##### Table of Contents



Exhibit 1

(SHAW LOGO), center

SHAW COMMUNICATIONS INC.

ANNUAL REPORT 2004













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Shaw Communications Inc.


ANNUAL REPORT


August 31, 2004


SHAW COMMUNICATIONS INC.

ANNUAL REPORT


|                                                        |  |      |    | 
|------------------------------------------------------- |  | ---- | -- | 
|CONTENTS                                                |  | Page
|Report to Shareholders                                  |  |      | 1  | 
|Managements Discussion
    and Analysis                |  |      | 3  | 
|Managements
    Responsibility for Financial Reporting |  |      | 45 | 
|Auditors Report                                        |  |      | 46 | 
|Consolidated Financial
    Statements                   |  |      | 47 | 
|Notes to the Consolidated
    Financial Statements      |  |      | 50 | 
|Five Years in Review                                    |  |      | 96 | 
|Shareholders
    Information                           |  |      | 97 | 
|Corporate Information                                   |  |      | 98 | 



The Annual General Meeting of Shareholders will
be held on January 13, 2005 at 11:00am at The Fairmont
Hotel Macdonald, 10065  100 Street, Edmonton, Alberta
T5J 0N6.



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##### Table of Contents



Shaw Communications Inc.





REPORT TO SHAREHOLDERS


August 31, 2004


Dear Fellow Shareholders:

Fiscal 2004 was marked by a number of significant
achievements. In addition to almost tripling free cash
flow1, we continued to grow our cable subscriber
base, and we reached one million Internet customers in June. Our
satellite division significantly improved its operating income
before amortization and became free cash flow positive for the
first time.

Our financial position has improved as a result
of this strong performance, enabling us to reduce debt by
$210.6 million and increase the quarterly dividend on the
Class B Non-Voting Shares to $0.07 per share effective
September 30, 2004. While reducing overall levels of
capital expenditures, we started a number of capital projects to
prepare for new services such as Digital Phone, which is
scheduled for launch in calendar 2005.

The foundation of our success this year resulted
from the continuation of a number of strategies: leveraging our
network infrastructure to offer customers a wider variety of
products and services; delivering quality customer service to
increase penetration; implementing price/ packaging structures
that provide value to both Shaw and the customer; and,
generating operating efficiencies to keep our competitive edge.

CABLE AND INTERNET

Customer acquisition strategies, including
several cable service introductory offers, continued to be
successful in terms of both acquiring and retaining new
customers during 2004. Also, same day/next day service delivers
timely connections and service visits. With these programs and a
focus on serving the customer, Shaw continues to grow in a cost
effective manner.

Bundling our services also builds customer
satisfaction and loyalty. At August 31, 2004, approximately
900,000 Shaw customers subscribed to bundled services, an
increase of more than 100,000 customers over last year. Bundling
improves customers value perception of Shaws
services and has contributed to reducing Digital and Internet
customer churn.

The Company strives to continuously improve its
services to add value and differentiate Shaws offerings
from its competitors. For example, we introduced a new
interactive program guide (IPG) that is faster and
more responsive, contains more program information to enable
viewers to plan their viewing in advance and will enable
on-screen ordering of Video-on-Demand (VOD) content.
The introduction of the single tuner personal video recorder
(PVR) and HDTV set-top is also showing early signs
of success.

Shaws Internet service continued its
impressive record of growth, achieving a 14% increase in
customers in 2004. Reliable service, combined with on-going
product enhancements, such as the launch of Xtreme-I, our ultra
high-speed Internet service, have enabled Shaw to maintain its
position as North Americas leading cable operator in terms
of Internet service penetration as a percentage of basic cable
customers. Shaws Internet product offers a wide range of
services designed to fit customers budgets which may be
purchased individually or as part of a Shaw bundle.

SATELLITE/DTH

Star Choice significantly improved its results
this year, particularly in service operating income before
amortization1, despite increased competition and rate
increases. Growth in the DTH industry has leveled off and
customer retention has become our primary focus. In line with
this, Star Choice made a number of improvements in its
operations including the addition of 15 new programming services
and the creation of a new programming package for the French
language market.

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Shaw Communications Inc.


REPORT TO SHAREHOLDERS


August 31, 2004


OUTLOOK

Without question the Company is operating in a
highly competitive environment. In order to prosper, we plan to
further expand our service offerings through enhancements and
new products, and to maintain a high level of customer care. We
have already taken a number of steps in these areas.

We have announced our plans to enter the local
telephone market with the launch of Digital Phone service in
calendar 2005. In addition, we are upgrading our cable plant to
860 Megahertz (MHz) capacity to accommodate new
products and services such as Digital Phone, VOD, new digital
programming, higher-speed Internet and HDTV.

In Internet, we are developing new communications
tools that will allow our customers to communicate in innovative
ways that take full advantage of our broadband network. Star
Choice has launched new attractively-priced receivers that
should help stimulate the DTH market. The move to Telesats
Anik F2 satellite provides Star Choice with the opportunity
to increase its HDTV content and to add new services.

SHAW IS WELL POSITIONED FOR GROWTH

As the results of the past two years demonstrate,
Shaws disciplined approach to capital expenditures and
operating excellence have produced significant improvements in
free cash flow while still supporting growth in our customer
base. In addition, we have achieved impressive gains in service
revenue, service operating income before amortization and net
income. This growth reflects the strength of the Companys
resources, particularly its 6,500 employees whose efforts
at all levels of the organization have been a key factor in
achieving these outstanding results.

Our continued emphasis on putting the
customer first and our improved financial position help
drive growth and enhance value for the Companys
stakeholders. Our products and service levels can meet the
competition head-on and position us to grow as a stronger
company in 2005 and beyond.

|                |  |                        
|--------------- |  | -----------------------
|[Signed]        |  | [Signed]               
|JR Shaw         |  | Jim Shaw               
|Executive Chair |  | Chief Executive Officer






|  |                                                                                          
|- | -----------------------------------------------------------------------------------------
|1 | See definitions under Key performance drivers in
    Managements Discussion and Analysis

2




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Shaw Communications Inc.





MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


October 28, 2004

FORWARD

Certain statements in this report may
constitute forward-looking statements. Such forward-looking
statements involve risks, uncertainties and other factors which
may cause actual results, performance or achievements of the
Company to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. Included herein is a Caution
Concerning Forward-Looking Statements section which should
be read in conjunction with this report.

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

INDEX

|         |  |    |  |                                                     |  |     
|-------- |  | -- |  | --------------------------------------------------- |  | ----
|CONTENTS |  |    |  |                                                     |  | Page
|Outline  |  |    |  |                                                     |  |     
|I.       |  |    |  | INTRODUCTION TO THE BUSINESS                        |  |     
|         |  | A. |  | Company overview  core business and
    strategies |  | 4   
|         |  | B. |  | Seasonality                                         |  | 6   
|         |  | C. |  | Key performance drivers                             |  | 6   
|         |  | D. |  | Critical accounting policies and estimates          |  | 8   
|         |  | E. |  | Related party transactions                          |  | 13  
|         |  | F. |  | New accounting standards                            |  | 13  
|         |  | G. |  | Known events, trends, risks and uncertainties       |  | 15  
|II.      |  |    |  | SUMMARY OF QUARTERLY RESULTS                        |  | 22  
|III.     |  |    |  | RESULTS OF OPERATIONS                               |  | 24  
|IV.      |  |    |  | FINANCIAL POSITION                                  |  | 39  
|V.       |  |    |  | CONSOLIDATED CASH FLOW ANALYSIS                     |  | 40  
|VI.      |  |    |  | LIQUIDITY AND CAPITAL RESOURCES                     |  | 41  
|VII.     |  |    |  | ADDITIONAL INFORMATION                              |  | 43  
|VIII.    |  |    |  | CAUTION CONCERNING FORWARD LOOKING STATEMENTS       |  | 43  

3




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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


I.     INTRODUCTION
TO THE BUSINESS

A.     Company
overview  core business and strategies

i)     Shaw
Communications Inc.

Shaw Communications Inc. (Shaw or
the Company) is a diversified Canadian
communications company whose core business is providing
broadband cable television, Internet and satellite
direct-to-home (DTH) services to over three million
customers. It provides customers with high-quality
entertainment, information and communications services,
utilizing a variety of distribution technologies.


Shaws strategy is to maximize shareholder
value through growth of free cash flow1. The key
elements of this strategy include: leveraging its network
infrastructure to offer customers an increasing number of
products and services; delivering quality customer service to
increase customer penetration; implementing price/ packaging
structures that provide value to both Shaw and the customer; and
generating operating efficiencies.

Shaw is organized into three business segments.
The relative size of each of the segments as a percentage of
consolidated service revenue in fiscal 2004 is as follows:
Cable  71.7%; DTH  24.3% and Satellite
Services  4.0%.

ii)     Cable

Cable is comprised of Shaws cable
television, Internet and Big Pipe operations. Shaw is the
largest cable television provider in Western Canada with
approximately 2.1 million cable television customers in
five provinces (British Columbia, Alberta, Saskatchewan,
Manitoba and northwestern Ontario), representing approximately
28% of the Canadian cable television market. Through its
technologically advanced broadband network, Shaw had 1,020,938
Internet customers and 540,535 digital cable customers as at
August 31, 2004. Big Pipe develops and manages Shaws
inter-city fiber network that serves as the primary Internet
backbone for Shaws broadband Internet customers and
provides Internet and data connectivity services to large
businesses and other organizations.


Shaws strategy is to leverage its network
by providing additional services beyond traditional cable. In
past years, Shaw enhanced the quality, depth and capacity of its
plant and network infrastructure through significant capital
investments. The plant and network is now essentially fully
digital and two-way capable. This has enabled Shaw to expand its
service offerings to include digital programming, Internet,
Video-on-Demand (VOD) and HDTV. In the fall of 2003,
Shaw deployed an advanced generation of cable modems based on
the DOCSIS 2.0 specifications. This advanced generation of
cable modem technology enabled Shaw to increase the capabilities
and reliability of its high-speed data network by increasing the
capacity and throughput in both the upstream and downstream
portions of the cable plant. As a result the network has the
ability to provide up to 30 megabit per second (Mbps) capacity
in both directions, representing about five times the capacity
of current cable modems. Over the next four years, Shaw will
complete a system-wide upgrade of its network to 860 MHz from
the current 550/750 MHz capacity. This investment in plant
infrastructure will accommodate further growth opportunities in
VOD, HDTV and High-Speed Internet, and lays the groundwork for
Shaws next anticipated high-growth opportunity, Digital
Phone.

Shaw plans to offer a primary line Digital Phone
service across certain of its cable services areas. The
investment includes capital costs required to offer the service
utilizing PacketCable and DOCSIS specifications,
including the costs associated with acquiring and operating an
IP based telephone switch (softswitch), IP
transport, network redundancy, network and customer premise
equipment and back-



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|  |                                                                                           
|- | ------------------------------------------------------------------------------------------
|1 | See definitions under Key performance drivers in
    Managements Discussion and Analysis.

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


up powering, network status monitoring,
provisioning systems, information technologies and systems
integration. Based on preliminary estimates, anticipated all-in
capital costs for the first 100,000 customers will be
approximately $50  $55 million and the next
100,000 customers will cost approximately $35 million.
To date, the Company has invested approximately $14 million
of capital in connection with Digital Phone. It has selected
Bell to provide wholesale services, including interconnection to
the public switched telephone network (PSTN) and
long distance termination, in order to enable Shaw to provide
residential phone service to its customers in Western Canada.
The Company has also selected Siemens, a global provider of
telecommunications infrastructure, equipment and software, to
provide the softswitch platform (telecommunications switching
infrastructure) for its initial launch. Over the next year, Shaw
will continue to focus its efforts on preparing its network,
customer support, billing and provisioning systems for launch in
calendar 2005.

Shaw has a customer-centric strategy designed to
deliver high-quality customer service, simplicity and value to
its customers through various bundled service offerings.
Delivering value to customers creates value for Shaws
stakeholders through incremental penetration, operational
efficiencies and reduced churn. Approximately 42% of Shaw cable
customers subscribe to bundled services compared to 38% last
year. Shaw has the highest penetration of Internet in North
America with 48% and among the highest rates of digital
penetration in Canada at 25% of basic cable customers.

Finally, Shaw creates value through operating
efficiencies. In the past, Shaw has accomplished this through
its clustering strategy, which involves geographical
consolidation and re-alignment of its cable systems to take
advantage of potential administrative, operating and marketing
synergies that arise from larger, focused operations. Over a
number of years, Shaw has acquired and divested various cable
systems to complement its cable clusters. As a result, Shaw has
consolidated its position as the dominant provider of cable
television services in Western Canada. Last year, Shaw completed
the sale of its US cable systems and this year, it acquired
certain cable systems in Alberta and southern British Columbia
from Monarch Cablesystems Ltd (Monarch).

iii)    DTH (Star
Choice)

DTH (Star Choice) distributes digital video and
audio programming services via DTH satellite to Canadian
residences and commercial establishments. It is one of two DTH
satellite operators licensed by the Canadian Radio-television
and Telecommunications (CRTC) to deliver digital
subscription video and audio programming services via satellite
directly to subscribers homes and businesses. Star Choice
began the national roll-out of its digital DTH services in
October, 1997 and, at August 31, 2004, had 827,903
subscribers across Canada.


Star Choices customer acquisition strategy
has evolved from predominantly rural households not served by
cable or underserved by cable (i.e., served by cable systems
that offer fewer than 80 channels) to households that have
access to a full range of cable services primarily in urban
areas. In early fiscal 2005, Star Choice further enhanced its
service offerings. First, Star Choice is operating with
additional capacity on Telesats Anik F2 satellite, which
replaces the Anik E2R satellite. This has enabled Star Choice to
offer its customers more HDTV channels and additional
programming services. Second, Star Choice introduced new
receivers which have provided a more economical entry point for
new customers and enabled existing customers to expand Star
Choice services in their homes.

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

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


iv)    Satellite
Services

Satellite Services has three principal lines of
business: (a) redistributing television and radio signals
via satellite to cable operators and other multi-channel system
operators in Canada and the US, referred to as satellite relay
distribution undertaking (SRDU); (b) providing
uplink and network management services for conventional and
specialty broadcasters on a contract basis; and c) through
Cancom Tracking Solutions, providing mobile tracking and
messaging services to over 400 companies making it the largest
provider of such services in the long-haul trucking industry in
Canada, with approximately 28,000 vehicles using its services.
The Business Television business which built and maintained
satellite interactive distance learning networks was sold in
March 2003.


B.     Seasonality

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


C.     Key
performance drivers

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


FINANCIAL MEASURES:

i)     Service
revenue


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


The Companys continuous disclosure
documents may provide discussion and analysis of non-GAAP
financial measures. These financial measures do not have
standard definitions prescribed by Canadian or US GAAP and
therefore may not be comparable to similar measures disclosed by
other companies. The Company utilizes these measures in making
operating decisions and assessing its performance. Certain
investors, analysts and others utilize these measures in
assessing the Companys financial performance and as an
indicator of its ability to service debt and return cash to
shareholders. These non-GAAP measures have not been presented as
an alternative to net income or any other measure of performance
by Canadian or US GAAP. The following contains a listing of the
Companys use of non-GAAP financial measures and provides a
reconciliation to the nearest GAAP measurement or provides a
reference to such reconciliation.

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


ii)     Service
operating income before amortization and operating
margin

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


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

iii)    Free cash
flow

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


|                                     |  |      |         |      |  |      |          |   |  |  |          |   |  | 
|------------------------------------ |  | ---- | ------- | ---- |  | ---- | -------- | - |  |  | -------- | - |  | 
|                                     |  | 2004 |         | 2003 |  | 2002 |          |  
|                                     |  |      |         |      |  |      |          |  
|                                    
|                                    
|($000s Cdn)                         |  |      |         |      |  |      |          |   |  |  |          |   |  | 
|Cable free cash flow(1)              |  |      | 272,250 |      |  |      | 205,178  |   |  |  | (349,383 | ) |  | 
|Combined satellite free cash flow(2) |  |      | 6,631   |      |  |      | (106,919 | ) |  |  | (211,382 | ) |  | 
|                                    
|Consolidated free cash flow          |  |      | 278,881 |      |  |      | 98,259   |   |  |  | (560,765 | ) |  | 
|                                    



|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|(1) | The reconciliation of free cash flow for cable is
    provided on page 30.             
|   
|(2) | The reconciliation of free cash flow for combined
    satellite is provided on page 34.

Free cash flow for cable and combined satellite
is calculated as service operating income before amortization,
less interest, entitlements on equity instruments net of current
taxes, cash taxes on net income, capital expenditures (on an
accrual basis) and equipment costs (net). All of the line items
used in the free cash flow calculation, with the exception of
equity instruments net of current taxes, are as reported on a
segmented basis in Note 15 to the Consolidated Financial
Statements. Therefore, segmented capital expenditures and
equipment costs (net) exclude capital expenditures in respect of
the Burrard Landing Lot 2 Partnership (the
Partnership) which is engaged in the construction of
an office/ residential tower in Vancouver. The Partnership,
which the Company is required to proportionately consolidate, is
financed by its own credit facility, with limited recourse to
the Company. Segmented service operating income before
amortization, which is the starting point of the free cash flow
calculation, excludes prepayments on an indefeasible right to
use (IRU) certain specifically identified fibers and
the profit from satellite services equipment, both of which are
recognized as amortization line elements in the income
statement. As a result, prepayments on IRUs in amounts not
exceeding the cost to build those fibers and equipment profit
from satellite services are subtracted from the calculation of
segmented capital expenditures and equipment costs (net).

STATISTICAL MEASURES:

i)     Subscriber
counts, including penetration


The Company measures the count of its customers
in Cable and DTH (Star Choice). Cable includes those customers
who are on billing and are paying a fee for service. The
customer count for Internet also includes scheduled
installations due to the high-growth nature of this product.
Cable measures


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


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

The count of Star Choice customers includes those
who are on billing and are paying a fee for service and also
includes seasonal customers who have indicated their intention
to reconnect within 180 days of disconnection.

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

ii)     Customer
churn

Customer churn is calculated as the number of new
customer activations less the net gain of customers during the
period, divided by the average of the opening and closing
customers for the applicable period of calculation. Churn
provides a measure of customer satisfaction and preferences.





D.     Critical
accounting policies and estimates

The Company prepared its Consolidated Financial
Statements in accordance with Canadian generally accepted
accounting principles (GAAP). An understanding of
the Companys accounting policies is necessary for a
complete analysis of results, financial position, liquidity and
trends. Refer to Note 1 to the Consolidated Financial
Statements for additional information on accounting policies.
The following section discusses key estimates and assumptions
that management has made under GAAP and how they affect the
amounts reported in the Consolidated Financial Statements and
notes. It also describes significant accounting policies where
alternatives exist. In addition, within the critical accounting
policies and estimates, Canadian-US GAAP differences are
identified where they exist. Refer to Note 21 to the
Consolidated Financial Statements for a complete reconciliation
of Canadian-US GAAP differences. Following is a discussion
of the Companys critical accounting policies:


i)     Revenue and
expense recognition

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


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

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


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

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

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

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

Income statement classification

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


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


Subscriber connection and installation
costs

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


Deferred charges  deferred
marketing costs

Shaw defers costs to launch key new services and
to position itself in new markets that have been acquired. These
costs are amortized over two years, the period during which
these costs are estimated to provide benefit. An acceptable
alternative accounting policy under Canadian GAAP, and required
under US GAAP, is to expense launch costs immediately. Shaw
follows the matching principle under Canadian GAAP, where
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. Shaw 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
free trial periods. The Company therefore benefits from this
initial cost in future periods as customers subscribe to the new
services after the trial periods. Experience indicates that it
takes approximately two years for the new services to reach
maturity level in terms of customer acceptance. Therefore, the
costs of the launch of the new services are matched to the
period in which the revenues from the new services will be
recognized. No marketing costs were deferred in 2004 or 2003.


ii)     Allowance
for doubtful accounts

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


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

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


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



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | Corporate departments such as engineering and
    information technology. Engineering is primarily involved in
    overall planning and development of the cable/ Internet
    infrastructure. Labour and overhead costs directly related to
    this activity are capitalized as the activities directly relate
    to the planning and design of the construction of the
    distribution system. In fiscal 2004, the information

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MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004




|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | technology department has devoted considerable
    efforts towards the development of a provisioning system for
    Digital Phone. Labour costs directly related to this and other
    projects were capitalized.                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|2. | Cable regional construction departments, which
    are principally involved in constructing, rebuilding and
    upgrading the cable/ Internet infrastructure. Labour and
    overhead costs directly related to the construction activity are
    capitalized as the activities directly relate to the
    construction or upgrade of the distribution system. Capital
    projects include, but are not limited to, projects such as new
    subdivision builds, decrease of node sizes, and upgrades of the
    plant to 860 MHz capacity.                                                                               
|  
|3. | Subscriber-related activities such as
    installation of new drops, satellite dishes and Internet
    services. The labour and overhead directly related to the
    installation of new services are capitalized as the activity
    involves the installation of capital assets (e.g. wiring,
    dishes, filters, software, etc.) which enhance the service
    potential of the distribution system through the ability to earn
    future service revenues. Costs associated with service calls,
    collections, disconnects and reconnects that do not involve the
    installation of a capital asset are expensed.

Amounts of direct labour and direct overhead
capitalized fluctuate from year to year depending on the level
of customer growth and plant upgrades for new services. In
addition, the level of capitalization fluctuates depending on
the proportion of internal labour versus external contractors
used in construction projects. For example, beginning in fiscal
2002, the Company directly employed unit-based employees
(UBEs) that were previously involved in customer
installations, ongoing plant upgrades and a portion of new
builds as contractors of Shaw.

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

iv)    Property, plant
and equipment  capitalization of
interest

As permitted by Canadian and US GAAP, the cost of
an item of property, plant and equipment that is acquired,
constructed, or developed over time may include carrying costs,
such as interest, which is directly attributable to such
activity. Shaw does not capitalize interest on the construction
of its own assets, with the exception of the Partnerships
construction of the office/ residential tower in Vancouver. The
interest is capitalized on the tower as the construction of it
has taken place over a significant period of time and the
interest on the Partnership construction facility is directly
attributable to such activity. Capitalization of interest will
cease when the tower is substantially completed and ready for
occupancy. The alternative accounting policy is to expense
interest on construction immediately, which would have resulted
in additional interest expense of $2.3 million and
$0.9 million in 2004 and 2003, respectively.


v)     Depreciation
policies and useful lives

The Company depreciates the cost of property,
plant and equipment over the estimated useful service lives of
the items. These estimates of useful lives involve considerable
judgment. In determining these estimates, the Company takes into
account industry trends and company-specific factors, including
changing technologies and expectations for the in-service period
of these assets. On an annual basis, the Company reassesses its
existing estimates of useful lives to ensure they match the
anticipated life of the technology from a revenue-producing
perspective. If technological change happens more quickly or in a


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


different way than the Company has anticipated,
the Company might have to shorten the estimated life of certain
property, plant and equipment which could result in higher
depreciation expense in future periods or an impairment charge
to write down the value of property, plant and equipment.

vi)    Asset
impairment

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


vii)    Employment
benefit plans

Shaw has a defined benefit pension plan for key
senior executives. The amounts reported in the financial
statements relating to the defined benefit pension plan are
determined using actuarial valuations that are based on several
assumptions. The valuation uses managements assumptions
for the discount rate, rate of compensation increase, and
expected average remaining years of service of employees. While
the Company believes these assumptions are reasonable,
differences in actual results or changes in assumptions could
affect employee benefit obligations and the related income
statement impact. The Company accounts for differences between
actual and assumed results by recognizing differences in benefit
obligations and plan performance over the working lives of the
employees who benefit from the plan. The most significant
assumption used to calculate the net employee benefit plan
expense is the discount rate. The discount rate is the interest
rate used to determine the present value of the future cash
flows that is expected will be needed to settle employee benefit
obligations. It is usually based on the yield on long-term
high-quality corporate fixed income investments and is
determined at the end of every year. The discount rate was 6.25%
at August 31, 2004 and 6.50% at August 31, 2003. A 1%
decrease in the discount rate would increase pension expense by
approximately $1 million and the accrued benefit obligation
by approximately $10 million.


viii)   Future income
taxes

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


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


ix)    Commitments and
contingencies

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


E.     Related party
transactions

All related party transactions are reviewed by
Shaws Corporate Governance Committee, comprised of
independent directors. Refer to Note 18 to the Consolidated
Financial Statements for information on related party
transactions.


F.     New accounting
standards

Shaw has adopted or will adopt a number of new
accounting policies as a result of recent changes in Canadian
accounting pronouncements. For a description of the changes in
accounting policies, readers should refer to Note 1 to the
Consolidated Financial Statements. The ensuing discussion
provides additional information as to the date that Shaw is or
was required to adopt the new standards, the methods of adoption
permitted by the standards, and the method chosen by Shaw, and
the effect on the financial statements as a result of adopting
the new policy. The adoption or future adoption of these
accounting policies has not and is not expected to result in
changes to the Companys current business practices. Shaw
adopted the following policies in fiscal 2004:




|    |                    
|--- | -------------------
|(i) | Revenue recognition

As more fully described in Note 1 to the
Consolidated Financial Statements, the Emerging Issues Committee
(EIC) issued Abstracts 141 Revenue
Recognition and 142 Revenue Arrangements with
Multiple Deliverables. The effect of adopting the policy
is fully described therein and a discussion of alternative
acceptable accounting principles within the Abstract are
described in the discussion of critical accounting
policies. The Abstracts permit prospective application of
the policies for sales transactions recognized subsequent to
February 28, 2004 or retroactive application, with
restatement. Shaw chose the latter to assist in the comparison
of historic results.


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

The Canadian standard for stock-based
compensation and other stock-based payments was amended. There
are a number of transitional provisions which permit companies
to adopt the amendments either prospectively or retroactively,
with or without restatement. Shaw early adopted the amendment
this year. No restatement of prior periods was required as a
result of prospective adoption of the amended standard.


(iii)   Hedging
relationships

Shaw adopted Accounting Guideline (AcG) 13,
Hedging Relationships. There was no impact as a result of
adopting this policy as Shaw had appropriately documented the
effectiveness of its hedging relationships.


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


The following polices will be adopted in future
fiscal periods:



|    |                             
|--- | ----------------------------
|(i) | Asset retirement obligations

Effective 2005, the Company will adopt CICA
issued Section 3110, Asset Retirement
Obligations. Section 3110 is applicable to fiscal
years beginning on or after January 1, 2004 and must be
applied retroactively with restatement of prior periods. The
application of this standard is not expected to have a
significant impact on the financial position or results of
operations of the Company.


(ii)    GAAP Hierarchy
and General Standards of Financial Statement
Presentation

In 2005, the Company will adopt the CICA issued
new Handbook Sections 1100, Generally Accepted
Accounting Principles, and 1400, General Standards
of Financial Statement Presentation. The effect of any
change in accounting policy made on adopting this Section
applies only to events and transactions occurring after the date
of the change and to any outstanding related balances existing
at the date of the change. The Company does not expect these
recommendations to have a significant impact on its consolidated
financial statements upon adoption.


(iii)   Consolidation of
Variable Interest Entities

In June 2003, the CICA issued Accounting
Guideline 15 (AcG-15), Consolidation of Variable Interest
Entities. AcG-15 applies to annual and interim periods
beginning on or after November 1, 2004 and must be applied
retroactively, with or without restatement of prior periods. The
Company does not expect this guideline to affect its
consolidated financial statements.


(iv)    Equity
Instruments

In 2006, the Company will retroactively adopt the
amended Canadian standard, Financial Instruments 
Disclosure and Presentation, which requires obligations that may
be settled at the issuers option by a variable number of
the issuers own shares to be presented as liabilities,
which is consistent with US standards. The policy must be
adopted retroactively, with restatement. As a result, the
Companys equity linked debentures will be classified as
debt instead of equity and the dividend entitlements thereon
will be treated as interest expense instead of dividends. Upon
adoption of the standard September 1, 2005, the financial
statement items in the 2004 consolidated financial statements
will be restated as follows:


|                                                          |  |                     |          |   |  | 
|--------------------------------------------------------- |  | ------------------- | -------- | - |  | 
|                                                          |  | Increase (decrease) |          |  
|                                                          |  | 2004                |          |  
|                                                          |  |                     |          |  
|                                                         
|                                                         
|($000s Cdn)                                               |  |                     |          |   |  | 
|Consolidated balance sheet:                               |  |                     |          |   |  | 
|Deferred charges                                          |  |                     | 19,816   |   |  | 
|Long-term debt                                            |  |                     | 693,578  |   |  | 
|Future income taxes                                       |  |                     | 14,758   |   |  | 
|Equity instruments                                        |  |                     | (724,923 | ) |  | 
|Deficit                                                   |  |                     | (36,403  | ) |  | 
|                                                         
|Decrease in deficit:                                      |  |                     |          |   |  | 
|Adjusted for change in accounting
    policy              |  |                     | (16,257  | ) |  | 
|Decrease in equity entitlements (net of income
    taxes) |  |                     | (40,185  | ) |  | 
|Decrease in net income causing increase in deficit        |  |                     | 20,039   |   |  | 
|                                                         
|                                                          |  |                     | (36,403  | ) |  | 
|                                                         

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MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


|                                                                 |  |                     |         |   |  | 
|---------------------------------------------------------------- |  | ------------------- | ------- | - |  | 
|                                                                 |  | Increase (decrease) |         |  
|                                                                 |  | in net income       |         |  
|                                                                 |  | 2004                |         |  
|                                                                 |  |                     |         |  
|                                                                
|                                                                
|($000s Cdn)                                                      |  |                     |         |   |  | 
|Consolidated statement of income:                                |  |                     |         |   |  | 
|Increase in amortization                                         |  |                     | (312    | ) |  | 
|Increase in interest                                             |  |                     | (62,302 | ) |  | 
|Increase in foreign exchange gain on unhedged
    long-term debt |  |                     | 24,559  |   |  | 
|Decrease in income tax expense                                   |  |                     | 18,016  |   |  | 
|                                                                
|Decrease in net income                                           |  |                     | (20,039 | ) |  | 
|                                                                
|Decrease in earnings per share (in
    $):                       |  |                     | (0.09   | ) |  | 
|                                                                

|                         |  |                     |         |   |  | 
|------------------------ |  | ------------------- | ------- | - |  | 
|                         |  | Increase (decrease) |         |  
|                         |  | 2004                |         |  
|                         |  |                     |         |  
|                        
|                        
|($000s Cdn)              |  |                     |         |   |  | 
|Statement of cash flows: |  |                     |         |   |  | 
|Operating activities     |  |                     | (38,343 | ) |  | 
|Financing activities     |  |                     | 38,343  |   |  | 
|                        




G.    Known events,
trends, risks and uncertainties

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


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



|  |                                                                               
|- | ------------------------------------------------------------------------------
| | Competition and technological change, including
    change in regulatory risks
| | Interest rate, foreign exchange and market value
    risks                    
| | Contingencies                                                                 
| | Uninsured risks of loss                                                       
| | Reliance on suppliers                                                         

i)     Competition
and technological change

Shaws businesses currently face competition
from entities utilizing other existing communications
technologies and may face competition in the future from other
technologies being developed or to be developed. In addition,
recent regulatory and public policy trends generally favour the
emergence of a more competitive environment in Canada.


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


CABLE TELEVISION

Shaws cable television systems compete with
the direct reception by antenna of unencrypted over-the-air
local and regional broadcast television signals. Shaw also
either currently competes or may in the future compete with
other distributors of television signals, including DTH
satellite services, satellite master antenna systems
(SMATV), multipoint distribution systems
(MDS), other competitive cable television
undertakings and telephone companies offering video service
using Digital Subscriber Line technology (DSL), all
of which offer services to subscribers for a fee.


DTH delivers programming via signals sent
directly to receiving dishes from medium and high-powered
satellites, as opposed to via broadcast, cable delivery or lower
powered transmissions. DTH services presently provide more
channels than some of Shaws cable systems and are fully
digital. Two licensed operators, Star Choice (owned by Shaw) and
Bell ExpressVu, are currently providing DTH services in Canada.
These DTH operators have achieved rapid subscriber growth and
together provide service to approximately 2.3 million
Canadian households. In addition, grey and black market DTH
providers (i.e., providers of US-based digital DTH programming
services available in Canada without authorization from the CRTC
or from the US DTH providers) also provide competitive services.
Black market DTH service is not permitted under Canadian law.
The Supreme Court of Canada has ruled that grey market DTH
providers are violating the Radiocommunication Act (Canada), and
are therefore providing an illegal service. In a recent
decision, however, a Quebec court ruled that the relevant
provisions of the Radiocommunication Act (Canada) violate the
freedom of expression guarantees in the Canadian Charter of
Rights and Freedoms but provided that the ruling would not come
into effect for one year. This decision is under appeal.

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

In recent years, the CRTC has also licensed a
number of competitive cable television undertakings to operate
within the authorized service areas of incumbent cable
licensees. One of these competitive undertakings, Novus
Entertainment Inc., operates within one of Shaws licensed
service areas in Vancouver.

Since 1998, telephone companies have been
eligible to hold full scale broadcasting distribution licenses
from the CRTC. To date, five telephone companies have been
granted broadcasting distribution licenses by the CRTC including
Telus Corporation, in Alberta and British Columbia; SaskTel in
Saskatchewan; and Manitoba Telecom Services Inc. in Manitoba.

To date, none of these competitors has had a
material impact on Shaws overall cable television
operations. However, there can be no assurance that increased
competition will not have a material adverse effect on
Shaws results of operations. Most of Shaws cable
systems are concentrated in major urban markets, with the
remainder in smaller clusters, linked via fiber optic
distribution systems either to each other or to larger clusters.
Through this strategy, Shaw maximizes the benefits of operating
efficiencies, enabling it to be a low-cost service provider,
which is a necessary component in strengthening its competitive
position. In addition, Shaw plans to continue to deploy new
technologies to increase channel capacity, to take advantage of
its existing infrastructure, to expand the range and quality of
its services, and to enhance its programming and communication
service offerings.

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


INTERNET

There are a number of different types of Internet
service providers (ISPs) offering residential and
business Internet access services that compete with the Shaw
High-Speed Internet service. These include on-line service and
content providers (such as AOL Canada), independent basic access
service providers (both national and regional), incumbent
telephone companies and wireless communications companies.


Many ISPs provide telephone dial-up Internet
access services that are limited to access speeds of up to 56
kbps. Such services are provided by incumbent telephone
companies and independent ISPs (mainly through the use of the
telephone companies facilities and services).

High-speed Internet access services are
principally provided through cable modem and DSL technology.
High-speed services enable users to transmit and receive print,
video, voice and data in digital form at significantly faster
access speeds than dial-up access through a regular telephone
line. Internet access services through cable modem technology
are primarily provided by cable companies. The CRTC has
authorized third-party ISPs to access cable companies
facilities to deliver high-speed Internet services. DSL services
are principally offered by incumbent telephone companies such as
BCE Inc. and its affiliates and Telus Corporation.

The ISPs have requested access to cable
companies facilities to use the network to deliver their
services. In November 2000, the CRTC approved a monthly rate for
ISP access of $21.25 per end-user for Shaw. Other connection and
installation charges will also apply. Until competing ISPs have
access to high-speed services pursuant to this third-party
Internet access tariff, cable operators have been directed by
the CRTC to provide access to their distribution systems to ISPs
for resale at a 25% discount off the lowest retail rate charged
by the cable operator for these services. To date, Shaw has
provided resale access services to two ISPs operating in certain
of Shaws cable systems.

In September 2003, Shaw filed an application with
the CRTC requesting that it restrict certain promotions by Telus
of its DSL Internet services on the grounds that Telus was
pricing below cost, violating bundling rules and conferring an
undue preference on itself. The request was denied by the CRTC
in two decisions issued, respectively, in April 2004 and October
2004.

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

DTH

The Star Choice DTH business faces a competitive
environment similar to that of cable television companies.
Competitors include Bell ExpressVu (the only other licensed DTH
satellite service currently operating in Canada), cable
television companies, grey and black market satellite service
providers and other competitors such as wireless operators,
telephone companies and off-air television broadcasters.


SATELLITE SERVICES

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


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


TELECOMMUNICATIONS

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


DIGITAL PHONE

Shaw plans to deploy a primary line,
facilities-based residential telephone service using Packet
CableTM, DOCSISTM and other IP-based
technologies. Trials and initial deployment are anticipated in
calendar 2005. The service will be marketed as Shaw Digital
Phone and will be deployed in certain areas of Shaws cable
service territories. Shaw is currently in the process of
refining its business strategies with respect to its residential
telephone service, including capital expenditures, pricing,
timing of launch, organizational structure and other matters.
There is no assurance that Shaw will be successful in
developing, implementing and marketing Digital Phone in a
reasonable time, or that the service will have a market.


