Score Score Score 2011Annual Report We, the leading entertainment and communications company, deliver exceptional customer experience through outstanding people sharing Shaw Values. Home content sharing Whole home HDPVR 5,000+ titles, 1200+ in HD Community Wi-Fi zones 250 Mbps download speed Record 6 HD programs & playback 5 Voicemail to email Score Score Score Score Trim: 17.25” x 11” 4 Bleed: .125” db 1 Report to Shareholders 4 Management’s Discussion and Analysis 70 Management’s Responsibility for Financial Statements and Report on Internal Control over Financial Reporting 72 Independant Auditors’ Reports 76 Consolidated Financial Statements 80 Notes to Consolidated Financial Statements 142 Five Years in Review 143 Shareholders’ Information 144 Corporate Information The Annual General Meeting of Shareholders will be held on January 12, 2012 at 11:00am (Mountain Time) at the Shaw Barlow Trail Building, 2400 – 32 Avenue NE, Calgary Alberta. AR 2011 It’s an exciting time for Shaw. We’re taking our business to the next level through innovation and leading edge technology. The power of the most advanced network gives us the opportunity to o er Canadians unparalleled products and services, compelling choice and everyday value. Over the next year we’ll continue to innovate, creating a whole new entertainment experience for our customers. Project: Shaw Annual Report Single Pages Project 3 Prints 4/4: 4C Process Trim: 8.5" x 11" db Bleed: .125" AR 2011 07 08 09 10 11 07 08 09 10 11 FREE CASH FLOW DIVIDENDS [in millions] [in millions] 07 08 09 10 11 07 08 09 10 11 EBITDA REVENUE [in billions] [in billions] Project: Shaw Annual Report Single Pages Project 3 Prints 4/4: 4C Process Trim: 8.5" x 11" db Bleed: .125" Shaw Communications Inc. REPORT TO SHAREHOLDERS August 31, 2011 Dear fellow Shareholders: As we look back, 2011 was a year of significant accomplishments for Shaw Communications Inc., both operationally and financially. This was also a year of considerable change that included the completion of the strategic acquisition of our new Media assets, our senior leadership transition, the start of our digital network upgrade, our broadband leadership initiatives including our Wi-Fi build, and our decision to not pursue a conventional wireless business. Looking back 40 years, to 1971 when we connected our first Cable customer, it’s exciting to see Shaw today. We have evolved from a single product company to a diverse entertainment and communications leader. We are a valued part of everyday life in more than 12 million homes, entertaining and engaging our customers through our portfolio of specialty channels and conventional programming delivered through high quality television in high definition. We connect people to the world and each other through our broadband and phone services. We inform people on the happenings around the globe and beyond through our news programming. We put our customers first, working hard to provide an exceptional customer experience. We are constantly looking for ways to improve and we challenge ourselves to continue to enhance our products and services. We are a dynamic company, a successful operator, and a technology leader. STRATEGIC INITATIVES The year was highlighted by the completion of the acquisition of our broadcasting business, Shaw Media, which has proven to be a key strategic asset and very attractive acquisition. The division performed very well this year, showcasing its leading portfolio of specialty channels and conventional programming. Shaw, including our executive team, was recognized in March 2011, receiving the 2010 Canadian Dealmaker of the Year Award for the Media and Telecommunications Industry. This strategic acquisition allows us to unite broadcasting services and content with our advanced distribution platforms to offer customers the choices they want in this rapidly evolving competitive landscape. Late in fiscal 2011 we made the decision to not pursue a conventional wireless build and instead focus on initiatives that align with leveraging our Media and programming assets and strengthening our leadership position in broadband and video. One of the broadband leadership initiatives that recently commenced includes the build of a managed carrier-grade Wi-Fi network to extend our customers’ broadband experience beyond their home. Shaw will become the first service provider in Canada to deliver secure and reliable wireless broadband through an extensive Wi-Fi network covering thousands of locations. FINANCIAL PERFORMANCE Consolidated revenue, operating income before amortization and free cash flow growth continued in 2011 driven by the Media acquisition and increases in the core Cable and Satellite divisions. We also continued to return value to shareholders. Š Revenue for the year improved 28% to $4.74 billion and operating income before amortization was up over 15% to $2.03 billion. Š Consolidated free cash flow increased to $603 million. Š During 2011 we increased the dividend rate by approximately 5% and paid over $390 million in dividends. 1 Shaw Communications Inc. REPORT TO SHAREHOLDERS August 31, 2011 During the year we also continued to strengthen our capital structure and lower costs, taking advantage of favorable market conditions. We issued $1.3 billion in debt and $300 million in preferred equity using a portion of the proceeds to refinance higher cost debt assumed in the Media acquisition. OPERATIONAL PERFORMANCE We continue to focus on the strength of our core business and make important investments in new technology platforms, digital reclamation and broadband capacity in order to ensure we maintain our technological leadership. During the year we commenced a major upgrade of our network to convert television analog tiers to digital (the Digital Network Upgrade). This upgrade is expected to triple the capacity of our network and allow expansion of our Internet, HD and On Demand offerings. We know that our investment in infrastructure provides further differentiation from our competition and we make capital and operating decisions ensuring that long-term value and profitability is generated from the appropriate investments. We are evolving our service offerings in-step with our customers, responding to their desire for more choice, value and freedom to choose. In 2011 we launched the Shaw Plan Personalizer, enabling customers to customize their core entertainment service needs and receive everyday value. We also launched the Shaw Gateway television product, providing the next generation in television viewing with advanced features and home networking capability, bringing together the power of broadband and high-definition technology that will be the centre of a connected home. During 2011, we initiated an extensive consultation process having our Internet customers share their ideas on Internet usage allowances and billing. As a result of these consultations, we 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 our subscribers. Currently, telecommunication competitors are unable to match our broadband speeds and this provides a competitive advantage now and for the foreseeable future. Subscriber growth during the year was balanced against strong financial performance as the competitive environment continued to increase across our operating areas. Š We achieved Digital television customer growth of over 165,000. At the end of fiscal 2011 there were over 1.8 million Digital customers, representing almost 80% of Basic customers. In 2011 we lost 51,000 Basic cable customers. Š During the year almost 55,000 Internet customers were added, maintaining one of the strongest broadband businesses in North America. We continue to increase the penetration rate of the service and now the equivalent of 82% of Basic subscribers take the Internet service, which represents one of the highest penetration rates in North America. Š The Digital Phone product has been a great success and we have over 1,200,000 Digital Phone lines since our first market launch in February 2005. Customer growth of 137,000 Digital Phone lines was achieved in fiscal 2011, with the equivalent of 54% of Basic subscribers now taking the telephone service. The broadcasting business acquisition included the Global Television Network (“Global”) and over 20 Specialty services. The segment performed very well in 2011 benefitting from the vendor operating under creditor protection and having undergone a restructuring process 2 Shaw Communications Inc. REPORT TO SHAREHOLDERS August 31, 2011 removing significant costs from the business and rationalizing assets, and a recovery in the economic cycle. We completed the organizational alignment of Shaw Media within the broader Shaw group of companies and then began setting key priorities to capitalize on opportunities from the combination of content and distribution. We hold a number of the top ten positions in the channel rankings amongst our specialty services and programs on Global and continue to optimize our portfolio to maximize long term value. Global reaches over 95% of Canadian households and Global National, featuring Canada’s first female national news anchor, averages one million viewers daily. MANAGEMENT CHANGE During the year the Corporation’s Board announced the orderly evolution of executive management responsibilities with the appointment of Bradley S. Shaw into the Chief Executive Officer role effective November