact centre industry. Star Choice continues to raise the bar in improving the overall customer service experience which is reflected in the reduced customer churn as outlined above.

2005 vs. 2004

OPERATING HIGHLIGHTS

• Free cash flow for the year increased to $48.7 million compared to $6.6 million in 2004.

• Star Choice added 16,759 customers in 2005 compared to 19,377 in the previous year.

• DTH customer churn decreased to 14.6% from 16.8% in 2004.

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Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

• On February 1, 2005 Star Choice implemented a rate increase on most of its programming packages ranging from $1.00 to $3.00 per month for a total average increase of approximately $1.50 per month.

Service revenue increased 4.0% over the prior year due to rate increases, customer growth and changes in the mix of promotional activities within the DTH business segment. Service operating income before amortization continued to outpace service revenue growth, with an increase of 20.7%, mainly due to reduced sales and distribution costs, lower bad debt costs, and a DTH inventory write-down which occurred in 2004.

Success-based capital spending for the year decreased $13.2 million primarily due to lower cost receivers and lower gross activations due to reduced churn. Annual spending on transponder and other assets increased over the prior year primarily due to the launch of Anik F2 and the purchase of additional capacity by Star Choice. The additional capacity offered by Anik F2 enabled Star Choice to offer eleven HDTV channels up from six in the previous year. During the last quarter of 2005, Star Choice entered into an agreement with Telesat to purchase two additional Ku-band transponders on Anik F2. This additional capacity is expected to be used to increase pay-per-view offerings and high definition services.

Throughout 2005, Star Choice introduced a number of product enhancements. For example, in May, it became the first Canadian satellite distributor to introduce a dual tuner HDTV digital video recorder to the market with the launch of the DVR530 HD receiver. In the fourth quarter, it introduced the DSR505 HD receiver, which is the lowest priced HD receiver currently in the market. These ongoing product enhancements, combined with continued improvements in customer service and a focus on acquisition of customers less susceptible to credit risk, resulted in improved customer retention as outlined in the table above.

IV. FINANCIAL POSITION

Total assets at August 31, 2006 were $7.5 billion compared to $7.4 billion at August 31, 2005. Following is a discussion of significant changes in the consolidated balance sheet since August 31, 2005.

Current assets increased by $32.3 million due to increases in accounts receivable of $23.5 million and inventories of $8.8 million. Accounts receivable increased primarily due to customer growth, rate increases and higher equipment shipments while inventories were up mainly due to timing of purchases in order to ensure sufficient supply for increased activity.

Investments and other assets decreased by $18.3 million primarily due to the sale of the shares of Canadian Hydro.

Property, plant and equipment increased by $60.8 million as current year capital expenditures exceeded amortization for the year.

Deferred charges increased during the year by $10.7 million. The increase was primarily due to an increase in financing costs of $10.9 million and deferred discounts totaling $8.5 million (incurred on the issuance of the $450 million and $300 million senior unsecured notes), both of which were partially offset by the write-off of $12.2 million of deferred financing costs upon redemption of the US $172.5 million 8.5% COPrS and $150 million 8.875% COPrS in the current year.

Broadcast licenses increased by $6.8 million due to completing the acquisitions of two cable systems in British Columbia.

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Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

Current liabilities (excluding current portion of long-term debt) increased by $80.2 million due to increases in bank indebtedness of $20.4 million, accounts payable of $53.1 million and unearned revenue of $8.1 million. Accounts payable increased primarily due to higher capital expenditure accruals and increased network fees associated with subscriber growth, new services and network rate increases. Unearned revenue increased due to customer growth and rate increases.

Total long-term debt decreased by $203.2 million as a result of a net decrease in bank line borrowings and Partnership debt of $517.0 million, repayment of the US $172.5 million 8.5% COPrS for $201.9 million and the $150 million 8.875% COPrS, a decrease of $84.3 million relating to the translation of US denominated debt, partially offset by the issuance of $450 million and $300 million senior unsecured notes.

Other long-term liabilities decreased by $3.1 million due to payment of $15.8 million to unwind and cancel the foreign currency forward contract in respect of the entitlement payments on the US $172.5 million COPrS. This was partially offset by an increase in the pension liability.

Deferred credits increased by $90.2 million principally due to the increase in deferred foreign exchange gains on the translation of hedged US dollar denominated debt of $78.9 million and an increase of $22.5 million in deferred equipment revenue, both of which were partially offset by amortization of prepaid IRU rental of $12.5 million. Future income taxes decreased by $83.9 million primarily due to income tax recoveries related to reductions in corporate income tax rates partially offset by the future income tax expense recorded in the current year.

Share capital decreased by $47.2 million, of which $49.6 million was due to the repurchase of 5,119,900 Class B Non-Voting Shares for cancellation for $146.6 million in the year. The balance of the cost of the shares repurchased of $97.0 million was charged to the deficit. During the year, 53,000 Class A Shares were converted into 53,000 Class B Non-Voting Shares and 82,799 Class B Non-Voting Shares were issued for $2.4 million under the Company’s option and warrant plans. As of November 20, 2006, share capital is as reported at August 31, 2006 with the exception of Class B Non-Voting Shares which were 203,910,516 due to the issuance of 170,818 shares on exercise of stock options and issuance of 89,794 shares in respect of a cable system acquisition.

V.     CONSOLIDATED CASH FLOW ANALYSIS

Operating activities

									Change
									2006			2005
	2006			2005			2004		%			%
(In $000’s Cdn)
Funds flow from operations		847,197			728,524			654,585		16.3			11.3
Decrease (increase) in non-cash working capital balances related to operations		(324	)		(86	)		38,025		(276.7	)		(100.2	)
		846,873			728,438			692,610		16.3			5.2

Funds flow from operations increased year-over-year due to growth in service operating income before amortization and decreased interest expense. The year over year net change in non-cash working capital balances is primarily due to increases in subscriber receivables resulting from subscriber growth and rate increases as well as timing of interest payments.

40

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

Investing activities

										Increase (decrease)
										in cash flow
	2006			2005			2004			2006			2005
(In $000’s Cdn)
Cash flow used in investing activities		(489,096	)		(380,032	)		(407,223	)		(109,064	)		27,191

In 2006 and 2005, proceeds on the sale of investments (2006 – $88.1 million; 2005 – $79.9 million) partially offset the cash outlay required for capital expenditures and equipment subsidies (2006 – $531.8 million; 2005 – $452.6 million).

In 2004, the principal use of cash was for capital expenditures and equipment subsidies of $388.8 million and $24.3 million on the purchase of the Monarch cable systems.

Financing activities

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

	2006			2005			2004
(In $millions Cdn)
Redemption of COPrS		(351.9	)		(172.4	)		–
Cost to terminate foreign currency forward contract		(15.8	)		(12.2	)		–
Repayment of $275 million Senior notes		–			(275.0	)		–
Settlement of Zero Coupon Loan		–			(27.9	)		–
Repayment of $350 million credit facility		–			–			(350.0	)
Repayment of $250 million Structured Note		–			–			(250.0	)
Partial repayment of $300 million Senior notes		–			–			(3.2	)
Issue of $350 million Senior notes		–			–			350.0
Bank loans and bank indebtedness – net borrowings (repayments)		(496.3	)		505.6			47.0
Purchase of Class B Non-Voting Shares for cancellation		(146.6	)		(287.1	)		(86.0	)
Dividends		(103.3	)		(70.5	)		(36.9	)
Debt retirement costs		–			–			(1.1	)
Proceeds on bond forward		2.5			–			–
Issuance of Class B Non-Voting Shares		2.3			0.2			–
Proceeds on prepayments of IRU		0.2			1.2			5.7
Increase (decrease) in Partnership debt		(0.4	)		(8.6	)		18.4
Proceeds on $300 million senior unsecured notes		300.0			–
Proceeds on $450 million senior unsecured notes		450.0			–			–
Repayment of long-term debt acquired on business acquisition		(0.2	)		–			–
Cash flow used in financing activities		(359.5	)		(346.7	)		(306.1	)

VI.    LIQUIDITY AND CAPITAL RESOURCES

In 2005, Shaw generated $277.3 million of consolidated free cash flow. Shaw used its free cash flow plus the increase in bank loans of $510.0 million, proceeds on the sale of various assets of $46.6 million, cash distributions from the Partnership of $10.6 million and other net cash items of $6.7 million to redeem the 8.45% Series A COPrS at a cost of $172.4 million, repay the Zero Coupon Loan and accrued

41

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

interest thereon of $34.0 million, repay $275 million Senior notes, purchase $287.1 million of Class B Non-Voting Shares for cancellation, pay common share dividends of $70.5 million and pay $12.2 million to terminate a foreign currency forward contract.

In November 2003, Shaw received approval from the Toronto Stock Exchange (“TSX”) to make a normal course issuer bid to purchase up to 11,000,000 Class B Non-Voting Shares for the period November 7, 2003 to November 6, 2004. In 2005, Shaw received approval from TSX to renew its normal course issuer bid for another one year period which authorized Shaw to purchase up to 10,900,000 of its Class B Non-Voting Shares for the period for the period November 6, 2004 to November 7, 2005. Pursuant to these normal course issuer bids, during 2005 Shaw repurchased 11,505,500 of its Class B Non-Voting Shares for a total of $287.1 million.

In the current year, Shaw generated $265.4 million of consolidated free cash flow. Shaw used its free cash flow along with the increase in bank indebtedness of $22.1 million, proceeds on the sale of various assets of $77.5 million, cash distributions from the Partnership of $8.5 million, and net change in working capital requirements of $32.3 million to repay $118.6 million in debt, purchase $146.6 million of Class B Non-Voting Shares for cancellation, pay common share dividends of $103.3 million, pay $21.5 million in financing costs (including debt discounts) and pay $15.8 million to terminate a foreign currency forward contract.

On May 9, 2006, Shaw issued $300 million of senior unsecured notes at a rate of 6.15% due May 9, 2016. Net proceeds (after issue and underwriting expenses) of $289.1 million were used for repayment of unsecured bank loans. The notes were issued at a discount of $5.8 million. In conjunction with the issuance of the notes, the $100 million revolving credit facility established by the Company on February 1, 2006, which had not been drawn upon, was terminated.

On November 16, 2005, Shaw issued $450 million of senior unsecured notes at a rate of 6.10% due November 16, 2012. Net proceeds (after issue and underwriting expenses) of $441.5 million were used for debt repayment, including the redemption of the Series B COPrS on December 16, 2005, the repayment of unsecured bank loans, and for working capital purposes. The notes were issued at a discount of $2.7 million.

In addition, Shaw redeemed the Cdn. $150.0 million 8.875% COPrS on July 17, 2006. The Company believes the redemption of the three series of COPrS over the past two years was prudent given the interest rate and foreign exchange environments. The redemptions have contributed significantly to lowering Shaw’s debt service costs with the combined annual interest savings estimated to be approximately $19 million. In connection with the redemption of the two US series of COPrS, the Company paid $28.0 million to terminate the foreign currency forward contract in respect of the interest entitlements. The pre-tax termination costs of $28.0 million was recorded against the foreign currency forward contract liability. All three redemptions were financed by the Company’s revolving credit facility.

During 2006, the Company amended its existing credit facility to extend the maturity date from April 2009 to May 2011 and implement new pricing terms effective May 2007. In conjunction with the amendment, the remainder of the non-revolving term facilities, due in fiscal 2007, were repaid early. Covenants and other material terms remain largely unchanged.

Pursuant to an amended normal course issuer bid expiring November 7, 2005 and a renewed normal course issuer bid expiring November 16, 2006, Shaw repurchased 5,119,900 of its Class B Non-Voting Shares for cancellation for $146.6 million, which represents approximately 2.5% of the Class B Non-Voting Shares that had been outstanding at August 31, 2005.

42

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

At August 31, 2006, Shaw had access to $759.3 million of available credit facilities. Based on available credit facilities and forecasted free cash flow, the Company expects to have sufficient liquidity to fund operations and obligations during the current fiscal year. On a longer-term basis, Shaw expects to generate free cash flow and have borrowing capacity sufficient to finance foreseeable future business plans and to refinance maturing debt.

On November 14, 2006, 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 an additional 15,300,000 Class B Non-Voting Shares, representing approximately 10% of the public float of Class B Non-Voting Shares, during the period November 17, 2006 to November 16, 2007.

Debt structure

Shaw structures its borrowings generally on a stand-alone basis. The borrowings of Shaw are unsecured. The borrowings of Videon are unsecured, but are guaranteed by the subsidiaries of Videon. The demand operating line of credit of $10 million of Satellite Services is secured by assets and undertakings of certain of Satellite Services’ subsidiaries. There are no further restrictions that prevent the remaining subsidiaries of the Company from transferring funds to Shaw.

Shaw’s borrowings are subject to covenants which include maintaining minimum or maximum financial ratios. At August 31, 2006, Shaw is in compliance with these covenants and based on current business plans, the Company is not aware of any condition or event that would give rise to non-compliance with the covenants over the life of the borrowings.

Off-balance sheet arrangement and guarantees

Guarantees

Generally it is not the Company’s policy to issue guarantees to non-controlled affiliates or third parties; however, it has entered into certain agreements as more fully described in Note 16 to the Consolidated Financial Statements. As disclosed thereto, Shaw believes it is remote that these agreements would require any cash payment.

Financial instruments

The Company uses various financial instruments to reduce or eliminate exposure to interest rate and currency risks. The majority of the fair values of these instruments are not reflected on the balance sheet and are disclosed in Note 19 to the Consolidated Financial Statements. Further information concerning policy and use of derivative financial instruments is contained in Note 1 to the Consolidated Financial Statements.

43

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

Contractual obligations

The Company also has various operating leases and purchase commitments for equipment and other network infrastructure. The amounts of estimated future payments under such arrangements are detailed in the following table.

CONTRACTUAL OBLIGATIONS

	Payments due by period
			Within						More than
	Total		1 year		2-3 years		4-5 years		5 years
(In $000’s Cdn)
Long-term debt		2,996,385		449		297,747		1,146,143		1,552,046
Operating lease obligations (maintenance and lease of satellite transponders, lease of transmission facilities and lease of premises)		986,879		107,077		196,273		184,629		498,900
Purchase obligations		26,596		5,636		20,960		–		–
Other long-term obligations		38,061		1,088		2,656		6,916		27,401
		4,047,921		114,250		517,636		1,337,688		2,078,347

VII.   ADDITIONAL INFORMATION

Additional information relating to Shaw, including the Company’s Annual Information Form, can be found on SEDAR at www.sedar.com.

VIII.  COMPLIANCE WITH NYSE CORPORATE GOVERNANCE LISTING STANDARDS

Disclosure of the Company’s corporate governance practices which differ from the New York Stock Exchange (“NYSE”) corporate governance listing standards are posted on Shaw’s website, www.shaw.ca (under Investor Relations/ Corporate Governance/ Other Corporate Governance Information/ Compliance with NYSE Corporate Governance Listing Standards).

IX.    CERTIFICATION

The Company’s Chief Executive Officer and Senior Vice President & Chief Financial Officer have filed certifications regarding Shaw’s disclosure controls and procedures.

As at August 31, 2006, the Company’s Management, together with its Chief Executive Officer and Senior Vice President & Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Senior Vice President & Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective.

44

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 31, 2006

There were no changes in the Company’s internal controls over financial reporting during the fiscal year that have materially affected or are reasonably likely to materially affect Shaw’s internal controls over financial reporting.

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of certain events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

45

Shaw Communications Inc.

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS AND REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

August 31, 2006

November 20, 2006

The accompanying consolidated financial statements of Shaw Communications Inc. and all the information in this annual report are the responsibility of management and have been approved by the Board of Directors.

The financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. When alternative accounting methods exist, management has chosen those it deems most appropriate in the circumstances. Financial statements are not precise since they include certain amounts based on estimates and judgements. Management has determined such amounts on a reasonable basis in order to ensure that the financial statements are presented fairly, in all material respects. Management has prepared the financial information presented elsewhere in the annual report and has ensured that it is consistent with the financial statements.

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. The internal control system includes an internal audit function and an established business conduct policy that applies to all employees. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Company’s assets are appropriately accounted for and adequately safeguarded.

Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s system of internal control over financial reporting was effective as at August 31, 2006.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which is included herein.

The Board of Directors is responsible for ensuring management fulfils its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. The Board carries out this responsibility through its Audit Committee.

The Audit Committee is appointed by the Board and its members are outside unrelated directors. The Committee meets periodically with management, as well as the external auditors, to discuss internal controls over the financial reporting process, auditing matters and financial reporting issues; to satisfy itself that each party is properly discharging its responsibilities; and, to review the annual report, the financial statements and the external auditors’ report. The Committee reports its findings to the Board for consideration when approving the financial statements for issuance to the shareholders. The Committee also considers, for review by the Board and approval by the shareholders, the engagement or re-appointment of the external auditors.

The financial statements have been audited by Ernst & Young LLP, the external auditors, in accordance with Canadian generally accepted auditing standards on behalf of the shareholders. Ernst & Young LLP has full and free access to the Audit Committee.

[Signed]	[Signed]
Jim Shaw	Steve Wilson
Chief Executive Officer	Senior Vice President and
	Chief Financial Officer

46

Shaw Communications Inc.

INDEPENDENT AUDITORS’ REPORT ON FINANCIAL STATEMENTS

Under Canadian Generally Accepted Auditing Standards and the Standards of the Public Company Accounting Oversight Board (United States)

To the Shareholders of

Shaw Communications Inc.

We have audited the Consolidated Balance Sheets of Shaw Communications Inc. as at August 31, 2006, 2005, and 2004, and the Consolidated Statements of Income and Deficit and Cash Flows for each of the years in the three-year period ended August 31, 2006. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian Generally Accepted Auditing Standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these Consolidated Financial Statements present fairly, in all material respects, the financial position of Shaw Communications Inc. as at August 31, 2006, 2005, and 2004 and the results of its operations and its cash flows for each of the years in the three-year period ended August 31, 2006 in accordance with Canadian Generally Accepted Accounting Principles.

We have also audited, in accordance with the Standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Shaw Communications Inc.’s internal control over financial reporting as of August 31, 2006, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated October 16, 2006, expressed an unqualified opinion thereon.

Calgary, Canada
October 16, 2006	Chartered Accountants

47

Shaw Communications Inc.

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROLS

Under the Standards of the Public Company Accounting Oversight Board (United States)

To the Shareholders of

Shaw Communications Inc.

We have audited management’s assessment, included on page 46 of this annual report, that Shaw Communications Inc. maintained effective internal control over financial reporting as of August 31, 2006, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Shaw Communications Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Corporation’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Generally Accepted Accounting Principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with Generally Accepted Accounting Principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Shaw Communications Inc. maintained effective internal control over financial reporting as of August 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Shaw Communications Inc. maintained, in all material respects, effective internal control over financial reporting as of August 31, 2006, based on the COSO criteria. We have also audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheets of Shaw Communications Inc. as at August 31, 2006, 2005 and 2004 and the Consolidated Statements of Income and Deficit and Cash Flows for each of the years in the three-year period ended August 31, 2006, and our report dated October 16, 2006, expressed an unqualified opinion thereon.

Calgary, Canada
October 16, 2006	Chartered Accountants

48

Shaw Communications Inc.

CONSOLIDATED BALANCE SHEETS

As at August 31

		2006			2005
[thousands of Canadian dollars]		$			$
					(Restated –
					note 1
ASSETS [note 9]
Current
Cash			–			1,713
Accounts receivable [note 3]			138,142			114,664
Inventories [note 4]			53,994			45,224
Prepaids and other			20,870			19,116
			213,006			180,717
Investments and other assets [notes 5 and 11]			17,978			36,229
Property, plant and equipment [note 6]			2,250,056			2,189,235
Deferred charges [note 7]			261,908			251,246
Intangibles [note 8]
	Broadcast licenses		4,691,484			4,684,647
	Goodwill		88,111			88,111
			7,522,543			7,430,185
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Bank indebtedness [note 9]			20,362			–
Accounts payable and accrued liabilities [note 13]			461,119			408,033
Income taxes payable			4,918			6,263
Unearned revenue			106,497			98,420
Current portion of long-term debt [note 9]			449			51,380
			593,345			564,096
Long-term debt [note 9]			2,995,936			3,148,162
Other long-term liabilities [notes 17 and 19]			37,724			40,806
Deferred credits [note 10]			1,100,895			1,010,723
Future income taxes [note 14]			984,938			1,068,849
			5,712,838			5,832,636
Commitments and contingencies [notes 9, 16 and 17]
Shareholders’ equity
Share capital [note 11]
	Class A Shares		2,475			2,487
	Class B Non-Voting Shares		1,974,491			2,021,686
Contributed surplus [note 11]			5,110			1,866
Deficit			(172,701	)		(428,855	)
Cumulative translation adjustment [note 12]			330			365
			1,809,705			1,597,549
			7,522,543			7,430,185

See accompanying notes

On behalf of the Board:

[Signed]
JR Shaw
Director [Signed]
Don Mazankowski
Director

49

Shaw Communications Inc.

CONSOLIDATED STATEMENTS OF INCOME

AND DEFICIT

Years ended August 31

[thousands of Canadian dollars			2006			2005			2004
except per share amounts]			$			$			$
						(Restated			(Restated
						–			–
						note 1			note 1
Service revenue [note 15]				2,459,284			2,209,810			2,079,749
Operating, general and administrative expenses				1,381,367			1,227,817			1,153,814
Service operating income before amortization [note 15]				1,077,917			981,993			925,935
Amortization –
	Deferred IRU revenue [note 10]			12,546			12,999			12,098
	Deferred equipment revenue [note 10]			80,256			71,677			82,711
	Deferred equipment costs [note 7]			(200,218	)		(210,477	)		(229,013	)
	Deferred charges [note 7]			(5,328	)		(6,595	)		(8,108	)
	Property, plant and equipment [note 6]			(385,607	)		(408,866	)		(403,395	)
Operating income				579,566			440,731			380,228
Interest [notes 7,9, 10 and 13]				(254,303	)		(262,949	)		(281,774	)
				325,263			177,782			98,454
Gain on sale of investments [note 5]				50,315			32,163			356
Write-down of investments [note 5]				(519	)		(1,937	)		(651	)
Debt retirement costs [notes 7 and 9]				(12,248	)		(6,311	)		(2,598	)
Foreign exchange gain on unhedged long-term debt				5,369			40,518			28,522
Fair value loss on foreign currency forward contracts				(360	)		(19,342	)		–
Other gains [note 1]				6,724			11,016			3,753
Income before income taxes				374,544			233,889			127,836
Income tax expense (recovery) [note 14]				(83,662	)		80,382			56,716
Income before the following				458,206			153,507			71,120
Equity income (loss) on investees [note 5]				44			(286	)		(250	)
Net income				458,250			153,221			70,870
Deficit beginning of year, as previously reported				(471,488	)		(369,194	)		(336,695	)
Adjustment for change in accounting policy [note 1]				42,633			36,403			16,257
Deficit, beginning of year, restated				(428,855	)		(332,791	)		(320,438	)
				29,395			(179,570	)		(249,568	)
Reduction on Class B Non-Voting Shares purchased for cancellation [note 11]				(97,056	)		(175,575	)		(46,313	)
Amortization of opening fair value loss on a foreign currency forward contract [note 7]				(1,705	)		(3,195	)		–
Dividends – Class A and Class B Non-Voting Shares				(103,335	)		(70,515	)		(36,910	)
Deficit, end of year				(172,701	)		(428,855	)		(332,791	)
Earnings per share [note 11]
		Basic		$2.11			$0.67			$0.31
		Diluted		$2.09			$0.67			$0.31

See accompanying notes

50

Shaw Communications Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended August 31

	2006			2005			2004
[thousands of Canadian dollars]	$			$			$
				(Restated			(Restate			d
				note 1			note 1
OPERATING ACTIVITIES [note 20]
Funds flow from operations		847,197			728,524			654,585
Net decrease (increase) in non-cash working capital balances related to operations		(324	)		(86	)		38,025
		846,873			728,438			692,610
INVESTING ACTIVITIES
Additions to property, plant and equipment [note 15]		(423,855	)		(336,888	)		(256,136	)
Additions to equipment costs (net) [note 15]		(107,929	)		(115,668	)		(132,711	)
Net (increase) reduction to inventories		(8,770	)		(1,648	)		7,898
Cable business acquisitions [note 2]		(5,829	)		–			(24,298	)
Proceeds on sale of investments and other assets		88,143			79,899			9,530
Costs to terminate IRU		–			(283	)		–
Acquisition of investments		(9,392	)		(5,265	)		(495	)
Additions to deferred charges [note 7]		(21,464	)		(179	)		(11,011	)
		(489,096	)		(380,032	)		(407,223	)
FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness		20,362			(4,317	)		4,317
Proceeds on pre-payment of IRU		228			1,216			5,700
Debt retirement costs [note 9]		–			–			(1,134	)
Increase in long-term debt		1,295,000			755,566			666,873
Long-term debt repayments		(1,414,067	)		(729,592	)		(859,142	)
Cost to terminate foreign currency forward contract [note 9]		(15,774	)		(12,200	)		–
Proceeds on bond forward		2,486			–			–
Issue of Class B Non-Voting Shares, net of after-tax expenses		2,274			228			133
Purchase of Class B Non-Voting Shares for cancellation [note 11]		(146,640	)		(287,063	)		(85,968	)
Dividends paid on Class A and Class B Non-Voting Shares		(103,335	)		(70,515	)		(36,910	)
		(359,466	)		(346,677	)		(306,131	)
Effect of currency translation on cash balances and cash flows		(24	)		(16	)		(9	)
Increase (decrease) in cash		(1,713	)		1,713			(20,753	)
Cash, beginning of the year		1,713			–			20,753
Cash, end of the year		–			1,713			–

See accompanying notes

51

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

1.      SIGNIFICANT ACCOUNTING POLICIES

Shaw Communications Inc. (the “Company”) is a public company whose shares are listed on the Toronto and New York Stock Exchanges. The Company is a diversified Canadian communications company whose core operating business is providing cable television services, high-speed Internet access, Digital Phone and Internet infrastructure services (“Cable”); Direct-to-home (“DTH”) satellite services (Star Choice) and satellite distribution services (“Satellite Services”).

The consolidated financial statements are prepared by management on the historical cost basis in accordance with Canadian generally accepted accounting principles (“GAAP”). The effects of differences between the application of Canadian and US GAAP on the financial statements of the Company are described in note 21.

Basis of consolidation

The consolidated financial statements include the accounts of the Company and those of its subsidiaries. Intercompany transactions and balances are eliminated on consolidation. The results of operations of subsidiaries acquired during the year are included from their respective dates of acquisition.

The accounts also include the Company’s proportionate share of the assets, liabilities, revenues, and expenses of its interest in the Burrard Landing Lot 2 Holdings Partnership (the “Partnership”). During 2005, the Company’s interest declined from 38.33% to 33.33% upon receipt of repayment of its equity contributions and a return on capital distribution.

The Company’s interest in the Partnership and in its results of operations and cash flows are as follows:

	2006			2005
	$			$
Working capital		1,103			344
Deferred charges		158			185
Property, plant and equipment		19,495			27,293
		20,756			27,822
Debt		23,010			23,432
Proportionate share of net assets (liabilities)		(2,254	)		4,390

52

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

	2006			2005			2004
	$			$			$
Operating, general and administrative expenses		1,829			1,464			–
Amortization		(714	)		(579	)		–
Interest		(1,445	)		(1,177	)		–
Other gains		2,588			7,470			–
Proportionate share of income before income taxes		2,258			7,178			–
Cash flow provided by operating activities		74			1,310			–
Cash flow provided by (used in) investing activities		8,848			18,023			(18,373	)
Cash flow provided by (used in) financing activities		(422	)		(8,637	)		18,373
Proportionate share of increase in cash		8,500			10,696			–

Investments

Investments in other entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company’s ability to exercise significant influence over the operating and financial policies of the investee. Equity method investments include The Biography Channel (Canada) Corp. (“The Biography Channel”) and 3773213 Canada Inc. (“G4TechTV Canada”) until June 2006, at which time these specialty channels were sold, and MSNBC Canada Holdings Corp. (“MSNBC”) in prior years until its windup in 2005. Investments of this nature are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment, additional contributions made and dividends received. When net losses from an equity accounted for investment exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for unless the Company is committed to provide financial support to the investee. The Company resumes accounting for the investment under the equity method when the entity subsequently reports net income and the Company’s share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down when there is clear evidence that a decline in value that is other than temporary has occurred.

When an equity accounted for investee issues its own shares, the subsequent reduction in the Company’s proportionate interest in the investee is reflected in income as a deemed dilution gain or loss on disposition.

Revenue and expenses

(i) Service revenue

Service revenue from cable, Internet, Digital Phone and DTH customers includes subscriber service revenue when earned. Satellite distribution services and telecommunications service revenue is recognized in the period in which the services are rendered to customers.