The competitors of Shaws planned
residential telephone service would include incumbent telephone
companies, competitive local exchange carriers (such as Call-Net
Enterprises Inc, through its subsidiary Sprint Canada Inc.) and
non-facilities-based Voice over Internet Protocol
(VoIP) providers (such as Primus Telecommunications
Canada Inc. and Vonage Holdings Corp.). As the market for VoIP
services develops, new competitors will likely emerge.

ii)     Interest
rate, foreign exchange and market value risks

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


Shaw has the following financial exposures to
risk in its day-to-day operations:



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



| |    |                                                                                                                                                                                                                         
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Banking facilities of Shaw as more fully
    described in Note 9 to the Consolidated Financial
    Statements.                                                                                                          
|
| | 2. | Various Canadian and US denominated senior notes
    and debentures with varying maturities issued in the public and
    private markets as more fully described in Note 9 to the
    Consolidated Financial Statements.
|
| | 3. | Equity instruments issued in Canadian and US
    dollars with original terms of 5  99 years as
    more fully described in Note 11 to the Consolidated
    Financial Statements.                                       



| |                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Interest on bank indebtedness is based on
    floating rates, while the debentures and Canadian Originated
    Preferred Securities (COPrS) are fixed-rate
    obligations. Shaw utilizes its

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | credit facility to finance day-to-day operations
    and, depending on market conditions, periodically converts the
    bank loans to fixed-rate instruments through public market debt
    issues. Shaw also uses interest rate swap transactions to fix
    the interest rates on a portion of its bank debt. At
    August 31, 2004 Shaw had swapped out
    $177.0 million of its $295.4 million Canadian
    floating-rate bank indebtedness by means of a Canadian interest
    rate swap transaction entered into with a major Canadian
    chartered bank. The swap fixes interest on a notional amount of
    bank debt of $177 million at a rate between 9.49% and
    11.64% depending on debt to cash flow ratios. The effective rate
    at August 31, 2004 was 9.62%. One-third of the interest
    rate swap terminates each year commencing April 30, 2005
    until fully terminated April 30, 2007. In addition, the
    Partnership entered into an interest rate hedge which terminated
    October 1, 2004. It fixed the interest rate at 5.125% plus
    a stamping fee on $58 million of the construction loan of
    which $95.1 million was drawn on August 31, 2004.
|
| | As at August 31, 2004, approximately 95% of
    Shaws consolidated long-term debt was fixed with respect
    to interest rates. Based on the variable rate debt outstanding
    and foreign exchange rate at August 31, 2004, a 1% increase
    in interest rates would result in an annual increase in interest
    expense of approximately $1.2 million. The equity
    instruments are also fixed with respect to interest rates, but
    are subject to the foreign exchange fluctuations described below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Foreign exchange: As the Company has grown it has
    accessed the US capital markets for a portion of its borrowings.
    Since Shaws revenues and assets are primarily denominated
    in Canadian dollars, it faces significant potential foreign
    exchange risks in respect of the servicing of the interest and
    principal components of its US dollar denominated debt. In
    view of this, the Companys policy with respect to
    US debt is that at least 70% of the amounts maturing within
    the next ten years be hedged to protect against exchange
    fluctuations, and at August 31, 2004, 95% of the maturities
    were hedged. The Company utilizes cross-currency interest rate
    transactions, where appropriate, to hedge its exposures on
    US dollar denominated bank and debenture indebtedness.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There is also an exchange risk present with
    respect to the US dollar denominated COPrS included in
    equity instruments which require quarterly interest payments and
    potential redemption in US dollars. However, because of the
    long period of time until mandatory redemption (42 to
    93 years), it is not practical to hedge these requirements.
    In respect of the quarterly interest payments, Shaw has entered
    into a five-year extendible forward US dollar purchase contract
    with a major Canadian bank whereby it buys US dollars at a fixed
    rate on the quarterly interest payment dates to make these
    payments. The current agreement enables Shaw to purchase
    US dollars at an exchange rate of $1.4078 Cdn. until
    March 31, 2005. The counterparty to this agreement has the
    option to extend this agreement for a further five years at this
    rate.
|
| | In addition, some of the Companys capital
    expenditures are incurred in US dollars, while basically all of
    its revenue is in Canadian dollars. Decreases in the value of
    the Canadian dollar relative to the US dollar could have a
    material adverse effect on the Companys cash flows. To
    mitigate some of the uncertainty in respect to capital
    expenditures, the Company often enters into forward contracts in
    respect of US dollar commitments. In 2004, the Company entered
    into a forward contract to purchase US $18 million
    over the year at an exchange rate of 1.4057 Cdn. Effective
    October 2004, the Company entered into forward                                                                                                                                                                                                                              

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004




| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | contracts to purchase approximately US
    $45 million over a period of 11 months at an average
    exchange rate 1.2581 Cdn.

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



| |                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following tables summarize the impact of
    changes in the Cdn/ US dollar exchange rate on the unhedged
    portion of Shaws US denominated debt.

|                                                |  |           |      |           |  |           |     |            |  |  |   |  |  |   |       |  |  | 
|----------------------------------------------- |  | --------- | ---- | --------- |  | --------- | --- | ---------- |  |  | - |  |  | - | ----- |  |  | 
|                                                |  |           |      |           |  |           |     | Impact on  |  | 
|                                                |  | Change in |      | Change in |  | Change in |     | income     |  | 
|                                                |  | Cdn $ vs. |      | principal |  | interest  |     | (loss) per |  | 
|                                                |  | US $      |      | amount    |  | expense   |     | share(1)   |  | 
|                                                |  |           |      |           |  |           |     |            |  | 
|                                               
|                                               
|(In $millions Cdn except per share
    amounts) |  |           |      |           |  |           |     |            |  | 
|Debt                                            |  | $         | 0.01 |           |  |           | 0.5 |            |  |  |  |  |  | $ | 0.002 |  |  | 
|                                                |  | $         | 0.03 |           |  |           | 1.6 |            |  |  |  |  |  | $ | 0.006 |  |  | 
|                                                |  | $         | 0.05 |           |  |           | 2.6 |            |  |  |  |  |  | $ | 0.009 |  |  | 
|                                               



| |     |                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Assumes income tax recovery of 35.5% and includes
    the impact of foreign exchange gain or loss, interest and
    dividend entitlements.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Under Canadian GAAP, equity instruments such as
    the COPrS and Zero Coupon Loan are classified as equity and are
    measured using historical values; therefore the principal amount
    stated in the financial statements does not change with foreign
    exchange rate fluctuations. Under US GAAP, equity
    instruments are classified as debt and are translated at the
    year-end rate of exchange; therefore the principal amount would
    fluctuate $3.4 million for each one cent change in the
    Canadian dollar versus the US dollar. As stated above, the
    equity entitlements on the COPrS are hedged and therefore do not
    change with foreign exchange fluctuations. Equity entitlements
    on the Zero Coupon Loan fluctuate less than $0.1 million
    per five cent change in the Canadian dollar versus the US dollar.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | Market value: The Company has $44.0 million
    of investments of which $30.7 million represents publicly
    traded securities. The value of the Companys investments
    is subject to market risk. To protect against future stock
    market volatility, Shaw has monetized its investment in
    Motorola, Inc. (Motorola) through the issuance of a
    Zero Coupon Loan which resulted in proceeds to Shaw based upon
    the then current trading values of Motorola. Upon maturity, the
    Zero Coupon Loan and interest payable thereon is repayable by
    tendering the underlying security of the Motorola shares,
    issuing Shaw Class B Non-Voting Shares or cash. Since the
    Company has the option of settling the Zero Coupon Loan by
    delivery of the Motorola shares, the respective foreign exchange
    risk and market risk on the Zero Coupon Loan and the Motorola
    investment are eliminated. The market value of publicly traded
    investments at August 31, 2004 is $73.9 million of
    which $33.9 million of principal and interest of
    $10.3 million has been monetized.

iii)    Contingencies

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


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


iv)    Uninsured risks
of loss

Until recently, business interruption insurance
covering damage or loss to one or more of the satellites that
the Company uses in its DTH and Satellite Services business was
unavailable. The Company is currently investigating possible
levels of coverage to see what would be available at a
commercially acceptable price. In the meantime however, Shaw has
rights to certain limited insurance proceeds which may be
received by Telesat during the first five years following
launch. The Companys transponders on Anik F1 and
Anik F2 were purchased from Telesat on an unprotected,
non-preemptible service level basis, and Shaw has priority
access to spare transponders on each satellite in the case of
interruption, although there is no assurance that such
transponders would be available. In the event of satellite
failure, service will only be restored as additional capacity
becomes available. Restoration of satellite service on a US
satellite may require repositioning or re-pointing of
customers receiving dishes. As a result, their level of
service may be diminished or they may require a larger dish.
Satellite failure could cause customers to deactivate their DTH
subscriptions or otherwise have a material adverse effect on
business and results of operations.


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

v)     Reliance on
suppliers

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


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

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


II.    SUMMARY OF
QUARTERLY RESULTS

|                                            |  |         |           |                  |  |            |         |            |  |               |         |   |  |  |       |   |  |  |         |  |  | 
|------------------------------------------- |  | ------- | --------- | ---------------- |  | ---------- | ------- | ---------- |  | ------------- | ------- | - |  |  | ----- | - |  |  | ------- |  |  | 
|                                            |  |         |           |                  |  |            |         | Basic and  |  |               |         |  
|                                            |  |         |           | Service          |  |            |         | diluted    |  |               |         |  
|                                            |  |         |           | operating income |  |            |         | earnings   |  | Cash flow     |         |  
|                                            |  | Service |           | before           |  | Net income |         | (loss) per |  | from          |         |  
|Quarter                                     |  | revenue |           | amortization(1)  |  | (loss)     |         | share      |  | operations(2) |         |  
|                                            |  |         |           |                  |  |            |         |            |  |               |         |  
|                                           
|                                           
|(In $000s Cdn except per share
    amounts) |  |         |           |                  |  |            |         |            |  |               |         |   |  | 
|2004                                        |  |         |           |                  |  |            |         |            |  |               |         |   |  |  |       |   |  |  |         |  |  | 
|Fourth                                      |  |         | 531,821   |                  |  |            | 239,212 |            |  |               | 28,882  |   |  |  | 0.08  |   |  |  | 186,311 |  |  | 
|Third                                       |  |         | 532,015   |                  |  |            | 237,659 |            |  |               | 24,828  |   |  |  | 0.06  |   |  |  | 179,260 |  |  | 
|Second                                      |  |         | 513,541   |                  |  |            | 224,102 |            |  |               | 17,191  |   |  |  | 0.03  |   |  |  | 163,068 |  |  | 
|First                                       |  |         | 502,372   |                  |  |            | 224,962 |            |  |               | 20,008  |   |  |  | 0.04  |   |  |  | 166,131 |  |  | 
|                                           
|Total                                       |  |         | 2,079,749 |                  |  |            | 925,935 |            |  |               | 90,909  |   |  |  | 0.22  |   |  |  | 694,770 |  |  | 
|                                           
|2003                                        |  |         |           |                  |  |            |         |            |  |               |         |   |  |  |       |   |  |  |         |  |  | 
|Fourth                                      |  |         | 502,296   |                  |  |            | 224,086 |            |  |               | 4,385   |   |  |  | (0.02 | ) |  |  | 160,840 |  |  | 
|Third                                       |  |         | 505,920   |                  |  |            | 205,613 |            |  |               | (12,999 | ) |  |  | (0.10 | ) |  |  | 139,908 |  |  | 
|Second                                      |  |         | 500,597   |                  |  |            | 199,562 |            |  |               | (19,506 | ) |  |  | (0.13 | ) |  |  | 128,997 |  |  | 
|First                                       |  |         | 489,608   |                  |  |            | 188,380 |            |  |               | (18,744 | ) |  |  | (0.13 | ) |  |  | 114,430 |  |  | 
|                                           
|Total                                       |  |         | 1,998,421 |                  |  |            | 817,641 |            |  |               | (46,864 | ) |  |  | (0.38 | ) |  |  | 544,175 |  |  | 
|                                           



|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Key performance drivers on page 6.                                                                                                                  
|   
|(2) | Cash flow from operations is presented before
    changes in net non-cash working capital as presented in the
    Consolidated Statements of Cash Flows.

Generally, service revenue and service operating
income before amortization have grown quarter-over-quarter as a
result of customer growth, rate increases and cost savings,
arising from a number of restructurings and efficiency measures
that the Company undertook over the past two years. The only
significant exception to the consecutive growth in service
revenue occurred in the fourth quarter of 2003 when results were
affected by the sale of the US cable systems.

Likewise, net income (loss) has generally trended
positively quarter-over-quarter as a result of a number of
factors including the growth in service operating income before
amortization described above, in addition to reductions of
interest expense as a result of debt repayment and retirement.
The exception to the aforementioned is that in 2004 and 2003,
second quarter earnings declined compared to the first quarter
by $2.8 million and $0.8 million, respectively. In the
second quarter of 2004, the Company recorded a foreign exchange
loss on unhedged long-term debt of $2.0 million compared to
a gain of $4.8 million recorded in the first quarter of
2004. In 2003, the second quarter included a provision for loss
on sale of the US assets of $50.0 million partly offset by
a gain on redemption of SHELS of $44.2 million.

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##### Table of Contents



Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


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

Growth in customer base as follows (includes
US cable systems subscribers to May 31,
2003):

|                     |  |       |        |        |  |       |        |        |  |       |        |        |  |       |        |        |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        |  |  | 
|-------------------- |  | ----- | ------ | ------ |  | ----- | ------ | ------ |  | ----- | ------ | ------ |  | ----- | ------ | ------ |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  | 
|                     |  |       |        |       
|                     |  | 2004  |        | 2003  
|                     |  |       |        |       
|Customer             |  | First |        | Second |  | Third |        | Fourth |  | First |        | Second |  | Third |        | Fourth |  | 
|                     |  |       |        |        |  |       |        |        |  |       |        |        |  |       |        |        |  | 
|                    
|                    
|Basic cable          |  |       | 21,894 |        |  |       | (114   | )      |  |       | 2,910  |        |  |       | 5,830  |        |  |  | 12,526 |  |  |  | 205    |  |  |  | 7,009  |  |  |  | 2,197  |  |  | 
|Digital customers(1) |  |       | 15,652 |        |  |       | 15,778 |        |  |       | 16,762 |        |  |       | 24,712 |        |  |  | 16,399 |  |  |  | 14,387 |  |  |  | 8,305  |  |  |  | 5,475  |  |  | 
|Internet             |  |       | 48,040 |        |  |       | 35,305 |        |  |       | 19,173 |        |  |       | 23,488 |        |  |  | 42,616 |  |  |  | 41,717 |  |  |  | 25,925 |  |  |  | 18,929 |  |  | 
|DTH                  |  |       | (956   | )      |  |       | 6,483  |        |  |       | 12,344 |        |  |       | 1,506  |        |  |  | 19,192 |  |  |  | 17,041 |  |  |  | 8,259  |  |  |  | 4,010  |  |  | 
|                    



|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The digital customer growth for 2003 and the
    first quarter of 2004 was restated to exclude customers with
    digital boxes who do not receive digital services.

Other operating costs:

| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | In February 2004, the Company settled certain
    litigation which resulted in a $6.5 million charge against
    income.               
| |  | In August 2003, the Company recorded a
    $12 million recovery on cable litigation and incurred a
    $4 million restructuring charge.
| |  | In May 2003, the Company wrote down DTH inventory
    by $4.4 million.                                                                 
| |  | In February 2003, Star Choice incurred a
    $4.8 million restructuring charge.                                                        

Significant acquisitions and
divestitures:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The acquisition of cable systems serving
    approximately 40,000 customers was completed effective
    March 31, 2004. These systems generated service revenue of
    approximately $3.9 million and $5.8 million in the
    third and fourth quarters of 2004, respectively, and service
    operating income before amortization of $2.1 million and
    $3.5 million in the third and fourth quarters, respectively.
| |  | The sale of the US cable systems was completed on
    June 30, 2003. Based on annualized results to the date of
    sale, the assets generated service revenue and service operating
    income before amortization of approximately
    US $45 million and US $17 million,
    respectively.                                                                                                                           

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


III.   RESULTS OF
OPERATIONS

OVERVIEW OF FISCAL 2004 CONSOLIDATED
RESULTS

|                                             |                                                                                   |      |  |           |  |      |    |           |   |      |    |           |   |  |  |       |  |  |  |       |  |  | 
|-------------------------------------------- | --------------------------------------------------------------------------------- | ---- |  | --------- |  | ---- | -- | --------- | - | ---- | -- | --------- | - |  |  | ----- |  |  |  | ----- |  |  | 
|                                             |                                                                                   |      |  |           |  |      |    |          
|                                             |                                                                                   |      |  |           |  |      |    | Change   
|                                             |                                                                                   |      |  |           |  |      |    |          
|                                             |                                                                                   |      |  |           |  |      |    | 2004      |   | 2003 |    |          
|                                             |                                                                                   | 2004 |  | 2003      |  | 2002 |    | %         |   | %    |    |          
|                                             |                                                                                   |      |  |           |  |      |    |           |   |      |    |          
|                                            
|                                            
|(In $000s Cdn except per share
    amounts) |                                                                                   |      |  |           |  |      |    |           |   |      |    |           |   |  |  |       |  |  |  |       |  | 
|Operations:                                  |                                                                                   |      |  |           |  |      |    |           |   |      |    |           |   |  |  |       |  |  |  |       |  | 
|                                             | Service revenue                                                                   |      |  | 2,079,749 |  |      |    | 1,998,421 |   |      |    | 1,824,549 |   |  |  | 4.1   |  |  |  | 9.5   |  |  | 
|                                             | Service operating income before
    amortization(1)                               |      |  | 925,935   |  |      |    | 817,641   |   |      |    | 630,416   |   |  |  | 13.2  |  |  |  | 29.7  |  |  | 
|                                             | Service operating margin                                                          |      |  | 44.5%     |  |      |    | 40.9%     |   |      |    | 34.6%     |   |  |  |       |  |  |  |       |  |  | 
|                                             | Cash flow from operations(2)                                                      |      |  | 694,770   |  |      |    | 544,175   |   |      |    | 332,109   |   |  |  | 27.7  |  |  |  | 63.9  |  |  | 
|                                             | Net income (loss)                                                                 |      |  | 90,909    |  |      |    | (46,864   | ) |      |    | (284,629  | ) |  |  | 294.0 |  |  |  | 83.5  |  |  | 
|                                             | Free cash flow (deficit)(1)                                                       |      |  | 278,881   |  |      |    | 98,259    |   |      |    | (560,765  | ) |  |  | 183.8 |  |  |  | 117.5 |  |  | 
|Balance sheet:                               |                                                                                   |      |  |           |  |      |    |           |   |      |    |           |   |  |  |       |  |  |  |       |  | 
|                                             | Total assets                                                                      |      |  | 7,556,904 |  |      |    | 7,710,801 |   |      |    | 8,622,061 |   |  |  |       |  |  |  |       |  |  | 
|                                             | Long-term financial liabilities (including
    current portion of long-term debt) |      |  | 2,650,680 |  |      |    | 2,917,068 |   |      |    | 3,469,637 |   |  |  |       |  |  |  |       |  |  | 
|Per share data:                              |                                                                                   |      |  |           |  |      |    |           |   |      |    |           |   |  |  |       |  |  |  |       |  | 
|                                             | Income (loss) per share  basic and
    diluted(3)                                |      |  | $0.22     |  |      | ($ | 0.38      | ) |      | ($ | 1.41      | ) |  |  |       |  |  |  |       |  |  | 
|                                             | Weighted average number of participating shares                                   |      |  |           |  |      |    |           |   |      |    |           |   |  |  |       |  |  |  |       |  |  | 
|                                             | outstanding during period (000s)                                                 |      |  | 231,605   |  |      |    | 231,848   |   |      |    | 231,820   |   |  |  |       |  |  |  |       |  |  | 
|Cash dividends paid per share                |                                                                                   |      |  |           |  |      |    |           |   |      |    |           |   |  |  |       |  |  |  |       |  | 
|                                             | Class A                                                                           |      |  | 0.155     |  |      |    | 0.045     |   |      |    | 0.045     |   |  |  |       |  |  |  |       |  |  | 
|                                             | Class B                                                                           |      |  | 0.160     |  |      |    | 0.050     |   |      |    | 0.050     |   |  |  |       |  |  |  |       |  |  | 
|                                            



|    |                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Key performance drivers on page 6.                                                                                                                                                     
|   
|(2) | Cash flow from operations is presented before
    changes in non-cash working capital as presented in the
    Consolidated Statements of Cash Flows.                                       
|   
|(3) | After deducting after-tax entitlements on equity
    instruments of $40,185 or $0.17 per share (2003 
    $40,193 or $0.17 per share; 2002  $42,331 or $0.18
    per share) for the year.

Highlights



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net income was $90.9 million for the year
    compared to losses of $46.9 million and $284.6 million
    in 2003 and 2002, respectively.   
| |  | Earnings per share were $0.22 compared to losses
    of $0.38 and $1.41 in 2003 and 2002, respectively.                                    
| |  | Service revenue for the year improved to
    $2.1 billion from $2.0 billion last year and
    $1.8 billion in 2002.                        
| |  | Service operating income before amortization of
    $925.9 was up over last years amount of
    $817.6 million and $630.4 million in 2002.
| |  | Consolidated free cash flow was
    $278.9 million compared to $98.3 million in 2003 and a
    deficit of $560.8 million in 2002.          

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##### Table of Contents



Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004




| |   |                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Shaw customer base continued to grow with
    increases of 30,520 for basic cable (2003  18,395);
    72,904 for digital (2003  44,235), 126,006 for
    Internet (2003  125,933) and 19,377 (2003 
    48,502) for DTH.
| |  | $210.6 million of debt was repaid in fiscal
    2004.                                                                                                                                                                           
| |  | Quarterly dividends on the Class B
    Non-Voting Shares increased from $0.03 per share
    September 30, 2003 to $0.07 per share effective
    September 30, 2004.                                                             
| |  | The Company repurchased 4,134,000 Class B
    Non-Voting Shares for cancellation, pursuant to a normal course
    issuer bid for $86.0 million ($20.80 per share) during 2004.                                                  

Revenue and operating expenses

2004 vs. 2003

Consolidated service revenue was
$2.1 billion versus $2.0 billion in 2003. The improved
service revenue resulted from growth in the customer base, rate
increases and the acquisition of the Monarch cable systems
effective March 31, 2004. Service operating income before
amortization of $926.0 million increased by 13.2% over last
year. Included in the results was a charge of $6.5 million
on the settlement of litigation in respect of an alleged breach
of contract terms. The overall increase in service operating
income before amortization resulted from growth in revenue and
cost savings across all divisions.


In fiscal 2003, the Company sold its US cable
systems. To present a view of the continuing operations of the
Company excluding the US cable systems, the annual increase in
service revenue and service operating income before amortization
over last year was 7.1% and 16.4%, respectively.

2003 vs. 2002

In 2003, consolidated service revenue increased
by 9.5% from $1.8 billion to $2.0 billion. Excluding
the US cable systems sold effective June 30, 2003,
consolidated revenue improved by 10.3%. The increase was due to
growth in the customer base, rate increases and sale of
additional digital services, the launch of HDTV and increased
VOD offerings.


Service operating income before amortization
exceeded revenue growth with an increase of 29.7%. Excluding the
US cable systems, the increase was 31.3%. The increase resulted
from revenue growth combined with the positive impact of cost
saving initiatives and restructuring in all divisions, the
elimination of the Excite@Home fee in December 2001 plus the
reduction of other operating items. In 2003, other operating
items netted to a $1.2 million charge compared to
$4.6 million in 2002. In 2003, the $1.2 million net
charge was comprised of restructuring charges of
$8.8 million, a $4.4 million write-down of DTH
inventory less the recovery on litigation of $12.0 million.
These other operating items are described in further detail in
the following paragraphs. In 2002, the Company recorded a
$4.6 million restructuring charge comprised of severance
costs of which $4.1 million and $0.5 million was
incurred in 2002 and 2003, respectively.

In April 2002 the CRTC modified certain
structural separation license requirements to allow DTH and
Cable to integrate accounting and other administrative functions
subject to the establishment of procedures to protect
confidential information. In light of this, the Satellite
division developed a restructuring plan to streamline its
operations and recorded a $4.8 million provision in the
first quarter of 2003 to cover severance costs of approximately
$4 million in respect of 400 employees and
$0.8 million of exit costs to centralize certain
operational functions in Calgary. As of August 2003,
approximately $3.5 million of severance costs were incurred
in respect of the restructuring and the remaining costs were
incurred in fiscal 2004.

Further to the restructuring process implemented
by the Company during the 2002 fiscal year, and consistent with
its stated objectives to improve profitability and increase free
cash flow, the Company

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


carried out an additional review of its
activities and operations at the corporate, cable and satellite
locations. The culmination of the review resulted in a
restructuring plan which eliminated 350 positions. A
restructuring charge of $4 million, comprised of severance
costs, was recognized in 2003, of which approximately
$3.5 million and $0.5 million was incurred in 2003 and
2004, respectively. During the operations review, Star Choice
evaluated its inventory and distribution logistics with respect
to replacement of customers DTH receivers and as a result,
recorded a write-down of DTH inventory of $4.4 million in
2003.

Pursuant to a favourable ruling from the Supreme
Court of Canada in October 2003, the authority of the CRTC to
determine conditions upon which a cable company may gain access
rights to public streets to construct transmission lines,
including reasonable terms of payment, was upheld. As a result,
in 2003 the Company reversed a $12 million litigation
accrual. In managements view, the Supreme Court of Canada
ruling strongly supports Shaws position in respect of
similar litigation commenced against the Company relating to
access to a municipalitys streets for a period of ten
years and therefore the accrual was no longer required.

Amortization

|                                 |                               |      |  |          |   |      |  |          |   |      |  |          |   |  |  |       |   |  |  |      |   |  | 
|-------------------------------- | ----------------------------- | ---- |  | -------- | - | ---- |  | -------- | - | ---- |  | -------- | - |  |  | ----- | - |  |  | ---- | - |  | 
|                                 |                               |      |  |          |   |      |  |         
|                                 |                               |      |  |          |   |      |  | Change  
|                                 |                               |      |  |          |   |      |  |         
|                                 |                               |      |  |          |   |      |  | 2004     |   | 2003 |  |         
|                                 |                               | 2004 |  | 2003     |   | 2002 |  | %        |   | %    |  |         
|                                 |                               |      |  |          |   |      |  |          |   |      |  |         
|                                
|                                
|(In $000s Cdn)                   |                               |      |  |          |   |      |  |          |   |      |  |          |   |  |  |       |   |  |  |      |   | 
|Amortization revenue (expense)  |                               |      |  |          |   |      |  |          |   |      |  |          |   |  |  |       |   |  |  |      |   | 
|                                 | Deferred IRU revenue          |      |  | 12,098   |   |      |  | 11,984   |   |      |  | 11,517   |   |  |  | 0.9   |   |  |  | 4.1  |   |  | 
|                                 | Deferred equipment revenue    |      |  | 82,711   |   |      |  | 91,863   |   |      |  | 96,499   |   |  |  | (10.0 | ) |  |  | (4.8 | ) |  | 
|                                 | Deferred equipment costs      |      |  | (229,013 | ) |      |  | (251,103 | ) |      |  | (244,640 | ) |  |  | (8.8  | ) |  |  | 2.6  |   |  | 
|                                 | Deferred charges              |      |  | (7,796   | ) |      |  | (21,125  | ) |      |  | (22,991  | ) |  |  | (63.1 | ) |  |  | (8.1 | ) |  | 
|                                 | Property, plant and equipment |      |  | (403,395 | ) |      |  | (413,381 | ) |      |  | (409,335 | ) |  |  | (2.4  | ) |  |  | 1.0  |   |  | 
|                                

The 2004 and 2003 year-over-year decreases
in amortization of deferred equipment revenue of 10.0% and 4.8%,
respectively, are primarily the result of lower truck tracking
and DTH equipment sales. This also caused the majority of the
8.8% decrease in amortization of deferred equipment costs in
2004. In 2003, amortization of deferred equipment costs
increased by 2.6% primarily due to a full years
amortization of modem costs on the purchase program introduced
in June 2002 and a change in Star Choices promotional
program on the sale of its customer premise equipment. From
September 2001 to January 2003, as part of the Simple
Satellite promotional program, Star Choice retained
ownership of the DTH satellite dishes, and therefore the dishes
were previously capitalized as part of property, plant and
equipment as opposed to deferred equipment costs.

Amortization of deferred charges decreased by
63.1% in 2004 primarily due to marketing launch costs becoming
fully amortized in the prior year and lower amortization of
deferred financing costs resulting from the repayment of the Big
Pipe and Cancom bank facilities.

Amortization of property, plant and equipment
decreased in 2004 compared to the prior year due to the sale of
the US cable systems effective June 30, 2003.

26




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##### Table of Contents



Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


Interest

|               |  |      |         |      |  |      |         |        |  |      |         |  |  |  |       |   |  |  |      |   |  | 
|-------------- |  | ---- | ------- | ---- |  | ---- | ------- | ------ |  | ---- | ------- |  |  |  | ----- | - |  |  | ---- | - |  | 
|               |  |      |         |      |  |      |         |       
|               |  |      |         |      |  |      |         | Change
|               |  |      |         |      |  |      |         |       
|               |  |      |         |      |  |      |         | 2004   |  | 2003 |         | 
|               |  | 2004 |         | 2003 |  | 2002 |         | %      |  | %    |         | 
|               |  |      |         |      |  |      |         |        |  |      |         | 
|              
|              
|(In $000s Cdn) |  |      |         |      |  |      |         |        |  |      |         |  |  |  |       |   |  |  |      |   |  | 
|Interest       |  |      | 219,472 |      |  |      | 259,702 |        |  |      | 267,323 |  |  |  | (15.5 | ) |  |  | (2.9 | ) |  | 
|              

Interest charges decreased from 2002 to 2004 as a
result of reduced consolidated debt levels and lower average
cost of borrowings. Debt reduction commenced in the latter
portion of 2003 as Shaw generated consolidated positive free
cash flow and utilized the proceeds from sale of the US cable
systems in June, 2003.

Investment activity gains and losses

|                                                          |  |      |      |      |  |      |         |                     |  |      |          |   |  |  |          |   |  |  |         |   |  | 
|--------------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ------- | ------------------- |  | ---- | -------- | - |  |  | -------- | - |  |  | ------- | - |  | 
|                                                          |  |      |      |      |  |      |         |                    
|                                                          |  |      |      |      |  |      |         | Increase (decrease)
|                                                          |  |      |      |      |  |      |         | in income          
|                                                          |  |      |      |      |  |      |         |                    
|                                                          |  | 2004 |      | 2003 |  | 2002 |         | 2004                |  | 2003 |          |  
|                                                          |  |      |      |      |  |      |         |                     |  |      |          |  
|                                                         
|                                                         
|(In $000s Cdn)                                            |  |      |      |      |  |      |         |                     |  |      |          |   |  |  |          |   |  |  |         |   |  | 
|Gain on sale of investments                               |  |      | 356  |      |  |      | 1,957   |                     |  |      | 2,321    |   |  |  | (1,601   | ) |  |  | (364    | ) |  | 
|Write-down of investments                                 |  |      | (651 | )    |  |      | (15,000 | )                   |  |      | (330,466 | ) |  |  | 14,349   |   |  |  | 315,466 |   |  | 
|Gain on redemption of SHELS                               |  |      |     |      |  |      | 119,521 |                     |  |      | 218,327  |   |  |  | (119,521 | ) |  |  | (98,806 | ) |  | 
|Dilution loss on issuance of stock by
    equity investee |  |      |     |      |  |      |        |                     |  |      | (571     | ) |  |  |         |   |  |  | 571     |   |  | 
|                                                         

Gain on sale of investments

The gains on sale of investments primarily
resulted from the sale of a minority interest in a small cable
company in British Columbia in 2004; sales of Cogeco Cable Inc.
shares, and another minority interest in a small cable company
in British Columbia in 2003; and, the sale of Terayon
Communications Systems (Terayon) shares in 2002.


Write-down of investments

The comparative write-downs of investments are
outlined in Note 5 to the Consolidated Financial
Statements. As a result of a general downturn in the markets in
2002, the Company incurred significant write-downs. The most
significant write-down resulted from the deterioration in the
market value of GT Group Telecom (GT) shares and the
announcement by GT in June 2002 that the company was unlikely to
meet certain of its banking covenants and would seek court
protection from its creditors. Pursuant to a reorganization of
GT in 2003, Shaw no longer has an ownership interest in GT.


Gain on redemption of Variable Rate Equity
Linked Debentures (SHELS)

The details of the gains on redemption of SHELS
of $119.5 million and $218.3 million in 2003 and 2002,
respectively, are outlined in Note 5 to the Consolidated
Financial Statements.


Dilution loss on issuance of stock by
investee

The dilution loss reported in 2002 arose in
connection with Shaws investment in GT.


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


Other income and expenses

|                                                            |  |      |        |      |  |      |          |                     |  |      |        |   |  |  |         |   |  |  |          |   |  | 
|----------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | -------- | ------------------- |  | ---- | ------ | - |  |  | ------- | - |  |  | -------- | - |  | 
|                                                            |  |      |        |      |  |      |          |                    
|                                                            |  |      |        |      |  |      |          | Increase (decrease)
|                                                            |  |      |        |      |  |      |          | in income          
|                                                            |  |      |        |      |  |      |          |                    
|                                                            |  | 2004 |        | 2003 |  | 2002 |          | 2004                |  | 2003 |        |  
|                                                            |  |      |        |      |  |      |          |                     |  |      |        |  
|                                                           
|                                                           
|(In $000s Cdn)                                              |  |      |        |      |  |      |          |                     |  |      |        |   |  |  |         |   |  |  |          |   |  | 
|Loss on sale of satellite assets                            |  |      |       |      |  |      | (3,800   | )                   |  |      | (1,281 | ) |  |  | 3,800   |   |  |  | (2,519   | ) |  | 
|Debt retirement costs                                       |  |      | (2,598 | )    |  |      | (10,634  | )                   |  |      |       |   |  |  | 8,036   |   |  |  | (10,634  | ) |  | 
|Foreign exchange gain (loss) on unhedged
    long-term debt |  |      | 3,963  |      |  |      | 32,617   |                     |  |      | (1,658 | ) |  |  | (28,654 | ) |  |  | 34,275   |   |  | 
|Loss on sale and write-down of assets                       |  |      |       |      |  |      | (124,674 | )                   |  |      |       |   |  |  | 124,674 |   |  |  | (124,674 | ) |  | 
|Other revenue                                               |  |      | 3,753  |      |  |      | 9,338    |                     |  |      | 6,048  |   |  |  | (5,585  | ) |  |  | 3,290    |   |  | 
|                                                           

During 2003, Shaw sold its Star Choice Business
Television division for $6.5 million which resulted in a
$3.8 million loss. The loss of $1.3 million in the
prior year relates to the sale of the uplink and SRDU business
in the Caribbean.

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

In 2003, the Company redeemed US
$150 million Senior secured notes of Star Choice with part
of the proceeds from the sale of the US cable systems. In
connection with the redemption Shaw incurred $10.6 million
in costs including early redemption premiums of US
$9.8 million and the purchase of outstanding Star Choice
warrants for US $2.4 million. These costs were partially
offset by the reversal of a mark-to-market credit related to the
notes.

Shaw recorded foreign exchange gains and losses
on the translation of its foreign denominated unhedged long-term
debt, which included the US denominated portion of its credit
facility which ranged from US $51.5 million at
August 31, 2004 to $57.2 million in fiscal 2002 and,
until August 2003, the Star Choice US $150 million Senior
secured notes. Due to the strengthening of the Canadian dollar
relative to the US dollar, the Company recorded foreign exchange
gains of $4.0 million in 2004 and $32.6 million in
2003. In 2002, the Canadian dollar weakened relative to the US
dollar, which resulted in a foreign exchange loss.

The loss on sale and write-down of assets of
$124.7 million in 2003 was comprised of $74.7 million
recorded on the Companys sale of the US cable systems in
June 2003 and a write-down of goodwill of $50 million.

Other revenue includes foreign exchange gains and
losses on current monetary assets and liabilities. The
year-over-year change in other revenue was a $5.6 million
decrease in 2004 and a $3.3 million increase in 2003. The
fluctuation was mainly due to a foreign exchange gain of
$3.5 million that arose in 2003 on the settlement of US
denominated vendor financing.

Income tax expense (recovery)

The income tax expense (recovery) was calculated
using current statutory income tax rates of 35.5%, 38%, and 40%
for the years 2004, 2003 and 2002, respectively, and was
adjusted for the reconciling items identified in Note 14 to
the Consolidated Financial Statements.


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


Equity loss on investees

The equity losses on investees were
$0.3 million, $1.9 million and $53.5 million in
2004, 2003 and 2002, respectively, and are detailed in
Note 5 to the Consolidated Financial Statements. The equity
loss of $53.5 million in 2002 is primarily in respect of
Shaws previous investment in GT.


