##### 



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

[   ]     Registration Statement pursuant to Section 12(b) or 12(g)

of the Securities Exchange Act of 1934



[X]      Annual Report pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

|                                          |  |                             
|----------------------------------------- |  | ----------------------------
|For the fiscal year ended August 31, 2002 |  | Commission File No. 333-8296

STAR CHOICE COMMUNICATIONS INC.

(Exact name of registrant as specified in its charter)

|                                                                                           |  |                                  
|------------------------------------------------------------------------------------------ |  | ---------------------------------
|Canada                                                                                     |  |                                  
|                                                                                          
|(State or Other Jurisdiction of
Incorporation or Organization)                             |  |                                  
|                                                                                          
|2924  11 Street N.E.
Calgary, Alberta, Canada                                             |  | T2E 7L7                          
|                                                                                          
|(Address of Principal Executive Office)                                                    |  | (Zip Code)                       
|                                                                                          
|Registrants telephone number, including area code                                         |  | (403) 538-4324                   
|                                                                                          
|Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act. |  | 13% Senior Secured Notes
due 2005

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934during 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.

|    |  |     |  |       |  |   
|--- |  | --- |  | ----- |  | --
|[X] |  | Yes |  | [   ] |  | No

Indicate by check mark which financial statement the registrant has elected to follow.

|    |  |         |  |       |  |        
|--- |  | ------- |  | ----- |  | -------
|[X] |  | Item 17 |  | [   ] |  | Item 18





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##### 



Star Choice Communications Inc.

Form 20-F

Table of Contents

|        |                                                                      |                                                                   |    |    |    | 
|------- | -------------------------------------------------------------------- | ----------------------------------------------------------------- | -- | -- | -- | 
|        | Exchange Rates                                                       |                                                                   |    | 4  |   
|        | Forward Looking Statements                                           |                                                                   |    | 4  |   
|PART 1  |                                                                      |                                                                   | 5  |   
|        | ITEM 1  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS       |                                                                   |    | 5  |   
|        | ITEM 2  OFFER STATISTICS AND EXPECTED TIMETABLE                     |                                                                   |    | 5  |   
|        | ITEM 3  KEY INFORMATION                                             |                                                                   |    | 5  |   
|        | A. Selected Financial Data                                           |                                                                   |    | 5  |   
|        | B. Capitalization and Indebtedness                                   |                                                                   |    | 7  |   
|        | C. Reasons for the Offer and Use of Proceeds                         |                                                                   |    | 7  |   
|        | D. Risk Factors                                                      |                                                                   |    | 7  |   
|        | ITEM 4  INFORMATION ON THE COMPANY                                  |                                                                   |    | 11 |   
|        | A. History and Development of the Company                            |                                                                   |    | 11 |   
|        | B. Business Overview                                                 |                                                                   |    | 11 |   
|        |                                                                      | Satellites  General                                              |    |    | 11 | 
|        |                                                                      | Business and Markets                                              |    |    | 12 | 
|        |                                                                      | Sales and Marketing                                               |    |    | 13 | 
|        |                                                                      | Technology and Security Platform                                  |    |    | 15 | 
|        |                                                                      | Regulatory Environment                                            |    |    | 16 | 
|        | C. Organizational Structure                                          |                                                                   |    | 19 |   
|        | D. Property, Plant and Equipment                                     |                                                                   |    | 19 |   
|        | ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS                |                                                                   |    | 20 |   
|        | A. ACCOUNTING POLICIES                                               |                                                                   |    | 20 |   
|        |                                                                      | Critical Accounting Policies                                      |    |    | 20 | 
|        |                                                                      | New Accounting Standards                                          |    |    | 22 | 
|        |                                                                      | Changes in accounting presentation                                |    |    | 23 | 
|        | B. Operating Results                                                 |                                                                   |    | 23 |   
|        |                                                                      | Year ended August 31, 2002 compared to year ended August 31, 2001 |    |    | 23 | 
|        |                                                                      | Year ended August 31, 2001 compared to year ended August 31, 2000 |    |    | 25 | 
|        | C. Liquidity and Capital Resources                                   |                                                                   |    | 26 |   
|        | ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                  |                                                                   |    | 27 |   
|        | A. Directors and Senior Management                                   |                                                                   |    | 27 |   
|        | B. Compensation                                                      |                                                                   |    | 28 |   
|        | C. Board Practices                                                   |                                                                   |    | 28 |   
|        | D. Employees                                                         |                                                                   |    | 28 |   
|        | E. Share Ownership                                                   |                                                                   |    | 28 |   
|        | ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS           |                                                                   |    | 28 |   
|        | A. Major Shareholders                                                |                                                                   |    | 28 |   
|        | B. Related Party Transactions                                        |                                                                   |    | 29 |   
|        | C. Interests of Experts and Counsel                                  |                                                                   |    | 29 |   
|        | ITEM 8  FINANCIAL INFORMATION                                       |                                                                   |    | 29 |   
|        | A. Consolidated Statements and Other Financial Information           |                                                                   |    | 29 |   
|        | B. Significant Changes                                               |                                                                   |    | 29 |   
|        | ITEM 9  THE OFFER AND LISTING                                       |                                                                   |    | 29 |   
|        | ITEM 10  ADDITIONAL INFORMATION                                     |                                                                   |    | 29 |   
|        | A. SHARE CAPITAL                                                     |                                                                   |    | 29 |   
|        | B. MEMORANDUM AND ARTICLES OF ASSOCIATION                            |                                                                   |    | 29 |   
|        | C. MATERIAL CONTRACTS                                                |                                                                   |    | 29 |   
|        | D. EXCHANGE CONTROLS                                                 |                                                                   |    | 30 |   
|        | E. TAXATION                                                          |                                                                   |    | 30 |   
|        | F. DIVIDENDS AND PAYING AGENTS                                       |                                                                   |    | 32 |   
|        | G. STATEMENT BY EXPERTS                                              |                                                                   |    | 32 |   
|        | H. DOCUMENTS ON DISPLAY                                              |                                                                   |    | 32 |   
|        | I. SUBSIDIARY INFORMATION                                            |                                                                   |    | 32 |   
|        | ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |                                                                   |    | 32 |   
|        | ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES     |                                                                   |    | 33 |   
|PART II |                                                                      |                                                                   | 34 |   

2



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|         |                                                                                    |  |    |    |  | 
|-------- | ---------------------------------------------------------------------------------- |  | -- | -- |  | 
|         | ITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                          |  |    | 34 | 
|         | ITEM 14  MATERIAL MODIFICATIONS TO RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  |    | 34 | 
|         | ITEMS 15  CONTROLS AND PROCEDURES                                                 |  |    | 34 | 
|         | ITEM 16  [RESERVED]                                                               |  |    | 34 | 
|PART III |                                                                                    |  | 35 |   
|         | ITEM 17  FINANCIAL STATEMENTS                                                     |  |    | 35 | 
|         | ITEM 18  FINANCIAL STATEMENTS                                                     |  |    | 35 | 
|         | ITEM 19  EXHIBITS                                                                 |  |    | 35 | 

3



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##### 



STAR CHOICE COMMUNICATIONS INC.

Form 20-F

As used in this Annual Report, unless the context requires otherwise, the terms
Star Choice, the Corporation, we or us means Star Choice Communications
Inc., the term Cancom refers to Canadian Satellite Communications Inc. and
the term Shaw refers to Shaw Communications Inc.

EXCHANGE RATES

In this Annual Report, references to $ or dollars are to Canadian dollars
and references to U.S.$ or U.S. dollars are to United States dollars. The
Corporations accounts are maintained in Canadian dollars and are presented in
accordance with Canadian generally accepted accounting principles (Canadian
GAAP). A reconciliation to United States generally accepted accounting
principles (U.S. GAAP) is included in Note 16 of the Notes to Consolidated
Financial Statements for the years ended August 31, 2002, 2001 and 2000.

As of February 27, 2003, the Noon Buying Rate (as defined below) as quoted by
the Federal Reserve Bank of New York was $1.4954 equals U.S. $1.00. See Item
3.A, Key Information  Selected Financial Data  Exchange Rate Data for
further information.

FORWARD LOOKING STATEMENTS

Certain statements made in this Annual Report are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. Any
statements contained or incorporated by reference in this document, including
statements to the effect that the Corporations management believes,
expects, intends, anticipates, plans, may, will, projects,
continues or estimates, or statements concerning potential or
opportunity or other variations of these words that are not statements of
historical fact should be considered forward-looking statements. Such
statements reflect Star Choices current views with respect to future events
and are subject to unknown risks, uncertainties and other factors that may
cause actual results to differ materially from those contemplated in such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions, both nationally, internationally and
in the regions in which Star Choice operates; demographic changes; existing
government regulations and changes in, or the failure to comply with,
government regulations; competition; the loss of any significant numbers of
subscribers or viewers; changes in business strategy or development plans;
technological developments and difficulties; the ability to attract and retain
qualified personnel; Star Choices significant indebtedness; the availability
and terms of capital to fund the expansion of Star Choices businesses; and
other factors referenced in this Annual Report. See, in particular, Item 3.D,
Key Information  Risk Factors of this Annual Report.

The forward-looking statements in this Annual Report are expressly qualified in
their entirety by this cautionary statement. Such statements are only made as
of the date of this Annual Report and Star Choice undertakes no obligation to
publicly update these forward-looking statements to reflect new information,
subsequent events or otherwise.

4



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##### 



PART 1

ITEM 1  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not required to be completed.

ITEM 2  OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable

ITEM 3  KEY INFORMATION



|A. |  | SELECTED FINANCIAL DATA
|-- |  | -----------------------

The Consolidated Financial Statements of Star Choice are presented in Canadian
dollars and are prepared in accordance with Canadian GAAP. Canadian GAAP
differs in certain respects from U.S. GAAP. For a discussion of the principal
differences between Canadian GAAP and U.S. GAAP, see Note 16 to the Star Choice
Consolidated Financial Statements (Item 17).

|                                                 |                                       |      |                               |         |   |         |          |         |   |         |          |         |   |   |          |         |  |   |          |        | 
|------------------------------------------------ | ------------------------------------- | ---- | ----------------------------- | ------- | - | ------- | -------- | ------- | - | ------- | -------- | ------- | - | - | -------- | ------- |  | - | -------- | ------ | 
|                                                 |                                       |      | For the Year Ended August 31,
|                                                 |                                       |      |                              
|[in thousands of Canadian dollars]               |                                       | 2002 |                               | 2001    |   | 2000(2) |          | 1999    |   | 1998(3)
|                                                 |                                       |      |                               |         |   |         |          |         |   |        
|Statement of Income Data:                        |                                       |      |                               |         |   |         |          |         |   |         |          |         |   |   |          |         |  |   |          |       
|Revenue(1)                                       |                                       | $    | 416,981                       |         |   | $       | 307,988  |         |   | $       | 239,833  |         |   | $ | 145,777  |         |  | $ | 85,938   |       
|Operating Expenses (Income)                      |                                       |      |                               |         |   |         |          |         |   |         |          |         |   |   |          |         |  |   |          |       
|                                                 | Direct                                |      |                               | 244,320 |   |         |          | 205,157 |   |         |          | 189,079 |   |   |          | 123,830 |  |   |          | 79,305 | 
|                                                 | Marketing, general and administrative |      |                               | 188,821 |   |         |          | 166,033 |   |         |          | 117,726 |   |   |          | 86,100  |  |   |          | 48,867 | 
|                                                 | Amortization                          |      |                               | 129,284 |   |         |          | 100,477 |   |         |          | 66,371  |   |   |          | 32,161  |  |   |          | 14,143 | 
|                                                 | Interest expense (income)             |      |                               | (18,143 | ) |         |          | (27,955 | ) |         |          | (20,548 | ) |   |          | 31,305  |  |   |          | 17,687 | 
|                                                 | Restructuring charge                  |      |                               |        |   |         |          | 1,200   |   |         |          |        |   |   |          |        |  |   |          |       | 
|                                                 |                                       |      |                               |         |   |         |          |         |   |         |          |         |   |   |          |         |  |   |          |       
|Loss before income taxes                         |                                       |      | (127,301                      | )       |   |         | (136,924 | )       |   |         | (112,795 | )       |   |   | (127,619 | )       |  |   | (74,064  | )     
|Income tax benefit                               |                                       |      | 12,505                        |         |   |         | 21,066   |         |   |         | 42,731   |         |   |   | 54,457   |         |  |   | 31,479   |       
|                                                 |                                       |      |                               |         |   |         |          |         |   |         |          |         |   |   |          |         |  |   |          |       
|Net loss for the year                            |                                       | $    | (114,796                      | )       |   | $       | (115,858 | )       |   | $       | (70,064  | )       |   | $ | (73,162  | )       |  | $ | (42,585  | )     
|                                                 |                                       |      |                               |         |   |         |          |         |   |         |          |         |   |   |          |         |  |   |          |       
|Net loss (U.S. GAAP)(4)                          |                                       | $    | (77,358                       | )       |   | $       | (132,489 | )       |   | $       | (93,928  | )       |   | $ | (74,450  | )       |  | $ | (58,311  | )     
|                                                 |                                       |      |                               |         |   |         |          |         |   |         |          |         |   |   |          |         |  |   |          |       
|Balance Sheet Data (at end of period):           |                                       |      |                               |         |   |         |          |         |   |         |          |         |   |   |          |         |  |   |          |       
|Cash and short term investments                  |                                       | $    |                              |         |   | $       |         |         |   | $       | 827      |         |   | $ | 7,638    |         |  | $ | 84,007   |       
|Property, plant and equipment                    |                                       |      | 118,379                       |         |   |         | 53,893   |         |   |         | 37,857   |         |   |   | 36,680   |         |  |   | 23,079   |       
|Total assets                                     |                                       |      | 1,055,939                     |         |   |         | 989,144  |         |   |         | 917,463  |         |   |   | 330,202  |         |  |   | 347,500  |       
|Long term debt and preferred shares              |                                       |      | 299,513                       |         |   |         | 286,757  |         |   |         | 262,068  |         |   |   | 257,555  |         |  |   | 259,426  |       
|Shareholders equity (deficiency)                |                                       |      | 617,964                       |         |   |         | 568,301  |         |   |         | 535,635  |         |   |   | (17,902  | )       |  |   | 55,247   |       
|Shareholders equity (deficiency) (U.S. GAAP)(4) |                                       |      | 554,095                       |         |   |         | 476,655  |         |   |         | 470,175  |         |   |   | (52,693  | )       |  |   | 27,775   |       
|Cash Flow Data:                                  |                                       |      |                               |         |   |         |          |         |   |         |          |         |   |   |          |         |  |   |          |       
|Cash used in operating activities                |                                       |      | (155                          | )       |   |         | (6,184   | )       |   |         | (31,697  | )       |   |   | (60,212  | )       |  |   | (54,681  | )     
|Cash from financing activities                   |                                       |      | 161,787                       |         |   |         | 157,386  |         |   |         | 163,149  |         |   |   | 44,713   |         |  |   | 275,847  |       
|Cash used in investing activities                |                                       |      | (161,632                      | )       |   |         | (152,029 | )       |   |         | (138,263 | )       |   |   | (60,870  | )       |  |   | (145,663 | )     

5



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##### 





|Notes: |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|1.     |  | Prior year revenue has been restated to net dealer discounts against
revenue. Previously these discounts were included in expenses (See Note 1
to the Consolidated Financial Statements). There is no impact on loss
before income taxes or net loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      
|2.     |  | On August 31, 1999, as a result of the Share Exchange Transaction, Star
Choice became a wholly owned subsidiary of Cancom. (See Item 4.A below.)
This transaction has been accounted for using the purchase method and
Cancom has been identified as the acquirer. As a consequence, the results
of operations of Star Choice have been included in the results of
operations of Cancom from September 1, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      
|3.     |  | On June 2, 1997, Star Choice entered into an agreement with Shaw, the
shareholder of Homestar, pursuant to which Star Choice exchanged
12,711,344 common shares to acquire all the issued and outstanding shares
of Homestar. (See Item 4.A below). The Star Choice shares acquired by
Shaw represented 51.06% of the voting shares of Star Choice after the
transaction and, therefore, represented a majority interest. The Homestar
transaction was accounted for as a reverse takeover under the purchase
method. Homestar was identified as the acquirer, and consequently, in
accordance with Canadian GAAP, the consolidated financial statements
reflect the historical results of Homestar since its formation, and the
Homestar assets and liabilities at their historic cost. The operations of
Star Choice are reflected from June 2, 1997 and its assets and liabilities
are reflected at their fair value as at June 2, 1997. The previously
issued August 31, 1997 consolidated financial statements of Star Choice
were restated to conform to this reverse takeover basis of accounting.
|      
|4.     |  | Net loss and shareholders equity (deficit) as determined in accordance
with Canadian GAAP differ from those determined in accordance with U.S.
GAAP, due principally to the deferral under Canadian GAAP of certain costs
incurred during the start up of Star Choices digital DTH business and the
deferral of subsidies on the sale of DTH equipment, the deferral of an
unrealized foreign exchange gains and losses and the exclusion of
dividends on preferred shares from the determination of net loss and their
related income tax effects. Under U.S. GAAP, pre-operating costs, DTH
equipment subsidies and foreign exchange gains and losses would not have
been deferred while the dividends on the preferred shares would have been
treated as a capital transaction.                                                                                                                                                                                                                                                                                                                     

Exchange Rate Data

The following tables sets forth, for each period indicated, the high and low
exchange rates for Canadian dollars expressed in U.S. dollars, the exchange
rate at the end of such period, and the average exchange rates for such periods
based on the noon buying rate in The City of New York for cable transfers in
Canadian dollars as certified for customs purposes by the Federal Reserve Bank
of New York (the Noon Buying Rate). Such rates are set forth as U.S. dollars
per $1.00 and are the inverse of rates quoted by the Federal Reserve Bank of
New York for Canadian dollars per U.S.$1.00. On February 27, 2003, the inverse
of the Noon Buying Rate was $1.00 equals U.S.$0.6687.

|           |  |                       |        |       |  |       |        |       |  |       |        |  |  |  |        |  |  |  |        | 
|---------- |  | --------------------- | ------ | ----- |  | ----- | ------ | ----- |  | ----- | ------ |  |  |  | ------ |  |  |  | ------ | 
|           |  | Years Ended August 31
|           |  |                      
|           |  | 2002                  |        | 2001  |  | 2000  |        | 1999  |  | 1998 
|           |  |                       |        |       |  |       |        |       |  |      
|           |  | U.S.$                 |        | U.S.$ |  | U.S.$ |        | U.S.$ |  | U.S.$
|High       |  |                       | 0.6618 |       |  |       | 0.6672 |       |  |       | 0.6969 |  |  |  | 0.6891 |  |  |  | 0.7292 | 
|Low        |  |                       | 0.6199 |       |  |       | 0.6344 |       |  |       | 0.6629 |  |  |  | 0.6423 |  |  |  | 0.6341 | 
|Period End |  |                       | 0.6415 |       |  |       | 0.6448 |       |  |       | 0.6793 |  |  |  | 0.6682 |  |  |  | 0.6351 | 
|Average(1) |  |                       | 0.6358 |       |  |       | 0.6541 |       |  |       | 0.6806 |  |  |  | 0.6630 |  |  |  | 0.6901 | 



|Note: |  |                                                                                             
|----- |  | --------------------------------------------------------------------------------------------
|     
|(1)   |  | The average of the exchange rates of the last day of each month during
the period indicated.

|     |  |                   |        |         |  |          |        |          |  |         |        |             |  |  |        |  |  |  |        |  |  |  |        | 
|---- |  | ----------------- | ------ | ------- |  | -------- | ------ | -------- |  | ------- | ------ | ----------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|     |  | Month (2002-2003)
|     |  |                  
|     |  | September         |        | October |  | November |        | December |  | January |        | February(1)
|     |  |                   |        |         |  |          |        |          |  |         |        |            
|     |  | U.S.$             |        | U.S.$   |  | U.S.$    |        | U.S.$    |  | U.S.$   |        | U.S.$      
|High |  |                   | 0.6434 |         |  |          | 0.6409 |          |  |         | 0.6418 |             |  |  | 0.6462 |  |  |  | 0.6570 |  |  |  | 0.6700 | 
|Low  |  |                   | 0.6306 |         |  |          | 0.6273 |          |  |         | 0.6289 |             |  |  | 0.6331 |  |  |  | 0.6350 |  |  |  | 0.6531 | 



|Note: |  |                             
|----- |  | ----------------------------
|     
|(1)   |  | February 1 to 27, 2003 only.