Subscriber connection fees received from customers are deferred and recognized as service revenue on a straight-line basis over two years. Direct and incremental initial selling, administrative and reconnection costs related to subscriber acquisitions, in an amount not exceeding initial subscriber connection fee revenue, are deferred and recognized as an operating expense on a straight-line basis over the same two-

53

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

years. The costs of physically connecting a new home are capitalized as part of the distribution system and costs of disconnections are expensed as incurred.

Installation revenue received on contracts with commercial business customers is deferred and recognized as service revenue on a straight-line basis over the related service contract which span two to ten years. Direct and incremental costs associated with the service contract, in an amount not exceeding the upfront installation revenue, are deferred and recognized as an operating expense on a straight-line basis over the same period.

(ii) Deferred equipment revenue and deferred equipment cost

Revenue from sales of modems, DTH equipment and digital cable terminals (“DCTs”) is deferred and recognized on a straight-line basis over two years commencing when subscriber service is activated. The total cost of the equipment, including installation, is deferred and recognized on a straight-line basis over the same period. The DCT, DTH and modem equipment is generally sold to customers at a subsidized price in order to expand the Company’s customer base.

Revenue from sales of satellite tracking hardware and costs of goods sold are deferred and recognized on a straight-line basis over the related service contract for monthly service charges for air time, which is generally five years. The amortization of the revenue and cost of sale of satellite service equipment commences when goods are shipped.

Recognition of deferred equipment revenue and deferred equipment cost is recorded as deferred equipment revenue amortization and deferred equipment cost amortization, respectively.

(iii) Deferred IRU revenue

Prepayments received under indefeasible right to use (“IRU”) agreements are amortized on a straight-line basis into income over the term of the agreement and are recognized in the income statement as deferred IRU revenue amortization.

(iv) Advertising costs

Advertising costs are expensed when incurred and for 2006, 2005 and 2004 were $35,464, $29,406 and $26,310, respectively.

Inventories

Inventories include subscriber equipment such as DCTs, internet modems and DTH receivers, which are held pending rental or sale at a subsidized price. When subscriber equipment is sold at a subsidized price, the equipment revenue and equipment cost are deferred and amortized over two years. When the subscriber equipment is rented, it is transferred to property, plant and equipment and amortized over its useful life. Inventories are determined on a first-in, first-out basis, and are stated at cost due to the eventual capital nature as either an addition to property, plant and equipment or deferred equipment subsidies.

54

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Property, plant and equipment

Property, plant and equipment are recorded at purchase cost. Direct labour and direct overhead incurred to construct new assets, upgrade existing assets and connect new subscribers are capitalized. Repairs and maintenance expenditures are charged to operating expense as incurred. Amortization is recorded on a straight-line basis over the estimated useful lives of assets as follows:

Asset	Estimated useful life
Cable and telecommunications distribution system	10-15 years
Digital cable terminals and modems	5-7 years
Satellite audio, video and data network equipment and DTH receiving equipment	2-10 years
Buildings	20-40 years
Data processing	4 years
Other	3-10 years

The Company reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment is recognized when the carrying amount of an asset is greater than the future undiscounted net cash flows expected to be generated by the asset. The impairment is measured as the difference between the carrying value of the asset and its fair value calculated using quoted market prices or discounted cash flows.

Deferred charges

Deferred charges primarily include (i) equipment costs, as described in the revenue and expenses accounting policy, deferred and amortized on a straight-line basis over two to five years upon activation of the equipment; (ii) financing costs and credit facility arrangement fees related to the issue of long-term debt, amortized on a straight-line basis over the period to maturity of the related debt; (iii) costs incurred in respect of connection fee revenue and upfront installation revenue, as described in the revenue and expenses accounting policy, deferred and amortized over two to ten years: and (iv) an adjustment on a foreign currency forward contract, amortized on a straight-line basis to deficit over the term to the maturity date of the contract.

Intangibles

The excess of the cost of acquiring cable and satellite businesses over the fair value of related net identifiable tangible and intangible assets acquired is allocated to goodwill. Net identifiable intangible assets acquired consist of amounts allocated to broadcast licenses which represent identifiable assets with indefinite useful lives.

Goodwill and intangible assets with an indefinite life are not amortized but are subject to an annual review for impairment which consists of a comparison of the fair value of the assets to their carrying value.

55

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Deferred credits

Deferred credits primarily include: (i) prepayments received under IRU agreements amortized on a straight-line basis into income over the term of the agreement; (ii) foreign exchange gains on translating hedged long-term debt; (iii) equipment revenue, as described in the revenue and expenses accounting policy, deferred and amortized over two years to five years; (iv) connection fee revenue and upfront installation revenue, as described in the revenue and expenses accounting policy, deferred and amortized over two to ten years; (v) a fair value adjustment on debt assumed on an acquisition amortized on a straight-line basis over the term of the debt; (vi) proceeds on a bond forward amortized over the term of the related debt and (vii) a deposit on a future fiber purchase.

Interest capitalization

The Company capitalizes interest on construction projects when the interest expense is directly attributed to the construction activity and the project is developed over a significant amount of time. The Company capitalized interest of $nil (2005 – $656; 2004 – $1,385) in respect of its proportionate share of the Partnership’s construction of a major office/residential tower in Coal Harbour, Vancouver. Interest capitalization in respect of the office portion of the project ceased upon substantial completion of commercial construction. Interest capitalization ceased for the residential component of the project upon repayment of the related bank facilities in 2005 (see note 9).

Income taxes

The Company accounts for income taxes using the liability method, whereby future tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities measured using substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse. Income tax expense for the period is the tax payable for the period and any change during the period in future income tax assets and liabilities.

Foreign currency translation

The financial statements of foreign subsidiaries, all of which are self-sustaining, are translated using the current rate method, whereby assets and liabilities are translated at year-end exchange rates and revenues and expenses are translated at average exchange rates for the year. Adjustments arising from the translation of the financial statements are deferred and included in a separate component of shareholders’ equity.

Transactions originating in foreign currencies are translated into Canadian dollars at the exchange rate at the date of the transaction. Monetary assets and liabilities are translated at the year-end rate of exchange and non-monetary items are translated at historic exchange rates. The net foreign exchange gain recognized on the translation and settlement of current monetary assets and liabilities was $1,546 (2005 – $2,471; 2004 – $61) and is included in other gains.

Exchange gains and losses on translating unhedged long-term debt are included in the Company’s Consolidated Statements of Income and Deficit.

Exchange gains and losses on translating hedged long-term debt are included in deferred credits or deferred charges, respectively.

56

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Derivative financial instruments

The Company uses derivative financial instruments to manage risks from fluctuations in exchange and interest rates. These instruments include cross-currency interest rate exchange agreements, interest rate exchange agreements, currency swaps, and foreign currency forward purchase contracts. Where permissible, the Company accounts for these financial instruments as hedges and as a result the carrying values of the financial instruments are not adjusted to reflect their current market value. The net receipts or payments arising from financial instruments relating to the management of interest risks are recognized as a adjustment to interest expense over the term of the instrument. Foreign exchange gains or losses arising on cross-currency agreements used to hedge US dollar denominated debt are deferred until the hedged item is settled, at which time they are offset against the gain or loss on the hedged item. Upon re-designation or amendment of a derivative financial instrument, the carrying value of the instrument is adjusted to fair value. If the related debt instrument that was hedged had been repaid, then the gain or loss is recorded as a component of the gain or loss on repayment of the debt. Otherwise, the gain or loss is deferred over the remaining life of the original debt instrument. Where hedge accounting is not permissible, the carrying values of derivative financial instruments are adjusted to reflect market value. The resulting gains and losses, in addition to the gains and losses realized on settlement of the contracts, are included in the Company’s Consolidated Statements of Income and Deficit.

Those instruments that have been entered into by the Company to hedge exposure to foreign exchange and interest rate risk are reviewed on a regular basis to ensure the hedges are still effective and that hedge accounting continues to be appropriate. For those instruments that do not meet the above criteria, variations in their fair value are marked-to-market on a current basis in the Company’s Consolidated Statements of Income and Deficit.

Employee Benefit Plans

The Company accrues its obligations and related costs under its employee benefit plans. The cost of pensions and other retirement benefits earned by certain senior employees is actuarially determined using the projected benefit method pro rated on service and management’s best estimate of salary escalation and retirement ages of employees. Past service costs from plan initiation and amendments are amortized on a straight-line basis over the estimated average remaining service life (“EARSL”) of employees active at the date of recognition of past service unless identification of a circumstance would suggest a shorter amortization period is appropriate. Negative plan amendments which reduce costs are applied to reduce any existing unamortized past service costs. The excess, if any, is amortized on a straight-line basis over EARSL. Actuarial gains or losses occur because assumptions about benefit plans relate to a long time frame and differ from actual experiences. These assumptions are revised based on actual experience of the plan such as changes in discount rates, expected retirement age and projected salary increases. Actuarial gains (losses) are amortized on a straight-line basis over EARSL which for active employees covered by the defined benefit pension plan is 12.5 years (2005 – 13.5 years; 2004 – 10.5 years). When the restructuring of a benefit plan gives rise to both a curtailment and a settlement of obligations, the curtailment is accounted for prior to the settlement.

August 31 is the measurement date for the Company’s employee benefit plans. Actuaries perform a valuation annually to determine the actuarial present value of the accrued pension benefits. The last actuarial valuation of the pension plan was performed August 31, 2006.

57

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Stock-based compensation

The Company has a stock option plan for directors, officers, employees and consultants to the Company. The options to purchase shares must be issued at not less than the fair value at the date of grant. Any consideration paid on the exercise of stock options, together with any contributed surplus recorded at the date the options vested, is credited to share capital.

The Company calculates the fair value of stock-based compensation awarded to employees using the Black-Scholes Option Pricing Model. Under the transition rules pertaining to stock-based compensation, the fair value of options granted subsequent to August 31, 2003 are expensed and credited to contributed surplus over the vesting period of the options of four years. For options granted prior to August 31, 2003, the Company discloses the pro forma net income and pro forma earnings per share in note 11 as if the Company had expensed the fair value of the options over the vesting period of the options.

Earnings per share

Basic earnings per share is calculated using the weighted average number of Class A and Class B Non-Voting Shares outstanding during the year. The Company uses the treasury stock method of calculating diluted earnings per share. This method assumes that any proceeds from the exercise of stock options and other dilutive instruments would be used to purchase Class B Non-Voting Shares at the average market price during the period.

Guarantees

The Company discloses information about certain types of guarantees that it has provided, including certain types of indemnities, without regard to whether it will have to make any payments under the guarantees (see note 16).

Use of estimates and measurement uncertainty

The preparation of consolidated financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.

Key areas of estimation, where management has made difficult, complex or subjective judgements, often as a result of matters that are inherently uncertain, are the allowance for doubtful accounts, the ability to use income tax loss carry forwards and other future income tax assets, capitalization of labour and overhead, useful lives of depreciable assets, contingent liabilities and the recoverability of deferred costs, broadcast licenses and goodwill using estimated future cash flows based on current business plans. Significant changes in assumptions with respect to the competitive environment could result in impairment of intangible assets.

58

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Adoption of recent Canadian accounting pronouncements

(i)     Equity Instruments

Effective September 1, 2006, the Company retroactively adopted the amended Canadian standard, Financial Instruments – Disclosure and Presentation, which requires obligations that may be settled at the issuer’s option by a variable number of the issuer’s own equity instruments to be presented as liabilities, which is consistent with US standards. As a result, the Company’s Canadian Originated Preferred Securities (“COPrS”) and Zero Coupon Loan have been classified as debt instead of equity and the dividend entitlements thereon are treated as interest expense instead of dividends. In addition, such US denominated instruments are translated at period-end exchange rates and to the extent they are unhedged, the resulting gains and losses are included in the Consolidated Statements of Income and Deficit. The impact on the Consolidated Balance Sheets as at August 31, 2006 and 2005 and on the Consolidated Statements of Income and Cash flows for each of the years in the three year period ended August 31, 2006 is as follows:

	Increase (decrease)
	2006			2005
	$			$
Consolidated balance sheets:
Deferred charges		793			13,247
Long-term debt		100,000			454,775
Future income taxes		267			14,033
Share capital		(98,467	)		(498,194	)
Deficit		1,007			(42,633	)
Decrease in deficit:
Adjusted for change in accounting policy		(42,633	)		(36,403	)
Decrease in equity entitlements (net of income taxes)		(16,788	)		(31,318	)
Decrease in gain on redemption of COPrS		40,484			12,803
Decrease in gain on settlement of Zero Coupon Loan		–			4,921
Decrease in net income		19,944			7,364
		1,007			(42,633	)

59

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

	Increase (decrease)
	in net income
	2006			2005			2004
	$			$			$
Consolidated statements of income:
Increase in amortization of deferred charges		(206	)		(258	)		(312	)
Increase in interest on long-term debt		(25,341	)		(48,541	)		(62,302	)
Increase in foreign exchange gain on unhedged long-term debt		2,881			34,258			24,559
Increase in debt retirement costs		(12,248	)		(6,311	)		–
Decrease in fair value loss on foreign currency forward contract		2,415			–			–
Decrease in income tax expense		12,555			13,488			18,016
Decrease in net income		(19,944	)		(7,364	)		(20,039	)
Increase (decrease) in earnings per share:		(0.01	)		0.03			0.09

	Increase (decrease)
	2006			2005			2004
	$			$			$
Statement of cash flows:
Operating activities		(20,724	)		(41,468	)		(38,343	)
Financing activities		20,724			41,468			38,343

(ii) Non-monetary Transactions

The Company prospectively adopted the new Canadian standard, Non-monetary Transactions, which requires application of fair value measurement to non-monetary transactions determined by a number of tests. The new standard is consistent with recently amended US standards. The application of these recommendations had no impact on the Company’s consolidated financial statements.

2. BUSINESS ACQUISITIONS AND DIVESTITURES

Cable business acquisitions

	2006
					Total
			Accounts		purchase
	Cash		payable		price
	$		$		$
(i)  Cable systems in British Columbia		5,829		25		5,854

60

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

	2004
					Issuance of
					Class B		Total
			Accounts		Non-Voting		purchase
	Cash		payable		Shares		price
	$		$		$		$
(ii) Monarch		24,122		198		65,000		89,320
(iii) Other		176		–		–		176
		24,298		198		65,000		89,496

A summary of net assets acquired on cable business acquisitions, accounted for as purchases, is as follows:

	2006		2005		2004
	$		$		$
Identifiable net assets acquired at assigned fair values
Property, plant and equipment		957		–		27,146
Deferred charges		–		–		450
Broadcast licenses		6,837		–		57,854
Future income taxes		–		–		5,400
		7,794		–		90,850
Working capital deficiency		129		–		1,354
Long-term debt		218		–		–
Future income taxes		1,593		–		–
		1,940		–		1,354
Purchase price		5,854		–		89,496

(i)	Effective June 30, 2006 and July 31, 2006, the Company purchased two cable systems serving approximately 1,800 basic subscribers in British Columbia.
(ii)	Effective March 31, 2004, the Company purchased certain cable systems of Monarch Cablesystems Ltd. (“Monarch”). The cable systems service approximately 40,000 basic subscribers in the Medicine Hat (Medicine Hat, Taber, Brooks), Canmore (Canmore, Banff, Lake Louise) and southern B.C. (Hope, Fernie, Kimberley) regions. Monarch is controlled by a Director of the Company (see note 18).
(iii)	Effective September 1, 2003, the Company purchased a cable television system serving approximately 200 subscribers in the interior of British Columbia from a Director of the Company (see note 18).

Divestiture

Effective October 1, 2004, the Company sold the cable television advertising business, originally acquired as part of the purchase of the Monarch cable systems in 2004, to Corus Entertainment Inc., a company subject to common voting control (see note 18).

61

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

3. ACCOUNTS RECEIVABLE

	2006			2005
	$			$
Subscriber and trade receivables		155,583			138,082
Due from officers and employees		339			170
Due from related parties [note 18]		1,318			2,278
Miscellaneous receivables including commodity taxes		8,981			6,067
		166,221			146,597
Less allowance for doubtful accounts		(28,079	)		(31,933	)
		138,142			114,664

Included in operating, general and administrative expenses is a provision for doubtful accounts of $7,477 (2005 – $20,356; 2004 – $19,545).

4. INVENTORIES

	2006		2005
	$		$
Subscriber equipment		51,203		42,799
Other		2,791		2,425
		53,994		45,224

Subscriber equipment includes internet modems, DTH equipment, digital cable terminals and related customer premise equipment.

5. INVESTMENTS AND OTHER ASSETS

	2006		2005
	$		$
Investments, at cost net of write-downs:
Canadian Hydro Developers, Inc. (“Canadian Hydro”) (market value 2005 – $58,920)		–		24,432
Q9 Networks Inc. (“Q9 Networks”) (market value 2005 – $2,731)		–		1,074
Investments in publicly traded companies (market value 2006 – $9,645)		9,392		–
Investments in private technology companies		1,295		2,126
Investments at equity:
Investments in specialty channel networks		–		668
Other assets:
Employee home relocation mortgages and loans [note 18]		5,446		6,246
Other		1,845		1,683
		17,978		36,229

62

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Canadian Hydro

Canadian Hydro, a Canadian public corporation, develops and operates electrical generating plants. In 2006, the Company sold 12,430,364 shares of Canadian Hydro for $69,749, resulting in a pre-tax gain of $45,317.

Q9 Networks

During 2006, the Company realized a pre-tax gain of $1,690 on the sale of the remaining 277,281 shares of Q9 Networks. In 2005, the Company sold 367,880 shares resulting in a pre-tax gain of $840.

Write-down of investments

	2006		2005		2004
	$		$		$
Specialty channel network		–		–		401
Private companies		519		1,937		250
		519		1,937		651

Investments at equity

In 2006, Shaw sold its interests in The Biography Channel and G4Tech TV Canada resulting in a combined pre-tax gain of $3,180.

Equity income (loss) on investees consists of the following:

	2006			2005			2004
	$			$			$
Specialty channel networks		(91	)		(346	)		(272	)
Other		135			60			22
		44			(286	)		(250	)

Motorola

In 2005 the Company settled an equity forward sales contract on the Motorola investment resulting in the realization of a $31,018 pre-tax gain. The Motorola investment had been pledged as collateral for the Zero Coupon Loan (see note 9) and the proceeds of settlement were used to repay the Zero Coupon Loan and accrued interest.

Other

Disposal of minor interests in various public and private companies amounted to pre-tax gains of $128, $305 and $356 in 2006, 2005 and 2004, respectively.

63

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

6. PROPERTY, PLANT AND EQUIPMENT

	2006						2005
			Accumulated		Net				Accumulated		Net book
	Cost		amortization		book		Cost		amortization		value
	$		$		value		$		$		$
Cable and telecommunications distribution system		3,046,373		1,371,765		1,674,608		2,932,741		1,314,268		1,618,473
Digital cable terminals and modems		410,637		303,959		106,678		443,051		350,677		92,374
Satellite audio, video and data network equipment and DTH receiving equipment		348,119		255,277		92,842		338,204		214,925		123,279
Buildings		254,048		70,068		183,980		244,172		58,478		185,694
Data processing		104,900		50,883		54,017		89,902		42,911		46,991
Other assets		187,323		104,953		82,370		183,856		100,743		83,113
		4,351,400		2,156,905		2,194,495		4,231,926		2,082,002		2,149,924
Land		33,112		–		33,112		32,103		–		32,103
Assets under construction		22,449		–		22,449		7,208		–		7,208
		4,406,961		2,156,905		2,250,056		4,271,237		2,082,002		2,189,235

Included in the cable and telecommunications distribution system assets is the cost of the Company’s purchase of fibers under IRU agreements with terms extending to 60 years totalling $61,811 (2005 – $61,811).

7. DEFERRED CHARGES

	2006						2005
			Accumulated		Net book				Accumulated		Net book
	Cost		amortization		value		Cost		amortization		value
	$		$		$		$		$		$
Equipment costs		616,627		409,060		207,567		664,599		463,293		201,306
Financing costs and credit facility arrangement fees		66,486		29,985		36,501		76,961		43,909		33,052
Connection and installation costs		40,214		27,388		12,826		45,377		31,266		14,111
Fair value adjustment on foreign currency forward contract		4,900		4,900		–		4,900		3,195		1,705
Other		5,370		356		5,014		4,542		3,470		1,072
		733,597		471,689		261,908		796,379		545,133		251,246

Amortization provided in the accounts on deferred charges for 2006 amounted to $234,056 (2005 – $242,091; 2004 – $252,163) of which $205,546 was recorded as amortization of deferred charges and equipment costs (2005 – $217,072; 2004 – $237,121), $752 was recorded as interest expense (2005 – $300; 2004 – $336), $12,248 was recorded as debt retirement costs (2005 – $6,311), $13,805 was recorded as operating, general and administrative expenses (2005 – $15,213; 2004 – $14,706) and $1,705 (2005 – $3,195) was charged to the deficit.

64

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

8. INTANGIBLES

		Carrying amount
		2006		2005
		$		$
Broadcast licenses Cable systems			3,708,352		3,701,515
	DTH and satellite services		983,132		983,132
			4,691,484		4,684,647
Goodwill – non-regulated satellite services			88,111		88,111
Net book value			4,779,595		4,772,758

The changes in the carrying amount of intangibles are as follows:

	Broadcast licenses			Goodwill
	$			$
August 31, 2004		4,685,582			88,111
Business divestiture [notes 2 and 18]		(935	)		–
August 31, 2005		4,684,647			88,111
Business acquisitions [note 2]		6,837			–
August 31, 2006		4,691,484			88,111

65

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

9.      LONG-TERM DEBT

				2006						2005
				Translated						Translated
				at year end		Adjustment		Translated		at year end				Translated
		Effective		exchange		for hedged		at hedged		exchange		Adjustment		at hedged
		interest rates		rate		debt(1)		rate		rate		for hedged		rate
		%		$		$		$		$		debt(1)		$
Corporate
Bank loans			Fixed and variable		280,000		–		280,000		799,023		–		799,023
Senior notes –
	Due November 16, 2012		6.11		450,000		–		450,000		–		–		–
	Due May 9, 2016		6.34		300,000		–		300,000		–		–		–
	Due October 17, 2007		7.40		296,760		–		296,760		296,760		–		296,760
	US $440,000 due April 11, 2010		7.88		486,332		156,288		642,620		522,324		120,296		642,620
	US $225,000 due April 6, 2011		7.68		248,693		107,145		355,838		267,098		88,740		355,838
	US $300,000 due December 15, 2011		7.61		331,590		145,260		476,850		356,130		120,720		476,850
	Due November 20, 2013		7.50		350,000		–		350,000		350,000		–		350,000
COPrS –
	Due September 30, 2027		8.54		100,000		–		100,000		100,000		–		100,000
	Due September 28, 2049		8.875		–		–		–		150,000		–		150,000
	US $172,500 due September 30, 2097		8.5		–		–		–		204,775		–		204,775
					2,843,375		408,693		3,252,068		3,046,110		329,756		3,375,866
Other subsidiaries and entities
Videon CableSystems Inc. 8.15% Senior Debentures Series “A” due April 26, 2010			7.63		130,000		–		130,000		130,000		–		130,000
Burrard Landing Lot 2 Holdings Partnership			6.31		23,010		–		23,010		23,432		–		23,432
					153,010		–		153,010		153,432		–		153,432
Total consolidated debt					2,996,385		408,693		3,405,078		3,199,542		329,756		3,529,298
Less current portion					449		–		449		51,380		–		51,380
					2,995,936		408,693		3,404,629		3,148,162		329,756		3,477,918

(1) Foreign denominated long-term debt is translated at the year-end rate. If the rate of translation was adjusted to reflect the hedged rates of the Company’s cross-currency interest rate agreements (which fix the liability for interest and principal), long-term debt would increase by $408,693 (2005 – $329,756) representing the amount of the corresponding deferred foreign exchange gain in deferred credits (see note 10).

Interest on long-term debt included in interest expense amounted to $254,502 (2005 – $263,319; 2004 – $282,108).

66

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Corporate

Bank loans

The Company has a $50,000 revolving operating loan facility, of which $18,297 has been drawn including committed letters of credit of $79. Interest rates and borrowing options are principally the same as those contained in the credit facility described below. The effective interest rate on the facility was 5.32% for the year (2005 – 4.21%; 2004 – 4.13%).

A syndicate of banks has provided the Company with an unsecured credit facility. During the current year, the Company amended the credit facility to extend the maturity date from April 2009 to May 2011 and implement new pricing terms effective May 2007. In conjunction with the amendment, the remainder of the non-revolving facilities, due in fiscal 2007, were repaid early. At August 31, 2006, $720,000 of the amended $1 billion revolving credit facility was not utilized. Funds are available to the Company in both Canadian and US dollars. Interest rates fluctuate with Canadian bankers’ acceptance rates, US bank base rates and LIBOR rates. The effective interest rate averaged 4.38% for the year (2005 – 2.75%; 2004 – 2.87%). The US funds required for the interest payments on the US portion of the bank loans were provided by a forward purchase contract at an exchange rate of 1.4078 Cdn.

Interest on $59,000 of Canadian dollar borrowings outstanding at August 31, 2006 was fixed by means of an interest rate swap originally placed in April 1994 for $177,000 at 8.89%. One third of the interest rate swap matures each year commencing April 30, 2005 until fully terminated. Accordingly, the remaining notional amount of $59,000 matures on April 30, 2007.

Senior notes

The Senior notes are unsecured obligations and rank equally and ratably with all existing and future senior 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 amount plus a make-whole premium.

On May 9, 2006 the Company issued $300 million of senior notes at a rate of 6.15%. The effective interest rate on the notes is 6.34% due to the discount on issuance. In conjunction with the issuance of the notes, the $100 million revolving credit facility established by the Company on February 1, 2006, which had not been drawn upon, was terminated.

On November 16, 2005 the Company issued $450 million of senior notes at a rate of 6.10%. The effective interest rate on the notes is 6.11% due to the discount on issuance and a bond forward transaction entered into by the Company in September 2005 on a portion of the principal.

The Company has entered into cross-currency interest rate agreements to fix the liability for interest and principal payments over the life of the US dollar Senior notes. The table below outlines the US dollar principal, the interest coupon rate, the effective interest rate on the Canadian dollar equivalent of the

67

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

US debt as a result of the agreements, and the exchange rate applicable to the principal portion of the debt (“Exchange rate”):

US Senior				Effective
note principal		Coupon rate		interest rate		Exchange rate
$		%		%		Cdn $ vs US $
	440,000		8.25		7.88		1.4605
	225,000		7.25		7.68		1.5815
	300,000		7.20		7.61		1.5895

COPrS

The COPrS rank as unsecured junior subordinated debt. The Company has the right to defer payments of interest on the securities for up to 20 consecutive quarterly periods provided that no extension period may extend beyond the stated maturity of the securities. There may be multiple extension periods of varying lengths, each of up to 20 consecutive quarterly periods, throughout the terms of the securities. During any extension period, interest will accrue but will not compound. The Company may satisfy its obligation to pay deferred interest on any applicable interest payment date through the issuance to the trustee of Class B Non-Voting Shares of the Company, in which event the holders of the securities shall be entitled to receive cash payments equal to the deferred interest from the proceeds of the sale of the requisite Class B Non-Voting Shares by the trustee of the COPrS.

The 8.54% Series B COPrS are redeemable, at the Company’s option, in whole or in part, at any time after September 30, 2007 at a redemption price equal to 104.27% of the principal amount with the redemption price declining each year until September 30, 2017 when the series is redeemable at par plus accrued and unpaid interest thereon to the date of such redemption. The Company has the ability to satisfy redemption obligations through the issuance of Class B Non-Voting Shares.

Shaw Satellite Services Inc. (“Satellite Services”)

Satellite Services has a $10,000 demand operating line of credit that is available in Canadian dollars or the US dollar equivalent, of which $2,367 has been drawn including committed letters of credit of $223. Interest rates fluctuate with Canadian prime rate and US base rates. The operating line is collateralized by a first ranking fixed and floating charge and security interest in all of the Canadian assets and undertakings of Satellite Services and two of Satellite Services’ subsidiaries (excluding assets located in the province of Quebec). The effective interest rate on the line of credit was 6.57% (2005 – 5.46%; 2004 – 5.38%).

Other subsidiaries and entities

Videon CableSystems Inc. (“Videon”)

Videon issued 8.15% Senior Debentures that are due April 26, 2010. Interest is payable semi-annually.

The debentures are unsecured and are non-recourse to the parent company. The Senior Debentures are guaranteed by the subsidiaries of Videon. The effective interest rate on the debentures is 7.63% after giving effect to the fair value adjustment to the debt at the date of the Moffat acquisition. This adjustment is included in deferred credits.