Investment in Burrard Landing Lot 2 Holdings
Partnership

As described in Note 1 to the Consolidated
Financial Statements, Shaw proportionately consolidates the
assets and liabilities of its 38.3% interest in the Partnership.
As the Shaw Tower is still under construction, all costs,
including interest, have been capitalized to the cost of the
building and no income or loss has been recorded by Shaw in
respect of its Partnership interest. The Company anticipates
that commercial construction of the building will be completed
by the fall of 2004. Residential construction is expected to be
completed in calendar 2005.


Net income (loss)

|                                                                                                 |  |      |         |      |  |      |         |        |  |      |          |   |  |  |       |   |  |  |      |  |  | 
|------------------------------------------------------------------------------------------------ |  | ---- | ------- | ---- |  | ---- | ------- | ------ |  | ---- | -------- | - |  |  | ----- | - |  |  | ---- |  |  | 
|                                                                                                 |  |      |         |      |  |      |         |       
|                                                                                                 |  |      |         |      |  |      |         | Change
|                                                                                                 |  |      |         |      |  |      |         |       
|                                                                                                 |  |      |         |      |  |      |         | 2004   |  | 2003 |          |  
|                                                                                                 |  | 2004 |         | 2003 |  | 2002 |         | %      |  | %    |          |  
|                                                                                                 |  |      |         |      |  |      |         |        |  |      |          |  
|                                                                                                
|                                                                                                
|(In $000s Cdn except per share
    amounts)                                                      |  |      |         |      |  |      |         |        |  |      |          |   |  |  |       |   |  |  |      |  |  | 
|Net income (loss)                                                                                |  |      | 90,909  |      |  |      | (46,864 | )      |  |      | (284,629 | ) |  |  | 294.0 |   |  |  | 83.5 |  |  | 
|After-tax equity entitlements                                                                    |  |      | (40,185 | )    |  |      | (40,193 | )      |  |      | (42,331  | ) |  |  |      |   |  |  | 5.1  |  |  | 
|                                                                                                
|Net income (loss) used for earning (loss) per
    share calculation                              |  |      | 50,724  |      |  |      | (87,057 | )      |  |      | (326,960 | ) |  |  | 158.3 |   |  |  | 73.4 |  |  | 
|Divided by weighted average number of
    participating shares outstanding during period (000s) |  |      | 231,605 |      |  |      | 231,848 |        |  |      | 231,820  |   |  |  | (0.1  | ) |  |  |     |  |  | 
|Income (loss) per share  basic and diluted                                                      |  | $    | 0.22    |      |  | ($   | 0.38    | )      |  | ($   | 1.41     | ) |  |  | 157.9 |   |  |  | 73.1 |  |  | 
|                                                                                                

The percentage improvements in earnings (loss)
per share in 2004 and 2003 are less than the respective
percentage improvements in earnings because the per share
calculation is affected by the deduction of after-tax
entitlements on equity instruments as illustrated in the above
table. Net income was $90.9 million in 2004 compared to net
losses of $46.9 million and $284.6 in 2003 and 2002,
respectively. The year-over year improvements are summarized as
follows:

|                                                                                             |  |      |       |      |  |  |        |   |  | 
|-------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  |  | ------ | - |  | 
|                                                                                             |  | 2004 |       | 2003 |  | 
|                                                                                             |  |      |       |      |  | 
|                                                                                            
|                                                                                            
|(In $millions Cdn)                                                                           |  |      |       |      |  |  |        |   |  | 
|Increased service operating income before
    amortization                                   |  |      | 108.3 |      |  |  | 187.2  |   |  | 
|Decreased (increased) amortization of deferred
    net equipment cost and IRU revenue        |  |      | 13.0  |      |  |  | (10.6  | ) |  | 
|Decreased (increased) amortization of deferred
    charges and property, plant and equipment |  |      | 23.3  |      |  |  | (2.2   | ) |  | 
|Decreased interest expense                                                                   |  |      | 40.2  |      |  |  | 7.6    |   |  | 
|Change in other net costs and
    revenue(1)                                                 |  |      | (4.5  | )    |  |  | 116.6  |   |  | 
|Increased income taxes                                                                       |  |      | (44.2 | )    |  |  | (112.4 | ) |  | 
|Decreased equity loss on investees                                                           |  |      | 1.7   |      |  |  | 51.6   |   |  | 
|                                                                                            
|                                                                                             |  |      | 137.8 |      |  |  | 237.8  |   |  | 
|                                                                                            



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Other net costs and revenue includes gain on sale
    of investments, write-down of investments, gain on redemption of
    SHELS, loss on sale of satellite assets, debt restructuring
    costs, foreign exchange gain (loss) on unhedged long-term debt,
    provision for loss on sale and write-down of assets and other
    revenue as detailed in the Consolidated Statements of Income
    (Loss) and Retained Earnings (Deficit). The positive change of
    $116.6 million in other net costs and revenue in 2003 was
    due to the write-down of investments in 2002.

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


SEGMENTED OPERATIONS REVIEW

Additional information concerning operating
segments is presented in Note 15 to the Consolidated
Financial Statements.


CABLE

FINANCIAL HIGHLIGHTS

|                                                    |                                                              |      |           |         |  |      |           |         |  |      |           |         |  |  |      |       |   |  |       |      |   |  | 
|--------------------------------------------------- | ------------------------------------------------------------ | ---- | --------- | ------- |  | ---- | --------- | ------- |  | ---- | --------- | ------- |  |  | ---- | ----- | - |  | ----- | ---- | - |  | 
|                                                    |                                                              |      |           |         |  |      |           |        
|                                                    |                                                              |      |           |         |  |      |           | Change 
|                                                    |                                                              |      |           |         |  |      |           |        
|                                                    |                                                              |      |           |         |  |      |           | 2004    |  | 2003 |           |        
|                                                    |                                                              | 2004 |           | 2003    |  | 2002 |           | %       |  | %    |           |        
|                                                    |                                                              |      |           |         |  |      |           |         |  |      |           |        
|                                                   
|                                                   
|($000s Cdn)                                        |                                                              |      |           |         |  |      |           |         |  |      |           |         |  |  |      |       |   |  |       |      |   | 
|Service revenue (third party)(1)                    |                                                              |      | 1,491,569 |         |  |      | 1,459,833 |         |  |      | 1,367,563 |         |  |  | 2.2  |       |   |  | 6.8   |      |   | 
|                                                   
|Service operating income before
    amortization(2) |                                                              |      | 779,579   |         |  |      | 727,458   |         |  |      | 608,916   |         |  |  | 7.2  |       |   |  | 19.5  |      |   | 
|Less:                                               |                                                              |      |           |         |  |      |           |         |  |      |           |         |  |  |      |       |   |  |       |      |   | 
|                                                    | Interest                                                     |      |           | 174,988 |  |      |           | 190,002 |  |      |           | 196,120 |  |  |      | (7.9  | ) |  |       | (3.1 | ) |  | 
|                                                    | Entitlements on equity instruments, net of
    current taxes |      |           | 40,185  |  |      |           | 40,193  |  |      |           | 42,331  |  |  |      |      |   |  |       | (5.1 | ) |  | 
|                                                    | Cash taxes on net income                                     |      |           | 25,043  |  |      |           | 34,809  |  |      |           | 36,523  |  |  |      | (28.1 | ) |  |       | (4.7 | ) |  | 
|                                                   
|Cash flow before the following:                     |                                                              |      | 539,363   |         |  |      | 462,454   |         |  |      | 333,942   |         |  |  | 16.6 |       |   |  | 38.5  |      |   | 
|Capital expenditures and equipment
    subsidies    |                                                              |      | 267,113   |         |  |      | 257,276   |         |  |      | 683,325   |         |  |  | 3.8  |       |   |  | (62.4 | )    |   | 
|                                                   
|Free cash
    flow(2)                               |                                                              |      | 272,250   |         |  |      | 205,178   |         |  |      | (349,383  | )       |  |  | 32.7 |       |   |  | 158.7 |      |   | 
|                                                   
|Operating
    margin(2)                             |                                                              |      | 52.3%     |         |  |      | 49.8%     |         |  |      | 44.5%     |         |  |  | 2.5  |       |   |  | 5.3   |      |   | 
|                                                   



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In conjunction with this years adoption of
    EIC 141, the Company separated the reporting of its ongoing
    service revenue from the amortization of equipment revenue. See
    Note 1 to the Consolidated Financial Statements in respect
    of the change in accounting policy. The impact of the accounting
    change resulted in a change in presentation of cable revenue
    only; service operating income before amortization and free cash
    flow were not impacted.
|   
|(2) | See Key performance drivers on page 6.                                                                                                                                                                                                                                                                                                                                                                                                                                               

2004 vs. 2003

OPERATING HIGHLIGHTS



|  |                                                                                                                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cable generated free cash flow of
    $272.3 million for the year, which represents a 32.7%
    increase over 2003 free cash flow of $205.2 million.                                                                                                                 
| | Effective March 31, 2004, Shaw acquired
    cable systems from Monarch Cablesystems Ltd. which served
    approximately 40,000 customers in Banff, Canmore and the
    Medicine Hat region in Alberta as well as the Kimberley and Hope
    area in British Columbia.
| | Commencing in February 2004, Shaw applied rate
    increases of $1 to $2 per month to most of its packages. The
    increases generated additional monthly revenue of approximately
    $1.5 million when they were fully implemented at the end of
    May 2004.    

The annual increase in cable service revenue over
last year was 2.2%. The year-over-year increase, after adjusting
2003 results to exclude the US cable systems sold in 2003, was
6.3%. The revenue growth is

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


the result of increased customer base, rate
increases implemented in the current and prior year, and the
recent Monarch systems acquisition. The Monarch systems
generated service revenue of $9.7 million for the year
ended August 31, 2004.

Service operating income before amortization
increased by 7.2% over last year and 10.5% after taking the 2003
sale of the US systems into account. The Monarch systems
generated service operating income before amortization of
$5.6 million for the year. The principal reason for the
balance of the increases in service operating income before
amortization is revenue growth arising from a higher customer
base, rate increases and reduction of costs, including decreased
bandwidth costs.

The cable division has experienced increased
competition with the entrance of new video competitors, such as
Manitoba Tel and SaskTel in Winnipeg and Saskatoon. In addition,
Telus, which operates in Shaws Alberta and British
Columbia service areas, has also been granted a broadcasting
distribution license to enter the video market in the near
future. In response, Shaw is solidifying its strong customer
relationships through initiatives such as same day/next day
service, enhancing the attractiveness of its current products
with new features (e.g. HDTV, PVR, a new interactive
program guide, Xtreme-I Internet ServiceTM),
launching Digital Phone and expanding its marketing efforts.
This investment in marketing, customer service and product
innovation may put some upward pressure on costs in the cable
division in the short term. However, this activity and the
triple play offering of voice, video and data are
expected to position Shaw for growth in the near future.

2003 vs. 2002

OPERATING HIGHLIGHTS



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Basic rate deregulation was completed in late
    October 2002. Effective January 2003, Shaw implemented basic
    rate price increases ranging from $0.16 to $2 per month per
    subscriber depending on the level of tiered service the customer
    received. This affected approximately 1.2 million basic
    analogue non-bundled subscribers and generated additional
    revenue of approximately $0.9 million per month.
| | During the second quarter, a new bundle of
    services was created for all three specialty service tiers. This
    change, which was instituted as a means of increasing the
    competitiveness of Shaws service bundles, resulted in a
    reduction of revenue of approximately $0.6 million per
    month.                                                                                                                  
| | Effective May 1, 2003 Shaw increased its
    monthly charge on certain packages affecting approximately
    550,000 customers which generated approximately $1 million
    of additional revenue per month.                                                                                                                                                                                                                       
| | Effective June 30, 2003, Shaw increased its
    monthly charge on its unbundled basic and FCS bundled packages.
    This affected approximately 1.1 million customers and
    generated additional monthly revenue of approximately
    $2 million when it was fully implemented by August 31,
    2003.                                                                                                                          
| | The US cable systems were sold effective
    June 30, 2003. These systems generated US $17 million
    of annual service operating income before amortization.                                                                                                                                                                                                                                                                    

In 2003 the Cable division generated
$205.2 million of free cash flow compared to negative free
cash flow of $349.4 million in 2002. Cable revenue
increased 6.8% over 2002. Excluding the US cable systems sold
effective June 30, 2003, cable revenue increased by 7.7%.
Substantially all of this increase was due to rate increases
implemented during 2002 and 2003 and customer growth in basic,
Internet and digital services.

Service operating income before amortization
increased 19.5% over 2002. Excluding the US cable systems,
service operating income before amortization increased 20.7%.
The improvement materialized from the impact of rate increases,
customer growth in Internet and digital services, decreases in

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MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


bandwidth costs, the elimination of the
Excite@Home fee in December 2001 and cost savings resulting from
restructuring programs.

CAPITAL EXPENDITURES AND EQUIPMENT
SUBSIDIES  CABLE

|                                              |                             |      |         |         |  |      |         |        |  |      |         |         |  |  |     |       |   |  |       |       |   |  | 
|--------------------------------------------- | --------------------------- | ---- | ------- | ------- |  | ---- | ------- | ------ |  | ---- | ------- | ------- |  |  | --- | ----- | - |  | ----- | ----- | - |  | 
|                                              |                             |      |         |         |  |      |         |       
|                                              |                             |      |         |         |  |      |         | Change
|                                              |                             |      |         |         |  |      |         |       
|                                              |                             |      |         |         |  |      |         | 2004   |  | 2003 |         |        
|                                              |                             | 2004 |         | 2003    |  | 2002 |         | %      |  | %    |         |        
|                                              |                             |      |         |         |  |      |         |        |  |      |         |        
|                                             
|                                             
|(In $000s Cdn)                                |                             |      |         |         |  |      |         |        |  |      |         |         |  |  |     |       |   |  |       |       |   | 
|Capital expenditures and equipment subsidies: |                             |      |         |         |  |      |         |        |  |      |         |         |  |  |     |       |   |  |       |       |   | 
|                                              | New housing development(1)  |      |         | 63,906  |  |      |         | 83,009 |  |      |         | 106,231 |  |  |     | (23.0 | ) |  |       | (21.9 | ) |  | 
|                                              | Success-based(2)            |      |         | 54,540  |  |      |         | 71,301 |  |      |         | 182,760 |  |  |     | (23.5 | ) |  |       | (61.0 | ) |  | 
|                                              | Upgrades and enhancement(3) |      |         | 112,223 |  |      |         | 62,133 |  |      |         | 270,033 |  |  |     | 80.6  |   |  |       | (77.0 | ) |  | 
|                                              | Replacement(4)              |      |         | 16,070  |  |      |         | 15,016 |  |      |         | 28,437  |  |  |     | 7.0   |   |  |       | (47.2 | ) |  | 
|                                              | Buildings/ other            |      |         | 20,374  |  |      |         | 25,817 |  |      |         | 95,864  |  |  |     | (21.1 | ) |  |       | (73.1 | ) |  | 
|                                             
|                                              |                             |      | 267,113 |         |  |      | 257,276 |        |  |      | 683,325 |         |  |  | 3.8 |       |   |  | (62.3 | )     |   | 
|                                             

Capital expenditure categories listed above
includes:



|    |                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Build out of mainline cable and the addition of
    drops in new subdivisions.                                                                                                                                   
|   
|(2) | Capital and equipment subsidies related to the
    acquisition of new customers, including installation of modems,
    digital cable terminals (DCTs), filters and
    commercial drops for Big Pipe customers.
|   
|(3) | Upgrades to the plant from 550 MHz to
    750 MHz in 2002 and 2003 and 750 MHz to 860 MHz
    in 2004, build out of fiber backbone to reduce use of leased
    circuits and costs to decrease Internet node size.
|   
|(4) | Normal replacement of aged assets such as drops,
    vehicles and other equipment.                                                                                                                               

2004 vs. 2003

Although total capital expenditures of
$267.1 million in fiscal 2004 increased marginally from
$257.3 million last year, the components of spending have
changed. The increase in upgrades and enhancements of
$50.1 million reflects projects undertaken this year
related to 860MHz upgrades, preparation for Digital Phone and
further DOCSISTM 2.0 deployment. New housing
development decreased $19.1 million or 23.0% as a result of
the sale of the US cable systems and better coordination of
construction projects with developers. Success based spending
decreased $16.8 million or 23.5% despite this years
net increase of Internet customers of 126,006 and digital
terminals of 107,879 compared to 125,933 and 57,093,
respectively, last year. The decrease in spending reflects the
deployment of lower cost DOCSISTM modems for Internet
customers, the strengthened Canadian dollar and reduced customer
churn.


2003 vs. 2002

Capital expenditures (including corporate) and
equipment subsidies decreased $426.0 million or 62.3% over
2002. Upgrades and enhancements decreased $207.9 million as
a result of the completion of the second Internet Data Center
(IDC) and major cable plant upgrades in 2002.
Success based spending decreased by $111.5 million as a
result of reduced Internet and digital activations compared to
2002. Buildings and other decreased by $70.0 million as a
result of the completion of major building projects in 2002. In
2003, Shaw predominantly used internal labour on new housing
development compared to the first half of 2002 where higher cost
external contractors were used extensively. As a result, and due
to more efficient management of resources including selective
pre-wiring and coordination of construc-


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


tion with developers, new housing development
expenditures decreased by $23.2 million. Replacement
expenditures decreased by $13.4 million as a result of a
more focused program of managing capital spending.

The decline in capital expenditures has not
impaired customer growth as evidenced by subscriber gains
highlighted in the following table.

SUBSCRIBER STATISTICS

|                                                 |                                    |      |           |         |  |            |           |        |  |        |           |        |  |        |         |  |  |  |      |  |  |  |         |  |  |  |      |  |  |  | 
|------------------------------------------------ | ---------------------------------- | ---- | --------- | ------- |  | ---------- | --------- | ------ |  | ------ | --------- | ------ |  | ------ | ------- |  |  |  | ---- |  |  |  | ------- |  |  |  | ---- |  |  |  | 
|                                                 |                                    |      |           |         |  |            |           |        |  |       
|                                                 |                                    |      |           |         |  |            |           | 2004   |  | 2003  
|                                                 |                                    |      |           |         |  |            |           |        |  |       
|                                                 |                                    |      |           |         |  |            |           |        |  | Change |           |        |  | Change |         | 
|                                                 |                                    | 2004 |           | 2003(1) |  | 2002(1)(2) |           | Growth |  | %      |           | Growth |  | %      |         | 
|                                                 |                                    |      |           |         |  |            |           |        |  |        |           |        |  |        |         | 
|                                                
|                                                
|CABLE:                                           |                                    |      |           |         |  |            |           |        |  |        |           |        |  |        |         |  |  |  |      |  |  |  |         |  |  |  |      |  |  | 
|Basic subscribers                                |                                    |      | 2,122,488 |         |  |            | 2,091,968 |        |  |        | 2,073,033 |        |  |        | 30,520  |  |  |  | 1.5  |  |  |  | 18,935  |  |  |  | 0.9  |  |  | 
|                                                 | Penetration as a % of homes passed |      |           | 67.2%   |  |            |           | 68.1%  |  |        |           | 69.0%  |  |        |         |  |  |  |      |  |  |  |         |  |  |  |      |  |  |  | 
|Digital customers(3)                             |                                    |      | 540,535   |         |  |            | 467,631   |        |  |        | 423,396   |        |  |        | 72,904  |  |  |  | 15.6 |  |  |  | 44,235  |  |  |  | 10.4 |  |  | 
|Digital deployment (DCTs)                      |                                    |      | 640,975   |         |  |            | 533,096   |        |  |        | 476,003   |        |  |        | 107,879 |  |  |  | 20.2 |  |  |  | 57,093  |  |  |  | 12.0 |  |  | 
|                                                
|INTERNET:                                        |                                    |      |           |         |  |            |           |        |  |        |           |        |  |        |         |  |  |  |      |  |  |  |         |  |  |  |      |  |  | 
|Connected and scheduled installations            |                                    |      | 1,020,938 |         |  |            | 894,932   |        |  |        | 768,999   |        |  |        | 126,006 |  |  |  | 14.1 |  |  |  | 125,933 |  |  |  | 16.4 |  |  | 
|                                                 | Penetration as % of basic          |      |           | 48.1%   |  |            |           | 42.8%  |  |        |           | 37.1%  |  |        |         |  |  |  |      |  |  |  |         |  |  |  |      |  |  |  | 
|Stand-alone Internet not included in basic cable |                                    |      | 114,767   |         |  |            | 103,894   |        |  |        | 91,420    |        |  |        | 10,873  |  |  |  | 10.5 |  |  |  | 12,474  |  |  |  | 13.6 |  |  | 
|                                                



|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | August 31, 2003 and 2002 statistics are
    restated for comparative purposes to adjust subscribers as if
    the 2004 cable system acquisitions had occurred on that date.
|   
|(2) | August 31, 2002 statistics restated for
    comparative purposes to adjust subscribers as if the sale of the
    US Cablesystems had occurred on August 31, 2002.          
|   
|(3) | August 31, 2003 digital customer count was
    restated to exclude customers with digital boxes who do not
    receive digital services.                                   

Shaw added 30,520 basic subscribers in 2004
compared to 18,935 last year. Shaw continued its innovative
service offerings such as its basic and full cable service
introductory offer to standalone Internet and other potential
customers. The intent of this offer is to encourage these
customers to develop viewing habits that recognize the value of
a monthly cable subscription and to continue as customers at the
end of the promotional period. This program has been in place
for over a year and has proven successful.

Digital customers increased by 72,904 in 2004
compared to 44,235 last year. During the fourth quarter of 2004,
Shaw launched a marketing campaign which helped push digital
customer additions. Growth has also been stimulated by recent
initiatives from DTH suppliers in both the US and Canadian
markets to crack-down on illegal satellite systems. In addition,
the introduction of HDTV in most major centers as well as the
offering of time-shifting channels and VOD have increased the
attractiveness of Shaws digital product. Shaw has further
enhanced its digital offering through the introduction of the
DCT 6208 digital terminal, the first set top box to incorporate
both HDTV and a PVR, as well as the launch of a new interactive
program guide that provides significant improvements over the
previous version.

The Internet customer base grew by approximately
126,000 in 2004, consistent with last year. Total Internet
customers surpassed the one million mark in June, and stood at
1,020,938 at August 31, 2004. Internet penetration as a
percentage of basic was 48.1% compared to 42.8% last year. Shaw
continues to be the most successful North American cable
operator in this regard. The recent addition of Xtreme-I

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


to the Internet product line in a number of major
systems has been successful. Xtreme-I uses DOCSIS
technology to significantly increase download and upload speeds,
which is appealing to customers who download large files or
visit online gaming and content-rich multimedia
sites.

The continued growth in Shaws customer base
is noteworthy given that it more than offset declines in
customers as a result of intensified competition from the entry
of new video competitors and it occurred during periods in which
Shaw implemented rate increases. To maintain growth in this
highly competitive market, Shaw continues to deliver
high-quality, reliable service and excellent customer care,
which includes support 24/7/365.

At the end of the year, approximately 42.4% of
Shaw customers subscribed to bundled services compared to 37.9%
last year. The attractiveness of the bundled packages is
enhanced by Shaws ability to offer services such as VOD,
HDTV and, in the near future, Digital Phone. Shaws
bundling strategy has proven to be an effective customer
retention tool for its digital and Internet customers as shown
by churn rates in the table below.

|                   |  |      |      |      |  |  |      |   |  | 
|------------------ |  | ---- | ---- | ---- |  |  | ---- | - |  | 
|Churn(1)           |  | 2004 |      | 2003 |  | 
|                   |  |      |      |      |  | 
|                  
|                  
|Digital customers  |  |      | 15.5 | %    |  |  | 21.8 | % |  | 
|Internet customers |  |      | 17.7 | %    |  |  | 20.1 | % |  | 
|                  



|    |                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Calculated as the number of new customer
    activations less the net gain of customers during the period
    divided by the average of the opening and closing customers for
    the applicable period. See Key performance drivers page 6.

COMBINED SATELLITE (DTH and Satellite Services)

FINANCIAL HIGHLIGHTS

|                                                       |                          |      |         |        |  |      |          |         |  |      |          |         |  |  |       |       |   |  |       |        |   |  | 
|------------------------------------------------------ | ------------------------ | ---- | ------- | ------ |  | ---- | -------- | ------- |  | ---- | -------- | ------- |  |  | ----- | ----- | - |  | ----- | ------ | - |  | 
|                                                       |                          |      |         |        |  |      |          |        
|                                                       |                          |      |         |        |  |      |          | Change 
|                                                       |                          |      |         |        |  |      |          |        
|                                                       |                          |      |         |        |  |      |          | 2004    |  | 2003 |          |        
|                                                       |                          | 2004 |         | 2003   |  | 2002 |          | %       |  | %    |          |        
|                                                       |                          |      |         |        |  |      |          |         |  |      |          |        
|                                                      
|                                                      
|($000s Cdn)                                            |                          |      |         |        |  |      |          |         |  |      |          |         |  |  |       |       |   |  |       |        |   | 
|Service revenue (third party)(1)                       |                          |      | 588,180 |        |  |      | 538,588  |         |  |      | 456,986  |         |  |  | 9.2   |       |   |  | 17.9  |        |   | 
|                                                      
|Service operating income before
    amortization(1)(2) |                          |      | 152,840 |        |  |      | 91,433   |         |  |      | 26,100   |         |  |  | 67.2  |       |   |  | 250.3 |        |   | 
|Less:                                                  |                          |      |         |        |  |      |          |         |  |      |          |         |  |  |       |       |   |  |       |        |   | 
|                                                       | Interest(3)              |      |         | 44,484 |  |      |          | 69,700  |  |      |          | 71,203  |  |  |       | (36.2 | ) |  |       | (2.1   | ) |  | 
|                                                       | Cash taxes on net income |      |         | 1,692  |  |      |          | 897     |  |      |          | 801     |  |  |       | 88.6  |   |  |       | 12.0   |   |  | 
|                                                      
|Cash flow before the following                         |                          |      | 106,664 |        |  |      | 20,836   |         |  |      | (45,904  | )       |  |  | 411.9 |       |   |  | 145.4 |        |   | 
|                                                      
|Less capital expenditures and equipment
    subsidies: |                          |      |         |        |  |      |          |         |  |      |          |         |  |  |       |       |   |  |       |        |   | 
|                                                       | Success-based            |      |         | 95,958 |  |      |          | 122,419 |  |      |          | 129,117 |  |  |       | (21.6 | ) |  |       | (5.2   | ) |  | 
|                                                       | Transponders             |      |         |       |  |      |          |        |  |      |          | 14,400  |  |  |       |      |   |  |       | (100.0 | ) |  | 
|                                                       | Other                    |      |         | 4,075  |  |      |          | 5,336   |  |      |          | 21,961  |  |  |       | (23.6 | ) |  |       | (75.7  | ) |  | 
|                                                      
|                                                       |                          |      | 100,033 |        |  |      | 127,755  |         |  |      | 165,478  |         |  |  | (21.7 | )     |   |  | (22.8 | )      |   | 
|                                                      
|Free cash flow(2)                                      |                          |      | 6,631   |        |  |      | (106,919 | )       |  |      | (211,382 | )       |  |  | 106.2 |       |   |  | 49.4  |        |   | 
|                                                      



|    |                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In conjunction with this years adoption of
    EIC 141, the Company separated the reporting of its ongoing
    service revenue from the amortization of equipment revenue. See
    Note 1 to the Consolidated Financial Statements in respect
    of the change in accounting policy. The impact of the accounting
    change resulted in a

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004




|    |                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | change in presentation of the Satellite
    divisions revenue and resulted in a nominal increase in
    the divisions service operating income before amortization
    and free cash flow.                                   
|   
|(2) | See Key performance drivers on page 6.                                                                                                                                                                                         
|   
|(3) | Interest is allocated to the Satellite division
    based on the actual cost of debt incurred by the Company to
    repay prior outstanding Satellite debt and to fund accumulated
    cash deficits of Cancom and Star Choice.

SATELLITE (DTH and Satellite Services)

2004 vs. 2003

The Satellite division increased annual service
revenue by 9.2% over 2003, and service operating income before
amortization grew by 67.2%. These improvements resulted mainly
from customer growth and rate increases in DTH.


This is the first year the Satellite division
generated positive free cash flow ($6.6 million compared to
negative $106.9 million last year). The outlook for free
cash flow remains positive; however, due to one-time capital
costs of approximately $10.3 million in connection with the
launch of Anik F2, it is expected that the Satellite division
will report negative free cash flow in the first quarter of
fiscal 2005. In addition, the division will likely incur higher
success-based capital expenditures during the first quarter in
preparation for the Christmas season.

The improvement in free cash flow over
comparative periods primarily resulted from increased service
operating income before amortization in the DTH (Star Choice)
segment, reduced success-based expenditures due to lower
customer activations, and reduced interest expense as a result
of last years redemption of the US $150 million
senior secured notes of Star Choice and this years
repayment of the $250 million Cancom structured note.

2003 vs. 2002

In 2003, the Satellite division was cash flow
negative by $106.9 million versus $211.4 million in
fiscal 2002. Most of the improvement was due to increased
service operating income before amortization of
$65.3 million resulting from economies of scale on a larger
DTH subscriber base and rate increases. The remainder is the
result of reduced spending on success-based capital, which
includes the capital cost of satellite dishes and equipment
subsidies related to the acquisition of customers, as a result
of lower customer activations in 2003, reduced transponder
commitments and completion of building projects in fiscal 2002.


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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


DTH (Star Choice)

FINANCIAL HIGHLIGHTS

|                                                           |  |      |         |      |  |      |         |        |  |      |         |   |  |  |       |  |  |  |       |  |  | 
|---------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ------ |  | ---- | ------- | - |  |  | ----- |  |  |  | ----- |  |  | 
|                                                           |  |      |         |      |  |      |         |       
|                                                           |  |      |         |      |  |      |         | Change
|                                                           |  |      |         |      |  |      |         |       
|                                                           |  |      |         |      |  |      |         | 2004   |  | 2003 |         |  
|                                                           |  | 2004 |         | 2003 |  | 2002 |         | %      |  | %    |         |  
|                                                           |  |      |         |      |  |      |         |        |  |      |         |  
|                                                          
|                                                          
|($000s Cdn)                                                |  |      |         |      |  |      |         |        |  |      |         |   |  |  |       |  |  |  |       |  |  | 
|Service revenue (third party)(1)                           |  |      | 505,637 |      |  |      | 450,176 |        |  |      | 361,116 |   |  |  | 12.3  |  |  |  | 24.7  |  |  | 
|                                                          
|Service operating income (loss) before
    amortization(2) |  |      | 111,150 |      |  |      | 52,814  |        |  |      | (14,103 | ) |  |  | 110.5 |  |  |  | 474.5 |  |  | 
|Service operating margin(2)                                |  |      | 22.0%   |      |  |      | 11.7%   |        |  |      | (3.9%   | ) |  |  | 10.3  |  |  |  | 15.6  |  |  | 
|                                                          



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In conjunction with this years adoption of
    EIC 141, the Company separated the reporting of its ongoing
    service revenue from the amortization of equipment revenue. See
    Note 1 to the Consolidated Financial Statements in respect
    of the change in accounting policy. The impact of the accounting
    change resulted in a change in presentation of DTH revenue only;
    service operating income (loss) before amortization was not
    affected.
|   
|(2) | See Key performance drivers page 6.                                                                                                                                                                                                                                                                                                                                                                                                                                   

CUSTOMER STATISTICS

|                           |  |      |         |      |  |      |         |  |  |  |         |   |  | 
|-------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | - |  | 
|Star Choice customers      |  | 2004 |         | 2003 |  | 2002 |         | 
|                           |  |      |         |      |  |      |         | 
|                          
|                          
|Beginning of year          |  |      | 808,526 |      |  |      | 760,024 |  |  |  | 628,806 |   |  | 
|Additions                  |  |      | 19,377  |      |  |      | 48,502  |  |  |  | 153,793 |   |  | 
|Adjustments(1)             |  |      |        |      |  |      |        |  |  |  | (22,575 | ) |  | 
|                          
|End of year                |  |      | 827,903 |      |  |      | 808,526 |  |  |  | 760,024 |   |  | 
|                          
|Addition as % of beginning |  |      | 2.4%    |      |  |      | 6.4%    |  |  |  | 24.5%   |   |  | 
|                          



|    |                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In 2002, Star Choice converted to the same
    billing system used by Shaw. It became evident during the
    billing conversion that there was an account aging problem,
    which resulted in a reduction of 15,000 customers. In addition,
    the conversion itself caused some difficulties in the customer
    service area resulting in the loss of approximately 8,000
    customers.

|                      |  |                       |       |      |  |      |       |  |  |  |       |  |  | 
|--------------------- |  | --------------------- | ----- | ---- |  | ---- | ----- |  |  |  | ----- |  |  | 
|                      |  |                      
|                      |  | Year ended August 31,
|                      |  |                      
|Churn(1)              |  | 2004                  |       | 2003 |  | 2002 |       | 
|                      |  |                       |       |      |  |      |       | 
|                     
|                     
|Star Choice customers |  |                       | 16.8% |      |  |      | 17.2% |  |  |  | 14.4% |  |  | 
|                     



|    |                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Calculated as the number of new customer
    activations less the net gain of customers during the period
    divided by the average of the opening and closing customers for
    the applicable period. See Key performance drivers page 6.

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


2004 vs. 2003

OPERATING HIGHLIGHTS



|  |                                                                                                                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | DTH added 19,377 customers in 2004 compared to
    48,502 last year.                                                                                                                                                                
| | Service operating income before amortization at
    Star Choice was $111.2 million versus $52.8 million in
    2003.                                                                                                                
| | Effective February 1, 2004, the monthly fee
    on most programming packages increased by $3. This resulted in
    an increase in revenue of approximately $2 million per
    month when fully implemented by the end of March 2004.

Service revenue increased by 12.3% for the year
as a result of rate increases and subscriber growth. The growth
in service revenue combined with cost savings, including call
center efficiencies and lower sales and marketing expenses,
resulted in service operating income before amortization
increasing by 110.5% over last year.

Although the rate of customer growth has declined
in relation to last year, it is encouraging that DTH was able to
grow its customer base despite the competitive challenges from
the black market and other service providers and the
monthly rate increase of $3 implemented on February 1,
2004. On an annual basis churn rates improved marginally over
2003.

The annual increase in customer retention was
enhanced by improvements in customer service starting with the
call center, where the percentage of abandoned calls during the
fourth quarter dropped to 2.1% compared to 31.4% a year ago. Not
only does this reduce churn, but long distance fees are
significantly reduced as a result of lower call waiting times.
In addition, customer growth is enhanced as a result of Star
Choices simple and affordable entry offers, in which,
unlike its direct competitor, there are no long-term contracts
that lock customers into high-end programming packages. Star
Choices lineup was also bolstered by the introduction of
15 new video services during the third quarter, which represent
a significant value-add to customers as they are able to take
advantage of more time-shifting opportunities.

2003 vs. 2002

OPERATING HIGHLIGHTS



|  |                                                                                                                                                                                                                                                                                                  
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective September 2002 Star Choice implemented
    a $3 per month rate increase on most of its packages and changed
    its programming credits such that they are spread over three to
    four months. Previously the customer received the entire
    programming credit in the first month.
| | Effective January 1, 2003, the price of most
    French programming packages was increased by $3.00 per month
    affecting approximately 100,000 customers.                                                                                                                                     
| | Effective January 2003, Star Choice discontinued
    the Simple Satellite program introduced September
    2001. Under the original program, customers received free
    installation and Star Choice retained ownership of the dish.                                                          
| | Effective April 1, 2003, Star Choice
    implemented a $3.00 rate increase affecting most of the
    programming packages that were not included in the September
    2002 rate increase affecting 150,000 customers.                                                                            
| | Effective June 1, 2003, Star Choice
    implemented a rate increase of $3.00 affecting the majority of
    customers, which generated revenues of approximately
    $1.8 million per month when fully implemented.                                                                               

Subscriber growth and rate increases implemented
throughout the period grew revenue by 24.7% over the comparative
year. These same factors, combined with the positive impact of
cost reduction initiatives, increased annual service operating
income before amortization to $52.8 million compared to

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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


an operating loss before amortization of
$14.1 million last year. Star Choice continued to benefit
from increased economies of scale on its larger DTH subscriber
base and from the synergies realized on the integration of its
accounting and other administrative functions with Shaw as a
result of the modified structural separation requirements issued
by the CRTC in April 2002.

Customer growth was 48,502 or 6.4% compared to
153,793 (before one-time adjustments) in 2002. The decline in
growth is partially reflective of the black market,
competition from cable and a maturing growth cycle. Annual churn
increased over 2002 due to transitional issues incurred during
the implementation of the new billing system.

