Shaw Communications, Inc. Annual Report 2012

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FY2012 Annual Report · Shaw Communications, Inc.

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2012
Annual
Report

127

128

129

Report to Shareholders

Management’s Discussion and Analysis

Management’s Responsibility for Financial Statements
and Report on Internal Control over Financial Reporting

Independant Auditors’ Reports

Consolidated Financial Statements

Notes to Consolidated Financial Statements

Five Years in Review

Shareholders’ Information

Corporate Information

The Annual General Meeting of Shareholders will be held on January 9, 2013 at 11:00am
(Mountain Time) at the Shaw Barlow Trail Building, 2400 – 32 Avenue NE, Calgary Alberta.

Shaw Communications Inc.

2012 Annual Report

Exciting things are coming down the pipe at Shaw. As technology

and content evolve – in this anytime, anywhere, at home or

on-the-go world – we are helping Canadians make sense of it all.

We put our customers first, work hard to earn their trust, and

never forget that Shaw is a choice.

Shaw Communications Inc.

2012 Annual Report

Revenue*
Figures in billions

5.0

4.7

Dividends
Figures in millions

3.7

3.4

3.1

391

372

352

416

304

EBITDA*
Figures in billions

Free cash flow*
Figures in millions

2.1

1.8

1.5

1.4

617

506

515

455

482

*Financial information for fiscal 2008, 2009 and 2010 is prepared in accordance with previous Canadian generally accepted accounting principles.

Shaw Communications Inc.
REPORT TO SHAREHOLDERS
August 31, 2012

Dear fellow Shareholders:

We are pleased to report solid operational and financial performance in fiscal 2012. Our
portfolio of assets has positioned us well to lead in this dynamic and competitive marketplace.
Our results reflect our effort during the year to balance customer and financial growth, the
in leading
delivery of an exceptional customer experience, and continued investment
technology.

Our strategy has been consistent over many years as we make significant investments in our
innovative products and services, strive to provide an
network and systems to deliver
exceptional customer experience, and focus on sound capital and financial management. We
are continually striving to enhance and improve our operations. Our focus and spirit has made
us what we are today and will drive us to become what we want to be tomorrow.

OUR CUSTOMER DRIVES OUR STRATEGY

Our customers have always been the cornerstone of our foundation. We put them first, work
hard to earn their trust, and never forget that Shaw is a choice. We believe that exceptional
customer service is a differentiator in this competitive environment and during 2012 we
continued to invest in our all Canadian customer call centres, adding resources and customer
care tool enhancements.

Our network represents a significant competitive and differentiated advantage. During the past
year we invested in projects and infrastructure that will further strengthen our strategic
positioning:

The Digital Network Upgrade (“DNU”) project remains on track and we expect to
complete the digitization of our analog tiers in 2013, expanding our broadband leadership
capabilities and providing additional capacity to add to our HDTV and On Demand
offerings. We continue to invest in technology initiatives to recapture bandwidth and
optimize our network.

Our WiFi network build is well underway extending our customers broadband experience
beyond their home, further differentiating our service from the competition. Shaw is the
first service provider in Canada to deliver secure and reliable wireless broadband through
an extensive WiFi network covering thousands of locations.

Our products and services are evolving as we deliver innovative new offerings and enhanced
services, providing choice and value to our customers.

We recently launched the initial products in our TV Everyway initiative, with Shaw Go
Movie Central and Shaw Go NFL Sunday Ticket apps for the Apple iPhone and iPad,
allowing our customers to access programming whether at home or on the go.

Within our Media division we launched new specialty services - National Geographic Wild,
Lifetime and H2 - and Global launched the first Mandarin language newscast produced by
a national network in Canada.

Using adaptive streaming technology through the satellite receiver, Shaw Direct launched
a Video-On-Demand service and currently has over 3,000 movie and TV titles available.

Shaw Communications Inc.
REPORT TO SHAREHOLDERS
August 31, 2012

Our people are vital to everything we do. The passion, commitment and dedication that
everyone at Shaw brings to work everyday allows us to execute against our priorities and deliver
to our customers. We recently were honored to learn that Shaw was named among Canada’s Top
100 Employers for 2013.

FINANCIAL PERFORMANCE

We delivered solid financial results in fiscal 2012 as we took steps to balance subscriber
growth and profitability in a highly competitive market. We are focused on disciplined and
retention and long term growth. During 2012
sustainable pricing strategies, customer
consolidated revenue and operating income before amortization improved and we made prudent
capital investment decisions focused on ensuring that long term value and profitability is being
generated. We also increased our dividend, as we return capital value to shareholders.

Revenue for
amortization was up 4% to $2.13 billion.

the year

improved 5% to $5.0 billion and operating income before

We invested over $900 million in our core Cable and Satellite capital infrastructure and
approximately $30 million in Media.

Free cash flow for the year was $482 million.

We increased our dividend during 2012 by 6%, paying a total of $416 million.

Our capital structure and healthy liquidity position support investment grade ratings. We enter
2013 with a strong balance sheet and solid cash flows providing the financial flexibility to
invest in our network, take advantage of strategic opportunities, and grow shareholder returns.

OPERATING HIGHLIGHTS

Fiscal 2012 marked the first full year of inclusion of our Shaw Media division. Although
conventional advertising revenues were affected by continued economic uncertainty,
the
business performed well, capitalizing on its strong specialty portfolio.

Our subscriber growth during the year was balanced as telecommunication companies across
our footprint competed to expand their service offerings.

During 2012 we added 35,000 Internet subscribers, maintaining one of the strongest
broadband businesses in North America. The equivalent of 86% of Basic subscribers now
take these services.

Digital Phone continues to be popular. As at August 31, 2012 we had over 1.3 million
Digital Phone lines. Customer growth of 131,000 lines was achieved in fiscal 2012, with
the equivalent of 61% of Basic subscribers taking these services.

Digital customers grew by 98,000, to total more than 1.9 million at August 31, 2012,
representing a penetration of over 86% of Basic cable. During the year we lost 71,000
Basic cable subscribers and gained 1,000 Shaw Direct DTH subscribers.

In addition to the DNU and WiFi build initiatives, we also focused on expanding Shaw Business
service offerings, increasing the serviceable footprint and growing our business sales force.
Through leveraging our existing and new fibre investments we believe Shaw Business provides
an attractive growth opportunity.

Shaw Communications Inc.
REPORT TO SHAREHOLDERS
August 31, 2012

OUR COMMUNITIES

We are committed to giving back to the communities where we live and work and taking action
to reduce our environmental impact. We support a wide variety of initiatives including those
directed towards children and families, education, health, historical preservation, and the arts.
We also recognize the environment is everyone’s responsibility and we promote conservation
practices throughout our operations.

MOVING FORWARD

The competitive environment remains challenging and we enter 2013 confident about the
opportunities that exist for our business. We are focused on driving performance and value
through continuous improvement and evolution. We know that to remain successful we can’t
stand still. We look forward to the opportunities that the new year will bring and we thank you,
our shareholders, for your continued support, loyalty and confidence.

[Signed]

JR Shaw
Executive Chair

[Signed]

Bradley S. Shaw
Chief Executive Officer

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

November 29, 2012

FORWARD

Tabular dollars are in millions of Canadian dollars, except per share amounts or unless
otherwise indicated. Management’s Discussion and Analysis should be read in conjunction with
the Consolidated Financial Statements.

INDEX

CONTENTS

Outline
I.

II.
III.
IV.
V.
VI.
VII.
VIII.

IX.

INTRODUCTION TO THE BUSINESS

A. Company overview – core business and strategies
B. Description of the business
C. Seasonality and other additional information concerning the business
D. Government regulations and regulatory developments
E. Key performance drivers
F. Critical accounting policies and estimates
G. Related party transactions
H. New accounting standards
I. Known events, trends, risks and uncertainties

SUMMARY OF QUARTERLY RESULTS
RESULTS OF OPERATIONS
FINANCIAL POSITION
CONSOLIDATED CASH FLOW ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
ADDITIONAL INFORMATION
COMPLIANCE WITH NYSE CORPORATE GOVERNANCE LISTING

STANDARDS
CERTIFICATION

Page

6
6
7
14
15
20
23
28
29
32
39
41
50
51
52
54

54
55

CAUTION CONCERNING FORWARD LOOKING STATEMENTS

Statements included in this Management’s Discussion and Analysis that are not historic
constitute “forward-looking statements” within the meaning of applicable securities laws. Such
statements include, but are not limited to, statements about future capital expenditures,
financial guidance for future performance, business strategies and measures to implement
strategies, competitive strengths, expansion and growth of Shaw’s business and operations and
other goals and plans. They can generally be identified by words such as “anticipate”,
“believe”, “expect”, “plan”, “intend”, “target”, “goal” and similar expressions (although not all
forward-looking statements contain such words). All of the forward-looking statements made in
this report are qualified by these cautionary statements.

Forward-looking statements are based on 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 as of the
current date. These assumptions include, but are not limited to, general economic conditions,
interest and exchange rates, technology deployment, content and equipment costs, industry
recent
structure, conditions and stability, government
acquisitions. Many of these assumptions are confidential.

regulation and the integration of

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

You should not place undue reliance on any forward-looking statements. Many factors,
including those not within Shaw’s control, may cause Shaw’s actual results to be materially
different from the views expressed or implied by such forward-looking statements, including,
but not
limited to, general economic, market and business conditions; changes in the
competitive environment in the markets in which Shaw operates and from the development of
new markets for emerging technologies; industry trends and other changing conditions in the
entertainment,
information and communications industries; Shaw’s ability to execute its
strategic plans; opportunities that may be presented to and pursued by Shaw; changes in laws,
regulations and decisions by regulators that affect Shaw or the markets in which it operates;
Shaw’s status as a holding company with separate operating subsidiaries; and other factors
described in this report under the heading “Known events, trends, risks and uncertainties”. The
foregoing is not an exhaustive list of all possible factors. Should one or more of these risks
materialize, or should assumptions underlying the forward-looking statements prove incorrect,
actual results may vary materially from those described herein.

The Corporation provides certain financial guidance for future performance as the Corporation
believes that certain investors, analysts and others utilize this and other forward-looking
information in order to assess the Company’s expected operational and financial performance
and as an indicator of its ability to service debt and return cash to shareholders. The Company’s
financial guidance may not be appropriate for this or other purposes.

Any forward-looking statement speaks only as of the date on which it was originally made and,
except as required by law, Shaw expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking statement to reflect any change in
related assumptions, events, conditions or circumstances.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

INTRODUCTION TO THE BUSINESS

Company overview – core business and strategies

Shaw Communications Inc. (“Shaw” or the “Company” or “Corporation”) is a diversified
Canadian communications and media company whose business is providing consumers with
broadband cable television, Internet, Home Phone, telecommunications services (through Shaw
Business), satellite direct-to-home services (through Shaw Direct) and engaging programming
content (through Shaw Media). Shaw Media operates the second largest conventional television
network in Canada, Global Television, and numerous specialty networks. It provides customers
with high-quality entertainment, information and communications services, utilizing a variety of
distribution technologies.

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

Shaw’s strategy is to maximize shareholder value through the generation of free cash flow.1 The
key elements of this strategy include: leveraging its network infrastructure and programming
assets to offer customers a wider variety of products and services; enhancing existing products
to provide greater value to customers; providing strong 24/7/365 service; bundling product
offerings to provide value to both Shaw and the customer; and focusing on sound capital
management and operational efficiencies to maintain a competitive edge.

The strategy also includes promoting brand awareness, strengthening the Shaw name from
coast to coast. The Shaw brand is synonymous with diverse product offerings and high-quality
customer service.

During 2012 the Company operated three principal business segments: (1) Cable – comprised
of cable television, Internet, Digital Phone and Shaw Business operations; (2) Satellite –
comprised of direct-to-home (“DTH”) and Satellite Services; and (3) Media – comprised of
television broadcasting. As a percentage of Shaw’s consolidated revenues for the year ended
August 31, 2012, the Cable, Satellite and Media divisions represented approximately 63%,
16% and 21% of Shaw’s business, respectively. During 2012 Shaw’s businesses generated
consolidated revenues of $5.0 billion.

A fourth business segment, Wireless, was in the development/construction stage during 2010
and 2011. During 2008 the Company participated in the Canadian Advanced Wireless
Spectrum (“AWS”) auction and was successful in acquiring 20 megahertz of spectrum across
most of its cable footprint. In March 2010 the Company commenced activities on a traditional
wireless infrastructure build and late in 2011, after completing a strategic review of this
initiative, concluded that the economics as a new entrant would be extremely challenging, even
with the Company’s established base and considerable strengths and assets. Shaw decided to
not pursue a traditional wireless business and instead plans to focus on initiatives that align
with leveraging its Media and programming assets, and strengthening its leadership position in
broadband and video.

The description of these operating business segments, including more specific details for the
last two fiscal years follows.

1 See definitions under key performance drivers on page 20.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Description of the business

Cable

(i)
Shaw’s Cable operations provide Cable television, Internet, and Digital Phone services to
residential and business customers. These services are delivered through an extensive fibre
optic and co-axial cable distribution network.

Shaw’s strategy is to leverage its network by providing additional services beyond traditional
cable television. In past years, it enhanced the quality, depth and capacity of its plant and
network infrastructure through significant capital investments, and the plant and network is
essentially fully digital and two-way capable. These investments enabled Shaw to leverage its
existing network and expand its service offerings to include digital programming, On Demand
programming, High Definition (“HD”)
(“3D”) HD,
Internet, and Digital Phone. During 2011 Shaw commenced a major upgrade of its network to
convert television analog tiers to digital (the Digital Network Upgrade “DNU”). This upgrade,
which continued through 2012, is expected to significantly increase the capacity of the Shaw
network and allow the Company to expand its Internet, HD and On Demand offerings. Shaw’s
investments in plant
infrastructure will accommodate further growth opportunities. Shaw
continues to invest in technology initiatives to recapture bandwidth and optimize its network,
including increasing the number of nodes on the network and using advanced encoding and
digital compression technologies such as MPEG-4.

television including three dimensional

To take advantage of potential administrative, operating and marketing synergies that arise from
larger, focused operations, Shaw has consolidated its position as the dominant provider of cable
services in Western Canada. Approximately 70% of the Company’s cable television subscribers
are clustered in and around five major urban markets in Western Canada: Vancouver and
Victoria, British Columbia; Calgary and Edmonton, Alberta; and Winnipeg, Manitoba. The
balance of Shaw’s subscribers are mainly in smaller regional clusters, linked via fibre either to
each other or to larger markets. These markets include the Okanagan region, British Columbia
(Kamloops, Kelowna, Penticton, Vernon); Saskatoon/Prince Albert/Moose Jaw/Swift Current,
Saskatchewan; and Thunder Bay/Sault Ste. Marie/Hamilton, Ontario.

Shaw continues to acquire cable systems to complement its cable “clustering” strategy. During
fiscal 2011 Shaw completed the acquisition of Lake Broadcasting and Sun Country Cablevision
cable systems located in the interior region of British Columbia.

Shaw has a customer-centric strategy designed to deliver high-quality customer service,
simplicity and value to its customers through various bundled service offerings for its video,
Internet and Digital Phone services. The benefits of bundling to customers include the
convenience of “one-stop shopping” and value pricing. The benefits to Shaw include retention
of existing customers (churn reduction); attraction of new customers; incremental penetration
as customers upgrade to additional services offered in a bundle; and operational efficiencies
through centralized billing and customer care.

A more detailed description of each of the principal operations comprising the Company’s Cable
Segment is set forth below.

Cable Television

The Company’s initial core business was cable television services, which today provides the
infrastructure for much of the Company’s distribution service
customer base and physical
businesses. The Company is one of the largest cable television providers in Canada. As at

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

August 31, 2012, Shaw served approximately 2.2 million cable television customers in five
provinces (British Columbia, Alberta, Saskatchewan, Manitoba and certain portions of Ontario),
representing approximately 31% of the Canadian cable television market.

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

Digital cable significantly expands the range of services that may be offered to a subscriber and
extends programming capacity. Digital cable, which is delivered by the Company’s network to
DCTs deployed in subscribers’ premises, also enhances picture and sound quality and provides
the platform from which Shaw has launched, and expects to continue to be able to launch, new
revenue-generating video and interactive services. Shaw offers customers a variety of DCTs for
purchase or rent.

To its Digital subscribers, Shaw also offers On Demand viewing options, including Pay-Per-View
(“PPV”) and Video-on-Demand (“VOD”) services. The PPV service allows customers to select
and pay for specific programs which are available on various channels with different start times.
The VOD service enables customers to select programming from a library of titles through an
on-line ordering system or directly through the set-top interactive program guide, and to view
the programming on their television at a time of their choosing, with pause, skip backward and
skip forward functionality. On Demand programming includes movies, sports, concerts and
other special events, with prices dependent on the nature of the programming. Shaw also offers
a wide variety of free On Demand programming including hit TV series, movies, events, music
videos and more. Shaw offers On Demand programming to over 97% of its customers.

As at August 31, 2012, the Company had approximately 1.9 million Digital subscribers,
representing a penetration rate of over 86% of Basic cable subscribers. Of
the Digital
customers, over 1.0 million have HD capabilities. Shaw continues to launch HD channels which
offer superior picture detail and sound quality in a format that fully utilizes the capabilities of
wide screen, HD ready televisions. In support of HD, Shaw offers for purchase or rent DCTs
which support the decoding and processing of HD content, as well as DCTs which incorporate
HD and Personal Video Recorder (“PVR”) features.

Shaw recently launched the first phase of its TV Everywhere service, Shaw Go, which allows
customers streaming access to TV shows, sporting events and movies on popular mobile
devices. The first phase of the service includes the Shaw Go Movie Central and Shaw Go NFL
Sunday Ticket apps.

Internet

Leveraging its cable television infrastructure, Shaw provides high-speed Internet access services
to residential and business subscribers in almost all of its operating areas. The Company
currently offers a wide variety of residential Internet service levels to match the speed, usage
and budget requirements of its subscribers. Similar to its residential Internet service, Shaw also
offers a variety of Internet services for small and medium business customers. As at August 31,
2012, there were over 1.9 million subscribers (connected and scheduled installations) to
Shaw’s Internet access services.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

In providing its Internet access services, Shaw deploys cable modems, generally based on
DOCSIS 2.0 or 3.0 specifications. This technology has enabled the Company to increase the
capabilities and reliability of its network by increasing the capacity and throughput of both the
upstream and downstream portions of Shaw’s cable infrastructure. Upgrades and enhancements
of its capital infrastructure are ongoing and include the DNU, building up the Company’s
Internet backbone, and decreasing the average node size.

During 2012, Shaw commenced building a managed carrier-grade WiFi network to extend a
customer’s broadband experience beyond their home, and launched the service on a trial basis
in select cities. WiFi is in virtually all portable consumer devices and customers are actively
seeking WiFi hotspots to reduce data costs and improve their wireless broadband experience.
The Shaw WiFi trial is currently available in Calgary, Edmonton, Winnipeg, Vancouver and
Victoria.

During 2011 Shaw conducted an extensive consultation process which allowed its Internet
customers to share their ideas on Internet usage allowances and billing. As a result of these
consultations, Shaw launched new Internet packages with higher speeds and expanded usage
allowances, including an industry leading 250 Mbps service using DOCSIS 3.0 technology to
meet the increasing data needs of its subscribers. Currently, the 250 Mbps service is available
to approximately 17% of the Company’s customers, and will be rolled out to additional areas as
the DNU is completed.

In 2011 Shaw also launched a 1 Gigabit Internet service in limited service areas. The service
utilizes Fibre-to-the-Premises (“FTTP”) and will be able to support new, cutting-edge
broadband applications that require faster download speeds.

Shaw operates two Internet data centres in Calgary, Alberta and several smaller regional
centres. The data centres allow the Company to manage its Internet services exclusively,
providing e-mail service directly to its customers using “@shaw.ca” e-mail addresses,
provisioning web space, and managing backbone connectivity and peering arrangements. The
centres also host Shaw customers’ most popular web content locally.

During 2011 the Company commenced construction of a new data centre in Calgary that will
allow it to stay ahead of the technology curve being able to handle new innovations as they are
adopted, such as the WiFi network initiative. The data centre will incorporate energy efficient
cooling systems allowing Shaw to reduce the environmental impact. The centre is planned to be
complete late in fiscal 2015.

Digital Phone

In 2005, Shaw entered the “triple play” market of voice, video and data services with the
launch of Shaw Digital Phone, a reliable, fully featured and affordable residential telephone
service. Since then, the Company continued to expand its Digital Phone footprint and offers the
service to 96% of homes passed. As at August 31, 2012, it had approximately 1.4 million
Digital Phone lines (primary and secondary lines on billing plus pending installs).

Shaw Digital Phone offers packages tailored to meet the needs of residential subscribers with
varying levels of included long distance and calling features. Professional installation, access to
E-911 (enhanced 911 emergency
and
around-the-clock (24/7/365) customer support are included in the Digital Phone service at no
additional cost to subscribers. Similar to the residential packages, Shaw offers a variety of Shaw
Business products for home based or smaller businesses including managed and hosted PBX
and a Primary Rate Interface (“PRI”) service for medium and larger businesses.

directory

services,

service),

operator

and

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

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

Unlike internet phone providers who use the internet to route calls, Shaw’s Digital Phone
service uses Shaw’s own private managed broadband network and the public switched
telephone network to route calls, allowing the Company to ensure a consistent level of quality
and reliability to its phone customers.

During 2012, Shaw Digital Phone expanded its service in the Kootenay region of British
Columbia to Fairmont, Invermere and Radium, and in 2011 Shaw Digital Phone services were
made available in a number of smaller communities in British Columbia, Alberta and Manitoba.

Shaw Business

Shaw Business is responsible for the development and management of the national fibre
network that is the primary Internet backbone for Shaw’s broadband Internet customers. This
backbone network is also used to carry Shaw Digital Phone capacity and video signals. In
addition, Shaw Business provides services to small and medium size business, Internet Service
Providers (“ISPs”), cable companies, broadcasters, governments and other organizations that
require end-to-end Internet, data and voice connectivity. Shaw Business is also a major account
and wholesale provider offering third parties advanced high speed data connectivity and
Internet services in Canada and the United States. Its offerings currently include data, voice
and video transport and Internet connectivity services. It also continues to establish public and
private peering arrangements with high speed connections to major North American, European
and Asian network access points and other tier-one backbone carriers.

Shaw Business has built both its fibre network and its customer base to promote future revenue
growth. Its network includes multiple fibre capacity on two diverse cross-North America routes.
The Company’s southern route principally consists of approximately 6,400 route kilometres
(4,000 miles) of fibre located on routes between Vancouver (via Calgary, Winnipeg, Chicago,
Toronto and Buffalo) and New York City and between Vancouver and Sacramento. The northern
fibre between
route consists of approximately 4,000 route kilometres (2,500 miles) of
Edmonton (via Saskatoon, Winnipeg and Thunder Bay) and Toronto. This route provides
redundancy for the existing southern route. Shaw Business also maintains a marine route
consisting of approximately 330 route kilometres (200 miles) located on two fibres from Seattle
to Vancouver Mainland (via Victoria). In addition, Shaw Business has secured additional
capacity to connect the cities of Toronto (via Montreal and Boston) to New York City, Seattle to
Vancouver and Edmonton to Toronto.

Satellite

(ii)
Shaw’s Satellite operations own and lease, directly and indirectly, satellite transponders that
receive and amplify digital signals and transmit them to receiving dishes located within the
footprint covered by the satellite. Shaw Direct and Satellite Services businesses share the
satellite infrastructure distributing digital video and audio signals to different markets
(residential and business), thereby allowing the Company to derive distinct revenue streams
from different customers using a common platform.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Satellite interests in these transponders are set forth in the table below.

Satellite

Anik F2

Anik F1R

Transponders

18 Ku-band
6 Ku-band
2 Ku-band (partial)

28 Ku-band
1 C-band
1 C-band (partial)

Intelsat Galaxy 16

1 Ku-band (partial)

Nature of Satellite
Interest

Owned
Leased
Leased

Leased
Leased
Leased

Leased

During 2010, Satellite entered into agreements to acquire capacity on a new satellite, Anik G1,
expected to be available in early calendar 2013. This capacity will provide additional bandwidth
for expanded customer choice, including new HD channels and other advanced services.

A more detailed description of each of the principal operations comprising the Company’s
Satellite Segment is set forth below.

Shaw Direct

Shaw Direct is one of three DTH satellite operators licensed by the CRTC to deliver digital
subscription video and audio programming services from satellites directly to subscribers’
homes and businesses. Shaw Direct began its national roll-out of digital DTH services in 1997
and, as at August 31, 2012, had approximately 910,000 subscribers.

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

With dual satellites (Anik F2 and Anik F1R) whose signals are received by subscribers through
an elliptical dish, as at August 31, 2012, Shaw Direct offered over 500 digital video and audio
channels with a programming line-up offering the majority of television services that are
available in Canada, including local over-the-air broadcasters, national networks, specialty
channels, U.S. and foreign channels, adult programming and ethnic services. Shaw Direct’s
subscribers have the option of choosing from a menu of programming packages designed to
target and accommodate subscriber interests, primary language, income level and type of
household. Such packages are marketed through Shaw Direct and a nation-wide distribution
network of third party retail locations.

Shaw Direct continues to transition to advanced modulation and encoding technology, including
MPEG-4, for its programming allowing it to increase its channel capacity. As part of its
commitment to enhance its service offerings, over 10 standard and high definition channels
were added during 2012. As at August 31, 2012, Shaw Direct offered over 90 HD channels. In
addition, during 2012 Shaw Direct began to offer a streaming VOD service through the satellite
receiver. Shaw Direct’s VOD service currently provides customers with access to over 3,000
movie and TV titles and series.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

With the new satellite expected to be available in early calendar 2013, Shaw Direct’s satellite
television services capacity will expand by 30 percent
through 16 additional national
transponders. The new transponders will provide bandwidth for expanded subscriber choice,
including new HD channels and other advanced services. The additional transponders will also
provide enhanced service quality, acting as important in-orbit back-up capacity. During 2012
Shaw Direct continued to install compatible outdoor equipment so that many customers will be
able to immediately access the new capacity once it is available.

Satellite Services

Satellite Services operations include two primary businesses, Shaw Broadcast Services and
Shaw Tracking.

Shaw Broadcast Services redistributes television and radio signals via satellite to cable
operators and other multi-channel system operators in Canada and the U.S., referred to as a
satellite relay distribution undertaking (“SRDU”), and provides uplink and network management
services for conventional and specialty broadcasters on a contract basis.

The redistribution of signals to cable companies and other operators is known in Canada as
SRDU services. Shaw Broadcast Services currently provides SRDU and signal transport services
to approximately 400 distribution undertakings, primarily cable operators, and redistributes
350 television signals and over 100 audio signals in both English and French to multi-channel
system operators. Shaw Broadcast Services also offers HITS/QT and QT Plus (Headend In the
Sky/Quick Take), which allow small and medium size cable companies to offer digital signals to
subscribers with a substantially reduced capital outlay. HITS/QT and QT Plus facilitate
increased availability and penetration of digital services in Canada and thereby add incremental
revenues to Shaw Broadcast Services from the additional services provided to smaller cable
companies.

Shaw Broadcast Services’ uplink and network management services include backhaul (transport
of signals to the uplink site), uplink (delivery of signal to the satellite so that it can be
distributed to cable operators and other distributors), bandwidth, authorization and signal
monitoring. Shaw Broadcast Services currently provides such services to over 130 specialty and
pay broadcasters across Canada, as well as to Canadian pay audio providers.

Shaw Tracking provides asset tracking and communication services to approximately 700
companies in the transportation industry in Canada, with over 45,000 vehicles using its
services. Shaw Tracking’s services capture all related information pertaining to an asset
(i.e. location, performance and productivity measures) and effectively integrate into a carrier’s
fleet management system. Via satellite, cellular and Bluetooth networks, Shaw Tracking
provides immediate real time visibility to a company’s fleet and freight. Shaw’s services and
solutions target a wide variety of segments of transportation across Canada.

(iii) Media
In May 2010, the Company entered into agreements to acquire, subject to various regulatory
approvals, 100% of
the broadcasting business of Canwest Global Communcations Corp.
(“Canwest”) including CW Investments Co. (“CW Media”), the company that owned the
specialty channels acquired from Alliance Atlantis Communications Inc. in 2007. During 2010,
the Company completed certain portions of the acquisition including acquiring a 49.9% equity
interest, a 29.9% voting interest, and an option to acquire an additional 14.8% equity interest
and 3.4% voting interest in CW Media for total consideration of approximately $750 million,

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

the Competition Bureau cleared Shaw’s
including acquisition costs. Also during 2010,
acquisition and the Ontario Superior Court of Justice issued a sanction order approving the
related consolidated plan of compromise, arrangement and reorganization. In late October 2010
the CRTC approved Shaw’s application to assume control of Canwest’s broadcasting business
and the outstanding portions of the acquisition closed on October 27, 2010. The total
consideration, including debt assumed, was approximately $2.0 billion.

In 2011 the Media results were equity accounted until October 27, 2010, at which time the
balance sheet and results of operations were consolidated.