68

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Burrard Landing Lot 2 Holdings Partnership

The Company has a 33.33% interest in the Partnership which built the Shaw Tower project with office/retail space and living/working space in Vancouver, B.C. The Partnership had an available construction facility of $128,500 and a letter of guarantee facility of $2,350 which were repayable no later than December 31, 2005 (if extended) and bore interest at prime plus 0.5%. Interest on $58,000 of the loan was fixed with an interest rate hedge at 5.125% plus a stamping fee from November 2003 to October 2004. In the fall of 2004, the commercial construction of the building was completed and at that time, the Partnership issued 25 year secured mortgage bonds in respect of the commercial component of the Shaw Tower. The interest rate has been fixed for the first 10 years at 6.31% compounded semi-annually. The bonds are collateralized by the property and the commercial rental income from the building and have no recourse to the Company. The proceeds from the bonds were used to repay a portion of the amounts outstanding under the Partnership’s construction facility. The remaining balance of the construction facility was repaid and cancelled in 2005 with proceeds from the sale of the residential units.

Debt retirement costs

COPrS

On July 17, 2006, the Company redeemed its $150,000 8.875% COPrS and on December 16, 2005, the Company redeemed its US $172,500 8.50% COPrS at an exchange rate of $1.1704 Canadian or $201,894. In connection with the early redemptions, the Company wrote-off the remaining deferred financing charges of $12,248.

On February 1, 2005, the Company redeemed the US $142,500 8.45% Series A COPrS at a cost of $172,363. In connection with the early redemption, the Company wrote-off the remaining deferred financing charges of $6,311.

The Company had purchased a foreign currency forward purchase contract to provide the US funds required for the quarterly interest payments on the 8.50% COPrS and 8.45% Series A COPrS at an exchange rate of $1.4078 Cdn. In connection with the early redemptions, the Company paid $15,574 (2005 – $12,200) to terminate the contract.

Senior notes

In August 2004, the Company repurchased $3,240 of the $300,000 Senior notes due October 17, 2007 and incurred $170 in costs.

Bank Loans

In November 2003 the Company repaid and cancelled its unsecured term loan in the amount of $350,000. In connection with the repayment, the Company incurred debt retirement costs of $2,428 consisting of $964 to cancel a related interest rate hedge on the $350,000 and $1,464 on the write-off of deferred financing costs. The effective interest rate on the term loan for the period to November 20, 2003 was 5.10%.

69

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Debt covenants

The Company and its subsidiaries have undertaken to maintain certain covenants in respect of the credit agreements and trust indentures described above. The Company and its subsidiaries were in compliance with these covenants at August 31, 2006.

Long-term debt repayments

Mandatory principal repayments on all long-term debt in each of the next five years are as follows:

			Exchange rate
	At year-end		adjusted for
	exchange rate		hedged rates
	$		$
2007		449		449
2008		297,238		297,238
2009		509		509
2010		616,874		773,162
2011		529,269		636,414
Thereafter		1,552,046		1,697,306
		2,996,385		3,405,078

10. DEFERRED CREDITS

	2006						2005
			Accumulated		Net book				Accumulated		Net book
	Amount		amortization		value		Amount		amortization		value
	$		$		$		$		$		$
IRU prepayments		629,119		69,064		560,055		629,005		56,518		572,487
Foreign exchange gains on translating hedged long-term debt		408,693		–		408,693		329,756		–		329,756
Equipment revenue		277,317		165,972		111,345		263,295		174,509		88,786
Connection fee and installation revenue		42,797		28,600		14,197		46,061		31,437		14,624
Fair value adjustment on debt assumed on acquisition		6,084		3,684		2,400		6,084		3,014		3,070
Bond forward proceeds		2,486		281		2,205		–		–		–
Deposit on future fiber purchase		2,000		–		2,000		2,000		–		2,000
		1,368,496		267,601		1,100,895		1,276,201		265,478		1,010,723

Amortization on deferred credits for 2006 amounted to $108,595 (2005 – $100,730; 2004 – $110,185) and was recorded in the accounts as described below.

IRU agreements are in place for periods ranging from 21 to 60 years and are being amortized to income over the agreement periods. Amortization in respect of the IRU agreements for 2006 amounted to $12,546 (2005 – $12,999; 2004 – $12,098). Amortization in respect of the fair value adjustment on debt amounted to $670 (2005 – $670; 2004 – $670) and amortization of the bond forward was $281, both of

70

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

which were offset against interest expense. Amortization of equipment revenue for 2006 amounted to $80,256 (2005 – $71,677; 2004 – $82,711). Amortization of connection fee and installation revenue for 2006 amounted to $14,842 (2005 – $15,384; 2004 – $14,706) and was recorded as service revenue.

11.     SHARE CAPITAL

Authorized

The Company is authorized to issue a limited number of Class A voting participating shares (“Class A Shares”) of no par value, as described below, an unlimited number of Class B non-voting participating shares (“Class B Non-Voting Shares”) of no par value, Class 1 preferred shares, Class 2 preferred shares, Class A preferred shares and Class B preferred shares.

The authorized number of Class A Shares is limited, subject to certain exceptions, to the lesser of that number of shares (i) currently issued and outstanding and (ii) that may be outstanding after any conversion of Class A Shares into Class B Non-Voting Shares.

					2006		2005
					$		$
Number of securities
2006		2005
	11,291,932		11,344,932	Class A Shares		2,475		2,487
	203,649,904		208,634,005	Class B Non-Voting Shares		1,974,491		2,021,686
	214,941,836		219,978,937			1,976,966		2,024,173

Class A and Class B Non-Voting Shares

Class A Shares are convertible at any time into an equivalent number of Class B Non-Voting Shares. In the event that a takeover bid is made for Class A Shares, in certain circumstances, the Class B Non-Voting Shares are convertible into an equivalent number of Class A Shares.

71

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Changes in Class A and Class B Non-Voting Share capital in 2006, 2005 and 2004 are as follows:

							Class B Non-Voting
	Class A Shares						Shares
	Number			$			Number			$
August 31, 2003		11,360,432			2,491			220,496,092			2,107,464
Class A Share conversions		(500	)		(1	)		500			1
Purchase of shares for cancellation		–			–			(4,134,000	)		(39,655	)
Stock option plans exercises		–			–			9,000			164
Issued in respect of Monarch acquisition		–			–			3,737,780			65,000
Share issue costs		–			–			–			(31	)
August 31, 2004		11,359,932			2,490			220,109,372			2,132,943
Class A Share conversions		(15,000	)		(3	)		15,000			3
Purchase of shares for cancellation		–			–			(11,505,500	)		(111,488	)
Stock option plans exercises		–			–			15,133			228
August 31, 2005		11,344,932			2,487			208,634,005			2,021,686
Class A Share Conversions		(53,000	)		(12	)		53,000			12
Purchase of shares for cancellation		–			–			(5,119,900	)		(49,584	)
Stock option plans exercises		–			–			82,799			2,377
August 31, 2006		11,291,932			2,475			203,649,904			1,974,491

During 2006 the Company purchased for cancellation 5,119,900 (2005 – 11,505,500; 2004 – 4,134,000) Class B Non-Voting Shares pursuant to its outstanding normal course issuer bid for $146,640 (2005 – $287,063; 2004 – $85,968). Share capital has been reduced by the stated value of the shares amounting to $49,584 (2005 – $111,488; 2004 – $39,655) with the excess of the amount paid over the stated value of the shares amounting to $97,056 (2005 – $175,575; 2004 – $46,313) charged to the deficit.

Stock option plan

Under a stock option plan, directors, officers, employees and consultants of the Company are eligible to receive stock options to acquire Class B Non-Voting Shares with terms not to exceed 10 years from the date of grant. Twenty-five percent of the options are exercisable on each of the first four anniversary dates from the date of the original grant. The options must be issued at not less than the fair market value of the Class B Non-Voting Shares at the date of grant. The maximum number of Class B Non-Voting Shares issuable under this plan and the warrant plan described below may not exceed 16,000,000. To date, 73,617 Class B Non-Voting Shares have been issued under these plans.

72

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

The changes in options in 2006, 2005 and 2004 are as follows:

	2006					2005					2004
				Weighted					Weighted					Weighted
				average					average					average
				exercise					exercise					exercise
				price					price					price
	Shares			$		Shares			$		Shares			$
Outstanding at beginning of year		8,452,250			32.59		7,847,000			32.55		7,607,500			32.58
Granted		2,769,500			32.62		1,783,000			32.62		1,216,750			32.49
Forfeited		(1,608,000	)		32.64		(1,177,750	)		32.38		(977,250	)		32.68
Exercised		(54,949	)		31.83		–			–		–			–
Outstanding at end of year		9,558,801			32.60		8,452,250			32.59		7,847,000			32.55

The following table summarizes information about the options outstanding at August 31, 2006:

	Options outstanding						Options exercisable
	Number		Weighted		Weighted		Number		Weighted
	outstanding at		average		average		exercisable		average
	August 31,		remaining		exercise		at August 31,		exercise
Range of prices	2006		contractual life		price		2006		price
$17.37		10,000		7.14		17.37		5,000		17.37
$29.70 – $34.70		9,548,801		6.23		32.62		5,959,802		32.61

The Company recorded compensation expense and credited contributed surplus for $3,272 (2005 – $1,454; 2004 – $412) in respect of the estimated fair value of options. Upon exercise of 54,949 options in the current year, $28 was transferred from contributed surplus to share capital.

For all common share options granted to employees up to August 31, 2003, had the Company determined compensation costs based on the fair values at grant dates of the common share options consistent with the method prescribed under CICA Handbook Section 3870, the Company’s net income and earnings per share would have been reported as the proforma amounts indicated below:

	2006		2005		2004
	$		$		$
Net income		458,250		153,221		70,870
Fair value of stock option grants		1,870		5,772		16,696
Proforma net income		456,380		147,449		54,174
Proforma basic earnings per share		2.10		0.65		0.23
Proforma diluted earnings per share		2.08		0.65		0.23

The weighted average estimated fair value at the date of the grant for common share options granted for the year ended August 31, 2006 was $2.88 per option (2005 – $4.30 per option; 2004 – $4.24 per

73

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

option). 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:

	2006		2005		2004
Dividend yield		1.91%		1.47%		0.94%
Risk-free interest rate		3.98%		3.54%		3.70%
Expected life of options		4 years		4 years		4 years
Expected volatility factor of the future expected market price of Class B Non-Voting Shares		20.4%		36.7%		39.7%

For the purposes of proforma disclosures, the estimated fair value of the options is amortized to expense over the options vesting period.

Other stock options

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

At August 31, 2006 there were 38,836 (2005 – 57,336) Satellite Services options outstanding with exercise prices between $7.75 and $23.25 and a weighted average price of $13.18 (2005 – $13.19). The weighted average remaining contractual life of the Satellite Services options is 1.4 years. At August 31, 2006, 38,836 (2005 – 57,336) Satellite Services options were exercisable into 34,952 (2005 – 51,602) Class B Non-Voting Shares of the Company at a weighted average price of $14.64 (2005 – $14.66) per Class B Non-Voting Share. During the year, 18,500 (2005 – 10,666; 2004 – 10,000) Satellite Services options were exercised for $244 (2005 – $84; 2004 – $164).

Warrants

Prior to the Company’s acquisition and consolidation of Satellite Services effective July 1, 2000, Satellite Services and Star Choice had established a plan to grant Satellite Services warrants to acquire Satellite Services 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 plans had no impact on earnings of the Company.

A total of 5,600 warrants remain outstanding under the plan and all are vested at August 31, 2006. During the year, 11,200 warrants (2005 – 5,534; 2004 – Nil) were exercised for $280 (2005 – $138; 2004 – Nil). On September 1, 2006, 250 warrants were exercised and the remaining 5,350 warrants expired.

Dividends

To the extent that dividends are declared at the election of the board of directors, the holders of Class B Non-Voting Shares are entitled to receive during each dividend period, in priority to the payment of

74

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

dividends on the Class A Shares, an additional dividend at a rate of $0.005 per share per annum. This additional dividend is subject to proportionate adjustment in the event of future consolidations or subdivisions of shares and in the event of any issue of shares by way of stock dividend. After payment or setting aside for payment of the additional non-cumulative dividends on the Class B Non-Voting Shares, holders of Class A and Class B Non-Voting Shares participate equally, share for share, as to all subsequent dividends declared.

Except in certain limited circumstances, the Company may not pay or declare dividends on any of its capital stock (including capital stock classified as debt) (except by way of stock dividend) at any time when any interest on the COPrS (see note 9) is either in default or is being deferred.

Share transfer restriction

The Articles of Arrangement of the Company empower the directors to refuse to issue or transfer any share of the Company that would jeopardize or adversely affect the right of Shaw Communications Inc. or any subsidiary to obtain, maintain, amend or renew a license to operate a broadcasting undertaking pursuant to the Broadcasting Act (Canada).

Earnings per share

Earnings per share calculations are as follows:

		2006		2005		2004
		$		$		$
Net income			458,250		153,221		70,870
Earnings per share
	Basic		2.11		0.67		0.31
	Diluted		2.09		0.67		0.31
Weighted average number of Class A and Class B Non-Voting Shares used as denominator in above calculations			217,666,000		228,210,000		231,605,000

Options to purchase 9,593,753 (2005 – 8,503,852; 2004 – 7,908,202) Class B Non-Voting Shares were outstanding under the Company’s stock option plan and the Cancom option plan at August 31, 2006, warrants to issue 5,600 Class B Non-Voting Shares (2005 – 237,121; 2004 – 248,205) were outstanding at August 31, 2006, and the Company has the right to issue Class B Non-Voting Shares in satisfaction of its redemption obligations on the COPrS included in long-term debt.

In 2006, diluted earnings per share is calculated by adding back the interest, net of tax, on the COPrS of $5,658 and by adding to the weighted average number of Class A and Class B Non-Voting Shares outstanding during the period, the number of shares that would be issued of 4,027,000 to settle the principal element of the COPrS based on opening market prices. In 2005 and 2004, the COPrS impact did not result in a dilutive effect.

The Class B Non-Voting Shares issuable under the Company’s stock option and warrant plans are either anti-dilutive (increase earnings per share) and are therefore not included in calculating diluted earnings per share.

75

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

12. FOREIGN CURRENCY CUMULATIVE TRANSLATION ADJUSTMENT

	2006			2005
	$			$
Balance, beginning of year		365			444
Current year’s deferred translation adjustment		(35	)		(79	)
Balance, end of year		330			365

13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	2006		2005
	$		$
Trade		63,374		48,368
Accrued liabilities		188,242		163,150
Accrued network fees		116,077		110,539
Interest		75,412		67,894
Related parties [note 18]		16,926		16,994
Current portion of pension plan liability		1,088		1,088
		461,119		408,033

14. INCOME TAXES

Future income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s future tax liabilities and assets are as follows:

		2006		2005
		$		$
Future income tax liabilities:
	Property, plant and equipment		101,670		137,456
	Broadcast licenses		1,012,448		1,157,966
	Deferred charges		–		10,870
	Partnership income		259,475		263,904
			1,373,593		1,570,196
Future income tax assets:
	Non-capital loss carryforwards		381,756		497,663
	Deferred charges		5,335		–
	Investments		1,564		3,684
			388,655		501,347
Net future income tax liability			984,938		1,068,849

76

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Realization of future income tax assets is dependent on generating sufficient taxable income during the period in which the temporary differences are deductible. Although realization is not assured, management believes it is more likely than not that all future income tax assets will be realized based on reversals of future income tax liabilities, projected operating results and tax planning strategies available to the Company and its subsidiaries.

The Company has capital loss carryforwards of approximately $206,000 for which no future income tax asset has been recognized in the accounts. These capital losses can be carried forward indefinitely.

The income tax expense or recovery differs from the amount computed by applying Canadian statutory rates to income before income taxes for the following reasons:

		2006			2005			2004
		$			$			$
Current statutory income tax rate			33.75%			35.5%			35.5%
Income tax expense at current statutory rates			126,409			83,031			45,382
Increase (decrease) in taxes resulting from:
	Large corporations tax		1,859			5,730			6,249
	Non-taxable portion of foreign exchange gains or losses and amounts on sale/write-down of assets and investments		(9,077	)		(9,903	)		(2,851	)
	Valuation allowance		(29,091	)		–			22,932
	Effect of future tax rate reductions		(175,752	)		–			(14,089	)
	Originating temporary differences recorded at future tax rates expected to be in effect when realized		750			(67	)		(610	)
	Other		1,240			1,591			(297	)
Income tax expense (recovery)			(83,662	)		80,382			56,716

Significant components of the provision for income taxes are as follows:

	2006			2005		2004
	$			$		$
Current tax expense		1,859			5,744		4,618
Future income tax expense related to origination and reversal of temporary differences		119,322			74,638		43,255
Future income tax expense (recovery) resulting from rate changes and valuation allowance		(204,843	)		–		8,843
Income tax expense (recovery)		(83,662	)		80,382		56,716

15. BUSINESS SEGMENT INFORMATION

The Company provides cable television services, high-speed Internet access, Digital Phone and Internet infrastructure services (“Cable”); DTH satellite services (Star Choice) and satellite distribution services (“Satellite Services”). All of these operating segments are located in Canada.

77

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Management evaluates divisional performance based on service revenue and service operating income before charges such as amortization and certain litigation settlements.

	2006
				Satellite
	Cable			DTH			Satellite Services			Total			Total
	$			$			$			$			$
Service revenue – total		1,811,579			573,100			86,434			659,534			2,471,113
Inter segment		(2,996	)		(5,293	)		(3,540	)		(8,833	)		(11,829	)
		1,808,583			567,807			82,894			650,701			2,459,284
Service operating income before amortization		857,466			175,401			45,050			220,451			1,077,917
Service operating income as % of external revenue		47.4%			30.9%			54.3%			33.9%			43.8%
Segment interest(1)		210,758			n/a			n/a			42,100			252,858
Burrard Landing Lot 2 Holdings Partnership														1,445
Total interest														254,303
Cash taxes(1)		1,761			n/a			n/a			98			1,859
Segment assets		5,891,103			859,941			536,044			1,395,985			7,287,088
Corporate assets														235,455
Total assets														7,522,543
Capital expenditures and equipment subsidies by segment
Capital expenditures		432,156			5,598			12,072			17,670			449,826
Equipment subsidies		19,393			88,536			–			88,536			107,929
		451,549			94,134			12,072			106,206			557,755
Reconciliation to Consolidated Statements of Cash Flows
Additions to property, plant and equipment														423,855
Additions to equipment costs (net)														107,929
Total of capital expenditures and equipment costs (net) per Consolidated Statements of Cash Flows														531,784
Decrease in working capital related to capital expenditures														31,343
Less: Partnership capital expenditures(2)														(1,803	)
Less: IRU prepayments(3)														(281	)
Less: Satellite services equipment profit(4)														(3,288	)
Total capital expenditures and equipment subsidies reported by segments														557,755

See notes following 2004 business segment table.

78

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

	2005
				Satellite
	Cable			DTH			Satellite Services			Total			Total
	$			$			$			$			$
Service revenue – total		1,601,126			535,333			90,152			625,485			2,226,611
Inter segment		(2,757	)		(4,604	)		(9,440	)		(14,044	)		(16,801	)
		1,598,369			530,729			80,712			611,441			2,209,810
Service operating income before amortization		797,583			141,687			42,723			184,410			981,993
Service operating income as % of external revenue		49.9%			26.7%			52.9%			30.2%			44.4%
Segment interest(1)		220,388			n/a			n/a			41,384			261,772
Burrard Landing Lot 2 Holdings Partnership														1,177
Total interest														262,949
Cash taxes(1)		5,410			n/a			n/a			334			5,744
Segment assets		5,788,468			877,397			534,278			1,411,675			7,200,143
Corporate assets														230,042
Total assets														7,430,185
Capital expenditures and equipment subsidies by segment
Capital expenditures		313,056			2,049			6,385			8,434			321,490
Equipment subsidies		30,112			85,556			–			85,556			115,668
		343,168			87,605			6,385			93,990			437,158
Reconciliation to Consolidated Statements of Cash Flows
Additions to property, plant and equipment														336,888
Additions to equipment costs (net)														115,668
Total of capital expenditures and equipment costs (net) per Consolidated Statements of Cash Flows														452,556
Decrease in working capital related to capital expenditures														4,378
Less: Partnership capital expenditures(2)														(15,045	)
Less: IRU prepayments(3)														(1,198	)
Less: Satellite services equipment profit(4)														(3,533	)
Total capital expenditures and equipment subsidies reported by segments														437,158

See notes following 2004 business segment table.

79

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

	2004
				Satellite
	Cable			DTH			Satellite Services			Total			Total
	$			$			$			$			$
Service revenue – total		1,494,176			510,386			96,543			606,929			2,101,105
Inter segment		(2,607	)		(4,749	)		(14,000	)		(18,749	)		(21,356	)
		1,491,569			505,637			82,543			588,180			2,079,749
Service operating income before amortization and litigation settlement		779,579			111,150			41,690			152,840			932,419
Litigation settlement														(6,484	)
Service operating income before amortization														925,935
Service operating income as % of external revenue		52.3%			22.0%			50.5%			26.0%			44.5%
Interest(1)		237,290			n/a			n/a			44,484			281,774
Cash taxes(1)		2,926			n/a			n/a			1,692			4,618
Segment assets		5,842,338			926,478			558,402			1,484,880			7,327,218
Corporate assets														249,502
Total assets														7,576,720
Capital expenditures and equipment subsidies by segment
Capital expenditures		223,665			11,656			(886	)		10,770			234,435
Equipment subsidies		43,448			89,263			–			89,263			132,711
		267,113			100,919			(886	)		100,033			367,146
Reconciliation to Consolidated Statements of Cash Flows
Additions to property, plant and equipment														256,136
Additions to equipment costs (net)														132,711
Total of capital expenditures and equipment costs (net) per Consolidated Statements of Cash Flows														388,847
Decrease in working capital related to capital expenditures														2,097
Less: Partnership capital expenditures(2)														(18,373	)
Less: IRU prepayments(3)														(1,420	)
Less: Satellite services equipment profit(4)														(4,005	)
Total capital expenditures and equipment subsidies reported by segments														367,146

(1)	The Company reports interest and cash taxes on a segmented basis for Cable and combined satellite only. It does not report interest and cash taxes on a segmented basis for DTH and Satellite Services.
(2)	Consolidated capital expenditures include the Company’s proportionate share of the Partnership’s capital expenditures which the Company is required to proportionately consolidate (see note 1). As the Partnership is financed by its own debt facility with limited recourse to the Company, the Partnership’s capital expenditures are subtracted from the calculation of segmented capital expenditures and equipment subsidies.
(3)	Prepayments on IRUs in amounts not exceeding the costs to build the fiber subject to the IRUs are subtracted from the calculation of segmented capital expenditures and equipment subsidies.

80

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

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

16.     COMMITMENTS AND CONTINGENCIES

Commitments

(i)

During prior years, the Company, through its subsidiaries, purchased 28 Ku-band transponders on the Anik F1 satellite and 16 Ku-band transponders on the Anik F2 satellite from Telesat Canada. During the current year, the Company purchased two additional Ku-band transponders on the Anik F2. In addition, the Company leases a number of C-band and Ku-band transponders. Under the Ku-band F1 and F2 transponder purchase agreements, the Company is committed to paying an annual transponder maintenance fee for each transponder acquired from the time the satellite becomes operational for a period of fifteen years.

(ii)

The Company has various long-term commitments for the maintenance and lease of satellite transponders, lease of transmission facilities, and lease of premises as follows:

	$
2007		107,077
2008		101,018
2009		95,255
2010		92,423
2011		92,206
Thereafter		498,900
		986,879

Included in operating, general and administrative expenses are transponder maintenance expenses of $57,132 (2005 – $52,604; 2004 – $35,043) and rental expenses of $51,437 (2005 – $54,459; 2004 – $70,517).

(iii) At August 31, 2006, the Company had capital expenditure commitments of $26,596 covering a two year period.

Contingencies

The Company and its subsidiaries are involved in litigation matters arising in the ordinary course and conduct of its business. Although resolution of such matters cannot be predicted with certainty, management does not consider the Company’s exposure to litigation to be material to these consolidated financial statements.

Guarantees

In the normal course of business the Company enters into indemnification agreements and has issued irrevocable standby letters of credit and performance bonds with and to third parties.

81

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Indemnities

Many agreements related to acquisitions and dispositions of business assets include indemnification provisions where the Company may be required to make payment to a vendor or purchaser for breach of contractual terms of the agreement with respect to matters such as litigation, income taxes payable or refundable or other ongoing disputes. The indemnification period usually covers a period of two to four years. Also, in the normal course of business, the Company has provided indemnifications in various commercial agreements, customary for the telecommunications industry, which may require payment by the Company for breach of contractual terms of the agreement. Counterparties to these agreements provide the Company with comparable indemnifications. The indemnification period generally covers, at maximum, the period of the applicable agreement plus the applicable limitations period under law.

The maximum potential amount of future payments that the Company would be required to make under these indemnification agreements is not reasonably quantifiable as certain indemnifications are not subject to limitation. However, the Company enters into indemnification agreements only when an assessment of the business circumstances would indicate that the risk of loss is remote. At August 31, 2006 management believes it is remote that the indemnification provisions would require any material cash payment.

The Company indemnifies its directors and officers against any and all claims or losses reasonably incurred in the performance of their service to the Company to the extent permitted by law. The Company has acquired and maintains liability insurance for its directors and officers as well as those of its subsidiaries as a group.

Irrevocable standby letters of credit and performance bonds

The Company and certain of its subsidiaries have granted irrevocable standby letters of credit and performance bonds, issued by high rated financial institutions, to third parties to indemnify them in the event the Company does not perform its contractual obligations. As of August 31, 2006, the guarantee instruments amounted to $357. The Company has not recorded any additional liability with respect to these guarantees, as the Company does not expect to make any payments in excess of what is recorded on the Company’s financial statements. The guarantee instruments mature at various dates in fiscal 2007.

17. PENSION PLANS

Defined contribution pension plans

The Company has defined contribution pension plans for all non-union employees and contributes 5% of eligible earnings to the maximum amount deductible under the Income Tax Act. For union employees, the Company contributes amounts up to 7.5% of earnings to the individuals’ registered retirement savings plans. Total pension costs in respect of these plans for the year were $12,359 (2005 – $11,091; 2004 – $9,388) of which $7,139 (2005 – $6,873; 2004 – $5,913) was expensed and the remainder capitalized.

Defined benefit pension plan

Effective September 1, 2002, the Company established a new non-contributory defined benefit pension plan for certain of its senior executives. Benefits under this plan are based on the employees’ length of

82

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

service and their highest three year average rate of pay during their years of service. Employees are not required to contribute to the plan. The plan is unfunded. The plan has remained unchanged since its initiation other than an amendment in 2004 to limit survivor benefits which decreased the pension obligation by approximately $3,600.

The table below shows the change in benefit obligations.

	2006			2005
	$			$
Accrued benefit obligation, beginning of year		100,004			61,888
Current service cost		2,271			996
Interest cost		5,088			3,930
Actuarial losses		4,811			34,330
Past service cost		–			–
Payment of benefits to employees		(1,088	)		(1,140	)
Accrued benefit obligation, end of year		111,086			100,004
Plan value of assets, end of year		–			–
Plan deficit, end of year		(111,086	)		(100,004	)

Reconciliation of accrued benefit obligation to balance sheet	2006		2005
accrued pension benefit liability	$		$
Balance of unamortized pension obligation:
Unamortized past service costs		20,275		22,842
Unamortized actuarial loss		51,999		50,963
		72,274		73,805
Accrued pension benefit liability recognized in balance sheet:
Accounts payable and accrued liability		1,088		1,088
Long-term liability		37,724		25,111
		38,812		26,199
Accrued benefit obligation, end of year as above		111,086		100,004

The actuarial loss in 2005 of $34,330 results from changes in interest rate assumptions, salary escalation assumptions, changes in the mortality table, as well as new entrants to the plan.

The tables below shows the significant weighted-average assumptions used to measure the pension obligation and cost.

	2006		2005
Accrued benefit obligation	%		%
Discount rate		5.25		5.00
Rate of compensation increase		5.00		4.00

83

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

	2006		2005		2004
Benefit cost for the year	%		%		%
Discount rate		5.00		6.25		6.50
Rate of compensation increase		4.00		3.00		3.00

The table below shows the components of the net benefit plan expense.

	2006			2005			2004
	$			$			$
Current service cost		2,271			996			1,743
Interest cost		5,088			3,930			3,202
Past service cost		–			–			–
Actuarial losses		4,811			34,330			9,495
Difference between amortization of actuarial loss recognized for the year and actual actuarial loss on the accrued benefit obligation for the year		(1,036	)		(32,579	)		(8,321	)
Difference between amortization of past service costs recognized for the year and actual past service costs on the accrued benefit obligation for the year		2,567			2,567			2,567
Pension expense		13,701			9,244			8,686

The table below shows the expected benefit payments in each of the next five fiscal years as actuarially determined, and in aggregate, for the five fiscal years thereafter:

	$
2007		1,088
2008		1,081
2009		1,575
2010		3,474
2011		3,442
2012 – 2016		27,401

18. RELATED PARTY TRANSACTIONS

The following sets forth transactions in which the Company and its affiliates, directors or executive officers are involved.