6



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|B. |  | CAPITALIZATION AND INDEBTEDNESS
|-- |  | -------------------------------

Not required to be completed.



|C. |  | REASONS FOR THE OFFER AND USE OF PROCEEDS
|-- |  | -----------------------------------------

Not applicable.



|D. |  | RISK FACTORS
|-- |  | ------------

Star Choices business, financial condition and results of operations could be
materially adversely affected by the risks described below. Such risks are not
the only ones facing Star Choice. Additional risks not presently known to Star
Choice or that Star Choice currently deems immaterial may also impair the
Corporations business operations.

Star Choice may be unable to manage its growth.

Star Choice has been operating as a provider of digital direct-to-home (DTH)
satellite services since May 1997. Star Choices business must expand to
achieve the Corporations business objectives. Whether Star Choice can meet
its goal of increasing its digital DTH subscriber base while maintaining its
price structure, limiting the rate of customer deactivations (churn) and
managing costs will depend upon, among other things, the Corporations ability
to manage its growth effectively. To manage such growth, Star Choice must
continue to develop its sales force, installation capability, customer service
operations and information systems; maintain its distribution channels and
relationship with third party vendors; and implement efficient procedures for
subscriber payments. Star Choice will also need to continue to grow, train and
manage its employee base. If Star Choice is unable to manage the growth of its
business effectively, its business and results of operations could be
materially adversely affected.

Star Choices operating losses may require it to seek additional financing
which might not be available.

Star Choice has sustained and expects to continue to sustain significant
operating losses over at least the next few years. Such losses will be
primarily due to equipment subsidies and planned marketing costs of Star
Choices digital DTH services. Star Choice believes that it
will have access to sufficient funding from Cancom, or from Shaw
through Cancom, to finance Star Choices
currently anticipated operating cash needs for fiscal 2003. However,
such belief is based on a business plan that is subject to numerous assumptions
and estimates, including anticipated numbers of subscribers, projected costs of
acquiring new subscribers, churn and average subscriber revenue. There can be
no assurance that such assumptions and estimates will prove to be accurate,
that the business plan will be achieved or that such funding will be
available. Moreover, although Star Choice believes that it will have
access to funding from Cancom or from Shaw through Cancom, neither
Cancom nor Shaw is currently obligated to provide such funding.

The recent development of the digital DTH industry in Canada causes
uncertainties regarding the digital DTH market

The success of Star Choices DTH business strategy is subject to factors that
are beyond Star Choices control and impossible to predict due, in part, to the
limited history of digital DTH services in Canada. The digital DTH
subscription television business was only introduced in Canada in 1997.
Consequently, the rates of penetration of that market, the extent and nature of
the competitive environment and whether the market will be large enough to
profitably support both Star Choice and competitors are uncertain.

Star Choices business is susceptible to changes in government rules and
regulations

Star Choices business is subject to a variety of government regulations. The
Corporations business prospects are directly affected by the adoption of new
laws, policies and regulations, or changes in the interpretation or application
of existing laws, policies and regulations, that may modify the present
regulatory environment in Canada. Star Choice is unable to predict the impact
which any changes to or adoptions of such laws or regulations affecting the
digital DTH and broadcasting industries in general will have.

7



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##### 



Star Choices DTH business in Canada requires a license from the Canadian
Radio-television and Telecommunications Commission (CRTC). The DTH business
has been deemed to be an area in which the CRTC wishes to promote competition
and thus there is the potential of new competitors being licensed.

Canada committed in international trade agreements to permit competition in the
provision of fixed satellite services starting March 1, 2000 exceptfor
satellite services used by DTH broadcasters. If this exception were to be
removed, it could alter the landscape in which Star Choice operates and could
open up the Canadian market to more competition, including from US providers.

Canadian law prohibits the decoding of encrypted program signals, except with
an appropriate authorization. It also prohibits the retransmission of any such
unlawfully decoded program signals. The scope of these laws, however, is still
currently being considered by the courts. If they should change, or be
interpreted in a manner that allows such decoding, Star Choices core business
could face challenges from larger, better financed foreign competitors whose
satellite footprints also cover Canada.

For a discussion of the applicable government regulations, see Item 4.B 
Information on the Company  Business Overview  Regulatory Environment.

Some of Star Choices subscribers might not be in its service area

Star Choice does not have the rights to distribute all of its programming via
DTH outside of Canada. Despite assurances from Star Choice subscribers that
they receive programming within Canada, a portion of the Corporations
subscribers may, in fact, be receiving Star Choice programming outside the
Corporations markets. If Star Choice must disconnect a significant portion of
its subscribers because they are receiving services outside the relevant
markets, Star Choices revenues could decrease.

Star Choices business is subject to competition

Star Choices main competitor is Bell ExpressVu (ExpressVu). ExpressVu is a
wholly owned subsidiary of BCE Inc., a communications, entertainment and media
services company and the parent of Telesat Canada (Telesat), the monopoly
provider of satellite facilities in Canada. ExpressVu has significant
financial resources and experience and is not subject to the structural
separation requirements that Star Choice is subject to with respect to Shaw.
These requirements mandate that Star Choice maintain separate customer sales,
marketing and affiliate relations employees, and prohibit certain types of
information sharing related to sales, marketing and customer service, as well
as affiliation agreements negotiated with programmers.

Grey and black market DTH providers are also competitors of Star Choice. Such
providers use programming supplied in the Canadian market by U.S. based digital
DTH service providers. Such providers are not licensed by the CRTC and the
Supreme Court of Canada recently held that the sale of their services in Canada
is contrary to certain Canadian laws and regulations. Star Choice believes
that there are a significant number of subscribers to grey and black market
services in Canada.

Star Choice faces additional competition from a broad range of companies
offering communications and entertainment services, including cable operators,
other competitive cable television distributors, wireless operators, telephone
companies and off-air television broadcasters. Many of the Corporations
competitors may have access to greater financial resources. The potential for
competition from new entrants into the market and new technologies is also
significant, especially in more urban markets. Star Choices DTH and cable
competitors have pursued, and may continue to pursue, aggressive marketing
campaigns and pricing policies targeting the existing customers of Star
Choices business.

It is difficult to predict what effect these competitors will have on the
Corporations market share.

Star Choice is dependent upon third-party suppliers

Star Choice is dependent upon third-party suppliers of programming and
equipment and must license the technology needed in order to provide digital
DTH services. For example, Motorola Broadband Sector (formerly General

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Instrument Corporation) is the supplier of Star Choices set-top boxes, which
are essential for Star Choices business. If any supplier terminates its
arrangements with the Corporation for any reason or proves unreliable, Star
Choice would be required to secure an alternative supplier. There can be no
assurance that Star Choice would be able to do so on a timely basis, at a
comparable cost and without a material adverse affect on its business.

Star Choice is also dependent on Telesat, a wholly-owned subsidiary of BCE Inc.
and a sister company of our main competitor ExpressVu, for the supply of
satellite capacity. As a satellite services company, Star Choice and Cancom
have key contracts for primary satellite space with Telesat.

Much of the technology used in Star Choices business is the subject matter of
patents held by various third parties. Star Choice or Cancom currently holds
valid licenses for the use of such technology. Star Choice cannot give
assurance that such licenses will continue to be available on commercially
reasonable terms, that such licenses will not become the subject matter of
competing patent claims or that Star Choice is not currently utilizing
technology that is subject to a patent of which the Corporation is not aware.
In such event, Star Choice may be required to acquire further licenses at
additional cost, or redesign its products and services in such a way as to
avoid the need for such licenses.

Star Choices business may be adversely affected by technological changes

Star Choices business relies on complex technology and the development,
manufacture and integration of advanced and technologically diverse components
and systems. There is no assurance that such technology, components and
systems will continue to be compatible or available on a timely basis. There
can be no assurance that competitors will not develop a more effective
technology or a technological breakthrough that cannot be adapted to Star
Choices business, thereby rendering its services less competitive.

A majority of Canadian television programmers currently use Digicipher® II
technology to deliver their signals to cable operators headends. Star Choice
uses these programmers signals for its business, subject to approval by way of
affiliation agreements with the programmers. There is no assurance that these
signals will continue to be provided by all programmers in the Digicipher® II
format, or that the programmers will continue to use Anik F1 or the
Corporations replacement satellite.

Star Choices revenue may decline if signal theft becomes widespread

As is the case with all providers of subscription television programming, Star
Choice faces the risk that its programming signal will be obtained by
unauthorized users. Any security system used to protect subscription services
may be subject to attack by hacker groups that attempt to crack certain
encryption codes or to cause the digital receivers to accept unauthorized
programming. If signal piracy becomes widespread, Star Choices revenue could
be materially adversely affected.

The occurrence of a satellite defect, loss or reduced performance would
impair Star Choices ability to operate

Loss, damage or destruction.

Satellites are subject to significant risks, including manufacturing
defects, destruction and damage that may, for example, result in incorrect
orbital placement or prevent proper commercial operation. For example, loss,
damage or destruction of a satellite may occur as a result of military actions
or acts of war, anti-satellite devices, electrostatic storms, collision with
space debris or technical malfunction. Any such loss, damage or destruction of
a satellite used by Star Choice could have a material adverse effect on Star
Choices business and results of operations.

Telesat has publicly disclosed that it has been advised by Boeing Satellite
Systems, the manufacturer of the Anik F1 satellite, of a continuing degradation
in available power on-board the satellite. Telesat has indicated that, over
time, this would require that some of Anik F1s transponders be turned off and that
certain core services on the satellite would be affected starting in mid 2005.
Telesat has filed a claim with its insurers accordingly.

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Telesat has indicated that is moving forward with activities aimed at replacing
Anik F1 in a timeframe that will ensure continuity of service for its North
American customers, including the Corporation. In this regard, Telesat
publicly announced in February, 2003 that it has signed a contract with Astrium
for a new satellite, Anik F1R, scheduled to launch in 2005 to replace Anik F1.
While there can be no assurance that such satellite will be launched on
schedule in a manner that will ensure continuity of service, based on current
information, Star Choice does not anticipate any incremental cost to the
Corporation or disruption to Star Choices DTH customers arising from the
degrading power situation on, or replacement of, Anik F1.

Star Choice has also been in discussions with Telesat and Industry Canada
regarding a plan put forward by Satmex (a Mexican satellite operator) to launch
and operate a new satellite adjacent to the satellites used by Star Choice, at
a power level that would cause significant interference to Star Choice. The
launch, if it proceeds, would contravene current satellite coordination
agreements between Telesat and Satmex, and Canada and Mexico. The Canadian
government and Telesat are directly opposed to the launch of the satellite and
are taking action to ensure that Satmex does not operate the satellite in a
manner that interferes with Star Choices services. Star Choice has been
advised by Industry Canada that the matter should be resolved consistent with
current satellite coordination agreements. Accordingly, Star Choice does not
anticipate any disruption to Star Choices services.

Star Choice does not have any business interruption insurance in
respect of satellite failure.

Star Choice does not have business interruption insurance that would be
available in the event of damage or loss to one or more of the satellites that
it uses in its business. In respect of the purchased transponders, Star Choice
and Cancom do have access to some of the launch and in orbit insurance proceeds
of the insurance procured by Telesat during the first five years following
launch. However, such proceeds would only relate to capital interest in the
affected transponders owned by Star Choice and Cancom.

Restoration in the event of satellite failure.

In respect of the 28 Ku-band transponders which Cancom purchased on the Anik F1
satellite, Telesat has made certain commitments for access to spare
transponders on Anik F1 in the case of interruption. There is no assurance
that such transponders would be available.

In respect of the leased transponders, Telesat has an Emergency Planning
Committee whose backup plans include catastrophic satellite failure and
reciprocal restoration agreements with U.S. satellite carriers. Services are
restored on a priority basis by class of service and then by seniority. Single
RF channel transponder failures can usually be restored by on-board backup of
stand-by systems. Cancom and Star Choice currently lease satellite capacity
from Telesat on the Anik E2 and Anik F1 satellites on an unprotected
pre-emptible service level basis (the same level as all of Telesats broadcast
customers). Therefore, in the event of satellite failure, each customer will
only be restored as additional capacity becomes available, unless backup
stand-by systems can be arranged. Restoration of Star Choices satellite
service on a U.S. satellite may require repositioning or re-pointing of
consumers receiving dishes. The consumers level of service may be diminished
or they may require a larger dish. There have been two in-orbit failures of
the Anik E satellite series. One or more failures of satellites used by Star
Choice could cause customers to deactivate their subscriptions or otherwise
have a material adverse effect on Star Choices business and results of
operations.

Star Choices controlling shareholder may have commercial interests in
conflict with Star Choice

Shaw beneficially holds a 99.7% voting interest in Cancom, which in turn, holds
all of the outstanding shares of Star Choice. Therefore, directly and
indirectly, Shaw has the power to control the vote on all matters submitted to
Star Choices shareholders, to elect Star Choices directors, and (subject to
conditions of license imposed by the CRTC) to exercise control over Star
Choices business, policies and affairs. Shaws cable systems compete with
Star Choices DTH business.

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ITEM 4  INFORMATION ON THE COMPANY



|A. |  | HISTORY AND DEVELOPMENT OF THE COMPANY
|-- |  | --------------------------------------

Star Choice was incorporated under the laws of British Columbia on April 29,
1987 (under the name Spruce Ridge Resources Ltd.). On March 14, 1995, Star
Choice completed the acquisition of the shares of Direct Choice T.V. Inc.,
which was engaged in the distribution of analog DTH satellite services.
Effective December 11, 1996, Star Choice was continued federally under the
Canada Business Corporations Actand changed its name to Star Choice
Communications Inc.

On June 2, 1997, Star Choice entered into an agreement with Shaw, the
shareholder of Homestar Services Inc. (Homestar), pursuant to which Star
Choice exchanged 12,711,344 common shares to acquire $2.0 million in cash and
all the issued and outstanding shares of Homestar. Homestar owned satellite
uplink assets and operations valued at $30.0 million and had cash on hand of
approximately $23.4 million.

On August 31, 1999, Star Choice and Cancom completed a share exchange
transaction (the Share Exchange Transaction) whereby Star Choice became a
wholly owned subsidiary of Cancom. In accordance with the terms of the Share
Exchange Transaction, Star Choice common shares, options and warrants were
exchanged for like securities of Cancom based on an exchange ratio of one
common share of Cancom for each 4.8 common shares of Star Choice. Star Choice
preferred shares were exchanged for Cancom preferred shares on a one for one
basis. The Cancom preferred shares were subsequently converted into 2,941,634
common shares of Cancom.

Effective September 1, 2000, Star Choice sold the assets of its wholesale
redistribution business to its parent company, Cancom, for $51.9 million. Such
business, which was consolidated with Cancoms similar business, redistributed
television and radio signals via satellite to cable operator and other
distributors and provided related network services. Following such
disposition, Star Choice retained and operated its DTH business as its sole
line of business.

During fiscal 2001, Star Choice purchased certain assets from MDU
Communications Inc. (MDU) for approximately $10.6 million. MDU provided
communication service to DTH apartment subscribers and to satellite master
antenna television subscribers in Canada.

Pursuant to two separate take-over bids dated August 9, 2000 and January 5,
2001 for all of the issued and outstanding shares of Cancom, Shaw increased its
voting interest in Cancom to 99.7%. As a result, Star Choice became an
indirect subsidiary of Shaw. Shaw is a diversified Canadian communications
company and is the second largest cable television company in Canada, serving
approximately 25% of the Canadian cable television market, with a concentrated
focus on Western Canada.

The registered office of Star Choice is located at Suite 900, 630 3rd Avenue
S.W., Calgary, Alberta, Canada T2P 4L4. The principal executive office is
located at 2924  11 Street N.E., Calgary, Alberta, Canada T2E 7L7. The
telephone and facsimile numbers of its principal executive office are (403)
538-4324 and (403) 538-4323, respectively.



|B. |  | BUSINESS OVERVIEW
|-- |  | -----------------

Since August 31, 2001, Star Choice has had one line of business: distribution
of digital video and audio programming services via satellite to Canadian
residences and commercial establishments. Prior to fiscal 2001, Star Choice
also operated a wholesale redistribution business, redistributing television
and radio signals via satellite to cable operators and other distributors and
providing related network services. This business was integrated with Cancoms
similar business effective September 1, 2000. See Item 4.A above.

Satellites  General

Satellites operate by receiving signals transmitted from terrestrial locations
and retransmitting those signals back to one or more different terrestrial
locations. Satellite signals travel at the speed of light and can be used for
video,

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data, audio and voice transmissions. Satellites accept and retransmit
signals through transponders. Transponders operate at various frequencies and
are designed to cover a designated geographic area.

Satellites operate in both geostationary and non-geostationary orbits. The
majority of the satellite industry is concentrated on the use of geostationary
satellites. These satellites are parked in specific orbital slots directly
above the equator and move at precisely the same speed as the earths rotation.
There are a limited number of slots available, which are allocated by the
International Telecommunications Union under international treaty. To maximize
the exploitation of these limited slots, geostationary satellites tend to be
large and complex, and expensive to build and launch.

Satellites have several competitive advantages over terrestrial distribution
technologies, including: (i) distance insensitivity  satellite signals can
reach any point within a geographic coverage area without incremental equipment
or service requirements; (ii) cost efficiency  additional users located at any
point within a geographic coverage area can be added to any single satellite
service without incremental service costs; and (iii) operational flexibility 
signals can be received by or transmitted from any point, fixed or mobile,
within the coverage area.

There are a number of manufacturers and operators of satellites around the
world. Telesat is currently the regulated provider of satellite facilities
utilizing Canadian orbital slots.

Cancom and Star Choice currently have access to 28 full Ku-band and 3 full
C-band transponders on Telesats Anik F1 satellite purchased by Cancom through
a subsidiary in 2001. Star Choice uses an additional two Ku-band transponders
on the Anik F1 satellite for the purposes of the digital DTH services business,
through arrangements with broadcasters currently occupying those transponders.
In addition, Cancom and Star Choice also have access to 8 full Ku-band national
beam equivalent, 3 Eastern and 69% partial RF channels on Telesats Anik E2
satellite at the 111.1 degree WL orbital slot, all of which channels have been
leased by Cancom. For the purpose of servicing Star Choices DTH business,
Cancom has agreed to purchase 16 Ku-band national beam transponders on a
condominium basis on Telesats Anik F2 satellite. Anik F2 is currently expected
to begin operation in early 2004, replacing Anik E2R, the interim satellite
scheduled to replace Anik E2 in June, 2003.