SATELLITE SERVICES

FINANCIAL HIGHLIGHTS

|                                                    |  |      |        |      |  |      |        |        |  |      |        |  |  |  |      |   |  |  |      |   |  | 
|--------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | ------ |  | ---- | ------ |  |  |  | ---- | - |  |  | ---- | - |  | 
|                                                    |  |      |        |      |  |      |        |       
|                                                    |  |      |        |      |  |      |        | Change
|                                                    |  |      |        |      |  |      |        |       
|                                                    |  |      |        |      |  |      |        | 2004   |  | 2003 |        | 
|                                                    |  | 2004 |        | 2003 |  | 2002 |        | %      |  | %    |        | 
|                                                    |  |      |        |      |  |      |        |        |  |      |        | 
|                                                   
|                                                   
|(In $000s Cdn)                                      |  |      |        |      |  |      |        |        |  |      |        |  |  |  |      |   |  |  |      |   |  | 
|Service revenue (third party)(1)                    |  |      | 82,543 |      |  |      | 88,412 |        |  |      | 95,870 |  |  |  | (6.6 | ) |  |  | (7.8 | ) |  | 
|                                                   
|Service operating income before
    amortization(2) |  |      | 41,690 |      |  |      | 38,619 |        |  |      | 40,203 |  |  |  | 8.0  |   |  |  | (3.9 | ) |  | 
|Service operating margin(2)                         |  |      | 50.5%  |      |  |      | 43.7%  |        |  |      | 41.9%  |  |  |  | 6.8  |   |  |  | 1.8  |   |  | 
|                                                   



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In conjunction with this years adoption of
    EIC 141, the Company separated the reporting of its ongoing
    service revenue from the amortization of equipment revenue. See
    Note 1 to the Consolidated Financial Statements in respect
    of the change in accounting. The impact of the accounting change
    resulted in a change in presentation of the Satellite Services
    divisions revenue and resulted in a nominal increase in
    the divisions service operating income before amortization.
|   
|(2) | See Key performance drivers on page 6.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

2004 vs. 2003

The year over year decline in service revenue of
approximately $5.9 million is due to the March 2003 sale of
Business Television, which had revenue of $7.2 million in
2003. Excluding the Business Television unit, service operating
income before amortization increased by 10.3% mainly due to
improvements in the Truck Tracking division.


2003 vs. 2002

Service revenue, consisting of Broadcast, Truck
Tracking and Business Television decreased 7.8% over 2002
primarily as a result of the sale of the SRDU and uplink
business in the Caribbean (Gulfcom) in May 2002, and
the sale of the Business Television division effective
March 21, 2003. Annualized service revenue and service
operating income before amortization related to this business
were approximately $11 million and $2 million,
respectively. Service operating income before amortization
decreased by 3.9% primarily as the result of the sale of
Business Television and Gulfcom.


38




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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004






|    |                   
|--- | ------------------
|IV. | FINANCIAL POSITION

Total assets at August 31, 2004 were
$7.6 billion compared to $7.7 billion at
August 31, 2003. The following discussion describes the
significant changes in the Consolidated Balance Sheet since
August 31, 2003.

Current assets decreased by $57.4 million
due to a reduction in accounts receivable of $24.4 million,
a reduction in inventory of $12.4 million and a decrease in
cash and term deposits of $20.8 million. The decrease in
receivables was primarily due to timing and improved collection
of subscriber receivables, such as an increase in number of
customers on preauthorized payment plans. The decrease in
inventory was mainly due to write-off of obsolete DTH equipment.

Property, plant and equipment decreased by
$123.3 million due to current year amortization being in
excess of capital expenditures and amounts assigned to property,
plant and equipment on business acquisitions during the year.

Deferred charges decreased by $25.6 million
due to a decrease in deferred equipment costs of
$27.2 million primarily as a result of lower tracking and
DTH equipment sales in recent years.

Broadcast licenses increased by
$57.9 million due to the acquisition of cable systems from
Monarch.

Current liabilities, excluding the current
portion of long-term debt, increased by $20.6 million due
to increases in accounts payable and accrued liabilities of
$5.7 million, income taxes payable of $3.8 million,
unearned revenue of $6.7 million and bank indebtedness of
$4.3 million. Accounts payable and accrued liabilities
increased due to timing of bonus payments. The increase was
partly offset by the settlement of litigation in the current
year. Unearned revenue increased primarily due to an increase in
prepayments on cable subscriber accounts. Income taxes payable
increased by $3.8 million due to income tax refunds
received in the current year.

Long-term debt, including current portion,
decreased by $266.4 million resulting from the net
repayment of Shaw Communications Inc. and Cancom debt of
$210.6 million and a decrease of $74.1 million
relating to the translation of the US denominated debt. This was
partially offset by an increase in the Burrard Landing Lot 2
Holdings Partnership debt of $18.4 million.

The other long-term liability, which is the
provision for Companys defined benefit pension plan,
increased by $7.5 million primarily due to the current year
pension expense of $8.7 million.

Deferred credits increased by $48.0 million
primarily from a $70.2 million increase in deferred foreign
exchange gains on the translation of hedged US denominated debt
and a $5.7 million prepayment on the grant of a new IRU,
which was partially offset by $12.1 million in amortization
of prepaid IRU rental revenue and a $15.1 million decrease
in deferred equipment revenues.

Future income taxes increased by
$43.0 million due to the future income tax expense of
$48.0 million recorded in the current year offset by the
future income tax asset of $5.4 million recorded on the
purchase of cable systems from Monarch. The current year income
tax expense includes a $22.9 million valuation allowance in
respect of capital losses offset by provincial income tax rate
reductions of $14.1 million.

Share capital increased by $25.5 million
primarily due to $65.0 million on the issuance of 3,737,780
Class B Non-Voting Shares on the acquisition of Monarch
cable systems offset by $39.7 million on the repurchase of
4,134,000 Class B Non-Voting Shares for cancellation. As of
the date of Managements Discussion and Analysis, there
were no subsequent changes in the outstanding share capital of
the Company, other than the repurchase of 383,000 Class B
Non-Voting Shares for cancellation at an average price of $20.76.

39




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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004




V.     CONSOLIDATED
CASH FLOW ANALYSIS

Operating activities

|                                                                                   |  |      |         |      |  |      |         |        |  |      |         |  |  |  |       |  |  |  |        |   |  | 
|---------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ------ |  | ---- | ------- |  |  |  | ----- |  |  |  | ------ | - |  | 
|                                                                                   |  |      |         |      |  |      |         |       
|                                                                                   |  |      |         |      |  |      |         | Change
|                                                                                   |  |      |         |      |  |      |         |       
|                                                                                   |  |      |         |      |  |      |         | 2004   |  | 2003 |         | 
|                                                                                   |  | 2004 |         | 2003 |  | 2002 |         | %      |  | %    |         | 
|                                                                                   |  |      |         |      |  |      |         |        |  |      |         | 
|                                                                                  
|                                                                                  
|(In $000s Cdn)                                                                     |  |      |         |      |  |      |         |        |  |      |         |  |  |  |       |  |  |  |        |   |  | 
|Cash flow from operations                                                          |  |      | 694,770 |      |  |      | 544,175 |        |  |      | 332,109 |  |  |  | 27.7  |  |  |  | 63.9   |   |  | 
|Decrease (increase) in non-cash working capital
    balances related to operations |  |      | 36,183  |      |  |      | (5,734  | )      |  |      | 3,303   |  |  |  | 731.0 |  |  |  | (273.6 | ) |  | 
|                                                                                  
|                                                                                   |  |      | 730,953 |      |  |      | 538,441 |        |  |      | 335,412 |  |  |  | 35.8  |  |  |  | 60.5   |   |  | 
|                                                                                  

Cash flow from operations increased from 2002 to
2004 due to growth in service operating income before
amortization and decreased interest and current income tax
expense. The net change in working capital increased in 2004
from 2003 primarily due to the repayment of a vendor financing
facility of approximately $40 million in 2003.

Investing activities

|                                       |  |      |          |      |  |      |         |                     |  |      |          |   |  |  |          |   |  |  |         |  |  | 
|-------------------------------------- |  | ---- | -------- | ---- |  | ---- | ------- | ------------------- |  | ---- | -------- | - |  |  | -------- | - |  |  | ------- |  |  | 
|                                       |  |      |          |      |  |      |         |                    
|                                       |  |      |          |      |  |      |         | Increase (decrease)
|                                       |  |      |          |      |  |      |         | in cash flow       
|                                       |  |      |          |      |  |      |         |                    
|                                       |  | 2004 |          | 2003 |  | 2002 |         | 2004                |  | 2003 |          |  
|                                       |  |      |          |      |  |      |         |                     |  |      |          |  
|                                      
|                                      
|(In $000s Cdn)                         |  |      |          |      |  |      |         |                     |  |      |          |   |  |  |          |   |  |  |         |  |  | 
|Cash flow used in investing activities |  |      | (407,218 | )    |  |      | (95,037 | )                   |  |      | (825,558 | ) |  |  | (312,181 | ) |  |  | 730,521 |  |  | 
|                                      

In 2004, the principal use of cash was for
capital expenditures and equipment subsidies of
$388.8 million and $24.3 million on the purchase of
the Monarch cable systems, while in 2003, the cash required to
fund capital expenditures and equipment subsidies of
$420.6 million was mainly offset by the proceeds on sale of
the US cable systems of $257.4 million and reduction in
inventory of $59.7 million.

In 2003, the cash outlay required for investing
activities was $730.5 million lower than 2002 due to the
proceeds received on sale of the US cable systems and a
$485.9 million reduction in capital expenditures.

40




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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


Financing activities

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


|                                                                   |  |      |        |      |  |      |        |   |  |  |       |   |  | 
|------------------------------------------------------------------ |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ----- | - |  | 
|                                                                   |  | 2004 |        | 2003 |  | 2002 |        |  
|                                                                   |  |      |        |      |  |      |        |  
|                                                                  
|                                                                  
|(In millions Cdn)                                                  |  |      |        |      |  |      |        |   |  |  |       |   |  | 
|Repayment of $350 million credit facility                          |  |      | (350.0 | )    |  |      |       |   |  |  |      |   |  | 
|Repayment of $250 million Structured Note                          |  |      | (250.0 | )    |  |      |       |   |  |  |      |   |  | 
|Partial repayment of $300 million Senior
    notes                 |  |      | (3.2   | )    |  |      |       |   |  |  |      |   |  | 
|Issue of $350 million Senior notes                                 |  |      | 350.0  |      |  |      |       |   |  |  |      |   |  | 
|Bank loans and bank indebtedness  net
    borrowings (repayments) |  |      | 47.0   |      |  |      | (140.5 | ) |  |  | (24.0 | ) |  | 
|Purchase of Class B Non-Voting Shares for
    cancellation         |  |      | (86.0  | )    |  |      |       |   |  |  |      |   |  | 
|Dividends and equity entitlements                                  |  |      | (75.3  | )    |  |      | (50.6  | ) |  |  | (53.2 | ) |  | 
|Debt retirement costs                                              |  |      | (1.1   | )    |  |      | (17.1  | ) |  |  |       |   |  | 
|Proceeds on prepayments of IRU                                     |  |      | 5.7    |      |  |      | 0.2    |   |  |  |       |   |  | 
|Increase in Partnership bank loans                                 |  |      | 18.4   |      |  |      | 10.4   |   |  |  |      |   |  | 
|Repayment of US $150 million Star Choice
    Senior notes          |  |      |        |      |  |      | (211.0 | ) |  |  |      |   |  | 
|Proceeds on term loan                                              |  |      |       |      |  |      | 350.0  |   |  |  |      |   |  | 
|Repayment of Cancom credit facilities                              |  |      |       |      |  |      | (364.0 | ) |  |  |       |   |  | 
|Issue of US $300 million senior notes                              |  |      |        |      |  |      |       |   |  |  | 476.8 |   |  | 
|Issuance of SHELS                                                  |  |      |        |      |  |      |       |   |  |  | 90.5  |   |  | 
|                                                                  
|Cash flow provided by (used in) financing
    activities           |  |      | (344.5 | )    |  |      | (422.6 | ) |  |  | 490.1 |   |  | 
|                                                                  




VI.    LIQUIDITY AND
CAPITAL RESOURCES

In 2003, Shaw strengthened its financial position
through the sale of non-strategic assets, including the sale of
the US cable assets, and through the generation of consolidated
free cash flow of $98.3 million. Shaw continued its focus
on strengthening its financial position with the generation of
$278.9 million of free cash flow for the year ended
August 31, 2004. Shaw used its free cash flow of
$278.9 million plus cash of $25.1 million, working
capital and inventory reduction of $51.6 million and other
cash items of $2.2 million to purchase $86.0 million
of Class B Non-Voting Shares for cancellation, pay
dividends on Class A and Class B Non-Voting Shares of
$36.9 million, pay the cash component of the Monarch cable
systems acquisition of $24.3 million and repay long-term
debt of Shaw Communications Inc. and Cancom of
$210.6 million.

Shaw received approval from The Toronto Stock
Exchange (TSX) to make a normal course issuer bid to
purchase its Class B Non-Voting Shares for the period
November 7, 2003 to November 6, 2004. Under the bid,
Shaw is authorized to acquire up to 11,000,000 Class B
Non-Voting Shares, representing approximately 5% of the issued
and outstanding Class B Non-Voting Shares. The purchase and
cancellation of outstanding Class B Non-Voting Shares under
the bid may represent an opportunity to provide capital
appreciation and market stability for the benefit of Shaws
shareholders. Pursuant to the normal course issuer bid, Shaw
repurchased 4,134,000 Class B Non-Voting Shares for a total
of $86.0 million.

The Company also improved its financial
flexibility in 2004 through the continued reorganization of its
debt. During the first quarter, Shaw issued $350 million in
7.5% Senior unsecured notes due November 20, 2013. The net
proceeds (after issue and underwriting expenses) from the
issuance of the notes were $343.1 million which were used
to repay the $350 million credit facility due
February 10, 2006. Shaw cancelled its interest rate hedge
for the $350 million facility incurring costs of
$1.0 million. As a result of the debt restructuring, Shaw
was able to extend $350 million of its credit horizon for

41




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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


another 8 years at a fixed rate of 7.5%. In
addition, in the third quarter Shaw amended its revolving credit
facility such that $910 million will be available through
to April 30, 2009. Previously, the revolving facility was
subject to an amortization schedule which reduced it to nil by
April 30, 2007. The amended facility requires no
amortization. It continues to be unsecured and ranks pari passu
with the senior unsecured notes. The amendment provides Shaw
with increased flexibility, longer debt horizon and underscores
the significant credit support that Shaw has from its existing
banking syndicate.

On December 15, 2003, Shaw repaid the
$250 million Cancom Structured Note with $22 million
in cash and the drawdown of its own credit facility. At
August 31, 2004, Shaw had access to $859 million of
available credit facilities based on existing bank covenants.
Based on available credit facilities and forecasted free cash
flow, the Company expects to have sufficient liquidity to fund
operations and obligations during the next fiscal year. On a
longer-term basis, Shaw expects to generate adequate free cash
flow and to have sufficient borrowing capacity to finance
foreseeable future business plans and refinance maturing debt.

Debt structure

Shaw structures its borrowings generally on a
stand-alone basis. The borrowings of Shaw are unsecured. The
borrowings of Videon are unsecured, but are guaranteed by the
subsidiaries of Videon. The demand operating line of credit of
$10 million of Cancom is secured by assets and undertakings
of certain of Cancoms subsidiaries. There are no further
restrictions that prevent the remaining subsidiaries of the
Company from transferring funds to Shaw. The various borrowings
generally do not provide for cross-collateralization,
cross-defaults between groups, or guarantees, other than the
guarantee in respect of the Partnership described below and the
guarantees of the Videon subsidiaries.


Shaws borrowings are subject to covenants
which include maintaining minimum or maximum financial ratios.
At August 31, 2004, Shaw is in compliance with these
covenants and based on current business plans, the Company is
not aware of any condition or event that would give rise to
non-compliance with the covenants over the life of the
borrowings.

Off-balance sheet arrangement and
guarantees

Guarantees


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


Financial instruments

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


Contractual obligations

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


42




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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


CONTRACTUAL OBLIGATIONS

|                                                                                                                                    |  |                        |           |        |  |             |         |             |  |         |         |  |  |  |         |  |  |  |           |  |  | 
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | ------ |  | ----------- | ------- | ----------- |  | ------- | ------- |  |  |  | ------- |  |  |  | --------- |  |  | 
|                                                                                                                                    |  |                       
|                                                                                                                                    |  | Payments due by period
|                                                                                                                                    |  |                       
|                                                                                                                                    |  |                        |           | Within |  |             |         | More than   |  |        
|                                                                                                                                    |  | Total                  |           | 1 year |  | 2  3 years |         | 4  5 years |  | 5 years |         | 
|                                                                                                                                    |  |                        |           |        |  |             |         |             |  |         |         | 
|                                                                                                                                   
|                                                                                                                                   
|(In $000s Cdn)                                                                                                                      |  |                        |           |        |  |             |         |             |  |         |         |  |  |  |         |  |  |  |           |  |  | 
|Long-term debt                                                                                                                      |  |                        | 2,650,680 |        |  |             | 343,097 |             |  |         | 158,277 |  |  |  | 402,260 |  |  |  | 1,747,046 |  |  | 
|Operating lease obligations (maintenance of
    satellite transponders, lease of transmission facilities and
    lease of premises) |  |                        | 909,431   |        |  |             | 94,883  |             |  |         | 174,516 |  |  |  | 156,375 |  |  |  | 483,657   |  |  | 
|Purchase obligations                                                                                                                |  |                        | 4,800     |        |  |             | 4,800   |             |  |         |        |  |  |  |        |  |  |  |          |  |  | 
|Other long-term obligations                                                                                                         |  |                        | 18,095    |        |  |             | 1,162   |             |  |         | 2,294   |  |  |  | 3,020   |  |  |  | 11,619    |  |  | 
|                                                                                                                                   
|                                                                                                                                    |  |                        | 3,583,006 |        |  |             | 443,942 |             |  |         | 335,087 |  |  |  | 561,655 |  |  |  | 2,242,322 |  |  | 
|                                                                                                                                   




VII.   ADDITIONAL
INFORMATION

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

VIII.  CAUTION CONCERNING FORWARD
LOOKING STATEMENTS

Certain statements included and incorporated by
reference herein constitute forward-looking statements. When
used, the words anticipate, believe,
expect, plan, intend,
target, guideline, goal, and
similar expressions are intended to identify forward-looking
statements. These forward-looking statements include, but are
not limited to, references to future capital expenditures
(including the amount and nature thereof), business strategies
and measures to implement strategies, competitive strengths,
goals, expansion and growth of Shaws business and
operations, plans and references to the future success of Shaw.
These forward-looking statements are based on certain
assumptions and analyses made by Shaw in light of its experience
and its perception of historical trends, current conditions and
expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether
actual results and developments will conform with the
expectations and predictions of Shaw is subject to a number of
risks and uncertainties, including, but not limited to, general
economic, market or business conditions; the opportunities (or
lack thereof) that may be presented to and pursued by Shaw;
increased competition in the markets in which Shaw operates and
from the development of new markets for emerging technologies;
changes in laws, regulations and decisions by regulators in
Shaws industries in both Canada and the United States;
Shaws status as a holding company with separate operating
subsidiaries; changing conditions in the entertainment,
information and communications industries; risks associated with
the economic, political and regulatory policies of local
governments and laws and policies of Canada and the United
States; and other factors, many of which are beyond the control
of Shaw. Should one or more of these risks materialize, or
should assumptions underlying the forward-looking statements
prove incorrect, actual results may vary materially from those
as described herein. Consequently, all of the forward-looking
statements made in this report and the documents incorporated by
reference herein are qualified by these cautionary statements,
and there can be no assurance that the actual results or
developments anticipated by Shaw will be realized or, even if
substantially realized, that they will have the expected
consequences to, or effects on, Shaw.

43




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Shaw Communications Inc.


MANAGEMENTS DISCUSSION AND ANALYSIS


August 31, 2004


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

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Shaw Communications Inc.





MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING


August 31, 2004


October 28, 2004

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

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

Shaw Communications Inc. maintains systems of
internal accounting and administrative controls of high quality,
consistent with reasonable cost. Such systems are designed to
provide reasonable assurance that the financial information is
relevant, reliable and accurate and that the Companys
assets are appropriately accounted for and adequately
safeguarded.

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

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

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

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

45




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Shaw Communications Inc.




AUDITORS REPORT


To the Shareholders of

Shaw Communications Inc.


We have audited the consolidated balance sheets
of Shaw Communications Inc.as at August 31, 2004
and 2003 and the consolidated statements of income (loss) and
retained earnings (deficit) and cash flows for each of the
years in the three year period ended August 31, 2004. 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
Canadian generally accepted auditing standards. 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, 2004 and
2003 and the results of its operations and its cash flows for
each of the years in the three year period ended August 31,
2004 in accordance with Canadian generally accepted accounting
principles.

As discussed in note 1 to the consolidated
financial statements, the Company changed its method of
accounting for stock-based compensation and revenue recognition.

|                |  |                           
|--------------- |  | --------------------------
|               
|Calgary, Canada |  | [signed] Ernst & Young LLP
|October 7, 2004 |  | Chartered
    Accountants 

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Shaw Communications Inc.



CONSOLIDATED BALANCE SHEETS


As at August 31

|                                                       |                           |             |           |           |  |  |           |           |  |  | 
|------------------------------------------------------ | ------------------------- | ----------- | --------- | --------- |  |  | --------- | --------- |  |  | 
|                                                       |                           | 2004        |           | 2003      |  | 
|[thousands of Canadian dollars]                        |                           | $           |           | $         |  | 
|                                                       |                           |             |           |           |  | 
|                                                      
|                                                      
|                                                       |                           | (Restated  |           |          
|                                                       |                           | note 1)     |           |          
|ASSETS[note
    9]                                     |                           |             |           |           |  |  |           |           |  | 
|Current                                                |                           |             |           |           |  |  |           |           |  | 
|Cash                                                   |                           |             |          |           |  |  | 20,753    |           |  | 
|Accounts receivable [note 3]                           |                           |             | 119,519   |           |  |  | 143,920   |           |  | 
|Inventories [note 4]                                   |                           |             | 42,973    |           |  |  | 55,364    |           |  | 
|Prepaids and other                                     |                           |             | 16,975    |           |  |  | 16,783    |           |  | 
|                                                      
|                                                       |                           |             | 179,467   |           |  |  | 236,820   |           |  | 
|Investments and other assets [notes 5 and
    11]      |                           |             | 43,965    |           |  |  | 49,415    |           |  | 
|Property, plant and equipment [note 6]                 |                           |             | 2,292,340 |           |  |  | 2,415,662 |           |  | 
|Deferred charges [note 7]                              |                           |             | 267,439   |           |  |  | 293,065   |           |  | 
|Intangibles [note 8]                                   |                           |             |           |           |  |  |           |           |  | 
|                                                       | Broadcast licenses        |             |           | 4,685,582 |  |  |           | 4,627,728 |  |  | 
|                                                       | Goodwill                  |             |           | 88,111    |  |  |           | 88,111    |  |  | 
|                                                      
|                                                       |                           |             | 7,556,904 |           |  |  | 7,710,801 |           |  | 
|                                                      
|LIABILITIES AND SHAREHOLDERS
    EQUITY               |                           |             |           |           |  |  |           |           |  | 
|Current                                                |                           |             |           |           |  |  |           |           |  | 
|Bank indebtedness [note 9]                             |                           |             | 4,317     |           |  |  |          |           |  | 
|Accounts payable and accrued liabilities [note
    13] |                           |             | 410,037   |           |  |  | 404,303   |           |  | 
|Income taxes payable                                   |                           |             | 5,563     |           |  |  | 1,725     |           |  | 
|Unearned revenue                                       |                           |             | 96,095    |           |  |  | 89,359    |           |  | 
|Current portion of long-term debt [note 9]             |                           |             | 343,097   |           |  |  | 271,520   |           |  | 
|                                                      
|                                                       |                           |             | 859,109   |           |  |  | 766,907   |           |  | 
|Long-term debt [note 9]                                |                           |             | 2,307,583 |           |  |  | 2,645,548 |           |  | 
|Other long-term liability [note 17]                    |                           |             | 16,933    |           |  |  | 9,409     |           |  | 
|Deferred credits [note 10]                             |                           |             | 898,980   |           |  |  | 850,991   |           |  | 
|Future income taxes [note 14]                          |                           |             | 982,281   |           |  |  | 939,281   |           |  | 
|                                                      
|                                                       |                           |             | 5,064,886 |           |  |  | 5,212,136 |           |  | 
|                                                      
|Commitments and contingencies[notes 5, 9, 16 and 17]   |                           |             |           |           |  |  |           |           |  | 
|Shareholders equity                                   |                           |             |           |           |  |  |           |           |  | 
|Share capital [note 11]                                |                           |             |           |           |  |  |           |           |  | 
|                                                       | Class A Shares            |             |           | 2,490     |  |  |           | 2,491     |  |  | 
|                                                       | Class B Non-Voting Shares |             |           | 2,132,943 |  |  |           | 2,107,464 |  |  | 
|                                                       | Equity instruments        |             |           | 724,923   |  |  |           | 724,923   |  |  | 
|Contributed surplus [note 11]                          |                           |             | 412       |           |  |  |          |           |  | 
|Deficit                                                |                           |             | (369,194  | )         |  |  | (336,695  | )         |  | 
|Cumulative translation adjustment [note 12]            |                           |             | 444       |           |  |  | 482       |           |  | 
|                                                      
|                                                       |                           |             | 2,492,018 |           |  |  | 2,498,665 |           |  | 
|                                                      
|                                                       |                           |             | 7,556,904 |           |  |  | 7,710,801 |           |  | 
|                                                      

See accompanying notes

On behalf of the Board:

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

47




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Shaw Communications Inc.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

AND RETAINED EARNINGS (DEFICIT)


Years ended August 31

|                                                                                |                                          |             |           |             |   |      |           |          |   |  |           |          |   |  | 
|------------------------------------------------------------------------------- | ---------------------------------------- | ----------- | --------- | ----------- | - | ---- | --------- | -------- | - |  | --------- | -------- | - |  | 
|[thousands of Canadian dollars                                                  |                                          | 2004        |           | 2003        |   | 2002 |           |         
|except per share amounts]                                                       |                                          | $           |           | $           |   | $    |           |         
|                                                                                |                                          |             |           |             |   |      |           |         
|                                                                               
|                                                                               
|                                                                                |                                          | (Restated  |           | (Restated  |   |     
|                                                                                |                                          | note 1)     |           | note 1)     |   |     
|Service revenue
    [note 15]                                                   |                                          |             | 2,079,749 |             |   |      | 1,998,421 |          |   |  | 1,824,549 |          |   | 
|Operating, general and administrative expenses                                  |                                          |             | 1,153,814 |             |   |      | 1,180,780 |          |   |  | 1,194,133 |          |   | 
|                                                                               
|Service operating income before amortization
    [note 15]                      |                                          |             | 925,935   |             |   |      | 817,641   |          |   |  | 630,416   |          |   | 
|Amortization                                                                   |                                          |             |           |             |   |      |           |          |   |  |           |          |   | 
|                                                                                | Deferred IRU revenue [note 10]           |             |           | 12,098      |   |      |           | 11,984   |   |  |           | 11,517   |   |  | 
|                                                                                | Deferred equipment revenue [note 10]     |             |           | 82,711      |   |      |           | 91,863   |   |  |           | 96,499   |   |  | 
|                                                                                | Deferred equipment costs [note 7]        |             |           | (229,013    | ) |      |           | (251,103 | ) |  |           | (244,640 | ) |  | 
|                                                                                | Deferred charges [note 7]                |             |           | (7,796      | ) |      |           | (21,125  | ) |  |           | (22,991  | ) |  | 
|                                                                                | Property, plant and equipment            |             |           | (403,395    | ) |      |           | (413,381 | ) |  |           | (409,335 | ) |  | 
|                                                                               
|Operating income                                                                |                                          |             | 380,540   |             |   |      | 235,879   |          |   |  | 61,466    |          |   | 
|Interest [notes 9, 10 and 13]                                                   |                                          |             | (219,472  | )           |   |      | (259,702  | )        |   |  | (267,323  | )        |   | 
|                                                                               
|                                                                                |                                          |             | 161,068   |             |   |      | (23,823   | )        |   |  | (205,857  | )        |   | 
|Gain on sale of investments [note 5]                                            |                                          |             | 356       |             |   |      | 1,957     |          |   |  | 2,321     |          |   | 
|Write-down of investments [note 5]                                              |                                          |             | (651      | )           |   |      | (15,000   | )        |   |  | (330,466  | )        |   | 
|Gain on redemption of SHELS [note 5]                                            |                                          |             |          |             |   |      | 119,521   |          |   |  | 218,327   |          |   | 
|Dilution loss on issuance of stock by equity
    investee [note 2]              |                                          |             |          |             |   |      |          |          |   |  | (571      | )        |   | 
|Loss on sale of satellite assets
    [note 2]                                   |                                          |             |          |             |   |      | (3,800    | )        |   |  | (1,281    | )        |   | 
|Debt retirement costs [note 9]                                                  |                                          |             | (2,598    | )           |   |      | (10,634   | )        |   |  |          |          |   | 
|Foreign exchange gain (loss) on unhedged
    long-term debt                     |                                          |             | 3,963     |             |   |      | 32,617    |          |   |  | (1,658    | )        |   | 
|Loss on sale and write-down of assets
    [note 8]                              |                                          |             |          |             |   |      | (124,674  | )        |   |  |          |          |   | 
|Other revenue [note 1]                                                          |                                          |             | 3,753     |             |   |      | 9,338     |          |   |  | 6,048     |          |   | 
|                                                                               
|Income (loss) before income
    taxes                                           |                                          |             | 165,891   |             |   |      | (14,498   | )        |   |  | (313,137  | )        |   | 
|Income tax expense (recovery)
    [note 14]                                     |                                          |             | 74,732    |             |   |      | 30,445    |          |   |  | (81,995   | )        |   | 
|                                                                               
|Income (loss) before the
    following                                          |                                          |             | 91,159    |             |   |      | (44,943   | )        |   |  | (231,142  | )        |   | 
|Equity loss on investees [note 5]                                               |                                          |             | (250      | )           |   |      | (1,921    | )        |   |  | (53,487   | )        |   | 
|                                                                               
|Net income (loss)[note 1]                                                       |                                          |             | 90,909    |             |   |      | (46,864   | )        |   |  | (284,629  | )        |   | 
|Retained earnings (deficit), beginning of year as
    previously reported       |                                          |             | (340,294  | )           |   |      | (240,737  | )        |   |  | 99,452    |          |   | 
|Adjustment for change in accounting policy
    [note 1]                         |                                          |             | 3,599     |             |   |      | 2,635     |          |   |  | 940       |          |   | 
|                                                                               
|Retained earnings (deficit), beginning of year as
    restated                  |                                          |             | (336,695  | )           |   |      | (238,102  | )        |   |  | 100,392   |          |   | 
|                                                                               
|                                                                                |                                          |             | (245,786  | )           |   |      | (284,966  | )        |   |  | (184,237  | )        |   | 
|Reduction on Class B Non-Voting Shares
    purchased for cancellation [note 11] |                                          |             | (46,313   | )           |   |      |          |          |   |  |          |          |   | 
|Dividends                                                                      |                                          |             |           |             |   |      |           |          |   |  |           |          |   | 
|                                                                                | Class A and Class B Non-Voting Shares    |             |           | (36,910     | ) |      |           | (11,536  | ) |  |           | (11,534  | ) |  | 
|                                                                                | Equity instruments (net of income taxes) |             |           | (40,185     | ) |      |           | (40,193  | ) |  |           | (42,331  | ) |  | 
|                                                                               
|Deficit, end of year                                                            |                                          |             | (369,194  | )           |   |      | (336,695  | )        |   |  | (238,102  | )        |   | 
|                                                                               
|Income (loss) per share[note 11]                                                |                                          |             |           |             |   |      |           |          |   |  |           |          |   | 
|                                                                                | Basic and diluted                        |             |           | $0.22       |   |      |           | ($0.38   | ) |  |           | ($1.41   | ) |  | 
|                                                                               

See accompanying notes

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Shaw Communications Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended August 31

|                                                                                       |                                          |             |          |             |   |      |          |         |   |  |           |         |   |  | 
|-------------------------------------------------------------------------------------- | ---------------------------------------- | ----------- | -------- | ----------- | - | ---- | -------- | ------- | - |  | --------- | ------- | - |  | 
|                                                                                       |                                          | 2004        |          | 2003        |   | 2002 |          |        
|[thousands of Canadian dollars]                                                        |                                          | $           |          | $           |   | $    |          |        
|                                                                                       |                                          |             |          |             |   |      |          |        
|                                                                                      
|                                                                                      
|                                                                                       |                                          | (Restated  |          | (Restated  |   |     
|                                                                                       |                                          | note 1)     |          | note 1)     |   |     
|OPERATING ACTIVITIES[note 20]                                                          |                                          |             |          |             |   |      |          |         |   |  |           |         |   | 
|Cash flow from operations                                                              |                                          |             | 694,770  |             |   |      | 544,175  |         |   |  | 332,109   |         |   | 
|Net decrease (increase) in non-cash working
    capital balances related to operations |                                          |             | 36,183   |             |   |      | (5,734   | )       |   |  | 3,303     |         |   | 
|                                                                                      
|                                                                                       |                                          |             | 730,953  |             |   |      | 538,441  |         |   |  | 335,412   |         |   | 
|                                                                                      
|INVESTING ACTIVITIES                                                                   |                                          |             |          |             |   |      |          |         |   |  |           |         |   | 
|Additions to property, plant and equipment                                             |                                          |             | (256,136 | )           |   |      | (257,683 | )       |   |  | (743,568  | )       |   | 
|Additions to equipment subsidies                                                       |                                          |             | (132,711 | )           |   |      | (162,876 | )       |   |  | (121,654  | )       |   | 
|Net reduction to inventories                                                           |                                          |             | 7,898    |             |   |      | 59,708   |         |   |  | 15,397    |         |   | 
|Cable acquisitions [note 2]                                                            |                                          |             | (24,298  | )           |   |      | (3,634   | )       |   |  | (40,454   | )       |   | 
|Proceeds (costs) on sale of satellite assets
    [note 2]                              |                                          |             |         |             |   |      | 6,461    |         |   |  | (631      | )       |   | 
|Proceeds received on assets held for sale
    [note 2]                                 |                                          |             |         |             |   |      |         |         |   |  | 89,500    |         |   | 
|Proceeds on sale of cable systems [note 2]                                             |                                          |             |         |             |   |      | 257,435  |         |   |  |          |         |   | 
|Proceeds on sale of investments and other assets                                       |                                          |             | 9,530    |             |   |      | 22,469   |         |   |  | 18,489    |         |   | 
|Costs on redemption of SHELS                                                           |                                          |             |         |             |   |      | (2,113   | )       |   |  | (3,134    | )       |   | 
|Acquisition of investments                                                             |                                          |             | (495     | )           |   |      | (9,662   | )       |   |  | (28,158   | )       |   | 
|Additions to deferred charges                                                          |                                          |             | (11,006  | )           |   |      | (5,142   | )       |   |  | (11,345   | )       |   | 
|                                                                                      
|                                                                                       |                                          |             | (407,218 | )           |   |      | (95,037  | )       |   |  | (825,558  | )       |   | 
|                                                                                      
|FINANCING ACTIVITIES                                                                   |                                          |             |          |             |   |      |          |         |   |  |           |         |   | 
|Increase (decrease) in bank indebtedness                                               |                                          |             | 4,317    |             |   |      | (2,303   | )       |   |  | 514       |         |   | 
|Proceeds on pre-payment of IRU                                                         |                                          |             | 5,700    |             |   |      | 235      |         |   |  |          |         |   | 
|Payment to terminate interest rate swaps                                               |                                          |             |         |             |   |      |         |         |   |  | (9,400    | )       |   | 
|Debt retirement costs [note 9]                                                         |                                          |             | (1,139   | )           |   |      | (17,134  | )       |   |  |          |         |   | 
|Increase in long-term debt                                                             |                                          |             | 666,873  |             |   |      | 505,599  |         |   |  | 1,049,520 |         |   | 
|Long-term debt repayments                                                              |                                          |             | (859,142 | )           |   |      | (858,510 | )       |   |  | (588,644  | )       |   | 
|Issue of equity instruments, net of after-tax
    expenses                             |                                          |             |         |             |   |      |         |         |   |  | 90,481    |         |   | 
|Issue of Class B Non-Voting Shares, net of
    after-tax expenses                      |                                          |             | 133      |             |   |      | 95       |         |   |  | 792       |         |   | 
|Purchase of Class B Non-Voting Shares for
    cancellation                             |                                          |             | (85,968  | )           |   |      |         |         |   |  |          |         |   | 
|Dividends paid                                                                        |                                          |             |          |             |   |      |          |         |   |  |           |         |   | 
|                                                                                       | Class A and Class B Non-Voting Shares    |             |          | (36,910     | ) |      |          | (11,536 | ) |  |           | (11,534 | ) |  | 
|                                                                                       | Equity instruments, net of current taxes |             |          | (38,343     | ) |      |          | (39,084 | ) |  |           | (41,618 | ) |  | 
|                                                                                      
|                                                                                       |                                          |             | (344,479 | )           |   |      | (422,638 | )       |   |  | 490,111   |         |   | 
|                                                                                      
|Effect of currency translation on cash
    balances and cash flows                     |                                          |             | (9       | )           |   |      | (13      | )       |   |  | 35        |         |   | 
|                                                                                      
|Increase (decrease) in cash                                                            |                                          |             | (20,753  | )           |   |      | 20,753   |         |   |  |          |         |   | 
|Cash, beginning of the year                                                            |                                          |             | 20,753   |             |   |      |         |         |   |  |          |         |   | 
|                                                                                      
|Cash, end of the year                                                                  |                                          |             |         |             |   |      | 20,753   |         |   |  |          |         |   | 
|                                                                                      

See accompanying notes

49




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##### Table of Contents



Shaw Communications Inc.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


August 31, 2004, 2003 and 2002

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


1.      SIGNIFICANT ACCOUNTING
POLICIES

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

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

Basis of consolidation

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

The accounts also include the Companys
proportionate share of the assets and liabilities of its 38.3%
interest in the Burrard Landing Lot 2 Holdings Partnership (the
Partnership).