Normal course transactions

The Company has entered into certain transactions and agreements in the normal course of business with certain of its related parties. These transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

84

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Corus Entertainment Inc. (“Corus”)

The Company and Corus are subject to common voting control. During the year, network fees of $100,046 (2005 – $94,165; 2004 – $90,537), advertising fees of $269 (2005 – $283; 2004 – $831) and programming fees of $1,116 (2005 – $1,083; 2004 – $1,129) were paid to various Corus subsidiaries and entities subject to significant influence. In addition, the Company provided cable system distribution access to Corus Custom Networks, the advertising division of Corus, for $253 (2005 – $251; 2004 – $243), administrative and other services to Corus for $1,743 (2005 – $1,646; 2004 – $1,488), uplink of television signals to Corus for $4,845 (2005 – $4,759; 2004 – $4,546) and Internet services and circuits for $637 (2005 – $92, 2004 – $18).

The Company provided Corus with television advertising spots in return for radio and television advertising. No monetary consideration was exchanged for these transactions and no amounts were recorded in the accounts.

Specialty Channels

The Company had equity interests in The Biography Channel and G4Tech TV Canada until June 2006, at which time these specialty channels were sold (see note 5), and MSNBC in prior years until its windup in 2005. During the year, the Company paid network fees of $1,729 (2005 – $2,188; 2004 – $2,390) and provided uplink television signals for $253 (2005 – $412; 2004 – $598).

Burrard Landing Lot 2 Holdings Partnership

During the current year, the Company paid $8,560 (2005 – $7,238) to the Partnership for lease of office space in Shaw Tower. Shaw Tower, located in Vancouver, B.C., is the Company’s headquarters for its Lower Mainland operations.

Other

The Company has entered into certain transactions with companies that are affiliated with Directors of the Company and are as follows:

During the year, the Company provided customer billing services for $161 (2005 – $210; 2004 – $197), Internet services for $241 (2005 – $665; 2004 – $551), cable subscriber services for $190 (2005 – $162; 2004 – $154), cable related services for $48 (2005 – $21; 2004 – $26) and satellite distribution services for $95 (2005 – $82; 2004 – $75) to a company controlled by a former Director of the Company.

During the current year, the Company paid $858 (2005 – $2,506; 2004 – $3,233) for direct sales agent, maintenance and service agent services to a company controlled by a former Director of the Company.

During the current year, the Company paid $1,928 (2005 – $1,328; 2004 – $1,935) for remote control units to a supplier where a Director of the Company holds a position on the supplier’s board of directors.

85

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Other transactions

The Company has entered into certain transactions with affiliated companies, senior officers and directors of the Company and are as follows:

During 2005, the Company sold the cable television advertising business, originally acquired as part of the purchase of the Monarch cable systems (see note 2), to Corus. The transaction was recorded at the exchange amount, representing the consideration received of $987. The consideration received reflected fair value as evidenced by similar transactions entered into by the Company.

Under a policy of supporting employee and officer relocations, the Company has granted non-interest bearing loans for a period of five years collateralized by mortgages on the personal residences. Other loans have in the past been granted to executive officers in connection with their employment for periods ranging up to ten years. In 2002, two real estate properties, initially acquired by the Company, were sold to an officer of the Company for the greater of cost or fair market value. In 2002, a 10-year loan for an amount up to $6,000 was taken back as consideration and a mortgage on each of the properties is held as collateral. Effective June 25, 2003 the officer elected to pay interest at the greater of 4% and Revenue Canada’s quarterly prescribed interest rate for employee taxable benefits. Effective January 1, 2006, the interest rate was set at Revenue Canada’s quarterly prescribed rate applicable to employee taxable benefits. Previous to June 2003, the loan had been non-interest bearing. The effective interest rate on the loan has been approximately 4% since June 25, 2003. Other loans are non-interest bearing. During the current year, executive officers voluntarily repaid approximately 10% (2005 – 10%) of their original loan balances. At August 31, 2006, the total amount outstanding on all employee and officer loans was $5,446 (2005 – $6,246).

During 2004, the Company acquired certain cable systems of Monarch as described in note 2. Monarch is controlled by a Director of the Company. The Company also acquired a small cable system from another Director as described in note 2.

In 2004, the Company settled certain indemnity claims in respect of a prior acquisition. The vendors of the company were represented by a director of Shaw. Shaw received a net payment of $890 in respect of the settlement.

Through an investment in a partnership, Corus and Shaw each had an indirect holding in certain assets, primarily consisting of a real estate property. In 2004, Shaw’s interest in the assets was transferred to Corus in exchange for cash of $253 and a promissory note of $1,140, which was repaid by August 31, 2006. As part of the transaction, Shaw and Corus entered into an agreement effective August 26, 2004 for Shaw’s use of the remaining assets for $20 per month for a period of 22 months. These transactions were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. The parties have agreed that the exchange amounts represent fair value consideration for the transactions.

86

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

19. FINANCIAL INSTRUMENTS

Fair values

The fair value of financial instruments has been determined as follows:

(i) Current assets and current liabilities

The fair value of financial instruments included in current assets and liabilities approximates their carrying amount due to their short-term nature.

(ii) Investments and other assets

a)	The fair value of publicly traded shares included in this category is determined by the closing market values for those investments.
b)	The carrying value of other investments in this category approximates their fair value.

(iii) Long – term debt

a)	The carrying value of bank loans approximates their fair value because interest charges under the terms of the bank loans are based upon current Canadian bank prime and bankers’ acceptance rates and on US bank base and LIBOR rates.
b)	The fair value of publicly traded notes is based upon current trading values. Other notes and debentures are valued based upon current trading values for similar instruments.

(iv) Derivative financial instruments

The fair value of interest and cross-currency interest exchange agreements and US currency contracts is based upon quotations by the counterparties to the agreements.

The estimated fair values of long-term debt and all derivative financial instruments are as follows:

		2006				2005
		Carrying		Estimated		Carrying		Estimated
		amount		fair value		amount		fair value
		$		$		$		$
Long-term debt			2,996,385		3,087,729		3,199,542		3,362,164
Derivative financial instruments –
	Interest exchange agreements		–		1,996		–		8,509
	Cross-currency interest rate exchange agreements		–		517,121		–		451,495
	US currency purchase and purchase option contracts		–		14,408		15,695		30,093
			2,996,385		3,621,254		3,215,237		3,852,261

A hypothetical one percentage point decrease in interest rates would have the effect of increasing the estimated fair value of the Company’s debt instruments to $3.8 billion at August 31, 2006 (2005 – $4.0 billion).

87

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

The maturity dates for derivative financial instruments related to long term debt are as outlined in note 9. US currency purchase contracts related to capital expenditures mature at various dates during 2007 to 2010.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Credit risks

Credit risks associated with interest and cross-currency interest exchange agreements and US currency contracts arise from the ability of counterparties to meet the terms of the contracts. In the event of non-performance by the counterparties, the Company’s accounting loss would be limited to the net amount that it would be entitled to receive under the contracts and agreements. These risks are mitigated by dealing with major creditworthy financial institutions.

Accounts receivable are not subject to any significant concentrations of credit risk.

20. STATEMENTS OF CASH FLOWS

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

(i) Funds flow from operations

		2006			2005			2004
		$			$			$
Net income			458,250			153,221			70,870
Non-cash items:
Amortization –
	Deferred IRU revenue		(12,546	)		(12,999	)		(12,098	)
	Deferred equipment revenue		(80,256	)		(71,677	)		(82,711	)
	Deferred equipment costs		200,218			210,477			229,013
	Deferred charges		5,328			6,595			8,108
	Property, plant and equipment		385,607			408,866			403,395
Future income tax expense (recovery)			(85,521	)		74,638			52,098
Write-down of investments			519			1,937			651
Gain on sale of investments			(50,315	)		(32,163	)		(356	)
Equity loss (income) on investees			(44	)		286			250
Debt retirement costs			12,248			6,311			2,598
Fair value loss on foreign currency forward contracts			360			19,342			–
Foreign exchange gain on unhedged long-term debt			(5,369	)		(40,518	)		(28,522	)
Stock option expense			3,272			1,454			412
Defined benefit pension plan			12,612			8,178			7,524
Other			2,834			(5,424	)		3,353
Funds flow from operations			847,197			728,524			654,585

88

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

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

	2006			2005			2004
	$			$			$
Accounts receivable		(23,561	)		4,907			24,865
Prepaids and other		(5,741	)		(2,043	)		(144	)
Accounts payable and accrued liabilities		22,338			(5,965	)		3,923
Income taxes payable/ recoverable		(1,348	)		690			4,308
Unearned revenue		7,988			2,325			5,073
		(324	)		(86	)		38,025

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

	2006		2005		2004
	$		$		$
Interest		245,404		287,906		272,772
Income taxes		3,203		5,091		51

(iv) Non-cash transactions

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

	2006		2005		2004
	$		$		$
Class B Non-Voting shares issued on acquisitions [note 2]		–		–		65,000

21. 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”).

89

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

(a) Reconciliation to accounting principles generally accepted in the United States

		2006			2005			2004
		$			$			$
Net income using Canadian GAAP			458,250			153,221			70,870
	Add (deduct) adjustments for:
	Deferred charges (2)		15,362			28,371			14,736
	Foreign exchange gains on hedged long-term debt (3)		78,937			121,494			70,156
	Reclassification of hedge losses from other comprehensive income (8)		(78,937	)		(121,494	)		(70,156	)
	Fair value loss on foreign currency forward contract (8)		–			(7,700	)		–
	Income tax effect of adjustments		(4,724	)		(7,375	)		(2,439	)
	Effect of future income tax rate reductions on differences		(4,266	)		–			(682	)
Net income using US GAAP			464,622			166,517			82,485
Unrealized foreign exchange loss on translation of self-sustaining foreign operations			(35	)		(79	)		(38	)
Unrealized gains on available-for-sale securities, net of tax (7) Unrealized holding gains arising during the year			–			26,923			4,091
	Less: reclassification adjustments for gains included in net income		(30,045	)		(21,074	)		(1,055	)
			(30,080	)		5,770			2,998
Adjustment to fair value of derivatives (8)			(51,033	)		(186,398	)		(67,408	)
Reclassification of derivative losses to income to offset foreign exchange gains on hedged long-term debt (8)			66,802			99,930			57,704
Minimum liability for pension plan (10)			4,118			(11,433	)		(3,864	)
Effect of future income tax rate reductions on differences			(4,933	)		–			(63	)
			(15,126	)		(92,131	)		(10,633	)
Comprehensive income using US GAAP			449,496			74,386			71,852
Earnings per share – basic and diluted
	Net income per share using US GAAP		2.13			0.73			0.36
	Comprehensive income per share using US GAAP		2.07			0.33			0.31

90

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Balance sheet items using US GAAP

	2006				2005
	Canadian		US		Canadian		US
	GAAP		GAAP		GAAP		GAAP
	$		$		$		$
Investments and other assets (7)		17,978		17,978		36,229		72,374
Deferred charges (2)(9)(10)		261,908		164,053		251,246		137,590
Broadcast licenses (1)(5)(6)		4,691,484		4,666,250		4,684,647		4,659,413
Other long-term liabilities (8)(10)		37,724		612,306		40,806		564,779
Deferred credits (3)(9)		1,100,895		679,652		1,010,723		667,114
Future income taxes		984,938		933,990		1,068,849		1,004,206
Shareholders’ equity		1,809,705		1,584,225		1,597,549		1,379,083

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

	2006			2005
	$			$
Shareholders’ equity using Canadian GAAP		1,809,705			1,597,549
Amortization of intangible assets (1)		(130,208	)		(124,179	)
Deferred charges (2)		(8,171	)		(17,521	)
Equity in loss of investees (4)		(35,710	)		(35,710	)
Gain on sale of subsidiary (5)		16,052			15,309
Gain on sale of cable systems (6)		50,063			47,745
Derivative not accounted for as a hedge (8)		–			(1,805	)
Foreign exchange gains on hedged long-term debt(3)		345,860			271,226
Reclassification of hedge losses from other comprehensive income(8)		(345,860	)		(271,226	)
Accumulated other comprehensive income		(117,176	)		(101,940	)
Cumulative translation adjustment		(330	)		(365	)
Shareholders’ equity using US GAAP		1,584,225			1,379,083

91

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

Included in shareholders’ equity under US GAAP is accumulated other comprehensive income (loss), which refers to revenues, expenses, gains and losses that under US GAAP are included in comprehensive income (loss) but are excluded from income (loss) as these amounts are recorded directly as an adjustment to shareholders’ equity, net of tax. The Company’s accumulated other comprehensive income (loss) is comprised of the following:

	2006			2005
	$			$
Unrealized foreign exchange gain on translation of self-sustaining foreign operations		330			365
Unrealized gains on investments (7)		—			29,729
Fair value of derivatives (8)		(103,114	)		(114,794	)
Minimum liability for pension plan (10)		(14,392	)		(17,240	)
		(117,176	)		(101,940	)

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 intangible assets

Until September 1, 2001, under Canadian GAAP amounts allocated to broadcast licenses were amortized using an increasing charge method which commenced in 1992. Under US GAAP, these intangibles were amortized on a straight-line basis over forty years. Effective September 1, 2001, broadcast licenses are considered to have an indefinite life and are no longer amortized under Canadian and US GAAP.

(2) Deferred charges

Marketing costs to launch new services and equipment subsidies are deferred and amortized under Canadian GAAP. Under US GAAP, these costs are expensed as incurred.

(3) Foreign exchange gains on hedged long-term debt

Foreign exchange gains on translation of hedged long-term debt are deferred under Canadian GAAP but included in income for US GAAP.

(4) Equity in loss of investees

The earnings of investees determined under Canadian GAAP have been adjusted to reflect US GAAP.

Under Canadian GAAP, the investment in Star Choice was accounted for using the cost method until CRTC approval was received for the acquisition. When the Company received CRTC approval, the amount determined under the cost method became the basis for the purchase price allocation and equity accounting commenced. Under US GAAP, equity accounting for the investment was applied retroactively to the date the Company first acquired shares in Star Choice.

92

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

(5) Gain on sale of subsidiary

In 1997, the Company acquired a 54% interest in Star Choice in exchange for the shares of HomeStar Services Inc., a wholly-owned subsidiary at that time. Under Canadian GAAP the acquisition of the investment in Star Choice was a non-monetary transaction that did not result in the culmination of the earnings process, as it was an exchange of control over similar productive assets. As a result, the carrying value of the Star Choice investment was recorded at the book value of assets provided as consideration on the transaction. Under US GAAP the transaction would have been recorded at the fair value of the shares in HomeStar Services Inc. This would have resulted in a gain on disposition of the consideration the Company exchanged for its investment in Star Choice and an increase in the acquisition cost for Star Choice.

(6) Gain on sale of cable systems

The gain on sale of cable systems determined under Canadian GAAP has been adjusted to reflect the lower net book value of broadcast licenses under US GAAP as a result of item (1) adjustments.

Under Canadian GAAP, no gain was recorded in 1995 on an exchange of cable systems with Rogers Communications Inc. on the basis that this was an exchange of similar productive assets. Under US GAAP the gain net of applicable taxes is recorded and amortization adjusted as a result of the increase in subscriber base upon the recognition of the gain.

(7) Unrealized gains (losses) on investments

Under US GAAP, equity securities having a readily determinable fair value and not classified as trading securities are classified as “available-for-sale securities” and reported at fair value, with unrealized gains and losses included in comprehensive income and reported as a separate component of shareholders’ equity net of related future income taxes. Gains and losses on the sale of available-for-sale securities are determined using the specific identification method. Declines in the fair value of individual available-for-sale securities below their cost that are other than temporary result in write-downs of the individual securities to their fair value. The related write-downs are included in earnings as realized losses.

Under Canadian GAAP, available-for-sale securities are carried at cost and written down only when there is evidence that a decline in value, that is other than temporary, has occurred.

(8) Derivative instruments and hedging activities

Under US GAAP, all derivatives are recognized in the balance sheet at fair value. Derivatives that are not hedges are adjusted to fair value through income. Derivatives that are hedges are adjusted through income or other comprehensive income until the hedged item is recognized in income depending on the nature of the hedge. Under Canadian GAAP, only speculative derivative financial instruments and those that do not qualify for hedge accounting are recognized in the balance sheet.

(9) Subscriber connection fee revenue and related costs

Subscriber connection fee revenue and related costs are deferred and amortized under Canadian GAAP. Under US GAAP, the revenue and costs are recognized into income and expense immediately.

93

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

(10) Minimum liability for pension plan

The Company’s unfunded non-contributory defined benefit pension plan for certain of its senior executives has an accumulated benefit obligation of $79,902 (2005 – $75,770). Under US GAAP, an additional minimum liability is to be recorded for the difference between the accumulated benefit obligation and the accrued pension liability. The additional liability is offset in deferred charges up to an amount not exceeding the unamortized past service costs. The remaining difference is recognized in other comprehensive income, net of tax. Under Canadian GAAP, the accumulated benefit obligation and additional minimum liability are not recognized.

(b) Stock-based compensation

For all common share options granted to employees up to August 31, 2003 the Company applied APB Opinion 25 “Accounting for Stock Issued to Employees” in accounting for common share options granted to employees and officers for US GAAP purposes. Pro forma disclosures of net income and net income per share are presented below as if the Company had adopted the cost recognition requirements under FASB Statement No. 123, “Accounting for Stock-Based Compensation”. Pro forma disclosures are not likely to be representative of the effects on reported income for future years.

		2006	2005		2004
		$	$		$
Net income, US GAAP	As reported	464,622		166,517		82,485
	Pro forma	462,752		160,745		65,789
Net income per share, US GAAP	As reported	2.13		0.73		0.36
	Pro forma	2.13		0.70		0.28

The fair value of common share options granted in 2006 was $7,562 (2005 – $7,301; 2004 – $5,000).

(c) Recent accounting pronouncements

(1) Share-Based Payment

Effective September 1, 2005, the Company adopted FASB Statement No. 123(R) “Share-Based Payment”, which replaced Statement 123 and superceded APB Opinion 25. Statement 123(R) requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements. The adoption of Statement 123(R) had no impact on the Company’s financial statements.

(2) Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans

In September 2006, the FASB issued Statement No. 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans”, which addresses recognition of overfunded or underfunded status of defined benefit postretirement plans as an asset or liability and recognition of changes in that funded status in the year in which the changes occur through comprehensive income. Statement 158 is effective for the Company’s 2007 fiscal year. The Company is currently assessing the impact of the adoption of this new accounting policy standard.

(3) Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued Interpretation 48 “Accounting for Uncertainty in Income Taxes” which prescribes a recognition threshold and measurement attribute for the financial statement recognition and

94

Shaw Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006, 2005 and 2004

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

measurement of a tax position taken or expected to be taken in a tax return. Interpretation 48 is effective for the Company’s 2008 fiscal year. The Company is currently assessing the impact of the adoption of this new accounting policy standard.

22. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

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

95

Shaw Communications Inc.

FIVE YEARS IN REVIEW

August 31, 2006

		2006		2005		2004			2003			2002
($000’s except per share amounts)
Service revenue
Cable			1,808,583		1,598,369		1,491,569			1,459,833			1,367,563
DTH			567,807		530,729		505,637			450,176			361,116
Satellite			82,894		80,712		82,543			88,412			95,870
			2,459,284		2,209,810		2,079,749			1,998,421			1,824,549
Service operating income (loss) before amortization(1)
Cable			857,466		797,583		779,579			727,458			608,916
DTH			175,401		141,687		111,150			52,814			(14,103	)
Satellite			45,050		42,723		41,690			38,619			40,203
Corporate restructuring and inventory write-down			–		–		–			(13,250	)		(4,600	)
Litigation settlements			–		–		(6,484	)		12,000			–
			1,077,917		981,993		925,935			817,641			630,416
Net income (loss)			458,250		153,221		70,870			(37,177	)		(315,794	)
Earnings (loss) per share
	Basic		2.11		0.67		0.31			(0.16	)		(1.36	)
	Diluted		2.09		0.67		0.31			(0.16	)		(1.36	)
Funds flow from operations(2)			847,197		728,524		654,585			494,573			289,778
Balance sheet
Total assets			7,522,543		7,430,185		7,576,720			7,730,929			8,644,926
Long-term debt (including current portion)			2,996,385		3,199,542		3,344,258			3,635,205			4,433,869
Cash dividends declared per share
Class A			0.470		0.305		0.155			0.045			0.045
Class B			0.475		0.310		0.160			0.050			0.050

(1)	See Key performance drivers on page 8.
(2)	Funds flow from operations is presented before changes in non-cash working capital as presented in the Consolidated Statements of Cash Flows.

96

Shaw Communications Inc.

SHAREHOLDERS’ INFORMATION

August 31, 2006

Share Capital and Listings

The Company is authorized to issue a limited number of Class A participating and an unlimited number of Class B Non-Voting participating shares. The authorized number of Class A Shares is limited, subject to certain exceptions, to the lesser of that number of such shares (i) currently issued and outstanding; and (ii) that may be outstanding after any conversion of Class A Shares into Class B Non-Voting Shares. At August 31, 2006, the Company had 11,291,932 Class A Shares and 203,649,904 Class B Non-Voting Shares outstanding. The Class A Shares are listed on the TSX Venture Stock Exchange under the symbol SJR.A. The Class B Non-Voting Shares are listed on The Toronto Stock Exchange under SJR.B and on the New York Stock Exchange under the symbol SJR.

Trading Range of Class B Non-Voting Shares on The Toronto Stock Exchange

					Total
Quarter	High Close		Low Close		Volume
September 1, 2005 to August 31, 2006
First		25.55		23.18		37,566,242
Second		31.73		23.46		42,162,990
Third		32.75		27.17		34,771,782
Fourth		34.25		29.50		42,009,818
Closing price, August 31, 2006	33.20					156,510,832

Share Splits

There have been three splits of the Company’s shares – February 7, 2000 (2 for 1), May 18, 1994 (2 for 1), and September 23, 1987 (3 for 1). In addition, as a result of the Arrangement referred to in the Management Information Circular dated July 22, 1999, a Shareholder’s Adjusted Cost Base (ACB) was reduced for tax purposes. For details on the calculation of the revised ACB, please refer to the Company’s September 1, 1999 and September 13, 1999 press releases on Shaw’s Investor Relations website at www.shaw.ca/investors.

97

Shaw Communications Inc.

CORPORATE INFORMATION

August 31, 2006

DIRECTORS	SENIOR OFFICERS	CORPORATE OFFICE	DEBENTURE TRUSTEES
JR Shaw(4) Executive Chair, Shaw Communications Inc. Adrian L. Burns(3) Corporate Director James F. Dinning(3) Non-Executive Chairman Western Financial Group Inc. George F. Galbraith (1)(4) Corporate Director Ronald V. Joyce(4) Corporate Director Rt. Hon. Donald F. Mazankowski(3)(4) Corporate Director Michael W. O’Brien(1) Corporate Director Harold A. Roozen(1) President and Chief Executive Officer, CCI Thermal Technologies Inc. Jeffrey C. Royer(2) Corporate Director Bradley S. Shaw Senior Vice President, Operations, Shaw Communications Inc. Jim Shaw Chief Executive Officer Shaw Communications Inc. JC Sparkman(2)(4) Corporate Director Carl E. Vogel(1) President and Vice Chairman EchoStar Communications Corporation Willard (Bill) H. Yuill (2) Chairman The Monarch Corporation	JR Shaw Executive Chair Jim Shaw Chief Executive Officer Rhonda D. Bashnick Vice President, Finance Peter J. Bissonnette President Michael D’Avella Senior Vice President, Planning Bradley S. Shaw Senior Vice President, Operations Ken C.C. Stein Senior Vice President, Corporate and Regulatory Affairs Steve Wilson Senior Vice President and Chief Financial Officer CORPORATE SECRETARY: Douglas J. Black, QC HONORARY SECRETARY: Louis Desrochers, CM, AOE, QC, LLD (1) Audit Committee (2) Human Resources Committee (3) Corporate Governance Committee (4) Executive Committee	Shaw Communications Inc. Suite 900, 630 – 3rd  Avenue S.W., Calgary, Alberta Canada T2P 4L4 Phone: (403) 750-4500 Fax: (403) 750-4501 Website: www.shaw.ca CORPORATE GOVERNANCE Information concerning Shaw’s corporate governance policies are contained in the Information Circular and is also available on Shaw’s website, www.shaw.ca. Information concerning Shaw’s compliance with the corporate governance listing standards of the New York Stock Exchange is available in the investor relations section on Shaw’s website, www.shaw.ca. INTERNET HOME PAGE Shaw’s Annual Report, Annual Information Form, Quarterly Reports, Press Releases and other relevant investor relations information are available electronically on the Internet at www.shaw.ca. AUDITORS Ernst & Young LLP PRIMARY BANKER The Toronto-Dominion Bank TRANSFER AGENTS CIBC Mellon Trust Company Calgary, AB Phone: 1-800-387-0825 Chase Mellon Shareholder Services, LLC New York, NY Phone: 1-800-526-0801	Computershare Trust Company of Canada 100 University Avenue, 9th Floor Toronto, ON M5J 2Y1 service@computershare.com Phone: 1-800-564-6253 Fax: 1-888-453-0330 or 416-263-9394 Bank of New York 101 Barclay Street, Floor 21F New York, NY 10288 Phone 1-800-438-5473 Fax: 212-815-5802 FURTHER INFORMATION Financial analysts, portfolio managers, other investors and interested parties may contact the Company at (403) 750-4500 or visit Shaw’s website at www.shaw.ca for further information. To receive additional copies of this Annual Report, please fax your request to (403) 750-7469 or email investor.relations@sjrb.ca For further inquiries relating to Shaw’s philanthropic practices, please call (403) 750-7498. All trademarks used in this annual report are used with the permission of the owners of such trademarks.

98

EX-2

TABLE OF CONTENTS

CORPORATE STRUCTURE	1
GENERAL DEVELOPMENT OF THE BUSINESS	2
1. Cable Division	2
2. Satellite Division	4
DESCRIPTION OF SHAW’S BUSINESSES	4
1. Cable Division	4
2. Satellite Division	12
3. Additional Information Concerning Shaw’s Businesses	15
4. Risk Factors	16
CANADIAN REGULATORY ENVIRONMENT	16
1. Overview	16
2. Cable Television	16
3. New Media and Internet Access	19
4. Digital Phone	19
5. Internet Infrastructure	20
6. Satellite	20
7. Other Regulatory Matters	21
CAPITAL STRUCTURE, DIVIDENDS AND RELATED MATTERS	23
1. Description of Capital Structure	23
2. Dividends	27
3. Ratings	29
4. Market for Securities	30
5. Prior Sales	32
DIRECTORS AND OFFICERS	32
1. Directors as of November 29, 2006	32
2. Board Committee Members	34
3. Executive Officers as of November 29, 2006	35
4. Shareholdings of Directors and Executive Officers	35
5. Additional Disclosure for Directors and Executive Officers	36
CONFLICTS OF INTEREST
AUDIT COMMITTEE	36
1. Audit Committee Charter	36
2. Audit Committee Composition and Background	36
3. Audit Fees	37
LEGAL PROCEEDINGS	38
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
REGISTRAR AND TRANSFER AGENT	38
MATERIAL CONTRACTS
INTERESTS OF EXPERTS	38
ADDITIONAL INFORMATION	38
SCHEDULE A — AUDIT COMMITTEE CHARTER	A-1

i

SHAW COMMUNICATIONS INC.

ANNUAL INFORMATION FORM

November 29, 2006

CORPORATE STRUCTURE

      Shaw Communications Inc. (“Shaw” or the “Corporation”) is a diversified Canadian communications company whose core business is providing cable television, Internet, Digital Phone, telecommunications (through Shaw Business Solutions Inc., formerly known as Big Pipe Inc.) and satellite direct-to-home (through Star Choice Communications Inc.) services to approximately 3.2 million customers. Shaw provides customers with high quality entertainment, information and communications services, utilizing a variety of distribution technologies.

      Shaw was incorporated under the laws of the Province of Alberta on December 9, 1966 under the name Capital Cable Television Co. Ltd. and was subsequently continued under the Business Corporations Act (Alberta) on March 1, 1984 under the name Shaw Cablesystems Ltd. Its name was changed to Shaw Communications Inc. on May 12, 1993. Shaw was reorganized pursuant to a plan of arrangement under the Business Corporations Act (Alberta) effective September 1, 1999, and amended its Articles on January 28, 2004 to limit the number of Class A Voting Participating Shares that may be issued. The head and registered office of Shaw is located at Suite 900, 630 — 3^rd Avenue S.W., Calgary, Alberta, Canada T2P 4L4, telephone (403) 750-4500.

      The following table lists certain subsidiaries and entities owned or controlled by Shaw, their jurisdictions of incorporation or organization and the nature of their operations. All of such entities are wholly-owned, directly or indirectly, by Shaw.