The acquisition of Shaw’s Media business included the Global Television Network (“Global”)
and a leading portfolio of Specialty services. Technology is driving change in the Canadian
Broadcasting system,
strategic
acquisition allows Shaw to unite broadcasting services and content with its advanced
distribution platforms to offer customers strong choices in this rapidly evolving landscape.

transforming content distribution and viewership. This

The Canadian television broadcasting market is comprised of a number of English, French, and
third language stations and services that operate in different segments of the market. The
“Conventional” broadcast sector includes government owned public networks, such as the
Canadian Broadcasting Corporation (“CBC”), as well as privately owned station groups and
networks, such as Global and the CTV Television Network (“CTV” owned by BCE Inc.). The
“Specialty and Pay” sector includes Specialty television services, such as Showcase, History,
HGTV Canada, TSN (owned by BCE Inc.), and Sportsnet (owned by Rogers Communications
Inc), which provide special interest programming including news, sports, arts, lifestyle and
entertainment programming.

Global reaches 96% of Canada’s population through 12 over-the-air (“OTA”) conventional
television stations. Global offers a programming mix of entertainment programs and news that
includes hit programs such as Bones, Glee, NCIS:LA, Hawaii Five-O, Rookie Blue and the
reality series Survivor and Big Brother. Global offers news through its early-evening network
newscast Global National and delivers local news programs to a number of markets. Global
expanded its news line-up in 2012 with the launch of morning news programming in Toronto,
Regina, Saskatoon and Winnipeg, and plans to launch morning news programming in Montreal
and Halifax in 2013.

The Specialty television services owned and operated by the Media division comprise 18
including Showcase, History, HGTV Canada, Food Network Canada, Slice and
channels,
TVtropolis. The Company also has an interest in several non-operated channels including two
French language specialty television services and one English language specialty television
service. In 2012, Media launched National Geographic Wild, a channel dedicated to wildlife
programming, and rebranded two existing channels as Lifetime and H2. Media also acquired
the remaining equity interest in Mystery during the year. Media plans to launch a dedicated 24
hour all news Specialty channel in the province of British Columbia in 2013.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

The following table sets forth all of the Specialty services in which the Company holds an
interest:

Specialty Services Operated

Showcase
Slice
History
H2
HGTV Canada
Food Network Canada
Action
Lifetime
National Geographic Canada
National Geographic Canada Wild
BBC Canada
Twist TV
IFC Canada
DIY
TVtropolis
MovieTime
DejaView
Mystery

% Equity Interest

100%
100%
100%
100%
67%
51%
100%
100%
50%
50%
50%
100%
100%
67%
67%
100%
100%
100%

Specialty Services Not Operated

% Equity Interest

Historia
Series+
ABC Spark

50%
50%
49%

Seasonality and other additional information concerning the business

Seasonality and customer dependency

(a)
Although financial results of the Cable and Satellite business segments are generally not
subject to significant seasonal fluctuations, subscriber activity may fluctuate from one quarter
to another. Subscriber activity may also be affected by competition and varying levels of
promotional activity undertaken by the Company. Shaw’s Cable and Satellite businesses
generally are not dependent upon any single customer or upon a few customers.

The Media business segment financial results are subject to fluctuations throughout the year
due to, among other things, seasonal advertising and viewing patterns. In general, advertising
revenues are higher during the fall, the first quarter, and lower during the summer months, the
fourth quarter. Expenses are incurred more evenly throughout the year. The Specialty Services
are dependent on a small number of broadcast distribution undertakings (“BDUs”)
for
distribution of the services.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

to environmental

Environmental matters
(b)
Shaw’s operations are subject
including those related to
electronic waste. A number of provinces have enacted regulations providing for the diversion of
certain types of electronic waste through product stewardship programs (“PSP”). Under a PSP,
companies who sell designated products in or into a province are required to participate in or
develop an approved program for the collection and recycling of designated electronic materials
and, in some cases, pay a per-item fee. Such regulations have not had, and are not expected to
have, a material effect on the Company’s earnings or competitive position.

regulations,

Foreign operations

Shaw Business U.S. Inc., a wholly-owned subsidiary of the Company, has entered into an
indefeasible right of use (“IRU”) with respect to a portion of a United States fibre network and
owns certain other
Inc.
commenced revenue-generating operations in the United States in 2002. Its revenues for the
year ended August 31, 2012 were not material.

fibre and facilities in the United States. Shaw Business U.S.

Employees

(d)
As at August 31, 2012, the Company employed approximately 14,000 people.

Government regulations and regulatory developments

under

various Acts
(Canada)

Substantially all of the Corporation’s business activities are subject to regulations and policies
(Broadcasting Act
established
(“Broadcasting Act”),
(“Telecommunications Act”), Radiocommunication Act
Telecommunications Act
(Canada)
(“Copyright Act”)).
Broadcasting and telecommunications are generally administered by the CRTC under the
supervision of the Department of Canadian Heritage (Canadian Heritage) and Department of
Industry (Industry Canada), respectively.

(“Radiocommunication Act”) and Copyright Act

(Canada)

Pursuant to the Broadcasting Act, the CRTC is mandated to supervise and regulate all aspects
of the broadcasting system in a flexible manner. The Broadcasting Act requires BDUs to give
priority to the carriage of Canadian services and to provide efficient delivery of programming
services. The Broadcasting Act also sets out requirements for television broadcasters with
respect to Canadian content. Shaw’s businesses are dependent upon licenses (or operate
pursuant to an exemption order) granted and issued by the CRTC and Industry Canada.

Under the Telecommunications Act, the CRTC is responsible for ensuring that Canadians in all
regions of Canada have access to reliable and affordable telecommunication services of high-
quality. The CRTC has the authority to forbear from regulating certain services or classes of
services provided by a carrier if the CRTC finds that there is sufficient competition for that
service to protect the interests of users. All of Shaw’s telecommunication retail services have
been forborne from regulation and are not subject to price regulation. However, regulations do
impact certain terms and conditions under which these services are provided.

The technical operating aspects of the Corporation’s businesses are also regulated by technical
requirements and performance standards established by Industry Canada, primarily under the
Telecommunications Act and the Radiocommunication Act.

to the Copyright Act,

Pursuant
the Copyright Board of Canada oversees the collective
administration of copyright royalties in Canada including the review and approval of copyright
tariff royalties payable to copyright collectives by BDUs.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

The sections below include a more detailed discussion of various regulatory matters and recent
developments specific to Shaw’s businesses.

its cable, DTH and SRDU undertakings,

Licensing and ownership
the Corporation holds a separate
For each of
broadcasting license or is exempt from licensing. In November 2010, cable undertakings owned
and operated by the Corporation were renewed by the CRTC for a five-year period ending
August 31, 2015. The licenses of the Corporation’s DTH and SRDU undertakings were recently
renewed by the CRTC for a seven year period to August 31, 2019. Shaw has never failed to
obtain a license renewal for its cable, DTH or SRDU undertakings.

The Company also holds a separate license for each of its conventional OTA television stations
and each specialty service. These CRTC broadcasting licenses must be renewed from time to
time and cannot be transferred without regulatory approval. The majority of the Corporation’s
licenses for its OTA television stations and specialty services expired on August 31, 2011 and
were renewed for a five-year term effective September 1, 2011 and ending August 31, 2016.
The renewal decision implemented an expenditure-based regulatory regime, whereby the
Corporation must expend a certain percentage of its prior-year revenues from its conventional
OTA and specialty services on Canadian content, and also on specific categories of Canadian
programs defined as “programs of national interest”. With certain restrictions, the Corporation
may share these regulatory obligations between and among its various conventional OTA and
specialty licenses. These obligations are imposed on an individual license basis.

The potential for new or increased fees through regulation
Effective September 1, 2009, each licensed BDU was required to contribute 1.5% of its gross
revenues derived from Broadcasting to the Local Programming Improvement Fund (“LPIF”) to
support local television stations operating in non-metropolitan markets. Exempt systems were
not required to contribute to the LPIF. In July 2012, the Commission determined that it is
inappropriate to maintain the LPIF in the long term and that it will phase out the LPIF over the
next two broadcast years. Accordingly, for the 2012-2013 broadcast year, the LPIF contribution
rate is reduced from 1.5% to 1.0%. For the 2013-2014 broadcast year, the LPIF contribution
rate will be further reduced to 0.5%. As of September 2014, the LPIF will be discontinued.

In October 2008 the CRTC announced a change in its policy regarding the delivery of distant
signals by licensed BDUs. Under the new policy, licensed cable BDUs must obtain the consent
of an OTA broadcaster to deliver its signal in a distant market. DTH distribution undertakings
can distribute a local over-the-air television signal without consent within the province of origin,
but must obtain permission to deliver the over-the-air television signal beyond the province of
origin unless the DTH distribution undertaking is required to carry the signal on its basic
service.

In May 2011 the CRTC released its new DTH satellite distribution policy, pursuant to which it
will require Shaw Direct to distribute, in standard definition, all conventional OTA stations that
conform with LPIF eligibility requirements 30 days after Anik G1 comes into operation. The
CRTC did not introduce any specific rules with respect to the permitted scope of distribution of
local stations or any new rights of remuneration.

In March 2010 the CRTC introduced a new regime to allow privately-owned local television
stations to negotiate a value for the distribution of their programming with cable and satellite
companies. The CRTC was uncertain as to its authority to implement this regime and sought
clarification of its jurisdiction to do so under the Broadcasting Act by reference of the matter to

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

the Federal Court of Appeal. In February 2011 the Federal Court of Appeal ruled, by a 2-1
majority, that the CRTC has the required jurisdiction. In April 2012, the Supreme Court of
Canada heard an appeal of the Federal Court of Appeal’s decision. Depending on the outcome
of the appeal, which was initiated by major broadcast distribution companies, it is possible that
the CRTC will implement a value-for-signal policy that requires the negotiation of monetary and/
or non-monetary compensation or, where no agreements are reached, permits blackouts.

Genre exclusivity
The CRTC has indicated its intention to review the Genre Protection Policy in 2013-2014. This
policy applies specifically to Category A specialty services, which are licensed on a
one-per-genre basis and enjoy broad protection from direct competition within their respective
programming genres. As a result of this proceeding, the policy could be removed entirely or for
specific programming genres.

the

Act

has

CRTC

jurisdiction

Access rights
Shaw’s cable systems require access to support structures, such as poles, strand and conduits
of telecommunication carriers and electric utilities, in order to deploy cable facilities. Under the
of
Telecommunications
telecommunication carriers, including rates for third party use. The CRTC’s jurisdiction does not
extend to electrical utility support structures, which are regulated by provincial utility
authorities. In December 2010 the CRTC issued Telecom Decision 2010-900, significantly
increasing the rates (including a retroactive component dating back to July 2009) for licensees,
such as the Corporation, to attach their facilities to support structures of incumbent telecom
carriers.
including the Corporation, applied to the Commission
requesting a review and variance of the decision, but the application was denied. In a follow-up
proceeding to Telecom Decision 2010-900, the CRTC approved in July 2011 a new charge for
the Corporation’s attachments to the service poles of telecommunications carriers, which is
equal to the normal pole charge set out in Telecom Decision 2010-900.

In 2011, cable carriers,

structures

support

over

Under the Telecommunications Act, the Corporation may construct facilities in roadways and
other public places with the consent of the municipality. The CRTC recently initiated a
proceeding to develop a non-binding model municipal access agreement and the Corporation is
a participant in that proceeding along with other industry members and municipalities.

Digital Phone, new media and Internet
Regulation of the incumbent local exchange carriers (“ILECs”), competitors of Shaw’s Digital
Phone business, is now largely governed by the current Government’s deregulatory initiatives.
Specifically, in December 2006, the Governor in Council directed the CRTC to “rely on market
forces to the maximum extent feasible as the means of achieving the telecommunications
policy objectives, and when relying on regulation to use measures that are efficient and
proportionate to their purpose and that interfere with the operations of competitive market
forces to the minimum extent necessary to meet the policy objectives”. Over the past several
years this has resulted in numerous forbearance orders being granted to TELUS Corporation
(“TELUS”), Manitoba Telecom Services Inc. (“MTS”), BCE Inc. and/or Bell Canada (collectively
“Bell”), and SaskTel that cover the majority of Shaw’s operating territory.

In May 2011, the CRTC issued its decision on the obligations of carriers to provide service and
to subsidize the provision of services to customers living in high cost areas. The CRTC reduced
the number of high-cost serving areas that were eligible for subsidy and eliminated the subsidy

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

granted to competitive phone providers such as Shaw. These changes resulted in a decrease in
the percentage of contribution by the Corporation to fund local telephone service in high cost
serving areas, and eliminated any subsidy that Shaw was receiving for providing telephone
service in rural or remote areas.

In June 2009 the CRTC issued its decision on “new media” by extending its exemption of the
provision of digital media broadcasting undertakings for another five years. It also decided
against imposing any regulatory measures, including financial contribution requirements on
ISPs, to support Canadian new media content.

In August 2009 the CRTC initiated a reference to the Federal Court of Appeal on the legal
question of whether the Broadcasting Act applies to ISPs. Shaw participated in the Federal
Court of Appeal Reference in June 2010 and submitted that ISPs are not subject to the
Broadcasting Act. In July 2010 the Federal Court of Appeal issued a decision finding that the
Broadcasting Act does not apply to ISPs. Leave to appeal that decision to the Supreme Court of
Canada was obtained by certain cultural groups. In February 2012, the Supreme Court of
Canada issued a decision upholding the Federal Court of Appeal’s finding that ISPs are not
subject to the Broadcasting Act.

Shaw is mandated by the CRTC to provide Third Party Internet Access (“TPIA”) service, which
enables independent ISPs to provide Internet services at premises served by Shaw’s network. In
2011, the CRTC reviewed the billing model for TPIA services, TPIA rates and whether, and how,
usage based billing may be applied to TPIA services. In the decision that followed its review
(the “Wholesale Internet Access Decision”), the CRTC approved two billing models, a flat-rate
model in which the TPIA rate includes access and usage and a capacity-based model in which
access and capacity usage are billed separately. Shaw is currently approved to provide TPIA
service under the flat-rate model although Shaw may elect to move to a capacity-based model
in the future.

In late 2010 Parliament passed anti-spam legislation, which has not yet come into force.
Canada’s anti-spam legislation (“CASL”) sets out a comprehensive regulatory regime regarding
including requirements to obtain consent prior to sending commercial
on-line commerce,
electronic messages and installing computer programs. Compliance with CASL will require
Shaw to review and update its current practices with respect
to marketing and other
communications with customers.

Shaw and other telecommunications providers will also need to review and may be required to
upgrade their
interception and other systems to comply with anticipated lawful access
requirements. In February 2012, the Government introduced Bill C-30, An Act to enact the
Investigating and Preventing Criminal Electronic Communications Act and to amend the
Criminal Code and other Acts, which has not yet come into force or proceeded beyond
introduction and first
reading in the House of Commons. The legislation would require
telecommunications service providers and ISPs to establish and maintain capabilities to
facilitate the lawful
interception of information transmitted by telecommunications and to
provide information about subscribers to law enforcement agencies.

Digital transition
In July 2009 the CRTC identified the major markets where it expected conventional television
broadcasters to convert their full-power OTA analog transmitters to digital transmitters by
August 31, 2011. The conversion from analog to digital is expected to free up spectrum for
government auction.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

The Corporation completed the digital transition in all mandatory markets as of August 31,
2011. During 2012 the Corporation commenced converting transmitters in non-mandatory
markets and expects to be complete in 2016.

Vertical integration proceeding
In view of increasing industry consolidation and vertical integration, the CRTC recently initiated
a hearing to review the regulatory framework relating to vertical integration. A decision pursuant
to this proceeding was issued in September 2011.

The Commission recognizes that vertical integration can be beneficial and that it also has
potential to enable preferential treatment. Accordingly, it introduced new safeguards in addition
to various regulatory mechanisms that already exist, including a prohibition on the distribution
of television programs on an exclusive basis on new media and a reverse onus of proof in cases
where undue preference is alleged in connection with the terms of distribution of any
programming service. New measures also include a code of conduct governing commercial
relations and interactions between and among broadcast distributors, programmers and new
media undertakings, and a standstill requirement prohibiting a distribution undertaking from
changing the terms of distribution or carriage pending the resolution of a dispute. Uncertainty
remains as to the ultimate impact of the CRTC decision introducing the new safeguards. The
code of conduct will be applied on a case-by-case basis when disputes arise. The new
safeguards could impact efficiencies and innovation that could otherwise be realized by the
Corporation.

Limits on non-Canadian ownership and control for broadcasting undertakings
Non-Canadians are permitted to own and control, directly or indirectly, up to 33.3% of the
voting shares and 33.3% of the votes of a holding company that has a subsidiary operating
company licensed under the Broadcasting Act. In addition, up to 20% of the voting shares and
20% of the votes of the licensee may be owned and controlled, directly or indirectly, by
non-Canadians. As well, the chief executive officer (CEO) and not less than 80% of the board of
directors of the licensee must be resident Canadians. There are no restrictions on the number of
non-voting shares that may be held by non-Canadians at either the holding company or licensee
level. Neither
the licensee may be controlled in fact by
non-Canadians, the determination of which is a question of fact within the jurisdiction of the
CRTC.

the holding company nor

The same restrictions apply to certain Canadian carriers pursuant to the Telecommunications
Act and associated regulations and the Radiocommunication Act and associated regulations,
except that there is no requirement that the CEO be a resident Canadian. In March 2012, the
government announced its intention to amend the Telecommunications Act to remove Canadian
ownership requirements for wire-line and wireless telecommunications carriers with annual
revenues from the provision of telecommunications services in Canada that represent less than
10% of the total annual revenues, as determined by the CRTC. These amendments were passed
as part of the federal budget bill in June 2012 and may lead to greater levels of competition in
the Canadian telecommunications market.

The Corporation’s Articles contain measures to ensure the Corporation is able to remain
compliant with applicable Canadian ownership requirements and its ability to obtain, amend or
renew a license to carry on any business. Shaw must file a compliance report annually with the
CRTC confirming that it is eligible to operate in Canada as a telecommunications common
carrier.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

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:

Revenue

i)
Revenue is a measurement determined in accordance with International Financial Reporting
Standards (“IFRS”). It represents the inflow of cash, receivables or other consideration arising
from the sale of products and services. Revenue is net of items such as trade or volume
discounts, agency commissions 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-
IFRS financial measures. These financial measures do not have standard definitions prescribed
by IFRS and therefore may not be comparable to similar measures disclosed by other
companies. The Company’s continuous disclosure requirements may also provide discussion
and analysis of additional GAAP measures. Additional GAAP measures include line items,
headings and sub-totals included in financial statements. The Company utilizes these measures
in making operating decisions and assessing its performance. Certain investors, analysts and
others utilize these measures in assessing the Company’s operational and financial performance
and as an indicator of its ability to service debt and return cash to shareholders. These
non-IFRS measures and additional GAAP measures have not been presented as an alternative to
net income or any other measure of performance or liquidity prescribed by IFRS. The following
contains a listing of the Company’s use of non-IFRS financial measures and additional GAAP
measures and provides a reconciliation to the nearest IFRS measure or provides a reference to
such reconciliation.

Operating income before amortization and operating margin

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

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

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Free cash flow

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

($millions Cdn)

Revenue

Cable
Satellite
Media

Intersegment eliminations

Operating income before amortization(1)

Cable
Satellite
Media

Capital expenditures and equipment costs (net):

Cable
Satellite
Media

Total

Free cash flow before the following
Less:

Interest
Cash taxes
Other adjustments:

Non-cash share-based compensation
CRTC benefit obligation funding
Non-controlling interests
Pension adjustment
Customer equipment financing
Preferred share dividends

Free cash flow

Operating margin(1)

Cable
Satellite
Media

Year ended August 31,

2012

2011(2)

Change
%

3,193
844
1,053

5,090
(92)

4,998

1,502
293
332

2,127

810
94
31

935

3,096
827
891

4,814
(73)
4,741

1,510
289
252

2,051

709
107
27

843

1,192

1,208

3.1
2.1
18.2

5.7
26.0
5.4

(0.5)
1.4
31.7

3.7

14.2
(12.1)
14.8

10.9

(1.3)

(329)
(282)

(312)
(240)

5.4
17.5

6
(48)
(34)
12
(20)
(15)

10
(30)
(20)
16
(15)

(40.0)
60.0
70.0
(25.0)
33.3
– >100.0

482

617

(21.9)

47.0% 48.8%
34.7% 34.9%
31.5% 28.3%

(1.8)
(0.2)
3.2

See key performance drivers on page 20.

(1)
(2) Restated to reflect changes in the calculation related to the pension adjustment and

customer equipment financing.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Free cash flow is calculated as operating income before amortization, less interest, cash taxes
paid or payable, capital expenditures (on an accrual basis and net of proceeds on capital
dispositions) and equipment costs (net), adjusted to exclude share-based compensation
expense, less cash amounts associated with funding the new and assumed CRTC benefit
obligations related to the acquisition of Shaw Media as well as excluding non-controlling
interest amounts that are consolidated in the operating income before amortization, capital
expenditure and cash tax amounts. Free cash flow also includes changes in receivable related
balances with respect to customer equipment financing transactions as a cash item, and is
adjusted for recurring cash funding of pension amounts net of pension expense. Dividends paid
on the Company’s Cumulative Redeemable Rate Reset Preferred Shares are also deducted.

Free cash flow has not been reported on a segmented basis. Certain components of free cash
flow including operating income before amortization, capital expenditures (on an accrual basis
net of proceeds on capital dispositions) and equipment costs (net), CRTC benefit obligation
funding, and non-controlling interest amounts continue to be reported on a segmented basis.
Other items, including interest and cash taxes, are not generally directly attributable to a
segment, and are reported on a consolidated basis.

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

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

Shaw Direct measures its count of subscribers in the same manner as Cable counts its Basic
customers, except that it also includes seasonal customers who have indicated their intention to
reconnect within 180 days of disconnection.

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

Commencing in 2013 the Company will no longer
include pending installations in the
subscriber counts for Internet and Digital Phone. Opening balances and subscriber growth will
be restated for comparable periods commencing in the first quarter reporting for 2013. Also,
given the growth in and penetration of Digital customers, the Company will also combine the
reporting of Basic cable and Digital as a Video subscriber.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Critical accounting policies and estimates

The Company prepared its Consolidated Financial Statements in accordance with IFRS as
issued by the International Accounting Standards Board (“IASB”). An understanding of the
Company’s accounting policies is necessary for a complete analysis of results,
financial
position, liquidity and trends. Refer to Note 2 to the Consolidated Financial Statements for
additional information on accounting policies. The following section discusses key estimates
and assumptions that management has made under IFRS and how they affect the amounts
reported in the Consolidated Financial Statements and notes. Following is a discussion of the
Company’s critical accounting policies:

Revenue and expense recognition

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

The Company has multiple deliverable arrangements comprised of upfront fees (subscriber
connection fee revenue and/or customer premise equipment revenue) and related subscription
revenue. The Company determined that the upfront fees charged to customers do not constitute
separate units of accounting; therefore, these revenue streams are assessed as an integrated
package.

With Shaw Media, subscriber revenue is recognized monthly based on subscriber levels.
Advertising revenues are recognized in the period in which the advertisements are aired or
displayed on the Companys’ digital properties and recorded net of agency commissions as these
amounts are paid directly to the agency or advertiser. When a sales arrangement includes
multiple advertising spots, the proceeds are allocated to individual advertising spots under the
arrangement based on relative fair values.

Subscriber connection fee revenue
Connection fees have no stand alone value to the customer separate and independent of the
Company providing additional subscription services, therefore the connection fee revenue must
be deferred and recognized systematically over the periods that the subscription services are
earned. There is no specified term for which the customer will receive the related subscription
service, therefore the Company has considered its customer churn rate and other factors, such
as competition from new entrants, to determine the deferral period of two years.

Customer premise equipment revenue and costs
Customer premise equipment available for sale, which generally includes DCT and DTH
equipment, has no stand alone value to the customer separate and independent of the Company
providing additional subscription services. Therefore the equipment revenue 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 equipment revenue commences once the subscriber service is activated.
There is no specified term for which the customer will receive the related subscription service,
therefore the Company has considered various factors including customer churn, competition
from new entrants, and technology changes to determine the deferral period of two years.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

In conjunction with equipment revenue, the Company also incurs incremental direct costs
which include equipment and related installation costs. These direct costs cannot be separated
from the undelivered subscription service included in the multiple deliverable arrangement.
Under IAS 2 “Inventories”, these costs represent inventoriable costs and are deferred and
amortized over the period of two years, consistent with the recognition of the related equipment
revenue. The equipment and installation costs generally exceed the amounts received from
customers on the sale of equipment (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.

Shaw Tracking equipment revenue and costs
Shaw Tracking equipment revenue is recognized over the period of the related service contract
for airtime, which is generally five years.

In conjunction with Shaw Tracking equipment revenue, the Company incurs incremental direct
costs which include equipment and related installation costs. These direct costs cannot be
separated from the undelivered tracking service included in the multiple deliverable
arrangement. Under IAS 2 “Inventories”, these costs represent inventoriable costs and are
deferred and amortized over the period of five years, consistent with the recognition of the
related tracking equipment revenue.

Shaw Business installation revenue and expenses
The Company also receives installation revenues in its Shaw Business operation on contracts
with commercial customers which are deferred and recognized as revenue on a straight-line
basis over the related service contract, generally spanning two to ten years. Direct and
incremental costs associated with the service contract, in an amount not exceeding the upfront
installation revenue, are deferred and recognized as an operating expense on a straight-line
basis over the same period.

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.

Income statement classification
revenue and deferred
The Company distinguishes amortization of deferred equipment
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 costs are non-cash items on the income statement,
similar to the Company’s amortization of deferred IRU revenue, which the Company also
segregates from ongoing revenue. Further, within the lifecycle of a customer relationship, the
customer generally purchases customer premise equipment at the commencement of the
customer relationship, whereas the subscription revenue represents a continuous revenue
stream throughout that customer relationship. Therefore, the segregated presentation provides a

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

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.

Allowance for doubtful accounts

ii)
The majority of the Company’s revenues are earned from selling on credit to individual
subscribers. Because there are some customers who do not pay their debts, selling on credit
necessarily involves credit losses. The Company is required to make an estimate of an
appropriate allowance for doubtful accounts on its receivables. In determining its estimate, the
Company considers factors such as the number of days the 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 accounts
receivable and collections will increase or decrease bad debt expense.

iii)

Property, plant and equipment and other intangibles – capitalization of direct labour and
overhead

As outlined in IAS 16 “Property, plant and equipment”, the cost of property, plant and
equipment and other intangibles 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 are directly attributable to the acquisition, construction, development or
betterment of the networks or other intangibles. Repairs and maintenance expenditures are
charged to operating expenses as incurred.

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

such as engineering and information technology

Corporate departments
(“IT”):
Engineering is primarily involved in overall planning and development of the cable/
Internet/Digital Phone infrastructure. Labour and overhead costs directly related to these
activities are capitalized as the activities directly relate to the planning and design of the
construction of the distribution system. The IT department devotes considerable efforts
towards the development of systems to support Digital Phone, WiFi, and projects related
to new customer management, billing and operating support systems. Labour costs
directly related to these and other projects are capitalized.

Cable regional construction departments, which are principally involved in constructing,
rebuilding and upgrading the cable/Internet/Digital Phone 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 the new subdivision builds, increasing
network capacity for Internet, Digital Phone and VOD by reducing the number of homes
fed from each node, and upgrades of plant capacity, including the DNU project, and the
WiFi build.

Subscriber-related activities such as installation of new drops and Internet and Digital
Phone services: The labour and overhead directly related to the installation of new
services are capitalized as the activity involves the installation of capital assets

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

(i.e., wiring, filters, software, etc.) which enhance the service potential of the distribution
system through the ability to earn future 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
labour versus external
contractors used in construction projects.

internal

The percentage of direct labour capitalized in many cases is determined by the nature of
employment in a specific department. For example, a significant portion of labour and direct
overhead of the cable regional construction departments is capitalized as a result of the nature
of the activity performed by those departments. Capitalization is also based on piece rate work
performed by unit-based employees 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.

Amortization policies and useful lives

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

Intangibles

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

Broadcast rights and licenses in the cable and satellite businesses are comprised of broadcast
authorities including licenses and exemptions from licensing that allow access to homes and
subscribers in a specific area that are identified on a business combination with respect to the
acquisition of shares or assets of a BDU.

Broadcast licenses in the media business are licenses to operate conventional and specialty
services that are identified on a business combination with respect to the acquisition of shares
or assets of a broadcasting undertaking.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

The Company has concluded that the broadcast rights and licenses have indefinite useful lives
since there are no legal, regulatory, contractual, economic or other factors that would prevent
the Company’s license renewals or limit the period over which these assets will contribute to
the Company’s cash flows. Goodwill and broadcast rights and licenses are not amortized but
assessed for impairment on an annual basis in accordance with IAS 36 “Impairment”.

The Company also owns AWS licenses that are required to operate a wireless system in Canada.
The AWS licenses have indefinite lives and are subject to an annual review for impairment by
comparing the estimated fair value to the carrying amount. In late 2011 Shaw decided not to
pursue a conventional wireless build. The Company continues to hold its wireless spectrum
while it reviews all options.

Program rights represent licensed rights acquired to broadcast television programs on the
Company’s conventional and specialty television channels and program advances are in respect
of payments for programming prior to the window license start date. For licensed rights, the
Company records a liability for program rights and corresponding asset when the license period
has commenced and all of the following conditions have been met: (i) the cost of the program is
known or reasonably determinable, (ii) the program material has been accepted by the Company
in accordance with the license agreement and (iii) the material is available to the Company for
telecast. Program rights are expensed on a systematic basis generally over the estimated
exhibition period as the programs are aired and are included in operating, general and
administrative expenses.

Other intangibles include software that is not an integral part of the related hardware as well as
a trademark and brands. Software is amortized on a straight line basis over their estimated
useful lives ranging from four to ten years.