Acquisitions subject to CRTC approval may be held
in trust by a trustee who exercises control over the business
until such time as the CRTC renders a decision on the proposed
acquisition. Accordingly, such acquisitions are recorded at cost
until a decision is rendered and the Company is able to exercise
significant influence or control and determine the appropriate
form of accounting.

Investments

Investments in other entities are accounted for
using the equity method or cost basis depending upon the level
of ownership and/or the Companys ability to exercise
significant influence over the operating and financial policies
of the investee. Equity method investments include GT Group
Telecom Inc. (GT) until February 4, 2003 (at
which time GT was reorganized and resulted in the disposition of
the Companys interest in GT), The Biography Channel
(Canada) Corp., MSNBC Canada (Holdings) Inc. and TechTV Canada
Holdings Inc. Investments of this nature are recorded at
original cost and adjusted periodically to recognize the
Companys proportionate share of the investees net
income or losses after the date of investment, additional
contributions made and dividends received. When net losses from
an equity accounted for investment exceed its carrying amount,
the investment balance is reduced to zero and additional losses
are not provided for unless the Company is committed to provide
financial support to the investee. The Company resumes
accounting for the investment under the equity method when the
entity subsequently reports net income and the Companys
share of that net income exceeds the share of net losses not
recognized during the period the equity method was suspended.
Investments are written down when there is clear evidence that a
decline in value that is other than temporary has occurred.

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

50




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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Revenue and expenses

(i)     Service
revenue

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

Subscriber connection fees received from
customers are deferred and recognized as service revenue on a
straight-line basis over two years. Direct and incremental
initial selling, administrative and reconnection costs related
to subscriber acquisitions in an amount not exceeding initial
subscriber connection fee revenue, is deferred and recognized as
an operating expense on a straight-line basis over the same
two-years. The costs of physically connecting a new home are
capitalized as part of the distribution system and costs of
disconnections are expensed as incurred.

(ii)    Deferred equipment
revenue and deferred equipment cost

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

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

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

(iii)   Deferred IRU
revenue

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

(iv)   Advertising
costs

Advertising costs are expensed when incurred with
the exception of marketing costs incurred to launch new
specialty services, which are deferred and amortized over a
two-year period. Advertising expenses for 2004, 2003 and 2002
were $26,310, $28,098, and $51,276 respectively.

Inventories

Inventories include subscriber equipment such as
DCTs, modems and DTH receivers, which are held pending rental or
sale at a subsidized price. When subscriber equipment is sold at
a subsidized price, the equipment revenue and equipment cost are
deferred and amortized over two years. When the subscriber
equipment is rented, it is transferred to property, plant and
equipment and amortized over its useful life.

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Inventories are determined on a first-in,
first-out basis, and are stated at cost due to the eventual
capital nature as either an addition to property, plant and
equipment or deferred equipment subsidies.

Property, plant and equipment

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

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

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

Deferred charges

Deferred charges primarily include
(i) deferred equipment costs, as described in the revenue
and expenses accounting policy, deferred and amortized on a
straight-line basis over two to five years upon activation of
the equipment; (ii) financing costs and credit facility
arrangement fees related to the issue of long-term debt,
amortized on a straight-line basis over the period to maturity
of the related debt; (iii) deferred costs incurred in
respect of connection fee revenue, as described in the revenue
and expenses accounting policy, deferred and amortized over two
years; and (iv) marketing costs incurred to launch new
specialty services amortized on a straight-line basis over a
two-year period commencing upon the commercial offering of the
service.

Intangibles

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

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

52




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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Deferred credits

Deferred credits primarily
include: (i) prepayments received under indefeasible
right to use (IRU) agreements amortized on a
straight-line basis into income over the term of the agreement;
(ii) foreign exchange gains on translating hedged long-term
debt; (iii) deferred equipment revenue, as described in the
revenue and expenses accounting policy, which is deferred and
amortized over two years to five years; (iv) deferred
connection fee revenue, as described in the revenue and expenses
accounting policy, which is deferred and amortized over two
years; (v) fair value adjustments on debt assumed on
acquisitions amortized on a straight-line basis over the term of
the debt; and (vi) deposits on future fiber purchase.

Interest capitalization

The Company capitalizes interest on construction
projects when the interest expense is directly attributed to the
construction activity and the project is developed over a
significant amount of time. The Company capitalized interest of
$2,292 (2003  $907) in respect of its proportionate
share of the Partnerships construction of a major office/
residential tower in Coal Harbour, Vancouver.

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.

Equity instruments

The Company has the ability to satisfy interest
and redemption obligations on various financial instruments
through the issuance of Class B Non-Voting Shares.
Accordingly, these instruments are included in
shareholders equity and any payments thereon, net of
taxes, are recorded as dividends.

Foreign currency translation

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

Transactions originating in foreign currencies
are translated into Canadian dollars at the exchange rate at the
date of the transaction. Monetary assets and liabilities are
translated at the year-end rate of exchange and non-monetary
items are translated at historic exchange rates. The net foreign
exchange gain recognized on the translation and settlement of
current monetary assets and liabilities was $61
(2003  $8,032; 2002  $667) and is included
in other revenue.

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

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Financial instruments

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

Those instruments that have been entered into by
the Company to hedge exposure to interest rate risk are
periodically examined by the Company to ensure that the
instruments are matched with underlying liabilities, reduce the
Companys risk relating to interest rates and, through
market value and sensitivity analysis, maintain a high
correlation to the interest expense of the hedged item. For
those instruments that do not meet the above criteria,
variations in their fair value are marked-to-market on a current
basis in the Companys Consolidated Statements of Income
(Loss).

Employee Benefit Plans

The Company accrues its obligations and related
costs under its employee benefit plans. The cost of pensions and
other retirement benefits earned by employees is actuarially
determined using the projected benefit method pro rated on
service and managements best estimate of salary escalation
and retirement ages of employees. Past service costs from plan
initiation and amendments are amortized on a straight-line basis
over the estimated average remaining service life
(EARSL) of employees active at the date of
recognition of past service unless identification of a
circumstance would suggest a shorter amortization period is
appropriate. Negative plan amendments which reduce costs are
applied to reduce any existing unamortized past service costs.
The excess, if any, is amortized on a straight-line basis over
EARSL. Actuarial gains or losses occur because assumptions about
benefit plans relate to a long time frame and differ from actual
experiences. These assumptions are revised based on actual
experience of the plan such as changes in discount rates,
expected retirement age and projected salary increases.
Actuarial gains (losses) are amortized on a straight-line
basis over EARSL which for active employees covered by the
defined benefit pension plan is 10.5 years
(2003  8.4 years; 2002 
11.9 years). When the restructuring of a benefit plan gives
rise to both a curtailment and a settlement of obligations, the
curtailment is accounted for prior to the settlement.

August 31 is the measurement date for the
Companys employee benefit plans. Actuaries perform a
valuation annually to determine the actuarial present value of
the accrued pension benefits. The last actuarial valuation of
the pension plan was performed August 31, 2004.

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Stock-based compensation

The Company has a stock option plan for
directors, officers, employees and consultants to the Company.
The options must be issued at not less than their fair value.
Any consideration paid by employees on the exercise of stock
options is credited to share capital.

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

Guarantees

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

Use of estimates and measurement uncertainty

The preparation of consolidated financial
statements in conformity with Canadian 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 revenues and expenses during the year.
Actual results could differ from those estimates.

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

Adoption of recent Canadian accounting pronouncements

(i)     Revenue
arrangements with multiple deliverables

The Emerging Issues Committee (EIC) recently
issued Abstract 142, Revenue Arrangements with
Multiple Deliverables, which the Company adopted
retroactively with restatement beginning March 1, 2004.
This Abstract is consistent with the US standard of the same
title, and addresses both when and how an arrangement involving
multiple deliverables should be divided into separate units of
accounting and how the arrangements consideration should
be allocated among separate units. The Company determined that
in both its cable and satellite divisions it has multiple
deliverables of subscriber connection fee revenue, customer
premise equipment revenue and related subscription revenue.
According to the criteria outlined in EIC 142, management has
determined that these should not be

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


considered separate units of accounting. As a
result, these multiple revenue streams must be assessed as an
integrated package under the guidance of EIC Abstract 141
outlined below.

(ii)    Revenue
recognition

Concurrent with EIC 142, the EIC issued
Abstract 141, Revenue Recognition. This
Abstract was issued to summarize principles set forth in the
SECs Staff Accounting Bulletin 101, Revenue Recognition in
Financial Statements. The Abstract provides general
interpretative guidance on the application of CICA 3400,
Revenue. As outlined above, the Company has multiple
deliverable arrangements of subscriber connection fee revenue,
customer premise equipment and related subscription revenue that
must be assessed as an integrated package under EIC 141.
Under EIC 141, up-front fees such as subscriber connection
fees and amounts charged on customer premise equipment, that
have no utility to the purchaser separate and independent of the
seller providing additional products or services, must be
deferred and recognized systematically over the periods that the
fees for the additional products or services are earned. The
impact of the retroactive adoption of this policy is as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Subscriber connection fees received from
    customers are deferred and recognized as revenue over two years.
    Direct and incremental initial selling, administrative and
    reconnection costs related to the subscriber acquisition, in an
    amount not exceeding the initial subscriber connection fee
    revenue, are now deferred and recognized as an operating expense
    over the same period. Previously, subscriber connection fees
    were recognized immediately in revenue as they were considered
    to represent a partial recovery of initial selling expenses and
    related administrative and general office expenses.                                                                                                                                                                                    
| |  | Revenue from sales of DTH equipment, DCTs and
    modems is deferred and recognized as revenue over two years
    commencing when subscriber service is activated. The total cost
    of the equipment, including installation, is deferred and
    recognized as an operating expense over the same period.
    Previously the equipment revenue and an equal cost were
    recognized as revenue and expense immediately upon the
    activation of the related subscriber service and the resulting
    equipment subsidy, being the difference between the revenue
    received and the actual cost of the equipment including
    installation, was deferred and amortized over two years.                                                                                                                                         
| |  | Tracking hardware sales and cost of goods sold
    are now deferred and recognized as revenue and operating expense
    over the related service contract for monthly service charges
    for air time, which is generally five years. Previously, the
    revenue, costs and profit on tracking hardware sales were
    recognized when the goods were shipped. As a result of this
    accounting change, the Company adjusted its opening purchase
    equation on the acquisition of Cancom in fiscal 2000 to
    recognize deferred credits of $46,379, deferred charges of
    $32,282 and a reduction to future income tax liability of $4,934
    attributable to deferred net revenue on tracking hardware sales.
    The adjustment in the purchase equation resulted in the
    recognition of additional goodwill of $9,163.
| |  | In conjunction with the adoption of EIC 141,
    the Company changed its income statement presentation to
    distinguish amortization of deferred equipment revenue and
    deferred equipment cost from the revenue and expenses from
    ongoing service activities. The equipment revenue and cost are
    deferred and recognized over the anticipated term of the future
    revenue (i.e. the monthly service subscription revenue)
    with the period of recognition spanning two to five years. As a
    result, the amortization of the equipment revenue and expense
    are non-cash                                                                                                                                                                                                                                       

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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




| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | items on the income statement, similar to the
    Companys recognition of deferred IRU revenue, which the
    Company also currently separates from ongoing revenue. Further,
    within the lifecycle of a customer relationship, the customer
    generally purchases the customer premise equipment only once, at
    the beginning of that relationship, whereas the subscription
    revenue represents a continuous revenue stream throughout that
    customer relationship. Therefore, in addition to the segregated
    presentation providing treatment consistent with the
    amortization of IRU revenue, it also provides a clearer
    distinction within the income statement between cash and
    non-cash activities and between upfront revenue streams and
    continuous revenue streams, which assists financial statement
    readers to predict future cash flows from operations.

A summary of the above-mentioned
reclassifications and adjustments is as follows:

Income statement:

Increase (decrease)


|                                                                              |                    |      |          |         |  |      |          |         |  |  |          |         |  |  | 
|----------------------------------------------------------------------------- | ------------------ | ---- | -------- | ------- |  | ---- | -------- | ------- |  |  | -------- | ------- |  |  | 
|                                                                              |                    | 2004 |          | 2003    |  | 2002 |          |        
|                                                                              |                    | $    |          | $       |  | $    |          |        
|                                                                              |                    |      |          |         |  |      |          |        
|                                                                             
|                                                                             
|Revenue:                                                                      |                    |      |          |         |  |      |          |         |  |  |          |         |  | 
|Remove equipment revenue previously reported
    prior to adoption of EIC 141 |                    |      | (67,611  | )       |  |      | (78,319  | )       |  |  | (89,735  | )       |  | 
|                                                                             
|Operating, general and administrative
    expenses:                           |                    |      |          |         |  |      |          |         |  |  |          |         |  | 
|Remove equipment cost previously reported prior
    to adoption of EIC 141    |                    |      | (64,143  | )       |  |      | (75,360  | )       |  |  | (87,478  | )       |  | 
|                                                                             
|Amortization  deferred equipment
    revenue                                 |                    |      |          |         |  |      |          |         |  |  |          |         |  | 
|                                                                              | Cable              |      |          | 26,774  |  |      |          | 26,489  |  |  |          | 25,724  |  |  | 
|                                                                              | DTH                |      |          | 42,608  |  |      |          | 50,461  |  |  |          | 54,435  |  |  | 
|                                                                              | Satellite Services |      |          | 13,329  |  |      |          | 14,913  |  |  |          | 16,340  |  |  | 
|                                                                             
|                                                                              |                    |      | 82,711   |         |  |      | 91,863   |         |  |  | 96,499   |         |  | 
|                                                                             
|Amortization  deferred equipment
    cost                                    |                    |      |          |         |  |      |          |         |  |  |          |         |  | 
|                                                                              | Cable              |      |          | 84,560  |  |      |          | 89,605  |  |  |          | 81,676  |  |  | 
|                                                                              | DTH                |      |          | 135,129 |  |      |          | 151,028 |  |  |          | 151,488 |  |  | 
|                                                                              | Satellite Services |      |          | 9,324   |  |      |          | 10,470  |  |  |          | 11,476  |  |  | 
|                                                                             
|                                                                              |                    |      | 229,013  |         |  |      | 251,103  |         |  |  | 244,640  |         |  | 
|                                                                             
|Amortization  deferred
    charges                                           |                    |      | (150,307 | )       |  |      | (163,683 | )       |  |  | (153,005 | )       |  | 
|                                                                             
|Operating income before
    amortization  Satellite Services                 |                    |      | 537      |         |  |      | 1,484    |         |  |  | 2,607    |         |  | 
|Future income tax expense                                                     |                    |      | 188      |         |  |      | 520      |         |  |  | 912      |         |  | 
|                                                                             
|Net income                                                                    |                    |      | 349      |         |  |      | 964      |         |  |  | 1,695    |         |  | 
|                                                                             

The change in net income had no impact on
earnings per share.

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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


As a result of the retroactive adoption of these
changes, the August 31, 2003 balance sheet was restated to:
increase goodwill by $9,163; increase deferred charges by
$107,078; increase deferred credits by $115,638; decrease future
income tax liability by $2,996; and to decrease the deficit by
$3,599.

(iii)   Stock-based
compensation

Commencing September 1, 2003, the Company
prospectively adopted the amended Canadian standard for
stock-based compensation and other stock-based payments which
requires that all stock-based awards be accounted for at fair
value. Under the amended standard, options granted subsequent to
August 31, 2003 are expensed and credited to contributed
surplus. For options granted prior to August 31, 2003, the
Company continues to disclose pro forma net income (loss) and
pro forma earnings (loss) per share in note 11. No
restatement of prior periods was required as a result of the
adoption of the new standard.

Recent Canadian accounting pronouncements

(i)     Asset
Retirement Obligations

In 2005, the Company will retroactively adopt the
new Canadian standard, Asset Retirement Obligations, which
establishes standards for the recognition, measurement and
disclosure of asset retirement obligations and the related asset
retirement costs. This new standard applies to obligations
associated with the retirement of property, plant and equipment
when those obligations result from the acquisition,
construction, development or normal operation of the assets. The
standard requires the recognition of all legal obligations
associated with the retirement, whether by sale, abandonment,
recycling or other disposal of an asset. The application of this
standard is not expected to have a significant impact on the
financial position or results of operations of the Company.

(ii)    GAAP Hierarchy and
General Standards of Financial Statement Presentation

In 2005, the Company will adopt the new CICA
Handbook Sections 1100, Generally Accepted Accounting
Principles, and 1400, General Standards of Financial
Statement Presentation. Section 1100 describes what
constitutes Canadian Generally Accepted Accounting Principles
(GAAP) and it sources and provides guidance on
sources to consult when selecting accounting policies and
determining appropriate disclosures when a matter is not dealt
with explicitly in the primary sources of generally accepted
accounting principles, thereby re-codifying the Canadian GAAP
hierarchy. Section 1400 provides general guidance on
financial statement presentation and further clarifies what
constitutes fair presentation in accordance with GAAP. The
Company does not expect these recommendations to have any
significant impact on its consolidated financial statements upon
adoption.

(iii)   Consolidation of
Variable Interest Entities

In June 2003, the CICA issued Accounting
Guideline 15 (AcG-15), Consolidation of Variable
Interest Entities. This guideline requires that an
enterprise holding other than a voting interest in a variable
interest entity (VIE) could, subject to certain
conditions, be required to consolidate the VIE if it is
considered its primary beneficiary whereby it would absorb the
majority of the VIEs expected losses and/or receive the
majority of its expected residual returns. AcG-15 applies to
annual and interim periods beginning on or after
November 1, 2004. The Company does not expect this
guideline to have an impact on its consolidated financial
statements.

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


(iv)     Equity
Instruments

In 2006, the Company will retroactively adopt the
amended Canadian standard, Financial Instruments 
Disclosure and Presentation, which requires obligations that may
be settled at the issuers option by a variable number of
the issuers own equity instruments to be presented as
liabilities which is consistent with US standards. As a result,
the Companys equity instruments will be classified as debt
instead of equity and the dividend entitlements thereon will be
treated as interest expense instead of dividends.

2.      BUSINESS ACQUISITIONS
AND DIVESTITURES

Cable business acquisitions

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

|                          |  |      |       |          |  |          |   |  |  |  |       |  |  | 
|------------------------- |  | ---- | ----- | -------- |  | -------- | - |  |  |  | ----- |  |  | 
|                          |  |     
|                          |  | 2003
|                          |  |     
|                          |  |      |       | Total    |  |         
|                          |  |      |       | Accounts |  | purchase |   | 
|                          |  | Cash |       | payable  |  | price    |   | 
|                          |  | $    |       | $        |  | $        |   | 
|                          |  |      |       |          |  |          |   | 
|                         
|                         
|(iii) Cable systems in US |  |      | 3,634 |          |  |          |  |  |  |  | 3,634 |  |  | 
|                         

|                                         |  |      |        |          |  |          |       |  |  |  |        |  |  | 
|---------------------------------------- |  | ---- | ------ | -------- |  | -------- | ----- |  |  |  | ------ |  |  | 
|                                         |  |     
|                                         |  | 2002
|                                         |  |     
|                                         |  |      |        | Total    |  |         
|                                         |  |      |        | Accounts |  | purchase |       | 
|                                         |  | Cash |        | payable  |  | price    |       | 
|                                         |  | $    |        | $        |  | $        |       | 
|                                         |  |      |        |          |  |          |       | 
|                                        
|                                        
|(iii) Cable systems in US                |  |      | 3,608  |          |  |          | 354   |  |  |  | 3,962  |  |  | 
|(iv) Cable systems in Canada             |  |      | 4,336  |          |  |          | 150   |  |  |  | 4,486  |  |  | 
|(v)  Direct-to-Home pay-per-view service |  |      | 32,510 |          |  |          | 4,000 |  |  |  | 36,510 |  |  | 
|                                        
|                                         |  |      | 40,454 |          |  |          | 4,504 |  |  |  | 44,958 |  |  | 
|                                        

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


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

|                                                             |  |      |        |      |  |      |       |  |  |  |        |  |  | 
|------------------------------------------------------------ |  | ---- | ------ | ---- |  | ---- | ----- |  |  |  | ------ |  |  | 
|                                                             |  | 2004 |        | 2003 |  | 2002 |       | 
|                                                             |  | $    |        | $    |  | $    |       | 
|                                                             |  |      |        |      |  |      |       | 
|                                                            
|                                                            
|Identifiable net assets acquired at assigned
    fair values |  |      |        |      |  |      |       |  |  |  |        |  |  | 
|Property, plant and equipment                                |  |      | 27,146 |      |  |      |      |  |  |  | 964    |  |  | 
|Deferred charges                                             |  |      | 450    |      |  |      |      |  |  |  |       |  |  | 
|Broadcast licenses                                           |  |      | 57,854 |      |  |      | 3,634 |  |  |  | 57,309 |  |  | 
|Future income taxes                                          |  |      | 5,400  |      |  |      |      |  |  |  |       |  |  | 
|                                                            
|                                                             |  |      | 90,850 |      |  |      | 3,634 |  |  |  | 58,273 |  |  | 
|                                                            
|Working capital deficiency                                   |  |      | 1,354  |      |  |      |      |  |  |  | 603    |  |  | 
|Long-term debt                                               |  |      |       |      |  |      |      |  |  |  | 644    |  |  | 
|Future income taxes                                          |  |      |       |      |  |      |      |  |  |  | 12,068 |  |  | 
|                                                            
|                                                             |  |      | 1,354  |      |  |      |      |  |  |  | 13,315 |  |  | 
|                                                            
|Purchase price                                               |  |      | 89,496 |      |  |      | 3,634 |  |  |  | 44,958 |  |  | 
|                                                            



|      |                                                                                                                                                                                                                                                                                                                                                                                                                         
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i)   | Effective March 31, 2004, the Company
    purchased certain cable systems of Monarch Cablesystems Ltd.
    (Monarch). The cable systems service approximately
    40,000 basic subscribers in the Medicine Hat (Medicine Hat,
    Taber, Brooks), Canmore (Canmore, Banff, Lake Louise) and
    southern B.C. (Hope, Fernie, Kimberley) regions. Monarch is
    controlled by a Director of the Company (see note 18).
|     
|(ii)  | Effective September 1, 2003, the Company
    purchased a cable television system serving approximately 200
    subscribers in the interior of British Columbia from a Director
    of the Company (see note 18).                                                                                                                                                                                                        
|     
|(iii) | The Company purchased 854 subscribers in 2003 and
    1,045 subscribers in 2002 in Florida.                                                                                                                                                                                                                                                                                                                             
|     
|(iv)  | Effective September 30, 2001,
    December 1, 2001, and June 1, 2002 the Company
    purchased three small cable television systems serving
    approximately 2,300 subscribers in the province of British
    Columbia.                                                                                                                                                                                                
|     
|(v)   | Effective June 1, 2002, the Company acquired
    from Corus Entertainment Inc. (Corus) (see
    note 18) 100% of Corus VC Ltd. (Viewers
    Choice), which operates a pay-per-view video service in
    Western Canada.                                                                                                                                                                                             

Divestitures



|     |                                                                                                                                                                                                                                                                                                                                                         
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i)  | Effective June 30, 2003, the Company sold
    its US cable systems for net proceeds of $257,435. Prior to the
    sale, the Company had written down the US cable system broadcast
    licences by $80,000. Subsequent to the write-down, a recovery of
    the US dollar relative to the Canadian dollar reduced the final
    loss on sale to $74,674.
|    
|(ii) | Effective March 21, 2003 the Company sold
    its Star Choice Business Television division for $6,461 which
    resulted in a pre-tax loss of $3,800.                                                                                                                                                                                                   

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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




|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(iii) | During 2003, 360networks acquired GT. The
    transaction did not result in any recovery for the shareholders
    of GT. In prior years, GT issued equity which reduced the
    Companys equity interest in 2002 from 23.28% to 23.22%
    resulting in a dilution loss of $571.                                                                                                                                                                                                                                                                                                                                  
|     
|(iv)  | Effective May 31, 2002, the Company incurred
    net costs of $631 on the sale of its Caribbean uplink and SRDU
    business, which resulted in a pre-tax loss of $1,281.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     
|(v)   | Effective November 2001, the Company sold its
    interest in WTN, a nationally distributed specialty television
    network, for $202,500 to Corus and its interest in CKY-TV (a CTV
    television network affiliate in Manitoba) for $37,500 to CTV
    Inc. These assets were acquired as part of an acquisition in
    2001 and were reflected in the balance sheet as assets held for
    sale at an amount of $89,500 which was the agreed upon selling
    price less a deposit of $150,000 received from Corus. Upon
    completion of the sales in 2002, the final proceeds of $89,500
    were received.

3.      ACCOUNTS RECEIVABLE

|                                                        |  |      |         |      |  |  |         |   |  | 
|------------------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | - |  | 
|                                                        |  | 2004 |         | 2003 |  | 
|                                                        |  | $    |         | $    |  | 
|                                                        |  |      |         |      |  | 
|                                                       
|                                                       
|Subscriber and trade receivables                        |  |      | 131,737 |      |  |  | 158,133 |   |  | 
|Officers and employees                                  |  |      | 225     |      |  |  | 69      |   |  | 
|Due from related parties [note 18]                      |  |      | 2,780   |      |  |  | 563     |   |  | 
|Miscellaneous receivables including commodity
    taxes |  |      | 7,772   |      |  |  | 7,887   |   |  | 
|                                                       
|                                                        |  |      | 142,514 |      |  |  | 166,652 |   |  | 
|Less allowance for doubtful accounts                    |  |      | (22,995 | )    |  |  | (22,732 | ) |  | 
|                                                       
|                                                        |  |      | 119,519 |      |  |  | 143,920 |   |  | 
|                                                       

Included in operating, general and administrative
expenses is a provision for doubtful accounts of $19,545
(2003  $35,019; 2002  $26,727).

4.      INVENTORIES

|                     |  |      |        |      |  |  |        |  |  | 
|-------------------- |  | ---- | ------ | ---- |  |  | ------ |  |  | 
|                     |  | 2004 |        | 2003 |  | 
|                     |  | $    |        | $    |  | 
|                     |  |      |        |      |  | 
|                    
|                    
|Subscriber equipment |  |      | 40,299 |      |  |  | 50,795 |  |  | 
|Other                |  |      | 2,674  |      |  |  | 4,569  |  |  | 
|                    
|                     |  |      | 42,973 |      |  |  | 55,364 |  |  | 
|                    

Subscriber equipment includes cable modems,
digital set-top boxes and related customer premise equipment.

61




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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


5.      INVESTMENTS AND OTHER
ASSETS

|                                                                                                    |  |      |        |      |  |  |        |  |  | 
|--------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ |  |  | 
|                                                                                                    |  | 2004 |        | 2003 |  | 
|                                                                                                    |  | $    |        | $    |  | 
|                                                                                                    |  |      |        |      |  | 
|                                                                                                   
|                                                                                                   
|Investments, at cost net of
    write-downs:                                                        |  |      |        |      |  |  |        |  |  | 
|Canadian Hydro Developers, Inc. (Canadian
    Hydro) (market value  $26,033; 2003 
    $20,454) |  |      | 19,267 |      |  |  | 19,111 |  |  | 
|Motorola, Inc. (Motorola) (market
    value  $44,113; 2003  $41,709)                            |  |      | 8,925  |      |  |  | 8,925  |  |  | 
|Q9 Networks Inc. (Q9 Networks)
    (market value  $3,710)                                        |  |      | 2,500  |      |  |  | 2,500  |  |  | 
|Liberty Media Corporation (Liberty)
    (market value  2003  $5,752)                            |  |      |       |      |  |  | 4,469  |  |  | 
|Investments in private technology companies                                                         |  |      | 4,063  |      |  |  | 4,313  |  |  | 
|Investments at equity:                                                                              |  |      |        |      |  |  |        |  |  | 
|Investments in specialty channel networks                                                           |  |      | 702    |      |  |  | 1,106  |  |  | 
|Other assets:                                                                                       |  |      |        |      |  |  |        |  |  | 
|Employee home relocation mortgages and loans
    [note 18]                                          |  |      | 6,899  |      |  |  | 7,299  |  |  | 
|Other                                                                                               |  |      | 1,609  |      |  |  | 1,692  |  |  | 
|                                                                                                   
|                                                                                                    |  |      | 43,965 |      |  |  | 49,415 |  |  | 
|                                                                                                   

The Motorola shares have been pledged as
collateral for the outstanding Zero Coupon Loan (see
note 11).

The market value of the Motorola shares is
reflected at the amount recorded in the accounts for the Zero
Coupon Loan and accrued interest thereon as the Company has
entered into an equity forward sale contract on an equivalent
number of Motorola shares for amounts to coincide with the
maturity of the loan.

Canadian Hydro

Canadian Hydro, a Canadian public corporation,
develops and operates electrical generating plants. A summary of
the holdings in Canadian Hydro is as follows:

|          |                                         |                  |            |           |  |  |            |           |  |  | 
|--------- | --------------------------------------- | ---------------- | ---------- | --------- |  |  | ---------- | --------- |  |  | 
|          |                                         | 2004             |            | 2003      |  | 
|          |                                         |                  |            |           |  | 
|         
|         
|          |                                         |                  |            |          
|          |                                         | (number of       |            |          
|          |                                         | shares/warrants) |            |          
|Shares    |                                         |                  | 10,330,364 |           |  |  | 10,330,364 |           |  | 
|Warrants: |                                         |                  |            |           |  |  |            |           |  | 
|          | Vested  exercise price of
    $3.27(1) |                  |            |          |  |  |            | 1,000,000 |  |  | 
|          | Vested  exercise price of $2.35        |                  |            | 1,100,000 |  |  |            | 1,100,000 |  |  | 
|         
|          |                                         |                  | 11,430,364 |           |  |  | 12,430,364 |           |  | 
|         



|    |                          
|--- | -------------------------
|(1) | Expired on July 31, 2004.

Q9 Networks

Q9 Networks, a Canadian provider of Internet
services, completed its initial public offering on
April 29, 2004. Concurrent with the offering,
Q9 Networks reorganized its share capital such that the
Company received 645,161 common shares for its previous
shareholding. The common shares are subject to a

62




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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


lock-up agreement restricting the sale or
transfer of the shares for periods expiring on October 29,
2004 and April 29, 2005.

Liberty

During the year, Liberty spun off Liberty Media
International, Inc. (LMI) through the distribution
of all outstanding common shares of LMI to Libertys
shareholders. In the spin off, each shareholder of Liberty
received 0.05 shares of LMI for each Liberty share owned,
resulting in the Company receiving 17,150 shares of LMI. In
connection with the spin off, LMI announced a rights offering
whereby each LMI shareholder was entitled to 0.20 transferable
subscription rights for each share of LMI resulting in the
Company receiving 3,430 rights. The Company sold the 343,000
Liberty shares, 17,150 LMI shares and 3,430 LMI rights resulting
in a pre-tax loss of $3.

Investments at cost, write-downs

|                          |  |      |     |      |  |      |        |  |  |  |         |  |  | 
|------------------------- |  | ---- | --- | ---- |  | ---- | ------ |  |  |  | ------- |  |  | 
|                          |  | 2004 |     | 2003 |  | 2002 |        | 
|                          |  | $    |     | $    |  | $    |        | 
|                          |  |      |     |      |  |      |        | 
|                         
|                         
|Liberty                   |  |      |    |      |  |      |       |  |  |  | 4,042   |  |  | 
|Cogeco Cable Inc.         |  |      |    |      |  |      |       |  |  |  | 33,605  |  |  | 
|Canadian Hydro            |  |      |    |      |  |      | 4,925  |  |  |  |        |  |  | 
|Other public companies    |  |      |    |      |  |      | 27     |  |  |  | 173     |  |  | 
|Specialty channel network |  |      | 401 |      |  |      |       |  |  |  |        |  |  | 
|Private companies         |  |      | 250 |      |  |      | 10,048 |  |  |  | 23,718  |  |  | 
|GT Group Telecom (GT)   |  |      |    |      |  |      |       |  |  |  | 268,928 |  |  | 
|                         
|                          |  |      | 651 |      |  |      | 15,000 |  |  |  | 330,466 |  |  | 
|                         

Investments at equity

The Company has a one-third interest in three
specialty channel networks.

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

|                           |  |      |      |      |  |      |        |   |  |  |         |   |  | 
|-------------------------- |  | ---- | ---- | ---- |  | ---- | ------ | - |  |  | ------- | - |  | 
|                           |  | 2004 |      | 2003 |  | 2002 |        |  
|                           |  | $    |      | $    |  | $    |        |  
|                           |  |      |      |      |  |      |        |  
|                          
|                          
|GT                         |  |      |     |      |  |      |       |   |  |  | (51,300 | ) |  | 
|Specialty channel networks |  |      | (272 | )    |  |      | (1,898 | ) |  |  | (1,862  | ) |  | 
|Other                      |  |      | 22   |      |  |      | (23    | ) |  |  | (325    | ) |  | 
|                          
|                           |  |      | (250 | )    |  |      | (1,921 | ) |  |  | (53,487 | ) |  | 
|                          

63




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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Gain on redemption of SHELS

In prior years, the Company issued equity
instruments which were collateralized by certain investments. In
2003 and 2002 the Company settled these equity instruments by
delivery of the underlying investments and recorded gains as
follows:

|                      |  |                                                        |  |      |   |      |  |         |  |         |  | 
|--------------------- |  | ------------------------------------------------------ |  | ---- | - | ---- |  | ------- |  | ------- |  | 
|                      |  | Delivery of                                            |  | 2004 |   | 2003 |  | 2002    |  |        
|Equity instrument     |  | underlying security                                    |  | $    |   | $    |  | $       |  |        
|                      |  |                                                        |  |      |   |      |  |         |  |        
|                     
|                     
|Series III & IV SHELS |  | 1,452,506 shares of Liberate Technologies              |  |      |  |      |  | 75,342  |  |        |  | 
|Series V SHELS        |  | 5,326,827 shares of Terayon Communications
    Systems |  |      |  |      |  | 44,179  |  |        |  | 
|Series II SHELS       |  | 4,361,186 shares of
    At Home Corporation            |  |      |  |      |  |        |  | 218,327 |  | 
|                     
|                      |  |                                                        |  |      |  |      |  | 119,521 |  | 218,327 |  | 
|                     

6.      PROPERTY, PLANT AND
EQUIPMENT

|                                                                                  |  |      |           |              |  |       |           |      |  |              |           |       |  |  |           |  |  |  |           |  |  |  |           |  |  | 
|--------------------------------------------------------------------------------- |  | ---- | --------- | ------------ |  | ----- | --------- | ---- |  | ------------ | --------- | ----- |  |  | --------- |  |  |  | --------- |  |  |  | --------- |  |  | 
|                                                                                  |  |      |           |             
|                                                                                  |  | 2004 |           | 2003        
|                                                                                  |  |      |           |             
|                                                                                  |  |      |           | Accumulated  |  | Net   |           |      |  | Accumulated  |           | Net   |  | 
|                                                                                  |  | Cost |           | amortization |  | book  |           | Cost |  | amortization |           | book  |  | 
|                                                                                  |  | $    |           | $            |  | value |           | $    |  | $            |           | value |  | 
|                                                                                  |  |      |           |              |  |       |           |      |  |              |           |       |  | 
|                                                                                 
|                                                                                 
|Cable and telecommunications distribution system                                  |  |      | 2,740,234 |              |  |       | 1,119,735 |      |  |              | 1,620,499 |       |  |  | 2,609,599 |  |  |  | 908,769   |  |  |  | 1,700,830 |  |  | 
|Digital cable terminals and modems                                                |  |      | 426,308   |              |  |       | 291,910   |      |  |              | 134,398   |       |  |  | 449,861   |  |  |  | 271,974   |  |  |  | 177,887   |  |  | 
|Satellite audio, video and data network equipment
    and DTH receiving equipment |  |      | 296,020   |              |  |       | 166,006   |      |  |              | 130,014   |       |  |  | 265,943   |  |  |  | 86,402    |  |  |  | 179,541   |  |  | 
|Buildings                                                                         |  |      | 250,460   |              |  |       | 47,309    |      |  |              | 203,151   |       |  |  | 237,594   |  |  |  | 38,283    |  |  |  | 199,311   |  |  | 
|Data processing                                                                   |  |      | 51,678    |              |  |       | 24,690    |      |  |              | 26,988    |       |  |  | 81,698    |  |  |  | 55,645    |  |  |  | 26,053    |  |  | 
|Other assets                                                                      |  |      | 196,476   |              |  |       | 107,575   |      |  |              | 88,901    |       |  |  | 227,198   |  |  |  | 186,354   |  |  |  | 40,844    |  |  | 
|                                                                                 
|                                                                                  |  |      | 3,961,176 |              |  |       | 1,757,225 |      |  |              | 2,203,951 |       |  |  | 3,871,893 |  |  |  | 1,547,427 |  |  |  | 2,324,466 |  |  | 
|Land                                                                              |  |      | 45,189    |              |  |       |          |      |  |              | 45,189    |       |  |  | 47,996    |  |  |  |          |  |  |  | 47,996    |  |  | 
|Satellite transponders under construction                                         |  |      | 43,200    |              |  |       |          |      |  |              | 43,200    |       |  |  | 43,200    |  |  |  |          |  |  |  | 43,200    |  |  | 
|                                                                                 
|                                                                                  |  |      | 4,049,565 |              |  |       | 1,757,225 |      |  |              | 2,292,340 |       |  |  | 3,963,089 |  |  |  | 1,547,427 |  |  |  | 2,415,662 |  |  | 
|                                                                                 

Included in the cable and telecommunications
distribution system assets is the cost of the Companys
purchase of fibers under IRU agreements with terms extending to
60 years totalling $61,811 (2003  $61,811;
2002  $61,698).