Entity	Jurisdiction		Nature of Operations
Shaw Cablesystems Limited		Federal		Television Distribution Services
Shaw Cablesystems G.P.(2)		Alberta	Television Distribution Services, Internet Services
Videon Cablesystems Inc.		Federal		Television Distribution Services
Shaw Telecom Inc.		Alberta		Telecommunications Services
Shaw Business Solutions Inc. (formerly Big Pipe Inc.)(3)		Alberta		Telecommunications Services
Shaw Satellite Services Inc. (formerly Canadian Satellite Communications Inc.)(4)		Federal		Satellite Services
Star Choice Communications Inc.		Federal		Satellite Services
Star Choice Television Network Incorporated		Federal		Satellite Services
Star Choice Satellite T.V. Inc.		Federal		Satellite Services

Notes:

(1)	The above table lists subsidiaries of Shaw in accordance with Multilateral Instrument 51-102, as well as certain other entities owned or controlled, directly or indirectly, by Shaw.
(2)	Shaw Cablesystems G.P. is a partnership of Shaw Communications Inc., Shaw Cablesystems Limited, Shaw Cablesystems (SBC) Ltd., Shaw Cablesystems (SMB) Limited, Shaw Cablesystems (SSK) Limited, Prairie Co-Ax TV Limited, Videon Cablesystems Inc. (“Videon”) and certain other subsidiaries of Shaw formed to operate the cable television systems owned by the partners.
(3)	On September 26, 2006, the name of Big Pipe Inc. was changed to Shaw Business Solutions Inc.
(4)	On October 3, 2006, the name of Canadian Satellite Communications Inc. was changed to Shaw Satellite Services Inc.

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      Unless the context otherwise indicates, a reference to “Shaw” or the “Corporation” in this Annual Information Form means Shaw Communications Inc. and its subsidiaries and other entities owned or controlled, directly or indirectly, by Shaw Communications Inc.

GENERAL DEVELOPMENT OF THE BUSINESS

      Shaw’s business is encapsulated within its vision statement: “We, the leading entertainment and communications company, deliver exceptional customer experience through outstanding people sharing Shaw values”.

      Shaw has two principal business divisions: (1) Cable Division — comprised of cable television, Internet, Digital Phone and Internet infrastructure service businesses; and (2) Satellite Division — comprised of direct-to-home satellite and satellite distribution service businesses. As a percentage of Shaw’s consolidated revenues for the year ended August 31, 2006, the Cable Division and Satellite Division represent approximately 73.5% and 26.5% of Shaw’s business, respectively compared to 73% (Cable Division) and 27% (Satellite Division) for the year ended August 31, 2005. The general development of each of these businesses is summarized below.

1. Cable Division

      Shaw’s Cable Division is comprised of the cable television, Internet access, Digital Phone and Internet infrastructure (Shaw Business Solutions) operations.

     (a) Cable Television

(i)     General

      Shaw’s initial core business was, and remains, cable television services, which today provides the customer base and physical infrastructure for much of the Corporation’s distribution service businesses. Under the name Capital Cable Television Co. Ltd., Shaw acquired its first licence to offer cable television services in Edmonton, Alberta and area in 1970. Over the course of the subsequent years, Shaw’s cable television operation has grown through a combination of the acquisition of new cable television licences awarded by the Canadian Radio-television and Telecommunications Commission (“CRTC”); the acquisition of existing cable companies; the exchange of cable systems and assets with other Canadian cable companies; and internally generated subscriber growth.

      Shaw is currently the second largest cable television company in Canada, and is the largest cable television provider in Western Canada. As at August 31, 2006, Shaw served approximately 2.2 million cable television customers in five provinces (British Columbia, Alberta, Saskatchewan, Manitoba and northwestern Ontario), representing approximately 28% of the Canadian cable television market.

(ii)     Acquisitions and Dispositions

      The Canadian cable television industry has moved from a highly regulated environment to one based on fair and sustainable competition under the superintendence of the CRTC. In such a competitive environment, cable companies have adopted “clustering” strategies, consolidating and realigning geographically to take advantage of potential administrative, operating and marketing synergies that arise from larger, focused operations. In executing its own clustering strategy, Shaw has consolidated its position as the dominant provider of cable television services in Western Canada, with approximately three-quarters of its subscribers clustered in five large urban markets.

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      Over a number of years Shaw has acquired and divested various cable systems to complement its cable clusters. Effective in fiscal 2004, Shaw acquired certain assets of Monarch Cablesystems Ltd. for a base purchase price of $90 million, including $25 million cash and the balance through the issuance of Class B Non-Voting Shares of Shaw at $17.39 per share. The cable systems acquired by Shaw from Monarch serve subscribers in the Medicine Hat and Canmore regions in Alberta and in southern British Columbia (Hope, Fernie, Kimberley). Monarch is controlled by Willard H. Yuill, a director of the Corporation. The acquisition of the assets of Monarch was approved by independent and disinterested directors of the Corporation.

      During fiscal 2006, Shaw announced that it had entered into agreements to acquire several smaller cable systems in British Columbia and Ontario which complement Shaw’s existing cable operations. Two of these acquisitions were completed during fiscal 2006 and the remainder have been completed during fiscal 2007.

     (b) Internet Access

      Since 1996, Shaw has provided Internet access services to residential and small business subscribers in its cable television systems via a cable connection and cable modem. Commencing in 1998, Shaw’s high speed Internet services were offered under the brand name Shaw@Home and now are offered under the name Shaw High-Speed Internet.

      Shaw currently offers three levels of Internet service: Shaw High-Speed Internet, Shaw High-Speed Lite Internet and Shaw High-Speed Xtreme-I^tm Internet. Shaw commenced offering Shaw High-Speed Lite Internet service (formerly known as Shaw Lite-Speed Internet) in fiscal 2002, targeted at users who do not require the features and speed (bandwidth capabilities) of Shaw’s High-Speed Internet service but who are interested in alternatives to dial-up services. In fiscal 2004, Shaw introduced High-Speed Xtreme-I^tm, which offers significantly increased download and upload speeds, as compared to Shaw High-Speed Internet, for customers who regularly download large files or visit online gaming and content-rich multimedia sites.

      As at August 31, 2006, there were approximately 1,307,000 subscribers (connected and scheduled installations) to Shaw’s Internet access services, representing a penetration rate of approximately 60% of basic subscribers.

      Shaw’s Internet infrastructure is owned, managed and controlled exclusively by Shaw, as discussed below. All of Shaw’s Internet customers use Shaw’s own network and are given “@shaw.ca” email addresses.

     (c) Digital Phone

      In fiscal 2005, Shaw entered the “triple play” market of voice, video and data services with the launch of Shaw Digital Phone^tm, a reliable, fully featured and affordable residential telephone service, across certain of its cable service areas, including Calgary, Edmonton and Winnipeg. In fiscal 2006, the Corporation expanded its Digital Phone footprint across other of its cable services areas, including Vancouver and Victoria and various other smaller centers. As at August 31, 2006, Shaw had approximately 213,000 digital phone lines (primary and secondary lines on billing plus pending installs).

      During fiscal 2006, Shaw invested approximately $86 million on the deployment of Digital Phone, which includes costs associated with customer premise equipment and installation, acquiring and operating softswitches (telecommunications switching infrastructure), IP transport, network redundancy, network equipment and back-up powering, information technologies and systems integration. In total, the Corporation has invested approximately $149 million in its Digital Phone deployment to August 31, 2006. Shaw currently uses Bell Inc. to provide wholesale services, including interconnection to the public switched telephone network and long distance termination, in order to enable Shaw to provide residential phone service to its customers in Western Canada.

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     (d) Internet Infrastructure (Shaw Business Solutions)

      Shaw’s Internet infrastructure services are offered through Shaw’s subsidiaries Shaw Business Solutions Inc. and Shaw Business Solutions U.S., Inc. (together, “Shaw Business Solutions”).

      Shaw Business Solutions Inc. was established in 2000, under the name Big Pipe Inc., to develop and operate the fibre network that serves as the primary Internet backbone for Shaw’s broadband Internet customers and to provide Internet and data connectivity services to large and medium businesses and other organizations. Shaw Business Solutions maintains a relationship with Group Telecom, a division of Bell Canada (formerly 360 networks inc.) (“Group Telecom”), pursuant to a master services agreement and an indefeasible right of use with respect to a portion of Group Telecom’s U.S. fibre network.

      Shaw Business Solutions has built both its fibre network and its customer base to promote future revenue growth. Its network consists of a redundant two route fibre backbone transecting Canada and the United States. The southern route consists of approximately 6,400 route kilometers (4,000 miles) of fibre located on routes between Vancouver (via Calgary, Winnipeg, Chicago, Toronto and Buffalo) and New York City. The northern route consists of approximately 4,000 route kilometers (2,500 miles) of fibre between Edmonton (via Saskatoon, Winnipeg and Thunder Bay) and Toronto. In addition, as a result of arrangements with Group Telecom, Shaw Business Solutions has additional capacity to connect the cities of Toronto (via Montreal and Boston) to New York City, Seattle (via Victoria) to Vancouver, Edmonton and Toronto.

2. Satellite Division

      Shaw’s satellite business is operated through its wholly-owned subsidiary, Shaw Satellite Services Inc. (“Satellite Services”), formerly known as Canadian Satellite Communications Inc., a Canadian satellite services company. Incorporated in 1980, Satellite Services provides satellite-based solutions to businesses and owns 100% of Star Choice Communications Inc. (“Star Choice”), which through its subsidiary Star Choice Television Network Incorporated, is one of two licensed direct-to-home (“DTH”) operators in Canada. Shaw’s interest in, and eventual control of, Satellite Services was acquired through several transactions between 1997 and 2003.

      On October 4, 2006, Shaw announced the rebranding all of its companies in the Satellite Division to leverage the Shaw name and build a consistent identity within the business. Star Choice will be branded Star Choice, a Shaw Company, and the Satellite Distribution Services will be branded Shaw Broadcast Services, (formerly known as Cancom Broadcast Solutions) and Shaw Tracking (formerly known as Cancom Tracking Solutions).

DESCRIPTION OF SHAW’S BUSINESSES

      A description of each of the principal businesses comprising Shaw’s Cable Division and Satellite Division, along with certain additional information, is set forth below.

1. Cable Division

     (a) Cable Television

(i)     General

      Shaw is the second largest cable television company in Canada, serving approximately 28% of the Canadian cable television market with a concentrated focus on Western Canada. Currently, over 75% of Shaw’s cable television subscribers are clustered in and around five major urban markets in Western Canada: Vancouver and Victoria (Vancouver Island), British Columbia; Calgary and Edmonton, Alberta; and

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Winnipeg, Manitoba. The balance of Shaw’s subscribers is mainly in smaller clusters, linked via fibre either to each other or to larger markets. These markets include the Okanagan region, British Columbia (Kamloops, Kelowna, Penticton, Vernon); Saskatoon/ Prince Albert/ Moose Jaw/ Swift Current, Saskatchewan; and Thunder Bay/ Sault Ste. Marie, Ontario.

      Shaw has achieved a critical mass of subscribers in its larger markets by completing selective acquisitions, using a clustering strategy and seamlessly integrating new customers. Clustering involves consolidating and realigning geographically around a regional office to provide subscriber services to several contiguous communities, thereby creating potential administrative, operating and market synergies through shared facilities and services and reduced operating redundancies.

(ii)     Cable Network

      Shaw’s cable television business is operated through Shaw’s extensive fibre optic and co-axial cable distribution network. Shaw’s fibre backbone and interconnect network links Shaw’s cable systems and subscribers together. Shaw receives originating television signals at its head-end sites through satellite, transmitters, off-air antennae and microwave systems and re-transmits these signals via its network to customers’ homes in Shaw’s licensed areas. Digital cable customers receive additional services via digital cable terminals (“DCTs”) which translate additional encrypted signals delivered to customers’ homes over Shaw’s network.

      Shaw’s strategy is to leverage its network by providing additional services beyond traditional cable. In past years, Shaw enhanced the quality, depth and capacity of its plant and network infrastructure through significant capital investments. The plant and network is now essentially fully digital and two-way capable. Over the past three years, Shaw has made capital investments in order to leverage its existing network to offer telephony services. These ongoing investments have enabled Shaw to expand its service offerings to include digital programming, Internet, Video-on-Demand (“VOD”), High Definition Television (“HDTV”), and Digital Phone.

(iii)     Cable Television Offerings

      Shaw offers a variety of cable television services from which its customers may choose.

      (A) Basic Cable and Extended Tiers

      Basic cable service in Canada consists primarily of local and national programming, as well as major U.S. networks. The number of channels offered and the monthly fee charged for basic service vary depending on the cable system in question. As at August 31, 2006, Shaw served approximately 2,186,000 basic cable subscribers.

      Extended tier cable is comprised of three discretionary tiers of services that consist of Canadian and non-Canadian specialty television programming. Canadian specialty television networks carried on the various tiers include CMT, Showcase, Discovery, History, Outdoor Life Network, Teletoon and Sportsnet. Foreign services represented on the tiers include TBS, Spike, CNN, TLC and A&E. In fiscal 2006, Shaw added the popular movie services Movie Central Encore Avenue, Turner Classic Movies and American Movie Classics to its analog discretionary channel choices.

      The majority of Shaw’s customers currently receive at least 58 analog channels on basic cable or as part of an extended tier, including the local news, sports and information programming produced by Shaw TV. Basic cable and extended tier customers can receive these analog channels using their current television tuners, so that no additional external equipment is required.

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      (B) Digital Cable

      Digital cable significantly expands the range of services that may be offered to a subscriber and extends programming capacity to more than 200 channels. Digital cable, which is delivered by the Corporation’s network to DCTs deployed in subscribers’ premises, also enhances picture and sound quality and provides the platform from which Shaw has launched, and expects to be able to launch, new revenue-generating video and interactive services.

      Shaw’s digital cable offering includes an interactive program guide, parental controls, 40 digital music formats (MaxTrax/ Galaxie), digital basic channels such as popular time-shifted U.S. major networks, Teletoon, Family Channel, Telelatino, Star!, CNBC, NFL Network, The Golf Channel and Basic HDTV channels, plus access to specialty and ethnic programming services and premium pay television and pay-per-view programming.

      Shaw carries over 45 low cost digital channels (“diginets”), including CRTC-licenced Category 1 “must carry” Canadian programmed services (such as Biography Channel, Documentary Channel, Fashion TV and Independent Film Channel) and discretionary Category 2 services (such as National Geographic, BBC Canada, Dejaview and Lonestar). Digital cable customers are able to select individual channels to tailor their own packages in a “pick and pay” manner, at a set per-channel price, or to make certain channel packages of their choice at a substantial per-channel price savings.

      In fiscal 2006, Shaw launched a distant-Canadian time shift package of 10 cross-Canada channels. Shaw also added additional HDTV channel choices, and announced an HD Plus subscription package of services.

      As of August 31, 2006, digital cable was available in almost all of Shaw’s cable systems. As at such date, Shaw had approximately 853,000 DCT’s deployed in customer premises and approximately 670,000 digital subscribers, representing a penetration rate of approximately 31% of basic cable television subscribers. Of these installed DCT’s, approximately 94,000 have access to HDTV programming on up to 12 featured HDTV channels.

      (C) Pay Television and Pay-Per-View

      Shaw’s pay television offering consists of genre-based commercial-free movie channels (with up to five choices offered under the brand Movie Central in Western Canada and The Movie Network in Eastern Canada), up to four Superstations from the United States and certain other ethnic, premium and adult services. These pay television offerings are available to subscribers for monthly fees which vary depending on the pay television offering selected.

      Shaw also offers up to 50 channels of interactive, impulse pay per view (“PPV”) to its digital subscribers. Shaw’s PPV offering allows customers to select and pay for specific programs which are available on various channels with different start times. PPV offerings include movies, sports, concerts and other special events, with the price dependent on the nature of the programming. Shaw is the principal provider of NHL PPV hockey in Western Canada, with over 40 games a year offered in-market through agreements with the Vancouver Canucks, Edmonton Oilers and Calgary Flames.

      (D) Video-on-Demand (“VOD”)

      Shaw also offers VOD services in selected markets under the name Shaw Video-on-Demand. Shaw’s VOD service enables customers to select programming from a library of titles through an on-line ordering system or directly through the interactive program guide, and to view the programming on their television at a time of their choosing, with full digital video disk-type functionality, including pause, skip backward and skip forward. Viewers have unlimited viewing of a program at their convenience for a 24 hour period.

      Shaw’s VOD service is available exclusively to Shaw’s digital cable customers. Over the course of fiscal 2005 and fiscal 2006, the Corporation had rolled out its VOD services in all of its major systems, as well as in

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several of its smaller systems. It had also launched on-screen ordering of VOD content in many of such systems.

      As part of its VOD service, Shaw has entered into content licensing arrangements with several movie studios and content providers, including Universal Studios, Twentieth Century Fox, Paramount Pictures, Warner Brothers, Viacom/ CBS and Alliance Atlantis Communications Inc. These arrangements provide Shaw’s VOD service with a library of current feature films, major motion pictures and other content, including VOD choices for popular television shows such as Rockstar and Survivor. The Corporation also supports subscription-based VOD services with Corus Entertainment Inc. (Movie Central on Demand and Treehouse) and with the Anime Network. Subscription-based VOD services allow a customer to access a library of films and series on a VOD basis, while paying a monthly subscription fee rather than a per-transaction fee.

      (E) Bundling of Services

      Cable offers customers attractively priced combinations of its four distinct products: analog video, digital video, Internet and Digital Phone. It measures bundled customers as the number of customers subscribing for two or more of those services as a percentage of basic customers.

      As at August 31, 2006, approximately 52% of Shaw’s cable customers subscribed to a bundled service. The benefits of bundling to customers include the convenience of “one-stop shopping” and price savings. The benefits to Shaw include retention of existing customers (churn reduction); attraction of new customers; incremental penetration as customers upgrade to additional services offered in a bundle; and operational efficiencies through centralized billing and customer care.

      Shaw has also partnered with several national Canadian retailers, such as Future Shop, Visions and Best Buy, to offer Shaw products and services through point-of-purchase displays in key retail locations. The focus of such marketing efforts centres on offering Shaw cable-related and Internet products and services in attractive bundles at competitive price points.

      (F) New Video Services

      Shaw anticipates that its on-going investment in network upgrades, along with advances in technology, will allow the Corporation to continue to upgrade and increase its cable television service offerings. Shaw expects to continue to roll-out digital cable services and VOD to an increased number of its subscribers, both in areas not previously able to receive such services and in areas already receiving such services. Shaw expects that newly-launched video services (VOD and HDTV choices, in particular) will enhance its current product offerings, making them more attractive to existing and potential customers.

      Shaw has launched HDTV channels and programming in most of its cable systems, including a 24 hour HDTV movie channel from Movie Central, sports programming from SportsNet, TSN, Discovery Network and A&E. HDTV offers superior picture detail and sound quality in a format that fully utilizes the capabilities of wide screen, high-definition ready televisions. In support of HDTV, Shaw offers for purchase, next-generation DCTs which support the decoding and processing of HDTV content without requiring additional digital terminals or equipment, as well as a DCT which incorporates HDTV and personal video recorder features into one box.

(iv)     Competition

      Cable providers operate in an open and competitive marketplace. Shaw’s cable television business faces competition from regulated entities utilizing existing communications technologies and from currently unregulated and illegal services. In addition, Shaw may face competition in the future from other newer technologies being developed or to be developed.

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      More specifically, Shaw’s cable television systems compete with subscription DTH satellite services, satellite master antenna systems, multipoint distribution systems (“MDS”), telephone companies offering DSL video service, Internet Protocol television providers, web-based video services and wireless mobile operators. Shaw also competes with the direct reception by antenna of free, unencrypted over-the-air local and regional broadcast television signals.

      DTH is currently the largest competitor to cable by number of subscribers, delivering programming via signals sent directly to receiving dishes from medium and high-powered satellites. DTH services presently provide more extensive channel line-ups and are fully digital. Two licensed operators, Star Choice, a Shaw Company, and Bell ExpressVu, are currently providing DTH services in Canada. These DTH operators currently provide service to approximately 2.6 million Canadian households. In addition, grey and black market satellite services (i.e. DTH programming services obtained in Canada without authorization from the CRTC or from the DTH providers) also constitute competitive services. The Supreme Court of Canada has ruled that grey and black market DTH providers are violating the Radiocommunication Act (Canada), and are therefore providing an illegal service.

      MDS delivers television programming by unobstructed line-of-sight microwave transmission to subscribers equipped with special antennae. Since 1995, the CRTC has approved MDS applications of distributors competing with cable television service in given service areas. In particular, the CRTC has granted licences to Craig Wireless International Inc. (formerly Skycable Inc.) with respect to certain areas of Manitoba and British Columbia and to Image Wireless Communications Inc. with respect to certain areas of Alberta and Saskatchewan. The CRTC has also issued a licence to Look Communications Inc. to operate MDS undertakings in southern and eastern Ontario and in Quebec.

      Other competitive television undertakings are licenced to operate within the authorized service areas of incumbent cable licences. One of these competitive undertakings, Novus Entertainment Inc., operates within Shaw’s licenced service areas in Vancouver.

      Since 1998, telephone companies have been eligible to hold full scale broadcasting distribution licences from the CRTC. To date, six telephone companies have been granted broadcasting distribution licences to provide television services, including in some cases, VOD: Telus Corporation currently offers Telus TV in select parts of Alberta, British Columbia and Quebec; SaskTel offers Max TV in Saskatchewan; Manitoba Telecom Services Inc. offers viewers a competitive choice with MTS TV in Manitoba; Bell Canada offers services in parts of Ontario and Quebec; Télébec offers services in Quebec; and Aliant Telecom Inc. offers services in Atlantic Canada.

      In Shaw’s territory, SaskTel launched its MaxTv service in September 2002 and as of December 31, 2005 had over 42,000 customers. Manitoba Telecom Services Inc. launched its MTS TV service in January 2003 and as of June 30, 2006 had approximately 56,000 customers. Telus has begun a limited launch of its DSL video service in a small number of markets.

      To date, none of these competitors has had a material impact on Shaw’s overall cable television operations. However, there can be no assurance that increased competition will not have a material adverse effect on Shaw’s results of operations. Almost all of Shaw’s cable systems are concentrated in major urban markets having favourable demographics and growth potential, with most of the remainder in smaller clusters, linked via fibre optic distribution systems either to each other or to larger markets. Through this clustering strategy, Shaw maximizes the benefits of operating efficiencies, enabling it to be a low cost service provider, which is a necessary component in strengthening its competitive position. In addition, Shaw plans to continue to deploy new technologies to increase channel capacity, to expand the range and quality of its services and to enhance its programming and communication service offerings, including for example, VOD, interactive television, full digital line-ups, HDTV and Digital Phone.

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     (b) Internet Access

(i)     General

      Leveraging off its cable television infrastructure, Shaw has provided high speed Internet access services to residential and small business subscribers since 1996. Offered under the brand name Shaw@Home commencing in 1998, and currently offered under the name Shaw High-Speed Internet, Shaw’s Internet access service is up to 200 times faster than conventional telephone access and is designed to be significantly faster than competing digital services over the telephone lines. Shaw High-Speed Internet customers receive up to ten email addresses, 200 megabytes of personal web space and two cable modems. Shaw’s High-Speed Internet service is also bundled with several complementary products and services, as well as many of the latest multimedia plug-ins.

      Shaw currently offers three levels of Internet service: Shaw High-Speed Internet, Shaw High-Speed Lite Internet and Shaw High-Speed Xtreme-I^tm Internet. Introduced during fiscal 2002, Shaw’s High-Speed Lite Internet service is targeted at users who do not require the features and speed (bandwidth capabilities) of Shaw’s High-Speed Internet service but who are interested in alternatives to dial-up services. Through a Shaw cable modem connection, the Shaw High-Speed Lite Internet Service features speeds up to five times faster than traditional dial-up service, an “always on” connection, one unique email address and 20 megabytes of personal web space.

      Utilizing DOCSIS^tm technology (as described below), the Corporation launched Shaw High-Speed Xtreme-I^tm during fiscal 2004. Xtreme-I^tm offers significantly increased download and upload speeds, which appeals to customers who regularly download large files or visit online gaming and content-rich multimedia sites.

      In providing its Internet access services, Shaw deploys an advanced generation of cable modem, based on Data Over Cable Service Interface Specification (DOCSIS^tm) 2.0 specifications. This technology has enabled Shaw to increase the capabilities and reliability of its network by increasing the capacity and throughput in both the upstream and downstream portions of Shaw’s cable infrastructure. As a result, the capacity of the Corporation’s network in both directions has increased to up to 30 megabits per second in both directions, representing approximately five times the capacity of pre-DOCSIS cable modems.

      During fiscal 2006, Shaw continued to invest in Internet value-added services and product improvements, including the addition of Shaw Photo Share, an on-line way to store pictures for sharing with family and friends, and also increased the speed of Shaw High Speed Xtreme-I Internet to a level of up to 10 megabits per second.

      Shaw’s Internet services are currently available in almost all of Shaw’s operating areas. As at August 31, 2006, Shaw’s Internet services had approximately 1,307,000 subscribers (connected and scheduled installations), representing a penetration rate of approximately 60% of basic subscribers.

      As at August 31, 2006, approximately 157,000 subscribers for Shaw’s Internet services did not concurrently subscribe for any of Shaw’s cable television or Digital Phone services.

(ii)     Network

      The fibre network that serves as the primary Internet backbone for Shaw’s broadband Internet customers is operated by Shaw Business Solutions (see “Description of Shaw’s Businesses — Cable Division-Internet Infrastructure”). The network, which is designed with fibre optic technology and has redundant capacity, extends from Victoria to New York, with connectivity to major Internet peering points in Seattle, Washington; Palo Alto, California; Chicago, Illinois; and Ashburn, Virginia.

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      Shaw has made significant investments to improve the speed and performance of its Internet access services. Future upgrades and enhancements of Shaw’s capital infrastructure are anticipated on a selective basis, including to build up the Corporation’s Internet backbone and decrease average node size.

      Shaw operates two Internet data centres in Calgary, Alberta. The data centres allow the Corporation to manage its Internet services exclusively and to provide e-mail service directly to its customers using “@shaw.ca” e-mail addresses. The data centre also allow Shaw to manage its own operations in terms of DNS, DHCP, provisioning web space, backbone connectivity and peering arrangements into the United States. The centres also host Shaw customers’ most popular web content locally.

(iii)     Competition

      There are a number of different types of ISPs offering residential and business Internet access services that currently compete, or may in the future compete, with Shaw’s Internet services. These include on-line service and content providers (such as AOL Canada), independent basic access service providers (both national and regional), incumbent telephone companies, wireless communications companies and electricity transmission and distribution companies.

      Many ISPs provide telephone dial-up Internet access services with typical access speeds of up to 56 kilobites per second. Such services are provided by incumbent telephone companies and independent ISPs (mainly through the use of the telephone companies’ facilities and services). According to a report from the CRTC dated October 2005, approximately 27% of all Internet subscribers in Canada used low-speed dial-up access services, while the other 73% used high speed services.

      High speed Internet access services are principally provided through cable modem and digital subscriber line (“DSL”) technology. High speed services enable users to transmit and receive print, video, voice and data in digital form at significantly faster access speeds than dial-up access through a regular telephone line. Internet access services through cable modem technology are currently provided by cable companies, although the CRTC has also authorized third-party ISPs to access cable companies’ facilities to deliver high speed Internet services (as discussed below). DSL services are principally offered by incumbent telephone companies, such as BCE Inc., SaskTel, Manitoba Telecom Services and Telus Corporation.

      The ISPs have access to cable companies’ facilities to deliver competing Internet access service. Currently, competing ISPs have access to high speed access services of Shaw pursuant to a third party Internet access tariff that came into effect on November 2, 2004, and which has subsequently been updated on March 20, 2006. Such third party Internet access services are available in Vancouver, Victoria, Calgary, Edmonton, Saskatoon and Winnipeg. Currently, only one ISP has subscribed to the tariff. Until such time as an ISP subscribes to the tariff, or areas where Shaw’s third party Internet access services are not available, Shaw has been directed by the CRTC to allow ISPs to resell cable Internet services at a 25% discount from the retail rate. Currently, there are three ISPs using Shaw’s resale services at the resale discount rate.

      Although operating in a competitive environment, Shaw expects that consumer desire for Internet access services, generally, and for bandwidth-intensive applications on the Internet (including streaming video, digital downloading and interactive gaming), in particular, will lead to continued, growth for high speed Internet services such as Shaw High-Speed Internet.