Asset impairment

vi)
The Company tests goodwill and indefinite-life intangibles for impairment annually (as at
March 1) and when events or changes in circumstances indicate that the carrying value may be
impaired. The recoverable amount of each cash-generating unit (“CGU”) is determined based
on the higher of the CGU’s fair value less costs to sell and its value in use. A CGU is the
smallest identifiable group of assets that generate cash flows that are independent of the cash
inflows from other assets or groups of assets. The Company’s cash generating units are
consistent with its reporting segments, Cable, DTH and Satellite Services and Media. Where the
recoverable amount of the CGU is less than its carrying amount, an impairment loss is
recognized. Impairment losses relating to goodwill cannot be reversed in future periods. The
results of
tests are provided in Note 10 to the Consolidated Financial
Statements.

the impairment

vii) Employee benefit plans
As at August 31, 2012, Shaw had an unfunded defined benefit pension plan for key senior
executives and various funded defined benefit plans for certain unionized and non-unionized
employees. The amounts reported in the financial statements relating to the defined benefit
pension plans are determined using actuarial valuations that are based on several assumptions
including the discount rate, rate of compensation increase and the expected return on plan assets
(for funded plans). 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

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

assumed results by immediately recognizing differences in benefit obligations and plan
performance in other comprehensive income/loss. 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 based on the yield of long-term, high-quality
corporate fixed income investments closely matching the term of the estimated future cash flows
and is reviewed and adjusted as changes required. The following table illustrates the increase on
the accrued benefit obligation and pension expense of a 1% decrease in the discount rate:

Accrued Benefit
Obligation at
End of Fiscal 2012

Pension Expense
Fiscal 2012

Discount Rate – Unfunded Plan
Weighted Average Discount Rate – Funded Plans
Impact of: 1% decrease ($ millions Cdn) – Unfunded Plan
Impact of: 1% decrease ($ millions Cdn) – Funded Plans

4.50%
4.67%
65
26

5.50%
5.75%
1
1

viii) Deferred income taxes
The Company has recognized deferred income tax assets in respect of its losses and losses of
certain of its subsidiaries. Realization of deferred 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 deferred 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
tax 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.

Commitments and contingencies

ix)
The Company is subject to various claims and contingencies related to lawsuits, taxes and
commitments under contractual and other commercial obligations. Contingent
losses are
recognized by a charge to income when it is likely that a future event will confirm that an asset
has been impaired or a liability incurred at the date of the financial statements and the amount
can be reasonably estimated. Contractual and other commercial obligations primarily relate to
network fees, program rights 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.

Related party transactions

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

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

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

Burrard Landing Lot 2 Holdings Partnership
The Company has a 33.33% interest in the Partnership. During the current year, the Company
paid the Partnership for
located in
Vancouver, BC, is the Company’s headquarters for its lower mainland operations.

lease of office space in Shaw Tower. Shaw Tower,

Specialty Channels
The Company has interests in a number of specialty television channels which are either
subject to joint control or significant influence, including Historia, Series+ and ABC Spark.
During the current year the Company paid network fees and provided uplink of television signals
to these channels.

Key management personnel
Key management personnel consist of the Board of Directors and the most senior executive
team that have the authority and responsibility for directing and controlling the activities of the
Company. In addition to compensation provided to key management personnel for services
rendered, the Company transacts with companies related to certain board members primarily for
the purchase of remote control units and agency services for direct sales and related installation
of equipment.

New accounting standards

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

The following policies were adopted in fiscal 2012:

International Financial Reporting Standards

In February 2008, the CICA Accounting Standards Board confirmed that Canadian publicly
accountable enterprises are required to adopt IFRS as issued by the IASB for fiscal periods
beginning on or after January 1, 2011. The Company’s date of
transition to IFRS is
September 1, 2010 and its date of adoption is September 1, 2011.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Exemption elections

The Company’s adoption of IFRS requires application of IFRS 1 which provides guidance for an
entity’s initial adoption of IFRS. IFRS 1 generally requires that an entity apply all IFRS
effective at the end of its first IFRS annual reporting period retrospectively. However, IFRS 1
does include certain mandatory exceptions and limited optional exemptions in specified areas
of certain standards from this general requirement. The Company has elected the following
exemptions from the general requirement of retrospective application as follows:

(a)

Business combinations

IFRS 1 provides the option to apply IFRS 3 Business Combinations retrospectively or
prospectively from the date of
transition. Retrospective application would require
restatement of all business combinations that occurred prior to the date of transition. The
Company has elected to not restate any business combinations that occurred prior to
September 1, 2010. Under Canadian GAAP, the Company had early adopted the new
accounting standards for business combinations, consolidation and non-controlling
interests effective September 1, 2010, which are aligned with IFRS 3 Business
Combinations and IAS 27 Consolidated and Separate Financial Statements.

(b)

Employee benefits

IFRS 1 provides the option to recognize all cumulative actuarial gains and losses on
defined benefit plans deferred under Canadian GAAP in opening retained earnings. The
loss in opening
Company elected to recognize the cumulative unamortized actuarial
retained earnings as at September 1, 2010.

(c)

Borrowing costs

IFRS 1 allows IAS 23 Borrowing Costs to be applied prospectively from the date of
transition. The Company has elected to apply IAS 23 prospectively for projects
commenced on or after September 1, 2010.

The significant differences between Canadian GAAP and IFRS are explained below.

(i)

Share-based compensation

Under IFRS, the fair value of stock options with service conditions is required to be
expensed over a vesting period (“graded vesting”) based on when options vest. Under
Canadian GAAP, share-based compensation was recognized using a straight-line method.

Under IFRS, cash settled share-based payments are measured initially and remeasured at
the end of each reporting period at fair value as determined by an option pricing model.
Under Canadian GAAP, the liability was measured and remeasured at intrinsic values.

(ii)

Employee benefits

As stated in exemption elections above, the Company elected to recognize cumulative
unamortized actuarial losses under IFRS in opening retained earnings. Subsequent to the
date of transition, actuarial gains and losses are recorded in other comprehensive income
at the end of each reporting period. Under Canadian GAAP, actuarial gains and losses
were amortized into income on a straight-line basis over the estimated average remaining
service life of employees.

Under IFRS, past service costs of defined benefit plans are expensed on a straight-line
basis over the vesting period. Under Canadian GAAP, past service costs were amortized on

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

a straight-line basis over the estimated average remaining service life of employees. As
part of the retrospective application of IAS 19, all vested past service costs have been
recognized in opening retained earnings at the transition date.

(iii)

Income taxes

The expected manner of recovery of intangible assets with indefinite useful lives for the
purpose of calculating deferred income taxes is different under IFRS than Canadian
GAAP. This difference in inclusion rate results in a reduction in the deferred income tax
liability related to these assets at transition and also results in a decrease to goodwill and
deferred income tax liability and increase to non-controlling interests in respect of the
Media business acquisition in fiscal 2011.

Under IFRS, the Company applies a probable weighted average methodology in respect to
its determination of measurement of its tax uncertainties.

Income taxes reflect the tax effect of other IFRS transition adjustments.

Also, under IFRS, deferred income tax assets and liabilities are only classified as long
term.

(iv)

Intangibles

Under IFRS, amortization of indefinite-life intangibles is prohibited. Upon transition,
amortization of broadcast rights and licenses that had been previously recorded under
Canadian GAAP has been reversed and recognized in opening retained earnings at the
date of transition.

Under Canadian GAAP, program rights were segregated between current and noncurrent in
the statement of financial position based on estimated time of usage. Under IFRS,
program rights are segregated between current and noncurrent based on expected life at
time of acquisition.

(v)

Constructive obligation

Under IFRS, constructive obligations must be recognized when certain criteria are met.
These have been accrued at the transition date.

(vi) Provisions

IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires separate
disclosure on the face of the statement of financial position. Under Canadian GAAP,
separate disclosure was not
therefore on transition all provisions were
reclassified from accounts payable and accrued liabilities or other long-term liabilities.

required,

Standards, interpretations and amendments to standards issued but not yet effective

The Company has not yet adopted certain standards, interpretations and amendments that have
been issued but are not yet effective. The following pronouncements are being assessed to
determine their impact on the Company’s results and financial position.

IFRS 9, Financial Instruments: Classification and Measurement, is the first part of the
replacement of IAS 39 Financial Instruments and applies to the classification and
measurement of financial assets and financial liabilities as defined by IAS 39. It is
required to be applied retrospectively for the annual period commencing September 1,
2015.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

The following standards and amended standards are required to be applied retrospectively
for the annual period commencing September 1, 2013 and other than the disclosure
requirements therein, they must be initially applied concurrently:
Š

IFRS 10, Consolidated Financial Statements,
replaces previous consolidation
guidance and outlines a single consolidation model that identifies control as the
basis for consolidation of all types of entities.
IFRS 11, Joint Arrangements, replaces IAS 31 Interests in Joint Ventures and SIC
13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers. The new
standard classifies joint arrangements as either joint operations or joint ventures.
IFRS 12, Disclosure of Interests in Other Entities, sets out required disclosures on
application of IFRS 10, IFRS 11, and IAS 28 (amended 2011).
IAS 27, Separate Financial Statements was amended in 2011 for the issuance of
IFRS 10 and retains the current guidance for separate financial statements.
IAS 28, Investments in Associates was amended in 2011 for changes based on
issuance of IFRS 10 and IFRS 11 and provides guidance on accounting for joint
ventures, as defined by IFRS 11, using the equity method.

requirements for disclosure of

Income Taxes (amended 2011),

IFRS 13, Fair Value Measurement, defines fair value, provides guidance on its
fair value
determination and introduces consistent
measurements and is required to be applied prospectively for
the annual period
commencing September 1, 2013.
IAS 12,
introduces an exception to the general
measurement requirements of IAS 12 in respect of investment properties measured at fair
value. It is required to be applied retrospectively for the annual period commencing
September 1, 2012.
IAS 19, Employee Benefits (amended 2011), eliminates the existing option to defer
actuarial gains and losses and requires changes from the remeasurement of defined
benefit plan assets and liabilities to be presented in the statement of other
comprehensive income and is required to be applied retrospectively (with certain
exemptions) for the annual period commencing September 1, 2013.
IAS 1, Presentation of Financial Statements, was amended to require presentation of
items of other comprehensive income based on whether they may be reclassified to the
statement of income and is required to be applied retrospectively for the annual period
commencing September 1, 2012.

Known events, trends, risks and uncertainties

I.
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 relate to:

Š
Š
Š
Š
Š

Competition and technological change, including change in regulatory regime
Economic conditions
Interest rates, foreign exchange rates, and capital markets
Litigation
Uninsured risks of loss

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Š
Š
Š
Š
Š
Š
Š
Š

Reliance on suppliers
Programming expenses
Unionized labour
Holding company structure
Control of the Company by the Shaw family
Information systems and internal business processes
Dividend payments
Acquisitions and other strategic transactions

Competition and technological change

i)
Cable and satellite providers and television broadcasters operate in an open and competitive
marketplace. Shaw’s businesses face competition from regulated and unregulated entities
utilizing existing or new communications technologies and from illegal services. In addition, the
rapid deployment of new technologies, services and products has reduced the traditional lines
between telecommunications, Internet and broadcasting services and expands further the
competitive landscape. Shaw may face competition in the future from other technologies being
developed or yet to be developed. While Shaw continually seeks to enhance its competitive
position through investments in infrastructure, technology, programming and customer service,
there can be no assurance that these investments will be sufficient to maintain Shaw’s market
share or performance in the future.

CABLE TELEVISION AND DTH
Shaw’s cable television and DTH systems currently compete or may in the future compete with
other distributors of video and audio signals, including other DTH satellite services, satellite
master antenna systems, multipoint distribution systems (“MDS”), other competitive cable
television undertakings and telephone companies offering video service. To a lesser extent,
Shaw’s cable television systems compete with the direct reception by antenna of unencrypted
OTA local and regional broadcast television signals. As noted above, Shaw also competes with
unregulated internet services,
illegal satellite services including grey and black market
offerings, and unregulated video services and offerings available over high-speed internet
connections.

Almost all of Shaw’s cable television systems are concentrated in major urban markets, having
favourable demographics and growth potential, with most of the remainder in smaller clusters,
linked by fibre optic distribution systems to each other or to larger markets. Through this
clustering strategy, Shaw maximizes the benefits of operating efficiencies to strengthen its
competitive position in smaller markets. In addition, Shaw continues to invest in technologies
to increase channel capacity, to expand the range and quality of its services, and to enhance its
programming and communication service offerings. Shaw’s ability to offer its cable, internet
and telecommunications services in bundles allows for strong competitive offerings. The
Company expects that competition will continue to increase and there can be no assurance that
such increased competition will not have a material adverse effect on Shaw’s results of
operations. The Company also expects increased IPTV competition across Canada with respect
to its DTH Satellite services.

INTERNET
There are a number of different types of ISPs offering residential and business Internet services
that compete or may compete in the future with Shaw’s Internet services. These include
ILECs, wireless providers and electricity transmission and
independent service providers,
distribution companies.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

High-speed Internet access services are principally provided through cable modem and digital
subscriber line (“DSL”) technology. Internet services through cable modem technology are
primarily provided by cable companies, although the CRTC has also authorized third-party ISPs
to access cable companies’ facilities, such as Shaw’s, to deliver high-speed Internet services.

Although operating in a competitive environment, Shaw expects that consumer demand for
Internet access services and for bandwidth-intensive applications on the Internet (including
streaming video, digital downloading and interactive gaming) will lead to continued demand for
high-speed Internet services. Shaw continues to expand the capacity of its network to handle
the anticipated increases in demand, however there can be no assurance that network capacity
will continue to meet the increasing demand of its customers.

DIGITAL PHONE
The competitors of Shaw Digital Phone include ILECs, Competitive Local Exchange Carriers
(“CLECs”), non-facilities-based Voice over Internet Protocol (“VoIP”) providers and wireless
providers. ILECs currently control the majority of the local telephone services market in Canada.
Several of such competitors have larger operational and financial resources than the Corporation
and are well established with residential customers in their respective markets. In addition,
there is an emerging trend toward households opting to rely on wireless voice services in place
of landline services such as Digital Phone. These developments may negatively affect the
business and prospects of Shaw’s Digital Phone.

INTERNET INFRASTRUCTURE
Through Shaw Business, Shaw competes with other telecommunications carriers in providing
high-speed broadband communications services (data and video transport and Internet
connectivity services)
telecommunications providers. The
ISPs and other
telecommunications services industry in Canada is highly competitive, rapidly evolving and
subject to constant change. Competitors of Shaw Business include ILECs, competitive access
providers, CLECs, 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 competition.

to businesses,

SATELLITE SERVICES
In its Canadian SRDU business, Satellite Services faces competition principally from one other
operating SRDU operator in Canada. In February 2010, another company was licensed by the
CRTC to provide both DTH and SRDU services in Canada, but has not yet commenced service.
Satellite Services also faces competition from the expansion of fibre distribution systems
delivering distant US and Canadian conventional television signals into territories previously
served only by SRDU operators.

MEDIA
The OTA and Specialty television business and the advertising markets in which they operate
are highly competitive. Numerous broadcast and specialty television networks compete for
advertising revenues. The CRTC continues to grant new Specialty television licenses which
further increases competition. The Company’s ability to compete successfully depends on a
number of factors, including its ability to secure popular television programming and achieve
high distribution levels. The Company expects that competition will continue to increase and
there can be no assurance that increased competition will not have a material adverse effect on
Shaw’s results of operations.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

IMPACT OF REGULATION
As more fully discussed under Government
regulations and regulatory developments,
substantially all of the Corporation’s business activities are subject to regulations and policies
administered by Industry Canada and/or the CRTC. The Corporation’s operations and results are
affected by changes in regulations, policies and decisions, including changes in interpretation
of existing regulations by courts, the regulator (the CRTC) or the government. This regulation
relates to, among other things, licensing, competition, programming carriage and the potential
for new or increased fees. Changes in the regulatory regime may adversely affect the operations
and performance of the Company.

Economic conditions

ii)
Canada’s economy is affected by uncertainty in global financial and equity markets and
slowdowns in global economic growth. Advertising revenues are affected by prevailing economic
conditions. Changes in economic conditions may affect discretionary consumer spending,
resulting in increased or decreased demand for Shaw’s product offerings as well as advertising
airtime and rates. There can be no assurance that current or future events caused by volatility
in domestic or international economic conditions or a decline in economic growth will not have
an adverse effect on the Company’s business and operating results.

Interest rates, foreign exchange rates and capital markets

iii)
As at August 31, 2012 Shaw has the following financial exposures at risk in its day-to-day
operations:

(a)

Interest rates: Due to the capital-intensive nature of Shaw’s operations, the Company
utilizes
structure. The primary
components of this structure are:

long-term financing extensively

in its capital

1. Banking facilities as more fully described in Note 13 to the Consolidated

Financial Statements.

2. Various Canadian denominated senior notes and debentures with varying
maturities issued in the public markets as more fully described in Note 13 to the
Consolidated Financial Statements.

Interest on bank indebtedness is based on floating rates while the senior notes are
fixed-rate obligations. If required, Shaw utilizes its credit facility to finance day-to-day
operations and, depending on market conditions, periodically converts the bank loans
to fixed-rate instruments through public market debt issues. Increases in interest rates
could have a material adverse effect on the Company’s cash flows.

As at August 31, 2012, 100% of Shaw’s consolidated long-term debt was fixed with
respect to interest rates.

(b) Foreign exchange: Some of the Company’s capital expenditures are incurred in US
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.

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

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Shaw manages its exposure to floating interest rates through maintaining a balance of fixed and
floating rate debt. To mitigate some of the foreign exchange uncertainty with respect to capital
expenditures, the Company regularly enters into forward contracts in respect of US dollar
commitments. 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 a financial institution with Standard & Poor’s ratings ranging from A+
to A-1. Further information concerning the policy and use of derivative financial instruments is
contained in Notes 2 and 28 to the Consolidated Financial Statements.

Litigation

iv)
The Company and its subsidiaries are involved in litigation matters arising in the ordinary
course and conduct of its business. Although management does not expect that the outcome of
these matters will have a material adverse effect on the Corporation, there can be no assurance
that these matters, or other matters that arise in the future, will not have an adverse effect on
the Corporation’s business and operating results.

Uninsured risks of loss

v)
The Company presently relies on two satellites (Anik F2 and Anik F1R) owned by Telesat
Canada (“Telesat”) to conduct its DTH and Satellite Services business. The Company has also
secured a dedicated payload (16 transponders plus 5 spares) on Telesat’s soon to be launched
Anik G1 satellite (projected in service date in early calendar 2013). The Company owns certain
transponders on Anik F2 and has long-term capacity service agreements in place in respect of
transponders on Anik F1R, Anik F2 and Anik G1. As the satellite owner, Telesat maintains
insurance policies on each of these satellites. In the case of Anik F1R and Anik F2, Shaw funds
a portion of the insurance cost such that in the event Telesat recovers insurance proceeds in
connection with an insured loss, Shaw will be entitled to receive certain compensation
payments from Telesat. The Company expects that Telesat will renew the insurance policies in
respect of Anik F1R and Anik F2 and that Shaw will continue to contribute to the cost of these
policies while they are in effect. In the case of Anik G1, Telesat will maintain insurance, at
minimum, for the launch and first five years of in orbit operation. Shaw maintains a security
interest in the transponder capacity and any insurance proceeds related thereto. The Company
does not maintain business interruption insurance covering damage or loss to one or more of
the satellites used in its DTH and Satellite Services business as it believes the premium costs
are uneconomic relative to the risk of satellite failure. Transponder capacity is available to the
Company on an unprotected, non-preemptible service level basis, in both the case of the Anik
F2 transponders that are owned by Shaw and the Anik F1R and Anik F2 transponders that are
secured through service capacity agreements. The Company has priority access to spare
transponders on Anik F1R and Anik F2 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
another satellite may require repositioning or re-pointing of customers’ receiving dishes. As a
result, the customers’ level of service may be diminished or they may require a larger dish. The
Anik G1 satellite has a switch feature that allows the whole channel services (transponders and
available spares) to be switched from extended Ku-band to Ku-band, which does provide the
Company with limited back-up to restore failed whole channel services on Anik F1R. Satellite
failure could cause customers to deactivate their DTH subscriptions or otherwise have a
material adverse effect on business and results of operations.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Network failures caused by damage by fire, natural disaster, power loss, hacking, computer
viruses, disabling devices, acts of war or terrorism and other events could have a material
adverse affect on the 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 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.

vi)
Reliance on suppliers
Shaw’s distribution and call
on other
telecommunication carriers and certain other utilities. 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 the business operations of these carriers or
utilities may have an adverse effect on the Company’s business and operating results.

center network

connected to

relies

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

vii) Programming expenses
Shaw’s programming expenses for cable and DTH continue to be one of the most significant
single expense items. Costs continue to increase, particularly for sports programming. In
addition, as the Company adds programming or distributes existing programming to more of the
subscriber base, programming expenses increase. Although the Company has been successful
at reducing the impact of these increases through sale of additional services or increasing
subscriber rates, there can be no assurance that the Company will continue to be able to do so
and operating results may be impacted.

the most significant expenses is also programming costs.

In Media one of
Increased
competition in the television broadcasting industry, developments affecting producers and
distributors of programming content, changes in viewer preferences and other developments
could impact both the availability and cost of programming content. Although the Corporation
has processes to effectively manage these costs, programming content may be purchased for
broadcasting one to two years in advance, making it more difficult to predict how such content
will perform.

viii) Unionized labour
Approximately 50% of the Media division employees are employed under one of five collective
agreements represented by three bargaining units. If labour disruptions occur, it is possible
large numbers of employees may be involved and that the Media business may be disrupted.
Currently all collective agreements have been renewed and are in effect for the next one to
three years.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Holding company structure

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

Control of the Company by the Shaw family

x)
As at October 31, 2012, JR Shaw and members of his family and the corporations owned and/
or controlled by JR Shaw and members of his family (the “Shaw Family Group”) own
approximately 79% of the outstanding Class A Shares of the Company. The Class A Shares are
the only shares entitled to vote in all shareholder matters. All of the Class A Shares held by the
Shaw Family Group are subject to a voting trust agreement entered into by such persons. The
voting rights with respect to such Class A Shares are exercised by the representative of a
committee of five trustees. Accordingly, the Shaw Family Group is, and as long as it owns a
majority of the Class A Shares will continue to be, able to elect a majority of the Board of
Directors of the Company and to control the vote on matters submitted to a vote of the
Company’s Class A shareholders.

Information systems and internal business processes

xi)
Many aspects of the Company’s business depend to a large extent on various IT systems and
software and internal business processes. Shaw also undertakes ongoing initiatives to update
and improve these systems and processes. Although the Company has taken steps to reduce
these risks, there can be no assurance that potential failures of, or deficiencies in, these
systems, processes or change initiatives will not have an adverse effect on the Corporation’s
business and operating results.

xii) Dividend payments
The Company currently pays monthly common share dividends in amounts approved on a
quarterly basis by the Board of Directors. At the current approved dividend amount, the
Company would pay approximately $430 million in common share dividends during 2013
(before taking into account the Company’s dividend reinvestment plan (“DRIP”), see further
details on page 53). While the Company expects to generate sufficient free cash flow in 2013
to fund these dividend payments, if actual results are different from expectations there can be
no assurance that the Company will continue common share dividend payments at the current
level.

xiii) Acquisitions and other strategic transactions
into other strategic
The Company may from time to time make acquisitions and enter
transactions. In connection with these acquisitions and strategic transactions, Shaw may fail to
realize the anticipated benefits,
incur unanticipated expenses and/or have difficulty
incorporating or integrating the acquired business, the occurrence of which could have a
material adverse effect on the Company.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

II.

SUMMARY OF QUARTERLY RESULTS

Net income
from
continuing
operations
attributable
to equity
shareholders

Operating
income
before
amortization(1)

Net income
attributable
to equity
shareholders

Net
income(2)

Basic
earnings
per share
from
continuing
operations(3)

Basic
earnings
per share(3)

Quarter

Revenue

($millions Cdn except per share amounts)
2012
Fourth
Third
Second
First

1,210
1,278
1,231
1,279

501
567
493
566

Total

2011
Fourth
Third
Second
First

Total

4,998

2,127

1,181
1,285
1,196
1,079

4,741

481
586
505
479

2,051

129
238
169
192

728

164
197
166
13

540

129
238
169
192

728

81
195
163
12

451

133
248
178
202

761

84
201
169
16

470

0.28
0.53
0.38
0.43

1.62

0.37
0.45
0.38
0.03

1.23

0.28
0.53
0.38
0.43

1.62

0.18
0.45
0.37
0.03

1.02

See key performance drivers on page 20.

(1)
(2) Net income attributable to both equity shareholders and non-controlling interests.
(3) Diluted earnings per share from continuing operations and diluted earnings per share is
$1.61 for 2012. Diluted earnings per share from continuing operations and diluted
earnings per share for 2011 is $1.23 and $1.02, respectively.

Generally, revenue and operating income before amortization have grown quarter-over-quarter
mainly due to customer growth and rate increases with the exception of the fourth quarters of
2012 and 2011 and second quarter of 2012. In the second quarter of 2012, revenue and
operating income before amortization decreased by $48 million and $73 million, respectively,
due to the seasonality of the Media business with higher revenues in the first quarter driven by
the fall launch of season premieres and high demand as well as lower operating income before
amortization in the Cable division. Operating expenses increased in the second quarter which
included employee related costs, mainly related to bringing the new customer service centres
on line, as well as higher marketing, sales and programming costs. The fourth quarters of 2011
and 2012 were both impacted by the cyclical nature of the Media business with lower
advertising revenues in the summer months. Accordingly, in the fourth quarter of 2011,
revenue and operating income before amortization declined $104 million and $105 million,
respectively, while in the fourth quarter of 2012, revenue and operating income before
amortization declined $68 million and $66 million, respectively. The impact of the Media
business in the fourth quarter of 2012 was partially offset by improved operating income before
amortization in the Cable division.

Net income has fluctuated quarter-over-quarter primarily as a result of the growth in operating
income before amortization described above and the impact of the net change in non-operating
items. In the fourth quarter of 2012, net income decreased by $115 million, primarily due to

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

lower operating income before amortization of $66 million and increased income tax expense of
$31 million. The fourth quarter also included a loss of $26 million in respect of the electrical
fire at the Company’s head office offset by a pension curtailment gain of $25 million. In the
third quarter of 2012, net income increased by $70 million due to higher operating income
before amortization of $74 million and lower amortization of $9 million partially offset by
increased income tax expense of $17 million. In the second quarter of 2012, net income
decreased by $24 million due to a decline in operating income before amortization of $73
million partially offset by lower income tax expense of $53 million. Net income increased by
$118 million in the first quarter of 2012 due to the combined impact of higher operating
income before amortization of $85 million and income tax expense of $18 million in the first
quarter and the loss from discontinued operations of $84 million and gain on redemption of
debt of $23 million recorded in the preceding quarter. The first and second quarters of 2011
were impacted by the Media acquisition. As a result, net income increased $153 million in the
second quarter of 2011 due to the impact of the CRTC benefit obligation of $139 million and
acquisition, integration and restructuring costs of $58 million recorded in the first quarter and
higher operating income before amortization and foreign exchange gain on unhedged long-term
debt in the second quarter, the total of which was partially offset by increases in interest
expense, loss on derivative instruments and income tax expense. During the third quarter of
2011 net income increased by $32 million due to higher operating income before amortization
and a lower loss on derivative instruments partially offset by increased income taxes, a lower
foreign exchange gain on unhedged long-term debt and the impact of the restructuring
activities undertaken by the Company. In the fourth quarter of 2011 net income declined $117
million due to lower operating income before amortization of $105 million and the loss of $83
million in respect of the wireless discontinued operations partially offset by the gain on
redemption of debt and the aforementioned restructuring activities in the previous quarter. As a
result of the aforementioned changes in net income, basic and diluted earnings per share have
trended accordingly.

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

Growth in subscriber statistics as follows:

Subscriber Statistics

First

Second

Third

Fourth

First

Second

Third

Fourth

2012

2011

Basic cable customers
Digital customers
Internet customers
Digital Phone lines
DTH customers

(22,768) (9,946) (21,515) (16,474) (7,542) (13,662) (13,577) (16,207)
59,566 46,564
246 (7,907) 62,216 35,403 19,202 49,548
(429) 6,062 18,752 10,772 11,165 13,528
10,685 18,681
22,969 54,407 29,142 24,185 49,842 32,512 31,404 22,776
806

531 1,274 (1,820) 1,155 (1,539) 2,176

1,644

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

III. RESULTS OF OPERATIONS

OVERVIEW OF FISCAL 2012 CONSOLIDATED RESULTS

(In $millions Cdn except per share amounts)
Operations:

Revenue
Operating income before amortization(1)
Operating margin(1)
Funds flow from continuing operations(2)
Net income from continuing operations
Free cash flow(1)

Balance sheet:

Change

2012
%

2011
%

5.4 27.5
3.7 16.5

2012

2011

2010(3)

4,998
3,718
4,741
2,127
1,760
2,051
42.6% 43.3% 47.3%
1,299
1,433
1,377
761
559
482
617

(9.4) 4.1
534 36.1
4.7
515 (21.9) 19.8

Total assets
Long-term financial liabilities (including current

12,722 12,588 10,154

portion)

Long-term debt
Derivative instruments
Other financial liabilities

Per share data:

Earnings per share from continuing operations

Basic
Diluted

5,263
1
7

5,257
8
171

3,983
87
159

1.62
1.61

1.23
1.23

Weighted average number of participating

shares outstanding during period (millions)

441

435

433

Cash dividends declared per share

Class A
Class B

0.9550 0.9075 0.8675
0.9575 0.9100 0.8700

(1)
(2)

(3)

See key performance drivers on page 20.
Funds flow from continuing operations is presented before changes in non-cash working
capital as presented in the Consolidated Statements of Cash Flows.
2010 comparative figures have not been restated for adoption of IFRS on September 1,
2010.