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


7.      DEFERRED CHARGES

|                                                         |  |      |         |              |  |       |         |      |  |              |         |       |  |  |         |  |  |  |         |  |  |  |         |  |  | 
|-------------------------------------------------------- |  | ---- | ------- | ------------ |  | ----- | ------- | ---- |  | ------------ | ------- | ----- |  |  | ------- |  |  |  | ------- |  |  |  | ------- |  |  | 
|                                                         |  |      |         |             
|                                                         |  | 2004 |         | 2003        
|                                                         |  |      |         |             
|                                                         |  |      |         | Accumulated  |  | Net   |         |      |  | Accumulated  |         | Net   |  | 
|                                                         |  | Cost |         | amortization |  | book  |         | Cost |  | amortization |         | book  |  | 
|                                                         |  | $    |         | $            |  | value |         | $    |  | $            |         | value |  | 
|                                                         |  |      |         |              |  |       |         |      |  |              |         |       |  | 
|                                                        
|                                                        
|Equipment costs                                          |  |      | 689,625 |              |  |       | 465,547 |      |  |              | 224,078 |       |  |  | 762,986 |  |  |  | 511,748 |  |  |  | 251,238 |  |  | 
|Financing costs and credit facility arrangement
    fees |  |      | 61,970  |              |  |       | 37,292  |      |  |              | 24,678  |       |  |  | 65,121  |  |  |  | 44,160  |  |  |  | 20,961  |  |  | 
|Deferred connection costs                                |  |      | 45,582  |              |  |       | 29,582  |      |  |              | 16,000  |       |  |  | 43,000  |  |  |  | 27,000  |  |  |  | 16,000  |  |  | 
|Marketing costs to launch new services                   |  |      | 3,910   |              |  |       | 3,910   |      |  |              |        |       |  |  | 14,211  |  |  |  | 13,436  |  |  |  | 775     |  |  | 
|Other                                                    |  |      | 4,579   |              |  |       | 1,896   |      |  |              | 2,683   |       |  |  | 6,808   |  |  |  | 2,717   |  |  |  | 4,091   |  |  | 
|                                                        
|                                                         |  |      | 805,666 |              |  |       | 538,227 |      |  |              | 267,439 |       |  |  | 892,126 |  |  |  | 599,061 |  |  |  | 293,065 |  |  | 
|                                                        

Amortization provided in the accounts on deferred
charges for 2004 amounted to $251,851 (2003 
$290,241; 2002  $281,495) of which $236,809 was
recorded as amortization of deferred charges and equipment costs
(2003  $272,228; 2002  $267,631), $336 was
recorded as interest expense (2003  $336;
2002  $335) and $14,706 was recorded as service
operating, general and administrative expenses (2003 
$17,677; 2002  $13,529).

8.      INTANGIBLES

|                                            |                            |                 |           |           |  |  |           |           |  |  | 
|------------------------------------------- | -------------------------- | --------------- | --------- | --------- |  |  | --------- | --------- |  |  | 
|                                            |                            |                
|                                            |                            | Carrying amount
|                                            |                            |                
|                                            |                            | 2004            |           | 2003      |  | 
|                                            |                            | $               |           | $         |  | 
|                                            |                            |                 |           |           |  | 
|                                           
|                                           
|Broadcast licenses                          |                            |                 |           |           |  |  |           |           |  | 
|                                            | Cable systems              |                 |           | 3,702,450 |  |  |           | 3,644,596 |  |  | 
|                                            | DTH and satellite services |                 |           | 983,132   |  |  |           | 983,132   |  |  | 
|                                           
|                                            |                            |                 | 4,685,582 |           |  |  | 4,627,728 |           |  | 
|Goodwill  non-regulated satellite services |                            |                 | 88,111    |           |  |  | 88,111    |           |  | 
|                                           
|Net book value                              |                            |                 | 4,773,693 |           |  |  | 4,715,839 |           |  | 
|                                           

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

|                               |  |                    |           |          |  |  |         |   |  | 
|------------------------------ |  | ------------------ | --------- | -------- |  |  | ------- | - |  | 
|                               |  | Broadcast licenses |           | Goodwill |  | 
|                               |  | $                  |           | $        |  | 
|                               |  |                    |           |          |  | 
|                              
|                              
|August 31, 2002                |  |                    | 4,877,256 |          |  |  | 155,208 |   |  | 
|Business acquisition [note 2]  |  |                    | 3,634     |          |  |  |        |   |  | 
|Business divestiture [note 2]  |  |                    | (173,162  | )        |  |  | (16,917 | ) |  | 
|Write-downs                    |  |                    | (80,000   | )        |  |  | (50,000 | ) |  | 
|                              
|August 31, 2003                |  |                    | 4,627,728 |          |  |  | 88,111  |   |  | 
|Business acquisitions [note 2] |  |                    | 57,854    |          |  |  |        |   |  | 
|                              
|August 31, 2004                |  |                    | 4,685,582 |          |  |  | 88,111  |   |  | 
|                              

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Loss on sale and write-down of
assets

In 2003, the Company tested the amounts allocated
to broadcast licences and goodwill and determined that a
write-down of $50,000 was required in respect of goodwill
attributed to the non-regulated business operations of the
satellite division. In addition, as described in note 2,
the Company recorded a write-down, net of a final gain on sale,
of $74,674 on the sale of the US cable systems. This
resulted in a total loss on sale and write-down of assets of
$124,674 in 2003.

9.      LONG-TERM DEBT

|                                                                                   |                                   |                |                    |             |  |            |           |            |  |             |         |            |  |            |           |         |  |  |           |         |  |  |         |        |  |  |           |         |  |  | 
|---------------------------------------------------------------------------------- | --------------------------------- | -------------- | ------------------ | ----------- |  | ---------- | --------- | ---------- |  | ----------- | ------- | ---------- |  | ---------- | --------- | ------- |  |  | --------- | ------- |  |  | ------- | ------ |  |  | --------- | ------- |  |  | 
|                                                                                   |                                   |                |                    |             |  |           
|                                                                                   |                                   |                |                    | 2004        |  | 2003      
|                                                                                   |                                   |                |                    |             |  |           
|                                                                                   |                                   |                |                    | Translated  |  |            |           | Translated |  |            
|                                                                                   |                                   |                |                    | at year end |  | Adjustment |           | Translated |  | at year end |         | Adjustment |  | Translated |           |        
|                                                                                   |                                   | Effective      |                    | exchange    |  | hedge      |           | at hedged  |  | exchange    |         | hedged     |  | at hedged  |           |        
|                                                                                   |                                   | interest rates |                    | rate        |  | debt(1)    |           | rate       |  | rate        |         | debt(1)    |  | rate       |           |        
|                                                                                   |                                   | %              |                    | $           |  | $          |           | $          |  | $           |         | $          |  | $          |           |        
|                                                                                   |                                   |                |                    |             |  |            |           |            |  |             |         |            |  |            |           |        
|                                                                                  
|                                                                                  
|Corporate                                                                          |                                   |                |                    |             |  |            |           |            |  |             |         |            |  |            |           |         |  |  |           |         |  |  |         |        |  |  |           |         |  | 
|Bank loans                                                                         |                                   |                | Fixed and variable |             |  |            | 295,433   |            |  |             |        |            |  |            | 295,433   |         |  |  | 606,798   |         |  |  |        |        |  |  | 606,798   |         |  | 
|Senior notes                                                                      |                                   |                |                    |             |  |            |           |            |  |             |         |            |  |            |           |         |  |  |           |         |  |  |         |        |  |  |           |         |  | 
|                                                                                   | Due April 11, 2005                |                |                    | 7.05        |  |            |           | 275,000    |  |             |         |           |  |            |           | 275,000 |  |  |           | 275,000 |  |  |         |       |  |  |           | 275,000 |  |  | 
|                                                                                   | Due October 17, 2007              |                |                    | 7.40        |  |            |           | 296,760    |  |             |         |           |  |            |           | 296,760 |  |  |           | 300,000 |  |  |         |       |  |  |           | 300,000 |  |  | 
|                                                                                   | US $440,000 due April 11, 2010    |                |                    | 7.88        |  |            |           | 577,720    |  |             |         | 64,900     |  |            |           | 642,620 |  |  |           | 609,708 |  |  |         | 32,912 |  |  |           | 642,620 |  |  | 
|                                                                                   | US $225,000 due April 6, 2011     |                |                    | 7.68        |  |            |           | 295,425    |  |             |         | 60,413     |  |            |           | 355,838 |  |  |           | 311,783 |  |  |         | 44,055 |  |  |           | 355,838 |  |  | 
|                                                                                   | US $300,000 due December 15, 2011 |                |                    | 7.61        |  |            |           | 393,900    |  |             |         | 82,950     |  |            |           | 476,850 |  |  |           | 415,710 |  |  |         | 61,140 |  |  |           | 476,850 |  |  | 
|                                                                                   | Due November 20, 2013             |                |                    | 7.50        |  |            |           | 350,000    |  |             |         |           |  |            |           | 350,000 |  |  |           |        |  |  |         |       |  |  |           |        |  |  | 
|                                                                                  
|                                                                                   |                                   |                |                    |             |  |            | 2,484,238 |            |  |             | 208,263 |            |  |            | 2,692,501 |         |  |  | 2,518,999 |         |  |  | 138,107 |        |  |  | 2,657,106 |         |  | 
|                                                                                  
|Canadian Satellite Communications Inc.
    (Cancom)                              |                                   |                |                    |             |  |            |           |            |  |             |         |            |  |            |           |         |  |  |           |         |  |  |         |        |  |  |           |         |  | 
|Structured Note, due December 15, 2003                                             |                                   |                | 7.00               |             |  |            |          |            |  |             |        |            |  |            |          |         |  |  | 250,000   |         |  |  |        |        |  |  | 250,000   |         |  | 
|                                                                                  
|Other subsidiaries and entities                                                    |                                   |                |                    |             |  |            |           |            |  |             |         |            |  |            |           |         |  |  |           |         |  |  |         |        |  |  |           |         |  | 
|Videon CableSystems Inc. 8.15% Senior Debentures
    Series A due April 26, 2010 |                                   |                | 7.63               |             |  |            | 130,000   |            |  |             |        |            |  |            | 130,000   |         |  |  | 130,000   |         |  |  |        |        |  |  | 130,000   |         |  | 
|Burrard Landing Lot 2 Holdings Partnership                                         |                                   |                | Variable           |             |  |            | 36,442    |            |  |             |        |            |  |            | 36,442    |         |  |  | 18,069    |         |  |  |        |        |  |  | 18,069    |         |  | 
|                                                                                  
|                                                                                   |                                   |                |                    |             |  |            | 166,442   |            |  |             |        |            |  |            | 166,442   |         |  |  | 148,069   |         |  |  |        |        |  |  | 148,069   |         |  | 
|                                                                                  
|Total consolidated debt                                                            |                                   |                |                    |             |  |            | 2,650,680 |            |  |             | 208,263 |            |  |            | 2,858,943 |         |  |  | 2,917,068 |         |  |  | 138,107 |        |  |  | 3,055,175 |         |  | 
|Less current portion                                                               |                                   |                |                    |             |  |            | 343,097   |            |  |             |        |            |  |            | 343,097   |         |  |  | 271,520   |         |  |  |        |        |  |  | 271,520   |         |  | 
|                                                                                  
|                                                                                   |                                   |                |                    |             |  |            | 2,307,583 |            |  |             | 208,263 |            |  |            | 2,515,846 |         |  |  | 2,645,548 |         |  |  | 138,107 |        |  |  | 2,783,655 |         |  | 
|                                                                                  



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Foreign denominated long-term debt is translated
    at the year-end rate. If the rate of translation was adjusted to
    reflect the hedged rates of the Companys cross-currency
    interest rate agreements (which fix the liability for interest
    and principal), long-term debt would increase by $208,263
    (2003  $138,107) representing the amount of the
    corresponding deferred foreign exchange gain in deferred credits
    (see note 10).

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Interest on long-term debt included in interest
expense amounted to $219,806 (2003  $261,970;
2002  $266,261).

Corporate

Bank loans

The Company has a $50,000 revolving operating
loan facility with interest rates and borrowing options
principally the same as those contained in the credit facility
described below. The effective interest rate on the facility was
4.13% for the year (2003  4.69%; 2002 
4.29%).

A syndicate of banks has provided the Company
with an unsecured credit facility, which at August 31, 2004
amounted to a maximum of $1,099,933, of which a maximum of
$910,000 is revolving. During 2004, the Company amended its
revolving credit facility such that the maturity date was
extended to April 30, 2009. As at August 31, 2004,
$804,291 (net of committed letters of credit of $209) of the
$910,000 portion of the unsecured facility was not utilized. The
balance of the facility, which has been fully drawn, is
non-revolving term repayable in eight semi-annual increasing
installments such that the loan is repaid by April 30,
2007. Funds are available to the Company in both Canadian and
US dollars. At August 31, 2004, the US portion of
the bank loans was US $51,510 ($67,633 Canadian). Interest
rates fluctuate with Canadian bankers acceptance and LIBOR
rates and averaged 2.87% for the year (2003  3.65%;
2002  4%). The Company has purchased a forward
purchase contract to provide the US funds required for the
interest payments on the US portion of the bank loans at an
exchange rate of 1.4078 Cdn.

On November 20, 2003 the Company repaid and
cancelled its unsecured term loan in the amount of $350,000. In
connection with the repayment, the Company incurred debt
retirement costs of $2,428 consisting of $964 to cancel a
related interest rate hedge on the $350,000 and $1,464 on the
write-off of deferred financing costs. The effective interest
rate on the term loan for the period to November 20, 2003
was 5.10% (2003  5.32%).

At August 31, 2004, interest on $177,000 of
Canadian dollar borrowings were fixed by means of an interest
rate swap originally placed in April 1994 at a rate which may
range between 9.49% to 11.64% depending on debt to cash flow
ratios. At August 31, 2004 the effective rate was 9.62%.
One third of the interest rate swap matures each year commencing
April 30, 2005 until fully terminated.

Senior notes

The Senior notes are unsecured obligations and
rank equally and ratably with all existing and future senior
indebtedness. The notes are redeemable at the Companys
option at any time, in whole or in part, prior to maturity at
100% of the principal amount plus a make-whole premium.

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

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

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


of the agreements, and the exchange rate
applicable to the principal portion of the debt (Exchange
rate):

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

Cancom

Bank loans

Cancom has a $10,000 demand operating line of
credit that is available in Canadian dollars or the
US dollar equivalent, of which $1,112 has been drawn as
committed letters of credit. Interest rates fluctuate with
Canadian prime rate and US base rates. The operating line is
collateralized by a first ranking fixed and floating charge and
security interest in all of the Canadian assets and undertakings
of Cancom and two of Cancoms subsidiaries (excluding
assets located in the province of Quebec). The effective
interest rate on the line of credit was 5.38% (2003 
6.60%; 2002  7.04%).

Structured Note

On December 15, 2003 the Company repaid the
Cancom $250,000 7% Structured Note.

Other subsidiaries and entities

Videon CableSystems Inc.

Videon CableSystems Inc. (Videon)
issued 8.15% Senior Debentures that are due April 26, 2010.
Interest is payable semi-annually.

Pursuant to the inter-creditor agreement between
the debenture holders and the syndicate of banks which had
provided a credit facility to Videon, the debenture holders were
required to release the debenture security when the credit
facilities were repaid. As a result, the debentures are
unsecured and are non-recourse to the parent company. The Senior
Debentures are guaranteed by the subsidiaries of Videon. The
effective interest rate on the debentures is 7.63% after giving
effect to the fair value adjustments to the debt at the date of
the Moffat acquisition. These adjustments are included in
deferred credits.

Burrard Landing Lot 2 Holdings
Partnership

The Company has a 38.3% interest in the
Partnership. The Partnership is building the Shaw Tower project
in Vancouver, B.C. and will own it when construction is
complete. The Partnership has an available construction facility
of $128,500 and a letter of guarantee facility of $2,350 which
are repayable no later than December 31, 2005 (if extended)
and bear interest at bank prime rate plus 0.5%. The credit
facilities are secured by a general security agreement and a
$150,000 fixed and floating charge debenture registered in a
first priority position with respect to the project land and
building. The credit facilities are severally guaranteed by the
Company and the other two partners in the Partnership in

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


the amount of $47,838. The Companys portion
of the guarantee is $18,338. Effective November 3, 2003,
the Partnership entered into an interest rate hedge to fix the
interest rate at 5.125% plus a stamping fee on $58,000 of the
loan until October 1, 2004.

Senior secured notes redemption

In August 2003, the Company redeemed the Star
Choice US $150,000 Senior secured notes. In connection with
the redemption, the Company incurred debt retirement costs of
$10,634 comprised of an early redemption premium of
US $9,750 ($13,722 Cdn), costs to purchase the
outstanding Cancom warrants of US $2,440 ($3,379 Cdn), and
legal costs of $33, offset by the write-off of the fair value
adjustment on the debt in deferred credits of $6,500.

Debt covenants

The Company and its subsidiaries have undertaken
to maintain certain covenants in respect of the credit
agreements and trust indentures described above. The Company and
its subsidiaries were in compliance with these covenants at
August 31, 2004.

Long-term debt repayments

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

|           |  |               |           |               |  |  |           |  |  | 
|---------- |  | ------------- | --------- | ------------- |  |  | --------- |  |  | 
|           |  |               |           | Exchange rate |  | 
|           |  | At year-end   |           | adjusted for  |  | 
|           |  | exchange rate |           | hedged rates  |  | 
|           |  | $             |           | $             |  | 
|           |  |               |           |               |  | 
|          
|          
|2005       |  |               | 343,097   |               |  |  | 306,655   |  |  | 
|2006       |  |               | 52,759    |               |  |  | 89,201    |  |  | 
|2007       |  |               | 105,518   |               |  |  | 105,518   |  |  | 
|2008       |  |               | 296,760   |               |  |  | 296,760   |  |  | 
|2009       |  |               | 105,500   |               |  |  | 105,500   |  |  | 
|Thereafter |  |               | 1,747,046 |               |  |  | 1,955,309 |  |  | 
|          
|           |  |               | 2,650,680 |               |  |  | 2,858,943 |  |  | 
|          

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


10.     DEFERRED CREDITS

|                                                                |  |        |           |              |  |       |         |        |  |              |         |       |  |  |           |  |  |  |         |  |  |  |         |  |  | 
|--------------------------------------------------------------- |  | ------ | --------- | ------------ |  | ----- | ------- | ------ |  | ------------ | ------- | ----- |  |  | --------- |  |  |  | ------- |  |  |  | ------- |  |  | 
|                                                                |  |        |           |             
|                                                                |  | 2004   |           | 2003        
|                                                                |  |        |           |             
|                                                                |  |        |           | Accumulated  |  | Net   |         |        |  | Accumulated  |         | Net   |  | 
|                                                                |  | Amount |           | amortization |  | Book  |         | Amount |  | amortization |         | Book  |  | 
|                                                                |  | $      |           | $            |  | Value |         | $      |  | $            |         | Value |  | 
|                                                                |  |        |           |              |  |       |         |        |  |              |         |       |  | 
|                                                               
|                                                               
|IRU agreements                                                  |  |        | 627,958   |              |  |       | 43,519  |        |  |              | 584,439 |       |  |  | 622,258   |  |  |  | 31,421  |  |  |  | 590,837 |  |  | 
|Foreign exchange gains on translating hedged
    long-term debt |  |        | 208,263   |              |  |       |        |        |  |              | 208,263 |       |  |  | 138,107   |  |  |  |        |  |  |  | 138,107 |  |  | 
|Equipment revenue                                               |  |        | 285,888   |              |  |       | 201,350 |        |  |              | 84,538  |       |  |  | 303,316   |  |  |  | 203,678 |  |  |  | 99,638  |  |  | 
|Connection fee revenue                                          |  |        | 45,582    |              |  |       | 29,582  |        |  |              | 16,000  |       |  |  | 43,000    |  |  |  | 27,000  |  |  |  | 16,000  |  |  | 
|Fair value adjustments on debt assumed on
    acquisitions      |  |        | 6,084     |              |  |       | 2,344   |        |  |              | 3,740   |       |  |  | 21,535    |  |  |  | 17,126  |  |  |  | 4,409   |  |  | 
|Deposit on future fiber purchase                                |  |        | 2,000     |              |  |       |        |        |  |              | 2,000   |       |  |  | 2,000     |  |  |  |        |  |  |  | 2,000   |  |  | 
|                                                               
|                                                                |  |        | 1,175,775 |              |  |       | 276,795 |        |  |              | 898,980 |       |  |  | 1,130,216 |  |  |  | 279,225 |  |  |  | 850,991 |  |  | 
|                                                               

Amortization on deferred credits for 2004
amounted to $110,185 (2003  $124,970;
2002  $125,696) and was provided in the accounts as
described below.

IRU agreements are in place for periods of either
30 or 60 years and are being amortized to income over the
agreement periods. Amortization in respect of the IRU agreements
for 2004 amounted to $12,098 (2003  $11,984;
2002  $11,517) and amortization in respect of fair
value adjustments on debt amounted to $670 (2003 
$3,446; 2002  $4,151) and was offset against interest
expense. Amortization of equipment revenue for 2004 amounted to
$82,711 (2003  $91,863; 2002  $96,499).
Amortization of connection fee revenue for 2004 amounted to
$14,706 (2003  $17,677; 2002  $13,529) and
was recorded as service revenue.

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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


11.     SHARE CAPITAL

Authorized

The Company is authorized to issue an unlimited
number of Class A voting participating shares
(Class A Shares), Class B non-voting
participating shares (Class B Non-Voting
Shares), Class 1 preferred shares, Class 2
preferred shares, Class A preferred shares, Class B
preferred shares, Canadian Originated Preferred Securities
(COPrS), Variable Rate Equity Linked Exchangeable
Debentures (SHELS) and Zero Coupon Loans.

|                     |             |      |  |  |             |      |  |                             |                                                        |  |           |         |  |  |           |         |  |  | 
|-------------------- | ----------- | ---- |  |  | ----------- | ---- |  | --------------------------- | ------------------------------------------------------ |  | --------- | ------- |  |  | --------- | ------- |  |  | 
|                     |             |      |  |  |             | 2004 |  | 2003                        |                                                        | 
|                     |             |      |  |  |             | $    |  | $                           |                                                        | 
|                     |             |      |  |  |             |      |  |                             |                                                        | 
|                    
|                    
|                     |             |      |  | 
|Number of securities |             |      |  | 
|                     |             |      |  | 
|2004                 |             | 2003 |  |  |             |     
|                     |             |      |  |  |             |     
|                     | 11,359,932  |      |  |  | 11,360,432  |      |  | Class A Shares              |                                                        |  | 2,490     |         |  |  | 2,491     |         |  | 
|                     | 220,109,372 |      |  |  | 220,496,092 |      |  | Class B Non-Voting Shares   |                                                        |  | 2,132,943 |         |  |  | 2,107,464 |         |  | 
|                    
|                     | 231,469,304 |      |  |  | 231,856,524 |      |  |                             |                                                        |  | 2,135,433 |         |  |  | 2,109,955 |         |  | 
|                    
|                     |             |      |  |  |             |      |  | EQUITY INSTRUMENTS COPrS-   |                                                        |  |           |         |  |  |           |         |  | 
|                     | 5,700,000   |      |  |  | 5,700,000   |      |  |                             | 8.45% Series A US $142,500, due
    September 30, 2046 |  |           | 192,871 |  |  |           | 192,871 |  |  | 
|                     | 100,000     |      |  |  | 100,000     |      |  |                             | 8.54% Series B, due September 30, 2027                 |  |           | 98,467  |  |  |           | 98,467  |  |  | 
|                     | 6,900,000   |      |  |  | 6,900,000   |      |  |                             | 8.50% Series US $172,500, due
    September 30, 2097   |  |           | 252,525 |  |  |           | 252,525 |  |  | 
|                     | 6,000,000   |      |  |  | 6,000,000   |      |  |                             | 8.875% Series, due September 28, 2049                  |  |           | 147,202 |  |  |           | 147,202 |  |  | 
|                     |             |      |  |  |             |      |  | Zero Coupon Loan US $22,835 |                                                        |  | 33,858    |         |  |  | 33,858    |         |  | 
|                    
|                     |             |      |  |  |             |      |  |                             |                                                        |  | 724,923   |         |  |  | 724,923   |         |  | 
|                    
|                     |             |      |  |  |             |      |  |                             |                                                        |  | 2,860,356 |         |  |  | 2,834,878 |         |  | 
|                    

Class A and Class B Non-Voting Shares

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

71




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Changes in Class A and Class B Share
capital in 2004, 2003 and 2002 are as follows:

|                                         |  |                |            |                    |  |        |       |   |  |  |             |   |  |  |           |   |  | 
|---------------------------------------- |  | -------------- | ---------- | ------------------ |  | ------ | ----- | - |  |  | ----------- | - |  |  | --------- | - |  | 
|                                         |  |                |            |                    |  |       
|                                         |  |                |            | Class B Non-Voting
|                                         |  | Class A Shares |            | Shares            
|                                         |  |                |            |                   
|                                         |  | Number         |            | $                  |  | Number |       | $ |  | 
|                                         |  |                |            |                    |  |        |       |   |  | 
|                                        
|                                        
|August 31, 2001                          |  |                | 11,403,972 |                    |  |        | 2,499 |   |  |  | 220,368,357 |   |  |  | 2,106,569 |   |  | 
|Class A Share conversions                |  |                | (30,000    | )                  |  |        | (6    | ) |  |  | 30,000      |   |  |  | 6         |   |  | 
|Stock option plan issuances              |  |                |           |                    |  |        |      |   |  |  | 75,195      |   |  |  | 792       |   |  | 
|                                        
|August 31, 2002                          |  |                | 11,373,972 |                    |  |        | 2,493 |   |  |  | 220,473,552 |   |  |  | 2,107,367 |   |  | 
|Class A Share conversions                |  |                | (13,540    | )                  |  |        | (2    | ) |  |  | 13,540      |   |  |  | 2         |   |  | 
|Stock option plans issuances             |  |                |           |                    |  |        |      |   |  |  | 9,000       |   |  |  | 95        |   |  | 
|                                        
|August 31, 2003                          |  |                | 11,360,432 |                    |  |        | 2,491 |   |  |  | 220,496,092 |   |  |  | 2,107,464 |   |  | 
|Class A Share conversions                |  |                | (500       | )                  |  |        | (1    | ) |  |  | 500         |   |  |  | 1         |   |  | 
|Purchase of shares for cancellation      |  |                |           |                    |  |        |      |   |  |  | (4,134,000  | ) |  |  | (39,655   | ) |  | 
|Stock option plans issuances             |  |                |           |                    |  |        |      |   |  |  | 9,000       |   |  |  | 164       |   |  | 
|Issued in respect of Monarch acquisition |  |                |           |                    |  |        |      |   |  |  | 3,737,780   |   |  |  | 65,000    |   |  | 
|Share issue costs                        |  |                |           |                    |  |        |      |   |  |  |            |   |  |  | (31       | ) |  | 
|                                        
|August 31, 2004                          |  |                | 11,359,932 |                    |  |        | 2,490 |   |  |  | 220,109,372 |   |  |  | 2,132,943 |   |  | 
|                                        

During 2004 the Company purchased for
cancellation 4,134,000 Class B Non-Voting Shares pursuant
to its outstanding normal course issuer bid for $85,968. Share
capital has been reduced by the stated value of the shares
amounting to $39,655 with the excess of the amount paid over the
stated value of the shares amounting to $46,313 charged to the
deficit.

Equity instruments

COPrS

The COPrS rank as unsecured junior subordinated
debt. The Company has the right to defer payments of interest on
the securities for up to 20 consecutive quarterly periods
provided that no extension period may extend beyond the stated
maturity of the securities. Except in certain limited
circumstances, the Company may not pay or declare dividends on
any of its capital stock (including capital stock classified as
debt) (except by way of stock dividend) at any time when any
interest on the securities is either in default or is being
deferred. There may be multiple extension periods of varying
lengths, each of up to 20 consecutive quarterly periods,
throughout the terms of the securities. During any extension
period, interest will accrue but will not compound. The Company
may satisfy its obligation to pay deferred interest on any
applicable interest payment date through the issuance to the
trustee of Class B Non-Voting Shares of the Company, in
which event the holders of the securities shall be entitled to
receive cash payments equal to the deferred interest from the
proceeds of the sale of the requisite Class B Non-Voting
Shares by the trustee of the COPrS.

The COPrS are redeemable, at the Companys
option, in whole or in part, at any time for the 8.45%
Series A and 8.50% Series and at any time after
October 17, 2005 (8.875% Series) or September 30, 2007
(8.54% Series B) at a redemption price equal to 100% of the
principal amount of the securities to be redeemed plus accrued
and unpaid interest thereon to the date of such redemption. The
Company has the ability to satisfy redemption obligations
through the issuance of Class B Non-Voting Shares.

72




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


The Company has purchased a five-year extendible
forward purchase contract which expires on March 31, 2005
to provide the US funds required for the quarterly interest
payments on the US denominated securities at an exchange
rate of $1.4078 Cdn. The counterparty has the option to
extend the contract at the same rate for five years on
March 31, 2005.

Zero Coupon Loan

The Zero Coupon Loan is collateralized by a
forward contract entered into by the Company in respect of
732,237 Motorola shares. The loan bears interest at 7.53%
compounded annually with principal and interest payable in
4 equal weekly installments commencing July 19, 2005.
The Company may satisfy its obligation to pay principal and
interest at maturity through the issuance of Class B
Non-Voting Shares.

Concurrent with receipt of the Zero Coupon Loan
proceeds, the Company entered into an equity forward sale
contract in respect of 732,237 Motorola shares whereby the
Company has agreed to forward sell the shares at dates that
coincide with the maturity dates of the Zero Coupon Loan.

Until May 27, 2005, the Company has the
option to elect to deliver the required number of Motorola
shares in exchange for cash payments that equal the payments
required under the Zero Coupon Loan at each respective maturity
date. If the Company does not elect to physically settle the
forward contract, a cash settlement will be made between the
parties for the difference between the fair market value of the
Motorola shares at maturity and the forward sale price of
US $44.7567 per share.

Stock option plan

Under a stock option plan, directors, officers,
employees and consultants of the Company are eligible to receive
stock options to acquire Class B Non-Voting Shares with
terms not to exceed 10 years from the date of grant.
Twenty-five percent of the options are exercisable on each of
the first four anniversary dates from the date of the original
grant. The options must be issued at not less than the fair
market value of the Class B Non-Voting Shares at the date
of grant. The maximum number of Class B Non-Voting Shares
issuable under this plan and the warrant plan described below
may not exceed 16,000,000 of which 7,904,795 are still available
for issue as at August 31, 2004.

The changes in options in 2004, 2003 and 2002 are
as follows:

|                                 |  |        |           |          |  |        |       |          |  |        |            |          |  |  |       |  |  |  |            |   |  |  |       |  |  | 
|-------------------------------- |  | ------ | --------- | -------- |  | ------ | ----- | -------- |  | ------ | ---------- | -------- |  |  | ----- |  |  |  | ---------- | - |  |  | ----- |  |  | 
|                                 |  |        |           |          |  |       
|                                 |  | 2004   |           | 2003     |  | 2002  
|                                 |  |        |           |          |  |       
|                                 |  |        |           | Weighted |  |        |       | Weighted |  |        |            | Weighted |  | 
|                                 |  |        |           | average  |  |        |       | average  |  |        |            | average  |  | 
|                                 |  |        |           | exercise |  |        |       | exercise |  |        |            | exercise |  | 
|                                 |  |        |           | price    |  |        |       | price    |  |        |            | price    |  | 
|                                 |  | Shares |           | $        |  | Shares |       | $        |  | Shares |            | $        |  | 
|                                 |  |        |           |          |  |        |       |          |  |        |            |          |  | 
|                                
|                                
|Outstanding at beginning of year |  |        | 7,607,500 |          |  |        | 32.58 |          |  |        | 8,303,000  |          |  |  | 32.58 |  |  |  | 7,640,500  |   |  |  | 32.57 |  |  | 
|Granted                          |  |        | 1,216,750 |          |  |        | 32.49 |          |  |        | 1,093,250  |          |  |  | 32.62 |  |  |  | 2,116,750  |   |  |  | 32.64 |  |  | 
|Exercised                        |  |        |          |          |  |        |      |          |  |        |           |          |  |  |      |  |  |  | (11,750    | ) |  |  | 32.63 |  |  | 
|Forfeited                        |  |        | (977,250  | )        |  |        | 32.68 |          |  |        | (1,788,750 | )        |  |  | 32.64 |  |  |  | (1,442,500 | ) |  |  | 32.67 |  |  | 
|                                
|Outstanding at end of year       |  |        | 7,847,000 |          |  |        | 32.55 |          |  |        | 7,607,500  |          |  |  | 32.58 |  |  |  | 8,303,000  |   |  |  | 32.58 |  |  | 
|                                

73




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


The following table summarizes information about
the options outstanding at August 31, 2004:

|                |  |                     |           |                     |  |          |     |               |  |          |       |  |  |  |           |  |  |  |       |  |  | 
|--------------- |  | ------------------- | --------- | ------------------- |  | -------- | --- | ------------- |  | -------- | ----- |  |  |  | --------- |  |  |  | ----- |  |  | 
|                |  |                     |           |                    
|                |  | Options outstanding |           | Options exercisable
|                |  |                     |           |                    
|                |  | Number              |           | Weighted            |  | Weighted |     | Number        |  | Weighted |       | 
|                |  | outstanding         |           | average             |  | average  |     | exercisable   |  | average  |       | 
|                |  | at August 31,       |           | remaining           |  | exercise |     | at August 31, |  | exercise |       | 
|Range of prices |  | 2004                |           | contractual life    |  | price    |     | 2004          |  | price    |       | 
|                |  |                     |           |                     |  |          |     |               |  |          |       | 
|               
|               
|$17.37          |  |                     | 10,000    |                     |  |          | 9.1 |               |  |          | 17.37 |  |  |  |          |  |  |  |      |  |  | 
|$29.70  $34.08 |  |                     | 7,837,000 |                     |  |          | 6.9 |               |  |          | 32.55 |  |  |  | 5,196,000 |  |  |  | 32.53 |  |  | 
|               

The Company recorded a compensation expense of
$412 and credited contributed surplus of $412 in respect of
options granted during the year.