     (c) Digital Phone

(i)     General

      During fiscal 2005, Shaw launched its fully featured residential telephone service under the brand name Shaw Digital Phone^tm. Shaw Digital Phone combines local, long distance and the most popular calling features into a simple package for a fixed monthly fee. The service includes a local residential line, unlimited

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anytime long distance calling within Canada and the United States, 1000 international calling minutes per month to a wide variety of countries in Europe and the Asia/ Pacific Region, as well as six calling features (voicemail, call display, call forwarding, three-way calling, call return and call waiting). Professional installation, access to E-911 (enhanced 911 emergency service), directory and operator services, and around-the-clock (24/7/365) customer support also form part of the Shaw Digital Phone service, at no additional cost to subscribers. With Shaw Digital Phone, customers have the option of keeping their current home phone numbers and the service works with existing telephones in customers’ homes, so that no purchase of additional equipment is required.

      Shaw Digital Phone utilizes PacketCable^tm technology and DOCSIS^tm specifications. Customers connect their existing phone lines into modems usually installed at the location of the central wiring in the customers’ premises. The modem converts the voice conversation into digital IP packets that are carried to an IP-based telephone switch (“softswitch”). At this point, the packets are transformed again into analogue signals and are handed off to the public switched telephone network or may be routed through the IP network to the called party.

      During fiscal 2005, the Corporation launched Shaw Digital Phone across certain of its cable service areas, including Calgary, Edmonton and Winnipeg, and in fiscal 2006, Shaw expanded its Digital Phone footprint across other of its cable service areas including Vancouver, Victoria and various other smaller centers in Alberta and British Columbia. As at August 31, 2006, Shaw had approximately 213,000 digital phone lines (primary and secondary lines on billing plus pending installs).

(ii)     Competition

      The competitors of Shaw Digital Phone include incumbent telephone companies (“ILECs”) (such as Telus Corporation, SaskTel, Manitoba Telecom Services Inc., and subsidiaries or affiliates of BCE Inc.), competitive local exchange carriers (“CLECs”) (such as Rogers Telecom Inc., formerly Sprint Canada Inc.) and non-facilities-based Voice over Internet Protocol (“VoIP”) providers (such as Primus Telecommunications Canada Inc. and Vonage Holdings Corp.). As the market for VoIP services develops and as VoIP technology evolves, new competitors (such as IT providers, network vendors and system integrators) may emerge from companies that have not offered voice solutions in the past.

      The ILECs currently control the vast majority of the local telephone services market in Canada. Several of such competitors have larger operational and financial resources than the Corporation and are well established with residential customers in their respective markets. See “Canadian Regulatory Environment — Digital Phone” for a discussion of regulatory factors affecting competition for Digital Phone.

     (d) Internet Infrastructure (Shaw Business Solutions)

(i)     General

      Shaw’s Internet infrastructure business is principally operated through Shaw Business Solutions which was established in 2000. Shaw Business Solutions operates the national fibre network that is the primary Internet backbone for Shaw’s broadband Internet customers. This backbone network is also used to carry Shaw Digital Phone capacity and video signals. In addition, Shaw Business Solutions’ facilities are available to Internet service providers (“ISPs”), cable companies, broadcasters, governments and other businesses and organizations that require end-to-end Internet and data connectivity. In particular, Shaw Business Solutions is focused on being a major account and wholesale provider offering third parties advanced high-speed data connectivity and Internet services in Canada and the United States. Its offerings currently include data and video transport and Internet connectivity services.

      Shaw Business Solutions launched its operations in Canada in March 2000 and commenced operations in the United States during fiscal 2003. During fiscal 2006, Shaw Business Solutions continued to grow its third

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party revenues with a focus on the large and medium customer market in North America. It also continues to establish public and private peering arrangements and high-speed connections to major North American, European and Asian network access points and other tier-one backbone carriers.

(ii)     Shaw Business Solutions Network

      Shaw Business Solutions’ network consists of a redundant two route fibre backbone transecting Canada and the United States, combined with numerous local access, intra-city fibre optic networks in municipalities served by Shaw Business Solutions.

      The fibre network serves as a national platform for voice services, IP-based services, business-to-business Services and video. The network also extends connectivity to all major Internet national peering points (NAPs) in Canada, the United States and Europe.

      The Shaw Business Solutions network includes multiple fiber capacity on two diverse cross-North America routes. Shaw Business Solutions’ southern route principally consists of approximately 6,400 route kilometers (4,000 miles) located on routes between Vancouver (via Calgary, Winnipeg, Chicago, Toronto and Buffalo) and New York City. The northern route consists of approximately 4,000 route kilometers (2,500 miles) of fibre between Edmonton (via Saskatoon, Winnipeg and Thunder Bay) and Toronto. This route provides redundancy for the existing southern route. In addition, as a result of arrangements with Group Telecom, Shaw Business Solutions secured additional capacity to connect the cities of Toronto (via Montreal and Boston) to New York City, Seattle (via Victoria) to Vancouver and Edmonton to Toronto.

(iii)     Competition

      Through its Shaw Business Solutions subsidiaries, Shaw competes with other telecommunications carriers in providing high speed broadband communications services (data and video transport and Internet connectivity services) to businesses, ISPs and other telecommunications providers. The telecommunications services industry in Canada is highly competitive, rapidly evolving and subject to constant change. Shaw Business Solutions competitors include ILECs (such as Telus and Bell Canada), competitive access providers, competitive local exchange carriers, ISPs, private networks built by large end users and other telecommunications companies. In addition, the development and implementation of new technologies by others could give rise to significant new competitors.

2. Satellite Division

     (a) General

      Shaw’s Satellite Division is principally operated through Shaw’s wholly owned subsidiaries, Satellite Services and Star Choice, and is comprised of DTH satellite and satellite distribution service businesses, as follows:

      (i) Star Choice DTH — distribution of digital video and audio programming services via direct-to-home satellite to Canadian residences and businesses;

      (ii) Satellite Distribution Services:

      (A) Shaw Broadcast Services — uplink and redistribution of television and radio signals via satellite to cable operators and other distributors, and related network services; and

      (B) Shaw Tracking — provision of satellite tracking and messaging services to the Canadian trucking industry, and integration and management of satellite data networks with land-based telecommunications.

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      Star Choice and Satellite Services share a common satellite infrastructure. The DTH and satellite services businesses distribute largely the same digital video and audio signals to different markets (residential and business), thereby allowing the Corporation to derive distinct revenue streams from different customers using a common platform.

     (b) Satellite Network

      Satellite Services owns and leases, directly and indirectly, satellite transponders that receive and amplify digital signals and transmit them to receiving dishes located within the footprint covered by the satellite. Satellite Services’ interests in such transponders are set forth in the table below.

		Nature of Cancom
Satellite	Transponders	Interest
Anik F2	18 Ku-band	Owned
	3 Ku-band	Leased
Anik F1R(1)	28 Ku-band	Leased
	2 C-band	Leased
Intelsat 1A5 (formerly known as Telstar 5)	1 Ku-band (partial)	Leased

Note:

(1)  Anik F1R was launched on September 9, 2005 and went into commercial service effective October 3, 2005. North American traffic on the Anik F1 satellite, including traffic relating to Star Choice’s DTH service, was then transferred from Anik F1 to Anik F1R. The Corporation has a service arrangement with Telesat Canada for the capacity on Anik F1R which has the same substantive benefits and obligations as on Anik F1. The Anik F1R arrangements expire in February, 2016 which was the originally expected end-of- service life for Anik F1.

     (c) Satellite Businesses

(i)     Star Choice DTH

      Through its wholly-owned subsidiary Star Choice Television Network Incorporated, Star Choice is one of two DTH satellite operators licensed by the CRTC to deliver digital subscription video and audio programming services from satellites directly to subscribers’ homes and businesses. Star Choice began the national roll-out of its digital DTH services in October 1997 and, as at August 31, 2006, had approximately 869,000 subscribers across Canada.

      The market for Star Choice’s digital DTH services can be divided into three principal categories: households not served by cable and typically having access to a limited number of broadcast services; households underserved by cable (i.e. served by cable systems that offer fewer than 80 channels); and households that receive full service cable (80 or more channels), primarily in urban areas. Other potential customers include Canadian commercial, institutional and recreational facilities interested in video and audio programming.

      Star Choice currently offers over 430 digital video and audio channels, with a programming line-up that offers the vast majority of television services that are available in Canada, including local over-the-air broadcasters, national networks, specialty channels, U.S. and foreign channels, adult programming and ethnic services. Star Choice obtains such programming from program providers whose distribution is authorized by the CRTC, in most cases pursuant to non-exclusive contracts ranging in term from three to five years. Star Choice’s subscribers have the option of choosing from a menu of programming packages designed to target and accommodate subscriber interests, primary language, income level and type of household. Such packages

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are primarily sold through a nation-wide distribution network of over 3,000 retail locations, including The Source (formerly known as Radio Shack), Future Shop, Best Buy, Leon’s and The Brick.

      During the 2001 fiscal year, Star Choice moved to dual satellites (Anik E2, subsequently replaced by Anik F2; and Anik F1, subsequently replaced by Anik F1R) whose signals can be received by customers through a unique elliptical dish. With multiple satellite reception, Star Choice expanded its offering to over 400 channels and has since further enhanced its services by offering customers more HDTV channels and additional programming services. Late in fiscal 2005, Star Choice also acquired two additional Ku-band transponders on Anik F2, which have allowed Star Choice to further expand its pay-per-view and high definition services.

      As part of its commitment to enhance its service offerings, during fiscal 2005, Star Choice was the first Canadian satellite service provider to launch an integrated dual-tuner digital video recorder (“DVR”) with high-definition, which allows a customer to watch one show while recording another, either in standard or high-definition formats. In fiscal 2005, Star Choice also introduced two new receivers which provide a more economical entry point for new customers and enable new customers to expand the range of Star Choice services in their homes. In fiscal 2006, Star Choice introduced a new receiver which offers customers an economic entry point for receiving high definition channels.

     (ii) Satellite Distribution Services

      (A) Shaw Broadcast Services

      Shaw Broadcast Services (formerly Cancom Broadcast Solutions) redistributes television and radio signals via satellite to cable operators and other multi-channel system operators in Canada and the U.S. and provides uplink and network management services for conventional and specialty broadcasters on a contract basis.

      The redistribution of signals to cable companies and other operators is known in Canada as satellite relay distribution undertaking (“SRDU”) services. Satellite Services currently provides SRDU and signal transport services to over 500 distribution undertakings, primarily cable operators, and redistributes more than 300 television signals and 125 audio signals in both English and French to multi-channel system operators. Shaw Broadcast Services also offers HITS/ QT (Headend In the Sky/ Quick Take), which allows small and medium size cable companies to offer digital signals to subscribers for a substantially reduced capital outlay. HITS/ QT facilitates increased availability and penetration of digital services in Canada and thereby adds incremental revenues to Shaw Broadcast Services from the additional services provided to smaller cable companies.

      Shaw Broadcast Services’ uplink and network management services include backhaul (transport of signals to the uplink site), uplink (delivery of signal to the satellite so that it can be distributed to cable operators and other distributors), bandwidth, authorization and signal monitoring. Shaw Broadcast Services currently provides such services to approximately 125, specialty and pay services across Canada, as well as to Canadian pay audio services (MaxTrax and Galaxie).

      (B) Shaw Tracking

      Shaw Tracking (formerly Cancom Tracking Solutions) provides mobile tracking and messaging services to approximately 550 companies and is the largest provider of such services in the long-haul trucking industry in Canada, with over 35,000 vehicles using its services. Shaw Tracking’s services effectively integrate a carrier’s truck fleet and dispatch system so that an office-bound dispatcher and back-office computer systems can be in direct and immediate contact with their trucks via satellite, no matter how widely dispersed that truck fleet is across North America.

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     (d) Competition

      The Star Choice DTH business faces much the same competitive environment as Shaw’s cable television business. Competitors include Bell ExpressVu (the only other licensed DTH satellite service currently operating in Canada), cable television companies, grey and black market satellite service providers and other competitors such as wireless operators, telephone companies and off-air television broadcasters. See “Description of Shaw’s Businesses — Cable Division — Cable Television — Competition”.

      In its Canadian SRDU business, Satellite Services faces competition principally from Bell ExpressVu. At present, Satellite Services and Bell ExpressVu are the only licensed SRDU operators in Canada. Satellite Services also faces competition from the expansion of fibre distribution systems into territories previously only served by SRDU operators. This expansion permits delivery of distant U.S. and Canadian conventional television stations to more remote locations without the use of satellite transmission.

3. Additional Information Concerning Shaw’s Businesses

     (a) Seasonality and Customer Dependency

      Shaw’s cable television and Internet subscriber numbers are subject to seasonal fluctuations with the fall season (coinciding with the return of students to school, the return from vacations and the new television and holiday seasons) being stronger than other seasons. The Star Choice DTH subscriber activity tends to follow the cycles of the retail industry, with the greatest sales volume occurring in the four months leading up to and including the Christmas holiday season. In addition, Star Choice subscriber numbers are affected by vacation schedules (as customers reconnect and disconnect DTH services at summer homes) and by “snowbirds” (customers who vacation in warmer climates during winter months and reconnect and disconnect services accordingly). While subscriber activity is generally subject to these seasonal fluctuations, it may also be affected by competition and varying levels of promotional activity undertaken by the Corporation.

      Shaw’s businesses generally are not dependent upon any single customer or upon a few customers.

     (b) Environmental Matters

      Shaw’s operations do not generally have a significant impact on the environment. The Corporation has not made, and does not anticipate making, any significant capital expenditures to comply with environmental regulations. Such regulations have not had, and are not expected to have, a material effect on the Corporation’s earnings or competitive position.

     (c) Foreign Operations

      Shaw does not have material foreign assets or operations.

      Shaw Business Solutions U.S. Inc., (formerly known as Big Pipe U.S., Inc.) a wholly-owned subsidiary of Shaw, has entered into an indefeasible right of use with respect to a portion of Group Telecom’s United States fibre network and owns certain other fibre and facilities in the United States. Shaw Business Solutions U.S. Inc. commenced revenue-generating operations in the United States in fiscal 2002. Its revenues for the year ended August 31, 2006 were not material.

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     (d) Employees

      As at August 31, 2006, the Corporation employed approximately 8,200 persons.

4. Risk Factors

      A discussion of risks affecting the Corporation and its business is set forth under the heading “Introduction to the Business — Known Events, Trends, Risks and Uncertainties” in Management’s Discussion and Analysis for the year ended August 31, 2006, as contained on pages 18 to 25 of the Corporation’s 2006 Annual Report, which discussion is incorporated by reference herein. The description of risks does not include all possible risks, and there may be other risks of which the Corporation is currently not aware.

CANADIAN REGULATORY ENVIRONMENT

1. Overview

      The Canadian communications industry is regulated by the CRTC, which supervises Canadian broadcasting and telecommunications systems, including broadcasting distribution undertakings (“BDUs”) and telecommunications common carriers. The CRTC’s telecom mandate includes ensuring that Canadians have access to reasonably priced, high-quality, varied and innovative communications services that are competitive nationally. The CRTC’s broadcasting mandate includes ensuring that BDU’s give priority to the carriage of Canadian services and provide efficient delivery, as well as ensuring that the system is regulated and supervised in a flexible manner.

      Shaw’s cable television, Internet, satellite and telecommunications businesses are subject to regulation principally by the CRTC pursuant to the Broadcasting Act (Canada) and the Telecommunications Act (Canada), as well as pursuant to certain other legislation, such as the Copyright Act (Canada) and the Radiocommunication Act (Canada). Shaw’s cable television and satellite (DTH and SRDU) businesses, in particular, are dependent upon licences granted and exemption orders issued by the CRTC and other regulatory bodies pursuant to such legislation. Shaw’s businesses are also regulated by technical requirements and performance standards established by Industry Canada, primarily under the Radiocommunication Act (Canada) and the Telecommunications Act (Canada).

2. Cable Television

     (a) General

      CRTC regulations govern the types of services offered, packaging, and in some cases the fees that may be charged, by terrestrial BDUs such as cable television, telephone company DSL and MDS systems. Under the Broadcasting Distribution Regulations (the “Broadcasting Regulations”), there are three licensed classes of terrestrial BDU’s: (i) Class 1 systems (serving 6,000 or more subscribers); (ii) Class 2 systems (serving between 2,000 and 5,999 subscribers); and (iii) Class 3 systems (serving fewer than 2,000 subscribers or located in areas which receive not more than two Canadian television signals over the air).

      There are also two classes of systems that are exempt from licensing, licensing fees, and certain regulatory requirements. These are systems with less than 2,000 subscribers, and systems having between 2,000 and 6,000 subscribers.

      Class 1 systems are subject to the most comprehensive regulation by the CRTC. Such regulations govern basic cable rates; the distribution and packaging of services (e.g. number of Canadian versus non-Canadian services per package); and priority access by Canadian television and audio services over foreign services. The Broadcasting Regulations allow for basic rate deregulation of Class 1 systems once 5% of the customers within their licensed territories have chosen an alternate service provider.

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      Class 2 systems have fewer regulatory restrictions, while Class 3 and exempt systems having less than 2,000 subscribers enjoy the most flexibility respecting the packaging and distribution of Canadian and non-Canadian services.

      Class 1, Class 2 and exempt systems having between 2,000 and 6,000 subscribers are required to contribute 5% of gross revenues to Canadian program production. Class 1 systems may devote 2% of gross revenues to community channels, while Class 2 systems and exempt systems having between 2,000 and 6,000 subscribers may devote the full 5% of gross revenues to programming on a community channel. As well, Class 1 systems having less than 20,000 subscribers may devote the full 5% to community channels.

     (b) Licensing

      The Corporation holds a separate licence or licence exemption for each of its cable systems, upon which its cable television business is dependent. These licences have generally been issued for terms of up to seven years and expire at various times through 2007. Shaw has never failed to obtain a licence renewal for its cable systems.

      The CRTC imposes restrictions on the transfer of ownership and control of cable licences. Pursuant to regulations promulgated by the CRTC, a holder of a cable licence must obtain the prior approval of the CRTC with respect to changes in the ownership of specified percentages of its voting and common shares and with respect to any act, agreement or transaction that directly or indirectly results in a material change of ownership or effective control of the licensee or of a person that has, directly or indirectly, effective control of the licensee. CRTC approval is contingent upon the purchaser demonstrating that the transfer is in the public interest. Exempt systems are not subject to the CRTC’s transfer of ownership rules.

     (c) Canadian Content

      Both licensed and exempt systems are subject to priority carriage requirements for local and regional Canadian broadcast signals. As well, they are subject to a “preponderance” rule that requires these customers to receive a majority of Canadian services on both analog and digital.

      The CRTC places restrictions on the distribution of non-Canadian services. For example, it generally does not permit the distribution of non-Canadian programming services that are determined to be directly or partially competitive with licensed Canadian pay television and specialty services. For that reason, certain pay movie channels and specialty programming services originating in the United States (such as HBO, Showtime, Cinemax, The Disney Channel, ESPN and Nickelodeon) are not approved for distribution in Canada.

      Eligible foreign services that may be distributed in Canada include The Learning Channel (TLC), Arts & Entertainment (A&E) Network, CNN, CNBC, and the “superstations” WTBS, KTLA, WGN, WSBK and WPIX. The CRTC requires that these services be sold to Canadian cable television subscribers in discretionary packages with Canadian specialty television services or with Canadian pay television services. Each non-Canadian specialty service must be linked with one Canadian specialty television service, and each Canadian pay television service may be linked with five non-Canadian services.

      The CRTC has recently modified its policy to allow the distribution of general interest, non-Canadian third-language services on a digital basis, subject to certain packaging requirements.

     (d) Digital Broadcasting Services

      Since 2000, the CRTC has licensed all new Canadian specialty, pay, PPV and VOD programming services only for digital distribution. There are 16 English language digital Category 1 Canadian specialty services that receive mandatory digital carriage by BDU’s that offer programming services to the public in

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English language markets using digital technology. There are also hundreds of digital Category 2 Canadian specialty services that have been licensed but without guaranteed distribution rights. The CRTC requires each BDU to distribute five non-affiliated Category 2 services for each affiliated Category 2 service that it distributes.

      In addition, the CRTC has imposed other distribution requirements on Class 1 and 2 cable distribution undertakings that use digital distribution technology to deliver programming services to subscribers. Class 1 and 2 cable distribution undertakings using high capacity digital technology (more than 750 megahertz) are required to offer all Canadian English and French-language specialty services (other than Category 2 services), as well the English and French-language versions of CPAC (The Cable Public Affairs Channel), in analog or digital mode. Other Class 1 and 2 cable distribution undertakings are required to distribute one minority official language Canadian specialty service for every ten majority official language services that are distributed by the undertaking.

     (e) Rate Regulation

      Rates charged for basic cable service of Class 1 systems, and increases in such rates, are currently regulated by the CRTC, although a BDU may be granted rate deregulation. Rates for all other types of licensed or exempt systems are not rate regulated. As part of the basic rate, cable licensees are permitted to pass through to subscribers increases in the CRTC-authorized wholesale fees paid to licensed Canadian specialty programming services distributed as part of the basic cable service, subject to the CRTC’s power to suspend or disallow such an increase. In addition, licensees may also request a rate increase that is in excess of that which would be allowed under the foregoing, if the licensee can establish economic need by demonstrating that the licensee’s average rate of return on average net fixed assets before interest and taxes but after depreciation for its basic cable service is less than an established industry benchmark.

      The CRTC also regulates the fees, on a cost recovery basis, which are charged for the connection of subscriber drop cables to a subscriber’s home. Cable television operators are required to offer to connect residences to their networks in areas serviced by municipal water or sewage systems only where the cable systems is subject to rate regulation by the CRTC. However, the CRTC may grant relief from such fee and rate regulations and Shaw has been granted relief with respect to both of these regulatory provisions.

      Under the Broadcasting Regulations, basic rates cease to be regulated when two conditions are met: (i) there is evidence that 30% or more of the households in an operator’s licensed service area have access to the basic service of another BDU; and (ii) there is a loss of 5% or more of its subscribers to competitive BDUs.

      All of the Corporation’s Class 1 systems have now been rate deregulated by the CRTC. All other systems owned by Shaw are also rate deregulated.

      Fees charged to subscribers for (i) extended cable service, over and above basic cable service, (ii) rental of DCT’s and (iii) pay television services, including PPV and VOD programming, are not rate regulated by the CRTC.

     (f) Access Rights

      Under the Telecommunications Act (Canada), if a cable television system is unable to obtain rights-of-way on any highway or other public place for the construction of transmission lines on terms acceptable to it, it may apply to the CRTC to obtain permission for such construction on terms set by the CRTC.

      In January 2001, the CRTC issued a decision concerning the appropriate terms and conditions, including rates, of access to municipal property in Vancouver. As part of its decision, the CRTC limited the fees chargeable to the City of Vancouver to the recovery of its causal costs of granting access to municipal

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property. Although the terms of the decision are limited to the specific dispute before the CRTC, the basic principles set out in the decision, which has been upheld by the courts, are expected to apply generally.

      Shaw’s cable systems also require access to support structures, such as poles, strand and conduits of telephone and electric utilities, in order to deploy cable facilities. The CRTC’s jurisdiction over support structures of telephone utilities, including rates for third party use, is well settled. Recently, however, the Supreme Court of Canada determined that the Telecommunications Act (Canada) does not give the CRTC jurisdiction to set the terms and conditions of access by cable systems to support structures of electric utilities. As a result, authority over such matters remains vested in certain provincial utility review agencies or boards, or in other provinces, and is not subject to federal regulation.

3. New Media and Internet Access

      In May 1999, the CRTC released its New Media Report which concentrated on communications products and services delivered via the Internet. The CRTC determined that it would not regulate or supervise new media services or products considered to be broadcasting pursuant to the Broadcasting Act (Canada) and has issued an exemption order in this regard.

      With respect to regulation under the Telecommunications Act (Canada), the CRTC has also determined that it will not regulate the rates at which BDUs offer retail level Internet services. However, the CRTC will regulate the rates and terms on which BDUs provide access to their facilities with respect to competitive providers of retail level Internet services.

      The CRTC has announced, as an interim measure, that the largest cable operators, including Shaw, must resell their Internet services at a 25% discount to ISPs. In December, 1999, the CRTC further decided that ISPs will be responsible for providing the cable modem and related equipment when they resell high speed Internet access to cable customers.

4. Digital Phone

      Shaw’s Digital Phone business is regulated by the CRTC pursuant to the Telecommunications Act (Canada). Shaw, through its subsidiary Shaw Telecom Inc., is registered with the CRTC as a competitive local exchange carrier (“CLEC”). CLECs own or operate local transmission facilities.

      Under the Telecommunications Act (Canada), the CRTC has the power to exempt any class of Canadian carrier from the application of the legislation if the CRTC is satisfied that such an exemption is consistent with Canadian telecommunications policy objectives. The CRTC also has the power to forbear from regulating certain services or classes of services provided by individual carriers. If the CRTC finds that a service or class of services provided by a carrier is subject to a degree of competition that is sufficient to protect the interests of users, the CRTC is required to forbear from regulating those services unless such an order would be likely to unduly impair the establishment or continuance of a competitive market for those services.

      The CRTC has largely forborne from the regulation of the provision of local telecommunications services by CLECs. However, CLECs must be “Canadian carriers” as defined in the Telecommunications Act (Canada) and are therefore subject to foreign ownership restrictions. In addition, CLECs are required to file intercarrier agreements and tariffs for services provided to other local carriers, but not for services that they provide to end-users. They are also subject to certain other obligations, including the provision of 911 and message relay services, the protection of customer privacy, and the provision of information to their customers and the CRTC regarding their billing and payment policies.

      While the CRTC has forborne from regulation in most telecommunications markets, it continues to regulate the ILECs due to their market power. To nurture the competitive entry of CLECs, the CRTC has

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established a number of competitive safeguards. These include: winback rules that govern the manner in which the ILECs can target customers lost to competitors; bundling restrictions on tariffed services marketed with untariffed services; restrictions on price promotions; and limitations on the ability of ILECs to use unregulated affiliates to avoid competitive safeguards.

      The CRTC’s decisions continue to demonstrate a strong commitment to ensuring sustainable facilities-based competition. Nevertheless, both the CRTC and the Ministry of Industry are emphasizing a greater reliance on market forces as the preferred mechanism for regulating the market. For example, the CRTC determined that Internet-based local exchange voice services (VoIP) offered by the ILECs were local services and would be regulated as such by the CRTC. On September 1, 2006, the CRTC reaffirmed its decision following a request from the Federal Cabinet to reconsider this matter. However, on November 15, 2006 the Government announced its intent to vary the decision in order to have the CRTC treat certain Internet-based VoIP services as distinct from other local services and have these ILEC VoIP services regulated in the same manner as comparable CLEC VoIP services. On November 16, 2006, the CRTC issued a circular giving immediate effect to this direction. Also in 2006, the CRTC rendered its decision on the forbearance criteria the ILECs must meet in order to have their local exchange service deregulated. The forbearance framework approved by the CRTC required a 25% market share loss threshold by the ILECs as well as several requirements and performance thresholds relating to their provision of wholesale services. The forbearance decision has been appealed by the ILECs to the Federal Cabinet. The CRTC also initiated further reviews on two aspects of the framework: first, whether to include wireless-only households in market share calculations: and second, whether to alter the market share loss threshold from the 25% requirement. Decisions on the appeal and these reviews are not expected before the spring of 2007.

      In April 2005, the Minister of Industry appointed a three person panel to make recommendations on the major issues and priorities for telecommunications policy and regulatory reform with a view of modernizing Canada’s telecommunications framework to the benefit of all Canadians. In March 2006, the panel issued its report. This report, which included 127 specific recommendations, called for a significant reduction in the role of the CRTC and greater reliance on market forces in the telecommunications sector. The Minister of Industry continues to deliberate on the recommendations contained in the report. As partial response to one of the recommendations, the Minister tabled before Parliament a draft policy direction to the CRTC that would require it to rely on market forces to the maximum extent feasible.

5. Internet Infrastructure

      Shaw Business Solutions’ telecommunications business in Canada is governed by the CRTC pursuant to the Telecommunications Act (Canada). Shaw Business Solutions Inc. is registered with the CRTC as a non-dominant Canadian telecommunications carrier. As such a carrier, Shaw Business Solutions Inc. operates under a significantly lessened regulatory regime (for example, no regulation of rates) as compared to incumbent telephone companies in Canada. Shaw Business Solutions Inc. has also received approval from the CRTC to transit traffic between Canada and the United States.

      In the United States, Shaw Business Solutions U.S. Inc. is, or may be, subject to regulation both at the federal and state level. In this regard, in August 2001, Shaw Business Solutions U.S. Inc. received an International Telecommunications Certificate from the United States Federal Communications Commission to operate as a facilities-based carrier to transport traffic between the United States and Canada. As Shaw Business Solutions Inc. expands its operations in the United States, it may be necessary to seek approval or certification from various state public utility commissions.

6. Satellite

      Certain of Shaw’s satellite businesses (Star Choice’s DTH business and Satellite Services’ SRDU business) are subject to regulation by the CRTC, as set forth below.