Highlights
Š

Š
Š

Net income from continuing operations was $761 million for the year compared to
$559 million in 2011.
Earnings per share from continuing operations were $1.62 compared to $1.23 in
2011.
Revenue for the year improved 5.4% to $5.00 billion from $4.74 billion last year.
Operating income before amortization of $2.13 billion was up 3.7% over last year’s
amount of $2.05 billion.
Consolidated free cash flow was $482 million compared to $617 million in 2011.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Inc.

During 2012 the Company increased the dividend rate on Shaw’s Class A
Participating Shares and Class B Non-Voting Participating Shares to an equivalent
dividend rate of $0.9675 and $0.97 respectively. Dividends paid in 2012
increased approximately 6% over 2011 to $416 million.
During the year the Company opened retail stores in Calgary, Vancouver and
Richmond offering a new retail experience as part of its continued investment in
defining the customer experience. The new stores showcase all of Shaw’s products
and services through a unique technology experience of interactive displays along
with hands on training and technical support.
In October 2010 Shaw completed its acquisition of the broadcasting business of
Canwest including CW Media, the company that owned the specialty channels
acquired from Alliance Atlantis Communications
in 2007. The total
consideration, including debt assumed, was approximately $2.0 billion.
On December 7, 2010 the Company issued $500 million senior notes at a rate of
5.5% due December 7, 2020 and issued an additional $400 million under the
reopened 6.75% senior notes due November 9, 2039. The net proceeds from the
notes issuances were used to repay borrowings under the Company’s $1 billion
revolving credit facility.
On February 17, 2011 the Company issued an additional $400 million under the
reopened 6.75% senior notes due November 9, 2039. The net proceeds were used
for working capital and general corporate purposes as well as to partially repay
borrowings under the revolving credit facility while excess funds are held in cash
and cash equivalents.
In March 2011 Shaw implemented various cost saving initiatives including staff
reductions and a review of overhead expenses to drive efficiencies and enhance
competitiveness.
On May 31, 2011 the Company issued 12,000,000 Cumulative Redeemable Rate
Reset Preferred Shares, Series A (“Preferred Shares”) at a price of $25.00 per
Preferred Share for aggregate gross proceeds of $300 million. The net proceeds
were used for working capital and general corporate purposes while excess funds are
held in cash and cash equivalents.

Revenue and operating expenses

Consolidated revenue of $5.00 billion for the twelve month period improved 5.4% over the prior
year. The improvement was primarily due to twelve months of revenue from Shaw Media, as well
as rate increases and growth in the Cable and Satellite divisions. Consolidated operating income
before amortization of $2.13 billion increased 3.7% over last year. The improvement was
primarily due to the current period including twelve months of Shaw Media.

Amortization

(In $millions Cdn)

Amortization revenue (expense) –
Deferred equipment revenue
Deferred equipment costs
Property, plant and equipment, intangibles and other

2012

2011

Change
%

115
(231)
(692)

107
7.5
(205) 12.7
8.6
(637)

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Amortization of deferred equipment revenue and deferred equipment costs increased in 2012
due to the sales mix of equipment and changes in customer pricing on certain equipment.

Amortization of property, plant and equipment, intangibles and other increased over the comparable
period as the amortization of new expenditures and inclusion of the Media division for the full twelve
months in the current year exceeded the impact of assets that became fully depreciated.

Amortization of financing costs and Interest expense

(In $millions Cdn)

Amortization of financing costs – long-term debt
Interest expense

Other income and expenses

(In $millions Cdn)

2012

2011

5
330

4
332

Change
%

25.0
(0.6)

2012

2011

Increase
(decrease)
in income

Gain on redemption of debt
CRTC benefit obligations
Business acquisition, integration and restructuring costs
Gain on remeasurement of interests in equity investments
Gain (loss) on derivative instruments
Accretion of long-term liabilities and provisions
Foreign exchange gain on unhedged long-term debt
Equity income from associates
Other gains

–
(2)
–
6
1
(14)
–
–
–

(33)
(139) 137
91
6
23
1
(17)
(14)
(11)

(91)
–
(22)
(15)
17
14
11

The gain on redemption of debt is in respect of the Media 13.5% senior unsecured notes. As a
result of a change of control triggered on the acquisition of the Media business an offer to
purchase all of the US $338 million 13.5% senior unsecured notes at a cash price equal to
101% was required. An aggregate US $52 million face amount, having an aggregate accrued
value of US $56 million, was tendered under the offer and purchased by the Company for
cancellation. Also during 2011, the Company redeemed the remaining outstanding US $260
million face amount, having an aggregate accrued valued of US $282 million, at 106.75% as
set out under the terms of the indenture. As a result, the Company recorded a gain of $33
million which resulted from recognizing the remaining unamortized acquisition date fair value
adjustment of $57 million partially offset by the 1% repurchase and 6.75% redemption
premiums totaling $19 million and $5 million in respect of the write-off of the embedded
derivative instrument associated with the early prepayment option.

As part of the CRTC decisions approving the acquisition of Mystery and The Cave during the
current year and the Media acquisition in the prior year, the Company is required to contribute
approximately $2 million and $180 million in new benefits to the Canadian broadcasting
system over seven years. Most of this contribution will be used to create new programming on
Shaw Media services, construct digital transmission towers and provide a satellite solution for
OTA viewers whose local television stations do not convert to digital. The fair value of the
obligations of $2 million and $139 million was determined by discounting future net cash flows
using appropriate discount rates and have been recorded in the income statement.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

During 2011, the Company incurred costs in respect of the acquisition of the broadcasting
business and organizational restructuring which amounted to $91 million. Amounts include
acquisition related costs to effect the acquisition, such as professional fees paid to lawyers and
consultants. The integration and restructuring costs relate to integrating the new business and
increasing organizational effectiveness for future growth as well as package costs for the former
In March 2011 Shaw implemented various cost saving initiatives including staff
CEO.
reductions and a review of overhead expenses
to drive efficiencies and enhance
competitiveness. Approximately 550 employee positions were eliminated, including 150 at the
management level.

The Company recorded a $6 million gain in respect of a remeasurement to fair value of the
Company’s 50% interest in Mystery and 49% interest in The Cave which were held prior to the
acquisition on May 31, 2012. The fair value of the Company’s equity interest in these specialty
channels held prior to the acquisition was $19 million compared to a carrying value of $13 million.

For derivative instruments where hedge accounting is not permissible or derivatives are not
designated in a hedging relationship, the Company records changes in the fair value of
derivative instruments in the income statement. In addition, the Media senior unsecured notes
had a variable prepayment option which represented an embedded derivative that was
accounted for separately at fair value until the Company gave notice of redemption during the
fourth quarter of 2011. The fluctuation in amounts recorded in 2012 compared to 2011 is due
to a reduction in the number of outstanding contracts as well as the amounts recorded in
respect of the embedded derivative in the prior year.

The Company records accretion expense in respect of the discounting of certain long-term
liabilities and provisions which are accreted to their estimated value over their respective terms.
The expense is primarily in respect of CRTC benefit obligations as well as the liability which
arose in 2010 when the Company entered into amended agreements with the counterparties to
certain cross-currency agreements which fixed the settlement of the principal portion of the
swaps in December 2011.

In conjunction with the acquisition of the broadcasting business, the Company assumed a US
$390 million term loan and US $338 million senior unsecured notes. Shortly after closing the
acquisition, the Company repaid the term loan including breakage of the related cross currency
interest rate swaps. A portion of the senior unsecured notes were repurchased during the
second quarter of 2011 and the Company redeemed the remaining notes in the fourth quarter
of 2011. As a result of fluctuations of the Canadian dollar relative to the US dollar, a foreign
exchange gain was recorded.

The Company recorded income of $14 million primarily in respect of its 49.9% equity interest in
CW Media for the period September 1 to October 26, 2010. On October 27, 2010, the Company
acquired the remaining equity interest in CW Media as part of its purchase of all the broadcasting
assets of Canwest. Results of operations are consolidated effective October 27, 2010. The equity
income was comprised of approximately $20 million of operating income before amortization
partially offset by interest expense of $5 million and other net costs of $2 million. The Company
also records equity income (loss) in respect of interests in several specialty channels.

Other gains generally includes realized and unrealized foreign exchange gains and losses on US
dollar denominated current assets and liabilities, gains and losses on disposal of property, plant
and equipment and minor investments, and the Company’s share of the operations of Burrard
Landing Lot 2 Holdings Partnership. In the current year, the category also includes a loss of

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

$26 million related to an electrical fire and resulting water damage to Shaw Court as well as a
pension curtailment gain of $25 million. The loss of $26 million includes $6 million of costs in
respect of restoration and recovery activities, including amounts incurred in the relocation of
employees, and an asset write-down of $20 million related to the damages sustained to the
building and its contents. Insurance recoveries are expected and amounts will be included in
Other gains as claims are approved. No insurance recoveries were recorded in 2012. The
pension curtailment gain arose due to a plan amendment to freeze base salary levels.

Income tax expense

The income tax expense was calculated using current statutory income tax rates of 26.3% for
2012 and 27.9% for 2011 and was adjusted for the reconciling items identified in Note 23 to
the Consolidated Financial Statements.

Loss from discontinued operations

In 2011, the Company discontinued further construction of its traditional wireless network and
accordingly, all traditional wireless activities have been classified as discontinued operations.

The Company recorded an after tax loss of $89 million comprised of a write-down of assets of
$112 million, operating expenditures and amortization of $8 million and an income tax
recovery of $31 million.

Earnings per share from continuing operations

(In $millions Cdn except per share amounts)
Net income from continuing operations
Weighted average number of participating

shares outstanding during period (millions)
Earnings per share from continuing operations –

Basic
Diluted

Net income from continuing operations

2012
761

2011
559

Change
%
36.1

441

435

1.4

1.62 1.23
1.61 1.23

31.7
30.9

Net income from continuing operations was $761 million in 2012 compared to $559 million in
2011. The year-over-year changes are summarized in the table below.

Net income from continuing operations increased $202 million over the prior year. The current
year benefitted from a reduction in net other costs of $183 million, improved operating income
before amortization of $76 million and decreased income taxes of $15 million partially offset
by higher amortization of $74 million. The change in net other costs and revenue of $183
million was due to amounts recorded in the prior year and were primarily in respect of the
Media business acquisition. These amounts included the CRTC benefit obligation, various
acquisition, integration and restructuring costs and the loss on derivative instruments partially
offset by the gain on redemption of debt, foreign exchange gain on unhedged long-term debt
and equity income from associates.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

(In $millions Cdn)

Increased operating income before amortization
Increased amortization
Decreased interest expense
Change in other net costs and revenue(1)
Decreased income taxes

76
(74)
2
183
15
202

(1) Other net costs and revenue include gain on redemption of debt, CRTC benefit
obligations, business acquisition,
integration and restructuring expenses, gain on
remeasurement of interests in equity investments, gain (loss) on derivative instruments,
accretion of long-term liabilities and provisions, foreign exchange gain on unhedged long-
term debt, equity income from associates and other gains as detailed in the Consolidated
Statements of Income.

SEGMENTED OPERATIONS REVIEW

CABLE

FINANCIAL HIGHLIGHTS

($millions Cdn)

Revenue

Operating income before amortization(1)

Capital expenditures and equipment costs (net):

New housing development(2)
Success-based(3)
Upgrades and enhancement(4)
Replacement(5)
Buildings and other

2012

2011

Change
%

3,193

3,096

3.1

1,502

1,510

(0.5)

100
250
322
41
97

810

88
207
278
47
89

709

13.6
20.8
15.8
(12.8)
9.0

14.2

Operating margin(1)

47.0% 48.8%

(1.8)

See key performance drivers on page 20.

(1)
(2) Build out of mainline cable and the addition of drops in new subdivisions.
(3)

Capital and equipment costs (net) related to the acquisition of new customers, including
installation of internet and digital phone modems, DCTs, filters and commercial drops for
Shaw Business customers.

(4) Upgrades to the plant and build out of fibre backbone to reduce use of leased circuits and

costs to decrease node size and Digital Phone capital.

(5) Normal replacement of aged assets such as drops, vehicles and other equipment.

Cable revenue of $3.19 billion improved 3.1% over last year. Cable operating income
before amortization of $1.50 billion declined modestly over last year.

OPERATING HIGHLIGHTS

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Digital customers increased 98,469 during the year to 1,917,857 and penetration of
Basic is now 86.4%, up from 79.5% at August 31, 2011.
Digital Phone lines increased 130,703 to 1,363,744 lines and Internet was up 34,999
to total 1,912,230 as at August 31, 2012. During the year Basic cable subscribers
decreased 70,703.

Cable revenue for 2012 of $3.19 billion improved 3.1% over the prior year. Rate increases and
customer growth in Internet and Digital Phone, including Business growth, partially offset by
lower Basic cable subscribers, accounted for the improvement.

Operating income before amortization of $1.50 billion declined modestly over the prior year.
The revenue related improvement was offset by higher employee related amounts, programming
costs, and various other expenses.

As at August 31, 2012 Shaw had 1,912,230 Internet customers which represents an 86%
penetration of Basic.

In pursuit of Shaw’s continued improvement
its approximately 1.9 million Internet
customers, the Company announced as part of its WiFi strategy a technical trial of HotSpot 2.0
in conjunction with Cisco Systems (“Cisco”), Shaw’s WiFi technology partner. HotSpot 2.0
provides a significant improvement in WiFi accessibility and security, and allows Shaw’s
broadband WiFi enabled customers to automatically connect and authenticate to the WiFi
network. The Company is now offering WiFi at over 1,500 sites in Calgary, Edmonton,
Vancouver, Victoria and Winnipeg.

for

Shaw recently introduced content offerings for
its TV Everywhere applications with the
introduction of Shaw Go. The Shaw Go Movie Central app for Apple devices provides access to
current and library content for Shaw customers who subscribe to Movie Central programming,
features that enhance the user
including HBO Canada titles. The app provides several
experience, including intelligent streaming, which provides the most optimal video quality
based on Internet connection speed, and video bookmarking, which allows customers to stop
and resume video playback at their convenience. The Shaw Go NFL Sunday Ticket app provides
Shaw NFL Sunday Ticket subscribers with live broadcasts of up to 14 NFL regular season
games along with interactive features, such as instant replay and play-by-play summaries. Shaw
customers have the added benefit of being able to access content on Shaw’s WiFi network.

Total capital investment of $810 million increased $101 million compared to 2011. Success
based capital
increased $43 million mainly due to higher subsidies on sales of HDPVRs
resulting from increased volumes and lower customer pricing, and investment in DOCSIS 3.0
WiFi internet modems, partially offset by lower HDPVR rentals and phone modem purchases.

Investment in Upgrades and enhancement and Replacement categories combined increased
$38 million compared to last year. The current period included higher spending on hub
upgrades, network electronics related to the DNU, Digital Phone infrastructure to support
Business growth, as well as investment related to the strategic WiFi build.

Buildings and other increased $8 million compared to the prior year. The current year increase
was mainly due to facility investment related to the Calgary data centre, customer service
centres and new retail locations. The prior year also benefitted from proceeds from the sale of
redundant real estate assets.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Spending in new housing development increased $12 million over the comparable period
mainly due to higher activity.

SUBSCRIBER STATISTICS

CABLE:
Basic subscribers

Penetration as a % of homes passed

Digital customers

INTERNET:
Connected and scheduled installations

Penetration as % of basic

Stand-alone Internet not included in basic

cable

DIGITAL PHONE:

Number of lines(1)

2012

2011

Growth

Change
%

2,219,072
56.0%
1,917,857

2,289,775
59.0%
1,819,388

1,912,230
86.2%

1,877,231
82.0%

(70,703)

(3.1)

98,469

5.4

34,999

1.9

225,639

217,068

8,571

3.9

1,363,744

1,233,041

130,703 10.6

(1) Represents primary and secondary lines on billing plus pending installs.

SATELLITE (DTH and Satellite Services)

FINANCIAL HIGHLIGHTS

($millions Cdn)

Revenue
DTH (Shaw Direct)
Satellite Services

Operating income before amortization(1)
DTH (Shaw Direct)
Satellite Services

Capital expenditures and equipment costs (net):

Success-based
Transponders
Buildings and other

2012

2011

Change
%

763
81

844

254
39

293

81
2
11

745
82

827

246
43

289

76
25
6

2.4
(1.2)

2.1

3.3
(9.3)

1.4

6.6
(92.0)
83.3

107

(12.1)

Operating margin(1)

34.7% 34.9%

(0.2)

(1)

See key performance drivers on page 20.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

SUBSCRIBER STATISTICS

Shaw Direct customers(1)

2012

2011

Growth

910,023 908,883 1,140

(1)

Including seasonal customers who temporarily suspend their service.

OPERATING HIGHLIGHTS

Š
Š

Satellite revenue of $844 million improved 2.1% over the comparable period
Operating income before amortization of $293 million improved 1.4%

Revenue of $844 million for 2012 was up 2.1% over last year. The improvement was primarily
due to customer rate increases. Operating income before amortization improved 1.4%.

Total capital investment of $94 million decreased over last year primarily due to the deposit for
the Anik G1 satellite included in the prior year partially offset by higher investment in the
current period on satellite related ground equipment. The launch of the satellite, originally
expected to occur this fall, has been delayed as a result of issues experienced on an unrelated
satellite launch, and Anik G1 is now expected to launch early in calendar 2013.

During 2012, Shaw Direct started offering a video on demand service using adaptive streaming
technology through the satellite receiver. This new internet based service currently has over
3,000 movie and TV titles available. In addition, with their television subscription package,
Shaw Direct customers now have access to the Shaw Go apps, including the recently launched
Shaw Go Movie Central and Shaw Go NFL Sunday Ticket.

MEDIA

FINANCIAL HIGHLIGHTS

Year ended
2012

Period from
October 27, 2010 to
August 31, 2011

1,053

332

12
19

(48)
(34)
31.5%

891

252

15
12

(30)
(20)
28.3%

Change
%

18.2

31.7

(20.0)
58.3

14.8

60.0
70.0
3.2

($millions Cdn)

Revenue

Operating income before amortization(1)

Capital expenditures:

Broadcast and transmission
Buildings/other

Other adjustments:

CRTC benefit obligation funding
Non-controlling interests

Operating margin(1)

(1)

See key performance drivers on page 20.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

OPERATING HIGHLIGHTS

Revenue and operating income before amortization for the year were $1.05 billion and $332
million, respectively, compared to $891 million and $252 million for the prior year period from
October 27, 2010 to August 31, 2011. For informational purposes, on a comparative basis to
the full twelve months ended August 31, 2011, Media revenues were down 2% reflecting
softness in the advertising market as a result of continued economic uncertainty. Operating
income before amortization increased 2%, as lower programming costs in 2012 more than
offset the reduced advertising revenues.

During the year, Global delivered solid programming results led by the strength of Big Brother,
Hotel Hell and Rookie Blue. The Media specialty portfolio also led in the channel rankings in
the adult 25-54 category, with 4 of the Top 10 analog services, including History as the top
the Top 10 digital services, with National
entertainment network in Canada, and 5 of
Geographic as the leading digital channel. During late 2012 Shaw Media launched Lifetime,
H2 and National Geographic Wild.

In News, Global is in the number one position in all three major western markets with ratings
up for the majority of all news programs. Global Toronto News Hour moved into the number two
position and the station also delivered solid audience growth in the News Hour Final. The West
Block with Tom Clark continued to perform well, beginning its second season as Canada’s most
watched political talk show.

The conventional fall programming premiered throughout the month of September with a solid
returning line-up and new drama programming including Vegas, Chicago Fire, Last Resort and
Elementary. Shaw Media also added several new comedies to the fall schedule including Go On
and Guys With Kids.

Capital
equipment, infrastructure and facility investments.

investment continued on various projects and included upgrading production

IV. FINANCIAL POSITION

Total assets at August 31, 2012 were $12.7 billion compared to $12.6 billion at August 31,
2011. Following is a discussion of significant changes in the consolidated statement of
financial position since August 31, 2011.

Current assets declined $31 million primarily due to decreases in cash of $16 million, assets
held for sale of $15 million, and accounts receivable of $10 million, the total of which was
partially offset by increased inventories of $5 million and other current assets of $7 million.
Cash decreased as the cash outlay for investing and financing activities exceeded the funds
provided by operations. Assets held for sale decreased as the sale of the wireless assets was
completed during the first quarter and accounts receivable declined due to timing of collection
of miscellaneous receivables. Inventories were higher due to timing of equipment purchases
while other current assets were up primarily as a result of increases in program rights.

Property, plant and equipment increased $42 million as current year capital
investment
exceeded amortization and the asset write-down related to the electrical fire and resulting water
damage at Shaw Court.

Other long-term assets were up $73 million primarily due to an increase in deferred equipment
costs and related customer equipment financing receivables.

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Intangibles increased $63 million due to higher program rights and advances and the broadcast
licenses recorded on the acquisition of Mystery and The Cave. Program rights and advances
(current and noncurrent) increased as advances and additional investment in acquired rights
exceeded the amortization for the current year. The increase in goodwill of $3 million is due to
the aforementioned acquisition of Mystery and The Cave.

Current liabilities were up $250 million due to increases in income taxes payable of $32
million and current portion of long-term debt of $450 million partially offset by decreases in
accounts payable and accrued liabilities of $67 million, other current liability of $161 million
and derivative instruments of $7 million. Income taxes payable increased due to the current
year provision partially offset by tax installment payments. The current portion of long-term debt
increased and long-term debt decreased due to the reclassification of the 6.1% $450 million
senior notes which were repaid at maturity on November 16, 2012. Accounts payable and
accrued liabilities decreased due to lower trade and other payables primarily in respect of
timing of payment of capital expenditures and inventory and a reduction in the current portion
of the CRTC benefit obligations. The other liability decreased due to settlement of previously
amended cross-currency interest rate agreements and derivative instruments decreased due to
settlement of contracts.

Other long-term liabilities were up $45 million due to an increase in employee benefit plans of
$71 million, primarily as a result of actuarial losses recorded in the current year, partially
reduced by a decrease in CRTC benefit obligations of $22 million.

Deferred credits were up $5 million due to an increase in deferred equipment revenue partially
offset by amortization of deferred IRU revenue.

Deferred income tax liabilities, net of deferred income tax assets, decreased $63 million due to
the current year recovery.

Shareholders’ equity increased $357 million primarily due to increases in share capital of $117
million, retained earnings of $291 million and non-controlling interests of $9 million partially
offset by an increase in accumulated other comprehensive loss of $64 million. Share capital
increased due to the issuance of 5,972,349 Class B Non-Voting Shares under the Company’s
option plan and DRIP. As of November 15, 2012, share capital is as reported at August 31,
2012 with the exception of the issuance of a total of 1,274,017 Class B Non-Voting Shares
under the DRIP and upon exercise of options under the Company’s option plan subsequent to
the year end. Retained earnings increased due to current year earnings of $728 million partially
offset by dividends of $437 million while non-controlling interests increased as their share of
earnings
year. Accumulated other
comprehensive loss increased due to the actuarial losses recorded on employee benefit plans.

exceeded the distributions declared during

the

V. CONSOLIDATED CASH FLOW ANALYSIS

Operating activities

(In $millions Cdn)

Funds flow from continuing operations
Net decrease (increase) in non-cash working capital balances

related to continuing operations

2012

2011

Change
%

1,299

1,433

(9.4)

(192) >100.0

1,317

1,241

6.1

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

Funds flow from continuing operations decreased over the comparative year as higher operating
income before amortization adjusted for non-cash program rights expenses in the current year
and charges in the prior year for termination of swap contracts and business acquisition,
integration and restructuring expenses were more than offset by the combined impact of the
settlement of the amended cross-currency interest rate agreements as well as increased current
income taxes, program rights purchases and CRTC benefit obligation funding in the current
year. The net change in non-cash working capital balances related to continuing operations
fluctuated over the comparative period due to fluctuations in accounts receivable and the
income taxes payable and accounts payable and accrued
timing of payment of current
liabilities.

Investing activities

(In $millions Cdn)

Cash flow used in investing activities

2012

2011

Decrease

(983)

(1,350)

367

Cash requirements for investing activities decreased over the comparable year due to amounts
paid to complete the Media business acquisition in 2011 and fluctuations in inventory levels
partially offset by the higher capital expenditures in the current year.

Financing activities

The changes in financing activities during 2012 and 2011 were as follows:

(In $millions Cdn)

2012

2011

Bank credit facility arrangement costs
Issuance of Cdn $500 million 5.50% senior notes
Issuance of Cdn $800 million 6.75% senior notes
Issuance of Preferred Shares
Senior notes and Preferred Shares issuance costs
Repayment of CW Media US $390 million term loan
Redemption of CW Media US $338 million 13.5% senior notes
Dividends
Distributions paid to non-controlling interests
Senior notes prepayment premium
Issuance of Class B Non-Voting Shares
Repayment of Partnership debt

(4)
–
–
–

(333)
(26)
–
17
(1)

–
498
779
300
(17)
(395)
(334)
(352)
(22)
(19)
46
(1)

Cash flow provided by financing activities

(347)

483

VI. LIQUIDITY AND CAPITAL RESOURCES

In the current year, the Company generated $482 million of free cash flow. Shaw used its free
cash flow along with cash of $16 million, proceeds on issuance of Class B Non-Voting Shares of
$17 million and other net items of $25 million to pay common share dividends of $318
million,
rate
agreements, invest an additional net $42 million in program rights and purchase the remaining
interests in two specialty channels for $18 million.

fund the $162 million on settlement of amended cross-currency interest

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

To allow for timely access to capital markets, the Company filed a short form base shelf
prospectus with securities regulators in Canada and the U.S. on November 18, 2010. The shelf
prospectus allows for the issue of up to an aggregate $4 billion of debt and equity securities
over a 25 month period. Pursuant to this shelf prospectus, the Company issued $300 million of
Preferred Shares and completed three senior notes offerings totalling $1.3 billion in 2011.

During the current year, the Company entered into a five-year $1 billion bank credit facility
which includes a revolving term facility to a maximum of $50 million and matures in January
2017. The credit facility has a feature whereby the Company may request an additional $500
million of borrowing capacity so long as no event of default or pending event of default has
occurred and is continuing or would occur as a result of the increased borrowings. No lender
has any obligation to participate in the requested increase unless it agrees to do so at its sole
discretion. This facility replaced the prior credit and operating loan facilities which were
scheduled to mature in May 2012. The new facility will be used for general corporate purposes.

On November 16, 2012, the Company repaid the 6.1% $450 million senior unsecured notes.

The Company’s DRIP allows holders of Class A Shares and Class B Non-Voting Shares who are
residents of Canada to automatically reinvest monthly cash dividends to acquire additional
Class B Non-Voting Shares. Effective for the May 31, 2011 dividend payment, Class B
Non-Voting Shares distributed under the Company’s DRIP are new shares issued from treasury
at a 2% discount from the 5 day weighted average market price immediately preceding the
applicable dividend payment date. Previously, the Class B Non-Voting Shares were acquired on
the open market at prevailing market prices. The DRIP has resulted in cash savings and
incremental Class B Non-Voting Shares of $98 million in 2012.

On November 29, 2011 Shaw received the approval of the TSX to renew its normal course issuer
bid to purchase its Class B Non-Voting Shares for a further one year period. The Company is
authorized to acquire up to 20,000,000 Class B Non-Voting Shares during the period
December 1, 2011 to November 30, 2012. No shares were repurchased by the Company.

At August 31, 2012, the Company held $427 million in cash and had access to $1 billion
under its credit facility. Based on the available credit facility and forecasted free cash flow, the
Company expects to have sufficient liquidity to fund operations and obligations during the
upcoming fiscal year. On a longer-term basis, Shaw expects to generate free cash flow and have
borrowing capacity sufficient
to finance foreseeable future business plans and refinance
maturing debt.

Debt structure and financial policy

Shaw structures its borrowings generally on a stand-alone basis. The borrowings of Shaw are
unsecured. While certain non-wholly owned subsidiaries are subject to contractual restrictions
which may prevent the transfer of funds to Shaw, there are no similar restrictions with respect
to wholly-owned subsidiaries of the Company.

Shaw’s borrowings are subject to covenants which include maintaining minimum or maximum
financial ratios. At August 31, 2012, 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. As at August 31, 2012,
the ratio of debt to operating income before amortization for the Corporation is 2.4 times.

Having regard to prevailing competitive, operational and capital market conditions, the Board of
Directors has determined that having this ratio in the range of 2.0 to 2.5 times would be

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

optimal leverage for the Corporation in the current environment. Should the ratio fall below this
the Board may choose to recapitalize back into this optimal range. The Board may also
determine to increase the Corporation’s debt above these levels to finance specific strategic
opportunities such as a significant acquisition or
repurchase of Class B Non-Voting
Participating Shares in the event that pricing levels were to drop precipitously.

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 25 to
the Consolidated Financial Statements. As disclosed thereto, Shaw believes it is remote that
these agreements would require any cash payment.

Contractual obligations
The amounts of estimated future payments under the Company’s contractual obligations at
August 31, 2012 are detailed in the following table.