DTH Satellite Services

DTH service is the transmission of video and audio programming from satellites
directly to a subscribers home or business. A DTH system typically consists of
one or more uplink centres, one or more geostationary satellites and the
subscribers receiving equipment.

The operator of a digital DTH service typically enters into agreements with
various programmers, who generally deliver their programming to the digital DTH
services operator via commercial satellite, fibre optics or microwave
transmissions. Through equipment located at an uplink centre, the operator
combines, compresses, encodes and then transmits, or uplinks, the programming
to transponders located on its geostationary satellite. The transponders
receive and amplify the digital signal and transmit it to subscribers
receiving dishes within the footprint covered by the satellite. A digital
signal transmitted to the subscribers digital receiver set-top box, sometimes
referred to as an integrated receiver/decoder, is converted into an analog
signal compatible with the subscribers television. System security is
generally maintained through the use of a conditional access data stream
embedded in the satellite signal.

Business and Markets

Star Choices revenue from DTH services and equipment sales was $417.0 million
for the year ended August 31, 2002 compared to $308.0 million for the year
ended August 31, 2001, an increase of 35%. Star Choice ended its fiscal year on
August 31, 2002 with approximately 760,024 subscribers including seasonal
subscribers, an increase of 21% over the previous year end number. As at November 30, 2002, Star
Choices subscriber base had grown to approximately 779,216 subscribers.

In the DTH business in Canada, there are now two licensed competitors: Star
Choice and ExpressVu. ExpressVu has reported in its most recent quarterly
report that it had approximately 1.3 million subscribers as of December 31,
2002.

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In addition to ExpressVu, Star Choice competes with cable television companies,
black and grey market satellite service providers (i.e. providers of U.S.-based
digital DTH programming services sold in Canada without authorization from the
CRTC) and other competitors such as wireless operators, telephone companies and
off-air television broadcasters.

The DTH business in Canada has been characterized by rapid growth in
subscriptions and rapidly evolving market conditions. The strong growth in the
industry has been due in part to continuous technological improvements,
enhanced services and reduced costs relative to cable services. DTH is
considered to be the only viable, widely available alternative to cable.

Historically, the market for digital DTH services has been broken into three
main categories:



|(i)   |  | Unserved by cable: this market consists of approximately 0.9 million
households that are not served by cable, and typically have access to a
limited number of broadcast services.1 DTH services have achieved
considerable penetration in this market, since they offer the range and
quality of the most advanced cable companies. Approximately 36% of Star
Choice subscribers come from this category.                                                                                                                                                                                                                                                                                              
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|(ii)  |  | Underserved by cable: approximately 0.7 million households in Canada are
in areas that are underserved by cable, i.e.households served by cable
systems that offer fewer than 40 channels.1 In these markets, digital DTH
services offer potential customers better signal quality in a digital
format, access to more channels at attractive price points and greater
flexibility in programming package selection. Cable television systems
serving these households require costly upgrades to add bandwidth or would
incur significant maintenance costs in order to match the services
available from Star Choice. Approximately 16% of Star Choice subscribers
come from customers in these areas.
|     
|(iii) |  | Served by cable: this covers the 10.0 million households that are passed
by full service cable, with more than 40 channels available.1 These homes
account for approximately 48% of Star Choice subscribers. Currently,
digital cable service is available in most Canadian urban centres.
Although these systems have advanced channel capacity, they still
experience capacity constraints as they implement digital service, since
they will need to reserve bandwidth to continue offering analog services
in conjunction with new digital offerings.                                                                                                                                               

The market for DTH services also includes seasonal homes, but no reliable data
is available to accurately determine the size of this market. Other potential
customers for digital DTH services include commercial, institutional and
recreational facilities interested in diverse programming choices and broad
program packages, including digital music.

Star Choice and ExpressVu currently serve approximately 17% of all Canadian
television households. DTH penetration rates are highest in rural areas, where
cable TV is not available or has limited channel capacity or features, and it
is lowest in urban markets, where channel capacity is high. Star Choice
expects DTH services to continue to be most successful in rural areas and is
actively targeting the under-served rural markets in Canada through a strong
rural distribution channel.

Sales and Marketing

Strategy

Star Choice sales and marketing efforts are focused on two fundamental
activities: (i) acquiring new subscribers; and (ii) maintaining and improving
average revenue per subscriber. The subscriber acquisition effort focuses on maximizing sales while managing the key issues of equipment subsidies,
programming subsidies, marketing costs



---

| |  | 1 Source: 1996 Census household projections and estimates for 2000 overlaid
with Mediastats Cabledata cable boundaries published January, 2002.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------

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and equipment supply. Once the
subscriber is acquired, the focus shifts to providing high levels of ongoing
customer service and continuous product enhancement to minimize churn
(subscriber turnover) and maximize subscriber revenue and operating margins.

Star Choice has developed and implemented a comprehensive sales and marketing
strategy designed to build awareness of the Star Choice brand and highlight the
advantages of digital DTH services relative to over-the-air broadcast services,
cable television and other digital DTH competitors. Star Choices ongoing
marketing campaign includes in-store merchandising and point of purchase
materials, and television, radio and print advertising promoting the benefits
of the Star Choice service. Sales strategies also focus on superior customer
interaction, including a direct sales team; accessible customer care centres in
Fredericton, New Brunswick, Montreal, Quebec and Calgary, Alberta; and a
robust, user-friendly website.

Sales and Distribution Network

Star Choice digital DTH equipment is available at more than 4,000 retail
locations across Canada, including those of RadioShack Canada, Future Shop
Ltd., Leons Furniture Limited, The Brick Warehouse Corporation and Sears
Canada Inc. Star Choice manages the sales and distribution of digital DTH
equipment by means of a master distribution arrangement with Barrett Xplore
Inc. (BXI). Star Choice and BXI together have developed local, regional and
national distribution networks to maximize product availability in target
markets. Star Choice has taken a disciplined approach in selecting the type
and number of retailers distributing its product in order to achieve effective
coverage of its target markets.

Star Choice provides marketing, subscriber authorization, installation and
customer service support to its retail dealers to enhance subscriber additions
from such dealers. The retail dealer earns ongoing commissions from the sale of
Star Choice programming packages to subscribers that purchase equipment from
that retailer.

Star Choice also provides digital DTH equipment through direct sales channels,
including through its call centres and direct sales agents who work in key
target areas across Canada.

Equipment and Programming Subsidies

Canadian DTH operators provide subsidies to customers to reduce the initial
cost of the equipment and accelerate sales. Since inception, Star Choice has
provided subsidies and reduced the price of equipment to consumers in order to
stimulate acceptance of DTH. These price reductions have been partially offset
by ongoing cost reductions in the manufacture of the equipment. The subsidy
increases Star Choices cash needs. Star Choice believes such subsidies will
be recouped from future net programming revenues. Subscribers cannot easily
migrate to competing digital DTH providers due to incompatibility of
technology. Star Choice believes the effort and expense involved in acquiring
and installing equipment is also an ongoing incentive to retain the service.

Competitive pressures from other DTH operators and wireless and cable systems
play a major role in establishing the level of equipment and programming
subsidies. These pressures play a similar role in establishing the compensation
patterns and practices offered to dealers and retailers.

Seasonality

The DTH services business follows the cycles of the retail industry. Based on
Star Choices experience and on experience of others in the U.S., sales are
highly seasonal with the greatest sales volume occurring in the four months
leading up to the Christmas and holiday season. It is important to effectively
co-ordinate supply with demand during this period, to ensure a sufficient
supply of equipment without carrying excess inventory. Star Choice and BXI work
closely with Motorola Broadband Sector (formerly General Instrument
Corporation), Star Choices supplier of set-top boxes, to develop short term
and long term volume projections to minimize the impact of business
fluctuations and ensure optimal levels of equipment supply throughout the
business cycle.

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Customer Service and Product Enhancements

For retail consumers, the equipment purchase and installation is conducted
through the retail dealer. Service subscriptions are then initiated and managed
by direct contact between the subscriber and the Star Choice customer care
centres in Calgary, Alberta, Montreal, Quebec and Fredericton, New Brunswick.
The Star Choice customer care facilities are technologically sophisticated call
centres operating 24 hours a day, 7 days a week, in both English and French.
This direct contact between the subscriber and Star Choice permits effective
customer management and the opportunity to up-sell subscribers by introducing
them to additional products and packages.

As the digital DTH services business develops in Canada, a program of
continuous product enhancement is necessary in order to acquire and retain
subscribers. Since 1997, Star Choice has introduced five successive models of
the digital set-top box, each providing enhanced functionality to the
subscriber at a lower wholesale cost. Further development cycles are underway.
As well, Star Choice has continually enhanced the programming packages offered
to consumers as additional satellite capacity is acquired and additional
programming services become available.

Programming Services

During the fiscal year ended August 31, 2001, Star Choice moved to dual
satellites (Anik E2 and F1) whose signals are recovered by customers through a
unique elliptical dish. As a result of this multiple satellite reception Star
Choice now offers subscribers a selection of more than 370 video and audio
programming services. The Star Choice programming line-up offers virtually
every television service that is 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
its programming from various program providers whose carriage is approved by
the CRTC, in most cases, pursuant to non-exclusive contracts ranging in term
from three to five years. As additional programming services and additional
transponder capacity become available through the arrival of the Anik F2
satellite expected in calendar 2004 and the improvement of technology, Star
Choice plans to continue to expand its channel line-up.

Star Choices digital DTH subscribers have the option of choosing from a menu
of programming packages designed to target and accommodate different segments
of the Canadian subscription television market according to subscriber
interests, primary language, income level and type of household. In designing
the programming service, Star Choice has sought to maximize the number of
choices available to subscribers. Subscribers are required to take a basic or
Bronze Choice package of about 165 video and audio channels, and they have
the choice of adding other programming to that basic Bronze package as they see
fit. The English basic Bronze Choice package currently retails for $20.99 per
month while the French basic Bronze package retails for $14.99 per month. The
basic packages include a selection of Canadian network programming, U.S.
network programming, and informational services such as the Weather Network,
CTV NewsNet and CBC Newsworld. Additional programming is made available in
smaller packages of three to six channels built around themes such as Sports,
Movies, or Music. These smaller packages range in price from $6.99 to
$19.99 per month.

The Silver Choice, Gold Choice, Gold Choice Plus, Platinum Choice,
Platinum Choice Plus, Titanium Choice, Titanium Choice Plus, Ultimate
Choice and Ultimate Plus programming packages each provides the subscriber
with the option of subscribing to a set number of the smaller packages at a
lower cost than would result from assembling the smaller packages individually.

Technology and Security Platform

Star Choice uses signal encryption equipment that provides a high level of
security for its programming and other services. System security is generally
maintained through the use of a conditional access data stream embedded in the
satellite signals. Star Choice uses Motorolas MPEG2/DigiCipherII encoding and
decoding platform. This is the technology used by a majority of cable operators
and certain other distributors for digital video compression deployment, thus
providing Star Choice with access to ongoing product development at competitive
prices. This technology platform affords Star Choice the flexibility and cost
advantage of using existing compressed digital feeds

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of various programmers designed to serve cable headends as primary feeds to the
digital DTH market, thereby reducing overall program distribution costs and
conserving satellite resources.

Regulatory Environment

Star Choices DTH business is principally regulated by the CRTC under the
Broadcasting Act(Canada) and the equipment used is regulated by the Minister
of Industry under the Radiocommunication Act(Canada). In order to be eligible
to hold a broadcasting license in Canada, the licensee entity must be Canadian
owned and controlled. The relevant Canadian ownership requirements are
described below under Foreign Ownership Constraints.

DTH Satellite Services  General

Star Choices DTH business is carried on by its wholly-owned subsidiary, Star
Choice Television Network Incorporated (SCTN), pursuant to a license issued
to SCTN by the CRTC under the Broadcasting Act(Canada). This license
authorizes SCTN to distribute a variety of television and radio signals via
satellite for direct-to-home reception by customers in Canada. Under the
Broadcasting Act, the CRTC has a statutory mandate to regulate and supervise
all aspects of the Canadian broadcasting system, including all aspects of DTH
satellite distribution and the programming services carried by DTH satellite
distribution undertakings in order to implement a number of policy objectives
outlined in the Broadcasting Act. On July 6, 1995, the Canadian federal
government issued the Order Issuing Directions to the Canadian Radio-television
and Telecommunications Commission Respecting Policy for the Licensing of Direct
to Home (DTH) Satellite Distribution Undertakings(the DTH Order) requiring
the CRTC to implement the government policy of competitive licensing of DTH
satellite distribution undertakings in accordance with substantially the same
rules that are in effect for other distribution undertakings (such as cable
television undertakings) regarding, among other things, the carriage of
Canadian programming.

On December 20, 1995, the CRTC issued its regulatory policy (Public Notice CRTC
1995-217) regarding the regulation of DTH satellite distribution undertakings.
While the rules regarding DTH undertakings established by the CRTC are similar
in most respects to the rules governing cable television, they are modified to
capture the differences between the DTH and cable television distribution
technology.

On January 1, 1998, new Broadcast Distribution Regulations (the Regulations)
which apply to all distributors of broadcasting services in Canada, including
DTH, cable and wireless distribution undertakings, came into effect. In
conjunction with specific conditions of license, the Regulations govern the
programming services that DTH distribution undertakings are authorized to
carry, impose program deletion and substitution obligations and require a 5%
contribution of gross annual revenues derived from annual broadcasting
activities to an independently administered Canadian program production fund or
other recipients approved by condition of license. The applicable programming
requirements and substitution and deletion obligations are described below
under the headings Programming Requirements and Funding Obligations.

The applicable provisions of the Regulations impose prior approval and
notification requirements on transfers of shares and changes in effective
control of licensed DTH undertakings, obligate DTH licensees to file annual
returns with the CRTC and generally prohibit DTH undertakings from altering or
curtailing the signals of programming services they distribute, except as
otherwise permitted or required by conditions of license. The Regulations also
contain mediation and dispute resolution provisions which apply where there is
a dispute between the licensee of a programming undertaking and a DTH licensee
concerning the carriage or terms of carriage of programming, including the
wholesale rate, originated by the programming undertaking.

DTH subscriber fees are not regulated. The basic rates of existing incumbent
cable distribution undertakings are regulated and will continue to be regulated
under the Regulations for a transition period, the duration of which is
dependent upon the roll-out of competition in the incumbents individual
territories. Under the Regulations, existing Class One cable undertakings will
continue to be rate-regulated until 60 days after proving to the CRTC that
another licensed DTH or terrestrial distributor is available to 30% of the
households in the cable undertakings service area and the cable undertaking
has lost at least 5% of its subscriber base.

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Programming Requirements

The programming requirements applicable to DTH licensees under applicable
conditions of license regime and the Regulations can be summarized as follows:



|(i)    |  | All DTH licensees are currently authorized to carry the same Canadian and
U.S. programming services, with the sole exception of the U.S. 4 + 1
network signals. Each of the DTH licensees applied for and received
authority to carry different U.S. 4 + 1 network packages. A U.S. network
4 + 1 package consists of one ABC, CBS, NBC and Fox affiliate plus one
U.S. PBS affiliate. The only difference among the DTH licensees is that
they have selected different network affiliates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(ii)   |  | DTH licensees must offer a basic service that includes at least one of
each of the CBC English and French-language television network affiliates
and at least one affiliate of Canadas only private national
English-language television network, CTV, as well as TVA and APTN. Every
subscriber must subscribe to the basic service to receive any
discretionary services, except DTH pay-per-view services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      
|(iii)  |  | DTH licensees are required to ensure that no subscriber receives a total
number of programming services that contains less than a preponderance of
Canadian programming services. No subscriber may be offered a package
consisting only of non-Canadian services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|      
|(iv)   |  | Each Canadian pay television service may be linked in a single
discretionary package with no more than five authorized non-Canadian
programming services selected from a CRTC authorized list of non-Canadian
programming services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      
|(v)    |  | Each Canadian specialty service distributed within a discretionary
package may be linked with no more than one authorized non-Canadian
satellite service, again drawn from a list of authorized services
established by the CRTC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      
|(vi)   |  | DTH licensees are required to distribute, subject to available satellite
capacity, all licensed English and French-language specialty and pay
television programming services, at least one English and one French
general interest pay-per-view service, and all licensed Category 1 digital
services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      
|(vii)  |  | DTH licensees are currently permitted by existing conditions of license
to distribute distant Canadian television stations unless the DTH licensee
receives an objection in writing from the originating broadcaster within
90 days of the date of the DTH licensees original licensing Decision.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|      
|(viii) |  | Star Choice is currently required by condition of license to delete
identical non-Canadian programming and to substitute it with the
programming provided by a Canadian station upon request of the Canadian
station when broadcast simultaneously and when the non-Canadian and
Canadian services originate from the same uplink centre. Unlike cable
operators and other distributors, the conditions of DTH licenses require
such licensees to also perform non-simultaneous deletion of Canadian and
non-Canadian programming services when requested to do so by local
broadcasters with respect to programming broadcast by them in the same
broadcast week. Star Choice and ExpressVu each have negotiated, with the
Canadian Association of Broadcasters, payment to broadcasters in lieu of
deletion. These agreements have expired and alternative proposals are
currently being negotiated by Star Choice with the Canadian Association of
Broadcasters and being considered by the CRTC.
|      
|(ix)   |  | DTH licensees that elect to distribute any pay audio service in which
they or another distribution undertaking have an ownership interest
exceeding 30% must also distribute at least one other pay audio service
whose ownership is independent of any distribution undertaking. The terms
of discretionary carriage of pay audio service are to be agreed upon by
the DTH licensee and the program originator.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      
|(x)    |  | A DTH licensee that elects to distribute a Category 2 digital service
licensed to the licensee or any of its affiliates, must also distribute at
least 5 non-affiliated Category 2 digital services for each affiliated
Category 2 digital service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

The Regulations prohibit any distribution undertaking (cable, DTH and wireless)
from conferring an undue preference upon itself or another person or from
subjecting another person to an undue disadvantage in relation to

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the distribution of programming services. This will likely prevent situations
where a distributor proposes to enter into an affiliation agreement or other
contractual arrangement that would prevent another distributor from gaining
access to the same programming, or where the distributor acquires programming
under terms and conditions that are significantly advantageous to itself or an
affiliate.

Funding Obligations

The CRTC requires Star Choice to contribute 5% of gross annual revenues from
its broadcasting activities to an existing independently administered Canadian
program production fund, of which 20% may, by condition of license, be
allocated directly to Canadian broadcasting undertakings.

DTH License Held by Star Choice

The Star Choice DTH license is held by SCTN (pursuant to Decision CRTC 96-529,
as amended by Decision CRTC 97-677, and pursuant to Decision CRTC 2002-84) and
expires on August 31, 2003 (the same expiry date as the license granted to
ExpressVu). The applicable conditions of license are described above under the
headings Programming Requirements and Funding Obligations. Pursuant to
Decision CRTC 2002-84, the CRTC removed conditions from Star Choices DTH
license that required SCTN to remain independent of, and legally separate and
distinct from, Shaw and to maintain a board of directors separate and distinct
from the board of directors of Shaw or any company controlled by Shaw. In
place of these conditions of license, the CRTC implemented new conditions
requiring Star Choice to maintain separate sales, marketing and customer
service functions and staff and to restrict information sharing with Shaw in
respect of confidential information related to sales, marketing and customer
service as well as affiliation agreements negotiated with programmers.
ExpressVus license does not provide any particular condition for the
separation of the business of the licensee from that of its principal
shareholder. At present, SCTN and ExpressVu are the only active licensed DTH
operators in Canada. Star Choice is required to comply with the conditions of
its DTH license and failure to comply with such terms could result in the
revocation or non-renewal of such license. As noted, such license will expire
on August 31, 2003, by which time SCTN will be required to seek a renewal.
Such renewals are typically granted to companies in compliance with their
conditions of license.

