2004 Crown Investments Corporation of Saskatchewan Annual Report

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Notes to Consolidated Financial StatementsDecember 31, 20046. Long-Term Investments (continued)All unpaid principal and interest is due on December 15, 2017. On that date, any amounts outstandingwill convert to 100 per cent of HARO equity shares. The Corporation has a unilateral right, prior toDecember 15, 2017, to convert no less than 25 per cent of the loan to either HARO non-voting, HAROvoting or Crown Life shares. Any conversion may be subject to regulatory approval.Ownership of the 68,000,000 of HARO’s Class B non-voting common shares entitles the Corporation toa maximum of 100 per cent of participation rights with respect to dividends and remaining property ofHARO on its liquidation or dissolution. Subject to regulatory approval, the Corporation has a unilateralright to exchange at any time the Class B shares for voting shares or HARO’s assets.g) The Corporation owns a 50 per cent joint venture interest in Meadow Lake Pulp Limited Partnership(MLPLP) located near Meadow Lake, Saskatchewan.The Corporation has provided the following loans:i) Participating Debenture ($79.5 million) bearing interest at a fixed rate of 11.15 per cent, calculatedon October 31 each year. Due to uncertainty of cash flows, an allowance for investment lossesof $79.5 million (2003 - $60.0 million) related to the Participating Debenture has been recordedresulting in a net balance of $Nil (2003 - $19.5 million).ii)Term Loan ($10.0 million) bearing interest at prime plus 2 per cent, or 6.25 per cent atDecember 31, 2004 (2003 - 6.5 per cent). Any interest not paid on October 31 of each year is addedto the principal balance.iii) Contingency Loan ($5.5 million) bearing interest at prime plus 1 per cent, or 5.25 per cent atDecember 31, 2004 (2003 - 5.5 per cent). Any interest not paid on October 31 of each year is addedto the principal balance. Due to uncertainty of cash flows, an allowance for investment losses of$5.5 million (2003 - $Nil) related to the Contingency Loan has been recorded resulting in a netbalance of $Nil (2003 - $5.5 million).iv) Guarantee Advance ($4.0 million) bearing interest at prime plus 1 per cent, or 5.25 per cent atDecember 31, 2004 (2003 - 5.5 per cent). Any interest not paid on October 31 of each year is addedto the principal balance.v) Cash Flow Loan ($5.2 million) bearing interest at prime plus 1 per cent, or 5.25 per cent atDecember 31, 2004 (2003 - 5.5 per cent). Any interest not paid on October 31 of each year is addedto the principal balance.vi)Guarantee Loan ($5.0 million) bearing interest at prime plus 1 per cent, or 5.25 per cent atDecember 31, 2004 (2003 - 5.5 per cent). Any interest not paid on October 31 of each year is addedto the principal balance. Due to uncertainty of cash flows, an allowance for investment losses of$5.0 million (2003 - $Nil) related to the Guarantee Loan has been recorded resulting in a net balanceof $Nil (2003 - $5.0 million).76
Notes to Consolidated Financial StatementsDecember 31, 20046. Long-Term Investments (continued)The Corporation records, as a separate loan (Interest Loan), accrued interest receivable from theParticipating Debenture totaling $241.3 million (2003 - $209.1 million). Interest on the Interest Loanat a fixed rate of 11.15 per cent, is calculated on October 31 of each year and is added to the principalbalance outstanding on the loan. Interest income earned and forming part of the Interest Loan isrecorded as deferred interest income due to the uncertainty of collection and is netted against theoutstanding loan balance. Deferred interest income will be recorded as income when payments arereceived under the cash availability formula.Any repayments of the Participating Debenture, Contingency Loan, Guarantee Advance, Cash Flow Loan,Guarantee Loan and Interest Loan are subject to available cash flows as defined in the loan agreements.Payments toward principal outstanding on the Term Loan are due in two equal instalments after MLPLPhas fully repaid an external loan.If, by October 31, 2014, less than $159.0 million in aggregate has been paid on the ParticipatingDebenture and Interest Loan, an amount equal to the difference between $159.0 million and theaggregate amount paid is due and payable. The remaining balance outstanding on the Interest Loanand Participating Debenture on October 31, 2014 shall bear interest at a rate equal to the short-termcost of borrowing for the Province of Saskatchewan, which is 2.63 per cent at December 31, 2004(2003 - 2.62 per cent), until paid in full. The Contingency Loan and Term Loan also mature in 2014.The Corporation’s loans to MLPLP are subject to measurement uncertainty since their value isdependent upon the present value of cash flows provided by MLPLP operations. Using management’sbest estimates based on assumptions that reflect the most probable set of economic circumstances, theCorporation has taken a provision of $30 million in the current year, against the carrying value of theseloans, and believes its loans to MLPLP are properly valued as at December 31, 2004. However, given thewide fluctuations in world commodity prices for pulp, this estimate could change materially in the nearterm.h) On April 1, 2004 the Corporation’s interest in Saskatoon Innovation Place and the Regina Research Parkwas transferred to the General Revenue Fund (GRF) for proceeds equaling their book value. Proceedsfrom the transfer were used to retire debt owing to the GRF (Note 23).i) Included in investment revenue are earnings (losses) from equity investments as follows(thousands of dollars):2004 2003Saskferco Products Inc.ML OSB Limited PartnershipMRM Cogeneration StationBig Sky Farms Inc.Other$19,66715,801302,866$6,1972,9681,579(143)(3,013) (1,232)$35,351$9,36977
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2004 Financial HighlightsCrown Sect
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Table Of Contents2004 HighlightsLet
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Chair’s MessageSaskatchewan’s C
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Corporate ProfileCIC is the financi
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Corporate ProfileCIC ManagementThe
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Corporate ProfileFinancial and Publ
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Corporate ProfileCIC’s Holdings20
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Corporate ProfileSASKATCHEWAN GOVER
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Corporate ProfileSaskatchewan Telec
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Policy and ProgramsUtility Bundle C
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Policy and ProgramsCommitment to Gr
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Policy and ProgramsCommitment to Yo
Page 30: GovernanceFor the purposes of this
Page 33 and 34: Strategic Direction and Performance
Page 41 and 42: Management’s Discussion and Analy
Page 43 and 44: MANAGEMENT’S DISCUSSION AND ANALY
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Page 68 and 69: Consolidated Statement of Financial
Page 70 and 71: Consolidated Statement of Cash Flow
Page 72 and 73: Notes to Consolidated Financial Sta
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Page 99 and 100: Non-Consolidated Statement of Finan
Page 101 and 102: Non-Consolidated Statement of Cash
Page 103 and 104: Notes to Non-Consolidated Financial
Page 105 and 106: Notes to Non-Consolidated Financial
Page 107: Notes to Non-Consolidated Financial
Page 110: Pat AtkinsonMinisterPrinted in Sask
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2004 Crown Investments Corporation of Saskatchewan Annual Report

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