CONTRACTUAL OBLIGATIONS

Payments due by period

(In $millions Cdn)

Long-term debt(1)
Operating obligations(2)
Purchase obligations(3)
Other long-term obligations(4)

Total

9,096
2,017
88
7

Within
1 year

768
683
88
7

1,497
617
–
–

2 – 3 years

4 – 5 years

More than
5 years

5,675
442
–
–

6,117

1,156
275
–
–

1,431

11,208 1,546

2,114

(1)
(2)

(3)
(4)

Includes principal repayments and interest payments.
Includes maintenance and lease of satellite transponders, program related agreements,
lease of transmission facilities and lease of premises.
Includes capital expenditure and inventory purchase commitments.
Includes other financial liabilities and are primarily in respect of program rights.

VII. ADDITIONAL INFORMATION

Additional information relating to Shaw, including the Company’s Annual Information Form
dated November 29, 2012, can be found on SEDAR at www.sedar.com.

VIII. COMPLIANCE WITH NYSE CORPORATE GOVERNANCE LISTING STANDARDS

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

(under

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012

IX. CERTIFICATION

The Company’s Chief Executive Officer and Chief Financial Officer have filed certifications
regarding Shaw’s disclosure controls and procedures and internal control over
financial
reporting.

As at August 31, 2012, the Company’s management, together with its Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of the design and operation of each
of
the Company’s disclosure controls and procedures and internal control over financial
reporting. Based on these evaluations, the Chief Executive Officer and Chief Financial Officer
have concluded that the Company’s disclosure controls and procedures and the Company’s
internal control over financial reporting are effective.

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

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

Shaw Communications Inc.
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS AND
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

November 29, 2012

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

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 International
Financial Reporting Standards. 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 judgments. Management
has determined such amounts on a reasonable basis in order to ensure that the financial
statements are presented fairly,
respects. Management has prepared the
information presented elsewhere in the annual report and has ensured that it is
financial
consistent with the financial statements.

in all material

Management has a system of internal controls designed to provide reasonable assurance that
the financial statements are accurate and complete in all material respects. The internal control
system includes an internal audit function and an established business conduct policy that
applies to all employees. Management believes that the systems provide reasonable assurance
that transactions are properly authorized and recorded, 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.

reporting issues;

The Audit Committee is appointed by the Board and its directors are unrelated and
independent. The Committee meets periodically with management, as well as the external
auditors, to discuss internal controls over the financial reporting process, auditing matters and
that each party is properly discharging its
financial
responsibilities; and, to review the annual report, the financial statements and the external
auditors’ report. The Audit 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.

to satisfy itself

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.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining an adequate system of internal
control over financial reporting. Internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation
of the financial statements for external purposes in accordance with generally accepted
accounting principles.

Due to its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements on a timely basis. Also, projections of any of the effectiveness of internal

Shaw Communications Inc.
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS AND
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

control are subject to the risk that the controls may become inadequate because of changes in
conditions or that the degree of compliance with the policies and procedures may deteriorate.
Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to the financial statement preparation and presentation.

Management conducted an evaluation of the effectiveness of the system of internal control over
financial reporting based on the framework in “Internal Control – Integrated Framework” issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, management concluded that the Company’s system of internal control over financial
reporting was effective as at August 31, 2012.

[Signed]

Brad Shaw
Chief Executive Officer

Steve Wilson
Senior Vice President and
Chief Financial Officer

Shaw Communications Inc.
INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of
Shaw Communications Inc.

We have audited the accompanying consolidated financial statements of Shaw Communications
Inc., which comprise the consolidated statements of financial position as at August 31, 2012
and 2011, and September 1, 2010, and the consolidated statements of comprehensive
income, changes in equity and cash flows for the years ended August 31, 2012 and 2011, and
a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with International Financial Reporting Standards as issued
by the International Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on
our audits. We conducted our audits in accordance with Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the
judgment, including the assessment of the risks of material misstatement of the
auditors’
consolidated financial statements, whether due to fraud or error.
In making those risk
assessments, the auditors consider internal control relevant to the entity’s preparation and fair
presentation of the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial statements,
evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate
to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of Shaw Communications Inc. as at August 31, 2012 and 2011, and
September 1, 2010, and its financial performance and its cash flows for the years ended
August 31, 2012 and 2011 in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board.

Other matter

We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Shaw Communication Inc.’s internal control over financial
reporting as of August 31, 2012, based on the criteria established in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated November 29, 2012 expressed an unqualified opinion on
Shaw Communications Inc’s internal control over financial reporting.

Calgary, Canada
November 29, 2012

Chartered Accountants

Shaw Communications Inc.
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROLS
UNDER STANDARDS OF THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD (UNITED STATES)

To the Shareholders of
Shaw Communications Inc.

We have audited Shaw Communications Inc.’s internal control over financial reporting as at
August 31, 2012, based on the criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Shaw Communications Inc.’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.

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

financial

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

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

In our opinion, Shaw Communications Inc. maintained, in all material respects, effective
internal control over financial reporting as at August 31, 2012, based on the COSO criteria.

We have also audited, in accordance with Canadian generally accepted auditing standards and
the standards of the Public Accounting Oversight Board (United States), the consolidated
statements of financial position of Shaw Communications Inc. as at August 31, 2012 and
2011, and September 1, 2010, and the consolidated statements of comprehensive income,
changes in equity and cash flows for the years ended August 31, 2012 and 2011, and our
report dated November 29, 2012 expressed an unqualified opinion thereon.

Calgary, Canada
November 29, 2012

Chartered Accountants

Shaw Communications Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

[millions of Canadian dollars]

ASSETS
Current
Cash
Accounts receivable [note 4]
Inventories [note 5]
Other current assets [note 6]
Derivative instruments [note 28]
Assets held for sale [note 3]

Investments and other assets [note 7]
Property, plant and equipment [note 8]
Assets held for sale [note 3]
Other long-term assets [note 9]
Deferred income tax assets [note 23]
Intangibles [note 10]
Goodwill [note 10]

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities [notes 11 and 26]
Provisions [note 12]
Income taxes payable
Unearned revenue
Current portion of long-term debt [notes 13 and 28]
Current portion of derivative instruments [note 28]
Other liability [note 28]

Long-term debt [notes 13 and 28]
Other long-term liabilities [note 14]
Provisions [note 12]
Derivative instruments [note 28]
Deferred credits [note 15]
Deferred income tax liabilities [note 23]

Commitments and contingencies [notes 13, 25 and 26]
Shareholders’ equity
Common and preferred shareholders
Non-controlling interests in subsidiaries

August 31,
2012
$

August 31,
2011
$
[note 31]

September 1,
2010
$
[note 31]

427
433
102
89
–
–

1,051
13
3,242
1
331
14
7,355
715

443
443
97
82
2
15

1,082
13
3,200
1
258
30
7,292
712

217
196
54
34
67
–

568
743
3,005
–
233
–
5,596
169

12,722

12,588

10,314

811
19
156
157
451
1
–

1,595
4,812
552
8
–
635
1,085
8,687

878
18
124
155
1
8
161

1,345
5,256
507
8
–
630
1,164

8,910

700
19
249
145
1
80
–

1,194
3,982
429
–
7
632
1,065

7,309

3,754
281

4,035

3,406
272

3,678

3,005
–

3,005

12,722

12,588

10,314

See accompanying notes
On behalf of the Board:
[Signed]
JR Shaw
Director

[Signed]
Michael O’Brien
Director

Shaw Communications Inc.
CONSOLIDATED STATEMENTS OF INCOME

Years ended August 31 [millions of Canadian dollars
except per share amounts]

Revenue [note 24]
Operating, general and administrative expenses [note 21]
Operating income before amortization [note 24]
Amortization –

Deferred equipment revenue [note 15]
Deferred equipment costs [note 9]
Property, plant and equipment, intangibles and other [notes 8, 9, 10

and 15]
Operating income
Amortization of financing costs – long-term debt [note 13]
Interest expense [notes 13 and 24]
Gain on redemption of debt [note 13]
CRTC benefit obligations [note 3]
Business acquisition, integration and restructuring expenses [notes 3

and 11]

Gain on remeasurement of interests in equity investments [note 3]
Gain (loss) on derivative instruments [note 28]
Accretion of long-term liabilities and provisions
Foreign exchange gain on unhedged long-term debt
Equity income from associates [note 7]
Other gains [note 22]
Income before income taxes
Current income tax expense [note 23]
Deferred income tax expense (recovery)

Net income from continuing operations
Loss from discontinued operations [note 3]

Net income

Net income attributable to:
Equity shareholders
Non-controlling interests in subsidiaries

Earnings per share – basic [note 18]
Earnings per share from continuing operations
Loss per share from discontinued operations

Earnings per share
Earnings per share – diluted [note 18]
Earnings per share from continuing operations
Loss per share from discontinued operations

Earnings per share

See accompanying notes

2012
$

4,998
2,871

2,127

2011
$
[note 31]
4,741
2,690

2,051

115
(231)

107
(205)

(692)

(637)

1,319
(5)
(330)
–
(2)

1,316
(4)
(332)
33
(139)

–
6
1
(14)
–
–
–

975
257
(43)

761
–

761

728
33
761

1.62
–

1.62

1.61
–

1.61

(91)
–
(22)
(15)
17
14
11

788
220
9

559
(89)

470

451
19

470

1.23
(0.21)

1.02

1.23
(0.21)

1.02

Shaw Communications Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended August 31 [millions of Canadian dollars]

Net income

Other comprehensive income (loss) [note 20]

Change in unrealized fair value of derivatives designated as cash flow

hedges

Adjustment for hedged items recognized in the period
Actuarial losses on employee benefit plans

Comprehensive income

Comprehensive income attributable to:
Equity shareholders
Non-controlling interests in subsidiaries

See accompanying notes

2012
$

761

2011
$
[note 31]
470

–
(2)
(62)

(64)

(12)
4
(30)

(38)

697

432

664
33

697

413
19

432

Shaw Communications Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Year ended August 31, 2012

[millions of Canadian dollars]

Balance as at September 1,

2011
Net income
Other comprehensive loss

Comprehensive income (loss)
Dividends
Dividend reinvestment plan
Shares issued under stock

option plan

Share-based compensation
Distributions declared by

subsidiaries to
non-controlling interests

Balance as at August 31,

Attributable to equity shareholders

Share
capital

Contributed
surplus

Retained
earnings

Accumulated
other
comprehensive
loss

2,633
–
–

–
–
98

19
–

73
–
–

–
–
–

(2)
6

–

729
728
–

728
(339)
(98)

–
–

–

(29)
–
(64)

(64)
–
–

–
–

–

Equity
attributable
to non-
controlling
interests

272
33
–

33
–
–

–
–

Total

3,406
728
(64)

664
(339)
–

17
6

Total
equity

3,678
761
(64)

697
(339)
–

17
6

–

(24)

2012

2,750

1,020

(93)

3,754

281

4,035

Year ended August 31, 2011

[millions of Canadian dollars]

Balance as at September 1,

2010

Business acquisition
Net income
Other comprehensive loss

Comprehensive income (loss)
Dividends
Dividend reinvestment plan
Issue of preferred shares
Share issue costs (net of taxes)
Shares issued under stock

option plan

Share-based compensation
Distributions declared by

subsidiaries to
non-controlling interests

Balance as at August 31,

2011

See accompanying notes

Attributable to equity shareholders

Share
capital

Contributed
surplus

Retained
earnings

Accumulated
other
comprehensive
income (loss)

2,250
–
–
–

–
–
39
300
(7)

67
–
–
–

–
–
–
–
–

51
–

(5)
11

–

679
–
451
–

451
(362)
(39)
–
–

–
–

–

9
–
–
(38)

(38)
–
–
–
–

–
–

–

Equity
attributable
to non-
controlling
interests

–
277
19
–

19
–
–
–
–

–
–

Total

3,005
–
451
(38)

413
(362)
–
300
(7)

46
11

Total
equity

3,005
277
470
(38)

432
(362)
–
300
(7)

46
11

–

(24)

2,633

729

(29)

3,406

272

3,678

Shaw Communications Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended August 31 [millions of Canadian dollars]

OPERATING ACTIVITIES [note 29]
Funds flow from continuing operations
Net decrease (increase) in non-cash working capital balances related to

continuing operations

INVESTING ACTIVITIES
Additions to property, plant and equipment [note 24]
Additions to equipment costs (net) [note 24]
Additions to other intangibles [note 24]
Net increase to inventories
Business acquisitions, net of cash acquired [note 3]
Proceeds on disposal of property, plant and equipment [note 24]
Proceeds from investments and other assets

FINANCING ACTIVITIES
Increase in long-term debt, net of discounts
Senior notes and Series A Preferred Shares issuance costs
Debt repayments
Issuance of Series A Preferred Shares
Debt retirement costs [note 13]
Bank credit facility arrangement costs
Issue of Class B Non-Voting Shares, net of after-tax expenses
Dividends paid on Class A Shares and Class B Non-Voting Shares
Dividends paid on Series A Preferred Shares
Distributions paid to non-controlling interests in subsidiaries

Increase (decrease) in cash from continuing operations
Decrease in cash from discontinued operations [note 3]

Increase (decrease) in cash
Cash, beginning of year

Cash, end of year

Cash includes cash and cash equivalents

See accompanying notes

2012
$

2011
$

1,299

1,433

(192)

1,317

1,241

(730)
(178)
(65)
(5)
(18)
9
4

(983)

–
–
(1)
–
–
(4)
17
(318)
(15)
(26)

(347)

(13)
(3)

(16)
443

427

(705)
(120)
(65)
(43)
(453)
27
9

(1,350)

2,352
(17)
(1,805)
300
(19)
–
46
(352)
–
(22)

483

374
(148)

226
217

443

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

1. CORPORATE INFORMATION

(the “Company”)

is a diversified Canadian communications
Shaw Communications Inc.
company whose core operating business is providing broadband cable television services,
Internet, Digital Phone and telecommunications services (“Cable”); Direct-to-home (“DTH”)
satellite services (Shaw Direct) and satellite distribution services (“Satellite Services”); and
programming content (through Shaw Media).

The Company was incorporated under the laws of the Province of Alberta on December 9, 1966
under the name Capital Cable Television Co. Ltd. and was subsequently continued under the
Business Corporations Act (Alberta) on March 1, 1984 under the name Shaw Cablesystems Ltd.
Its name was changed to Shaw Communications Inc. on May 12, 1993. The Company’s shares
are listed on the Toronto and New York Stock Exchanges. The registered office of the Company
is located at Suite 900, 630 – 3rd Avenue S.W., Calgary, Alberta, Canada T2P 4L4.

2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Statement of compliance

These consolidated financial statements of the Company have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”). These are the first annual financial statements prepared
under IFRS and IFRS 1 First-time Adoption of International Financial Reporting Standards
(“IFRS 1”) has been applied. An explanation of how the transition to IFRS has affected the
Company’s consolidated financial statements is provided in note 31.

The consolidated financial statements of the Company for the years ended August 31, 2012
and 2011 and as at September 1, 2010, were approved by the Board of Directors and
authorized for issue on November 29, 2012.

Basis of presentation

These consolidated financial statements have been prepared primarily under the historical cost
convention and are expressed in millions of Canadian dollars unless otherwise indicated. Other
measurement bases used are outlined in the applicable notes below. The consolidated
statements of income are presented using the nature classification for expenses.

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 period are included from their
respective dates of acquisition.

The accounts also include the Company’s proportionate share of
liabilities,
revenues, and expenses of its interests in joint ventures which includes a 33.33% interest in
the Burrard Landing Lot 2 Holdings Partnership and 50% interest in several specialty television
channels.

the assets,

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

The Company’s interest in the assets, liabilities, results of operations and cash flows of these
joint ventures are as follows:

Current assets
Program rights
Property, plant and equipment

Current liabilities
Long-term debt

Proportionate share of net assets

Revenue
Operating, general and administrative expenses
Amortization
Interest
Other gains

Proportionate share of income before income taxes

Cash flow provided by operating activities
Cash flow used in financing activities

Proportionate share of cash distributions

2012
$

2011
$

8
–
16

24
1
20

12
1
16

29
1
21

2012
$

2011
$

31
(14)
(1)
(1)
1

14
(1)

27
(12)
(1)
(1)
1

14
(1)

Non-controlling interests arise from business combinations in which the Company acquires less
than 100% interest. At the time of acquisition, non-controlling interests are measured at either
fair value or their proportionate share of the fair value of acquiree’s identifiable assets. The
Company determines the measurement basis on a transaction by transaction basis. Subsequent
to acquisition, the carrying amount of non-controlling interests is increased or decreased for
their share of changes in equity.

Investments and other assets

Investments in associates are accounted for using the equity method based on the Company’s
ability to exercise significant influence over the operating and financial policies of the investee.
Investments of this nature are recorded at original cost and adjusted periodically to recognize
the Company’s proportionate share of the associate’s net income or losses after the date of
investment, additional contributions made and dividends received. Investments are written
down when there has been a significant or prolonged decline in fair value.

Revenue and expenses

The Company has multiple deliverable arrangements comprised of upfront fees (subscriber
connection and installation fee revenue and/or customer premise equipment revenue) and

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

related subscription revenue. Upfront fees charged to customers do not constitute separate
units of accounting, therefore these revenue streams are assessed as an integrated package.

(i)

Revenue

Revenue from cable, Internet, Digital Phone and DTH customers includes subscriber revenue
earned as services are provided. Satellite distribution services and telecommunications service
revenue is recognized in the period in which the services are rendered to customers. Affiliate
subscriber revenue is recognized monthly based on subscriber levels. Advertising revenues are
recognized in the period in which the advertisements are broadcast and recorded net of agency
commissions as these amounts are paid directly to the agency or advertiser. When a sales
arrangement includes multiple advertising spots, the proceeds are allocated to individual
advertising spots under the arrangement based on relative fair values.

Subscriber connection fees received from customers are deferred and recognized as revenue on
a straight-line basis over two years. Direct and incremental initial selling, administrative and
connection costs related to subscriber acquisitions are recognized as an operating expense as
incurred. The costs of physically connecting a new home are capitalized as part of the
distribution system and costs of disconnections are expensed as incurred.

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

(ii)

Deferred equipment revenue and deferred equipment costs

Revenue from sales of 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, represents an inventoriable
cost which is deferred and recognized on a straight-line basis over the same period. The DCT
and DTH equipment is generally sold to customers at cost or a subsidized price in order to
expand the Company’s customer base.

Revenue from sales of satellite tracking hardware and costs of goods sold is 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 costs is recorded as
deferred equipment
revenue amortization and deferred equipment costs 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 included in amortization of
property, plant and equipment, intangibles and other in the consolidated statements of income.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Cash

Cash is presented net of outstanding cheques. When the amount of outstanding cheques and
the amount drawn under the Company’s revolving term facility are greater than the amount of
cash, the net amount is presented as bank indebtedness.

Allowance for doubtful accounts

The Company maintains an allowance for doubtful accounts for the estimated losses resulting
from the inability of its customers to make required payments. In determining the allowance,
the Company considers factors such as the number of days the account is past due, whether or
not the customer continues to receive service, the Company’s past collection history and
changes in business circumstances.

Inventories

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

is rented,

Property, plant and equipment

Property, plant and equipment are recorded at purchase cost. Direct labour and other directly
attributable costs incurred to construct new assets, upgrade existing assets and connect new
subscribers are capitalized and borrowing costs on qualifying assets
for which the
commencement date is on or after September 1, 2010 are also capitalized. As well, any asset
removal and site restoration costs in connection with the retirement of assets 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
Digital cable terminals and modems
Satellite audio, video and data network equipment and DTH receiving

equipment

Transmitters, broadcasting and communication equipment
Buildings
Data processing
Other

5-15 years
2-7 years

2-10 years
5-15 years
15-40 years
3-4 years
3-20 years

The Company reviews the estimates of lives and useful lives on a regular basis.

Assets held for sale and discontinued operations

Assets are classified as held for sale when specific criteria are met and are measured at the
lower of carrying amount and estimated fair value less costs to sell. Assets held for sale are not

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

amortized and are reported separately on the statement of financial position. The operating
results of a component that has been disposed of or is classified as held for sale are reported as
discontinued operations if the operations and cash flows of the component have been, or will
be, eliminated from the company’s ongoing operations and if the company does not have
significant continuing involvement in the operations of the component after the disposal
transaction. A component of a company includes operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the rest of a company’s
operations and cash flows. The Company does not allocate interest to discontinued operations.

Other long-term assets

Other long-term assets primarily include (i) equipment costs, as described in the revenue and
expenses accounting policy, deferred and amortized on a straight-line basis over two to five
years; (ii) credit facility arrangement fees amortized on a straight-line basis over the term of the
facility; (iii) long-term receivables; and (iv) the non-current portion of prepaid maintenance and
support contracts.

Intangibles

The excess of the cost of acquiring cable, satellite and media 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 rights and licenses,
trademarks, brands, program rights and software assets. Broadcast rights and licenses, trademarks
and brands represent identifiable assets with indefinite useful
lives. Spectrum licenses were
acquired in Industry Canada’s auction of licenses for advanced wireless services and have an
indefinite life.

Software that is not an integral part of the related hardware is classified as an intangible asset.
Internally developed software assets are recorded at historical cost and include direct material
and labour costs as well as borrowing costs on qualifying assets for which the commencement
date is on or after September 1, 2010. Software assets are amortized on a straight-line basis
over estimated useful lives ranging from four to ten years. The Company reviews the estimates
of lives and useful lives on a regular basis.

Borrowing costs

The Company capitalizes borrowing costs on qualifying assets, for which the commencement
date is on or after September 1, 2010, that take more than one year to construct or develop
using the Company’s weighted average cost of borrowing.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Impairment

(i)

Goodwill and indefinite-life intangibles

The Company tests goodwill and indefinite-life intangibles for impairment annually (as at
March 1) and when events or changes in circumstances indicate that the carrying value may be
impaired. The recoverable amount of each cash-generating unit (“CGU”) is determined based
on the higher of the CGU’s fair value less costs to sell (“FVLCS”) and its value in use (“VIU”). A
CGU is the smallest identifiable group of assets that generate cash flows that are independent
of the cash inflows from other assets or groups of assets. The Company’s cash generating units
are consistent with its reporting segments, Cable, DTH and Satellite Services and Media. Where
the recoverable amount of the CGU is less than its carrying amount, an impairment loss is
recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

(ii)

Non-financial assets with finite useful lives

For non-financial assets, such as property, plant and equipment and finite-life intangible
assets, an assessment is made at each reporting date as to whether there is an indication that
an asset may be impaired. If any indication exists, the recoverable amount of the asset is
determined based on the higher of FVLCS and VIU. Where the carrying amount of the asset
exceeds its recoverable amount, the asset is considered impaired and written down to its
recoverable amount. Previously recognized impairment losses are reviewed for possible reversal
at each reporting date and all or a portion of the impairment reversed if the asset’s value has
increased.

CRTC benefit obligations

The fair value of CRTC benefit obligations committed as part of business acquisitions are
initially recorded, on a discounted basis, at the present value of amounts to be paid net of any
expected incremental cash inflows. The obligation is subsequently adjusted for the incurrence
of related expenditures, the passage of time and for revisions to the timing of the cash flows.
Changes in the obligation due to the passage of time are recorded as accretion of long-term
liabilities and provisions in the income statement.

Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as
a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. Provisions are measured using the best estimate of the expenditure
required to settle the present obligation at the end of the reporting period, taking into account
risks and uncertainties associated with the obligation. Provisions are discounted where the time
value of money is considered material.

(i)

Asset retirement obligations

The Company recognizes the fair value of a liability for an asset retirement obligation in the
period in which it is incurred, on a discounted basis, with a corresponding increase to the
carrying amount of property and equipment, primarily in respect of transmitter sites. This cost

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

is amortized on the same basis as the related asset. The liability is subsequently increased for
the passage of time and the accretion is recorded in the income statement as accretion of long-
term liabilities and provisions. The discount rates applied are subsequently adjusted to current
rates as required at the end of reporting periods. Revisions due to the estimated timing of cash
flows or the amount required to settle the obligation may result in an increase or decrease in
the liability. Actual costs incurred upon settlement of the obligation are charged against the
liability to the extent recorded.

(ii)

Other provisions

Provisions for disputes, legal claims and contingencies are recognized when warranted. The
(if
Company establishes provisions after
applicable), expected availability of insurance or other recourse and other available information.

taking into consideration legal assessments

Deferred credits

Deferred credits primarily include: (i) prepayments received under IRU agreements amortized
on a straight-line basis into income over the term of the agreement; (ii) equipment revenue, as
described in the revenue and expenses accounting policy, deferred and amortized over two
years to five years; (iii) connection fee revenue and upfront installation revenue, as described in
the revenue and expenses accounting policy, deferred and amortized over two to ten years; and
(iv) a deposit on a future fibre sale.

Income taxes

The Company accounts for income taxes using the liability method, whereby deferred income
tax assets and liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities measured using substantively enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to offset and they relate to income
taxes levied by the same authority in the same taxable entity. Income tax expense for the period
is the tax payable for the period using tax rates substantively enacted at the reporting date, any
adjustments to taxes payable in respect of previous years and any change during the period in
deferred income tax assets and liabilities, except to the extent that they relate to a business
items recognized directly in equity or in other comprehensive income. The
combination,
Company records interest and penalties related to income taxes in income tax expense.

Tax credits and government grants

The Company has access to a government program which supports local programming produced
by conventional television stations. In addition, the Company receives tax credits primarily
related to its research and development activities. Government
financial assistance is
recognized when management has reasonable assurance that the conditions of the government
programs are met and accounted for as a reduction of related costs, whether capitalized and
amortized or expensed in the period the costs are incurred.

Foreign currency translation

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

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

period-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 $nil (2011 – $4) and is included in other gains.

Exchange gains and losses on translating hedged and unhedged long-term debt are included in
the consolidated statements of
income. Foreign exchange gains and losses on hedging
derivatives are reclassified from other comprehensive income (loss) to income to offset the
foreign exchange adjustments on hedged long-term debt.

Financial instruments other than derivatives

Financial instruments have been classified as loans and receivables, assets available-for-sale,
assets held-for-trading or financial liabilities. Cash has been classified as held-for-trading and is
recorded at fair value with any change in fair value immediately recognized in income (loss).
Other
financial assets are classified as available-for-sale or as loans and receivables.
Available-for-sale assets are carried at fair value with changes in fair value recorded in other
comprehensive income (loss) until realized. Loans and receivables and financial liabilities are
carried at amortized cost. None of
the Company’s financial assets are classified as
held-to-maturity and none of its financial liabilities are classified as held-for-trading.

Finance costs, discounts and proceeds on bond forward contracts associated with the issuance
of debt securities and fair value adjustments to debt assumed in business acquisitions are
netted against the related debt instrument and amortized to income using the effective interest
rate method. Accordingly, long-term debt accretes over time to the principal amount that will be
owing at maturity.

Derivative financial instruments

The Company uses derivative financial instruments to manage risks from fluctuations in foreign
exchange rates and interest rates. These instruments include cross-currency interest rate
exchange agreements, foreign currency forward purchase contracts and bond forward contracts.
All derivative financial instruments are recorded at fair value in the statement of financial
position. Where permissible, the Company accounts for these financial instruments as hedges
which ensures that counterbalancing gains and losses are recognized in income in the same
period. With hedge accounting, changes in the fair value of derivative financial instruments
designated as cash flow hedges are recorded in other comprehensive income (loss) until the
variability of cash flows relating to the hedged asset or liability is recognized in income (loss).
When an anticipated transaction is subsequently recorded as a non-financial asset, the amounts
recognized in other comprehensive income (loss) are reclassified to the initial carrying amount
of
the related asset. Where hedge accounting is not permissible or derivatives are not
designated in a hedging relationship, they are classified as held-for-trading and the changes in
fair value are immediately recognized in income (loss).

Instruments that have been entered into by the Company to hedge exposure to foreign exchange
and interest rate risk are reviewed on a regular basis to ensure the hedges are still effective and
that hedge accounting continues to be appropriate.

Derivatives embedded in other financial instruments or contracts are separated from their host
contracts and separately accounted for as derivatives when their economic characteristics and
risks are not closely related to the host contract, they meet the definition of a derivative and the

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

combined instrument or contract is not measured at fair value. The Company records embedded
derivatives at fair value with changes recognized in the income statement as loss/gain on
derivative instruments.

Fair value measurements

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
therefore, cannot be
determined with precision. Changes in assumptions could significantly affect the estimates.

judgement and,

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair
value that are either observable or unobservable. Observable inputs reflect assumptions market
participants would use in pricing an asset or liability based on market data obtained from
independent sources while unobservable inputs reflect a reporting entity’s pricing based upon
their own market assumptions.

The fair value hierarchy consists of the following three levels:

Level 1

Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2

Inputs for the asset or liability are based on observable market data, either directly or
indirectly, other than quoted prices.

Level 3

Inputs for the asset or liability that are not based on observable market data.