Copyright Fees

DTH undertakings are subject to tariffs prescribing the payment of certain
copyright fees under the Copyright Act(Canada). The Copyright Board approves
the tariffs for the retransmission of distant radio and television signals.
The tariffs applicable to DTH systems calculate the royalties payable based on
a monthly per subscriber rate set in reference to the total number of
subscribers served by the DTH undertaking. For example, the tariff currently
in effect for the retransmission of distant signals is a fee of $0.70 per month
per subscriber for any number of distant television signals for a DTH
undertaking serving over 6,001 subscribers.

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. Pursuant to the tariffs approved
by the Copyright Board, broadcasting distribution undertakings including Star
Choice must pay a monthly royalty based on the number of subscribers that they
serve in respect of other non-broadcast services, including Canadian specialty
services. A portion of the royalties payable under these tariffs is
recoverable from the various pay television, specialty and pay audio services
distributed by the broadcasting distribution undertakings.

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Radio Apparatus

Star Choice employs a variety of radio apparatus (including satellite earth
stations) in its businesses. Star Choice requires a radio authorization from
the Minister of Industry under the Radiocommunication Act(Canada) for each
radio apparatus installed, operated or possessed by Star Choice for use in its
businesses unless the apparatus has been exempted from the requirement for an
authorization.

Ownership Regulation

As Star Choice is a licensee under the Broadcasting Act(Canada), Cancom (in
its own capacity and as parent of Star Choice) and Shaw (in its own capacity
and as indirect parent of Star Choice) must be controlled by Canadians. These
foreign ownership regulations require that (i) Cancom and Shaw be incorporated
in Canada or a province; (ii) the chief executive officer of Cancom and Shaw be
a Canadian; (iii) not less than 80% of the directors of Cancom and Shaw be
Canadians; (iv) at least 80% of the issued and outstanding voting shares of
Cancom and Shaw and 80% of the votes attached to such shares be beneficially
owned and controlled by Canadians; and (v) Cancom and Shaw not be otherwise
controlled in fact by persons who are not Canadians. Cancom and Shaw comply
with all of these requirements.

The regulations and conditions which apply to Cancom and Shaw under the
Broadcasting Act(Canada) require that Cancom and Shaw obtain the prior
approval of the CRTC in respect of any act, agreement or transaction that
directly or indirectly would result in (i) a change of the effective control of
SCTNs DTH operations; or (ii) a person or a person and an associate acquiring
control of 30% or more of the issued voting securities, or 50% or more of the
equity, of SCTN, Cancom or Shaw or of a person that has, directly or
indirectly, effective control of SCTN, Cancom or Shaw. A notification
requirement also applies to any act, agreement or transaction resulting,
directly or indirectly, in the acquisition of 20% or more but less than 30% of
the issued voting securities or in the acquisition of 40% or more of the issued
voting securities. These are the same transfer of ownership requirements which
apply to other licensees of the CRTC under the Broadcasting Act(Canada).

Cancoms and Shaws constating documents contain constrained share provisions
which give the directors the power to refuse to issue shares or to register a
transfer of shares to ensure that Cancom and Shaw remain in compliance with the
foreign ownership restrictions and the requirements for prior approval of
transfers of ownership.



|C. |  | ORGANIZATIONAL STRUCTURE
|-- |  | ------------------------

Star Choice is a wholly-owned subsidiary of Cancom. Cancom is owned and
controlled by Shaw, which holds, directly and indirectly, a 99.7% voting
interest in Cancom. As at August 31, 2002, Star Choice had the following
material, direct and indirect wholly owned subsidiaries:

|                                                    |  |                               |  | 
|--------------------------------------------------- |  | ----------------------------- |  | 
|Subsidiary                                          |  | Jurisdiction of Incorporation
|                                                    |  |                              
|Star Choice Television Network Incorporated         |  | Canada                       
|Direct Choice TV Inc.                               |  | New Brunswick                
|Star Choice Television Networks (D.S.) Incorporated |  | Canada                       



|D. |  | PROPERTY, PLANT AND EQUIPMENT
|-- |  | -----------------------------

Star Choice has access to uplink centres in the following Canadian cities:
Vancouver, British Columbia; Calgary, Alberta; Edmonton, Alberta; Winnipeg,
Manitoba; Toronto, Ontario; Mississauga, Ontario; Montreal, Quebec; and
Halifax, Nova Scotia. These facilities are leased by Cancom and include
equipment necessary to support digital DTH services.

The Corporation also operates a leased bilingual (English and French) customer
care facility in Fredericton, New Brunswick and owned customer care and
operating facilities in Montreal, Quebec and Calgary, Alberta. Star

19



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Choices principal executive office is located in Calgary, Alberta in premises
leased from Shaw. Other operating offices are located in Mississauga, Ontario
and are leased from Cancom.

ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The Consolidated Financial Statements of Star Choice are presented in Canadian
dollars and are prepared in accordance with Canadian GAAP. Canadian GAAP
differs in certain respects from U.S. GAAP. For a discussion of the principal
differences between Canadian GAAP and U.S. GAAP, see Note 16 to the
Consolidated Financial Statements for the years ended August 31, 2002, 2001 and
2000.

On August 31, 1999, as a result of the Share Exchange Transaction, Star Choice
became a wholly owned subsidiary of Cancom. This transaction has been accounted
for using the purchase method and Cancom has been identified as the acquirer.
As a consequence, the results of operations of Star Choice have been included
in the results of operations of Cancom from September 1, 1999.

As required by Section 302(a) of the Sarbanes-Oxley Act of 2002, Star Choices
Chief Executive Officer (Vice-Chair) and Chief Financial Officer (Treasurer)
will be certifying Star Choices Form 20-F. As part of such certification, the
Chief Executive Officer and Chief Financial Officer must certify that they are
responsible for establishing and maintaining disclosure controls to ensure
material information with respect to Star Choice is made known to them and that
they have evaluated the effectiveness of Star Choices disclosure controls and
procedures as of a date within 90 days prior to filing Star Choices Form 20-F.
Disclosure controls and procedures ensure that information required to be
disclosed by Star Choice in its Form 20-F is recorded, processed, summarized
and reported, within the time periods required. Star Choice has adopted or
formalized such controls and procedures as it believes are necessary and
consistent with its business and internal management and supervisory practices.
Based upon the most recently completed evaluation, Star Choice is satisfied
that its disclosure controls and procedures are effective to ensure full and
timely public disclosure.



|A. |  | ACCOUNTING POLICIES
|-- |  | -------------------

Star Choice believes that an understanding of its accounting policies is
necessary for a complete analysis of Star Choices results, financial position,
liquidity and trends. Set forth below is a summary of several of Star Choices
critical accounting policies.

Critical Accounting Policies

Revenue Recognition

Revenue is considered earned as the performance of the work is accomplished,
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 satellite customers includes
subscriber service revenue when earned. The revenue is considered earned as
the period of service relating to the customer billing elapses. The sale of
DTH receiving equipment and subscription for service are considered one
transaction to generate future revenue. Therefore, the sale of DTH equipment
is recognized only when the subscriber service is activated.

Property, Plant and Equipment  Capitalization of Direct Labour and
Overhead

As outlined in the recommendations of the Canadian Institute of Chartered
Accountants (CICA) with respect to property, plant and equipment,
capitalization of costs includes the consideration expended to acquire,
construct, develop or better an item of property, plant and equipment. All
costs directly attributable to the acquisition, construction, development or
betterment of an asset may be capitalized, including costs of installing the
asset at the location and in the condition necessary for its intended use (for
example, architectural, design and engineering fees, legal fees, survey costs,
site preparation costs, freight charges, transportation insurance costs,
duties, and testing and preparation charges). The cost to acquire or construct
an item of property, plant and equipment includes direct construction or development costs (such as materials and labour) and overhead
costs directly attributable to the

20



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construction or development activity. The
cost to enhance the service potential of an item of property, plant and
equipment is considered a betterment. Service potential may be enhanced where
the previously assessed physical output or service capacity is increased,
associated operating costs are decreased, the life or useful life is extended,
or the quality of output is improved. Costs incurred in the maintenance of the
service potential of an item of property, plant and equipment are expensed as
incurred.

Star Choice 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 the Corporations
assets through either increased service capacity or lowered associated
operating costs. Repairs and maintenance expenditures are charged to operating
expenses as incurred. Although interest costs may be capitalized during
construction, it is Star Choices policy not to capitalize interest.

The Corporation capitalizes costs of subscriber-related activities, such as the
installation of satellite dishes. The labour and overhead directly related to
the installation of new services are capitalized as the activity involves the
installation of a capital asset (e.g. wiring, dishes, etc.) which enhance the
service potential of Star Choices distribution system through the ability to
charge future service revenues. Installation costs generated by the
Corporations own installation department are capitalized, as are the costs
incurred from third party installers. Costs associated with service calls,
collection, 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.

Deferred Charges  Deferred Marketing Costs and Equipment Subsidies

Under Canadian GAAP, 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.

Deferred Marketing Costs

Star Choice defers and amortizes costs to launch new services over the
estimated period of benefit of two years. Star Choice incurs significant
marketing costs during the first few months of the launch of new services, such
as new digital tier launches. These costs are often incurred during the
Corporations free trial periods. Star Choice therefore benefits from this
initial cost in future periods as customers adopt the new services after the
trial periods. The Corporations experience indicates that it takes
approximately two years for the adoption of new services to reach maturity
level. Therefore, the Corporation matches the costs of the launch of the new
services to the adoption period in which the revenues from the new services
will be recognized.

Equipment Subsidies

The Corporation subsidizes the cost of equipment sold to subscribers to access
DTH services. This activity creates an asset in the form of a customer which
generates future revenues. Since both the customer and the Corporation make an
investment, a relationship is created that provides future value for both.
This relationship has resulted in a lower rate of turnover which also adds
value. The sale of the equipment and subscription for service is considered as
one transaction. Accordingly, Star Choices policy of amortizing the subsidies
over a future period matches the cost of the subsidy with the anticipated
future revenues generated from the customer subscription. Although each
customer signs a service agreement, the term is not specified. Accordingly,
the Corporation has considered its customer churn rate in determining that the
amortization period of two years is reasonable. Star Choices actual churn
rate may justify a longer amortization period, but the Corporation has selected
a more conservative period to account for uncertainty related to potential
changes in the competitive environment.

The amortization of equipment subsidies and deferred marketing costs is
included in the amortization line of the Statement of Loss and is disclosed in
Note 5 to the Consolidated Financial Statements.

Under US GAAP, marketing costs and equipment subsidies are expensed as
incurred. Star Choice recognizes the difference between Canadian GAAP and US
GAAP on deferred equipment subsidies and marketing costs in Note 16 to the
Consolidated Financial Statements.

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Asset Impairment

All long-lived assets, including broadcast licences, goodwill and capital
assets, are evaluated for impairment. The Corporation compares the recovery of
broadcast licences, goodwill and capital assets against discounted cash flows.
An impaired asset is written down to its estimated fair market value based on
the best information available. Considerable management judgment is necessary
to estimate discounted cash flows. Assumptions used in these cash flows are
consistent with internal forecasts of the Corporation and are compared for
reasonability to forecasts prepared by external analysts. Significant changes
in assumptions with respect to the competitive environment could also result in
impairment of these assets.

Future Income Taxes

The Corporation has recognized future income tax assets in respect of losses of
Star Choice. Realization of future income tax assets is dependent upon
generating sufficient taxable income during the period in which the temporary
differences are deductible. The Corporation has evaluated the likelihood of
realization of future income tax assets based on forecasts of taxable income of
future years and tax planning strategies available within the Shaw corporate
group and believes that it is more likely than not that the all of the future
tax assets will be realized. Assumptions used by the Corporation 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 impairment of
these assets.

Commitments and Contingencies

Star Choice is subject to various claims and contingencies related to lawsuits,
taxes and commitments under contractual and other commercial obligations. The
Corporation recognizes liabilities for contingencies and commitments when a
loss is probable and capable of being estimated. Star Choices contractual and
other commercial obligations primarily relate to contracts and operating lease
agreements, including maintenance of satellite transponders and premises in the
normal course of business. Significant changes in the Corporations
assumptions as to the likelihood and estimates of the amount of a loss could
result in further recognition of a liability.

Refer to Note 2 to the Consolidated Financial Statements for additional
information on the Corporations accounting policies and to Note 16 to the
Consolidated Financial Statements for additional information on differences
between Canadian GAAP and US GAAP.

New Accounting Standards

Adoption of New Policies in Fiscal 2002

During the first quarter of its 2002 fiscal year, Star Choice adopted the
recommendations of the CICA with respect to goodwill and other intangible
assets. Under the new standard, goodwill and identifiable intangibles with
indefinite useful lives are no longer amortized but are subject to an annual
review for impairment. Reviews conducted March 1, 2002 and August 31, 2002,
which assessed amounts allocated to broadcast licences and goodwill, concluded
that no provisions for impairment were necessary. Accordingly, no amortization
has been recorded for the fiscal year ended August 31, 2002 on these
intangibles. If this change were applied to the prior years results, the net
loss for the year ended August 31, 2001 would have decreased by $858,000 to
$115.0 million and the net income for the year ended August 31, 2000 would have
increased by $750,000 to $69.3 million.

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Adoption of New Policies in Fiscal 2003

Effective September 1, 2002, Star Choice will retroactively adopt the new
Canadian accounting pronouncements for foreign currency translation, as more
fully described in Note 2 to the Consolidated Financial Statements.

Changes in Accounting Presentation

During its 2002 fiscal year, the Corporation retroactively changed the income
statement classification of the discounts given to dealers who distribute DTH
receiving equipment to be consistent with the practices of Shaw. Prior to
2002, discounts were reported in expense and equipment revenue was recorded on
a gross basis. The discount is now netted against revenue. As a result,
revenue and expenses of the Corporation have decreased by $25.6 million, $35.0
million and $37.5 million for fiscal 2002, 2001 and 2000 respectively. The
reclassification has no impact on loss before income taxes or net loss.



|B. |  | OPERATING RESULTS
|-- |  | -----------------

Year ended August 31, 2002 compared to year ended August 31, 2001

Customer Statistics

CUSTOMER STATISTICS

|                        |  |      |         |      |  |      |         |   |  |  |         |  
|----------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|Star Choice customers   |  | 2002 |         | 2001 |  | 2000
|                        |  |      |         |      |  |     
|Beginning of year       |  |      | 628,806 |      |  |      | 445,074 |   |  |  | 241,438 |  
|Additions               |  |      | 153,793 |      |  |      | 183,732 |   |  |  | 203,636 |  
|Adjustments             |  |      | (22,575 | )    |  |      |        |   |  |  |        |  
|                        |  |      |         |      |  |      |         |   |  |  |         |  
|End of year             |  |      | 760,024 |      |  |      | 628,806 |   |  |  | 445,074 |  
|                        |  |      |         |      |  |      |         |   |  |  |         |  
|% increase in additions |  |      | 24.5    | %    |  |      | 41.3    | % |  |  | 84.3    | %
|                        |  |      |         |      |  |      |         |   |  |  |         |  

On April 12, 2002, the CRTC modified certain structural separation license
conditions so as to allow Star Choice and Shaw to integrate accounting and
other administrative functions, subject to the establishment of procedures to
protect confidential information. As a result, during the fourth quarter, Star
Choice converted to the same billings system used by Shaw. The conversion is
expected to provide cost benefits and more importantly, improved customer care
and service capabilities, while at the same time respecting the required
confidentiality procedures. During the conversion process, it became evident
to Star Choice that there was an account aging problem, which resulted in the
reduction of 15,000 customers. In addition, the conversion itself caused
difficulties in the customer service area resulting in the loss of
approximately 8,000 customers. These difficulties were resolved during the
first quarter of fiscal 2003 with training and the addition of more customer
service representatives. The higher rate of growth of Star Choice in the prior
years reflects the higher growth of a start-up business that was establishing
its customer base.

Revenue

Total revenue increased $109.0 million or 35.4% to $417.0 million for the year
ended August 31, 2002 from $308.0 million for the year ended August 31, 2001.

Subscriber revenue for the year ended August 31, 2002 increased 40.5% to $362.5
million from $258.0 million, due to increased subscriber growth discussed
above, increased services and rate increases. With respect to price increases,
in September 2001, Star Choice raised monthly rates on its Platinum, Gold and
Silver packages by $2 and the Bronze package by $1. Also effective March 2002,
Star Choice introduced a charge of $4.99 per month on second receivers (except
leased receivers) on certain selected English language and bilingual packages,
and a similar charge of $2.99 on certain French language packages. With
respect to increased services, in January 2002, Star

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Choice offered 30 new digital service offerings. For fiscal 2003, revenue is
expected to increase, as effective September 1, 2002, Star Choice raised its
monthly rates by $3.00 on most of its packages.

DTH equipment sales increased to $54.4 million for the year ended August 31,
2002 from $50.1 million for the year ended August 31, 2001 as a result of
higher sales prices for equipment.

Operating Expenses

Subscriber programming costs increased to $147.6 million for the year ended
August 31, 2002 from $115.4 million for the year ended August 31, 2001 as a
result of the increase in Star Choices subscriber base. Subscriber programming
costs as a percentage of DTH subscriber revenue decreased to 40.7% for the year
ended August 31, 2002 from 44.8% for the year ended August 31, 2001. This
reflects lower network fees as a result of volume discounts attributable to a
higher subscriber base in 2002.

DTH equipment costs for the year ended August 31, 2002 were $54.4 million
compared to $50.1 million for the year ended August 31, 2001. Star Choice
subsidizes the cost of DTH equipment sold to its subscription television
customers in order to expand its customer base. These subsidies are deferred
and amortized over a two-year amortization period. For fiscal 2002, $69.2
million (2001  $107.1 million) in equipment subsidies were deferred and $97.0
million (2001  $87.5 million) were amortized.

During 2002, transponder costs increased by 6.5% to $42.3 million from $39.7
million in 2001 as a result of increased transponder usage and adding
transponder capacity.

Marketing, general and administrative costs increased approximately 13.7% to
$188.8 million for the year ended August 31, 2002 from $166.0 million for the
year ended August 31, 2001. This category includes sales and marketing costs,
costs associated with Star Choices call centres, variable costs such as CRTC
licence fees and production fund contributions, as well as administrative costs
associated with Star Choices operations.

Amortization increased to $129.3 million for the year ended August 31, 2002
from $100.5 million for the year ended August 31, 2001 primarily due to
increase amortization of equipment subsidies. Amortization of equipment
subsidies increased to $97.0 million for fiscal 2002 (2001  $87.5 million)
because of continued additions to equipment subsidies. Amortization of
deferred foreign exchange (which relates to the U.S. dollar denominated senior
secured notes and preferred shares of the Corporation) increased to $4.4
million for fiscal 2002 (2001  $1.3 million) because of a general weakening of
the Canadian dollar relative to the U.S. dollar. Amortization of deferred
financing costs associated with the senior secured notes and preferred shares
remained at $1.4 million for fiscal 2002 (2001  $1.4 million).