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

|                                    |  |      |        |      |  |  |         |   |  | 
|----------------------------------- |  | ---- | ------ | ---- |  |  | ------- | - |  | 
|                                    |  | 2004 |        | 2003 |  | 
|                                    |  | $    |        | $    |  | 
|                                    |  |      |        |      |  | 
|                                   
|                                   
|Net income (loss)                   |  |      | 90,909 |      |  |  | (46,864 | ) |  | 
|Pro forma net income (loss)         |  |      | 74,213 |      |  |  | (67,700 | ) |  | 
|Pro forma earnings (loss) per share |  |      | 0.15   |      |  |  | (0.47   | ) |  | 
|                                   

The weighted average estimated fair value at the
date of the grant for common share options granted for the year
ended August 31, 2004 was $2.50 per option
(2003  $1.36 per option). The fair value of each
option granted was estimated on the date of the grant using the
Black-Scholes option pricing model with the following
assumptions:

|                                                  |  |      |         |      |  |  |         |  |  | 
|------------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- |  |  | 
|                                                  |  | 2004 |         | 2003 |  | 
|                                                  |  |      |         |      |  | 
|                                                 
|                                                 
|Dividend yield                                    |  |      | 0.94%   |      |  |  | 0.33%   |  |  | 
|Risk-free interest rate                           |  |      | 3.70%   |      |  |  | 3.19%   |  |  | 
|Expected life of options                          |  |      | 4 years |      |  |  | 4 years |  |  | 
|Expected volatility factor of the future expected |  |      |         |      |  |  |         |  |  | 
|market price of Class B Non-Voting Shares         |  |      | 39.7%   |      |  |  | 40.4%   |  |  | 
|                                                 

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

Other stock options

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

At August 31, 2004 there were 68,002
(2003  78,002) Cancom options outstanding with
exercise prices between $7.75 and $23.25 and a weighted average
price of $12.37 (2003  $12.89). The weighted

74




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


average remaining contractual life of the Cancom
options is 3.0 years. At August 31, 2004, 68,002
Cancom options were exercisable into 61,202 Class B
Non-Voting Shares of the Company at a weighted average price of
$13.74 per Class B Non-Voting Share. At August 31,
2003, 65,002 Cancom options were exercisable into 58,502
Class B Non-Voting Shares of the Company at a weighted
average price of $14.13 per Class B Non-Voting Share.
During 2004 10,000 (2003  10,000) Cancom options were
exercised for $164 (2003  $95).

Warrants

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

A total of 248,205 warrants remain outstanding
and vest evenly over a four-year period. The weighted average
remaining contractual life of the warrants is 1.2 years. At
August 31, 2004, 181,641 warrants have vested.

Dividends

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

Share transfer restriction

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

Earnings (loss) per share

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

75




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Earnings (loss) per share calculations are
as follows:

|                                                                                                                   |  |      |             |      |  |      |             |   |  |  |             |   |  | 
|------------------------------------------------------------------------------------------------------------------ |  | ---- | ----------- | ---- |  | ---- | ----------- | - |  |  | ----------- | - |  | 
|                                                                                                                   |  | 2004 |             | 2003 |  | 2002 |             |  
|                                                                                                                   |  | $    |             | $    |  | $    |             |  
|                                                                                                                   |  |      |             |      |  |      |             |  
|                                                                                                                  
|                                                                                                                  
|Net income (loss)                                                                                                  |  |      | 90,909      |      |  |      | (46,864     | ) |  |  | (284,629    | ) |  | 
|Equity entitlements, net of tax                                                                                    |  |      | (40,185     | )    |  |      | (40,193     | ) |  |  | (42,331     | ) |  | 
|                                                                                                                  
|                                                                                                                   |  |      | 50,724      |      |  |      | (87,057     | ) |  |  | (326,960    | ) |  | 
|                                                                                                                  
|Earnings (loss) per share  basic
    and diluted                                                                  |  |      | 0.22        |      |  |      | (0.38       | ) |  |  | (1.41       | ) |  | 
|                                                                                                                  
|Weighted average number of Class A and
    Class B Non-Voting Shares used as denominator in above
    calculations |  |      | 231,605,000 |      |  |      | 231,848,000 |   |  |  | 231,820,000 |   |  | 
|                                                                                                                  

Options to purchase 7,908,202 (2003 
7,677,702; 2002  8,382,202) Class B Non-Voting
Shares were outstanding under the Companys stock option
plan and the Cancom option plan at August 31, 2004,
warrants to issue 248,205 Class B Non-Voting Shares
(2003  262,807; 2002  262,807) were
outstanding at August 31, 2004, and the Company has the
right to issue Class B Non-Voting Shares in satisfaction of
its redemption obligations on equity instruments included in
share capital. The Class B Non-Voting Shares issuable under
the option, warrant plans and equity instruments are
anti-dilutive (increase earnings per share or decrease loss per
share) and are therefore not included in calculating diluted
earnings or loss per share.



|    |                                                   
|--- | --------------------------------------------------
|12. | FOREIGN CURRENCY CUMULATIVE TRANSLATION ADJUSTMENT

|                                                   |  |      |     |      |  |  |         |   |  | 
|-------------------------------------------------- |  | ---- | --- | ---- |  |  | ------- | - |  | 
|                                                   |  | 2004 |     | 2003 |  | 
|                                                   |  | $    |     | $    |  | 
|                                                   |  |      |     |      |  | 
|                                                  
|                                                  
|Balance, beginning of year                         |  |      | 482 |      |  |  | 1,513   |   |  | 
|Current years deferred translation
    adjustment |  |      | (38 | )    |  |  | (20,083 | ) |  | 
|Disposition of US cable systems                    |  |      |    |      |  |  | 19,052  |   |  | 
|                                                  
|Balance, end of year                               |  |      | 444 |      |  |  | 482     |   |  | 
|                                                  



|    |                                         
|--- | ----------------------------------------
|13. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

|                                          |  |      |         |      |  |  |         |  |  | 
|----------------------------------------- |  | ---- | ------- | ---- |  |  | ------- |  |  | 
|                                          |  | 2004 |         | 2003 |  | 
|                                          |  | $    |         | $    |  | 
|                                          |  |      |         |      |  | 
|                                         
|                                         
|Trade                                     |  |      | 44,219  |      |  |  | 60,918  |  |  | 
|Accrued liabilities                       |  |      | 158,302 |      |  |  | 153,791 |  |  | 
|Accrued network fees                      |  |      | 100,580 |      |  |  | 88,427  |  |  | 
|Interest and dividends                    |  |      | 89,045  |      |  |  | 83,394  |  |  | 
|Due to related parties [note 18]          |  |      | 16,729  |      |  |  | 17,503  |  |  | 
|Current portion of pension plan liability |  |      | 1,162   |      |  |  | 270     |  |  | 
|                                         
|                                          |  |      | 410,037 |      |  |  | 404,303 |  |  | 
|                                         

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Interest expense includes $nil (2003 
$842; 2002  $4,878) in respect of a vendor financing
facility which was repaid in 2003.

14.     INCOME TAXES

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

|                                |                                |      |           |           |  |  |           |           |  |  | 
|------------------------------- | ------------------------------ | ---- | --------- | --------- |  |  | --------- | --------- |  |  | 
|                                |                                | 2004 |           | 2003      |  | 
|                                |                                | $    |           | $         |  | 
|                                |                                |      |           |           |  | 
|                               
|                               
|Future income tax liabilities:  |                                |      |           |           |  |  |           |           |  | 
|                                | Property, plant and equipment  |      |           | 142,002   |  |  |           | 180,727   |  |  | 
|                                | Broadcast licenses             |      |           | 1,156,369 |  |  |           | 1,165,646 |  |  | 
|                                | Deferred charges               |      |           | 8,252     |  |  |           | 13,021    |  |  | 
|                                | Partnership income             |      |           | 263,653   |  |  |           | 200,822   |  |  | 
|                               
|                                |                                |      | 1,570,276 |           |  |  | 1,560,216 |           |  | 
|                               
|Future income tax assets:       |                                |      |           |           |  |  |           |           |  | 
|                                | Non-capital loss carryforwards |      |           | 581,791   |  |  |           | 608,634   |  |  | 
|                                | Investments                    |      |           | 6,204     |  |  |           | 12,301    |  |  | 
|                               
|                                |                                |      | 587,995   |           |  |  | 620,935   |           |  | 
|                               
|Net future income tax liability |                                |      | 982,281   |           |  |  | 939,281   |           |  | 
|                               

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

The Company has capital loss carryforwards of
approximately $225,000 for which no future income tax asset has
been recognized in the accounts. These capital losses can be
carried forward indefinitely.

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


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

|                                                            |                                                                                                             |      |        |         |   |      |        |        |  |  |          |        |  |  | 
|----------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ---- | ------ | ------- | - | ---- | ------ | ------ |  |  | -------- | ------ |  |  | 
|                                                            |                                                                                                             | 2004 |        | 2003    |   | 2002 |        |       
|                                                            |                                                                                                             | $    |        | $       |   | $    |        |       
|                                                            |                                                                                                             |      |        |         |   |      |        |       
|                                                           
|                                                           
|Current statutory income tax rate                           |                                                                                                             |      | 35.5%  |         |   |      | 38.0%  |        |  |  | 40.0%    |        |  | 
|                                                           
|Income tax expense (benefit) at current
    statutory rates |                                                                                                             |      | 58,891 |         |   |      | (5,509 | )      |  |  | (125,255 | )      |  | 
|Increase (decrease) in taxes resulting from:                |                                                                                                             |      |        |         |   |      |        |        |  |  |          |        |  | 
|                                                            | Large corporations tax                                                                                      |      |        | 6,249   |   |      |        | 8,632  |  |  |          | 7,945  |  |  | 
|                                                            | Non-taxable portion of foreign exchange losses
    and amounts on sale/write-down of assets and investments |      |        | 1,656   |   |      |        | 5,268  |  |  |          | 18,659 |  |  | 
|                                                            | Writedown of non-deductible goodwill                                                                        |      |        |        |   |      |        | 19,000 |  |  |          |       |  |  | 
|                                                            | Valuation allowance                                                                                         |      |        | 22,932  |   |      |        |       |  |  |          |       |  |  | 
|                                                            | Effect of future tax rate reductions                                                                        |      |        | (14,089 | ) |      |        |       |  |  |          |       |  |  | 
|                                                            | Originating temporary differences recorded at
    future tax rates expected to be in effect when realized   |      |        | (610    | ) |      |        | 1,620  |  |  |          | 16,626 |  |  | 
|                                                            | Other                                                                                                       |      |        | (297    | ) |      |        | 1,434  |  |  |          | 30     |  |  | 
|                                                           
|Income tax expense (recovery)                               |                                                                                                             |      | 74,732 |         |   |      | 30,445 |        |  |  | (81,995  | )      |  | 
|                                                           

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

|                                                                                                     |  |      |        |      |  |      |        |   |  |  |          |   |  | 
|---------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | -------- | - |  | 
|                                                                                                     |  | 2004 |        | 2003 |  | 2002 |        |  
|                                                                                                     |  | $    |        | $    |  | $    |        |  
|                                                                                                     |  |      |        |      |  |      |        |  
|                                                                                                    
|                                                                                                    
|Current tax expense                                                                                  |  |      | 26,735 |      |  |      | 35,706 |   |  |  | 37,324   |   |  | 
|Future income tax expense (benefit) related to
    origination and reversal of temporary differences |  |      | 39,154 |      |  |      | (5,261 | ) |  |  | (119,319 | ) |  | 
|Future income tax expense resulting from rate
    changes and valuation allowance                    |  |      | 8,843  |      |  |      |       |   |  |  |         |   |  | 
|                                                                                                    
|Income tax expense (recovery)                                                                        |  |      | 74,732 |      |  |      | 30,445 |   |  |  | (81,995  | ) |  | 
|                                                                                                    

Current and future income taxes payable have been
reduced by the benefit of income tax deductions attributable to
dividends on equity instruments, considered as interest for
income tax purposes, and equity issue costs in the amount of
$22,584 (2003  $24,634; 2002  $28,656).
The income tax benefits have been credited to equity in each
respective year.

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


15.     BUSINESS SEGMENT
INFORMATION

The Company provides cable television services,
high-speed Internet access and Internet infrastructure services
(Cable); DTH (Star Choice) satellite and satellite
distribution services (Satellite Services). All of
these operating segments are located in Canada except for two
small US cable television systems acquired in the Moffat
acquisition, which were sold effective June 30, 2003.

The accounting policies of the segments are the
same as those described in the summary of significant accounting
policies. Management evaluates divisional performance based on
service revenue and service operating income before charges such
as amortization, restructuring costs, recoveries on litigation,
litigation settlements and inventory write-downs.

|                                                                                                    |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|--------------------------------------------------------------------------------------------------- |  | ----- | --------- | --------- |  | ------------------ | ------- | ----- |  | ----- | ------- | - |  |  | --------- | - |  |  | --------- | - |  | 
|                                                                                                    |  |      
|                                                                                                    |  | 2004 
|                                                                                                    |  |      
|                                                                                                    |  |       |           |           |  |                   
|                                                                                                    |  |       |           | Satellite |  |                   
|                                                                                                    |  |       |           |           |  |                   
|                                                                                                    |  | Cable |           | DTH       |  | Satellite Services |         | Total |  | Total |         |  
|                                                                                                    |  | $     |           | $         |  | $                  |         | $     |  | $     |         |  
|                                                                                                    |  |       |           |           |  |                    |         |       |  |       |         |  
|                                                                                                   
|                                                                                                   
|Service revenue  total                                                                             |  |       | 1,494,176 |           |  |                    | 510,386 |       |  |       | 96,543  |   |  |  | 606,929   |   |  |  | 2,101,105 |   |  | 
|Inter segment                                                                                       |  |       | (2,607    | )         |  |                    | (4,749  | )     |  |       | (14,000 | ) |  |  | (18,749   | ) |  |  | (21,356   | ) |  | 
|                                                                                                   
|                                                                                                    |  |       | 1,491,569 |           |  |                    | 505,637 |       |  |       | 82,543  |   |  |  | 588,180   |   |  |  | 2,079,749 |   |  | 
|                                                                                                   
|Service operating income before amortization and
    litigation settlement                          |  |       | 779,579   |           |  |                    | 111,150 |       |  |       | 41,690  |   |  |  | 152,840   |   |  |  | 932,419   |   |  | 
|                                                                                                    |  |       |           |           |  |                    |         |      
|Litigation settlement                                                                               |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | (6,484    | ) |  | 
|                                                                                                    |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Service operating income before amortization                                                        |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | 925,935   |   |  | 
|                                                                                                   
|Service operating income as % of external revenue                                                   |  |       | 52.3%     |           |  |                    | 22.0%   |       |  |       | 50.5%   |   |  |  | 26.0%     |   |  |  | 44.5%     |   |  | 
|                                                                                                   
|Interest(1)                                                                                         |  |       | 174,988   |           |  |                    | n/a     |       |  |       | n/a     |   |  |  | 44,484    |   |  |  | 219,472   |   |  | 
|                                                                                                   
|Cash taxes(1)                                                                                       |  |       | 25,043    |           |  |                    | n/a     |       |  |       | n/a     |   |  |  | 1,692     |   |  |  | 26,735    |   |  | 
|                                                                                                   
|Segment assets                                                                                      |  |       | 5,842,338 |           |  |                    | 926,478 |       |  |       | 558,402 |   |  |  | 1,484,880 |   |  |  | 7,327,218 |   |  | 
|                                                                                                    |  |       |           |           |  |                    |         |      
|Corporate assets                                                                                    |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | 229,686   |   |  | 
|                                                                                                    |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Total assets                                                                                        |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | 7,556,904 |   |  | 
|                                                                                                   
|Capital expenditures and equipment subsidies
    by segment                                         |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Capital expenditures                                                                                |  |       | 223,665   |           |  |                    | 11,656  |       |  |       | (886    | ) |  |  | 10,770    |   |  |  | 234,435   |   |  | 
|Equipment subsidies                                                                                 |  |       | 43,448    |           |  |                    | 89,263  |       |  |       |        |   |  |  | 89,263    |   |  |  | 132,711   |   |  | 
|                                                                                                   
|                                                                                                    |  |       | 267,113   |           |  |                    | 100,919 |       |  |       | (886    | ) |  |  | 100,033   |   |  |  | 367,146   |   |  | 
|                                                                                                   
|Reconciliation to Consolidated Statements of
    Cash Flows                                         |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Additions to property, plant and equipment                                                          |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | 256,136   |   |  | 
|Additions to equipment costs (net)                                                                  |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | 132,711   |   |  | 
|                                                                                                   
|Total of capital expenditures and equipment
    subsidies per Consolidated Statements of Cash Flows |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | 388,847   |   |  | 
|Decrease (increase) in working capital
    related to capital expenditures                          |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | 2,097     |   |  | 
|Less: Partnership capital
    expenditures(2)                                                       |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | (18,373   | ) |  | 
|Less: IRU prepayments(3)                                                                            |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | (1,420    | ) |  | 
|Less: Satellite services equipment
    profit(4)                                                    |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | (4,005    | ) |  | 
|                                                                                                   
|Total capital expenditures and equipment
    subsidies reported by segments                         |  |       |           |           |  |                    |         |       |  |       |         |   |  |  |           |   |  |  | 367,146   |   |  | 
|                                                                                                   

See notes following 2002 business segment table.

79




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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


|                                                                                                     |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|---------------------------------------------------------------------------------------------------- |  | ----- | --------- | --------- |  | ------------------ | --------- | ----- |  | ----- | ------- | - |  |  | --------- | - |  |  | --------- | - |  | 
|                                                                                                     |  |      
|                                                                                                     |  | 2003 
|                                                                                                     |  |      
|                                                                                                     |  |       |           |           |  |                   
|                                                                                                     |  |       |           | Satellite |  |                   
|                                                                                                     |  |       |           |           |  |                   
|                                                                                                     |  | Cable |           | DTH       |  | Satellite Services |           | Total |  | Total |         |  
|                                                                                                     |  | $     |           | $         |  | $                  |           | $     |  | $     |         |  
|                                                                                                     |  |       |           |           |  |                    |           |       |  |       |         |  
|                                                                                                    
|                                                                                                    
|Service revenue  total                                                                              |  |       | 1,462,440 |           |  |                    | 455,343   |       |  |       | 106,413 |   |  |  | 561,756   |   |  |  | 2,024,196 |   |  | 
|Inter segment                                                                                        |  |       | (2,607    | )         |  |                    | (5,167    | )     |  |       | (18,001 | ) |  |  | (23,168   | ) |  |  | (25,775   | ) |  | 
|                                                                                                    
|                                                                                                     |  |       | 1,459,833 |           |  |                    | 450,176   |       |  |       | 88,412  |   |  |  | 538,588   |   |  |  | 1,998,421 |   |  | 
|                                                                                                    
|Service operating income before amortization,
    restructuring charges and DTH inventory write-down |  |       | 727,458   |           |  |                    | 52,814    |       |  |       | 38,619  |   |  |  | 91,433    |   |  |  | 818,891   |   |  | 
|                                                                                                     |  |       |           |           |  |                    |           |      
|Satellite restructuring charge                                                                       |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | (4,850    | ) |  | 
|Corporate restructuring charge                                                                       |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | (4,000    | ) |  | 
|DTH write-down of inventory                                                                          |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | (4,400    | ) |  | 
|Recovery of Cable litigation accrual                                                                 |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 12,000    |   |  | 
|                                                                                                     |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Service operating income before amortization                                                         |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 817,641   |   |  | 
|                                                                                                    
|Service operating income as % of external revenue                                                    |  |       | 49.8%     |           |  |                    | 11.7%     |       |  |       | 43.7%   |   |  |  | 17.0%     |   |  |  | 40.9%     |   |  | 
|                                                                                                    
|Interest(1)                                                                                          |  |       | 190,002   |           |  |                    | n/a       |       |  |       | n/a     |   |  |  | 69,700    |   |  |  | 259,702   |   |  | 
|                                                                                                    
|Cash taxes(1)                                                                                        |  |       | 34,809    |           |  |                    | n/a       |       |  |       | n/a     |   |  |  | 897       |   |  |  | 35,706    |   |  | 
|                                                                                                    
|Segment assets                                                                                       |  |       | 5,891,064 |           |  |                    | 1,002,951 |       |  |       | 587,085 |   |  |  | 1,590,036 |   |  |  | 7,481,100 |   |  | 
|                                                                                                     |  |       |           |           |  |                    |           |      
|Corporate assets                                                                                     |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 229,701   |   |  | 
|                                                                                                     |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Total assets                                                                                         |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 7,710,801 |   |  | 
|                                                                                                    
|Capital expenditures and equipment subsidies
    by segment                                          |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Capital expenditures                                                                                 |  |       | 189,648   |           |  |                    | 35,038    |       |  |       | (2,531  | ) |  |  | 32,507    |   |  |  | 222,155   |   |  | 
|Equipment subsidies                                                                                  |  |       | 67,628    |           |  |                    | 95,248    |       |  |       |        |   |  |  | 95,248    |   |  |  | 162,876   |   |  | 
|                                                                                                    
|                                                                                                     |  |       | 257,276   |           |  |                    | 130,286   |       |  |       | (2,531  | ) |  |  | 127,755   |   |  |  | 385,031   |   |  | 
|                                                                                                    
|Reconciliation to Consolidated Statements of
    Cash flows                                          |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Additions to property, plant and equipment                                                           |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 257,683   |   |  | 
|Additions to equipment costs (net)                                                                   |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 162,876   |   |  | 
|                                                                                                    
|Total of capital expenditures and equipment
    subsidies per Consolidated Statements of Cash Flows  |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 420,559   |   |  | 
|Decrease (increase) in working capital
    related to capital expenditures                           |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | (20,109   | ) |  | 
|Less: Partnership capital
    expenditures(2)                                                        |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | (10,976   | ) |  | 
|Less: Satellite services equipment
    profit(4)                                                     |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | (4,443    | ) |  | 
|                                                                                                    
|Total capital expenditures and equipment
    subsidies reported by segments                          |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 385,031   |   |  | 
|                                                                                                    

See notes following 2002 business segment table.

80




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


|                                                                                                    |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|--------------------------------------------------------------------------------------------------- |  | ----- | --------- | --------- |  | ------------------ | --------- | ----- |  | ----- | ------- | - |  |  | --------- | - |  |  | --------- | - |  | 
|                                                                                                    |  |      
|                                                                                                    |  | 2002 
|                                                                                                    |  |      
|                                                                                                    |  |       |           |           |  |                   
|                                                                                                    |  |       |           | Satellite |  |                   
|                                                                                                    |  |       |           |           |  |                   
|                                                                                                    |  | Cable |           | DTH       |  | Satellite Services |           | Total |  | Total |         |  
|                                                                                                    |  | $     |           | $         |  | $                  |           | $     |  | $     |         |  
|                                                                                                    |  |       |           |           |  |                    |           |       |  |       |         |  
|                                                                                                   
|                                                                                                   
|Service revenue  total                                                                             |  |       | 1,369,379 |           |  |                    | 362,546   |       |  |       | 110,198 |   |  |  | 472,744   |   |  |  | 1,842,123 |   |  | 
|Inter segment                                                                                       |  |       | (1,816    | )         |  |                    | (1,430    | )     |  |       | (14,328 | ) |  |  | (15,758   | ) |  |  | (17,574   | ) |  | 
|                                                                                                   
|                                                                                                    |  |       | 1,367,563 |           |  |                    | 361,116   |       |  |       | 95,870  |   |  |  | 456,986   |   |  |  | 1,824,549 |   |  | 
|                                                                                                   
|Service operating income (loss) before
    amortization and restructuring charge                    |  |       | 608,916   |           |  |                    | (14,103   | )     |  |       | 40,203  |   |  |  | 26,100    |   |  |  | 635,016   |   |  | 
|                                                                                                    |  |       |           |           |  |                    |           |      
|Corporate restructuring charge                                                                      |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | (4,600    | ) |  | 
|                                                                                                    |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Service operating income before amortization                                                        |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 630,416   |   |  | 
|                                                                                                   
|Service operating income (loss) as % of
    external revenue                                        |  |       | 44.5%     |           |  |                    | (3.9%     | )     |  |       | 41.9%   |   |  |  | 5.7%      |   |  |  | 34.6%     |   |  | 
|                                                                                                   
|Interest(1)                                                                                         |  |       | 196,120   |           |  |                    | n/a       |       |  |       | n/a     |   |  |  | 71,203    |   |  |  | 267,323   |   |  | 
|                                                                                                   
|Cash taxes(1)                                                                                       |  |       | 36,523    |           |  |                    | n/a       |       |  |       | n/a     |   |  |  | 801       |   |  |  | 37,324    |   |  | 
|                                                                                                   
|Segment assets                                                                                      |  |       | 6,557,123 |           |  |                    | 1,050,007 |       |  |       | 670,672 |   |  |  | 1,720,679 |   |  |  | 8,277,802 |   |  | 
|                                                                                                   
|Corporate assets                                                                                    |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 344,259   |   |  | 
|                                                                                                    |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Total assets                                                                                        |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 8,622,061 |   |  | 
|                                                                                                   
|Capital expenditures and equipment subsidies
    by segment                                         |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Capital expenditures                                                                                |  |       | 630,879   |           |  |                    | 80,558    |       |  |       | 15,712  |   |  |  | 96,270    |   |  |  | 727,149   |   |  | 
|Equipment subsidies                                                                                 |  |       | 52,446    |           |  |                    | 69,208    |       |  |       |        |   |  |  | 69,208    |   |  |  | 121,654   |   |  | 
|                                                                                                   
|                                                                                                    |  |       | 683,325   |           |  |                    | 149,766   |       |  |       | 15,712  |   |  |  | 165,478   |   |  |  | 848,803   |   |  | 
|                                                                                                   
|Reconciliation to Consolidated Statements of
    Cash flows                                         |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  |           |   |  | 
|Additions to property, plant and equipment                                                          |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 743,568   |   |  | 
|Additions to equipment costs (net)                                                                  |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 121,654   |   |  | 
|                                                                                                   
|Total of capital expenditures and equipment
    subsidies per Consolidated Statements of Cash Flows |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 865,222   |   |  | 
|Decrease (increase) in working capital
    related to capital expenditures                          |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | (11,555   | ) |  | 
|Less: Satellite services equipment
    profit(4)                                                    |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | (4,864    | ) |  | 
|                                                                                                   
|Total capital expenditures and equipment
    subsidies reported by segments                         |  |       |           |           |  |                    |           |       |  |       |         |   |  |  |           |   |  |  | 848,803   |   |  | 
|                                                                                                   



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company reports interest and cash taxes on a
    segmented basis for Cable and combined satellite only. It does
    not report interest and cash taxes on a segmented basis for DTH
    and Satellite Services.                                                                                                                                                                                                                                                     
|   
|(2) | Consolidated capital expenditures include the
    Companys 38.3% proportionate share of the
    Partnerships capital expenditures which the Company is
    required to proportionately consolidate (see note 1). As the
    Partnership is financed by its own credit facility with limited
    recourse to the Company, the Partnerships capital
    expenditures are subtracted from the calculation of segmented
    capital expenditures and equipment subsidies.
|   
|(3) | Prepayments on IRUs in amounts not exceeding the
    costs to build the fiber subject to the IRUs are subtracted from
    the calculation of segmented capital expenditures and equipment
    subsidies.                                                                                                                                                                                                                                                                
|   
|(4) | The profit from the sale of satellite equipment
    is subtracted from the calculation of segmented capital
    expenditures and equipment subsidies as the Company views the
    profit on sale as a recovery of expenditures on customer premise
    equipment.                                                                                                                                                                                                       

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


16.     COMMITMENTS AND
CONTINGENCIES

Commitments



|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i)  | During 2001 the Company, through one of its
    subsidiaries, purchased 28 Ku-band transponders and leased
    3 C-band transponders on the Anik F1 satellite from
    Telesat Canada (Telesat). The Company has posted a
    letter of credit with Telesat to secure the monthly lease
    payments for the term of the lease, which is five years. The
    posting of this letter of credit reduces the available funds
    that can be drawn under Cancoms operating line of credit
    (see note 9). The Company, through another one of its
    subsidiaries, entered into an agreement with Telesat to purchase
    16 Ku-band transponders on the Anik F2 satellite,
    which was launched in fiscal 2005, at a cost of $48,000. Under
    the terms of this agreement the Company made three cash deposits
    totalling $43,200 and made a final deposit of $4,800 upon
    acceptance, which occurred subsequent to year end. Under the
    Ku-band F2 transponder purchase agreements, the Company is
    committed to paying an annual transponder maintenance fee for
    each transponder acquired from the time the satellite becomes
    operational for a period of fifteen years.
|    
|(ii) | The Company has various long-term commitments for
    the maintenance of satellite transponders, lease of transmission
    facilities, and lease of premises as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|           |  |   |         |  |  | 
|---------- |  | - | ------- |  |  | 
|           |  | $ |         | 
|           |  |   |         | 
|          
|          
|2005       |  |   | 94,883  |  |  | 
|2006       |  |   | 89,263  |  |  | 
|2007       |  |   | 85,253  |  |  | 
|2008       |  |   | 80,659  |  |  | 
|2009       |  |   | 75,716  |  |  | 
|Thereafter |  |   | 483,657 |  |  | 
|          
|           |  |   | 909,431 |  |  | 
|          

Included in operating, general and administrative
expenses are transponder maintenance expenses of $35,043
(2003  $35,010; 2002  $35,029) and rental
expenses of $70,517 (2003  $85,025; 2002 
$84,052).

Contingencies

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

Guarantees

In the normal course of business the Company
enters into indemnification agreements and has issued
irrevocable standby letters of credit and performance bonds with
and to third parties. In addition, the Company has guaranteed a
portion of the indebtedness of the Partnership.

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Indemnities

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

The maximum potential amount of future payments
that the Company would be required to make under these
indemnification agreements is not reasonably quantifiable as
certain indemnifications are not subject to limitation. However,
the Company enters into indemnification agreements only when an
assessment of the business circumstances would indicate that the
risk of loss is remote. At August 31, 2004 management
believes it is remote that the indemnification provisions would
require any material cash payment.

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

Irrevocable standby letters of credit and
performance bonds

The Company and certain of its subsidiaries have
granted irrevocable standby letters of credit and performance
bonds, issued by high rated financial institutions, to third
parties to indemnify them in the event the Company does not
perform its contractual obligations. As of August 31, 2004,
the guarantee instruments amounted to $1,376. The Company has
not recorded any additional liability with respect to these
guarantees, as the Company does not expect to make any payments
in excess of what is recorded on the Companys financial
statements. The guarantee instruments mature at various dates in
fiscal 2005 and 2006.

Indirect guarantee of indebtedness of another
party

As described in Note 9, the Company has
severally guaranteed $47,838 of the Partnership total credit
facilities of $130,850, with Shaws portion being $18,338.
The Partnership was formed by Shaw, Westbank Projects
Corporation and Ledcor Industries to build a mixed-use
structure, with office/retail space and living/working space in
Coal Harbour, Vancouver. A subsidiary of Shaw will become one of
the major tenants of the building as it will become Shaws
headquarters for its Lower Mainland operations. The total cost
of the project is anticipated to be approximately $149,000 and
is financed primarily through the Partnerships own credit
facilities of $130,850 plus equity from the partners of
approximately $18,790.

The terms of the loan guarantee are intended to
preserve the structure of the Partnerships separation from
Shaw and payment would only be triggered if the Partnership
failed to perform under its debt obligations. The Company
anticipates that commercial construction of the building will be
completed by

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


the fall of 2004 and at that time, the
Partnership will enter into mortgage financing that will be
collateralized by the property and the commercial rental income
from the building, including rent paid by Shaw for its lease of
office space in the tower. The proceeds from the financing will
be used to repay a portion of the Partnerships
construction facility. The mortgage financing will have no
recourse to the Company. Residential construction is expected to
be completed in calendar 2005. Proceeds of over $115,000 from
the sale of the residential units, which have been entirely
pre-sold, will be utilized to repay the remaining construction
facility and to pay Partnership distributions. Accordingly, as
of August 2004, the Company believes it is remote that the loan
guarantee would require any cash payment.

17.     PENSION PLAN

The Company has defined contribution pension
plans and a defined benefit pension plan as described below:

Defined contribution pension plan

The Company has defined contribution pension
plans for all non-union employees and contributes amounts based
on earnings to a maximum of 5% and the amount deductible under
the Income Tax Act. For union employees, the Company contributes
amounts up to 7.5% of earnings to the individuals
registered retirement savings plans. Pension costs in respect of
these plans incurred during the year were $5,913
(2003  $5,582; 2002  $5,931).

Defined benefit pension plan

Effective September 1, 2002, the Company
established a new non-contributory defined benefit pension plan
for certain of its senior executives. Benefits under this plan
are based on the employees length of service and their
highest three year average rate of pay during their years of
service. Employees are not required to contribute to the plan.
The plan is unfunded. The plan has remained unchanged since its
initiation other than in fiscal 2004 when the plan was amended
to limit survivor benefits which decreased the pension
obligation by approximately $3.6 million. The table below
shows the change in benefit obligations.

|                                              |  |      |         |      |  |  |         |   |  | 
|--------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | - |  | 
|                                              |  | 2004 |         | 2003 |  | 
|                                              |  | $    |         | $    |  | 
|                                              |  |      |         |      |  | 
|                                             
|                                             
|Accrued benefit obligation, beginning of year |  |      | 47,718  |      |  |  | 30,543  |   |  | 
|Current service cost                          |  |      | 1,743   |      |  |  | 1,546   |   |  | 
|Interest cost                                 |  |      | 3,202   |      |  |  | 2,166   |   |  | 
|Actuarial losses                              |  |      | 9,495   |      |  |  | 10,063  |   |  | 
|Past service cost                             |  |      |        |      |  |  | 3,400   |   |  | 
|Payment of benefits to employees              |  |      | (270    | )    |  |  |        |   |  | 
|                                             
|Accrued benefit obligation, end of year       |  |      | 61,888  |      |  |  | 47,718  |   |  | 
|Plan value of assets, end of year             |  |      |        |      |  |  |        |   |  | 
|                                             
|Plan deficit, end of year                     |  |      | (61,888 | )    |  |  | (47,718 | ) |  | 
|                                             

84




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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


|                                                                   |  |      |        |      |  |  |        |  |  | 
|------------------------------------------------------------------ |  | ---- | ------ | ---- |  |  | ------ |  |  | 
|Reconciliation of accrued benefit obligation to balance sheet      |  | 2004 |        | 2003 |  | 
|accrued pension benefit liability:                                 |  | $    |        | $    |  | 
|                                                                   |  |      |        |      |  | 
|                                                                  
|                                                                  
|Balance of unamortized pension obligation:                         |  |      |        |      |  |  |        |  |  | 
|Unamortized past service costs                                     |  |      | 25,409 |      |  |  | 27,976 |  |  | 
|Unamortized actuarial loss                                         |  |      | 18,384 |      |  |  | 10,063 |  |  | 
|                                                                  
|Balance of unamortized pension obligation                          |  |      | 43,793 |      |  |  | 38,039 |  |  | 
|                                                                  
|Accrued pension benefit liability recognized in
    balance sheet: |  |      |        |      |  |  |        |  |  | 
|Accounts payable and accrued liability                             |  |      | 1,162  |      |  |  | 270    |  |  | 
|Long-term liability                                                |  |      | 16,933 |      |  |  | 9,409  |  |  | 
|                                                                  
|Balance of unamortized pension obligation                          |  |      | 18,095 |      |  |  | 9,679  |  |  | 
|                                                                  
|Accrued benefit obligation, end of year as above                   |  |      | 61,888 |      |  |  | 47,718 |  |  | 
|                                                                  

The table below shows the significant
weighted-average assumptions we used to measure the pension
obligation.

|                              |  |      |      |      |  |  |      |  |  | 
|----------------------------- |  | ---- | ---- | ---- |  |  | ---- |  |  | 
|                              |  | 2004 |      | 2003 |  | 
|                              |  | %    |      | %    |  | 
|                              |  |      |      |      |  | 
|                             
|                             
|Discount rate                 |  |      | 6.25 |      |  |  | 6.50 |  |  | 
|Rate of compensation increase |  |      | 3.00 |      |  |  | 3.00 |  |  | 
|                             

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

|                                   |  |      |       |      |  |  |       |  |  | 
|---------------------------------- |  | ---- | ----- | ---- |  |  | ----- |  |  | 
|                                   |  | 2004 |       | 2003 |  | 
|                                   |  | $    |       | $    |  | 
|                                   |  |      |       |      |  | 
|                                  
|                                  
|Current service cost               |  |      | 1,743 |      |  |  | 1,546 |  |  | 
|Interest cost                      |  |      | 3,202 |      |  |  | 2,166 |  |  | 
|Amortization of past service costs |  |      | 2,567 |      |  |  | 5,967 |  |  | 
|Amortization of actuarial loss     |  |      | 1,174 |      |  |  |      |  |  | 
|                                  
|Pension expense                    |  |      | 8,686 |      |  |  | 9,679 |  |  | 
|                                  

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

|            |  |   |        |  |  | 
|----------- |  | - | ------ |  |  | 
|            |  | $ |        | 
|            |  |   |        | 
|           
|           
|2005        |  |   | 1,156  |  |  | 
|2006        |  |   | 1,150  |  |  | 
|2007        |  |   | 1,144  |  |  | 
|2008        |  |   | 1,137  |  |  | 
|2009        |  |   | 1,883  |  |  | 
|2010  2014 |  |   | 27,353 |  |  | 
|           

85




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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


18.     RELATED PARTY
TRANSACTIONS

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

Normal course transactions

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

Corus Entertainment Inc.
(Corus)

The Company and Corus are subject to common
voting control. During the year, network fees of $90,537
(2003  $87,957; 2002  $98,211),
advertising fees of $831 (2003  $337;
2002  $1,245) and programming fees of $1,129
(2003  $1,414; 2002  $967) were paid to
various Corus subsidiaries and entities subject to significant
influence. In addition, the Company provided cable system
distribution access to Digital ADventure, the advertising
division of Corus, for $243 (2003  $240;
2002  $761), administrative and other services to
Corus for $1,488 (2003  $1,486; 2002 
$1,539) and uplink of television signals to Corus for $4,546
(2003  $3,372; 2002  $5,233).