Employee benefits

The Company accrues its obligations and related costs under its employee benefit plans, net of
plan assets. The cost of pensions and other retirement benefits earned by certain employees is
actuarially determined using the projected benefit method pro-rated on service and
management’s best estimate of expected plan investment performance, salary escalation and
retirement ages of employees. For purposes of calculating the expected return on plan assets,
those assets are valued at fair value. Past service costs from plan initiation and amendments
are recognized immediately in the income statement to the extent they are vested. Unvested
past service costs are amortized on a straight-line basis over the expected average remaining
vesting period. Negative plan amendments which reduce costs are applied to reduce any
existing unamortized past service costs. The excess, if any, is amortized over the expected
average remaining vesting period. 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 plans such as changes in discount rates, expected
return on plan assets, expected retirement ages and projected salary increases. Actuarial gains
(losses) are recognized in other comprehensive income (loss) on an annual basis, at a
minimum, and on an interim basis when there are significant changes in assumptions.
Curtailment gains arising from amendments to the terms of a defined benefit plan such that a
significant element of future service by current employees will no longer qualify for benefits, or
will only qualify for reduced benefits, are recognized in the period in which they occur. 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.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

August 31 is the measurement date for the Company’s employee benefit plans. The last
actuarial valuations for
the various plans were performed between
December 31, 2011 and January 1, 2012. The next actuarial valuations for funding purposes
are effective December 31, 2012.

funding purposes for

Share-based compensation

The Company has a stock option plan for directors, officers, employees and consultants to the
Company. The options to purchase shares must be issued at not less than the fair value at the
date of grant. Any consideration paid on the exercise of stock options, together with any
contributed surplus recorded at the date the options vested, is credited to share capital. The
Company calculates the fair value of share-based compensation awarded to employees using
the Black-Scholes option pricing model. The fair value of options are expensed and credited to
contributed surplus over the vesting period of the options using the graded vesting method.

The Company has a restricted share unit (“RSU”) plan for officers and employees of the
Company. RSUs vest on the second anniversary of the grant date and compensation is
recognized on a straight-line basis over the two year vesting period. RSUs will be settled in cash
and the obligation for RSUs is measured at the end of each period at fair value using the Black-
Scholes option pricing model and the number of outstanding RSUs.

The Company has a deferred share unit (“DSU”) plan for its Board of Directors. Compensation
cost is recognized immediately as DSUs vest when granted. DSUs will be settled in cash and
the obligation is measured at the end of each period at fair value using the Black-Scholes
option pricing model and the number of outstanding DSUs.

The Company has an employee share purchase plan (the “ESPP”) under which eligible
employees may contribute to a maximum of 5% of their monthly base compensation. The
Company contributes an amount equal to 25% of the participant’s contributions.

Earnings per share

Basic earnings per share is based on net income attributable to equity shareholders adjusted for
dividends on preferred shares and is calculated using the weighted average number of Class A
Shares and Class B Non-Voting Shares outstanding during the period. The Company uses the
treasury stock method of calculating diluted earnings per share. This method assumes that any
proceeds from the exercise of stock options and other dilutive instruments would be used to
purchase Class B Non-Voting Shares at the average market price during the period.

Guarantees

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

Estimation uncertainty and critical judgements

The preparation of consolidated financial statements in conformity with IFRS 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 period.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Actual results could differ from those estimates and significant changes in assumptions could
cause an impairment in assets. The following require the most difficult, complex or subjective
judgements which result from the need to make estimates about the effects of matters that are
inherently uncertain.

Estimation uncertainty

The following are key assumptions concerning the future and other key sources of estimation
uncertainty that could impact the carrying amount of assets and liabilities and results of
operations in future periods:

(i)

Allowance for doubtful accounts

The Company is required to make an estimate of an appropriate allowance for doubtful
accounts on its receivables. 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.

(ii)

Property, plant and equipment

The Company is required to estimate the expected useful
lives of its property, plant and
equipment. These estimates of useful lives involve significant judgement. 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.
Management’s judgement is also required in determination of the amortization method, the
residual value of assets and the capitalization of labour and overhead.

(iii) Business combinations – purchase price allocation

Purchase price allocations involve uncertainty because management is required to make
assumptions and judgements to estimate the fair value of the identifiable assets acquired and
liabilities assumed in business combinations. Fair value estimates are based on quoted market
prices and widely accepted valuation techniques, including discounted cash flow (“DCF”)
analysis. Such estimates include assumptions about
inputs to the valuation techniques,
industry economic factors and business strategies.

(iv)

Impairment

The Company estimates the recoverable amount of its CGUs using a FVLCS calculation based
on a DCF analysis. Significant judgements are inherent in this analysis including estimating the
amount and timing of the cash flows attributable to the broadcast rights and licenses and the
AWS licenses,
rate, and the identification of
appropriate terminal growth rate assumptions. In this analysis the Company estimates the
discrete future cash flows associated with the intangible asset for five years and determines a
terminal value. The future cash flows are based on the Company’s estimates of future operating
results, economic conditions and the competitive environment. The terminal value is estimated
using both a perpetuity growth assumption and a multiple of operating income before

the selection of an appropriate discount

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

amortization. The discount rates used in the analysis are based on the Company’s weighted
average cost of capital and an assessment of the risk inherent in the projected cash flows. In
analyzing the FVLCS determined by the DCF analysis the Company also considers a market
approach determining a recoverable amount for each unit and total entity value determined
using a market capitalization approach. Recent market transactions are taken into account,
when available. The key assumptions used to determine the recoverable amounts, including a
sensitivity analysis, are included in note 10.

(v)

Employee benefit plans

The amounts reported in the financial statements relating to the defined benefit pension plans
are determined using actuarial valuations that are based on several assumptions including the
discount rate, rate of compensation increase and the expected return on plan assets (for funded
plans). 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 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 based on the yield of long-term, high-quality corporate fixed
income investments closely matching the term of the estimated future cash flows and is
determined at the end of every year.

(vi)

Income taxes

tax uncertainties,

The Company is required to estimate income taxes using substantively enacted tax rates and
laws that will be in effect when the differences are expected to reverse. In determining the
the Company applies a probable weighted average
measurement of
methodology. Realization of deferred 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 recognized
deferred income tax assets will be realized based on reversals of deferred income tax liabilities,
projected operating results and tax planning strategies available to the Company and its
subsidiaries.

(vii) Contingencies

The Company is subject to various claims and contingencies related to lawsuits, taxes and
commitments under contractual and other commercial obligations. Contingent
losses are
recognized by a charge to income when it is likely that a future event will confirm that an asset
has been impaired or a liability incurred at the date of the financial statements and the amount
can be reasonably estimated. Significant changes in assumptions as to the likelihood and
estimates of the amount of a loss could result in recognition of additional liabilities.

Critical judgements

The following are critical judgements apart from those involving estimation:

(i)

Determination of a CGU

Management’s judgement is required in determining the Company’s cash generating units for
the impairment assessment of
its indefinite-life intangible assets. The CGUs have been
determined considering operating activities and asset management and are consistent with the
Company’s reporting segments, Cable, DTH and Satellite Services and Media.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

(ii)

Broadcast rights and licenses and spectrum licenses – indefinite-life assessment

The Company’s businesses are dependent upon broadcast licenses (or operate pursuant to an
exemption order) granted and issued by the CRTC. In addition, the Company holds AWS
licenses to operate a wireless system in Canada. While these licenses must be renewed from
time to time, the Company has never failed to do so. In addition, there are currently no legal,
regulatory or competitive factors that limit the useful lives of these assets.

Standards, interpretations and amendments to standards issued but not yet effective

IFRS 9, Financial Instruments: Classification and Measurement, is the first part of the
replacement of IAS 39 Financial Instruments and applies to the classification and
measurement of financial assets and financial
liabilities as defined by IAS 39. It is
required to be applied retrospectively for the annual period commencing September 1,
2015.

IFRS 11, Joint Arrangements, replaces IAS 31 Interests in Joint Ventures and SIC
13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers. The new
standard classifies joint arrangements as either joint operations or joint ventures.

IFRS 12, Disclosure of Interests in Other Entities, sets out required disclosures on
application of IFRS 10, IFRS 11, and IAS 28 (amended 2011).

IAS 27, Separate Financial Statements was amended in 2011 for the issuance of
IFRS 10 and retains the current guidance for separate financial statements.

IAS 28, Investments in Associates was amended in 2011 for changes based on
issuance of IFRS 10 and IFRS 11 and provides guidance on accounting for joint
ventures, as defined by IFRS 11, using the equity method.

IFRS 13, Fair Value Measurement, defines fair value, provides guidance on its
determination and introduces consistent
fair value
measurements and is required to be applied prospectively for
the annual period
commencing September 1, 2013.

requirements for disclosure of

Income Taxes (amended 2011),

introduces an exception to the general
IAS 12,
measurement requirements of IAS 12 in respect of investment properties measured at fair
value. It is required to be applied retrospectively for the annual period commencing
September 1, 2012.

IAS 19, Employee Benefits (amended 2011), eliminates the existing option to defer
actuarial gains and losses and requires changes from the remeasurement of defined

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

benefit plan assets and liabilities to be presented in the statement of other
comprehensive income and is required to be applied retrospectively (with certain
exemptions) for the annual period commencing September 1, 2013.

IAS 1, Presentation of Financial Statements, was amended to require presentation of
items of other comprehensive income based on whether they may be reclassified to the
statement of income and is required to be applied retrospectively for the annual period
commencing September 1, 2012.

3. BUSINESS ACQUISITIONS AND DISCONTINUED OPERATIONS

Business acquisitions

2012

Television broadcasting businesses

Cash
Consideration for the equity interests held prior to the acquisition

Cumulative income from equity interests prior to acquisition
Gain on remeasurement of interests in equity investments

21
9

30
4
6

On May 31, 2012, the Company closed the acquisition of the partnership units of Mystery
Partnership (“Mystery”) and Men TV General Partnership (“The Cave”) not already owned by the
Company, for total consideration of $21. Prior to the acquisition, the Company held a 50%
interest in Mystery which was proportionately consolidated and a 49% interest in The Cave
which was accounted for under the equity method. The fair value of the previous ownership
interests in these specialty channels on the acquisition date was $19. The transaction is
accounted for using the acquisition method and as a result of remeasuring these equity
interests to fair value, the Company recorded a gain of $6 in the income statement. If the
acquisition had occurred on September 1, 2011, revenue and net income for the year would
have been approximately $12 and $2, respectively.

As part of the CRTC decisions approving the transaction, the Company is required to contribute
$2 in new benefits to the Canadian broadcasting system over the next seven years. The
contribution will be used to create new programming. The obligation has been recorded in the
income statement at fair value, being the discounted future cash flows using a 4% discount
rate.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

A summary of net assets acquired and allocation of consideration is as follows:

Net assets acquired at assigned fair values
Cash
Accounts receivable
Other current assets(1)
Intangibles(2) [note 10]
Goodwill, not deductible for tax(3) [note 10]

Current liabilities
Deferred income taxes

6
4
4
28
3

45
3
2

(1) Other current assets is comprised of program rights.

(2)

Intangibles include broadcast licenses and program rights.

(3) Goodwill comprises the value of expected efficiencies and synergies from integrating the

operations with the Company’s other wholly-owned specialty channels.

2011

(i)

Television broadcasting businesses

Cumulative
equity
income
$

Total
$

1,210

Cash(1)
$

1,208

(1)

The cash consideration includes $708 paid in 2010 for the Company’s initial equity
investment in CW Investments Co. (“CW Media”) and an option to acquire an additional
equity interest. The acquisition-date fair value of the Company’s initial equity investment
approximated $549 compared to its carrying value of $558 under the equity method of
accounting which resulted in an amount of approximately $9 related to transaction costs
which are included in business acquisition, integration and restructuring expenses in the
income statement.

On May 3, 2010 the Company announced that it had entered into agreements to acquire
100% of the broadcasting businesses of Canwest Global Communications Corp. (“Canwest”).
The acquisition includes all of the over-the-air channels, which were in creditor protection,
and the specialty television business of Canwest, including Canwest’s equity interest in CW
Media, the company that owns the portfolio of specialty channels acquired from Alliance
Atlantis Communications Inc. in 2007. During 2010, the Company completed certain
portions of the acquisition including acquiring a 49.9% equity interest, a 29.9% voting
interest, and an option to acquire an additional 14.8% equity interest and 3.4% voting
interest in CW Media. On October 22, 2010, the CRTC approved the transaction and the
Company closed the purchase on October 27, 2010. Certain of the subsidiary specialty
channels continue to have non-controlling interests. The purpose of the acquisition is to

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

combine programming content with the Company’s cable and satellite distribution network to
create a vertically integrated entertainment and communications company.

The transaction has been accounted for using the acquisition method and results of operations
have been included commencing October 27, 2010. These broadcasting businesses have
contributed $891 of revenue and $252 of operating income before amortization for the period
from October 27 to August 31, 2011. If the acquisition had closed on September 1, 2010,
the Media revenue and operating income before amortization for the year would have been
approximately $1,075 and $325, respectively. Net income is not determinable due to
emergence of certain portions of the business from bankruptcy protection.

In 2011, acquisition related costs of $61 were expensed and include amounts incurred to
effect the transaction, such as professional fees paid to lawyers and consultants, as well
as restructuring costs to integrate the new businesses and increase organizational
effectiveness for future growth as well as senior leadership reorganization.

As part of the CRTC decision approving the transaction, the Company is required to
contribute approximately $180 in new benefits to the Canadian broadcasting system over
the next seven years. Most of this contribution will be used to create new programming on
Canwest services, construct digital transmission towers and provide a satellite solution for
over-the-air viewers whose local television stations do not convert to digital. The obligation
has been recorded in the income statement at fair value, being the sum of the discounted
future net cash flows using a 5.75% discount rate. In addition, the Company assumed the
CRTC benefit obligation from Canwest’s acquisition of Specialty services in 2007 which
was a remaining commitment of approximately $95 on acquisition.

A summary of net assets acquired and allocation of consideration is as follows:

Net assets acquired at assigned fair values
Cash
Receivables
Other current assets(1)
Deferred income tax assets
Derivative instrument
Investments and other assets
Property and equipment
Intangibles(2)
Goodwill, not deductible for tax(3)

Current liabilities(1)
Current debt(4)
Derivative instruments(4)
Non-current liabilities
Deferred income tax liabilities
Long-term debt(5)
Non-controlling interests(6)

83
297
147
27
16
16
141
1,651
538

2,916
307
399
82
105
124
412
277
1,210

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

(1)

The Company acquired a remaining tax indemnity amount of $21 as part of
the
acquisition. The indemnity arose in 2007 as part of Canwest’s acquisition of Specialty
services where a wholly-owned subsidiary of CW Media entered into an agreement
pursuant to which certain of the parties agreed to indemnify the company in respect of
certain tax liabilities. A corresponding income tax liability was also assumed which
according to the terms of the agreement, will be recovered from other parties to the
agreement if and when the liabilities are settled.

(2)

Intangibles include broadcast licenses, brands, program rights, a trademark and software
assets.

(3) Goodwill comprises the value of expected efficiencies from combining programming
integrated operations, growth

into vertically

content and distribution businesses
expectations and an assembled workforce.

(4)

(5)

Current debt was comprised of a US $390 term loan. Shortly after closing the acquisition,
the Company repaid the term loan including breakage of the related currency swaps.

Long-term debt is comprised of US $338 13.5% senior unsecured notes due 2015. The
notes were subsequently redeemed (see note 13).

(6) Non-controlling interests in certain of the subsidiary specialty channels were assumed as
part of the acquisition and are recorded at their proportionate share of the fair value of
identifiable net assets acquired.

(ii)

Cable systems

A summary of net assets acquired and allocation of the consideration is as follows:

Net assets acquired at assigned fair values
Property, plant and equipment
Broadcast rights [note 10]
Goodwill, not deductible for tax [note 10]

Other liability

Cash purchase price

2011
$

9
24
5

38
2

During 2011, the Company purchased the assets of several cable systems serving approximately
7,300 basic subscribers in the interior of British Columbia. These assets were purchased as
they compliment the Company’s existing surrounding cable systems. Goodwill comprises the
value of expected synergies and future growth opportunities. The transaction has been
accounted for using the acquisition method and results of operations have been included from
their respective acquisition dates. These assets contributed approximately $2 of revenue and
$1 of operating income before amortization in 2011.

Discontinued operations

its wireless business
During late 2011,
opportunity including the potential value of wireless with its other operating segments, the rapid

the Company completed a strategic review of

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

evolution of wireless technologies, the capital required to build a competitive network and
recent changes in the wireless competitive environment. As a result, the Company decided to
discontinue any further construction of its traditional wireless network. Accordingly, the assets
were measured at the lower of carrying amount and estimated fair value less costs to sell
resulting in a write-down of $112 and classification of $16 as assets held for sale. The
Company has determined the carrying value of the wireless spectrum licenses continues to be
appropriate and intends to hold these assets while it reviews all options.

The results of operations and related cash flows have been reported as discontinued operations.
The loss from discontinued operations in 2012 and 2011 is comprised of the following:

Operating expenditures
Amortization
Write-down of assets
Income tax recovery

Loss from discontinued operations

2012
$

2011
$

–
–
–
–

–

7
1
112
(31)

The cash flows used in discontinued operations in 2012 and 2011 is comprised of the
following:

Cash used in operating activities
Cash used in investing activities

Decrease in cash from discontinued operations

4. ACCOUNTS RECEIVABLE

Subscriber and trade receivables
Due from related parties [note 27]
Miscellaneous receivables

Less allowance for doubtful accounts

2012
$

–
3

2011
$

11
137

148

September 1,
2010
$

210
1
4

215
(19)

196

2012
$

436
1
24

461
(28)

433

2011
$

425
1
46

472
(29)

443

Included in operating, general and administrative expenses is a provision for doubtful accounts
of $30 (2011 – $34).

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

INVENTORIES

Subscriber equipment
Other

Subscriber equipment
equipment.

2012
$

98
4

102

2011
$

91
6

September 1,
2010
$

51
3

includes DTH equipment, DCTs and related customer premise

6. OTHER CURRENT ASSETS

Program rights
Tax indemnity
Prepaid expenses and other

INVESTMENTS AND OTHER ASSETS

Investments, at equity:
CW Media
Specialty channel networks
Other assets:
Loan
Loan to equity associate
Other

Investments at equity

2012
$

2011
$

September 1,
2010
$

21
17
51

14
21
47

–
–
34

2012
$

2011
$

September 1,
2010
$

–
10

–
2
1

–
10

–
2
1

739
–

4
–
–

743

The Company exercised significant influence over CW Media with its 49.9% ownership and
recorded equity income of $13 for the period of September 1 to October 26, 2010. On
October 22, 2010, the CRTC approved the transaction and the Company closed the purchase
on October 27, 2010 (see note 3).

During 2012, the Company recorded equity income of $nil in respect of its non-controlling
interests in several specialty channels which were acquired as part of the Media acquisition
(2011 – $1).

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

The Company’s interest in the assets, liabilities and results of operations of investments in
associates accounted for using the equity method are summarized as follows:

Current assets
Non-current assets

Current liabilities
Non-current liabilities

Proportionate interest in net assets

Revenue
Expenses

Proportionate share of net income

Other assets

2012
$

2011
$

2
13

15
3
2

2012
$

5
(5)

–

3
11

14
2
2

2011
$

44
(30)

The loan to an equity associate bears interest at prime plus 2.5% and is repayable on demand.
The Company has agreed to not demand repayment unless certain conditions and events occur.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

8. PROPERTY, PLANT AND EQUIPMENT

Satellite
audio,
video and
data
network
and DTH
receiving
equipment
$

Digital
cable
terminals
and
modems
$

Transmitters,
broadcasting,
communications
and production
equipment
$

Cable and
telecommunications
distribution system
$

Land
and
buildings
$

Data
processing
and other
$

Assets
under
construction
$

Cost
September 1, 2010
Additions
Business acquisitions
Transfers
Assets held for resale
Discontinued
operations
Retirement and
disposals

August 31, 2011
Additions
Transfers
Write-down
Retirement and
disposals

August 31, 2012

Accumulated

amortization

September 1, 2010
Amortization
Retirement and
disposals

August 31, 2011
Amortization
Write-down
Retirement and
disposals

August 31, 2012

Net carrying amount
September 1, 2010
August 31, 2011
August 31, 2012

4,198
387
8
–
–

–

(244)

4,349
441
21
–

(414)

4,397

2,129
358

(243)

2,244
380
–

(414)

2,210

2,069
2,105
2,187

552
174
–
–
–

–

(78)

648
167
–
–

(96)

719

224
152

(78)

298
165
–

(96)

367

328
350
352

154
9
–
–
–

–

(2)

161
3
–
–

(79)

115
16

(2)

129
11
–

(79)

39
32
24

–
15
63
–
–

–

(2)

76
13
–
–

(1)

–
12

(1)

11
14
–

(1)

–
65
64

406
12
53
5
–

–

(12)

464
11
2
(23)

(6)

448

121
20

(3)

138
21
(7)

(6)

146

285
326
302

311
55
26
21
–

–

(59)

354
38
19
(8)

(38)

365

151
46

(54)

143
52
(4)

(32)

159

160
211
206

124
113
–
(26)
(16)

(77)

(7)

111
42
(42)
–

(4)

107

–
–

–

–
–
–

–

124
111
107

Total
$

5,745
765
150
–
(16)

(77)

(404)

6,163
715
–
(31)

(638)

6,209

2,740
604

(381)

2,963
643
(11)

(628)

2,967

3,005
3,200
3,242

In 2012, the Company recognized a gain (loss) of ($1) (2011 – $4) on the disposal of property, plant
and equipment.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

9. OTHER LONG-TERM ASSETS

Equipment costs subject to a deferred revenue arrangement
Customer equipment financing receivables
Credit facility arrangement fees
Other

2012
$

278
17
3
33

331

2011
$

216
9
1
32

258

September 1,
2010
$

202
–
2
29

233

Amortization provided in the accounts for 2012 amounted to $232 (2011 – $206) and was
recorded as amortization of deferred equipment costs and other amortization.

10. INTANGIBLES AND GOODWILL

Broadcast rights and licenses

Cable systems
DTH and satellite services
Television broadcasting

Program rights and advances
Goodwill

Non-regulated satellite services
Cable systems
Television broadcasting

Wireless spectrum licenses
Other intangibles

Software
Trademark and brands

Carrying amount

2012
$

2011
$

September 1,
2010
$

4,260
1,013
1,402

6,675
253

4,260
1,013
1,382

6,655
217

88
86
541

715
191

195
41

236

88
86
538

712
191

188
41

229

4,236
1,013
–

5,249
–

88
81
–

169
191

156
–

156

Net book value

8,070

8,004

5,765

Broadcast rights and licenses, trademark, brands and wireless spectrum licenses have been
assessed as having indefinite useful lives. While licenses must be renewed from time to time,
the Company has never failed to do so. In addition, there are currently no legal, regulatory,
competitive or other factors that limit the useful lives of these assets.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

The changes in the carrying amount of intangibles with indefinite useful lives, and therefore not
subject to amortization, are as follows:

September 1, 2010
Business acquisitions [note 3]

August 31, 2011
Business acquisitions [note 3]

August 31, 2012

Broadcast
rights and
licenses
$

5,249
1,406

6,655
20

6,675

Trademark and
brands
$

Goodwill
$

Wireless
spectrum
licenses
$

–
41

41
–

169
543

712
3

715

191
–

191

Intangibles subject to amortization are as follows:

Program rights
and advances Software

Cost
September 1, 2010
Business acquisitions [note 3]
Additions
Transfers
Discontinued operations
Retirement and disposals

August 31, 2011
Business acquisitions [note 3]
Additions
Transfers
Retirement and disposals

August 31, 2012

Accumulated amortization
September 1, 2010
Amortization
Discontinued operations
Retirement and disposals

August 31, 2011
Amortization
Retirement and disposals

August 31, 2012

Net carrying amount
September 1, 2010

August 31, 2011

Less current portion of program rights

August 31, 2012

Less current portion of program rights

–
332
260
–
–
–

592
1
427
–
(215)

805

–
361
–
–

361
385
(215)

531

–

231
14

217

274
21

253

171
19
37
18
(4)
(14)

227
–
52
19
(22)

276

87
46
(1)
(14)

118
60
(21)

157

109
–

109

119
–

119

Software under
construction
$

Total
$

72
–
54
(18)
(29)
–

79
–
16
(19)
–

–
–
–
–

–
–
–

–

79
–

76
–

243
351
351
–
(33)
(14)

898
1
495
–
(237)

1,157

87
407
(1)
(14)

479
445
(236)

688

156

419
14

405

469
21

448

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Impairment testing of indefinite-life intangibles and goodwill

The Company conducted its annual impairment test on goodwill and indefinite-life intangibles
as at March 1, 2012 and the recoverable amount of each of the cash generating units exceeded
their carrying value by a significant amount.

The Company also conducted an impairment test on its wireless spectrum assets utilizing the
Greenfield Approach as at March 1, 2012. The recoverable amount of the assets exceeded their
carrying amount. During August 2011 the Company discontinued construction of a traditional
wireless network and considered if this would result in an impairment to the spectrum carrying
value. The Company concluded that the carrying value of the AWS licenses continues to be
appropriate and intends to hold these assets while it reviews all options. A hypothetical decline
of 10% and 20% in the fair value of the wireless spectrum as at March 1, 2012 would not
result in any impairment loss.

A hypothetical decline of 10% and 15% in the recoverable amount of the broadcast rights and
licenses for each cash generating unit as at March 1, 2012 would not result in any impairment
loss. Further, any changes in economic conditions since the impairment testing conducted as at
March 1, 2012 do not represent events or changes in circumstance that would be indicative of
impairment at August 31, 2012.

Significant estimates inherent to this analysis include discount rates and the terminal value. At
March 1, 2012, the estimates that have been utilized in the impairment tests reflect any
changes in market conditions and are as follows:

Cable systems
DTH and satellite services
Media
Wireless

Terminal value

Pre-tax
discount rate

Terminal growth rate

Terminal operating
income before
amortization
multiple

11.5%
13.6%
12.3%
15.7%

1.50%
1.00%
n/a
n/a

5.50x
4.50x
6.50x
5.25x

A sensitivity analysis of significant estimates is conducted as part of every impairment
test. With respect to the impairment tests performed in the third quarter, the estimated decline
in recoverable amount for the sensitivity of significant estimates is as follows:

Cable systems
DTH and satellite services
Media
Wireless

Estimated decline in recoverable amount

Terminal value

1% increase in
discount rate

1% decrease in
terminal growth rate

0.5 times decrease in
terminal operating
income before
amortization
multiple

3%
2%

n/a
n/a

3%
3%
4%
37%

6%
6%
4%
30%

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Trade
Program rights
CRTC benefit obligations
Accrued liabilities
Accrued network fees
Interest and dividends
Related parties [note 27]
Current portion of unfunded pension plan liability [note 26]

2012
$

50
72
43
289
105
219
24
9
811

2011
$

99
78
53
296
102
214
27
9
878

September 1,
2010
$

113
12
–
266
91
181
36
1
700

During 2011, the Company recorded $30 in respect of its restructuring activities to streamline
operations, drive efficiencies and enhance competiveness. The restructuring included elimination
of approximately 550 employee positions, management relocations and facilities consolidation. A
total of $28 was paid in 2011 and of the majority of remaining $2 was paid in 2012.

12. PROVISIONS

September 1, 2010
Media business acquisition [note 3]
Additions
Accretion
Reversal
Payments
August 31, 2011
Additions
Reversal
Payments
August 31, 2012

Current
Long-term
September 1, 2010

Current
Long-term
August 31, 2011

Current
Long-term
August 31, 2012

Asset
retirement
obligations Other

–
7
–
1
–
–

8
–
–
–

–
–

–

–
8

–
8
8

19
8
9
–
(7)
(11)

18
6
(1)
(4)

19
–

18
–

19
–
19

Total
$

19
15
9
1
(7)
(11)

26
6
(1)
(4)

19
–

18
8

19
8
27

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

13. LONG-TERM DEBT

2012

2011

September 1,
2010

Effective
interest
rates
%

Long-term
debt at
amortized
cost(1)
$

Adjustment
for
finance
costs(1)
$

Long-term
debt
repayable at
maturity
$

Long-term
debt at
amortized
cost(1)
$

Adjustment
for
finance
costs(1)
$

Long-term
debt
repayable
at maturity
$

Long-term
debt at
amortized
cost(1)
$

6.11
7.50
6.56
6.34
5.72
5.69
5.55
6.89

450
349
598
295
397
1,242
496
1,416

5,243

6.31

5,263
451

4,812

–
1
2
5
3
8
4
34

–

57
–

450
350
600
300
400
1,250
500
1,450

5,300

449
348
596
294
397
1,241
495
1,416

5,236

5,320
451

4,869

5,257
1

5,256

1
2
4
6
3
9
5
34

–

64
–

450
350
600
300
400
1,250
500
1,450

5,300

5,321
1

5,320

448
347
595
293
396
1,241
–
642

3,962

3,983
1

3,982

Corporate
Cdn senior notes-

6.10% due November 16, 2012(2)
7.50% due November 20, 2013
6.50% due June 2, 2014
6.15% due May 9, 2016
5.70% due March 2, 2017
5.65% due October 1, 2019
5.50% due December 7, 2020
6.75% due November 9, 2039

Other
Burrard Landing Lot 2 Holdings

Partnership

Total consolidated debt
Less current portion(2)

(1)

(2)

Long-term debt is presented net of unamortized discounts, finance costs and bond
forward proceeds of $57 (August 31, 2011 – $64; September 1, 2010 – $38).

Current portion of long-term debt includes the 6.10% senior notes which were repaid on
November 16, 2012 and the amount due within one year on the Partnership’s mortgage
bonds.

Corporate

Bank loans

During the current year, a syndicate of banks provided the Company with an unsecured $1
billion credit facility which includes a maximum revolving term facility of $50 and matures in
January 2017. The credit facility has a feature whereby the Company may request an additional
$500 of borrowing capacity so long as no event of default or pending event of default has
occurred and is continuing or would occur as a result of the increased borrowings. No lender
has any obligation to participate in the requested increase unless it agrees to do so at its sole
discretion. This facility replaces the prior credit and operating loan facilities which were
scheduled to mature in May 2012. Funds are available to the Company in both Canadian and
US dollars. At August 31, 2012, $1 has been drawn as committed letters of credit against the
revolving term facility. Interest rates fluctuate with Canadian prime and bankers’ acceptance
rates, US bank base rates and LIBOR rates. The effective interest rate on the operating and
revolving term facilities for 2012 was 3% (2011 – 2.99%). The effective interest rate on actual
borrowings under the prior credit facility during 2011 was 2.59%. Excluding the revolving term
facility, no amounts were borrowed under either the new or prior credit facilities during 2012.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

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.