Interest income net of interest expense decreased to $18.1 million for the year
ended August 31, 2002 from a net income of $28.0 million for the year ended
August 31, 2001. Interest expense increased to $46.9 million in fiscal 2002
(2001  $37.0 million) due to increased debt and the weakening of the Canadian
dollar relative to the U.S. dollar. Interest revenue was unchanged at $65.0
million in fiscal 2002 (2001  $65.0 million) as a result of the interest
earned on the Corporations $500 million investment in Cancom, as disclosed in
the Notes to the Consolidated Financial Statements of the Corporation.

The recovery of income taxes declined to $12.5 million for fiscal 2002 from
$21.0 million for fiscal 2001 because of decreased losses before income taxes
and a decline in corporate tax rates.

Net Loss

The net loss of Star Choice decreased by $1.1 million to $114.8 million for the
year ended August 31, 2002 from a net loss of $115.9 million for the year ended
August 31, 2001 as a result of decreased loss before income taxes due to
increased economies of scale achieved from an increased number of DTH
customers.

24



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Capital Expenditures

Effective September 1, 2001, Star Choice introduced the Simple Satellite plan.
Under that plan, which Star Choice expects to modify or discontinue during
fiscal 2003, Star Choice pays for and retains ownership of the satellite dish.
Simple Satellite customers receive free basic installation by professional
installers with lifetime maintenance on the dish and all outside components.
In addition, if a customer moves, Star Choice will install a new dish at their
new home at no cost. As a result of this plan, capital expenditures increased
by $57.0 million and DTH equipment subsidies decreased by $37.9 million over
last year. On a combined basis, the capital expenditures and DTH subsidies for
2002 were $158.7 million compared to $139.6 million in the prior year. Capital
expenditures are expected to decrease in fiscal 2003, as effective January,
2003, the Simple Satellite plan was revised such that new customers will retain
ownership of the satellite dish.

Year ended August 31, 2001 compared to year ended August 31, 2000

Revenue

Total revenue increased $68.2 million or 28.4% to $308.0 million for the year
ended August 31, 2001 from $239.8 million for the year ended August 31, 2000.

Subscriber revenue for the year ended August 31, 2001 increased 79% to $257.9
million from $143.9 million, principally due to the 41% increase in subscribers
from 445,074 for the year ended August 31, 2000 to 628,806 for the year ended
August 31, 2001. In addition to this, Pay Per View revenues and commercial
revenues increased substantially from the prior year.

Uplink and satellite relay distribution undertaking (SRDU) revenues were nil
for the period ending August 31, 2001 as compared to $21.7 million for the year
ended August 31, 2000. This was due to the sale of the uplink and SRDU assets
of the Corporation and its subsidiaries to Cancom, resulting in a
discontinuation of this line of business effective September 1, 2000.

DTH equipment sales decreased to $50.1 million for the year ended August 31,
2001 from $74.3 million for the year ended August 31, 2000 as a result of
decreased sales of DTH receivers and lower sales prices for equipment over the
prior year.

Operating Expenses

Subscriber programming costs increased to $115.4 million for the year ended
August 31, 2001 from $68.3 million for the year ended August 31, 2000 as a
result of the increase in Star Choices subscriber base. Subscriber programming
costs as a percentage of DTH subscriber revenue decreased to 44.8% for the year
ended August 31, 2001 from 47.5% for the year ended August 31, 2000. This
reflects lower network fees as a result of volume discounts attributable to a
higher subscriber base in 2001.

Uplink and SRDU operating expenses were nil for the year ended August 31, 2001
from $13.2 million (60.9% of revenue) for the year ended August 31, 2000. The
decrease reflects the sale of the uplink and SRDU assets to Cancom effective
September 1, 2000.

DTH equipment costs for the year ended August 31, 2001 were $50.1 million
compared to $74.3 million for the year ended August 31, 2000. Star Choice
subsidizes the cost of DTH equipment sold to its subscription television
customers in order to expand its customer base. These subsidies are deferred
and amortized over a twoyear amortization period. For fiscal 2001, $107.1
million (2000  $90.3 million) in equipment subsidies were deferred and $87.5
million (2000  $29.0 million) were amortized.

During 2001, transponder costs increased by 19% to $39.7 million from $33.3
million in 2000 as a result of adding transponder capacity which allowed Star
Choice to increase its programming offering to residential customers.

Marketing, general and administrative costs increased to $166.0 million for the
year ended August 31, 2001 from $117.7 million for the year ended August 31,
2000. This category includes sales and marketing costs, costs

25



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associated with Star Choices call centres, variable costs such as CRTC licence fees and
production fund contributions, as well as administrative costs associated with
Star Choices operations.

Amortization increased to $100.5 million for the year ended August 31, 2001
from $66.4 million for the year ended August 31, 2000 primarily due to
amortization of equipment subsidies which increased to $87.5 million for fiscal
2001 (2000  $29.0 million) because of continued addition to equipment
subsidies over the past few years. Amortization of deferred foreign exchange
relates to the U.S. dollar denominated senior secured notes and the preferred
shares. The amortization of deferred foreign exchange loss increased to $1.3
million for fiscal 2001 (2000  $0.7 million) because of a general weakening of
the Canadian dollar relative to the U.S. dollar. Amortization of deferred
financing costs associated with the senior secured notes and the Preferred
shares remained at $1.4 million for fiscal 2001 (2000  $1.4 million).

Interest income net of interest expense increased to $28.0 million for the year
ended August 31, 2001 from a net income of $20.5 million for the year ended
August 31, 2000. Interest expense decreased to $37.0 million in fiscal 2001
(2000  $37.6 million). Interest revenue increased to $65.0 million in fiscal
2001 (2000  $58.1 million) as a result of the interest earned on the $500
million investment in Cancom as disclosed in the Notes to the Consolidated
Financial Statements of the Corporation.

The recovery of income taxes declined to $21.0 million for fiscal 2001 from
$42.8 million for fiscal 2000 because of increased losses before income taxes
and a decline in corporate tax rates that are expected to be in effect when
temporary differences are realized.

Net Loss

The net loss of Star Choice increased by $45.8 million to $115.9 million for
the year ended August 31, 2001 from a net loss of $70.1 million for the year
ended August 31, 2000 as a result of the reasons noted above.

Capital Expenditures

Capital expenditures for 2001 increased by $24.1 million over 2000 principally
due to the $36 million cost to install new elliptical satellite dishes in
Quebec. As a result of the conversion to Anik F1, elliptical dishes were
required in Quebec to receive French programming signals. Star Choice has
retained ownership to the dishes.



|C. |  | LIQUIDITY AND CAPITAL RESOURCES
|-- |  | -------------------------------

To fund day-to-day operating expenses, Star Choice currently has an operating
line of credit with a Canadian chartered bank in the amount of $5.0 million.
In addition, during fiscal 2001, Star Choice arranged a line of credit with one
of its vendors in the amount of $40 million to finance equipment purchases,
subject to annual review by the vendor. Negotiations are in progress
in connection with the current annual review by the vendor, and the
line of credit may or may not be renewed as a result.

Star Choice began the national roll out of its digital DTH equipment and
programming services on October 1, 1997. In order to acquire a subscriber, Star
Choice incurs subscriber acquisition costs which consist of equipment
subsidies, marketing costs and programming credits. These costs have resulted
and will continue to result in operating losses during the initial period of
growth of the DTH business. Although Star Choice generated essentially
breakeven (use of $155,000) cash flow from operating activities in fiscal 2002
(compared to use of $6.2 million and $31.7 million in 2001 and 2000
respectively), Star Choice will still incur significant subscriber acquisition
costs as it continues to expand its customer base. Such costs, including the
capital costs of satellite dishes and equipment subsidies related to subscriber
acquisition, are anticipated to be $120 million in 2003 compared to $144.7
million and $106.4 million in 2002 and 2001, respectively. Further, at August
31, 2002, Star Choices current assets of approximately $116.3 million (2001 
$83.5 million) were less than current liabilities of $138.5 million (2001 
$134.1 million) resulting in a working capital deficiency of $22.1 million
(2001  $50.6 million). Star Choice anticipates that funding of these capital
commitments and the working capital deficiencies over fiscal 2003
will be provided from Cancom or from Shaw through Cancom (as set
forth below).

At August 31, 2002, Cancoms banking facilities included a $10 million demand
operating line of credit, a seven year $350 million revolving term facility of
which $96.2 million was undrawn, and fully drawn standby credit facilities aggregating $40
million. On February 10, 2003,

26



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Cancom repaid the term
facility outstanding at that time in the amount of approximately $324 million with the proceeds of a
$350 million subscription by Shaw for preferred shares of Cancom. In
connection with this re-financing, Star Choice agreed to amend the terms of a
$500 million unsecured subordinated intercompany debenture of Cancom which is
held by Star Choice and SCTN. These amendments extend the maturity date of the
debenture to December 15, 2005 and gives Cancom the option of satisfying the
maturity by delivering senior preferred shares of Cancom or class B non-voting
participating shares of Shaw.

From September 1, 2002 to February 10,
2003, Star Choice received funding from Cancom for its operating cash
needs during such period. For the balance of fiscal 2003, Star Choices currently anticipated
operating cash needs will be financed by Cancom through the proceeds
received from the issuance of preferred shares of Cancom to Shaw (net
of the repayment of the Cancom term facility). Star Choice
anticipates receiving any additional required funding from Cancom or
from Shaw through Cancom. However, neither Cancom nor Shaw is
currently obligated to provide such funding.

Star Choice believes that, through Cancom and Shaw, it has access to sufficient
sources of funding to achieve Star Choices business plan. However, such
belief is based on a business plan that is subject to numerous assumptions and
estimates, including anticipated numbers of DTH subscribers, projected costs of
acquiring new subscribers, churn rate, average subscriber revenue and the
technological preferences of its wholesale customers. There can be no
assurance that such assumptions and estimates will prove to be accurate or that
the business plan will otherwise be achieved. In addition, the indenture
governing Star Choices Notes restricts Star Choices ability to incur
additional indebtedness and encumber its assets. As at August 31,
2002, Shaw had access to approximately $1
billion of available credit facilities based on existing bank covenants. There
are no restrictions under Shaws credit facilities that would prevent Shaw from
assisting in the funding of Star Choices business plan.

ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



|D. |  | DIRECTORS AND SENIOR MANAGEMENT
|-- |  | -------------------------------

The following table sets forth certain information with respect to the current
directors and executive officers of Star Choice as of February 1, 2003. Each
of the directors listed below is a nominee of Cancom, the sole shareholder of
Star Choice.

|                              |  |                                                        |  |                                                                               |  |                          
|----------------------------- |  | ------------------------------------------------------ |  | ----------------------------------------------------------------------------- |  | -------------------------
|Name                          |  | Position(s)                                            |  | Principal Occupation                                                          |  | Period of Service        
|                              |  |                                                        |  |                                                                               |  |                          
|JR Shaw(1)                    |  | Chair                                                  |  | Executive Chair of
Shaw Communications
Inc.                                   |  | December 2002 to present 
|                              |  |                                                        |  |                                                                               |  |                          
|Jim Shaw(1)                   |  | Director & Vice Chair                                  |  | Chief Executive
Officer of Shaw
Communications Inc.                           |  | September 2000 to present
|                              |  |                                                        |  |                                                                               |  |                          
|Peter J. Bissonnette          |  | Director & Vice Chair                                  |  | President of Shaw
Communications Inc.                                         |  | February 2001 to present 
|                              |  |                                                        |  |                                                                               |  |                          
|Ronald D. Rogers              |  | Director & Treasurer                                   |  | Senior
Vice-President and
Chief Financial
Officer of Shaw
Communications Inc. |  | October 1999 to present  
|John (Jack) R.
Perraton, Q.C. |  | Director                                               |  | Partner, Field Atkinson Perraton,
Barristers & Solicitors                     |  | January 2003 to present  
|Bradley S. Shaw(1)            |  | Senior Vice President, Operations                      |  | Senior
Vice-President,
Operations of the
Corporation                          |  | February 2001 to present 
|                              |  |                                                        |  |                                                                               |  |                          
|Doug McWilliams               |  | Vice President 
Operations, Atlantic & Western Canada |  | Vice President,
Operations of the
Corporation                                 |  | December 2002 to present 

27



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|                 |  |                                               |  |                                                         |  |                         
|---------------- |  | --------------------------------------------- |  | ------------------------------------------------------- |  | ------------------------
|Name             |  | Position(s)                                   |  | Principal Occupation                                    |  | Period of Service       
|                 |  |                                               |  |                                                         |  |                         
|Jim Cummins      |  | Vice President 
Operations; Ontario
& Quebec |  | Vice-President,
Operations of the
Corporation           |  | May 2001 to present     
|Cynthia Rathwell |  | Vice President,
Regulatory Affairs            |  | Vice-President,
Regulatory Affairs
of the Corporation   |  | January 2002 to present 
|                 |  |                                               |  |                                                         |  |                         
|Gary Pizante     |  | Vice President,
Business
Development          |  | Vice President,
Business
Development of the
Corporation |  | December 2002 to present



|Note: |  |                                                       
|----- |  | ------------------------------------------------------
|     
|(1)   |  | JR Shaw is the father of Jim Shaw and Bradley S. Shaw.

E.     COMPENSATION

For the year ended August 31, 2002, the aggregate compensation paid to all
officers as a group was $1.8 million. Directors do not receive any
compensation from Star Choice for acting as directors of the Corporation.

Officers of Star Choice are eligible to participate in the employee benefit,
pension, discretionary bonus, employee share purchase and similar plans
established by Shaw. The officers of Star Choice have also been granted an
aggregate of 150,000 options to acquire shares in the capital of Shaw under
Shaws stock option plan. Such options, which typically were granted to the
officers on or about the date of appointment at then current market prices,
have a 10 year term and vest as to 25% on each of the first four anniversary
dates of grant.



|F. |  | BOARD PRACTICES
|-- |  | ---------------

The term of office of each director is until the next annual meeting or until
his successor is elected or appointed. Each executive officer will serve until
his or her successor is duly appointed or elected by the board of directors or
his or her earlier removal or resignation from office.

The Board of Directors of the Corporation has not constituted a separate audit
committee or compensation committee. No director of the Corporation has a
service contract with the Corporation or any of its subsidiaries providing for
benefits upon termination of employment.



|G. |  | EMPLOYEES
|-- |  | ---------

As at August 31, 2002 Star Choice employed approximately 1,422 full and part
time employees (fiscal 2001  442; fiscal 2000  380). None of the employees
are party to a collective bargaining agreement.



|H. |  | SHARE OWNERSHIP
|-- |  | ---------------

None of the directors or officers of Star Choice own shares of the Corporation.
There are no arrangements for involving the employees of Star Choice in the
capital of the Corporation.

ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



|A. |  | MAJOR SHAREHOLDERS
|-- |  | ------------------

As at August 31, 2002, Star Choice had issued and outstanding 99,849,127
exchangeable common shares and 1,861,632 exchangeable preferred shares, all of
which are beneficially owned by Cancom. Shaw, in turn, holds a 99.7% voting
interest in Cancom. See Item 4.A  Information on the Company  History and
Development of the

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Company. Star Choice also has issued and outstanding Notes
in the principal amount of U.S. $150 million held by the public.



|B. |  | RELATED PARTY TRANSACTIONS
|-- |  | --------------------------

Refer to Note 15 to the Consolidated Financial Statements for information on
related party transactions and see also Item 5.C  Operating and Financial
Review and Prospects  Liquidity and Capital Resources for a description of
loans from Cancom to Star Choice.



|C. |  | INTERESTS OF EXPERTS AND COUNSEL
|-- |  | --------------------------------

Not required to be completed.

ITEM 8  FINANCIAL INFORMATION



|A. |  | CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
|-- |  | -------------------------------------------------------

See Item 17  Financial Statements

From time to time Star Choice has been, and expects to continue to be, subject
to legal proceedings and claims in the ordinary course of its business. Such
claims, even if lacking merit, could result in the expenditure of significant
financial and managerial resources. Star Choice is not aware of any legal
proceedings or claims against Star Choice that it believes will have,
individually or in the aggregate, a material adverse effect on Star Choice or
on its financial condition or results of operations.

As a wholly-owned subsidiary of Cancom, the Corporation does not have a policy
on dividend distributions.



|B. |  | SIGNIFICANT CHANGES
|-- |  | -------------------

Other than as described elsewhere in this Annual Report, there have been no
significant changes since the end of the last fiscal year of the Corporation.

ITEM 9  THE OFFER AND LISTING

Not required to be completed or not applicable.

ITEM 10  ADDITIONAL INFORMATION



|A. |  | SHARE CAPITAL
|-- |  | -------------

Not required to be completed.



|B. |  | MEMORANDUM AND ARTICLES OF ASSOCIATION
|-- |  | --------------------------------------

The information called for by Item 10.B is incorporated by reference from the
Corporations Form 20-F for the fiscal years ended August 31, 1999 and August
31, 1998.



|C. |  | MATERIAL CONTRACTS
|-- |  | ------------------

Other than as described elsewhere in this Annual Report, there are no material
contracts to which the Corporation is a party entered into during the two years
immediately preceding the date of this Annual Report.

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|D. |  | EXCHANGE CONTROLS
|-- |  | -----------------

Other than as described in Item 10.E below, there are no exchange controls
applicable to the Corporation or the Corporations securities.



|E. |  | TAXATION
|-- |  | --------

The following discussion sets forth the material U.S. and Canadian income tax
considerations for holders of Notes.

U.S. Federal Income Tax Considerations

The following is a summary of the principal U.S. federal income tax
considerations relevant to the ownership and disposition of the Notes. This
summary is based on the Internal Revenue Code of 1986, as amended (the Code),
existing and proposed Treasury regulations, and administrative and judicial
interpretations thereof (all as currently in effect and all of which are
subject to change, possibly with retroactive effect). Except as specifically
set forth herein, this summary deals only with Notes purchased by a U.S. Holder
(as defined below) on original issue at their initial issue price and that are held as capital assets within the meaning of Section
1221 of the Code. This summary does not discuss all of the tax consequences
that may be relevant to holders in light of their particular circumstances or
to holders subject to special tax rules, such as insurance companies, dealers
in securities or foreign currencies, tax-exempt investors, persons holding the
Notes as part of a hedging transaction, straddle, conversion transaction, or
other integrated transaction, or U.S. Holders whose functional currency (as
defined in Section 985 of the Code) is not the U.S. dollar. Persons holding
the Notes should consult with their own tax advisors with regard to the
application of the U.S. federal income tax laws to their particular situations
as well as any tax consequences arising under the laws of any state, local or
foreign jurisdiction.

As used herein, the term U.S. Holder means a beneficial owner of a Unit (as
defined below), Note, Warrant (as defined below) or Warrant share or that is
for U.S. federal income tax purposes: (i) a citizen or individual resident of
the United States; (ii) a corporation or partnership created or organized in or
under the laws of the United States or of any political subdivision thereof;
(iii) an estate, the income of which is subject to U.S. federal income taxation
regardless of its source; or (iv) a trust, if both (a) a U.S. court is able to
exercise primary supervision over the administration of the trust, and (b) one
or more U.S. persons have the authority to control all substantial decisions of
the trust.