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     (a) DTH

      Generally, DTH companies, as BDUs, are subject to regulations similar to competitive cable distributors. Currently, there are only two active, licensed DTH operators in Canada, Star Choice Television Network Incorporated (“SCTN”), an indirect subsidiary of Satellite Services, and Bell ExpressVu.

      SCTN’s DTH business is carried on pursuant to, and is dependent upon, a licence issued by the CRTC under the Broadcasting Act (Canada). The licence, which expires on August 31, 2010, authorizes SCTN to distribute a variety of television and radio services via satellite for direct-to-home reception by customers in Canada. The Broadcasting Regulations and conditions applicable to SCTN’s licence govern the signals SCTN must and may distribute, require a contribution to the creation and presentation of Canadian programming of at least 5% of SCTN’s gross DTH revenues, regulate the resolution of disputes and impose certain structural separation safeguards between SCTN and Shaw. The rates charged by SCTN to its customers are not regulated by the CRTC.

     (b) SRDU

      Satellite Services’ SRDU business is carried on pursuant to, and is dependent upon, a licence issued to Satellite Services by the CRTC under the Broadcasting Act (Canada). Currently, Satellite Services and Bell ExpressVu are the only licensed SRDU operators in Canada.

      The SRDU licence held by Shaw Satellite, which expires on August 31, 2010, authorizes Shaw Satellite to distribute a variety of television and radio signals via satellite for reception by terrestrial distribution undertakings, such as cable systems, in Canada for retransmission to their subscribers. The conditions applicable to Satellite Services’ SRDU licence govern the signals which Satellite Services must and may distribute, require a contribution to the creation and presentation of Canadian programming of at least 5% of its gross SRDU revenues, prohibit discriminatory treatment of customers, regulate the resolution of disputes and impose certain structural separation safeguards between Satellite Services and the cable operations of Shaw. The rates charged by Satellite Services to SRDU customers are not regulated by the CRTC.

7. Other Regulatory Matters

     (a) Restrictions on Non-Canadian Ownership and Control

      The legal requirements relating to Canadian ownership and control of BDUs are embodied in a statutory order (the “Order”) from the Governor in Council (i.e. the federal Cabinet) to the CRTC, issued pursuant to authority contained in the Broadcasting Act (Canada). Under the Order, non-Canadians are permitted to own and control, directly or indirectly, up to 33¹/3% of the voting shares and 33¹/3% of the votes of a holding company which has a subsidiary operating company licensed under the Broadcasting Act (Canada). In addition, up to 20% of the voting shares and 20% of the votes of the operating licensee company may be owned and controlled, directly or indirectly, by non-Canadians. The Order also provides that the chief executive officer and 80% of the members of the board of directors of the operating company must be Canadian and that the holding company and its directors are prohibited from exercising any control or influence over the programming decisions of a subsidiary operating company in certain circumstances. There are no restrictions on the number of non-voting shares that may be held by non-Canadians at either the holding company or licensee operating company level. The CRTC retains the discretion under the Order to determine as a question of fact whether a given licensee is controlled by non-Canadians.

      The Telecommunications Act also implements the Canadian government’s policy of promoting Canadian ownership and control of the country’s telecommunications infrastructure. Specifically, 80% of the voting shares of a carrier subject to the Telecommunications Act must be owned and controlled by Canadians. In the case of a company that wholly owns a carrier, not less than 66²/3% of the voting shares of that company must

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be owned and controlled by Canadians. In addition, carriers may not “otherwise be controlled” by non-Canadians and not less than 80% of the board of directors of a company operating as a carrier must be Canadian. Shaw must report to the CRTC annually with respect to its compliance with these foreign ownership requirements.

      In order to ensure that Shaw remains eligible or qualified to provide broadcasting and telecommunications services in Canada, the Articles of Arrangement of Shaw require the directors of Shaw to refuse to issue or register the transfer of any Shaw Class A Shares to a person that is not a Canadian, if such issue or transfer would result in the total number of such shares held by non-Canadians exceeding the maximum number permitted by applicable law. In addition, the directors of Shaw are required to refuse to issue or register the transfer of any Shaw Class A Shares to a person in circumstances where such issue or transfer would affect the ability of Shaw to obtain, maintain, amend or renew a licence to carry on any business.

      The Articles of Arrangement of Shaw further provide that if, for whatever reason, the number of Shaw Class A Shares held by non-Canadians or other persons exceeds the maximum number permitted by applicable law or would affect the ability to carry on any licensed business, Shaw may, to the extent permitted by corporate or communications statutes, sell the Shaw Class A Shares held by such non-Canadians or other persons as if it were the owner of such shares. The Articles of Arrangement also give the directors of Shaw the right to refuse to issue or register the transfer of shares of any class in the capital of Shaw if: (i) the issue or the transfer requires the prior approval of a regulatory authority, unless and until such approval has been obtained; or (ii) the person to whom the shares are to be issued or transferred has not provided Shaw with such information as the directors may request for the purposes of administering these share transactions.

     (b) Copyright

      The Copyright Act (Canada) provides for the payment by BDUs of a royalty fee in respect of the retransmission of conventional radio and television broadcast signals (defined as over-the-air television signals originating more than a minimum specified distance from a cable operator’s licensed area). The amounts raised from these royalty fees are paid to copyright collectives representing the owners of the copyright in television programming, including producers, broadcasters and major league sports organizations, as well as authors, composers and publishers of the music in these programs. The level of this compulsory royalty fee is subject to the approval of the Copyright Board.

      The Copyright Act (Canada) also provides for performing rights royalties that are payable in respect of the transmission of the music component of non-broadcast television and audio services, such as pay television, specialty services, pay audio and background music services. Pursuant to tariffs approved by the Copyright Board, BDUs and programmers are jointly responsible for a monthly royalty in respect of such non-broadcast television services.

     (c) Radio Apparatus

      Shaw’s satellite business employs a variety of radio apparatus, including satellite earth stations, and uses radio spectrum. Shaw requires a radio authorization from the Minister of Industry under the Radiocommunication Act (Canada) for each radio apparatus installed, operated or possessed by Satellite Services for use in its businesses unless the apparatus has been exempted from the requirement for an authorization. Shaw also requires a licence from Industry Canada to utilize specified radio spectrum for Shaw Tracking.

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CAPITAL STRUCTURE, DIVIDENDS AND RELATED MATTERS

1. Description of Capital Structure

     (a) General

      The authorized share capital of Shaw consists of a limited number of Class A Voting Participating Shares (the “Class A Shares”), as described below; an unlimited number of Class B Non-Voting Participating Shares (the “Class B Non-Voting Shares”) (and, together with the Class A Shares, the “Shaw Shares”); an unlimited number of Class 1 preferred shares (the “Class 1 Preferred Shares”), issuable in series; and an unlimited number of Class 2 preferred shares (the “Class 2 Preferred Shares”), issuable in series. As at August 31, 2006, there were 11,291,932 Class A Shares, 203,649,904 Class B Non-Voting Shares and no preferred shares outstanding.

     (b) Class A Shares and Class B Non-Voting Shares

(i)             Authorized Number of Class A Shares

      The authorized number of Class A Shares is limited to the lesser of that number of such shares (i) currently issued and outstanding; and (ii) that may be outstanding after any conversion of Class A Shares into Class B Non-Voting Shares (subject to certain conversion rights as described below under the heading “Conversion Privilege”).

(ii)              Voting Rights

      The holders of Class A Shares are entitled to one vote per share at all meetings of shareholders. The holders of Class B Non-Voting Shares are entitled to receive notice of, to attend, and to speak at all meetings of shareholders but are not entitled to vote thereat except as required by law and except upon any resolution to authorize the liquidation, dissolution and winding-up of Shaw or the distribution of assets among the shareholders of Shaw for the purpose of winding up its affairs, in which event each holder of Class B Non-Voting Shares will be entitled to one vote per share.

(iii)               Dividends

      In general, subject to the rights of any preferred shares outstanding from time to time, holders of Class A Shares and Class B Non-Voting Shares are entitled to receive such dividends as the Board of Directors of Shaw determines to declare on a share-for-share basis, as and when any such dividends are declared or paid, except that, during each Dividend Period (as defined below), the dividends (other than stock dividends) declared and paid on the Class A Shares will always be $0.005 per share per annum less than the dividends declared and paid in such Dividend Period to holders of the Class B Non-Voting Shares, subject to proportionate adjustment in the event of any future consolidations or subdivisions of Shaw Shares and in the event of any issue of Shaw Shares by way of stock dividends. A “Dividend Period” is defined as the fiscal year of Shaw or such other period, not to exceed one year, in respect of which the directors of Shaw have announced a current policy to declare and pay, or set aside for payment, regular dividends on the Shaw Shares.

(iv)              Rights on Liquidation

      In the event of the liquidation, dissolution or winding-up of Shaw or other distribution of assets of Shaw for the purpose of winding up its affairs, all property and assets of Shaw available for distribution to the holders of Shaw Shares will be paid or distributed equally, share for share, to the holders of Shaw Shares without preference or distinction.

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(v)             Conversion Privilege

      Any holder of Class A Shares may, at any time or from time to time, convert any or all Class A Shares held by such holder into Class B Non-Voting Shares on the basis of one Class B Non-Voting Share for each Class A Share so converted. Subject to certain exceptions described below, if an Exclusionary Offer is made, any holder of Class B Non-Voting Shares may, at any time or from time to time during a Conversion Period, convert any or all of the Class B Non-Voting Shares held by such holder into Class A Shares on the basis of one Class A Share for each Class B Non-Voting Share so converted. For the purpose of this paragraph, the following terms have the following meanings:

      “Class A Offeror” means a person or company that makes an offer to purchase Class A Shares (the “bidder”), and includes any associate or affiliate of the bidder or any person or company that is disclosed in the offering document to be acting jointly or in concert with the bidder;

      “Conversion Period” means the period of time commencing on the eighth day after the Offer Date and terminating on the Expiry Date;

      “Exclusionary Offer” means an offer to purchase Class A Shares that:

      (A) must, by reason of applicable securities legislation or the requirements of a stock exchange on which the Class A Shares are listed, be made to all or substantially all holders of Class A Shares who are residents of a province of Canada to which the requirement applies; and

      (B) is not made concurrently with an offer to purchase Class B Non-Voting Shares that is identical to the offer to purchase Class A Shares in terms of price per share and percentage of outstanding shares to be taken up exclusive of shares owned immediately prior to the offer by the Class A Offeror, and in all other material respects (except with respect to the conditions that may be attached to the offer for Class A Shares), and that has no condition attached other than the right not to take up and pay for shares tendered if no shares are purchased pursuant to the offer for Class A Shares, and for the purposes of this definition if an offer to purchase Class A Shares is not an Exclusionary Offer as defined above but would be an Exclusionary Offer if it were not for this sub-clause (B), the varying of any term of such offer shall be deemed to constitute the making of a new offer unless an identical variation concurrently is made to the corresponding offer to purchase Class B Non-Voting Shares;

      “Expiry Date” means the last date upon which holders of Class A Shares may accept an Exclusionary Offer;

      “Offer Date” means the date on which an Exclusionary Offer is made; and

      “Transfer Agent” means the transfer agent for the time being of the Class A Shares.

      Subject to certain exceptions, the foregoing conversion right shall not come into effect if:

      (A) prior to the time at which the offer is made there is delivered to the Transfer Agent and to the Secretary of Shaw a certificate or certificates signed by or on behalf of one or more shareholders of Shaw owning in the aggregate, as at the time the Exclusionary Offer is made, more than 50% of the then outstanding Class A Shares, exclusive of shares owned immediately prior to the Exclusionary Offer by the Class A Offeror, which certificate or certificates shall confirm, in the case of each such shareholder, that such shareholder shall not:

      a. tender any shares in acceptance of any Exclusionary Offer without giving the Transfer Agent and the Secretary of Shaw written notice of such acceptance or intended acceptance at least seven days prior to the Expiry Date;

      b. make any Exclusionary Offer;

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      c. act jointly or in concert with any person or company that makes any Exclusionary Offer; or

      d. transfer any Class A Shares, directly or indirectly, during the time at which any Exclusionary Offer is outstanding without giving the Transfer Agent and the Secretary of Shaw written notice of such transfer or intended transfer at least seven days prior to the Expiry Date, which notice shall state, if known to the transferor, the names of the transferees and the number of Class A Shares transferred or to be transferred to each transferee; or

      (B) as of the end of the seventh day after the Offer Date there has been delivered to the Transfer Agent and to the Secretary of Shaw a certificate or certificates signed by or on behalf of one or more shareholders of Shaw owning in the aggregate more than 50% of the then outstanding Class A Shares, exclusive of shares owned immediately prior to the Exclusionary Offer by the Class A Offeror, which certificate or certificates shall confirm, in the case of each such shareholder:

      a. the number of Class A Shares owned by the shareholder;

      b. that such shareholder is not making the offer and is not an associate or affiliate of, or acting jointly or in concert with, the person or company making the offer;

      c. that such shareholder shall not tender any shares in acceptance of the offer, including any varied form of the offer, without giving the Transfer Agent and the Secretary of Shaw written notice of such acceptance or intended acceptance at least seven days prior to the Expiry Date; and

      d. that such shareholder shall not transfer any Class A Shares, directly or indirectly, prior to the Expiry Date without giving the Transfer Agent and the Secretary of Shaw written notice of such transfer or intended transfer at least seven days prior to the Expiry Date, which notice shall state, if known to the transferor, the names of the transferees and the number of Class A Shares transferred or to be transferred to each transferee; or

      (C) as of the end of the seventh day after the Offer Date, a combination of certificates that comply with either clause (a) or (b) from shareholders of Shaw owning in the aggregate more than 50% of the then outstanding Class A Shares, exclusive of shares owned immediately prior to the Exclusionary Offer by the Class A Offeror, has been delivered to the Transfer Agent and to the Secretary of Shaw.

(vi)              Modification

      Neither class of Shaw Shares may be subdivided, consolidated, reclassified or otherwise changed unless contemporaneously therewith the other class of Shaw Shares is subdivided, consolidated, reclassified or otherwise changed in the same proportion and in the same manner.

(vii)               Offer to Purchase

      Shaw may not make an offer to purchase any outstanding Class A Shares unless at the same time it makes an offer to purchase, on the same terms, an equivalent proportion of the outstanding Class B Non-Voting Shares.

(viii)                Redemption

      The Shaw Shares are not redeemable at the option of either Shaw or the holder of any such Shaw Shares.

     (c) Class 1 Preferred Shares

      The Class 1 Preferred Shares are issuable in one or more series. The Board of Directors may fix from time to time before such issue the number of shares which is to comprise each series then to be issued and the designation, rights, conditions, restrictions and limitations attaching thereto, including, without limiting the

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generality of the foregoing, the rate of preferential dividends and whether or not such dividends shall be cumulative, the dates of payment thereof, the redemption price and terms and conditions of redemption (including the rights, if any, of the holders of the Class 1 Preferred Shares of such series to require the redemption thereof), conversion rights (if any) and any redemption fund, purchase fund or other provisions to be attached to the Class 1 Preferred Shares of such series.

      The shares of each successive series of Class 1 Preferred Shares shall have preference over the Class A Shares and Class B Non-Voting Shares as to dividends of not less than 1/100th of a cent per share, and shall not confer upon the shares of one series a priority over the shares of any other series of the Class 1 Preferred Shares in respect of voting, dividends or return of capital. If any amount of cumulative dividends or any amount payable on return of capital in respect of shares of a series of the Class 1 Preferred Shares is not paid in full, the shares of such series shall participate rateably with the shares of all other series of Class 1 Preferred Shares in respect of accumulated dividends and return of capital.

     (d) Class 2 Preferred Shares

      The Class 2 Preferred Shares are issuable in one or more series. From time to time before any such issue, the directors may fix the number of shares which is to comprise each series then to be issued and the designation, rights, conditions, restrictions or limitations attaching thereto, including, without limiting the generality of the foregoing, the rate of preferential dividends, and whether or not the same shall be cumulative, the dates of payment thereof, the redemption price and terms and conditions of redemption (including the rights, if any, of the holders of Class 2 Preferred Shares of such series to require the redemption thereof), conversion rights (if any), and any redemption fund, purchase fund or other provisions to be attached to the Class 2 Preferred Shares of such series.

      The shares of each successive series of Class 2 Preferred Shares shall have preference over the Class A Shares and Class B Non-Voting Shares (but shall rank junior to the Class 1 Preferred Shares) as to dividends and shall not confer upon the shares of one series a priority over the shares of any other series of Class 2 Preferred Shares in respect of voting, dividends or return of capital. If any amount of cumulative dividends or any amount payable on return of capital in respect of shares of a series of Class 2 Preferred Shares is not paid in full, the shares of such series shall participate rateably with the shares of all other series of the Class 2 Preferred Shares in respect of accumulated dividends and return of capital.

     (e) Share Constraints

      The statutes which govern the provision of broadcasting and telecommunications services by Shaw and its regulated subsidiaries impose restrictions on the ownership of shares of Shaw and its regulated subsidiaries by persons that are not Canadian. (See information under the heading “Canadian Regulatory Environment — Other Regulatory Matters — Restrictions on Non-Canadian Ownership and Control”). In order to ensure that Shaw and its regulated subsidiaries remain eligible or qualified to provide broadcasting and telecommunications services in Canada, the Articles of Arrangement of Shaw require the directors of Shaw to refuse to issue or register the transfer of any Class A Shares to a person that is not a Canadian if such issue or transfer would result in the total number of such shares held by non-Canadians exceeding the maximum number permitted by applicable law. In addition, the directors of Shaw are required to refuse to issue or register the transfer of any Class A Shares to a person in circumstances where such issue or transfer would affect the ability of Shaw and its regulated subsidiaries to obtain, maintain, amend or renew a licence to carry on any business. The Articles of Arrangement of Shaw further provide that if, for whatever reason, the number of Class A Shares held by non-Canadians or other such persons exceeds the maximum number permitted by applicable law or would affect the ability to carry on any licensed business, Shaw may, to the extent permitted by corporate or communications statutes, sell the Class A Shares held by such non-Canadians or other persons as if it were the owner of such shares. The Articles of Arrangement of Shaw also give the directors of Shaw the

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right to refuse to issue or register the transfer of shares of any class in the capital of Shaw if (i) the issue or the transfer requires the prior approval of a regulatory authority unless and until such approval has been obtained; or (ii) the person to whom the shares are to be issued or transferred has not provided Shaw with such information as the directors may request for the purposes of administering these share constraints.

2. Dividends

     (a) Dividend Policy

      The Corporation’s dividend policy is reviewed on a quarterly basis by the Board of Directors of Shaw. In general, subject to the rights of any preferred shares outstanding from time to time, holders of Class A Shares and Class B Non-Voting Shares are entitled to receive such dividends as the Board of Directors determines to declare on a share-for-share basis, if, as and when any such dividends are declared and paid.

      In accordance with the terms and conditions of such shares, the dividends (other than stock dividends) declared and paid on the Class A Shares shall be $0.005 per share per annum less than the dividends declared and paid to holders of the Class B Non-Voting Shares. See the information under the heading “Capital Structure, Dividends and Related Matters — Description of Capital Structure — Class A Shares and Class B Non-Voting Shares”.

     (b) Distribution Rates and Payment Dates

      Set forth in the tables below are the annual distribution rates on equity securities of the Corporation outstanding as at August 31, 2006 and payment dates for the fiscal year ended August 31, 2006, as well as the amount of cash dividends declared per Class A Share and Class B Non-Voting Share for each of the past three fiscal years.

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Fiscal 2006 Distribution Rates and Payment Dates

Class of Shares	Distribution Rate		Payment Dates
Class A Participating	$	0.0337500		September 30, 2005
	$	0.0337500		October 31, 2005
	$	0.0337500		November 30, 2005
	$	0.0337500		December 31, 2005
	$	0.0337500		January 31, 2006
	$	0.0337500		February 28, 2006
	$	0.0445833		March 31, 2006
	$	0.0445833		April 28, 2006
	$	0.0445833		May 31, 2006
	$	0.0445833		June 30, 2006
	$	0.0445833		July 31, 2006
	$	0.0445833		August 31, 2006
Class B Non-Voting Participating	$	0.0341667		September 30, 2005
	$	0.0341667		October 31, 2005
	$	0.0341667		November 30, 2005
	$	0.0341667		December 31, 2005
	$	0.0341667		January 31, 2006
	$	0.0341667		February 28, 2006
	$	0.0450000		March 31, 2006
	$	0.0450000		April 28, 2006
	$	0.0450000		May 31, 2006
	$	0.0450000		June 30, 2006
	$	0.0450000		July 31, 2006
	$	0.0450000		August 31, 2006

Effective Annual Dividend Payments (Fiscal 2004 — Fiscal 2006)

Class of Shares	Fiscal 2006		Fiscal 2005		Fiscal 2004
Class A Participating	$	0.470	$	0.305	$	0.155
Class B Non-Voting Participating	$	0.475	$	0.31	$	0.160

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3. Ratings

      The following table sets forth the ratings assigned to the Corporation’s preferred securities, known as Canadian Originated Preferred Securities (“COPrS”), senior note obligations and unsecured debt by Dominion Bond Rating Service Limited (“DBRS”), Standard & Poor’s Rating Services (“S&P”) and Moody’s Investor Services, Inc. (“Moody’s”):

Security	DBRS(1)(2)		S&P(3)(4)		Moody’s(5)(6)
Senior Notes		BB (high)		BB+		Ba2
Senior Unsecured Debentures — Videon		BB (high)		BB+		—
COPrS (Preferred Securities)		Pfd-4 y		B+		Ba3

Notes:

(1)	DBRS’ credit ratings are on a long-term debt rating scale that ranges from AAA to D, which represents the range from highest to lowest quality of such securities rated. A rating of BB by DBRS is the fifth highest of ten categories and is assigned to debt securities considered to be speculative. The assignment of a “(high)” or “(low)” modifier within each rating category indicates relative standing within such category. The “high” and “low” grades are not used for the AAA category.
(2)	DBRS’ rating of securities and preferred shares is on a rating scale that ranges from a high of Pfd-1 to a low of Pfd-5. The “y” modifier is used to indicate a hybrid security. DBRS also applies modifiers “high”, “medium”, and “low” which indicate where the obligation ranks in its generic rating category.
(3)	S&P’s credit ratings are on a long-term debt rating scale that ranges from AAA to D, which represents the range from highest to lowest quality of such securities rated. A rating of BB by S&P is the fifth highest of eleven categories. According to the S&P rating system, debt securities rated BB have significant speculative characteristics but are less vulnerable in the near term than other lower rated obligations. However, an obligor rated BB faces major ongoing uncertainties and exposure to adverse business, financial or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitments. A rating of B by S&P is the sixth highest of eleven categories. According to the S&P rating system, an obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation. The addition of a plus (+) or minus (-) designation after a rating indicates the relative standing within a particular rating category.
(4)	S&P rates preferred shares using categories from a high of ‘P-1’ to a low of ‘P-5’. Preferred securities are rated using long-term debt rating scale that ranges from a high of ‘AAA’ to a low of ‘D’.
(5)	Moody’s credit ratings are on a long-term debt rating scale that ranges from Aaa to C, which represents the range from highest to lowest quality of such securities rated. A rating of Ba is the fifth highest of nine categories and denotes obligations judged to have speculative elements and which are subject to substantial credit risk. The addition of a 1, 2 or 3 modifier after a rating indicates the relative standing within a particular rating category. The modifier 1 indicates that the issue ranks in the higher end of its generic rating category, the modifier 2 indicates a mid-range ranking and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
(6)	Moody’s rates securities and shares by rating categories from a high of ‘Aaa’ to a low of ‘C’. Moody’s applies modifiers 1, 2 and 3, which indicate where the obligation ranks in its generic rating category. Modifier 1 is higher end, modifier 2 is mid-range and modifier 3 is low end of the generic rating category.

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      Credit ratings are intended to provide investors with an independent measure of the quality of an issue of securities. The foregoing ratings should not be construed as a recommendation to buy, sell or hold the securities, in as much as such ratings do not comment as to market price or suitability for a particular investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future if in its judgment circumstances so warrant, and if any such rating is so revised or withdrawn, the Corporation is under no obligation to update this Annual Information Form.

4. Market for Securities

     (a) Marketplaces

      As at August 31, 2006, the following securities of the Corporation were listed and posted for trading on the exchanges set forth below.

Security	Exchange		Symbol		CUSIP Number
Class A Participating Shares		TSX Venture Exchange		SJR.A		82028K101
Class B Non-Voting Participating Shares		Toronto Stock Exchange		SJR.B		82028K200
		New York Stock Exchange		SJR		82028K200

     (b) Trading Price and Volume

      The following table sets forth the monthly price range and volume traded for each of the Corporation’s publicly traded securities for each month during the fiscal year ending August 31, 2006.

			TSX Venture — C$		TSX — C$				NYSE — US$
			SJR.A		SJR.B(2)		SJR.PR.A(3)		SJR		SJR PrB(4)
September 2005		High		26.50		25.55		25.99		21.73		25.85
		Low		26.50		24.15		25.25		20.60		25.25
	Sept-30	Close		26.50		24.30		25.26		20.97		25.42
		Volume		120		12,426,512		131,926		5,368,600		N/A
October 2005		High		26.00		24.99		25.75		21.64		25.53
		Low		25.40		23.18		25.26		19.54		25.34
	Oct-31	Close		25.90		23.85		25.40		20.24		25.46
		Volume		2,625		9,404,933		113,060		3,832,300		N/A
November 2005		High		26.00		25.23		25.74		20.73		25.55
		Low		23.50		23.27		25.40		19.60		25.30
	Nov-30	Close		26.00		23.55		25.53		20.25		25.35
		Volume		1,700		15,734,797		51,619		2,576,500		N/A
December 2005		High		25.30		25.67		25.79		22.03		25.40
		Low		23.75		23.46		25.41		20.03		25.34
	Dec-30	Close		25.30		25.23		25.45		21.68		25.36
		Volume		3,638		6,871,251		61,007		1,836,700		N/A

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			TSX Venture — C$		TSX — C$				NYSE — US$
			SJR.A		SJR.B(2)		SJR.PR.A(3)		SJR		SJR PrB(4)
January 2006		High		30.00		27.94		25.90		24.53		N/A
		Low		24.60		24.70		25.40		21.33		N/A
	Jan-31	Close		30.00		27.70		25.75		24.35		N/A
		Volume		20,664		13,151,464		62,964		2,937,000		N/A
February 2006		High		31.50		31.73		26.25		27.70		N/A
		Low		28.25		27.71		25.72		24.28		N/A
	Feb-28	Close		30.00		29.75		26.25		26.14		N/A
		Volume		6,190		22,140,275		51,804		3,550,700		N/A
March 2006		High		33.90		30.38		26.41		26.79		N/A
		Low		29.00		27.17		25.55		23.25		N/A
	Mar-31	Close		29.00		27.85		25.81		23.91		N/A
		Volume		2,200		10,840,885		69,333		2,264,800		N/A
April 2006		High		31.25		30.25		26.45		26.99		N/A
		Low		29.00		27.24		25.71		23.27		N/A
	Apr-28	Close		29.50		30.10		25.75		26.94		N/A
		Volume		1,355		11,190,272		59,335		1,705,900		N/A
May 2006		High		31.50		32.75		26.70		29.50		N/A
		Low		30.00		29.75		25.71		26.82		N/A
	May-31	Close		30.10		30.70		26.01		27.89		N/A
		Volume		5,100		12,740,625		64,227		1,963,800		N/A
June 2006		High		31.35		31.75		26.45		28.75		N/A
		Low		30.00		29.50		24.77		26.41		N/A
	Jun-30	Close		30.00		31.55		25.00		28.29		N/A
		Volume		3,870		15,981,971		90,336		2,784,300		N/A
July 2006		High		33.50		33.89		25.24		29.70		N/A
		Low		30.50		30.90		25.00		27.70		N/A
	Jul-31	Close		33.50		32.90		25.03		29.00		N/A
		Volume		2,674		15,658,673		67,550		2,266,800		N/A
August 2006		High		32.90		34.25		N/A		30.64		N/A
		Low		32.90		32.36		N/A		28.78		N/A
	Aug-31	Close		32.90		33.20		N/A		30.05		N/A
		Volume		135		10,369,174		N/A		2,129,900		N/A

Notes:

(1)	All price and volume information is from independent third-party sources (i.e. Toronto Stock Exchange (“TSX”) website, Bloomberg and Yahoo Finance).
(2)	The symbol assigned by the TSX to the Class B Non-Voting Shares changed from SJR.B to SJR.NV.B on November 15, 2004 and back to SJR.B on May 29, 2006 pursuant to TSX requirements.
(3)	Shaw Communications redeemed its Series A Preferred Security trading on the TSX on July 17, 2006.
(4)	Shaw Communications redeemed its Series B Preferred Security trading on the New York Stock Exchange (“NYSE”) on December 16, 2005.