Other

Burrard Landing Lot 2 Holdings Partnership

The Company has a 33.33% interest in the Partnership which built the Shaw Tower project
with office/retail space and living/working space in Vancouver, BC. In the fall of 2004, the
commercial construction of the building was completed and at that time, the Partnership issued
ten year secured mortgage bonds in respect of the commercial component of the Shaw Tower.
The bonds bear interest at 6.31% compounded semi-annually and are collateralized by the
property and the commercial rental income from the building with no recourse to the Company.

Gain on redemption of debt

In 2011, the Company assumed US $338 senior unsecured notes on acquisition of the
Canwest broadcasting business. The US $312 13.5% senior unsecured notes were originally
issued on July 3, 2008. For periods up to August 15, 2011, interest was accrued, however was
not payable until maturity unless CW Media elected to do so. As at acquisition date, US $26 of
accrued interest remained outstanding and was included in the principal debt balance with
respect to the period July 3, 2008 to February 15, 2009. Interest for all periods subsequent to
February 15, 2009 was paid in cash.

Within 30 days of closing the transaction, a subsidiary of CW Media was required to make a
change of control offer at a cash price equal to 101% of the obligations under the US $338
senior unsecured notes in accordance with a related indenture. As a result, on November 15,
2010, an offer was made to purchase all of the notes. An aggregate of US $52 face amount
was tendered under the offer and purchased by the Company for cancellation for an aggregate
price of US $59 including accrued interest and repurchase premium. In August, 2011, the
Company redeemed the remaining outstanding US $260 face amount at 106.75% as set out
under the terms of the indenture for an aggregate purchase price of US $320 including accrued
interest and prepayment premium.

The Company recorded a gain of $33 in respect of the redemption which resulted from
recognizing the remaining unamortized acquisition date fair value adjustment of $57 partially
offset by the 1% repurchase and 6.75% redemption premiums totaling $19 and $5 in respect of
the write-off of the embedded derivative instrument associated with the early prepayment option.

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, 2012.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Long-term debt repayments

Mandatory principal repayments on all
thereafter are as follows:

long-term debt in each of the next five years and

2013
2014
2015
2016
2017
Thereafter

Interest expense

Interest expense – long-term debt
Amortization of senior notes discounts
Amortization of fair value adjustment to debt assumed in the Media business

acquisition

Interest income – short-term (net)
Capitalized interest

14. OTHER LONG-TERM LIABILITIES

Pension liabilities [note 26]
Amended cross-currency interest rate agreements [note 28]
CRTC benefit obligations
Post retirement liabilities [note 26]
Program rights liabilities
Other

2012
$

401
–
125
19
4
3

552

2011
$

334
–
147
16
7
3

507

451
951
18
300
400
3,200

5,320

2012
$

334
2

–
(3)
(3)

2011
$

341
2

(8)
(3)
–

330

332

September 1,
2010
$

270
159
–
–
–
–

429

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

15. DEFERRED CREDITS

IRU prepayments
Equipment revenue
Connection fee and installation revenue
Deposit on future fibre sale
Other

2012
$

485
137
10
2
1

635

2011
$

497
120
10
2
1

630

September 1,
2010
$

510
112
7
2
1

632

Amortization of deferred credits for 2012 amounted to $136 (2011 – $126) and was recorded
in the accounts as described below.

IRU agreements are in place for periods ranging from 21 to 60 years and are being amortized to
income over the agreement periods. Amortization in respect of the IRU agreements for 2012
amounted to $12 (2011 – $13) and was recorded as other amortization. Amortization of
equipment revenue for 2012 amounted to $115 (2011 – $107). Amortization of connection
fee and installation revenue for 2012 amounted to $9 (2011 – $7) and was recorded as
revenue.

16. SHARE CAPITAL

Authorized

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

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

2012

2011

Number of securities

22,520,064

22,520,064 Class A Shares

421,188,697 415,216,348 Class B Non-Voting Shares
12,000,000 Series A Preferred Shares

12,000,000

455,708,761 449,736,412

2012
$

2
2,455
293

2,750

2011
$

2
2,338
293

2,633

Class A Shares 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 take-over 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.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Changes in Class A Share capital and Class B Non-Voting Share capital in 2012 and 2011 are
as follows:

September 1, 2010
Stock option exercises
Dividend reinvestment plan

August 31, 2011
Stock option exercises
Dividend reinvestment plan

August 31, 2012

Series A Preferred Shares

Class A Shares
Number

Class B Non-Voting Shares

Number

22,520,064 2
–
–

–
–

22,520,064 2
–
–

–
–

410,622,001 2,248
51
39

2,690,118
1,904,229

415,216,348 2,338
19
98

969,803
5,002,546

22,520,064 2

421,188,697 2,455

The Cumulative Redeemable Rate Reset Preferred Shares, Series A (“Series A Preferred
Shares”) are classified as equity since redemption, at $25.00 per Series A Preferred Share, is
at the Company’s option and payment of dividends is at the Company’s discretion.

Share transfer restriction

The Articles 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).

17. SHARE-BASED COMPENSATION

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
ten years from the date of grant. Options granted up to August 31, 2012 vest evenly on the
anniversary dates from the original grant date at either 25% per year over four years or 20% per
year over five years. The options must be issued at not less than the fair market value of the
Class B Non-Voting Shares at the date of grant. The maximum number of Class B Non-Voting
Shares issuable under the plan may not exceed 52,000,000. As at August 31, 2012,
17,764,506 Class B Non-Voting Shares have been issued under the plan.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

The changes in options are as follows:

Outstanding, beginning of year
Granted
Forfeited
Exercised(1)

2012

2011

Weighted
average
exercise
price
$

Number

Weighted
average
exercise
price
$

Number

20.91
21,970,400
1,229,000
21.05
(1,066,925) 20.96
(969,803) 17.09

20.48
23,993,150
3,269,000
20.91
(2,601,632) 20.88
(2,690,118) 17.08

Outstanding, end of year

21,162,672

21.09

21,970,400

20.91

(1)

The weighted average Class B Non-Voting Share price for the options exercised was $20.67.

The following table summarizes information about the options outstanding at August 31, 2012:

Range of prices

$14.85 – $22.27
$22.28 – $26.20

Options outstanding

Options exerciseable

Weighted
average
remaining
contractual
life

Weighted
average
exercise
price

Number
exercisable

Weighted
average
exercise
price

Number
outstanding

13,720,672
7,442,000

6.50
5.17

$19.29 8,304,972 $18.82
$24.42 7,139,250 $24.51

The weighted average estimated fair value at the date of the grant for common share options
granted for the year ended August 31, 2012 was $2.72 (2011 – $3.13) 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 weighted-average assumptions:

Dividend yield
Risk-free interest rate
Expected life of options
Expected volatility factor of the future expected market price of Class B

Non-Voting Shares

Restricted share unit plan

2012

2011

4.48% 4.32%
1.42% 2.19%
5 years 5 years

24.7% 25.8%

During 2011, the Company implemented an RSU plan whereby RSUs are granted to eligible
employees and officers of the Company. An RSU is a right that tracks the value of one Class B
Non-Voting Share and permits the holder to receive a cash payment equal to the market value
once RSUs are vested. Market value is determined by the average of the closing prices of the
Class B Non-Voting Shares on the Toronto Stock Exchange for the five trading days preceding
the applicable payment date as determined by the Company. When cash dividends are paid on
Class B Non-Voting Shares, holders are credited with RSUs equal to the dividend. RSUs do not
have voting rights as there are no shares underlying the plan.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

During 2012, $2 was recorded as compensation expense (2011 – $1) and at August 31, 2012,
the carrying value of the liability was $3 (2011 – $1).

Deferred share unit plan

The Company has a DSU plan for its Board of Directors whereby directors can elect to receive
their annual cash compensation, or a portion thereof, in DSUs. In addition, the Company may
adjust and/or supplement directors’ compensation with periodic grants of DSUs. A DSU is a
right that tracks the value of one Class B Non-Voting Share. Holders will be entitled to a cash
payout when they cease to be a director. The cash payout will be based on market value of a
Class B Non-Voting Share at the time of payout. When cash dividends are paid on Class B
Non-Voting Shares, holders are credited with DSUs equal to the dividend. DSUs do not have
voting rights as there are no shares underlying the plan.

During 2012, $1 was recognized as compensation expense (2011 – $1). The carrying value and
intrinsic value of DSUs at August 31, 2012 was $6 and $5, respectively (August 31, 2011 –
$5 and $4, respectively).

Employee share purchase plan

The Company’s ESPP provides employees with an incentive to increase the profitability of the
Company and a means to participate in that increased profitability. Generally, all non-unionized
full time or part time employees of the Company are eligible to enroll in the ESPP. Under the
their monthly base
ESPP, eligible employees may contribute to a maximum of 5% of
compensation. The Company contributes an amount equal
the employee’s
contributions.

to 25% of

During the 2012, $5 was recorded as compensation expense (2011 – $4).

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

18. EARNINGS PER SHARE
Earnings per share calculations are as follows:

Numerator for basic and diluted earnings per share ($)
Net income from continuing operations
Deduct: net income attributable to non-controlling interests in subsidiaries
Deduct: dividends on Series A Preferred Shares

Net income from continuing operations attributable to common shareholders
Net loss from discontinued operations attributable to common shareholders

Net income attributable to common shareholders

Denominator (millions of shares)
Weighted average number of Class A Shares and Class B Non-Voting Shares

for basic earnings per share

Effect of potentially dilutive securities(1)

Weighted average number of Class A Shares and Class B Non-Voting Shares

for diluted earnings per share

Earnings per share – basic ($)
Earnings per share from continuing operations
Loss per share from discontinued operations

Earnings per share

Earnings per share – diluted ($)
Earnings per share from continuing operations
Loss per share from discontinued operations

Earnings per share

2012

2011

761
(33)
(15)

713
–

713

559
(19)
(4)

536
(89)

447

441
1

435
1

442

436

1.62
–

1.62

1.23
(0.21)

1.02

1.61
–

1.61

1.23
(0.21)

1.02

(1)

The earnings per share calculation does not take into consideration the potential dilutive
effect of certain stock options since their impact is anti-dilutive. For the year ended
August 31, 2012, 12,083,206 options were excluded from the diluted earnings per share
calculation (2011 – 8,100,404).

19. DIVIDENDS
Common share dividends

The holders of Class A Shares and Class B Non-Voting Shares are entitled to receive such
dividends as the Board of Directors determines to declare on a share-for-share basis, as and
when any such dividends are declared or paid. 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 $0.0025 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 Shares and Class B Non-Voting Shares participate
equally, share for share, as to all subsequent dividends declared.

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Preferred share dividends

Holders of the Series A Preferred Shares are entitled to receive, as and when declared by the
Company’s Board of Directors, a cumulative quarterly fixed dividend yielding 4.50% annually for
the initial period ending June 30, 2016. Thereafter, the dividend rate will be reset every five years
at a rate equal to the then current 5-year Government of Canada bond yield plus 2.00%. Holders
of Series A Preferred Shares will have the right, at their option, to convert their shares into
Cumulative Redeemable Floating Rate Preferred Shares, Series B (the “Series B Preferred
Shares”), subject to certain conditions, on June 30, 2016 and on June 30 every five years
thereafter. The Series B Preferred Shares also represent a series of Class 2 preferred shares and
holders will be entitled to receive cumulative quarterly dividends, as and when declared by the
Company’s Board of Directors, at a rate set quarterly equal to the then current three-month
Government of Canada Treasury Bill yield plus 2.00%.

Dividend reinvestment plan

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

Dividends declared

The dividends per share recognized as distributions to common shareholders for dividends
declared during the year ended August 31, 2012 and 2011 are as follows:

Class A Voting Share

Class B Non-Voting Share

Class A Voting Share

Class B Non-Voting Share

2012

2011

0.9550

0.9575

0.9075

0.9100

The Preferred Shares were issued on May 31, 2011. On June 29, 2011, the Company declared
dividends of $0.37603 per Preferred Share. The total amount payable was $4 of which $1 was
not recognized as at August 31, 2011. The dividend payment was made on September 30, 2011.

On October 20, 2011, January 12, 2012 and April 13, 2012, the Company declared dividends of
$0.28125 per Preferred Share. The dividend payments were made on January 3, 2012, April 2,
2012 and July 3, 2012, respectively.

On June 28, 2012, the Company declared dividends of $0.28125 per Preferred Share which
were paid on October 1, 2012. The total amount paid was $3 of which $1 was not recognized as
at August 31, 2012.

On October 25, 2012, the Company declared dividends of $0.080625 per Class A Voting Share
and $0.080833 per Class B Non-Voting Share payable on each of December 28, 2012,
January 30, 2013 and February 27, 2013 to shareholders of record at the close of business on
December 14, 2012, January 15, 2013 and February 15, 2013, respectively.

100

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

On October 25, 2012, the Company declared dividends of $0.28125 per Preferred Share payable
on December 31, 2012 to holders of record at the close of business on December 14, 2012.

20. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER

COMPREHENSIVE INCOME (LOSS)

Components of other comprehensive income (loss) and the related income tax effects for 2012
are as follows:

Adjustment for hedged items recognized in the period
Actuarial losses on employee benefit plans

Amount
$

Income taxes
$

Net
$

(3)
(83)

(86)

1
21

(2)
(62)

(64)

Components of other comprehensive income (loss) and the related income tax effects for 2011
are as follows:

Change in unrealized fair value of derivatives designated as cash

flow hedges

Adjustment for hedged items recognized in the period
Actuarial losses on employee benefit plans

Amount
$

Income taxes
$

Net
$

(14)
6
(41)

(49)

2
(2)
11

(12)
4
(30)

(38)

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

Fair value of derivatives
Actuarial losses on employee benefit plans

2012
$

(1)
(92)

(93)

2011
$

1
(30)

(29)

September 1,
2010
$

9
–

21. OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES

Employee salaries and benefits
Purchases of goods and services

22. OTHER GAINS

2012
$

835
2,036

2,871

2011
$

751
1,939

2,690

101

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Landing Lot 2 Holdings Partnership. During the current year, the category also includes a loss
of $26 related to the electrical fire and resulting water damage at the Company’s head office in
Calgary, Alberta as well as a pension curtailment gain of $25. The loss of $26 includes $6 of
costs in respect of restoration and recovery activities,
including amounts incurred in the
relocation of employees, and a write-down of $20 related to the damages sustained to the
building and its contents. Insurance recoveries are expected and will be included in Other gains
as claims are approved. No insurance recoveries were recorded in 2012. The pension
curtailment gain arose due to a plan amendment to freeze salary levels.

23. INCOME TAXES

Deferred 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 deferred income tax liabilities
and assets are as follows:

Deferred income tax liabilities:

Property, plant and equipment and software assets
Broadcast rights and licenses
Partnership income

Deferred income tax assets:

Non-capital loss carryforwards
Accrued charges
Foreign exchange on long-term debt and fair value of

derivative instruments

Net deferred income tax liabilities
Deferred income tax assets

Deferred income tax liabilities

2012
$

2011
$

September 1,
2010
$

133
840
271

145
820
354

167
635
350

1,244

1,319

1,152

33
137

173

50
132

185

8
63

1,071
14

1,134
30

1,085

1,164

1,065
–

1,065

102

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Significant changes recognized to deferred income tax assets (liabilities) are as follows:

Property, plant
and equipment
and software
assets
$

Broadcast
rights
and
licenses
$

Partnership
income
$

Non-capital
loss carry-
forwards
$

Accrued
charges
$

Balance at

September 1, 2010
Recognized in statement

of income
Recognized in
discontinued
operations

Recognized in other
comprehensive
income (loss)

Recognized on Media

business acquisition

Balance at August 31,

2011

Recognized in statement

of income

Recognized in other
comprehensive
income (loss)

Recognized on business

acquisition

Balance at August 31,

2012

(167)

(635)

(350)

(8)

(17)

(3)

–

(168)

(1)

(145)

(820)

(354)

(3)

–

132

(18)

(17)

–

(2)

–

(133)

(840)

(271)

137

Foreign
exchange on
long-term debt
and fair value
of derivative
instruments
$

Total
$

(1,065)

(14)

(9)

–

(97)

(1,134)

(2)

(1,071)

The Company has capital
loss carryforwards of approximately $146 for which no deferred
income tax asset has been recognized in the accounts. These capital losses can be carried
forward indefinitely.

The Company has taxable temporary differences associated with its investment
in its
subsidiaries. No deferred tax liabilities have been provided with respect to such temporary
differences as the Company is able to control the timing of the reversal and such reversal is not
probable in the foreseeable future.

103

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

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

Current statutory income tax rate

Income tax expense at current statutory rates
Net increase (decrease) in taxes resulting from:

Effect of tax rate changes
Recognition of previously unrecognized deferred tax assets
Originating temporary differences recorded at future tax rates expected

to be in effect when realized

Other

Income tax expense

2012
$

2011
$

26.3% 27.9%

256

220

11
(32)

2
(23)

–
–

2
7

214

229

Due to Canadian federal and provincial enacted corporate income tax rate changes, the
statutory income tax rate for the Company decreased from 27.9% in 2011 to 26.3% in 2012.

The components of income tax expense are as follows:

Current income tax expense

Deferred tax expense (recovery) related to temporary differences
Deferred tax expense from tax rate changes
Deferred tax recovery from recognition of previously unrecognized deferred

tax assets

Income tax expense

2012
$

257

(22)
11

(32)

2011
$

220

9
–

–

214

229

104

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

24. BUSINESS SEGMENT INFORMATION

The Company’s operating segments are Cable, Media, DTH and Satellite Services, all of which
are substantially located in Canada. 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 revenue and operating income before charges such as
amortization.

2012

Satellite

Satellite
Services
$

Cable
$

Media
$

DTH
$

Revenue

Operating income before amortization

3,193

1,053

1,502

332

763

254

Total
$

844

293

Operating income as % of revenue

47.0% 31.5% 33.3% 48.1% 34.7%

Intersegment
eliminations
$

(92)

–

Total
$

4,998

2,127

42.6%

729
81

810

31
–

3
83

8
–

11
83

–
–

–

Interest(1)
Burrard Landing Lot 2 Holdings Partnership

Cash taxes(1)
Corporate/other

Capital expenditures and equipment costs (net) by

segment

Capital expenditures
Equipment costs (net)

Reconciliation to Consolidated Statements of Cash

Flows

Additions to property, plant and equipment
Additions to equipment costs (net)
Additions to other intangibles

Total of capital expenditures and equipment costs
(net) per Consolidated Statements of Cash Flows

Increase in working capital related to capital

expenditures

Increase in customer equipment financing receivables
Less: Proceeds on disposal of property, plant and

equipment

Less: Satellite services equipment profit(2)

Total capital expenditures and equipment costs (net)

reported by segments

See notes following 2011 business segment table.

329
1

330

282
(25)

257

771
164

935

730
178
65

973

(10)
(16)

(9)
(3)

935

105

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Revenue

Operating income before amortization

2011

Satellite

Satellite
Services
$

Media
$

DTH
$

891

252

745

246

Total
$

827

289

Cable
$

3,096

1,510

Operating income as % of revenue

48.8% 28.3% 33.0% 52.4% 34.9%

Intersegment
eliminations
$

(73)

–

Total
$

4,741

2,051

43.3%

Interest(1)
Burrard Landing Lot 2 Holdings Partnership
Wireless

Cash taxes(1)
Corporate/other

Capital expenditures and equipment costs (net) by

segment

Capital expenditures
Equipment costs (net)

Reconciliation to Consolidated Statements of Cash

Flows

Additions to property, plant and equipment
Additions to equipment costs (net)
Additions to other intangibles

Total of capital expenditures and equipment costs
(net) per Consolidated Statements of Cash Flows

Increase in working capital related to capital

expenditures

Increase in customer equipment financing receivables
Less: Proceeds on disposal of property, plant and

equipment

Less: Satellite services equipment profit(2)

Total capital expenditures and equipment costs (net)

reported by segments

677
32

709

27
–

6
75

26
–

32
75

107

–
–

–

312
1
19

332

240
(20)

220

736
107

843

705
120
65

890

(4)
(13)

(27)
(3)

843

(1)

(2)

The Company does not report interest or cash taxes on a segmented basis. Interest was
allocated to the discontinued Wireless division in 2011 based on the Company’s average
cost of borrowing to fund the capital expenditures and operating costs and therefore has
not been included in discontinued operations.

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

25. COMMITMENTS AND CONTINGENCIES

Commitments

(i)

the Company,

During prior years,
through its subsidiaries, purchased 28 Ku-band
transponders on the Anik F1 satellite and 18 Ku-band transponders on the Anik F2
satellite from Telesat Canada. During 2006, the Company’s traffic on the Anik F1 was
transferred to the Anik F1R under a capacity services arrangement which has all of the

106

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

same substantive benefits and obligations as on Anik F1. In addition, the Company leases
a number of C-band and Ku-band transponders. Under
the Ku-band F1 and F2
the Company is committed to paying an annual
transponder purchase agreements,
transponder maintenance fee for each transponder acquired from the time the satellite
becomes operational for a period of 15 years.

(ii)

The Company has various long-term commitments of which the majority are for the
maintenance and lease of satellite transponders, program related agreements, lease of
transmission facilities, and lease of premises as follows:

2013
2014-2017
Thereafter

683
892
442

2,017

Program agreements generally commit the Company to acquire specific programs or films or
certain levels of future productions. The acquisition of these program rights is contingent on
actual production or airing of the programs or films. At August 31, 2012, there is
approximately $503 included above in respect of such program rights commitments.

Included in operating, general and administrative expenses are transponder maintenance
expenses of $58 (2011 – $58) and rental expenses of $95 (2011 – $90).

(iii) At August 31, 2012, the Company had capital expenditure commitments in the normal
course of business including $22 for transponders on the new Anik G1 satellite which is
expected to be available in fiscal 2013.

(iv) As part of the CRTC decisions approving the acquisition of the broadcasting businesses in
2012 and 2011, the Company is required to contribute approximately $182 in new
benefits to the Canadian broadcasting system over seven years. The obligations have been
recorded in the income statement at fair value, being the sum of the discounted future
net cash flows using appropriate discount rates. In addition, the Company assumed the
CRTC benefit obligation from Canwest’s acquisition of Specialty services in 2007. At
August 31, 2012, the remaining expenditure commitments in respect of these obligations
is $198 which will be funded over future years through fiscal 2019.

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 commercial surety bonds with and to third
parties.

107

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Indemnities

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

these indemnification agreements is not

The maximum potential amount of future payments that the Company would be required to
reasonably quantifiable as certain
make under
indemnifications are not
into
the Company enters
indemnification agreements only when an assessment of the business circumstances would
indicate that the risk of loss is remote. At August 31, 2012, management believes it is remote
that the indemnification provisions would require any material cash payment.

to limitation. However,

subject

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.

Irrevocable standby letters of credit and commercial surety bonds

The Company and certain of its subsidiaries have granted irrevocable standby letters of credit
and commercial surety 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, 2012, the guarantee instruments amounted to $4. 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 consolidated financial
statements. The guarantee instruments mature at various dates during fiscal 2013 and 2014.

26. EMPLOYEE BENEFIT PLANS

Defined contribution pension plans

The Company has defined contribution pension plans for the majority of its non-union and
certain union employees and, for the majority of these employees, contributes 5% of eligible
earnings to the maximum amount deductible under the Income Tax Act. Total pension costs in
respect of these plans for the year were $32 (2011 – $29) of which $20 (2011 – $18) was
expensed and the remainder capitalized.

Defined benefit pension plans

The Company provides a 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 eligible pensionable earnings during their years of service. In
2012, the Company closed the plan to new participants and amended the plan to freeze base
salary levels at August 31, 2012 for purposes of determining eligible pensionable earnings.

108

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Employees are not required to contribute to this plan and there are no minimum required
employer contributions under the plan. Subsequent to year end, the plan became partially
funded as the Company made discretionary contributions of $300 to a Retirement
Compensation Arrangement Trust.

The table below shows the change in benefit obligation for this plan.

Accrued benefit obligation and plan deficit, beginning of year
Current service cost
Past service cost
Interest cost
Curtailment gain
Actuarial losses
Payment of benefits to employees

Accrued benefit obligation and plan deficit, end of year

Reconciliation of accrued benefit obligation to
Consolidated Statement of Financial Position accrued benefit liability

Balance of unamortized pension obligation:

Past service costs

Accrued pension benefit liability recognized in Consolidated Statement of

Financial Position:
Accounts payable and accrued liabilities
Other long-term liabilities

Accrued benefit obligation, end of year as above

2012
$

2011
$

334
7
–
19
(25)
52
(9)

275
6
–
16
–
43
(6)

378

334

2012
$

2011
$

9
368

377

378

9
324

333

334

The actuarial
escalation assumptions, and changes in the mortality table.

losses resulted primarily from changes in interest rate assumptions, salary

The tables below show the significant weighted-average assumptions used to measure the
pension obligation and cost for this plan.

Accrued benefit obligation

Discount rate
Rate of compensation increase

Benefit cost for the year

Discount rate
Rate of compensation increase

2012
%

2011
%

4.50
5.50
5.00(1) 5.00

2012
%

5.50
5.00

2011
%

5.75
5.00

(1)

Applies only to incentive compensation component of eligible pensionable earnings.

109

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

A one percentage point decrease in the discount rate would have increased the accrued benefit
obligation at August 31, 2012 by $65 and 2012 pension expensed by $1.

The net pension benefit plan expense is comprised of the following components:

Current service cost
Interest cost
Curtailment gain
Past service costs

Pension expense

2012
$

7
19
(25)
–

2011
$

6
16
–
1

The components of pension expense are included in employee salaries and benefits except for
the curtailment gain which is included in other gains in the income statement.

As part of the broadcasting business acquisition in 2011, the Company assumed a number of
funded defined benefit pension plans which provide pension benefits to certain unionized and
non-unionized employees. Benefits under these plans are based on the employees’ length of
service and final average salary.

The table below shows the change in the benefit obligations, change in fair value of plan assets
and the funded status of these defined benefit plans.

Accrued benefit obligation, beginning of year
Media business acquisition
Current service cost
Interest cost
Employee contributions
Actuarial losses (gains)
Payment of benefits to employees

Accrued benefit obligation, end of year

Fair value of plan assets, beginning of year
Media business acquisition
Employer contributions
Employee contributions
Expected return on plan assets
Actuarial losses
Payment of benefit and administrative expenses

Fair value of plan assets, end of year

Accrued benefit liability and plan deficit, end of year

110

2012
$

119
–
4
7
1
24
(6)

149

109
–
10
1
6
(4)
(6)

116

2011
$

–
124
4
6
1
(7)
(9)

119

–
110
6
1
6
(5)
(9)

109

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

The accrued benefit liability is included in other long-term liabilities. The actuarial gains and
losses resulted primarily from changes in interest
rate assumptions, salary escalation
assumptions, and changes in the mortality table.

The asset allocation of the plans at August 31, 2012 is as follows:

Equity securities
Fixed income securities

% of plan
assets

69
31

100

The tables below show the significant weighted-average assumptions used to measure the
pension obligation and cost for these plans. The expected rate of return on plan assets is based
on investment mix, current yields and past experience.

Accrued benefit obligation

Discount rate
Rate of compensation increase

Benefit cost for the year

Discount rate
Expected return on plan assets
Rate of compensation increase

2012
%

4.67
3.50

2012
%

5.75
5.25
4.00

2011
%

5.75
4.00

2011
%

5.65
6.70
3.70

A one percentage point decrease in the discount rate would have increased the accrued benefit
obligation at August 31, 2012 by $26 and 2012 pension expense by $1.

The net pension benefit plan expense, which is included in employee salaries and benefits
expense, is comprised of the following components:

Current service cost
Interest cost
Expected return on plan assets

Pension expense

2012
$

2011
$

4
7
(6)

4
6
(6)

111

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Other benefit plans

As part of the broadcasting business acquisition in fiscal 2011, the Company assumed post
employment benefits plans that provide post retirement health and life insurance coverage.

Accrued benefit obligation, beginning of year
Media business acquisition
Current service cost
Interest cost
Plan amendment
Actuarial loss
Payment of benefits to employees

Accrued benefit obligation and plan deficit, end of year

2012
$

2011
$

15
–
1
1
–
3
(1)

–
15
–
1
(1)
–
–

Reconciliation of accrued benefit obligation to Consolidated Statement of Financial Position
accrued benefit liability

2012
$

2011
$

Balance of unamortized obligation:

Plan amendment

Accrued post-retirement liability recognized in Consolidated Statement of

Financial Position:
Other long-term liabilities

Accrued benefit obligation, end of year as above

–

(1)

The table below shows the components of the post-retirement benefit plan expense. The net
post-retirement benefit plan expense, which is included in employee salaries and benefits
expense, is comprised of the following components:

Current service cost
Interest cost
Plan amendment

Post-retirement expense

2012
$

2011
$

1
1
(1)

–
1
–

The discount rates used to measure the post-retirement benefit cost for the year and the
accrued benefit obligation as at August 31, 2012 were 5.50% and 4.50%, respectively (2011
– 5.50% and 5.50%, respectively). The assumed health care cost trend rate for the next year
used to measure expected benefit costs is 6.39% decreasing to an ultimate rate of 4.58% in
2029. A one percentage point increase in the assumed health care cost trend rate would have
increased the service and interest costs and accrued obligation by $nil and $3, respectively. A
one percentage point decrease in the assumed health care cost trend rate would have lowered
the service and interest costs and accrued obligation by $nil and $3, respectively.