Allocation of Purchase Price Between Notes and Warrants

For U.S. federal income tax purposes, the Notes, and the accompanying warrants
to purchase common stock (the Warrants) were treated as an investment unit
(Unit). The issue price of a Unit for U.S. federal income tax purposes was
the first price at which a substantial amount of Units were sold to the public
(excluding sales to bonds houses, brokers or similar persons acting as
underwriters, placement agents or wholesalers). The issue price of a Unit must
be allocated between the Note and the Warrants comprising such Unit,
U.S.$950.19 to the Note and U.S.$49.81 to the Warrants, based on the
Corporations best judgment of the relative fair market values of each such
component of each Unit. Under the Treasury regulations relating to original
issue discount (OID), each U.S. Holder is bound by such allocation for U.S.
federal income tax purposes unless such Holder discloses on a statement
attached to its tax return for the taxable year that includes the acquisition
date of such Unit that its allocation differs from that of the Corporation. No
assurance can be given that the Internal Revenue Service (the IRS) will
accept the Corporations allocation. If the Corporations allocation were
successfully challenged by the IRS, the issue price, OID accrual on the Note
and gain or loss on the sale or disposition of a Note would be different from
that resulting under the allocation determined by the Corporation.

Interest and Original Issue Discount

Stated interest on the Notes will be taxable to a U.S. Holder as it accrues or
is received, according to such holders method of accounting for U.S. federal
income tax purposes.

U.S. Holders will be required to include OID in income as it accrues in advance
of the receipt of cash attributable to such income, whether such U.S. Holder
uses the cash or accrual method of accounting.

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The amount of OID on a Note will be the excess of its stated redemption price
at maturity over the portion of the issue price of a Unit that is properly
allocable to a Note. The stated redemption price at maturity of a Note will
include all payments required to be made over the term of the Note other than
interest that is unconditionally payable in cash at least annually at a single
fixed rate (qualified stated interest). Stated interest on the Notes will be
qualified stated interest and will thus not be included in the Notes stated
redemption price at maturity. As a result, each Note will bear OID in an
amount equal to the excess of its principal amount over its issue price.

A U.S. Holder (whether on the cash or accrual method of accounting) will be
required to include in gross income for each taxable year as ordinary income an
amount equal to the sum of the daily portions OID for each day of the taxable
year on which the U.S. Holder held a Note. The daily portions of OID required
to be included in a U.S. Holders gross income will be determined on a constant
yield to maturity basis by allocating to each day in any accrual period in
which a Note is held a pro rata portion of the OID allocable to that accrual
period. Under Treasury regulations, accrual periods for the Notes may be
selected by each U.S. Holder, may be of any length, and may vary in length over
the term of such Notes, provided that each accrual period is no longer than one
year and each scheduled payment of principal and interest occurs either on the first day or
on the last day of an accrual period. In general, the OID allocable to an
accrual period equals the product of the Notes adjusted issued price at the
beginning of the accrual period (i.e. its original issue price plus previously
accrued OID, minus any previous payments on the Note) multiplied by the
original yield to maturity of the Note (determined on the basis of compounding
at the end of each accrual period). Each payment made on a Note will be
treated first, as a payment of OID to the extent of OID that has accrued as of
the payment date and that has not been allocated prior payments and second, as
a payment of principal.

Interest on the Notes, including OID accrued with respect to the Notes,
constitutes income from sources outside the U.S., and generally will be
passive or financial services income for foreign tax credit purposes.

Sale, Exchange, Redemption or Repayment of Notes

Upon the disposition of a Note by sale, exchange, redemption or repayment, a
U.S. Holder generally will recognize gain or loss equal to the difference
between the amount realized on the disposition and the U.S. Holders adjusted
tax basis in the Note. A U.S. Holders adjusted tax basis in a Note generally
will equal the portion of the issue price of a Unit that is properly allocable
to the Note, increased by amounts included in income as OID. Gain or loss in
respect of a Note generally will constitute capital gain or loss and will
constitute long term capital gain or loss if the Notes have been held for more
than one year.

Backup Withholding

Backup withholding at a rate equal to the fourth highest marginal tax rate
(30% in 2003) may apply to payments of principal and interest made on a Note
and to the proceeds of a sale or exchange of a Note (before maturity) within
the United States, that are made to a noncorporate U.S. Holder if such holder
fails to provide a correct taxpayer identification number or otherwise comply
with applicable requirements of the backup withholding rules. The backup
withholding tax is not an additional tax and may be credited against a U.S.
Holders U.S. federal income tax liability, provided that correct information
is provided to the IRS.

INVESTORS SHOULD CONSULT WITH THEIR PERSONAL TAX ADVISORS REGARDING THE
CONSEQUENCES OF AN INVESTMENT IN A PASSIVE FOREIGN INVESTMENT CORPORATION AND
SHOULD CAREFULLY CONSIDER WHETHER TO MAKE A QUALIFIED ELECTING FUND ELECTION OR
A MARK-TO-MARKET ELECTION.

Canadian Federal Income Tax Considerations

The following is a summary of the principal Canadian federal income tax
considerations generally applicable to a holder of Notes (a Non-Canadian
Holder) who, at all relevant times, deals at arms length with Star Choice, is
not and is not deemed to be resident in Canada, does not use or hold and is not
deemed to use or hold the Notes in carrying on a business in Canada and, in the
case of a holder who carries on an insurance business in Canada and elsewhere,
establishes that the Notes are not effectively connected with such insurance
business carried on in Canada and are not designated insurance property in
respect of such business.

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This summary is based on the current provisions of the Income Tax Act(Canada)
(the ITA), the regulations thereunder, proposals to amend the ITA and
regulations announced by the Minister of Finance prior to the date of this
Annual Report and takes into account the administrative practices and policies
of the Canada Customs and Revenue Agency. This summary does not take into
account or anticipate any other changes in law, whether by legislative,
regulatory, administrative or judicial action, nor does it take into account
provincial, territorial or foreign income tax legislation or considerations.

This summary is of a general nature only and it is not a complete analysis of
the tax considerations that may be applicable to a holder of Notes. Therefore,
holders of Notes should consult their own tax advisors as to the Canadian tax
consequences applicable to their particular circumstances.

Tax Treatment of the Notes

Under the ITA, the payment by Star Choice of interest, principal or premium in
respect of the Notes to a Non-Canadian Holder will be exempt from Canadian
withholding tax.

No other taxes on income (including taxable capital gains) will be payable
under the ITA in respect of the acquisition, holding, redemption or disposition
of the Notes or the receipt of interest, principal and premium thereon by a
Non-Canadian Holder solely as a consequence of such acquisition, holding,
redemption or disposition of the Notes.



|F. |  | DIVIDENDS AND PAYING AGENTS
|-- |  | ---------------------------

Not required to be completed.



|G. |  | STATEMENT BY EXPERTS
|-- |  | --------------------

Not required to be completed.



|H. |  | DOCUMENTS ON DISPLAY
|-- |  | --------------------

Documents concerning the Corporation which are referred to in this Annual
Report are available for inspection at the Corporations registered office at
Suite 900, 630  3rd Avenue S.W., Calgary, Alberta, Canada T2P 4L4.



|I. |  | SUBSIDIARY INFORMATION
|-- |  | ----------------------

Not required to be completed.

ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Star Choice has minimal financial exposures to changes in interest rates as the
interest on the Notes is fixed. The interest on the Corporations $5 million
operating line is based on Canadian prime rate. The maximum exposure related to
a one percent change in prime rate would be a $50,000 increase or decrease in
interest expense for the year.

Because Star Choices revenues and assets are primarily denominated in Canadian
dollars, it faces potential foreign exchange risks in respect of the servicing
of the interest and principal components of the Notes. The following table
summarizes the impact of changes in the Canadian/U.S. dollar exchange rate on
the Notes:

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|                           |  |                            |       |                            |  |  |     | 
|-------------------------- |  | -------------------------- | ----- | -------------------------- |  |  | --- | 
|                           |  | Change in principal amount |       | Change in interest expense
|Change in Cdn. $ vs. U.S.$ |  | ($ thousands Cdn)          |       | ($ thousands Cdn)         
|                           |  |                            |       |                           
|$0.01                      |  |                            | 1,500 |                            |  |  | 195 | 
|$0.03                      |  |                            | 4,500 |                            |  |  | 585 | 
|$0.05                      |  |                            | 7,500 |                            |  |  | 975 | 

ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not required to be completed.

33



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PART II

ITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14  MATERIAL MODIFICATIONS TO RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEMS 15  CONTROLS AND PROCEDURES

Within 90 days prior to the date of the filing of this Form 20-F, the Chief
Executive Officer (Vice Chair) and Chief Financial Officer (Treasurer) of the
Corporation carried out an evaluation of the effectiveness of the design and
operation of the Corporations disclosure controls and procedures pursuant to
Rule 13a-14(c) of the Securities Exchange Act of 1934. The Corporations
disclosure controls and procedures are designed to ensure that information
required to be disclosed in this Form 20-F and similar reports is recorded,
processed, summarized and reported on a timely basis. Upon evaluation, the
Corporations Chief Executive Officer and Chief Financial Officer have
concluded that such disclosure controls and procedures are effective in
accumulating and communicating to them in a timely manner all material
information with respect to the Corporation that is required to be disclosed in
Star Choices public filings.

There have been no significant changes in the Corporations internal controls
or other factors which could significantly affect internal controls subsequent
to the date of the evaluation, and therefore no corrective actions have been
taken.

ITEMS 16  [RESERVED]

34



---



##### 



PART III

ITEM 17  FINANCIAL STATEMENTS

The following documents are filed as part of this Annual Report:

A.     Auditors Report

B.     Consolidated Balance Sheets

C.     Consolidated Statements of Loss and Deficit

D.     Consolidated Statements of Cash Flows

E.     Notes to Consolidated Financial Statements

ITEM 18  FINANCIAL STATEMENTS

Not applicable. See Item 17.

ITEM 19  EXHIBITS

The Exhibits appended to Star Choices Form 20-F for the fiscal years ended
August 31, 2001, 2000 and 1999 are hereby incorporated by reference.

35



---



##### 



SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this Annual Report on its behalf.

DATED this 28th day of February, 2003.

| |                                
| | -------------------------------
| | STAR CHOICE COMMUNICATIONS INC.
|
| | /s/ Jim ShawJim Shaw
Vice-Chair

36



---



##### 



STAR CHOICE COMMUNICATIONS INC.
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER

I, Ronald D. Rogers, Treasurer of Star Choice Communications Inc., certify
that:



|1. |  | I have reviewed the annual report
(the Annual Report) on Form 20-F of
Star Choice Communications Inc. for the year ended August 31, 2002;                                                                                                                                                                               
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, the Annual 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
the Annual Report;    
|  
|3. |  | Based on my knowledge, the financial statements for the year ended August
31, 2002, and other financial information included in the Annual Report,
fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the year
ended August 31, 2002;
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                    



| |  | a. | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which the Annual Report is being prepared;
| |  | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b. | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of the Annual Report (the Evaluation
Date); and                                                                                                  
|
| |  | c. | presented in the Annual Report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





---



##### 





| |  | a. | all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and any fraud,
whether or not material, that involves management or other
employees who have a significant role in the registrants
internal controls; and
| |  | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The registrants other certifying officers and I have indicated in the
Annual Report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: February 28, 2003

(signed) Ronald D. Rogers
Ronald D. Rogers
Treasurer
Star Choice Communications Inc.





---



##### 



STAR CHOICE COMMUNICATIONS INC.
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER

I, Jim Shaw, Vice-Chair of Star Choice Communications Inc., certify that:



|1. |  | I have reviewed the annual report
(the Annual Report) on Form 20-F of
Star Choice Communications Inc. for the year ended August 31, 2002;                                                                                                                                                                               
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, the Annual 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
the Annual Report;    
|  
|3. |  | Based on my knowledge, the financial statements for the year ended August
31, 2002, and other financial information included in the Annual Report,
fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the year
ended August 31, 2002;
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                    



| |  | a. | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which the Annual Report is being prepared;
| |  | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b. | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of the Annual Report (the Evaluation
Date); and                                                                                                  
|
| |  | c. | presented in the Annual Report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





---



##### 





| |  | a. | all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and any fraud,
whether or not material, that involves management or other
employees who have a significant role in the registrants
internal controls; and
| |  | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The registrants other certifying officers and I have indicated in the
Annual Report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: February 28, 2003

(signed) Jim Shaw

Jim Shaw
Vice-Chair
Star Choice Communications Inc.





---



##### 



Consolidated Financial Statements

Star Choice Communications Inc.August 31, 2002, 2001 and 2000





---



##### 



AUDITORS REPORT

To the Shareholder ofStar Choice Communications Inc.

We have audited the consolidated balance sheets of Star Choice
Communications Inc.as at August 31, 2002 and 2001 and the
consolidated statements of loss and deficit and cash flows for each of
the years in the three year period ended August 31, 2002. These
financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in Canada and the 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.

In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as at August 31, 2002 and 2001 and the results of its
operations and its cash flows for each of the years in the three year
period ended August 31, 2002 in accordance with Canadian generally
accepted accounting principles.

As discussed in note 2 to the consolidated financial statements, in
2002 the Company changed its method of accounting for Goodwill and
Other Intangible Assets.

ERNST and YOUNG SIGNATURE

|                                  |  |                      
|--------------------------------- |  | ---------------------
|Calgary, Canada,
October 11, 2002 |  | Chartered Accountants





---



##### 



Star Choice Communications Inc.

CONSOLIDATED BALANCE SHEETS
[in thousands of Canadian dollars]

As at August 31

|                                             |  |      |           |      |  |  |          |  
|-------------------------------------------- |  | ---- | --------- | ---- |  |  | -------- | -
|                                             |  | 2002 |           | 2001
|                                             |  | $    |           | $   
|                                            
|ASSETS[note 7]                               |  |      |           |      |  |  |          |  
|Current                                      |  |      |           |      |  |  |          |  
|Accounts receivable                          |  |      | 60,964    |      |  |  | 36,945   |  
|Inventory                                    |  |      | 45,875    |      |  |  | 42,615   |  
|Prepaid expenses and other assets            |  |      | 9,491     |      |  |  | 3,984    |  
|                                            
|                                             |  |      | 116,330   |      |  |  | 83,544   |  
|Property, plant and equipment [note 4]       |  |      | 118,379   |      |  |  | 53,893   |  
|Long-term investments [note 15]              |  |      | 500,000   |      |  |  | 500,000  |  
|Deferred costs [note 5]                      |  |      | 106,570   |      |  |  | 149,391  |  
|Broadcast licenses [note 2]                  |  |      | 53,167    |      |  |  | 53,167   |  
|Future income tax asset [note 6]             |  |      | 161,493   |      |  |  | 149,149  |  
|                                            
|                                             |  |      | 1,055,939 |      |  |  | 989,144  |  
|                                            
|LIABILITIES AND SHAREHOLDERS EQUITY         |  |      |           |      |  |  |          |  
|Current                                      |  |      |           |      |  |  |          |  
|Bank indebtedness                            |  |      | 1,952     |      |  |  | 4,624    |  
|Accounts payable and accrued liabilities     |  |      | 117,147   |      |  |  | 120,158  |  
|Income taxes payable                         |  |      | 1,262     |      |  |  | 1,535    |  
|Unearned revenue                             |  |      | 17,506    |      |  |  | 7,408    |  
|Due to related parties [note 15]             |  |      | 595       |      |  |  | 361      |  
|                                            
|                                             |  |      | 138,462   |      |  |  | 134,086  |  
|Long-term debt and preferred shares [note 7] |  |      | 299,513   |      |  |  | 286,757  |  
|                                            
|                                             |  |      | 437,975   |      |  |  | 420,843  |  
|                                            
|Commitments and contingencies[note 12]       |  |      |           |      |  |  |          |  
|Shareholders equity                         |  |      |           |      |  |  |          |  
|Capital stock [note 8]                       |  |      | 1,022,767 |      |  |  | 858,308  |  
|Contributed surplus [note 3]                 |  |      | 11,065    |      |  |  | 11,065   |  
|Deficit                                      |  |      | (415,868  | )    |  |  | (301,072 | )
|                                            
|                                             |  |      | 617,964   |      |  |  | 568,301  |  
|                                            
|                                             |  |      | 1,055,939 |      |  |  | 989,144  |  
|                                            

See accompanying notes

On behalf of the Board:

|                           |  |                              
|-------------------------- |  | -----------------------------
|[Signed]
Jim Shaw
Director |  | [Signed]
R.D. Rogers
Director





---



##### 



Star Choice Communications Inc.

CONSOLIDATED STATEMENTS OFLOSS AND DEFICIT
[in thousands of Canadian dollars]

Years ended August 31

|                                                               |  |      |          |      |  |      |          |   |  |  |          |  
|-------------------------------------------------------------- |  | ---- | -------- | ---- |  | ---- | -------- | - |  |  | -------- | -
|                                                               |  | 2002 |          | 2001 |  | 2000
|                                                               |  | $    |          | $    |  | $   
|                                                              
|REVENUE[note 15]                                               |  |      |          |      |  |      |          |   |  |  |          |  
|Subscriber                                                     |  |      | 362,546  |      |  |      | 257,912  |   |  |  | 143,868  |  
|Uplink and SRDU                                                |  |      |         |      |  |      |         |   |  |  | 21,689   |  
|DTH equipment                                                  |  |      | 54,435   |      |  |      | 50,076   |   |  |  | 74,276   |  
|                                                              
|                                                               |  |      | 416,981  |      |  |      | 307,988  |   |  |  | 239,833  |  
|                                                              
|EXPENSES[note 15]                                              |  |      |          |      |  |      |          |   |  |  |          |  
|Subscriber                                                     |  |      | 147,563  |      |  |      | 115,421  |   |  |  | 68,346   |  
|Uplink and SRDU                                                |  |      |         |      |  |      |         |   |  |  | 13,201   |  
|DTH equipment                                                  |  |      | 54,434   |      |  |      | 50,076   |   |  |  | 74,276   |  
|Transponder                                                    |  |      | 42,323   |      |  |      | 39,660   |   |  |  | 33,256   |  
|Marketing, general and administrative                          |  |      | 188,821  |      |  |      | 166,033  |   |  |  | 117,726  |  
|Amortization of property, plant and equipment                  |  |      | 17,069   |      |  |      | 2,151    |   |  |  | 7,117    |  
|Amortization of broadcast licenses and deferred
costs          |  |      | 112,215  |      |  |      | 98,326   |   |  |  | 59,254   |  
|Interest income, net [note 7[c]]                               |  |      | (18,143  | )    |  |      | (27,955  | ) |  |  | (20,548  | )
|Restructuring charge [note 10]                                 |  |      |         |      |  |      | 1,200    |   |  |  |         |  
|                                                              
|                                                               |  |      | 544,282  |      |  |      | 444,912  |   |  |  | 352,628  |  
|Loss before income taxes                                       |  |      | (127,301 | )    |  |      | (136,924 | ) |  |  | (112,795 | )
|                                                              
|Income tax provision (benefit)[note 6]                         |  |      |          |      |  |      |          |   |  |  |          |  
|Current                                                        |  |      | (161     | )    |  |      | 196      |   |  |  | 1,057    |  
|Future                                                         |  |      | (12,344  | )    |  |      | (21,262  | ) |  |  | (43,788  | )
|                                                              
|                                                               |  |      | (12,505  | )    |  |      | (21,066  | ) |  |  | (42,731  | )
|                                                              
|Reported net loss for the year                                 |  |      | (114,796 | )    |  |      | (115,858 | ) |  |  | (70,064  | )
|Deficit, beginning of year                                     |  |      | (301,072 | )    |  |      | (185,214 | ) |  |  | (115,150 | )
|                                                              
|Deficit, end of year                                           |  |      | (415,868 | )    |  |      | (301,072 | ) |  |  | (185,214 | )
|                                                              
|Reported net loss for the year                                 |  |      | (114,796 | )    |  |      | (115,858 | ) |  |  | (70,064  | )
|Addback: Broadcast license amortization, net of
taxes [note 2] |  |      |         |      |  |      | 858      |   |  |  | 750      |  
|                                                              
|Adjusted net loss                                              |  |      | (114,796 | )    |  |      | (115,000 | ) |  |  | (69,314  | )
|                                                              