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5. Prior Sales

      On November 16, 2005 and pursuant to a prospectus dated November 9, 2005, the Corporation issued $450 million of Senior Notes. The following summarizes the details of that public offering:

Size of Offering:	$450 million
Form of Securities:	6.10% Senior Notes
Maturity Date:	November 16, 2012
Net proceeds of issue:	$442,250,500
Public Offering Price:	99.389%
Application of Proceeds:	Debt repayment, including redemption of the Corporation’s U.S. $172.5 million 8.5% Series COPrS due September 30, 2097, the repayment of unsecured bank loans and for working capital purposes.

      On May 9, 2006, and pursuant to a prospectus dated May 2, 2006, the Corporation issued $300 million of Senior Notes. The following summarizes the details of that public offering:

Size of Offering:	$300 million
Form of Securities:	6.15% Senior Notes
Maturity Date:	May 9, 2016
Net proceeds of issue:	$289,677,000
Public Offering Price:	98.052%
Application of Proceeds:	Debt repayment and working capital purposes.

DIRECTORS AND OFFICERS

1. Directors as of November 29, 2006

      Set forth below is a list of the directors of the Corporation as of November 29, 2006 indicating their municipality, province or state and country of residence, their principal occupations during the five preceding years and the year in which they became a director of the Corporation. Each director is elected at the annual meeting of shareholders to serve until the next annual meeting or until a successor is elected or appointed.

		Director
Name and Municipality of Residence	Principal Occupation Within Five Preceding Years	Since
Adrian I. Burns	Corporate Director; former Member of the		2001
Rockcliffe Park, Ontario, Canada	Copyright Board of Canada; former
	Commissioner of the CRTC
James F. Dinning	Non-Executive Chairman, Western Financial		1997
Calgary, Alberta, Canada	Group Inc., a financial services company;
	former Executive Vice President, TransAlta Corporation, an electric industry holding company, and former Member of the Legislative Assembly of Alberta who held a number of Cabinet positions, including Provincial Treasurer, Minister of Education and Minister of Community and Occupational Health

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		Director
Name and Municipality of Residence	Principal Occupation Within Five Preceding Years	Since
George F. Galbraith	Corporate Director; former President of		1991
Vernon, British Columbia, Canada	Vercom Cable Services Ltd. which operated
	the cable television system serving Vernon, British Columbia
Ronald V. Joyce	Corporate Director; former Senior		2000
Calgary, Alberta, Canada	Chairman and Co-Founder, The TDL Group,
	licensee of Tim Horton’s restaurants in
	Canada and the United States
Rt. Hon. Donald F. Mazankowski	Corporate Director; former Member of		1993
Vegreville, Alberta, Canada	Parliament who held a number of Cabinet
	positions, including Deputy Prime Minister and Minister of Finance
Harold A. Roozen	President and Chief Executive Officer,		2000
Edmonton, Alberta, Canada	CCI Thermal Technologies Inc., a
	manufacturing company
Michael W. O’Brien	Corporate Director; former Executive		2003
Canmore, Alberta, Canada	Vice-President, Corporate Development and
	Chief Financial Officer of Suncor Energy Inc., an integrated oil and gas company
Jeffrey C. Royer	Corporate Director and Private Investor		1995
Toronto, Ontario, Canada
Bradley S. Shaw(1)	Senior Vice President, Operations of the		1999
Calgary, Alberta, Canada	Corporation
Jim Shaw(2)	Chief Executive Officer of the Corporation		2002
Calgary, Alberta, Canada
JR Shaw(1)(2)	Executive Chair of the Corporation		1966
Calgary, Alberta, Canada
JC Sparkman	Corporate Director; former Executive Vice		1994
Englewood, Colorado U.S.A.	President and Executive Officer of
	Telecommunications Inc. (also known as TCI), one of the largest cable television operators in the United States.

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		Director
Name and Municipality of Residence	Principal Occupation Within Five Preceding Years	Since
Carl E. Vogel	President since September 2006 and Vice		2006
Cherry Hills Village, Colorado U.S.A.	Chairman since June 2005, EchoStar
	Communications Corporation, a satellite-delivered digital television services provider in the United States; former President, Chief Executive Officer and a director of Charter Communications, a broadband service provider in the United States.
Willard H. Yuill	Chairman and Chief Executive Officer, The		1999
Medicine Hat, Alberta,	Monarch Corporation, a private holding
Canada	company with investments in communications, real estate and sports-related properties

Notes:

(1)	Bradley S. Shaw is the son of JR Shaw and the brother of Jim Shaw.
(2)	Jim Shaw is the son of JR Shaw and the brother of Bradley S. Shaw.

2. Board Committee Members

      The Board of Directors of the Corporation has established four standing committees: Executive, Audit, Corporate Governance and Nominating, and Human Resources and Compensation. The membership of each committee is set forth below.

      The Executive Committee consists of JR Shaw (Chair), George F. Galbraith, Ronald V. Joyce, Donald F. Mazankowski and JC Sparkman.

      The Audit Committee consists of Michael W. O’Brien (Chair), George F. Galbraith, Harold A. Roozen and Carl E. Vogel. For further details concerning the Audit Committee, see the information under the heading “Audit Committee”.

      The Corporate Governance and Nominating Committee consists of Donald F. Mazankowski (Chair), Adrian Burns and James F. Dinning.

      The Human Resources and Compensation Committee consists of Willard H. Yuill (Chair), Jeffrey C. Royer and JC Sparkman.

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3. Executive Officers as of November 29, 2006

      Set forth below is a list of the executive officers of the Corporation as of November 29, 2006 indicating their municipality, province or state and country of residence and their respective positions with the Corporation. Officers are appointed annually and serve at the discretion of the Board of Directors of the Corporation.

Name and Municipality of Residence	Principal Position with the Corporation
JR Shaw(1)(2)	Executive Chair
Calgary, Alberta, Canada
Jim Shaw(1)(2)	Chief Executive Officer
Calgary, Alberta, Canada
Rhonda D. Bashnick	Vice-President, Finance
Calgary, Alberta, Canada
Peter J. Bissonnette	President
Calgary, Alberta, Canada
Douglas J. Black, Q.C.	Corporate Secretary
Calgary, Alberta, Canada
Michael D’Avella	Senior Vice President, Planning
Calgary, Alberta, Canada
Louis A. Desrochers, Q.C.	Honorary Corporate Secretary
Edmonton, Alberta, Canada
Bradley S. Shaw(1)(2)	Senior Vice President, Operations
Calgary, Alberta, Canada
Ken C.C. Stein	Senior Vice President, Corporate and Regulatory
Toronto, Ontario, Canada Affairs
Steve Wilson	Senior Vice President and Chief Financial Officer
Calgary, Alberta, Canada

Notes:

(1)	Jim Shaw is the son of JR Shaw and the brother of Bradley S. Shaw.
(2)	Bradley S. Shaw is the son of JR Shaw and the brother of Jim Shaw.

      All of the above officers have been employed in various capacities by the Corporation during the past five years except: Steve Wilson who was Vice-President, Finance and Chief Financial Officer of Husky Injection Molding Systems Ltd. from 1997 to 2004; Douglas J. Black, Q.C., who is Vice-Chairman of Fraser Milner Casgrain LLP, Barristers and Solicitors; and Louis A. Desrochers, Q.C., who is counsel with McCuaig Desrochers, Barristers and Solicitors.

4. Shareholdings of Directors and Executive Officers

      To the knowledge of the Corporation, the directors and executive officers, as a group, beneficially own, directly or indirectly, or exercise control or direction over, 10,063,204 Class A Shares, representing, as of November 20, 2006, approximately 89.1% of the issued and outstanding shares of such class. Of such number, JR Shaw beneficially owns, controls or directs 8,889,504 Class A Shares, representing 78.7% of the issued and outstanding shares of such class. JR Shaw, members of his family and corporations owned or controlled by them are parties to a Voting Trust Agreement relating to all Class A Shares that they own, control or direct.

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The voting rights with respect to such shares are exercised by the representative of a committee of five trustees.

5. Additional Disclosure for Directors and Executive Officers

      To the knowledge of the Corporation, no director or executive officer of the Corporation, as of the date hereof, or a shareholder holding a sufficient number of securities of the Corporation to affect materially the control of the Corporation, is or has been, within the ten years before the date of this Annual Information Form, a director or executive officer of any company that, while that person was acting in that capacity, (a) was the subject of a cease trade order or similar order or an order that denied the company access to any exemptions under Canadian securities legislation for a period of more than 30 consecutive days; (b) was subject to an event that resulted, after that person ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the company access to any exemption under Canadian securities legislation for a period of more than 30 consecutive days; or (c) has, within the ten years before the date of this Annual Information Form, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or become subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder.

AUDIT COMMITTEE

1. Audit Committee Charter

      The Audit Committee of the Board of Directors of the Corporation is responsible for overseeing the integrity of the Corporation’s financial reporting process. In this regard, the primary duties of the Audit Committee involve reviewing the Corporation’s annual and interim financial statements; monitoring the Corporation’s financial reporting process and internal and disclosure control systems; and overseeing the audits conducted by the Corporation’s external auditors.

      The Audit Committee is also responsible for overseeing the integrity of the Corporation’s internal controls and risk management, and the reporting procedures with respect thereto; evaluating the qualifications and performance of the Corporation’s external auditors and implementing practices to preserve their independence; reviewing the engagements to be provided by the external auditors; and reviewing all significant auditing and accounting practices and policies and any proposed changes with respect thereto.

      A copy of the charter of the Audit Committee is attached as Schedule A to this Annual Information Form.

2. Audit Committee Composition and Background

      The Audit Committee consists of Michael W. O’Brien (Chair), George F. Galbraith, Harold A. Roozen and Carl Vogel. Each member of the Audit Committee is independent and financially literate, as such terms are defined in Multilateral Instrument 52-110 — Audit Committees. In addition, Mr. O’Brien and Mr. Vogel each qualify as a “financial expert” under the Sarbanes-Oxley Act of 2002 and other applicable regulatory requirements.

      In addition to each member’s general business experience, the education and experience of each member of the Audit Committee that is relevant to the performance of his responsibilities as a member of the Audit Committee are set forth below.

      Michael O’Brien (Chair) served as Executive Vice-President, Corporate Development and Chief Financial Officer of Suncor Energy Inc., an integrated oil and gas company, until his retirement in 2002. He

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currently is a director and member of the Environmental, Health & Safety Committee of Suncor Energy Inc.; and director, chair of the Corporate Governance and Nominating Committee and member of the Compensation Committee and Audit Committee of PrimeWest Energy Inc.

      George Galbraith is the former President of Vercom Cable Services Ltd. which operated the cable television system serving Vernon, British Columbia. He also serves as chairman of Pacific Coast Public Television.

      Harold Roozen is President and Chief Executive Officer, CCI Thermal Technologies Inc., a manufacturing company. Mr. Roozen is a trustee of Royal Host Real Estate Investment Trust and formerly served as chair of the board of directors of WIC Western International Communications Ltd. and Canadian Satellite Communications Inc. Mr. Roozen holds Bachelor of Commerce and Masters of Business Administration degrees.

      Carl Vogel is the President and Vice Chairman of EchoStar Communications Inc., a leading provider of satellite-delivered digital television services and operator of the DISH NetworkTM, in the United States. He is a director of numerous public and private companies, a member of the Executive Committee of EchoStar Communications Inc., and a member of the Audit Committees of iBahn Corporation and RGB Networks.

3. Audit Fees

      The aggregate amounts paid or accrued by the Corporation with respect to fees payable to Ernst & Young LLP, the auditors of the Corporation, for audit (including separate audits of subsidiary entities, financings, regulatory reporting requirements and Sarbanes-Oxley Act-related services), audit-related, tax and other services in the fiscal years ended August 31, 2006 and 2005 were as follows:

Type of Service	Fiscal 2006		Fiscal 2005
Audit	$	2,213,961	$	2,056,213
Audit-related		195,457		186,150
Tax		436,736		232,859
All Other		—		—
Total	$	2,846,154	$	2,475,222

      Fees paid for audit-related services in fiscal 2006 and 2005 were in respect of the separate audit of a subsidiary that was not required by law. The tax fees paid in fiscal 2006 and 2005 were related to tax compliance and tax consultation on scientific research, exploration and development tax credits, commodity taxes, linear property taxes and transfer pricing.

      The Audit Committee of the Corporation considered and agreed that the above fees are compatible with maintaining the independence of the Corporation’s auditors. Further, the Audit Committee determined that, in order to ensure the continued independence of the auditors, only limited non-audit related services will be provided to the Corporation by Ernst & Young LLP and in such case, only with the prior approval of the Audit Committee. The Chair of the Audit Committee has been delegated authority to approve the retainer of Ernst & Young LLP to provide non-audit services in extraordinary circumstances where it is not feasible or practical to convene a meeting of the Audit Committee, subject to an aggregate limit of $100,000 in fees payable to Ernst & Young LLP for such services per fiscal year of the Corporation. The Chair of the Audit Committee is required to report any such services approved by him to the Audit Committee.

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LEGAL PROCEEDINGS

      The Corporation is involved in litigation matters arising in the ordinary course and conduct of its business. Although such proceedings cannot be predicted with certainty, management of the Corporation does not expect that the outcome of these matters will have a material adverse effect on the Corporation.

      In addition, Cancom, a subsidiary of the Corporation, is one of several defendants in an action brought by General Discovery (Canada) in the Ontario Superior Court of Justice in January, 2000 seeking general, special and punitive damages in the aggregate sum of $1.5 billion. The claim arises from Cancom’s involvement in a joint venture to establish a telecommunications network with Russia called Sovcan Star Satellite Communications Inc. General Discovery (Canada) alleges that the defendants wrongfully conspired to prevent the business venture from proceeding. No statement of defence has been filed to date, as General Discovery (Canada) has not responded on a timely basis to requests for information since filing its statement of claim. The Corporation does not believe that this claim has merit.

REGISTRAR AND TRANSFER AGENT

      The registrar and transfer agent for the Class A Shares and Class B Non-Voting Shares is CIBC Mellon Trust Company at its principal offices in Vancouver, British Columbia; Calgary, Alberta; Toronto, Ontario; and Halifax, Nova Scotia. The co-registrar and co-transfer agent in the United States for the Class B Non-Voting Shares is Mellon Investor Services LLC at its principal office in New York City, New York.

INTERESTS OF EXPERTS

      The Corporation’s auditors are Ernst & Young LLP. The Corporation’s consolidated annual financial statements for the year ended August 31, 2006 have been filed under National Instrument 51-102 in reliance on the report of Ernst & Young LLP, independent chartered accountants, given on their authority as experts in auditing and accounting. As of October 13, 2006, the partners and employees of Ernst & Young LLP as a group did not beneficially own, directly or indirectly, any of the Corporation’s outstanding securities.

ADDITIONAL INFORMATION

      Additional information concerning the Corporation is available through the Internet on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) which may be accessed at www.sedar.com. Copies of such information may also be obtained on the Corporation’s website at www.shaw.ca, or on request without charge from the Vice President, Finance of the Corporation, Suite 900, 630 — 3^rd Avenue S.W., Calgary, Alberta, Canada T2P 4L4 (telephone (403) 750-4500).

      Additional information including directors’ and officers’ remuneration and indebtedness, principal holders of the Corporation’s securities, and securities authorized for issuance under equity compensation plans is contained in the Corporation’s Information Circular dated December 8, 2005. Additional financial information is provided in the Corporation’s comparative financial statements for its most recently completed financial year, and management’s discussion and analysis thereon. Copies of such documents may be obtained in the manner set forth above.

CAUTION CONCERNING FORWARD LOOKING STATEMENTS

      Certain statements included in this Annual Information Form may constitute forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of Shaw to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used, the words “anticipate”,

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“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), 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 described under “Known events, trends, risks and uncertainties” discussed on pages 18 to 25 of Shaw’s 2006 Annual Report. These factors include 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 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, 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 Shaw 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 Shaw to predict what factors will arise or when. In addition, Shaw 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.

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SCHEDULE A -

AUDIT COMMITTEE CHARTER

SHAW COMMUNICATIONS INC.

      This Charter of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Shaw Communications Inc. (the “Corporation”) was adopted and approved on January 21, 2004 (revised April 1, 2004 and October 26, 2005).

I. PURPOSE

      The primary function of the Committee is to assist the Board in fulfilling its oversight responsibilities with respect to the integrity of the Corporation’s financial reporting process. In this regard, the primary duties of the Committee involve reviewing the Corporation’s annual and interim financial statements; monitoring the Corporation’s financial reporting process and internal control systems; and overseeing the audits conducted by the Corporation’s external auditors.

      The Committee will fulfill these responsibilities primarily by carrying out the activities set forth in Section IV of this Charter.

II. COMPOSITION

      The Committee shall be comprised of three or more independent directors, as appointed by the Board. A director is “independent” if he or she has no direct or indirect material relationship with the Corporation, as determined by the Board in consultation with the Corporate Governance Committee, in accordance with applicable laws, policies and guidelines of securities regulatory authorities.

      To maintain their independence, members of the Committee may not accept any consulting, advisory or other compensatory fee (other than remuneration for acting in the capacity as a member of the Board or a committee of the Board) from the Corporation or any of its affiliates. Members of the Committee also may not receive any indirect payments from the Corporation or any of its affiliates, including payments (whether or not material) made to spouses or family members, or payments for services to law firms, accounting firms, consulting firms and investment banks for which the Committee member serves as a partner, member, managing director or executive.

      All members of the Committee shall be financially literate and at least one member shall be a “financial expert” or otherwise have accounting or related financial expertise. The definitions of “financial literacy” and “financial expertise”, and the determination of whether any given member of the Committee meets such definition, will be made by the Board, in consultation with the Corporate Governance Committee, in accordance with applicable laws, policies and guidelines of securities regulatory authorities.

      The members of the Committee shall be appointed by the Board annually. Each member shall serve until the next annual general meeting of the shareholders of the Corporation or until his or her earlier resignation or removal by the Board. The Chair of the Committee shall be appointed by the Board annually and shall carry out the responsibilities and duties set forth in Section V of this Charter.

III. MEETINGS

      The Committee shall meet at least on a quarterly basis, or more frequently as circumstances dictate or as requested by the Board, a member of the Committee, the Corporation’s external auditors or a senior officer of the Corporation.

      The Committee shall also meet at least annually with the Corporation’s senior management (including the Chief Executive Officer and Chief Financial Officer), internal auditors and external auditors in separate sessions to discuss any matters that the Committee or any of these groups believe should be discussed privately. In addition, the Committee (or at least its Chair) should meet with the external auditors and management quarterly to review the Corporation’s interim financial statements.

A-1

      Notice of each meeting of the Committee shall be given to each member of the Committee as far in advance of the time for the meeting as possible, but in any event, not later than 24 hours preceding the time stipulated for the meeting (unless otherwise waived by all members of the Committee). Each notice of meeting shall state the nature of the business to be transacted at the meeting in reasonable detail and to the extent practicable, be accompanied by copies of documentation to be considered at the meeting.

      A quorum for the transaction of business at a meeting shall consist of not less than a majority of the members of the Committee. Members of the Committee may participate in any meeting by means of such telephonic, electronic or other communication facilities as permit all persons participating in the meeting to communicate adequately with each other, and a member participating by any such means shall be deemed to be present at that meeting.

      Senior management of the Corporation and other parties may attend meetings of the Committee, as may be deemed appropriate by the Committee.

      Minutes shall be kept of all meetings of the Committee and shall be signed by the Chair and Secretary of the meeting.

IV. RESPONSIBILITIES AND DUTIES OF THE COMMITTEE

      The Committee shall fulfill its oversight responsibilities primarily by carrying out the activities set forth below as well as all such other actions which may be incidental thereto or which may be necessary for the Committee to comply with the spirit and intent of this Charter. The items enumerated below are not intended to be exhaustive of the duties of the Committee and may be supplemented and revised from time to time as may be appropriate:

Financial Statement Review

      1. Review and oversee the integrity of the Corporation’s annual financial statements (including any certification, report, opinion or review thereon rendered by external auditors) and any public disclosure documents or reports containing financial information that are submitted to any governmental body or to the public (including, in particular, management’s discussion and analysis (“MD&A”), prospectuses and registration statements).

      2. Review and oversee the integrity of the Corporation’s quarterly financial statements and any public disclosure documents containing financial information that are submitted to any governmental body or to the public pursuant to applicable securities laws, and approve such quarterly financial statements for disclosure to the public (provided that such statements are subsequently tabled before, and ratified, confirmed and approved by, the Board).

      3. Review earnings press releases as well as financial information and earnings guidance given to analysts and rating agencies.

      4. Review the Corporation’s MD&A to ensure that it provides all material information in a fair and balanced manner, in compliance with applicable requirements.

      5. Periodically consult with the Corporation’s external auditors in the absence of management concerning the fullness and accuracy of the Corporation’s financial statements.

      6. Establish regular, timely and separate systems of reporting to the Committee by each of management of the Corporation and the external auditors regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments.

      7. Review any proposed changes in major auditing and accounting practices and policies, the presentation of significant risks and uncertainties and key estimates and judgments of management that may be material to financial statement presentation and reporting.

      8. Obtain assurance that financial statement certifications and attestations from management of the Corporation have been completed and filed with applicable securities regulatory authorities.

A-2

      9. Report to the Board on at least a quarterly basis on the results of the Committee’s activities, including the Committee’s review of the Corporation’s annual and interim financial statements.

Financial Reporting Process and Internal Control

      10. In consultation with the external auditors, review the integrity of the Corporation’s financial reporting processes, both internal and external, and the Corporation’s accounting principles as applied in its financial reporting, to determine the quality and acceptability of the Corporation’s financial reporting.

      11. Review the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented.

      12. Receive timely reports from the external auditors concerning all critical accounting policies and practices of the Corporation, all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management; and all material written correspondence and disagreements between management and the external auditors (including any management letter or schedule of unadjusted differences).

      13. Review summaries of significant, unusual or material off-balance sheet transactions to assess their impact on the Corporation’s financial reporting process and financial statements.

      14. Review pension and other post-employment benefit liabilities, including underlying assumptions, financial health of pension plans and disclosure in the Corporation’s financial statements.

      15. Review the integrity of internal controls and disclosure processes and controls (as evaluated by the internal and external auditors or otherwise) and make recommendations with respect thereto.

      16. Review the appointment, removal, independence and performance of the Corporation’s internal auditor.

      17. Review the Corporation’s internal audit procedures, including the mandate of, and all reports issued by, the Corporation’s internal auditor and management’s response and subsequent follow up to any identified weaknesses.

      18. Review and approve an annual control assurance plan.

      19. Establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal control or auditing matters, including a procedure for the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters, and review and consider reports on the investigation and resolution of such complaints.

      20. Review reports of any fraud that involves management or other employees, particularly where such individuals have a significant role in the Corporation’s internal controls.

      21. Consider the implications of applicable laws and regulatory policies on the Corporation’s financial reporting process and financial statements.

External Auditors

      22. Make recommendations to the Board and the shareholders of the Corporation, on an annual basis, concerning the appointment of the external auditors (considering, in particular, their independence and effectiveness) and approve the terms of engagement and fees and other compensation to be paid to the external auditors.

      23. Oversee and review the qualifications and performance of the external auditors, who shall report directly and be accountable to the Committee (and ultimately, the Board), and approve any proposed discharge or change of the external auditors, or of the lead audit partner thereof, when circumstances warrant.

A-3

      24. Review in advance any engagements for non-audit services to be provided by the external auditors’ firm or its affiliates, together with estimated fees, along with any other significant relationships which the external auditors have with the Corporation, and consider the impact on the independence of the external auditor and compliance with applicable laws.

Audit Process

      25. Review the audit plan with the external auditors and with senior management of the Corporation.

      26. Review, in the absence of management, any problems experienced by the external auditors in performing the audit, including any restrictions imposed by management or significant accounting issues on which there was a disagreement with management.

      27. Review the post-audit or management letter, containing the recommendations of the external auditor and management’s response and subsequent follow up to any identified weakness.

      28. Resolve disputes, if any, that may arise between the external auditors and management regarding financial reporting.

Risk Management

      29. Identify and review, with management, the principal risks facing the Corporation and ensure that management has in place the policies and systems to assess and manage these risks.

      30. Review financial risks (foreign exchange risk, interest rate risk etc.) of the Corporation and the management of such risks.

      31. Review the Corporation’s long term financing strategy, annual financing plan and specific proposed financings not otherwise considered in such plan.

      32. Review the Corporation’s tax status and monitor its approach to tax strategy, including tax reserves and potential reassessments and audits

      33. Review, with the Corporation’s internal legal counsel and/or external counsel, any material legal matter that could have a significant impact on the Corporation’s financial reporting.

      34. Review the status of the Corporation’s compliance with laws, regulations and internal policies and procedures, and the scope and status of systems designed to ensure such compliance, particularly in relation to contingent liabilities and material risks facing the Corporation.

      35. Review the amount and terms of any insurance to be obtained or maintained by the Corporation and any other related risk management policies or measures.

Other

      36. Engage and set the remuneration of such independent external advisors, including independent legal counsel, at the Corporation’s expense, as the Audit Committee may deem necessary or desirable to carry out its duties.

      37. Review the appointment of the Chief Financial Officer and any key financial executives of the Corporation involved in the financial reporting process, and set policies for the hiring by the Corporation of employees or former employees of the Corporation’s external auditors.

      38. Review policies and procedures with respect to the expense accounts and perquisites of executives and directors of the Corporation.

      39. Review the succession plans for the Chair of the Committee and for Committee’s financial experts.

      40. Provide orientation and training for new members of the Committee and continuing education initiatives for existing members.

A-4

      41. Conduct all such investigations, or authorize others to conduct such investigations, as may be necessary or desirable with respect to matters within the Committee’s mandate.

      42. Review this charter of the Audit Committee on an annual basis and suggest to the Corporate Governance Committee of the Board such revisions as the Audit Committee may believe to be required by new laws or to be prudent.

      43. Perform any other activities consistent with this Charter, the Corporation’s constating documents and governing law, as the Committee or the Board deems necessary or appropriate.

V. RESPONSIBILITIES AND DUTIES OF THE CHAIR OF THE COMMITTEE

      To fulfill his or her responsibilities and duties, the Chair of the Committee shall:

      1. Facilitate the effective operation and management of, and provide leadership to, the Committee.

      2. Act as chair of meetings of the Committee.

      3. Assist in setting the agenda for each meeting of the Committee and in otherwise bringing forward for consideration matters within the mandate of the Committee.

      4. Facilitate the Committee’s interaction with management of the Corporation, the Board and other committees of the Board.

      5. Meet at least annually, prior to the end of each fiscal year, with the external auditors of the Corporation to review and discuss matters within the mandate of the Committee and to otherwise facilitate the Committee’s relationship with the external auditors.

      6. Act as a resource and mentor for other members of the Committee.

      7. Perform such other duties and responsibilities as may be delegated to the Chair by the Committee from time to time.

A-5

EX-3

Exhibit 3

CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Annual Report (Form 40-F) of Shaw Communications Inc. of our report dated October 16, 2006 included in the 2006 annual report to shareholders of Shaw Communications Inc.

Calgary, Canada
November 28, 2006	Chartered Accountants

EX-4

Exhibit 4

SHAW COMMUNICATIONS INC.
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER

I, Jim Shaw, Chief Executive Officer of Shaw Communications Inc., certify that:

1.	I have reviewed this annual report on Form 40-F of Shaw Communications Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4.	The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d.	Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5. The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of issuer’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date: November 29, 2006

/s/  Jim Shaw Jim Shaw

Chief Executive Officer

Shaw Communications Inc.

SHAW COMMUNICATIONS INC.
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER

I, Steve Wilson, Senior Vice President and Chief Financial Officer of Shaw Communications Inc., certify that:

1.	I have reviewed this annual report on Form 40-F of Shaw Communications Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4.	The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d.	Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5. The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of issuer’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date: November 29, 2006

/s/ Steve Wilson

Steve Wilson

Senior Vice President and Chief Financial Officer

Shaw Communications Inc.

EX-5

Exhibit 5

SHAW COMMUNICATIONS INC.
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER

Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002
Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18 of the United
States Code

In connection with the annual report of Shaw Communications Inc. (the “Corporation”) on Form 40-F for the fiscal year ending August 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jim Shaw, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Dated at Calgary, Alberta, Canada this 29th day of November 2006.

/s/ Jim Shaw

Jim Shaw

Chief Executive Officer

Shaw Communications Inc.

SHAW COMMUNICATIONS INC.

CERTIFICATE OF THE CHIEF FINANCIAL OFFICER

Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002
Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18 of the United
States Code

In connection with the annual report of Shaw Communications Inc. (the “Corporation”) on Form 40-F for the fiscal year ending August 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steve Wilson, Senior Vice-President and Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Dated at Calgary, Alberta, Canada this 29th day of November 2006.

/s/ Steve Wilson

Steve Wilson

Senior Vice-President and Chief Financial Officer

Shaw Communications Inc.