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

GT Group Telecom Inc.
(GT)

On February 4, 2003, GT was reorganized
resulting in the disposition of the Companys interest.
Accordingly, only transactions between the Company and GT up to
that date are included as related party transactions.

GT has been granted an IRU relating to certain
specifically identified existing fibers in the fiber optic cable
networks of the Company for 30 to 60 years. The Company
performed maintenance for GT in respect of the fiber subject to
the IRU for $2,695 in 2003 and $4,803 in 2002, and provided GT
with Internet services for $730 in 2003 and $6,456 in 2002.
Leased circuit charges of $695 in 2003 and $3,696 in 2002 were
paid to GT.

In addition, the Company paid GT $2,573 in 2002
for fiber and equipment for its distribution system.

Specialty Channels

The Company has equity interests in The Biography
Channel (Canada) Corp., MSNBC Canada (Holdings) Inc. and Tech TV
Canada Holdings Inc., all of which commenced commercial
operations in January 2002. During the year, the Company paid
network fees of $2,390 (2003  $2,384;
2002  $1,182) and provided uplink television signals
for $598 (2003  $621; 2002  $730), in
respect of these specialty channels.

86




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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Billing, Internet and satellite
services

During the year, the Company provided customer
billing services for $197 (2003  $192;
2002  $195), Internet services for $551
(2003  $395; 2002  $114), cable subscriber
services for $154 (2003  $149; 2002  $35)
and satellite distribution services for $75 (2003 
$72; 2002  $72) to a company controlled by a Director
of the Company.

Other

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

The Company acquired certain cable systems of
Monarch Cablesystems Ltd. (Monarch) as described in
note 2. Monarch is controlled by a Director of the Company.
The Company also acquired a small cable system from another
Director as described in note 2.

Under a policy of supporting employee and officer
relocations, the Company has granted non-interest bearing loans
for a period of five years collateralized by mortgages on the
personal residences. Other loans have in the past been granted
to executive officers in connection with their employment for
periods ranging up to ten years. In 2002, two real estate
properties, initially acquired by the Company, were sold to an
officer of the Company for the greater of cost or fair market
value. In 2002, a 10-year loan for an amount up to $6,000 was
taken back as consideration and a mortgage on each of the
properties is held as collateral. Effective June 25, 2003
the officer elected to pay interest at the greater of 4% and
Revenue Canadas quarterly prescribed interest rate for
employee taxable benefits. Previously the loan was non-interest
bearing. The effective interest rate on the loan has been 4%
since June 25, 2003. At August 31, 2004, the total
amount outstanding on all employee and officer loans was $6,899
(2003  $7,299).

During the year, the Company settled certain
indemnity claims relating to its purchase of a company. The
vendors of the company were represented by a director of Shaw.
Shaw received a net payment of $890 in respect of the settlement.

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

In 2002, the Company sold its interest in WTN to
Corus for $202,500 (see note 2) and purchased Corus Viewers
Choice, the Western Canadian pay-per-view service from Corus,
for $33,000 (before costs of acquisition). Corus paid interest
of $2,440 to Shaw on settlement of final amounts owing in
respect of the sale of WTN.

87




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


19.     FINANCIAL INSTRUMENTS

Fair values

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



|    |                                       
|--- | --------------------------------------
|(i) | Current assets and current liabilities



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



|     |                             
|---- | ----------------------------
|(ii) | Investments and other assets



| |    |                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | The fair value of publicly traded shares included
    in this category is determined by the closing market values for
    those investments. The fair value of investments subject to
    forward sale agreements, which are pledged as collateral for the
    Zero Coupon Loan and match the maturity of the loan, are valued
    at the proceeds received on the loan plus accrued interest
    thereon.
|
| | b) | The carrying value of other investments in this
    category approximates their fair value.                                                                                                                                                                                                                                                                                                               



|      |                
|----- | ---------------
|(iii) | Long -term debt



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



|     |                                 
|---- | --------------------------------
|(iv) | Derivative financial instruments



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

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

|                                   |                                                    |          |           |            |  |          |           |            |  |  |           |   |  |  |           |         |  |  | 
|---------------------------------- | -------------------------------------------------- | -------- | --------- | ---------- |  | -------- | --------- | ---------- |  |  | --------- | - |  |  | --------- | ------- |  |  | 
|                                   |                                                    |          |           |           
|                                   |                                                    | 2004     |           | 2003      
|                                   |                                                    |          |           |           
|                                   |                                                    | Carrying |           | Estimated  |  | Carrying |           | Estimated  |  | 
|                                   |                                                    | amount   |           | fair value |  | amount   |           | fair value |  | 
|                                   |                                                    | $        |           | $          |  | $        |           | $          |  | 
|                                   |                                                    |          |           |            |  |          |           |            |  | 
|                                  
|                                  
|Long-term debt                     |                                                    |          | 2,650,680 |            |  |          | 2,823,790 |            |  |  | 2,917,068 |   |  |  | 2,953,902 |         |  | 
|Derivative financial instruments  |                                                    |          |           |            |  |          |           |            |  |  |           |   |  |  |           |         |  | 
|                                   | Interest exchange agreements                       |          |           |           |  |          |           | 17,395     |  |  |           |  |  |  |           | 26,590  |  |  | 
|                                   | Cross-currency interest rate exchange agreements   |          |           |           |  |          |           | 215,598    |  |  |           |  |  |  |           | 131,636 |  |  | 
|                                   | US currency purchase and purchase option contracts |          |           |           |  |          |           | 17,167     |  |  |           |  |  |  |           | 10,531  |  |  | 
|                                  
|                                   |                                                    |          | 2,650,680 |            |  |          | 3,073,950 |            |  |  | 2,917,068 |   |  |  | 3,122,659 |         |  | 
|                                  

A hypothetical one percentage point decrease in
interest rates would have the effect of increasing the estimated
fair value of the Companys debt instruments to
$3.2 billion at August 31, 2004 (2003 
$3.2 billion).

88




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


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

Credit risks

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

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

20.     STATEMENTS OF CASH FLOWS

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



|    |                          
|--- | -------------------------
|(i) | Cash flow from operations

|                                                            |                               |      |         |         |   |      |          |         |   |  |          |         |   |  | 
|----------------------------------------------------------- | ----------------------------- | ---- | ------- | ------- | - | ---- | -------- | ------- | - |  | -------- | ------- | - |  | 
|                                                            |                               | 2004 |         | 2003    |   | 2002 |          |        
|                                                            |                               | $    |         | $       |   | $    |          |        
|                                                            |                               |      |         |         |   |      |          |        
|                                                           
|                                                           
|Net income (loss)                                           |                               |      | 90,909  |         |   |      | (46,864  | )       |   |  | (284,629 | )       |   | 
|Non-cash items:                                             |                               |      |         |         |   |      |          |         |   |  |          |         |   | 
|Amortization                                               |                               |      |         |         |   |      |          |         |   |  |          |         |   | 
|                                                            | Deferred IRU revenue          |      |         | (12,098 | ) |      |          | (11,984 | ) |  |          | (11,517 | ) |  | 
|                                                            | Deferred equipment revenue    |      |         | (82,711 | ) |      |          | (91,863 | ) |  |          | (96,499 | ) |  | 
|                                                            | Deferred equipment cost       |      |         | 229,013 |   |      |          | 251,103 |   |  |          | 244,640 |   |  | 
|                                                            | Deferred charges              |      |         | 7,796   |   |      |          | 21,125  |   |  |          | 22,991  |   |  | 
|                                                            | Property, plant and equipment |      |         | 403,395 |   |      |          | 413,381 |   |  |          | 409,335 |   |  | 
|Future income tax expense (recovery)                        |                               |      | 47,997  |         |   |      | (5,261   | )       |   |  | (119,319 | )       |   | 
|Write-down of investments                                   |                               |      | 651     |         |   |      | 15,000   |         |   |  | 330,466  |         |   | 
|Gain on redemption of SHELS                                 |                               |      |        |         |   |      | (119,521 | )       |   |  | (218,327 | )       |   | 
|Gain on sale of investments                                 |                               |      | (356    | )       |   |      | (1,957   | )       |   |  | (2,321   | )       |   | 
|Losses on sale of satellite assets                          |                               |      |        |         |   |      | 3,800    |         |   |  | 1,281    |         |   | 
|Dilution loss on issuance of stock by equity
    investee   |                               |      |        |         |   |      |         |         |   |  | 571      |         |   | 
|Equity loss on investees                                    |                               |      | 250     |         |   |      | 1,921    |         |   |  | 53,487   |         |   | 
|Debt restructuring costs                                    |                               |      | 2,598   |         |   |      | 10,634   |         |   |  |         |         |   | 
|Foreign exchange (gain) loss on unhedged
    long-term debt |                               |      | (3,963  | )       |   |      | (32,617  | )       |   |  | 1,658    |         |   | 
|Loss on sale and write-down of assets                       |                               |      |        |         |   |      | 124,674  |         |   |  |         |         |   | 
|Stock option expense                                        |                               |      | 412     |         |   |      |         |         |   |  |         |         |   | 
|Defined benefit pension plan                                |                               |      | 7,524   |         |   |      | 9,409    |         |   |  |         |         |   | 
|Other                                                       |                               |      | 3,353   |         |   |      | 3,195    |         |   |  | 292      |         |   | 
|                                                           
|Cash flow from operations                                   |                               |      | 694,770 |         |   |      | 544,175  |         |   |  | 332,109  |         |   | 
|                                                           

89




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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




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

|                                         |  |      |        |      |  |      |         |   |  |  |         |   |  | 
|---------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------- | - |  |  | ------- | - |  | 
|                                         |  | 2004 |        | 2003 |  | 2002 |         |  
|                                         |  | $    |        | $    |  | $    |         |  
|                                         |  |      |        |      |  |      |         |  
|                                        
|                                        
|Accounts receivable                      |  |      | 24,865 |      |  |      | 49,864  |   |  |  | 6,082   |   |  | 
|Prepaids and other                       |  |      | (144   | )    |  |      | 3,369   |   |  |  | 1,568   |   |  | 
|Accounts payable and accrued liabilities |  |      | 1,067  |      |  |      | (76,494 | ) |  |  | (38,682 | ) |  | 
|Income taxes payable/recoverable         |  |      | 5,322  |      |  |      | 8,655   |   |  |  | 18,737  |   |  | 
|Unearned revenue                         |  |      | 5,073  |      |  |      | 8,872   |   |  |  | 15,598  |   |  | 
|                                        
|                                         |  |      | 36,183 |      |  |      | (5,734  | ) |  |  | 3,303   |   |  | 
|                                        



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

|             |  |      |         |      |  |      |         |  |  |  |         |   |  | 
|------------ |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | - |  | 
|             |  | 2004 |         | 2003 |  | 2002 |         | 
|             |  | $    |         | $    |  | $    |         | 
|             |  |      |         |      |  |      |         | 
|            
|            
|Interest     |  |      | 213,326 |      |  |      | 272,110 |  |  |  | 257,609 |   |  | 
|Income taxes |  |      | 51      |      |  |      | 3,151   |  |  |  | (10,443 | ) |  | 
|            



|     |                      
|---- | ---------------------
|(iv) | Non-cash transactions

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

|                                                              |  |      |        |      |  |      |   |  |  |  |   |  |  | 
|------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | - |  |  |  | - |  |  | 
|                                                              |  | 2004 |        | 2003 |  | 2002 |   | 
|                                                              |  | $    |        | $    |  | $    |   | 
|                                                              |  |      |        |      |  |      |   | 
|                                                             
|                                                             
|Class B Non-Voting shares issued on
    acquisitions [note 2] |  |      | 65,000 |      |  |      |  |  |  |  |  |  |  | 
|                                                             

90




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


21.     UNITED STATES ACCOUNTING
PRINCIPLES

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

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

|                                                                                                 |                                                                         |      |         |         |   |      |          |         |   |  |          |          |   |  | 
|------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------- | ---- | ------- | ------- | - | ---- | -------- | ------- | - |  | -------- | -------- | - |  | 
|                                                                                                 |                                                                         | 2004 |         | 2003    |   | 2002 |          |        
|                                                                                                 |                                                                         | $    |         | $       |   | $    |          |        
|                                                                                                 |                                                                         |      |         |         |   |      |          |        
|                                                                                                
|                                                                                                
|Net income (loss) using Canadian
    GAAP                                                        |                                                                         |      | 90,909  |         |   |      | (46,864  | )       |   |  | (284,629 | )        |   | 
|                                                                                                 | Add (deduct) adjustments for:                                           |      |         |         |   |      |          |         |   |  |          |          |   |  | 
|                                                                                                 | Deferred charges (2)                                                    |      |         | 14,424  |   |      |          | (9,849  | ) |  |          | 35,594   |   |  | 
|                                                                                                 | Foreign exchange gains (3)                                              |      |         | 22,899  |   |      |          | 54,527  |   |  |          | 1,370    |   |  | 
|                                                                                                 | Equity in losses of investees (4)                                       |      |         |        |   |      |          | 2,001   |   |  |          | (19,901  | ) |  | 
|                                                                                                 | Entitlement payments on equity instruments (8)                          |      |         | (62,302 | ) |      |          | (64,827 | ) |  |          | (70,551  | ) |  | 
|                                                                                                 | Adjustment to write-down of GT Group Telecom Inc.
    (11)              |      |         |        |   |      |          |        |   |  |          | 28,374   |   |  | 
|                                                                                                 | Income tax effect of adjustments                                        |      |         | 15,724  |   |      |          | 18,005  |   |  |          | 13,631   |   |  | 
|                                                                                                 | Effect of future income tax rate reductions on
    differences          |      |         | (534    | ) |      |          |        |   |  |          |         |   |  | 
|                                                                                                
|Net income (loss) using US GAAP                                                                  |                                                                         |      | 81,120  |         |   |      | (47,007  | )       |   |  | (296,112 | )        |   | 
|                                                                                                
|Unrealized foreign exchange gain (loss) on
    translation of self-sustaining foreign operations |                                                                         |      | (38     | )       |   |      | (1,031   | )       |   |  | 1,513    |          |   | 
|Unrealized gains on available-for-sale
    securities,
    net of tax (7)                        |                                                                         |      |         |         |   |      |          |         |   |  |          |          |   | 
|                                                                                                 | Unrealized holding gains arising during the year                        |      |         | 5,456   |   |      |          | 1,361   |   |  |          | 59,406   |   |  | 
|                                                                                                 | Less: reclassification adjustments for gains
    included in net income |      |         | (1,055  | ) |      |          | (95,879 | ) |  |          | (180,425 | ) |  | 
|                                                                                                
|                                                                                                 |                                                                         |      | 4,363   |         |   |      | (95,549  | )       |   |  | (119,506 | )        |   | 
|Adjustment to fair value of derivatives (9)                                                      |                                                                         |      | (67,408 | )       |   |      | (224,341 | )       |   |  | 53,293   |          |   | 
|Foreign exchange gains on hedged long-term debt
    (10)                                         |                                                                         |      | 57,704  |         |   |      | 136,975  |         |   |  |         |          |   | 
|Minimum liability for pension plan (13)                                                          |                                                                         |      | (3,864  | )       |   |      | (1,928   | )       |   |  |         |          |   | 
|Effect of future income tax rate reductions on
    differences                                   |                                                                         |      | (63     | )       |   |      |         |         |   |  |         |          |   | 
|                                                                                                
|                                                                                                 |                                                                         |      | (9,268  | )       |   |      | (184,843 | )       |   |  | (66,213  | )        |   | 
|                                                                                                
|Comprehensive income (loss) using US
    GAAP                                                    |                                                                         |      | 71,852  |         |   |      | (231,850 | )       |   |  | (362,325 | )        |   | 
|                                                                                                
|Earnings (loss) per share 
    basic and diluted                                                |                                                                         |      |         |         |   |      |          |         |   |  |          |          |   | 
|                                                                                                 | Net income (loss) per share using US GAAP                               |      |         | 0.35    |   |      |          | (0.20   | ) |  |          | (1.28    | ) |  | 
|                                                                                                 | Comprehensive income (loss) per share using
    US GAAP                 |      |         | 0.31    |   |      |          | (1.00   | ) |  |          | (1.56    | ) |  | 
|                                                                                                

91




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


Balance sheet items using US GAAP

|                                      |  |          |           |      |  |          |           |      |  |  |           |  |  |  |           |  |  | 
|------------------------------------- |  | -------- | --------- | ---- |  | -------- | --------- | ---- |  |  | --------- |  |  |  | --------- |  |  | 
|                                      |  |          |           |     
|                                      |  | 2004     |           | 2003
|                                      |  |          |           |     
|                                      |  | Canadian |           | US   |  | Canadian |           | US   |  | 
|                                      |  | GAAP     |           | GAAP |  | GAAP     |           | GAAP |  | 
|                                      |  | $        |           | $    |  | $        |           | $    |  | 
|                                      |  |          |           |      |  |          |           |      |  | 
|                                     
|                                     
|Investments and other assets (7)      |  |          | 43,965    |      |  |          | 72,998    |      |  |  | 49,415    |  |  |  | 74,758    |  |  | 
|Deferred charges (2)(10)(12)(13)      |  |          | 267,439   |      |  |          | 147,353   |      |  |  | 293,065   |  |  |  | 161,122   |  |  | 
|Broadcast licenses (1)(5)(6)          |  |          | 4,685,582 |      |  |          | 4,660,348 |      |  |  | 4,627,728 |  |  |  | 4,602,494 |  |  | 
|Other long-term liability (13)        |  |          | 16,933    |      |  |          | 51,345    |      |  |  | 9,409     |  |  |  | 40,397    |  |  | 
|Deferred credits (10)(12)             |  |          | 898,980   |      |  |          | 674,718   |      |  |  | 850,991   |  |  |  | 696,884   |  |  | 
|Derivatives instruments liability (9) |  |          |          |      |  |          | 250,160   |      |  |  |          |  |  |  | 168,757   |  |  | 
|Future income taxes                   |  |          | 982,281   |      |  |          | 943,531   |      |  |  | 939,281   |  |  |  | 896,263   |  |  | 
|Long-term debt (8)                    |  |          | 2,344,025 |      |  |          | 3,037,603 |      |  |  | 2,645,548 |  |  |  | 3,363,685 |  |  | 
|Shareholders equity                  |  |          | 2,492,018 |      |  |          | 1,660,593 |      |  |  | 2,498,665 |  |  |  | 1,646,074 |  |  | 
|                                     

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

|                                             |  |      |           |      |  |  |           |   |  | 
|-------------------------------------------- |  | ---- | --------- | ---- |  |  | --------- | - |  | 
|                                             |  | 2004 |           | 2003 |  | 
|                                             |  | $    |           | $    |  | 
|                                             |  |      |           |      |  | 
|                                            
|                                            
|Shareholders equity using Canadian
    GAAP |  |      | 2,492,018 |      |  |  | 2,498,665 |   |  | 
|Amortization of intangible assets (1)        |  |      | (124,179  | )    |  |  | (123,542  | ) |  | 
|Deferred charges (2)                         |  |      | (35,817   | )    |  |  | (44,973   | ) |  | 
|Equity in loss of investees (4)              |  |      | (35,710   | )    |  |  | (36,202   | ) |  | 
|Gain on sale of subsidiary (5)               |  |      | 15,309    |      |  |  | 13,822    |   |  | 
|Gain on sale of cable systems (6)            |  |      | 47,745    |      |  |  | 47,501    |   |  | 
|Equity instruments (3)(8)                    |  |      | (688,520  | )    |  |  | (709,540  | ) |  | 
|Accumulated other comprehensive income       |  |      | (9,809    | )    |  |  | 825       |   |  | 
|Cumulative translation adjustment            |  |      | (444      | )    |  |  | (482      | ) |  | 
|                                            
|Shareholders equity using US
    GAAP       |  |      | 1,660,593 |      |  |  | 1,646,074 |   |  | 
|                                            

92




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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


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

|                                                                                          |  |      |          |      |  |  |          |   |  | 
|----------------------------------------------------------------------------------------- |  | ---- | -------- | ---- |  |  | -------- | - |  | 
|                                                                                          |  | 2004 |          | 2003 |  | 
|                                                                                          |  | $    |          | $    |  | 
|                                                                                          |  |      |          |      |  | 
|                                                                                         
|                                                                                         
|Unrealized foreign exchange gain on translation
    of self-sustaining foreign operations |  |      | 444      |      |  |  | 482      |   |  | 
|Unrealized gains on investments (7)                                                       |  |      | 23,880   |      |  |  | 20,721   |   |  | 
|Fair value of derivatives (9)                                                             |  |      | (199,622 | )    |  |  | (131,698 | ) |  | 
|Foreign exchange gains on hedged long-term debt
    (10)                                  |  |      | 171,296  |      |  |  | 113,248  |   |  | 
|Minimum liability for pension plan (13)                                                   |  |      | (5,807   | )    |  |  | (1,928   | ) |  | 
|                                                                                         
|                                                                                          |  |      | (9,809   | )    |  |  | 825      |   |  | 
|                                                                                         

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



|    |                                  
|--- | ---------------------------------
|(1) | Amortization of intangible assets



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



|    |                 
|--- | ----------------
|(2) | Deferred charges



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



|    |                                                          
|--- | ---------------------------------------------------------
|(3) | Foreign exchange gains (losses) on equity
    instruments



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



|    |                            
|--- | ---------------------------
|(4) | Equity in loss of investees



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

93




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##### Table of Contents



Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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




|    |                           
|--- | --------------------------
|(5) | Gain on sale of subsidiary



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



|    |                              
|--- | -----------------------------
|(6) | Gain on sale of cable systems



| |                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The gain on sale of cable systems determined
    under Canadian GAAP has been adjusted to reflect the lower net
    book value of broadcast licenses under US GAAP as a result
    of item (1) adjustments.                                                                                                                                                                     
|
| | Under Canadian GAAP, no gain was recorded in 1995
    on an exchange of cable systems with Rogers Communications Inc.
    on the basis that this was an exchange of similar productive
    assets. Under US GAAP the gain net of applicable taxes is
    recorded and amortization adjusted as a result of the increase
    in subscriber base upon the recognition of the gain.



|    |                                         
|--- | ----------------------------------------
|(7) | Unrealized gains (losses) on investments



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Under US GAAP, equity securities having a readily
    determinable fair value and not classified as trading securities
    are classified as available-for-sale securities and
    reported at fair value, with unrealized gains and losses
    included in comprehensive income and reported as a separate
    component of shareholders equity net of related future
    income taxes. Gains and losses on the sale of available-for-sale
    securities are determined using the specific identification
    method. Declines in the fair value of individual
    available-for-sale securities below their cost that are other
    than temporary result in write-downs of the individual
    securities to their fair value. The related write-downs are
    included in earnings as realized losses.
|
| | Under Canadian GAAP, available-for-sale
    securities are carried at cost and written down only when there
    is evidence that a decline in value, that is other than
    temporary, has occurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



|    |                   
|--- | ------------------
|(8) | Equity instruments



| |                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Equity instruments are classified as equity under
    Canadian GAAP and interest thereon net of taxes is recorded as
    dividends. Under US GAAP, these instruments would be
    classified as debt and interest thereon recorded as interest
    expense.



|    |                                              
|--- | ---------------------------------------------
|(9) | Derivative instruments and hedging activities



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

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Shaw Communications Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2004, 2003 and 2002

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




|     |                                                             
|---- | ------------------------------------------------------------
|(10) | Foreign exchange gains (losses) on hedged
    long-term debt



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



|     |                                                  
|---- | -------------------------------------------------
|(11) | Adjustment to write-down of GT Group Telecom Inc.



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



|     |                                                        
|---- | -------------------------------------------------------
|(12) | Subscriber connection fee revenue and related
    costs



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



|     |                                   
|---- | ----------------------------------
|(13) | Minimum liability for pension plan



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys unfunded non-contributory
    defined benefit pension plan for certain of its senior
    executives has an accumulated benefit obligation of $52,507
    (2003  $40,667). Under US GAAP, an additional minimum
    liability is to be recorded for the difference between the
    accumulated benefit obligation and the accrued pension
    liability. The additional liability is offset in deferred
    charges up to an amount not exceeding the unamortized past
    service costs. The remaining difference is recognized in other
    comprehensive income, net of tax. Under Canadian GAAP, the
    accumulated benefit obligation and additional minimum liability
    are not recognized.



|    |                         
|--- | ------------------------
|(b) | Stock-based compensation

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

|                                     |  |             |  |        |  |      |         |      |  |  |          |   |  | 
|------------------------------------ |  | ----------- |  | ------ |  | ---- | ------- | ---- |  |  | -------- | - |  | 
|                                     |  |             |  | 2004   |  | 2003 |         | 2002 |  | 
|                                     |  |             |  | $      |  | $    |         | $    |  | 
|                                     |  |             |  |        |  |      |         |      |  | 
|                                    
|                                    
|Net income (loss), US GAAP           |  | As reported |  | 81,120 |  |      | (47,007 | )    |  |  | (296,112 | ) |  | 
|                                     |  | Pro forma   |  | 64,424 |  |      | (67,843 | )    |  |  | (316,314 | ) |  | 
|Net income (loss) per share, US GAAP |  | As reported |  | 0.35   |  |      | (0.20   | )    |  |  | (1.28    | ) |  | 
|                                     |  | Pro forma   |  | 0.28   |  |      | (0.29   | )    |  |  | (1.36    | ) |  | 
|                                    

The fair value of common share options granted in
2004 was $3,038 (2003  $1,491; 2002 
$11,978).



|    |                                              
|--- | ---------------------------------------------
|22. | COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

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

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##### Table of Contents



Shaw Communications Inc.




FIVE YEARS IN REVIEW


August 31, 2004


|                                                  |  |      |           |         |  |         |           |         |  |         |           |   |  |  |           |   |  |  |           |   |  | 
|------------------------------------------------- |  | ---- | --------- | ------- |  | ------- | --------- | ------- |  | ------- | --------- | - |  |  | --------- | - |  |  | --------- | - |  | 
|                                                  |  | 2004 |           | 2003(1) |  | 2002(1) |           | 2001(1) |  | 2000(1) |           |  
|                                                  |  |      |           |         |  |         |           |         |  |         |           |  
|                                                 
|                                                 
|($000s except per share
    amounts)             |  |      |           |         |  |         |           |         |  |         |           |   |  |  |           |   |  |  |           |   |  | 
|Service revenue                                   |  |      |           |         |  |         |           |         |  |         |           |   |  |  |           |   |  |  |           |   |  | 
|Cable                                             |  |      | 1,491,569 |         |  |         | 1,459,833 |         |  |         | 1,367,563 |   |  |  | 1,120,244 |   |  |  | 880,702   |   |  | 
|DTH                                               |  |      | 505,637   |         |  |         | 450,176   |         |  |         | 361,116   |   |  |  | 257,912   |   |  |  | 31,256    |   |  | 
|Satellite                                         |  |      | 82,543    |         |  |         | 88,412    |         |  |         | 95,870    |   |  |  | 97,695    |   |  |  | 16,650    |   |  | 
|FiberLink                                         |  |      |          |         |  |         |          |         |  |         |          |   |  |  |          |   |  |  | 20,756    |   |  | 
|                                                 
|                                                  |  |      | 2,079,749 |         |  |         | 1,998,421 |         |  |         | 1,824,549 |   |  |  | 1,475,851 |   |  |  | 949,364   |   |  | 
|                                                 
|Service operating income
    (loss)(2)            |  |      |           |         |  |         |           |         |  |         |           |   |  |  |           |   |  |  |           |   |  | 
|Cable                                             |  |      | 779,579   |         |  |         | 727,458   |         |  |         | 608,916   |   |  |  | 470,700   |   |  |  | 391,874   |   |  | 
|DTH                                               |  |      | 111,150   |         |  |         | 52,814    |         |  |         | (14,103   | ) |  |  | (58,512   | ) |  |  | (5,970    | ) |  | 
|Satellite                                         |  |      | 41,690    |         |  |         | 38,619    |         |  |         | 40,203    |   |  |  | 44,898    |   |  |  | 3,251     |   |  | 
|FiberLink                                         |  |      |          |         |  |         |          |         |  |         |          |   |  |  |          |   |  |  | 7,321     |   |  | 
|Corporate restructuring and inventory write-down  |  |      |          |         |  |         | (13,250   | )       |  |         | (4,600    | ) |  |  |          |   |  |  |          |   |  | 
|Litigation settlements                            |  |      | (6,484    | )       |  |         | 12,000    |         |  |         |          |   |  |  |          |   |  |  |          |   |  | 
|                                                 
|                                                  |  |      | 925,935   |         |  |         | 817,641   |         |  |         | 630,416   |   |  |  | 457,086   |   |  |  | 396,476   |   |  | 
|                                                 
|Net income (loss)                                 |  |      | 90,909    |         |  |         | (46,864   | )       |  |         | (284,629  | ) |  |  | (156,067  | ) |  |  | 144,226   |   |  | 
|                                                 
|Earnings (loss) per share  basic
    and diluted |  |      | 0.22      |         |  |         | (0.38     | )       |  |         | (1.41     | ) |  |  | (0.89     | ) |  |  | 0.59      |   |  | 
|                                                 
|Cash flow from
    operations(3)                  |  |      | 694,770   |         |  |         | 544,175   |         |  |         | 332,109   |   |  |  | 210,514   |   |  |  | 237,789   |   |  | 
|                                                 
|Balance sheet                                     |  |      |           |         |  |         |           |         |  |         |           |   |  |  |           |   |  |  |           |   |  | 
|Total assets                                      |  |      | 7,556,904 |         |  |         | 7,710,801 |         |  |         | 8,622,061 |   |  |  | 8,891,329 |   |  |  | 6,506,416 |   |  | 
|Long-term debt (including current portion)        |  |      | 2,650,680 |         |  |         | 2,917,068 |         |  |         | 3,469,637 |   |  |  | 3,010,348 |   |  |  | 1,777,654 |   |  | 
|                                                 
|Cash dividends declared per share                 |  |      |           |         |  |         |           |         |  |         |           |   |  |  |           |   |  |  |           |   |  | 
|Class A                                           |  |      | 0.155     |         |  |         | 0.045     |         |  |         | 0.045     |   |  |  | 0.045     |   |  |  | 0.040     |   |  | 
|Class B                                           |  |      | 0.160     |         |  |         | 0.050     |         |  |         | 0.050     |   |  |  | 0.050     |   |  |  | 0.045     |   |  | 
|                                                 



|    |                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Prior year results have been restated to reflect
    adoption of EIC 141 Revenue Recognition (see
    Note 1 to Consolidated Financial Statements).
|   
|(2) | See Key performance drivers on page 6.                                                                                                               
|   
|(3) | Cash flow from operations is presented before
    changes in non-cash working capital as presented in the
    Consolidated Statements of Cash Flows. 

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##### Table of Contents



Shaw Communications Inc.




SHAREHOLDERS INFORMATION


August 31, 2004


Share Capital and Listings

The Company is authorized to issue an unlimited
number of Class A participating and Class B Non-Voting
participating shares. At August 31, 2004, the Company had
11,359,932 Class A Shares and 220,109,372 Class B
Non-Voting Shares outstanding. The Class A Shares are
listed on the TSX Venture Stock Exchange under the symbol SJR.A.
The Class B Non-Voting Shares are listed on The Toronto
Stock Exchange under SJR.NV.B and on the New York Stock Exchange
under the symbol SJR. The 8.45% Series A and 8.50% Series
of Preferred Securities (COPrS) are listed on the New York Stock
Exchange under SJRPRA and SJRPRB respectively. The 8.875%
Preferred Securities are listed on The Toronto Stock Exchange
under SJR.PR.A.


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

|                                         |  |            |       |           |             |        |       |  |  |  |            |  |  | 
|---------------------------------------- |  | ---------- | ----- | --------- | ----------- | ------ | ----- |  |  |  | ---------- |  |  | 
|                                         |  |            |       |           |             | Total  |       | 
|Quarter                                  |  | High Close |       | Low Close |             | Volume |       | 
|                                         |  |            |       |           |             |        |       | 
|                                        
|                                        
|September 1, 2003 to August 31,
    2004 |  |            |       |           |             |        |       |  |  |  |            |  |  | 
|First                                    |  |            | 20.14 |           |             |        | 15.95 |  |  |  | 44,876,600 |  |  | 
|Second                                   |  |            | 23.24 |           |             |        | 19.21 |  |  |  | 34,431,400 |  |  | 
|Third                                    |  |            | 24.25 |           |             |        | 20.27 |  |  |  | 31,140,400 |  |  | 
|Fourth                                   |  |            | 24.31 |           |             |        | 19.58 |  |  |  | 19,728,900 |  |  | 
|                                        
|Closing price, August 31, 2004           |  | 20.40      |       |           | 130,177,300 |        |       | 
|                                        

Share Splits

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


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Shaw Communications Inc.




CORPORATE INFORMATION


August 31, 2004


|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | FURTHER                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|DIRECTORS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | SENIOR OFFICERS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | CORPORATE OFFICE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|JR Shaw(4)Executive Chair,
    Shaw Communications Inc.Adrian Burns(3)Corporate DirectorJames F. Dinning(1)Executive Vice President
    TransAlta CorporationGeorge F. Galbraith(1)(4)Corporate DirectorRonald V. Joyce(4)Senior Chairman and
    Co-Founder
    The TDL GroupCharles V. Keating(3)Corporate DirectorRt. Hon. Donald F. Mazankowski(3)(4)Corporate DirectorMichael OBrien(1)Corporate DirectorHarold A. Roozen(1)President and Chief
    Executive Officer,
    CCI Thermal
    Technologies Inc.Jeffrey Royer(2)(4)Corporate DirectorBradley S. ShawSenior Vice President,
    Operations, CableJim ShawChief Executive Officer
    Shaw Communications Inc.J.C. Sparkman(2)(4)Corporate DirectorJohn S. Thomas(3)President, Delta Cable
    Communications Ltd. &
    Coast
    Cable Communications Ltd.Willard (Bill) H. Yuill(2)Chairman
    The Monarch Corporation |  | JR ShawExecutive ChairJim ShawChief Executive OfficerJackie L. AltwasserVice President, FinancePeter J. BissonnettePresidentMichael DAvellaSenior Vice President, PlanningRobert A. (Randy) ElliotSenior Vice President,
    Technical Operations
    Shaw Cablesystems G.P.Bradley S. ShawSenior Vice President,
    Operations, CableKen C.C. SteinSenior Vice President
    Corporate and Regulatory AffairsDavid TaniguchiSenior Counsel and Assistant
    Corporate SecretarySteve WilsonSenior Vice President and
    Chief Financial Officer
    CORPORATE SECRETARY:Douglas J. Black, Q.C.HONORARY SECRETARY:Louis Desrochers, CM, AOE, QC, LLD(1) Audit Committee
    (2) Human Resources Committee
    (3) Corporate Governance Committee
    (4) Executive Committee |  | Shaw Communications Inc.
    Suite 900, 630  3rdAvenue S.W.,
    Calgary, Alberta
    T2P 4L4
    Tel: (403) 750-4500
    Facsimile (403) 750-4501
    Website www.shaw.caCORPORATE GOVERNANCEInformation concerning Shaws corporate governance
    policies are contained in the Information Circular and is also
    available by contacting the Company.INTERNET HOME PAGEShaws Annual Report, Annual Information Form,
    Quarterly Reports, Press Releases and other relevant investor
    relations information are available electronically on the
    Internet at www.shaw.ca.AUDITORSErnst & Young LLPPRIMARY BANKERThe Toronto-Dominion BankTRANSFER AGENTSCIBC Mellon Trust Company
    Calgary
    1-800-387-0825
    Chase Mellon Shareholder
    Services, L.L.C.,
    New York
    1-800-526-0801DEBENTURE TRUSTEESComputershare Trust
    Company of Canada
    100 University Avenue,
    9thFloor
    Toronto, ON M5J 2Y1
    service@computershare.com
    Phone 1-800-564-6253
    Fax 1-888-453-0330/
    416-263-9394
    Bank of New York
    101 Barclay Street, Floor 21F
    New York, N.Y. 10288
    Phone 1-800-438-5473
    Fax: 212-815-5802 |  | Financial analysts, portfolio managers, other
    investors and interested parties may contact the Company at
    (403) 750-4500 or visit Shaws website at
    www.shaw.cafor further information.
    To receive additional copies of the Annual Report for Shaw
    Communications Inc., please fax your request to
    (403) 750-7469 or email angela.haigh@sjrb.caFor further inquiries relating to Shaws philanthropic
    practices, please call (403) 750-7498.
    All trademarks used in this annual report are used with the
    permission of the owners of such trademarks.

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(SHAW LOGO)

630  3rd Avenue
S.W.

Suite 900


Calgary, Alberta


T2P 4L4