See accompanying notes





---



##### 



Star Choice Communications Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
[in thousands of Canadian dollars]

Years ended August 31

|                                                                                |                                                                  |  |          |         |      |  |          |         |   |  |          |         |  
|------------------------------------------------------------------------------- | ---------------------------------------------------------------- |  | -------- | ------- | ---- |  | -------- | ------- | - |  | -------- | ------- | -
|                                                                                |                                                                  |  | 2002     |         | 2001 |  | 2000    
|                                                                                |                                                                  |  | $        |         | $    |  | $       
|                                                                               
|OPERATING ACTIVITIES                                                            |                                                                  |  |          |         |      |  |          |         |   |  |          |        
|Reported net loss for the year                                                  |                                                                  |  | (114,796 | )       |      |  | (115,858 | )       |   |  | (70,064  | )      
|Add (deduct) items not involving cash                                           |                                                                  |  |          |         |      |  |          |         |   |  |          |        
|                                                                                | Amortization                                                     |  |          | 129,284 |      |  |          | 100,477 |   |  |          | 66,371  |  
|                                                                                | Issuance of preferred shares in lieu of cash
dividend            |  |          | 9,380   |      |  |          | 7,918   |   |  |          | 6,805   |  
|                                                                                | Future income tax benefit                                        |  |          | (12,344 | )    |  |          | (21,262 | ) |  |          | (43,788 | )
|                                                                                | Amortization of discounts on long-term debt and
preferred shares |  |          | 1,905   |      |  |          | 1,905   |   |  |          | 1,864   |  
|                                                                                | Other                                                            |  |          | 4       |      |  |          | 1,574   |   |  |          | 14      |  
|                                                                               
|Cash flow provided by (used in) operations                                      |                                                                  |  | 13,433   |         |      |  | (25,246  | )       |   |  | (38,798  | )      
|Net change in non-cash working capital balances
related to operations [note 13] |                                                                  |  | (13,588  | )       |      |  | 19,062   |         |   |  | 7,101    |        
|                                                                               
|Cash used in operating activities                                               |                                                                  |  | (155     | )       |      |  | (6,184   | )       |   |  | (31,697  | )      
|                                                                               
|FINANCING ACTIVITIES                                                            |                                                                  |  |          |         |      |  |          |         |   |  |          |        
|Increase (decrease) in bank indebtedness                                        |                                                                  |  | (2,672   | )       |      |  | 4,624    |         |   |  |         |        
|Issue of common shares                                                          |                                                                  |  | 164,459  |         |      |  | 137,459  |         |   |  | 135,097  |        
|Repayment to related party [note 15]                                            |                                                                  |  |         |         |      |  |         |         |   |  | (10,000  | )      
|Short-term investments held in escrow                                           |                                                                  |  |         |         |      |  | 15,303   |         |   |  | 38,052   |        
|                                                                               
|Cash provided by financing activities                                           |                                                                  |  | 161,787  |         |      |  | 157,386  |         |   |  | 163,149  |        
|                                                                               
|INVESTING ACTIVITIES                                                            |                                                                  |  |          |         |      |  |          |         |   |  |          |        
|Additions to property, plant and equipment                                      |                                                                  |  | (89,449  | )       |      |  | (32,420  | )       |   |  | (8,308   | )      
|Additions to equipment subsidies                                                |                                                                  |  | (69,208  | )       |      |  | (107,140 | )       |   |  | (105,609 | )      
|Net addition to inventory                                                       |                                                                  |  | (2,260   | )       |      |  | (29,518  | )       |   |  | (16,623  | )      
|Additions to deferred costs                                                     |                                                                  |  | (715     | )       |      |  | (7,289   | )       |   |  | (7,723   | )      
|MDU business acquisitions [note 3]                                              |                                                                  |  |         |         |      |  | (10,612  | )       |   |  |         |        
|Proceeds on sale of uplink and SRDU business
[notes 3 and 15]                   |                                                                  |  |         |         |      |  | 34,950   |         |   |  |         |        
|Cash used in investing activities                                               |                                                                  |  | (161,632 | )       |      |  | (152,029 | )       |   |  | (138,263 | )      
|                                                                               
|Decrease in cash and cash equivalents                                           |                                                                  |  |         |         |      |  | (827     | )       |   |  | (6,811   | )      
|Cash and cash equivalents, beginning of year                                    |                                                                  |  |         |         |      |  | 827      |         |   |  | 7,638    |        
|                                                                               
|Cash and cash equivalents, end of year                                          |                                                                  |  |         |         |      |  |         |         |   |  | 827      |        
|                                                                               
|Supplemental cash flow information                                              |                                                                  |  |          |         |      |  |          |         |   |  |          |        
|Interest paid                                                                   |                                                                  |  | 33,383   |         |      |  | 27,523   |         |   |  | 28,000   |        
|Income taxes paid (recovered)                                                   |                                                                  |  | 115      |         |      |  | (421     | )       |   |  | 714      |        
|                                                                               

See accompanying notes





---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

1.     NATURE OF BUSINESS AND ECONOMIC DEPENDENCY

Star Choice Communications Inc.
[Star Choice or the Company] is
comprised of one operating segment and is a direct-to-home [DTH]
satellite operator that distributes digital subscription video and
audio programming services via satellite throughout Canada to
residences and commercial establishments. Until August 31, 2000, Star
Choice provided satellite uplink and wholesale distribution services
to television programmers for distribution [note 3]. The Company uses
satellites operated by Telesat Canada for the distribution of its
services to customers.

Star Choice is a wholly owned subsidiary of Canadian Satellite
Communications Inc. [Cancom], which in turn is a wholly-owned
subsidiary of Shaw Communications Inc. [Shaw], a public company with
shares listed on the Toronto and New York exchanges. Star Choice
commenced commercial operations on October 1, 1997 and has experienced
significant operating losses as the Company builds its DTH customer
base. This build up of operations has resulted in increases in debt
and deficit and the need for financial support from Cancom. Star
Choice may require further financial support from Cancom and Shaw to
fund future operations to the extent that current credit facilities,
equity, expected cash flows from operations and access to third party
capital markets are insufficient to fund the Companys consolidated
operations.

2.     SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been 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 U.S. GAAP on the
consolidated financial statements of the Company are described in note
16.

Basis of consolidation

The consolidated financial statements include the accounts of the
Company and those of its wholly-owned subsidiaries. Inter-company
transactions and balances are eliminated on consolidation.

Inventory

Inventory includes subscriber equipment such as DTH receivers, which
are held pending rental or sale at a subsidized price. When
subscriber equipment is sold at a subsidized price, the subsidized
cost is deferred and amortized over two years. When subscriber
equipment is rented, it is transferred to property, plant and
equipment and amortized over its useful life. Inventory is stated at
cost due to its eventual capital nature as either an addition to
property, plant and equipment or deferred equipment subsidy,
determined on a first-in, first-out basis. Inventory is classified as
a current asset as proceeds will be received on sale of subscriber
equipment.

1



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

Property, plant and equipment

Property, plant and equipment are recorded at cost. Direct labour and
direct overhead 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 | 
|                       
|Decoders                |  | 5 years               | 
|DTH receiving equipment |  | 5 years               | 
|Satellite equipment     |  | 3-7 years             | 
|Data processing         |  | 4 years               | 
|Building                |  | 20 years              | 
|Leasehold improvements  |  | Lease term            | 
|Other                   |  | 3-10 years            | 

The Company reviews property, plant and equipment for impairment
whenever events or changes in circumstances indicate the carrying
value may not be recoverable. Recoverability is measured by a
comparison of the carrying amount of an asset to future undiscounted
net cash flows expected to be generated by the asset.

Deferred costs

Deferred charges primarily include (i) DTH equipment subsidies, (ii)
DTH pre-operating costs, (iii) financing costs related to the issue of
long-term debt, amortized on a straight-line basis over the period to
maturity of the related debt, (iv) marketing costs incurred to launch
DTH services under the new Anik F1 satellite, amortized on a
straight-line basis over a two year period and (v) foreign exchange
losses on translating long-term debt, amortized on a straight-line
basis over the period to maturity of the related debt.

DTH equipment subsidies are incurred to expand the Companys customer
base and are amortized over a two-year period on a straight-line
basis.

The deferred pre-operating costs incurred prior to October 1997
included the costs of positioning the Company for entry into the DTH
digital satellite business. These costs were deferred until
commercial operations commenced and are now fully amortized.

Broadcast licenses

The excess of the cost of acquiring 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.

2



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

Effective September 1, 2001, the Company adopted the recommendations
of the Canadian Institute of Chartered Accountants relating to
Business Combinations and Goodwill and Other Intangible Assets.
Similar standards in the United States were also adopted. As the
Company has always accounted for business combinations using the
purchase method, adoption of this standard had no impact on the
consolidated financial statements. Under the goodwill and other
intangible assets standard, goodwill and intangible assets with an
indefinite life are no longer 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. The Company evaluated
intangible assets acquired in prior business combinations and
allocated the amounts to broadcast licenses, which represent
identifiable assets with indefinite useful lives. During the year,
the Company tested the amounts allocated to broadcast licenses for
impairment and concluded that no provisions for impairment were
required. This change in accounting resulted in a reduction in
amortization expense of $1,444 for 2002.

Prior to September 1, 2001, these intangible assets were included in
goodwill and amortized on a straight-line basis over 40 years. These
assets were written down if there was evidence of a permanent
impairment in their value to the Company. The potential impairment of
these assets was measured against the undiscounted value of expected
future operating income before amortization, taxes and interest.

Revenue recognition

Revenue from satellite customers is recognized wh en the subscriber
revenue is earned. The sale of DTH receiving equipment is recognized
when subscriber service is activated.

In 2002, the Company retroactively changed the income statement
classification of the discounts given to dealers who distribute DTH
receiving equipment to be consistent with practices throughout Shaw.
Discounts are now netted against revenue. Previously, these discounts
were included in expense. As a result, revenue and expenses have
decreased by $25,600 for the year [2001  $35,000 and 2000  $37,500].

Stock-based compensation

Employees of the Company are members of the stock-based compensation
plans of Shaw. Options under the Shaw plan must be issued at no less
than their fair value; accordingly, no compensation expense is
recorded on the grant of options under the plan.

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 substantially 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.

3



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

Foreign currency translation

Transactions originating in foreign currencies are translated to
Canadian dollars at the exchange rate in effect at the date of the
transaction. Monetary assets and liabilities denominated in a foreign
currency are translated using the year-end exchange rate. Any
resulting exchange gains and losses are included in the net loss for
the year.

Exchange losses on translating long-term debt and preferred shares are
deferred and amortized on a straight-line basis over the remaining
life of the debt [note 7].

Use of estimates

The preparation of the consolidated financial statements in conformity
with Canadian generally accepted accounting principles 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 revenue and expenses during the year.
Actual results could differ from those estimates.

The Company has estimated the useful lives of property, plant and
equipment and recoverability of deferred costs and broadcast licenses
using current business plans. Significant changes in the assumptions
with respect to the competitive environment and the DTH market could
result in an impairment of these assets.

The Company has tested the amounts allocated to broadcast licenses for
impairment using discounted cash flows based on current business
plans. Significant changes in assumptions with respect to the
competitive environment could result in impairment of these intangible
assets.

Recent Canadian accounting pronouncements

(i)  Foreign currency translation

Commencing September 1, 2002, the Company will be retroactively
adopting the new Canadian standard for foreign currency translation
and will eliminate the deferral and amortization method of accounting
for unrealized translation gains and losses on non-current monetary
assets and liabilities that are not hedged and will require exchange
gains and losses be included in net income in the period they are
incurred. Upon adoption of this standard on September 1, 2002,
deferred unamortized foreign exchange losses amounting to $2,881 (net
of taxes) will be eliminated and charged against the opening deficit
as at September 1, 2000. As prior years will be restated upon
adoption, the Companys net loss for 2002 and 2001 will (decrease)
increase by ($2,285) and $9,398 respectively.

4



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

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

Commencing September 1, 2002, the Company will be adopting the new
Canadian standard for stock-based compensation and other stock-based
payments which requires that all stock-based awards granted to
non-employees be accounted for at fair value. With limited exceptions
relating to direct awards of stock, awards required or expected to be
settled in cash and stock appreciation rights, the new standard
permits the Company to continue its current policy of not recording
any compensation cost on the grant of stock options to employees.

3.     BUSINESS ACQUISITIONS AND DIVESTITURES

A summary of net assets acquired on MDU business acquisitions in 2001,
accounted for as purchases, is as follows:

|                                                     |  |   |        | 
|---------------------------------------------------- |  | - | ------ | 
|Identifiable assets acquired at assigned fair values |  | $
|                                                    
|Inventory                                            |  |   | 318    | 
|Property, plant and equipment                        |  |   | 400    | 
|Broadcast licenses                                   |  |   | 9,894  | 
|                                                    
|Cash purchase price                                  |  |   | 10,612 | 
|                                                    

Effective September 1, 2000, property, plant and equipment, customer
contracts and agreements and licenses relating to the satellite uplink
and wholesale distribution businesses were sold to Cancom for $51,900.
Consideration consisted of $34,950 in cash and cancellation of the
$16,950 advance owing to Cancom [note 15]. No gain was recorded on
the sale as the transaction was recorded at the carrying amount of the
assets of $40,835. The excess of sale price over the carrying amount
[$11,065] was credited to contributed surplus.

5



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

4.     PROPERTY, PLANT AND EQUIPMENT

|                            |  |      |         |              |  |             |        |              |  |  |        |             |  |  |       | 
|--------------------------- |  | ---- | ------- | ------------ |  | ----------- | ------ | ------------ |  |  | ------ | ----------- |  |  | ----- | 
|                            |  | 2002 |         | 2001        
|                            |  |     
|                            |  |      |         |              |  | Accumulated |        |              |  |  |        | Accumulated
|                            |  | Cost |         | Amortization |  | Cost        |        | Amortization
|                            |  | $    |         | $            |  | $           |        | $           
|                           
|Decoders                    |  |      | 37,836  |              |  |             | 8,233  |              |  |  | 34,876 |             |  |  | 962   | 
|DTH receiving equipment     |  |      | 77,529  |              |  |             | 6,653  |              |  |  | 10,000 |             |  |  |      | 
|Satellite equipment         |  |      | 3,416   |              |  |             | 485    |              |  |  | 544    |             |  |  | 33    | 
|Data processing             |  |      | 7,321   |              |  |             | 3,502  |              |  |  | 4,121  |             |  |  | 2,321 | 
|Building under construction |  |      | 3,654   |              |  |             | 156    |              |  |  | 2,585  |             |  |  |      | 
|Leasehold improvements      |  |      | 2,562   |              |  |             | 954    |              |  |  | 2,560  |             |  |  | 442   | 
|Other                       |  |      | 7,422   |              |  |             | 1,795  |              |  |  | 3,500  |             |  |  | 952   | 
|Land                        |  |      | 417     |              |  |             |       |              |  |  | 417    |             |  |  |      | 
|                           
|                            |  |      | 140,157 |              |  |             | 21,778 |              |  |  | 58,603 |             |  |  | 4,710 | 
|                           
|                            |  |      | 118,379 |              |  |             | 53,893 |             
|                           

5.     DEFERRED COSTS

|                                |  |      |         |              |  |             |         |              |  |  |         |             |  |  |         | 
|------------------------------- |  | ---- | ------- | ------------ |  | ----------- | ------- | ------------ |  |  | ------- | ----------- |  |  | ------- | 
|                                |  | 2002 |         | 2001        
|                                |  |     
|                                |  |      |         |              |  | Accumulated |         |              |  |  |         | Accumulated
|                                |  | Cost |         | Amortization |  | Cost        |         | Amortization
|                                |  | $    |         | $            |  | $           |         | $           
|                               
|DTH equipment subsidies         |  |      | 326,112 |              |  |             | 238,927 |              |  |  | 258,904 |             |  |  | 141,952 | 
|Pre-operating costs             |  |      | 19,755  |              |  |             | 19,755  |              |  |  | 19,755  |             |  |  | 13,955  | 
|Financing costs                 |  |      | 11,007  |              |  |             | 6,384   |              |  |  | 11,007  |             |  |  | 4,997   | 
|Marketing costs                 |  |      | 7,302   |              |  |             | 5,189   |              |  |  | 7,302   |             |  |  | 1,538   | 
|Foreign exchange loss and other |  |      | 24,032  |              |  |             | 11,383  |              |  |  | 21,846  |             |  |  | 6,981   | 
|                               
|                                |  |      | 388,208 |              |  |             | 281,638 |              |  |  | 318,814 |             |  |  | 169,423 | 
|                               
|                                |  |      | 106,570 |              |  |             | 149,391 |             
|                               

Amortization expense provided in the accounts on deferred costs for
2002 amounted to $112,215 [2001  $97,006 and 2000  $58,100].

6



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##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

6.     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 income tax
assets and liabilities are as follows:

|                                    |  |      |         |      |  |  |         | 
|----------------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                                    |  | 2002 |         | 2001
|                                    |  | $    |         | $   
|                                   
|Property, plant and equipment       |  |      | 6,783   |      |  |  | 2,948   | 
|Non-capital losses carried forward  |  |      | 203,420 |      |  |  | 201,976 | 
|                                   
|Gross future income tax assets      |  |      | 210,203 |      |  |  | 204,924 | 
|                                   
|Deferred costs                      |  |      | 30,396  |      |  |  | 42,849  | 
|Broadcast licenses                  |  |      | 18,314  |      |  |  | 12,926  | 
|                                   
|Gross future income tax liabilities |  |      | 48,710  |      |  |  | 55,775  | 
|                                   
|Net future income tax asset         |  |      | 161,493 |      |  |  | 149,149 | 
|                                   

The future tax asset primarily reflects the benefit of utilizing
non-capital losses carried forward, which expire in varying amounts
between 2003 and 2009. Realization of the future income tax asset is
dependent on generating sufficient taxable income prior to the
expiration of the non-capital losses carried forward. Although
realization is not assured, management believes it is more likely than
not that all of the future income tax assets will be realized. The
amount of the future income tax assets considered realizable, however,
could be reduced in the near term if estimates of future taxable
income during the carryforward period are reduced.