112

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Experience adjustments

The Company’s defined benefit plan experience adjustments were as follows:

Unfunded plans:

Experience losses on liabilities

Funded plans:

Experience losses on assets
Experience losses (gains) on liabilities

Employer contributions

2012
$

2011
$

4
24

5
(7)

The Company’s estimated contributions to the defined benefit plans in fiscal 2013 are $311.

27. RELATED PARTY TRANSACTIONS
Controlling shareholder

The majority of the Class A Shares are held by JR Shaw, members of his family and the
companies owned and/or controlled them (the “Shaw Family Group”). All of the Class A Shares
held by the Shaw Family Group are subject to a voting trust agreement entered into by such
persons. The Shaw Family Group is represented as Directors, Senior Executive and Corporate
Officers of the Company.

Significant investments in subsidiaries

The following are the significant subsidiaries of the Company, all of which are incorporated in
Canada.

Shaw Cablesystems Limited
Shaw Cablesystems G.P.
Mountain Cablevision Limited
Shaw Telecom Inc.
Shaw Telecom G.P.
Shaw Satellite Services Inc.
Star Choice Television Network Incorporated
Shaw Satellite G.P.
Shaw Media Inc.
Shaw Television Limited Partnership

Key management personnel

August 31,
2012

Ownership Interest
August 31,
2011

September 1,
2010

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
49.9%
–

Key management personnel consist of the Board of Directors and the most senior executive
team that have the authority and responsibility for planning, directing and controlling the
activities of the Company.

113

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Compensation

The compensation expense of key management personnel is as follows:

Short-term employee benefits
Post-employment pension benefits
Retirement benefits
Share-based compensation

Transactions

2012
$

2011
$

32
(23)
–
3

35
21
26
5

The Company paid $3 (2011 – $4)
maintenance services to a company controlled by a Director of the Company.

for direct sales agent, marketing,

installation and

During the year, the Company paid $9 (2011 – $6) for remote control units to a supplier where
Directors of the Company hold positions on the supplier’s board of directors.

Loans have in the past been granted to executive officers in connection with their employment
for periods ranging up to ten years. In 2011, the remaining amount outstanding of $4 was
repaid. The effective interest rate on the interest bearing loan for 2011 was 1.0%.

Other related parties

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
$132 (2011 – $136), advertising fees of $2 (2011 – $1) and programming fees of $1 (2011 –
$1) were paid to various Corus subsidiaries and entities subject to significant influence. In
addition, the Company provided administrative and other services for $1 (2011 – $1), uplink of
television signals for $5 (2011 – $5) and Internet services and lease of circuits for $1 (2011 –
$1).

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.

Burrard Landing Lot 2 Holdings Partnership

During the year, the Company paid $10 (2011 – $10) to the Partnership for lease of office
space in Shaw Tower. Shaw Tower, located in Vancouver, BC, is the Company’s headquarters for
its Lower Mainland operations.

114

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Specialty Channels

The Company holds interests in a number of specialty television channels which are subject to
either joint control or significant influence. The Company paid network fees of $6 (2011 –
$5) and provided uplink of television signals of $1 (2011 – $1) to these channels during the
year.

28. 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 current liabilities
approximates their carrying value due to their short-term nature.

(ii)

Investment and other assets and Other long-term assets

The carrying value of investments and other assets approximates their fair value. The fair
value of long-term receivables approximates their carrying value as they are recorded at
the net present values of their future cash flows, using an appropriate discount rate.

(iii)

Other current/non-current liabilities

The carrying value of the liability in respect of amended cross-currency interest rate
agreements, which fixed the settlement of the principal portion of the liability on
December 15, 2011, was at amortized cost based on an estimated mark-to-market
valuation at the date of amendment. The fair value of this liability was determined using
an estimated mark-to-market valuation. The fair value of program rights payable,
estimated by discounting future cash flows, approximates their carrying value.

(iv)

Long-term debt

The carrying value of long-term debt is at amortized cost based on the initial fair value as
determined at the time of issuance or at the time of a business acquisition. 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.

(v)

Derivative financial instruments

The fair value of cross-currency interest rate exchange agreements and US currency
forward purchase contracts
is determined using an estimated credit-adjusted
mark-to-market valuation.

115

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

The carrying values and estimated fair values of long-term debt, other liabilities and derivative
financial instruments are as follows:

Assets
Derivative financial instruments –
Cross-currency interest rate
exchange agreements(1)
US currency forward purchase

contracts(1)

Liabilities
Other current/non-current liability
Long-term debt
Derivative financial instruments –
US currency forward purchase

contracts(1)

Cross-currency interest rate
exchange agreements(1)

August 31, 2012

August 31, 2011

Carrying
value
$

Estimated
fair value
$

Carrying
value
$

Estimated
fair value
$

September 1, 2010
Estimated
Carrying
fair value
value
$
$

–

–
5,263

–
5,753

161
5,257

162
5,542

159
3,983

160
4,353

–

5,264

5,754

5,426

5,712

4,229

4,600

(1)

Level 2 fair value – determined by valuation techniques using inputs based on observable
market data, either directly or indirectly, other than quoted prices.

Derivative financial instruments held at August 31, 2012 have maturity dates throughout fiscal
2013.

As at August 31, 2012 and 2011 and September 1, 2010, US currency forward purchase
contracts qualified as hedging instruments and were designated as cash flow hedges. The cross-
currency interest rate exchange agreements did not qualify as hedging instruments as the
underlying hedged US denominated debt was repaid during 2010.

Upon redemption of US $300 7.2% senior notes in 2010, the Company entered into amended
agreements with the counterparties of the cross-currency agreements to fix the settlement of
the principal liability on December 15, 2011 at $162. At August 31, 2011, the carrying
amount of the liability was $161 (September 1, 2010 – $159).

Risk management

The Company is exposed to various market risks including currency risk and interest rate risk,
as well as credit risk and liquidity risk associated with financial assets and liabilities. The
Company has designed and implemented various risk management strategies, discussed further
below, to ensure the exposure to these risks is consistent with its risk tolerance and business
objectives.

116

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Currency risk

Certain of the Company’s capital expenditures and equipment costs are incurred in US dollars,
while its revenue is primarily denominated in Canadian dollars. Decreases in the value of the
Canadian dollar relative to the US dollar could have an adverse effect on the Company’s cash
flows. To mitigate some of the uncertainty in respect to capital expenditures and equipment
costs,
the Company regularly enters into forward contracts in respect of US dollar
commitments. With respect to 2012, the Company entered into forward contracts to purchase
US $83 over a period of 12 months commencing in September 2011 at an average exchange
rate of 0.9725 Cdn. At August 31, 2012 the Company had forward contracts to purchase US
$75 over a period of 12 months commencing in September 2012 at an average exchange rate
of 0.9998 Cdn in respect of capital expenditures and equipment costs.

As part of the broadcasting business acquisition in 2011, the Company assumed US dollar
denominated debt. To mitigate some of the foreign exchange risk with respect to interest
payments and amounts due on redemption of the senior unsecured notes, the Company entered
into forward contracts to purchase US $340 at an average exchange rate of 0.9931.

Interest rate risk

Due to the capital-intensive nature of its operations, the Company utilizes long-term financing
extensively in its capital structure. The primary components of this structure are a banking
facility and various Canadian senior notes with varying maturities issued in the public markets
as more fully described in note 13.

Interest on the Company’s banking facility is based on floating rates, while the senior notes are
fixed-rate obligations. The Company utilizes its credit facility to finance day-to-day operations
and, depending on market conditions, periodically converts the bank loans to fixed-rate
instruments through public market debt
the
Company’s consolidated long-term debt was fixed with respect to interest rates.

issues. As at August 31, 2012, 100% of

Market risk

Net income and other comprehensive income for 2012 could have varied if the Canadian dollar to
US dollar foreign exchange rates or market interest rates varied by reasonably possible amounts.

The sensitivity to currency risk has been determined based on a hypothetical change in
Canadian dollar to US dollar foreign exchange rates of 10%. The financial
instruments
impacted by this hypothetical change include foreign exchange forward contracts and cross-
currency interest rate exchange agreements and would have changed net income by $nil net of
tax (2011 – $1) and other comprehensive income by $5 net of tax (2011 – $4). A portion of
the Company’s accounts receivables and accounts payable and accrued liabilities is
denominated in US dollars; however, due to their short-term nature, there is no significant
market risk arising from fluctuations in foreign exchange rates.

The sensitivity to interest rate risk has been determined based on a hypothetical change of one
percentage or 100 basis points. The financial instruments impacted by this hypothetical change
include foreign exchange forward contracts and cross-currency interest
rate exchange
agreements and would not have changed net income in 2012 or 2011. Interest on the
Company’s banking facility is based on floating rates and there is no significant market risk
arising from fluctuations in interest rates.

117

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Credit risk

Accounts receivable in respect of Cable and Satellite divisions are not subject to any significant
concentrations of credit risk due to the Company’s large and diverse customer base. For the
Media division, a significant portion of sales are made to advertising agencies which results in
some concentration of credit risk. At August 31, 2012, approximately 58% (2011 – 58%) of
the $182 (2011 – $176) of advertising receivables is due from the ten largest accounts. The
largest amount due from an advertising agency is $20 (2011 – $20) which is approximately
11% (2011 – 12%) of advertising receivables. As at August 31, 2012, the Company had
accounts receivable of $433 (August 31, 2011 – $443; September 1, 2010 – $196), net of
the allowance for doubtful accounts of $28 (August 31, 2011 – $29; September 1, 2010 –
$19). The Company maintains an allowance for doubtful accounts for the estimated losses
resulting from the inability of its customers to make required payments. In determining the
allowance, 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. As at August 31, 2012, $111
(August 31, 2011 – $121; September 1, 2010 – $79) of accounts receivable is considered to
be past due, defined as amounts outstanding past normal credit terms and conditions.
Uncollectible accounts receivable are charged against the allowance account based on the age
of the account and payment history. The Company believes that its allowance for doubtful
accounts is sufficient to reflect the related credit risk.

The Company mitigates the credit risk of advertising receivables by performing initial and
ongoing credit evaluations of advertising customers. Credit is extended and credit limits are
determined based on credit assessment criteria and credit quality. In addition, the Company
mitigates credit risk of subscriber receivables through advance billing and procedures to
downgrade or suspend services on accounts that have exceeded agreed credit terms.

Credit risks associated with cross-currency interest rate exchange agreements and US currency
contracts arise from the inability 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. In order to minimize the risk of counterparty default under its swap agreements,
the Company assesses the creditworthiness of its swap counterparties. Currently 100% of the
total swap portfolio is held by a financial institution with Standard & Poor’s ratings ranging from
A+ to A-1.

Liquidity risk

Liquidity risk is the risk that the Company will experience difficulty in meeting obligations
associated with financial liabilities. The Company manages its liquidity risk by monitoring cash
flow generated from operations, available borrowing capacity, and by managing the maturity
profiles of its long-term debt.

118

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

The Company’s undiscounted contractual maturities as at August 31, 2012 are as follows:

Within one year
1 to 3 years
3 to 5 years
Over 5 years

Accounts
payable and
accrued
liabilities(1)
$

Long-term
debt
repayable at
maturity
$

Other
liabilities
$

Derivative
instruments(2)
$

Interest
payments
$

811
–
–
–

811

–
4
–
–

451
969
700
3,200

5,320

1
–
–
–

317
528
456
2,475

3,776

(1)
(2)

Includes accrued interest and dividends of $219.
The estimated net undiscounted cash outflow for derivative instruments is based on the
US dollar foreign exchange rate as at August 31, 2012.

29. CONSOLIDATED STATEMENTS OF CASH FLOWS

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

(i)

Funds flow from continuing operations

Net income from continuing operations
Adjustments to reconcile net income to funds flow from continuing

operations:
Amortization
Program rights
Deferred income tax expense (recovery)
Equity income from associates
Gain on redemption of debt
CRTC benefit obligations [note 3]
CRTC benefit obligation funding
Business acquisition, integration and restructuring expenses
Gain on remeasurement of interests in equity investments [note 3]
Share-based compensation
Defined benefit pension plans
Loss (gain) on derivative instruments
Realized loss on settlement of derivative instruments
Payments on cross-currency agreements [note 3]
Foreign exchange gain on unhedged long-term debt
Accretion of long-term liabilities and provisions
Settlement of amended cross-currency interest rate agreements [note 28]
Write-down of property damaged by electrical fire
Other

2012
$

2011
$

761

559

813
(42)
(43)
–
–
2
(48)
–
(6)
5
(13)
(1)
(7)
–
–
14
(162)
20
6

739
101
9
(14)
(33)
139
(30)
37
–
9
16
22
(29)
(86)
(17)
15
–
–
(4)

Funds flow from continuing operations

1,299

1,433

119

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

(ii)

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

Accounts receivable
Other current assets
Accounts payable and accrued liabilities and provisions
Income taxes payable
Unearned revenue

2012
$

22
–
(37)
31
2

2011
$

54
(13)
(54)
(187)
8

(192)

(iii)

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

Interest
Income taxes

(iv) Non-cash transactions

2012
$

328
218

2011
$

332
400

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

Issuance of Class B Non-Voting Shares:
Dividend reinvestment plan [note 19]

30. CAPITAL STRUCTURE MANAGEMENT

The Company’s objectives when managing capital are:

2012
$

2011
$

(i)

to maintain a capital structure which optimizes the cost of capital, provides flexibility and
diversity of funding sources and timing of debt maturities, and adequate anticipated
liquidity for organic growth and strategic acquisitions;

(ii)

to maintain compliance with debt covenants; and

(iii)

to manage a strong and efficient capital base to maintain investor, creditor and market
confidence.

120

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

The Company defines capital as comprising all components of shareholders’ equity (other than
non-controlling interests and amounts in accumulated other comprehensive income/loss), long-
term debt (including the current portion thereof), and bank indebtedness less cash and cash
equivalents.

Cash and cash equivalents
Long-term debt repayable at maturity
Share capital
Contributed surplus
Retained earnings

August 31, 2012
$

August 31, 2011
$

September 1, 2010
$

(427)
5,320
2,750
77
1,020
8,740

(443)
5,321
2,633
73
729
8,313

(217)
4,021
2,250
67
679
6,800

The Company manages its capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of underlying assets. The Company may also
in light of the
from time to time change or adjust its objectives when managing capital
Company’s business circumstances, strategic opportunities, or
the relative importance of
competing objectives as determined by the Company. There is no assurance that the Company
will be able to meet or maintain its currently stated objectives.

On November 29, 2011 Shaw received the approval of the TSX to renew its normal course
issuer bid to purchase its Class B Non-Voting Shares for a further one year period. The Company
is authorized to acquire up to 20,000,000 Class B Non-Voting Shares during the period
December 1, 2011 to November 30, 2012.

The Company’s banking facility is subject to covenants which include maintaining minimum or
maximum financial ratios, including total debt to operating cash flow and operating cash flow to
fixed charges. At August 31, 2012, the Company is in compliance with these covenants and
based on current business plans and economic conditions, the Company is not aware of any
condition or event that would give rise to non-compliance with the covenants.

The Company’s overall capital structure management strategy remains unchanged from the
prior year.

31. TRANSITION TO IFRS
The Company’s date of transition to IFRS is September 1, 2010 and its date of adoption is
September 1, 2011.

Exemption elections

(a)

Business combinations

IFRS 1 provides the option to apply IFRS 3 Business Combinations retrospectively or
transition. Retrospective application would require
prospectively from the date of

121

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

restatement of all business combinations that occurred prior to the date of transition. The
Company has elected to not restate any business combinations that occurred prior to
September 1, 2010. Under Canadian GAAP, the Company had early adopted the new
accounting standards for business combinations, consolidation and non-controlling
interests effective September 1, 2010, which are aligned with IFRS 3 Business
Combinations and IAS 27 Consolidated and Separate Financial Statements.

(b)

Employee benefits

IFRS 1 provides the option to recognize all cumulative actuarial gains and losses on
defined benefit plans deferred under Canadian GAAP in opening retained earnings. The
Company elected to recognize the cumulative unamortized actuarial
loss in opening
retained earnings as at September 1, 2010.

(c)

Borrowing costs

122

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Reconciliation of Canadian GAAP to IFRS

Consolidated statements of financial position as at September 1, 2010 and August 31, 2011

Explanation

(iii), (iv)

(iii)

(iii)
(iv)
(iii)

(i), (v), (vi)
(vi)
(iii)

ASSETS
Current
Cash
Account receivable
Inventories
Other current assets
Derivative instruments
Assets held for sale
Deferred income tax assets

Investments and other assets
Property, plant and equipment
Assets held for sale
Other long-term assets
Deferred income taxes
Intangibles
Goodwill

LIABILITIES AND SHAREHOLDERS’

EQUITY

Current
Accounts payable and accrued

liabilities

Provisions
Income taxes payable
Unearned revenue
Current portion of long-term debt
Current portion of derivative

instruments
Other liability

Long-term debt
Other long-term liabilities
Provisions
Derivative instruments
Deferred credits
Deferred income tax liabilities

(ii), (vi)
(vi)

(i) to (iv)

Shareholders’ equity
Common and preferred shareholders
Non-controlling interests in subsidiaries

(i) to (v)
(iii)

September 1, 2010
Effect of
transition
to IFRS

Canadian
GAAP

IFRS

August 31, 2011
Effect of
transition
to IFRS

Canadian
GAAP

IFRS

217
196
54
34
67
–
28

596
743
3,005
–
233
–
5,408
169
10,154

623
–
171
145
1

80
–

1,020
3,982
291
–
7
632
1,452

7,384

2,770
–

2,770

–
–
–
–
–
–
(28)

(28)
–
–
–
–
–
188
–
160

77
19
78
–
–

–
–

174
–
138
–
–
–
(387)

217
196
54
34
67
–
–

443
443
97
236
2
15
26

568
743
3,005
–
233
–
5,596
169
10,314

1,262
13
3,200
1
258
22
6,955
815
12,526

700
19
249
145
1

80
–

1,194
3,982
429
–
7
632
1,065

795
–
12
155
1

8
161

1,132
5,256
351
–
–
630
1,700

–
–
–
(154)
–
–
(26)

(180)
–
–
–
–
8
337
(103)
62

83
18
112
–
–

–

213
–
156
8
–
–
(536)

443
443
97
82
2
15
–

1,082
13
3,200
1
258
30
7,292
712
12,588

878
18
124
155
1

8
161

1,345
5,256
507
8
–
630
1,164

(75)

7,309

9,069

(159)

8,910

235
–

235

3,005
–

3,216
241

3,005

3,457

190
31

221

3,406
272

3,678

10,154

160

10,314

12,526

12,588

123

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

Consolidated statements of income and comprehensive income for the year ended August 31, 2011

Explanation

Canadian
GAAP

Revenue
Operating, general and administrative expenses

Operating income before amortization
Amortization:

Deferred equipment revenue
Deferred equipment costs
Property, plant and equipment, intangibles and other

Operating income

Amortization of financing costs – long-term debt
Interest expense
Gain on redemption of debt
CRTC benefit obligation
Business acquisition, integration and restructuring expenses
Loss on derivative instruments
Accretion of long-term liabilities and provisions
Foreign exchange gain on unhedged long-term debt
Equity income from associates
Other gains

Income before income taxes

Current income tax expense
Deferred income tax expense (recovery)

Net income from continuing operations
Loss from discontinued operations

Net income

(i), (ii)

(iii)
(i) to (iii)

Other comprehensive income (loss)
Change in unrealized fair value of derivatives designated as cash flow

hedges

Adjustment for hedged items recognized in the period
Actuarial losses on employee benefit plans

(ii)

Comprehensive income

Net income attributable to:
Equity shareholders
Non-controlling interests in subsidiaries

Comprehensive income attributable to:
Equity shareholders
Non-controlling interests in subsidiaries

Earnings per share – basic and diluted

Earnings per share from continuing operations
Loss per share from discontinued operations

Earnings per share

Effect of
transition
to IFRS

–
(20)

–
–
–

20
–
–
–
–
–
–
–
–
–
–

20
10
14

(4)
–

(4)

–
–
(30)

(30)

(34)

(4)
–

(4)

(34)
–

(34)

IFRS

4,741
2,690

2,051

107
(205)
(637)

1,316
(4)
(332)
33
(139)
(91)
(22)
(15)
17
14
11

788
220
9

559
(89)

470

(12)
4
(30)

(38)

432

451
19

470

413
19

432

4,741
2,710

2,031

107
(205)
(637)

1,296
(4)
(332)
33
(139)
(91)
(22)
(15)
17
14
11

768
210
(5)

563
(89)

474

(12)
4
–

(8)

466

455
19

474

447
19

466

1.24
(0.21)

1.03

(0.01)
–

(0.01)

1.23
(0.21)

1.02

124

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

The significant differences between Canadian GAAP and IFRS are explained below.

(i)

Share-based compensation

Under IFRS, cash settled share-based payments, such as DSUs and RSUs, are measured
initially and remeasured at the end of each reporting period at fair value as determined by
an option pricing model. Under Canadian GAAP,
the liability was measured and
remeasured at intrinsic values.

(ii)

Employee benefits

Under IFRS, past service costs of defined benefit plans are expensed on a straight-line
basis over the vesting period. Under Canadian GAAP, past service costs were amortized on
a straight-line basis over the estimated average remaining service life of employees. As
part of the retrospective application of IAS 19, all vested past service costs have been
recognized in opening retained earnings at the transition date.

(iii)

Income taxes

Under IFRS, the Company applies a probable weighted average methodology in respect to
its determination of measurement of its tax uncertainties.

Income taxes reflect the tax effect of other IFRS transition adjustments.

Also, under IFRS, deferred income tax assets and liabilities are only classified as long
term.

(iv)

Intangibles

125

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]

(v)

Constructive obligation

Under IFRS, constructive obligations must be recognized when certain criteria are met.
These have been accrued at the transition date.

(vi) Provisions

required,

Consolidated statements of cash flows

The Company’s consolidated statements of cash flows were not materially affected by the
transition to IFRS.

126

Shaw Communications Inc.
FIVE YEARS IN REVIEW
August 31, 2012

($millions except per share amounts)
Revenue
Cable
DTH
Satellite
Media

Intersegment

Operating income before amortization(1)
Cable
DTH
Satellite
Media

IFRS
2012

IFRS
2011

Canadian
GAAP
2010(3)

Canadian
GAAP
2009(3)

Canadian
GAAP
2008(3)

3,193
763
81
1,053

3,096
745
82
891

2,932
722
83
–

2,636
685
90
–

2,379
651
93
–

5,090
(92)

4,814
(73)

3,737
(19)

3,411
(20)

3,123
(18)

4,998

4,741

3,718

3,391

3,105

1,502
254
39
332

1,510
246
43
252

1,453
265
42
–

1,268
223
50
–

1,153
206
52
–

2,127

2,051

1,760

1,541

1,411

Net income from continuing operations(4)

761

559

534

536

673

Earnings per share from continuing

operations
Basic
Diluted

1.62
1.61

1.23
1.23

1.25
1.25

1.56
1.55

Funds flow from continuing operations(2)

1,299

1,433

1,377

1,324

1,223

Statement of Financial Position
Total assets
Long-term debt (including current portion)

Cash dividends paid per share
Class A
Class B

12,722 12,588 10,154
3,982
5,257

5,263

8,935
3,150

8,353
2,707

0.942
0.945

0.897
0.900

0.858
0.860

0.818
0.820

0.702
0.705

(1)

(2)

(3)

See key performance drivers on page 20.

Funds flow from continuing operations is presented before changes in non-cash working
capital as presented in the Consolidated Statements of Cash Flows.

Comparative periods for fiscal 2008 to 2010 are reported under Canadian GAAP and have
not been restated in accordance with IFRS.

(4) Net income from continuing operations attributable to equity shareholders is the same as
net income from continuing operations except in 2012 and 2011 where it was $728 and
$540, respectively.

127

Shaw Communications Inc.
SHAREHOLDERS’ INFORMATION
August 31, 2012

Share Capital and Listings

The Company is authorized to issue a limited number of Class A participating and an unlimited
number of Class B Non-Voting participating shares. The authorized number of Class A Shares is
limited, subject to certain exceptions, to the lesser of that number of such shares (i) currently
issued and outstanding; and (ii) that may be outstanding after any conversion of Class A Shares
into Class B Non-Voting Shares. At August 31, 2012, the Company had 22,520,064 Class A
Shares and 421,188,697 Class B Non-Voting Shares outstanding. The Class A Shares are listed
on the TSX Venture Stock Exchange under the symbol SJR.A. The Class B Non-Voting Shares
are listed on the Toronto Stock Exchange under SJR.B and on the New York Stock Exchange
under the symbol SJR. The Series A Preferred Shares are listed on the Toronto Stock Exchange
under the symbol SJR.PR.A.

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

Quarter

September 1, 2011 to August 31, 2012
First
Second
Third
Fourth

Closing price, August 31, 2012

Share Splits

High Close

Low Close

Total
Volume

21.83
20.94
21.39
20.42

19.84
19.55
19.07
19.07

63,209,995
49,238,359
63,504,839
50,236,419

20.16

226,189,612

There have been four splits of the Company’s shares; July 30, 2007 (2 for 1), 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.

128

Shaw Communications Inc.
CORPORATE INFORMATION
August 31, 2012

DIRECTORS

JR Shaw(4)
Executive Chair
Shaw Communications Inc.

Peter J. Bissonnette
President
Shaw Communications Inc.

Adrian L. Burns(3)(4)
Corporate Director

George F. Galbraith(3)
Corporate Director

Dr. Richard R. Green(2)
Corporate Director

Dr. Lynda Haverstock(3)
Senior Vice President,
Operations
RMD Engineering Inc.

Gregory John Keating(1)
Chairman and Chief
Executive Officer
Altimax Venture Capital

Michael W. O’Brien(3)(4)
Corporate Director

Paul K. Pew(1)
Co-Founder and Co-CEO
G3 Capital Corp.

Jeffrey C. Royer(1)
Corporate Director
and Private Investor

Bradley S. Shaw(4)
Chief Executive Officer
Shaw Communications Inc.

Jim Shaw
Vice Chair
Shaw Communications Inc.

JC Sparkman(2)(4)
Corporate Director

Carl E. Vogel(1)
Private Investor; Senior
Advisor to DISH Network

Sheila C. Weatherill(2)
Corporate Director

Willard (Bill) H. Yuill(2)
Chairman and Chief
Executive Officer
The Monarch Corporation

SENIOR OFFICERS
JR Shaw
Executive Chair

Jim Shaw
Vice Chair

Bradley S. Shaw
Chief Executive Officer

Peter J. Bissonnette
President

Steve Wilson
Senior Vice President and
Chief Financial Officer

Michael D’Avella
Senior Vice President,
Planning

Jay Mehr
Senior Vice President,
Operations

Jean Brazeau
Senior Vice President,
Regulatory Affairs

Paul Robertson
Group Vice President,
Broadcasting & President,
Shaw Media

Rhonda D. Bashnick
Group Vice President,
Finance

Peter A. Johnson
General Counsel and
Corporate Secretary

HONORARY SECRETARY:
Louis Desrochers, CM, AOE, QC,
LLD

(1) Audit Committee
(2) Human Resources and

Compensation
Committee

(3) Corporate Governance

and Nominating
Committee

(4) Executive Committee

DEBENTURE TRUSTEES
Computershare Trust
Company of Canada
100 University Avenue,
9th Floor
Toronto, ON M5J 2Y1
service@computershare.com
Phone : 1-800-564-6253
Fax: 1-888-453-0330 or
416-263-9394

DEBENTURE
TRUSTEES cont’d.
The Bank of New York
101 Barclay Street, Floor 4E
New York, NY 10288
Phone 1-800-438-5473
Fax: 212-815-5802

FURTHER INFORMATION
Financial analysts, portfolio
managers, other investors
and interested parties may
contact the Company at
(403) 750-4500 or visit
Shaw’s website at
www.shaw.ca for further
information.

To receive additional copies
of this Annual Report,
please fax your request to
(403) 750-7469 or email
investor.relations@sjrb.ca

For further inquiries relating
to Shaw’s philanthropic
practices, please call
(403) 750-7498.

All trademarks used in this
annual report are used with
the permission of the
owners of such trademarks.

CORPORATE OFFICE
Shaw Communications Inc.
Suite 900, 630 – 3rd Avenue
S.W., Calgary, Alberta
Canada T2P 4L4
Phone: (403) 750-4500
Fax: (403) 750-4501
Website: www.shaw.ca

CORPORATE GOVERNANCE
Information concerning
Shaw’s corporate
governance policies are
contained in the
Information Circular and is
also available on Shaw’s
website, www.shaw.ca

Information concerning
Shaw’s compliance with the
corporate governance listing
standards of the New York
Stock Exchange is available
in the investors section on
Shaw’s website,
www.shaw.ca

INTERNET HOME PAGE
Shaw’s Annual Report,
Annual Information Form,
Quarterly Reports, Press
Releases and other relevant
investor information are
available electronically on
the Internet at
www.shaw.ca

AUDITORS
Ernst & Young LLP

PRIMARY BANKER
The Toronto-Dominion Bank

TRANSFER AGENTS
CIBC Mellon Trust
Company, Calgary, AB
Phone: 1-800-387-0825

BNY Mellon Shareholder
Services
Jersey City, NJ
Phone: 1-800-522-6645

129

2012
Annual
Report