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

|                                               |                                                                                                       |  |         |        |      |  |         |        |  |  |         |       | 
|---------------------------------------------- | ----------------------------------------------------------------------------------------------------- |  | ------- | ------ | ---- |  | ------- | ------ |  |  | ------- | ----- | 
|                                               |                                                                                                       |  | 2002    |        | 2001 |  | 2000   
|                                               |                                                                                                       |  | $       |        | $    |  | $      
|                                              
|Income tax benefit at Canadian statutory rates |                                                                                                       |  | (50,920 | )      |      |  | (58,877 | )      |  |  | (49,652 | )    
|Decrease in tax benefit resulting from:        |                                                                                                       |  |         |        |      |  |         |        |  |  |         |      
|                                               | Effect of future tax rate reductions and other                                                        |  |         | 27,719 |      |  |         | 23,178 |  |  |         |      | 
|                                               | Difference from statutory rate relating to items not
deductible for tax purposes                      |  |         | 4,812  |      |  |         | 4,258  |  |  |         | 5,864 | 
|                                               | Large Corporations Tax                                                                                |  |         | 120    |      |  |         | 190    |  |  |         | 1,057 | 
|                                               | Originating temporary differences recorded at
future tax rates expected to be in effect when
realized |  |         | 5,764  |      |  |         | 10,185 |  |  |         |      | 
|                                              
|Income tax benefit                             |                                                                                                       |  | (12,505 | )      |      |  | (21,066 | )      |  |  | (42,731 | )    
|                                              

7



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##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

7.     LONG-TERM DEBT AND PREFERRED SHARES

|                             |  |      |         |      |  |  |         | 
|---------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                             |  | 2002 |         | 2001
|                             |  | $    |         | $   
|                            
|13% Senior secured notes [a] |  |      | 229,306 |      |  |  | 226,752 | 
|14% Preferred shares [b]     |  |      | 70,207  |      |  |  | 60,005  | 
|                            
|                             |  |      | 299,513 |      |  |  | 286,757 | 
|                            



|[a] |  | 13% Senior secured notes [U.S. $150,000]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Senior secured notes [the
Notes] are due December 15, 2005 and are redeemable at the
option of the Company at 106.5% of the issue price of U.S. $150,000 on or after December 15,
2002, 103.25% of the issue price on or after December 15, 2003, or at 100% of the issue price
on or after December 15, 2004. Interest is payable semi-annually.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | The Notes are collateralized by all of the assets of Star Choice with the exception of the assets
of a subsidiary, Direct Choice TV Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|[b] |  | Preferred shares [U.S $46,541]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | The preferred shares are held by Cancom and are non-voting and mandatory redeemable on
December 15, 2006. The annual 14% dividend is payable at the option of the Company in cash
or in additional preferred shares until December 15, 2002. Thereafter, dividends will be payable
in cash. If cash or in kind dividend payments are not made, the dividend rate will increase to
16%. The preferred shares are redeemable at the option of the Company at 107% of the per
share issue price of U.S. $25.00 on or before December 15, 2003, 104.68% of the issue price
after December 15, 2003, 102.32% of the issue price after December 15, 2004 and 100% of the
issue price after December 15, 2005. During the year, the Company issued 239,328 preferred
shares in lieu of cash dividend payments [2001  208,560 shares and 2000  147,926 shares].
|   
|[c] |  | Interest expense (income) consists of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

|                                          |  |      |         |      |  |      |         |   |  |  |         |  
|----------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|                                          |  | 2002 |         | 2001 |  | 2000
|                                          |  | $    |         | $    |  | $   
|                                         
|Senior secured notes and preferred shares |  |      | 46,857  |      |  |      | 39,273  |   |  |  | 35,160  |  
|Advance from related party                |  |      |        |      |  |      | (1,742  | ) |  |  | 1,742   |  
|Other                                     |  |      |        |      |  |      | (486    | ) |  |  | 683     |  
|Less interest income [note 15]            |  |      | (65,000 | )    |  |      | (65,000 | ) |  |  | (58,133 | )
|                                         
|                                          |  |      | (18,143 | )    |  |      | (27,955 | ) |  |  | (20,548 | )
|                                         

8



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##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

8.     CAPITAL STOCK

Authorized
100,000,000 common shares without
nominal or par value
30,000,000 preferred shares without nominal or par
value

Capital stock

Changes in capital stock are as follows:

|                         |  |               |            |   |  |  |           | 
|------------------------ |  | ------------- | ---------- | - |  |  | --------- | 
|                         |  | Common shares
|                         |  |              
|                         |  | #             |            | $
|                        
|Balance, August 31, 1999 |  |               | 5,846,326  |   |  |  | 85,752    | 
|Shares issued [i]        |  |               | 94,000,000 |   |  |  | 500,000   | 
|Cash proceeds [ii]       |  |               | 500        |   |  |  | 135,097   | 
|                        
|Balance, August 31, 2000 |  |               | 99,846,826 |   |  |  | 720,849   | 
|Cash proceeds [ii]       |  |               | 1,200      |   |  |  | 137,459   | 
|                        
|Balance, August 31, 2001 |  |               | 99,848,026 |   |  |  | 858,308   | 
|Cash proceeds [ii]       |  |               | 1,200      |   |  |  | 164,459   | 
|                        
|Balance, August 31, 2002 |  |               | 99,849,226 |   |  |  | 1,022,767 | 
|                        



|[i]  |  | On October 7, 1999, the Company issued 94,000,00 common shares to
Cancom in exchange for a $500,000 13% debenture [note 15].     
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------
|    
|[ii] |  | In 2002, 2001 and 2000 the Company received cash advances from
Cancom and issued common shares as consideration for the advances.

9.     STOCK-BASED COMPENSATION PLANS

In conjunction with the acquisition of Star Choice by Cancom, as at
August 31, 1999, holders of the Companys options elected to receive
one Cancom option in lieu of 4.8 Star Choice options. In 2000, Shaw
completed the acquisition of Cancom and employees elected to receive
0.9 of a Shaw option in lieu of one Cancom option.

The Company and Cancom established a distributor and dealer warrant
plan to grant Cancom warrants to acquire shares at a price of $22.50
per Cancom share. As part of Shaws acquisition of Cancom in fiscal
2000, the warrants issued under this plan will now be exercisable into
Shaw shares at $25 per Shaw share. The warrants issued under this
plan expire five years after the date of grant.

9



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

A total of 76,150 dealer warrants remain outstanding and vest evenly
over a four-year period. Of the warrants outstanding, 44,750 expire
on September 1, 2005 and the remainder on September 1, 2006. During
2002, 11,500 dealer warrants vested and 1,250 were exercised. As the
warrants vest, the Company records an expense equal to the difference
between the Shaw Class B Share price and the exercise price as the
Company will be required to reimburse Shaw for the shortfall on the
exercise price when the warrants are exercised. The amount charged to
the Consolidated Statements of Loss and Deficit was $83.

10.     RESTRUCTURING CHARGE

During the year ending August 31, 2001, management evaluated the
operations of the Company and identified areas where certain synergies
existed between the Star Choice operations and the corporate office of
Shaw. As a result of this evaluation, management implemented a
restructuring plan and recorded a provision for restructuring costs of
$1,200. The provision represented managements best estimate of costs
relating to employee severance, relocation and other restructuring
costs. As at August 31, 2002, all costs have been incurred.

11.     CRTC LICENSES

DTH satellite broadcasting and distribution of Canadian and U.S.
television signals to cable operators in Canada [SRDU] is regulated
by the CRTC, which issues broadcasting licenses. As a result of the
sale of the uplink and SRDU businesses, Star Choice surrendered such
licenses
[note 3].

12.     COMMITMENTS AND CONTINGENCIES



| |  | [a] The Company has various long-term commitments under contracts and
operating lease agreements for the use of premises as follows:
| |  | ------------------------------------------------------------------------------------------------------------------------------------

|           |  |   |       | 
|---------- |  | - | ----- | 
|           |  | $
|          
|2003       |  |   | 1,745 | 
|2004       |  |   | 1,506 | 
|2005       |  |   | 1,113 | 
|2006       |  |   | 183   | 
|2007       |  |   | 183   | 
|Thereafter |  |   | 227   | 
|          
|           |  |   | 4,957 | 
|          



|[b] |  | The Company is involved in various lawsuits, the loss from which,
if any, would not be considered material to the consolidated financial
statements.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

10



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

13.     CONSOLIDATED STATEMENT OF CASH FLOWS

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

|                                         |  |      |         |      |  |      |        |   |  |  |         |  
|---------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------ | - |  |  | ------- | -
|                                         |  | 2002 |         | 2001 |  | 2000
|                                         |  | $    |         | $    |  | $   
|                                        
|Cash provided by (used in)               |  |      |         |      |  |      |        |   |  |  |         |  
|Accounts receivable                      |  |      | (24,019 | )    |  |      | 7,413  |   |  |  | (30,357 | )
|Due from related party                   |  |      |        |      |  |      |       |   |  |  | (2,996  | )
|Prepaid expenses and other assets        |  |      | (5,507  | )    |  |      | (3,379 | ) |  |  | 1,243   |  
|Accounts payable and accrued liabilities |  |      | 5,879   |      |  |      | 19,996 |   |  |  | 29,145  |  
|Income taxes payable                     |  |      | (273    | )    |  |      | 668    |   |  |  | 867     |  
|Unearned revenue                         |  |      | 10,098  |      |  |      | 2,408  |   |  |  |        |  
|Due to related parties                   |  |      | 234     |      |  |      | (8,044 | ) |  |  | 9,199   |  
|                                        
|                                         |  |      | (13,588 | )    |  |      | 19,062 |   |  |  | 7,101   |  
|                                        

14.     FINANCIAL INSTRUMENTS

Fair values

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

The long-term investment is being held to maturity.

The fair value of the Senior secured notes is determined based on the
publicly traded value of these instruments and the fair value of the
preferred shares is based upon the current trading value of similar
instruments. As at August 3l, 2002, the fair value of the Companys
Senior secured notes and preferred shares is estimated at $311,042.

Foreign currency rate risk

The Company is exposed to foreign currency fluctuations in respect of
servicing the interest payments on the Senior secured notes, and 14%
preferred share dividends after December 15, 2002 and to the extent
that many purchases are in U.S. dollar denominated prices

Credit risks

The Companys DTH equipment sales of $54,435 [2001  $50,076; 2000 -
$74,276] are to one customer who acts as an intermediary to franchise
dealers. The accounts receivable from this customer comprises
approximately 27% of accounts receivable as at August 31, 2002 [2001
  32%].

11



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

15.     RELATED PARTY TRANSACTIONS

The amounts due to related parties are in respect of the Companys
parent, Cancom and Cancoms parent, Shaw, and their subsidiaries and
other companies subject to common control and significant influence.

During 2002, network fees of $33,377
[2001  $28,210 and 2000 
$8,000], signal fees of $661 [2001  $769 and 2000  $491] and circuit
charges of $289 were paid to companies subject to common control and
significant influence.

During 2002, the Company paid $66,061 [2001  $62,691 and 2000  $nil]
in transponder fees, technical support services and administrative
services to Cancom. Transponder capacity is obtained from Cancom
under a service agreement where the fees are based on the Companys
utilization of the transponders.

In 2001, the Company transferred its interest in the Anik F1 satellite
to a company subject to common control.

During 2000, signal sales of $7,000 were made to Shaw and other
companies subject to common control, with purchases from Shaw of
signal monitoring fees of $1,600.

During 2000, Star Choice repaid $26,950 to Shaw for the advances Shaw
made to the Company in 1999.

During 2000, Cancom advanced $16,950 to the Company. The advance was
without stated terms of repayment and non-interest bearing. On
September 1, 2000, the advance was used by Cancom to partially satisfy
the purchase price owing on the acquisition of the uplink and
distribution assets from Star Choice [note 3].

On October 7, 1999 the Company invested in a $500,000 unsecured
debenture issued by Cancom bearing interest at 13% per annum.
Interest earned by Star Choice during the year on the debenture was
$65,000 [2001  $65,000 and 2000  $58,133]. The debenture is due
December 31, 2004.

These transactions are in the normal course of operations, at standard
payment terms, and are recorded at the exchange amount, which is the
amount of consideration established and agreed to by the related
parties.

12



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

16.     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES

These consolidated financial statements have been prepared in
accordance with Canadian GAAP. The following adjustments would be
required in order to present these consolidated financial statements
in accordance with the U.S. GAAP.



|[a] |  | Reconciliation of consolidated statements of loss to U.S. GAAP
|--- |  | --------------------------------------------------------------

|                                                   |  |      |          |      |  |      |          |   |  |  |         |  
|-------------------------------------------------- |  | ---- | -------- | ---- |  | ---- | -------- | - |  |  | ------- | -
|                                                   |  | 2002 |          | 2001 |  | 2000
|                                                   |  | $    |          | $    |  | $   
|                                                  
|Reported net loss for the year using Canadian
GAAP |  |      | (114,796 | )    |  |      | (115,858 | ) |  |  | (70,064 | )
|Deferred costs [i]                                 |  |      | 39,218   |      |  |      | (23,417  | ) |  |  | (57,018 | )
|Broadcast licenses [ii]                            |  |      |         |      |  |      | 158      |   |  |  | 158     |  
|Deferral of foreign exchange gain (loss) [iii]     |  |      | 2,770    |      |  |      | (11,766  | ) |  |  | 3,666   |  
|Preferred share dividends [iv]                     |  |      | 9,661    |      |  |      | 8,194    |   |  |  | 6,805   |  
|Income tax effect of adjustments                   |  |      | (14,211  | )    |  |      | 10,200   |   |  |  | 22,525  |  
|                                                  
|Net loss for the year using U.S. GAAP              |  |      | (77,358  | )    |  |      | (132,489 | ) |  |  | (93,928 | )
|                                                  



|[i]   |  | Under Canadian GAAP certain expenses incurred by the Company prior to the
commencement of commercial operations, subsidies provided by the Company on the sale
of DTH equipment and marketing costs to launch new services, have been deferred. Under
U.S. GAAP these costs are required to be expensed as incurred.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|[ii]  |  | As a result of the recognition of a deferred tax asset for U.S. GAAP purposes, the amount
allocated to broadcast licenses that arises on the acquisition is different than the amount
allocated to broadcast licenses that arise under Canadian GAAP.                                                               
|     
|[iii] |  | Under Canadian GAAP, exchange gains and losses on the translation of long-term
monetary debt are deferred and amortized over the term of the debt. Under U.S. GAAP,
these items are recorded in current income as incurred.                                                                                         
|     
|[iv]  |  | Under Canadian GAAP, dividends paid related to preferred shares that are classified as
debt are considered to be interest expense. Under U.S. GAAP such dividends are charged
directly to the deficit.                                                                                                              

13



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000



|[b] |  | Reconciliation of balance sheet items to U.S. GAAP
|--- |  | --------------------------------------------------

|                                        |                         |  |          |        |      |  |          |   |      |  |          |         |  |  |          |   | 
|--------------------------------------- | ----------------------- |  | -------- | ------ | ---- |  | -------- | - | ---- |  | -------- | ------- |  |  | -------- | - | 
|                                        |                         |  | 2002     |        | 2001
|                                        |                         |  |         
|                                        |                         |  | Cdn.     |        | U.S. |  | Cdn.     |   | U.S.
|                                        |                         |  | GAAP     |        | GAAP |  | GAAP     |   | GAAP
|                                       
|Deferred costs [a][i]                   |                         |  |          |        |      |  |          |   |      |  |          |         |  |  |          |  
|                                        | Pre-operating costs     |  |          |       |      |  |          |  |      |  |          | 5,800   |  |  |          |  | 
|                                        | DTH equipment subsidies |  |          | 87,185 |      |  |          |  |      |  |          | 116,952 |  |  |          |  | 
|                                        | Marketing costs         |  |          | 2,113  |      |  |          |  |      |  |          | 5,764   |  |  |          |  | 
|Broadcast licenses [a][ii]              |                         |  | 53,167   |        |      |  | 47,093   |   |      |  | 53,167   |         |  |  | 47,093   |  
|Future income taxes                     |                         |  | 161,493  |        |      |  | 205,109  |   |      |  | 149,149  |         |  |  | 206,976  |  
|Deferred foreign exchange loss [a][iii] |                         |  | 12,113   |        |      |  |         |   |      |  | 14,883   |         |  |  |         |  
|Deficit                                 |                         |  | (415,868 | )      |      |  | (479,737 | ) |      |  | (301,072 | )       |  |  | (392,718 | )
|                                       



|[c] |  | Cumulative effect of adjustments on shareholders equity
|--- |  | --------------------------------------------------------

|                                              |                                   |  |         |         |      |  |         |         |  
|--------------------------------------------- | --------------------------------- |  | ------- | ------- | ---- |  | ------- | ------- | -
|                                              |                                   |  | 2002    |         | 2001
|                                              |                                   |  | $       |         | $   
|                                             
|Shareholders equity using Canadian GAAP      |                                   |  | 617,964 |         |      |  | 568,301 |        
|U.S. GAAP adjustments to net loss (after tax) |                                   |  |         |         |      |  |         |        
|                                              | Current [a]                       |  |         | 37,438  |      |  |         | (16,631 | )
|                                              | Cumulative                        |  |         | (66,453 | )    |  |         | (49,822 | )
|                                              | Preferred share dividends [a][iv] |  |         | (34,854 | )    |  |         | (25,193 | )
|                                             
|Shareholders equity using U.S. GAAP          |                                   |  | 554,095 |         |      |  | 476,655 |        
|                                             



|[d] |  | Other disclosures
|--- |  | -----------------

The significant components of accounts receivable are as follows:

|                                                    |  |      |        |      |  |  |        |  
|--------------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|                                                    |  | 2002 |        | 2001
|                                                    |  | $    |        | $   
|                                                   
|Trade accounts receivable                           |  |      | 48,896 |      |  |  | 33,298 |  
|Miscellaneous receivables including commodity taxes |  |      | 14,917 |      |  |  | 5,213  |  
|Allowance for doubtful accounts                     |  |      | (2,849 | )    |  |  | (1,566 | )
|                                                   
|                                                    |  |      | 60,964 |      |  |  | 36,945 |  
|                                                   

14



---



##### 



Star Choice Communications Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[all amounts in thousands of Canadian dollars]

August 31, 2002, 2001 and 2000

The significant components of accounts payable and accrued liabilities are as
follows:

|                          |  |      |         |      |  |  |         | 
|------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                          |  | 2002 |         | 2001
|                          |  | $    |         | $   
|                         
|Trade payables            |  |      | 23,981  |      |  |  | 63,490  | 
|Accrued liabilities       |  |      | 39,964  |      |  |  | 32,564  | 
|Accrued interest          |  |      | 10,323  |      |  |  | 6,300   | 
|Accrued programming costs |  |      | 40,670  |      |  |  | 14,770  | 
|Accrued media expenses    |  |      | 2,209   |      |  |  | 3,034   | 
|                         
|                          |  |      | 117,147 |      |  |  | 120,158 | 
|                         



|[e] |  | Stock-based compensation
|--- |  | ------------------------

The Company applied APB Opinion 25 in accounting for common share
options granted to employees and officers for U.S. GAAP purposes. Had
compensation expense been determined on the basis of the estimated
fair values of the options granted in accordance with SFAS No. 123,
Accounting for Stock-Based Compensation, the pro forma net loss for
the year ended August 31, 2000 would have increased by $500 to
$70,564.

The fair value of stock options granted in 2000, estimated as at the
grant date using the Black-Scholes option pricing model, was $5,600,
based on the following assumptions:

|                        |  |              |  | 
|----------------------- |  | ------------ |  | 
|Dividend yield          |  | nil         
|Risk free interest rate |  | 5.5% to 7%  
|Expected life           |  | 4 to 6 years
|Expected volatility     |  | 45% to 55%  



|[f] |  | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | In August 2001, the Financial Accounting Standards Board issued
Statement No. 144 Accounting for the Impairment or Disposal of
Long-Lived Assets [FAS 144 which addresses the financial
accounting and reporting for impairment or disposal of long-lived
assets. FAS 144 is effective for the Companys 2003 fiscal year.
The impact of adopting this pronouncement on the Companys
financial statements has not yet been determined.

17.     COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

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

15