2004 Crown Investments Corporation of Saskatchewan Annual Report

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Notes to Consolidated Financial StatementsDecember 31, 200421. Financial Risk Management (continued)b) Foreign currency and interest risk managementThe Corporation has an exposure to the United States/Canadian dollar exchange rate primarilythrough the long-term United States denominated debt that has been incurred by the Corporation.This risk includes exposure to fluctuations in both the principal and coupon payments associated withthe United States denominated debt. The Corporation utilizes cross currency swaps and coupon swapsto offer protection from fluctuations on a portion of this debt that is due in the future.The following summarizes instruments held at each year end (millions of dollars):CarryingAmountOwed to (by) the Corporation:2004 2003FairValueRepricing/Maturity DateCarryingAmountFairValueCross currency swapsInterest rate hedgesForeign exchange- contracts- options$ (62.0) $ (101.9) 2008-2022 $ (22.0) $---25.11.01.9-200562.00.5(30.0)(0.1)0.7-i) Cross currency swaps, interest rate hedges, and foreign exchange contracts are valued atDecember 31, 2004 market rates.c) Fair value of financial assets and liabilitiesThe fair value of the Corporation’s financial assets and liabilities is as follows (millions of dollars):CarryingAmount2004 2003FairValueCarryingAmountFairValueLong-term investments (d)Sinking fund equityLong-term debt$350.1221.73,245.7$ 370.9 $ 343.4 $230.9194.63,839.5 3,146.3357.9203.43,843.4The fair values of the above instruments were based on the following:i) Long-term investmentsShare investments - The fair value of publicly traded share investments is based on their finaltraded price per share on December 31, 2004, less estimated selling costs.Bonds, debentures, loans and notes receivable - The fair value of bonds, debentures, loans andnotes receivable is determined by discounting scheduled cash flows through estimated maturity,using estimated discount rates that reflect the credit and interest rate risk inherent in the loan lessdisposition costs.ii)Sinking fund equityThe fair value of the investments held in the sinking fund is based on their December 31, 2004,quoted market value.86
Notes to Consolidated Financial StatementsDecember 31, 200421. Financial Risk Management (continued)iii) Long-term debtThe fair value of long-term debt is determined by the present value of future cash flowsdiscounted at the market rate of interest for the equivalent Province of Saskatchewan debtinstruments.d) The Corporation has not attempted to determine the fair value of its investments in its equity holdings($271.1 million), non-publicly traded common shares ($14.9 million), property holdings ($4.5 million),leases receivable ($3.4 million), or certain loans ($31.5 million) due to the costs associated with thistype of valuation.Excluded from the amounts above are $83.4 million of assets held with HARO, and secured by HARO’s65.2 per cent interest in Crown Life. It is not practicable to determine the fair value of the Corporation’sinvestment in HARO with any sufficient reliability.e) Credit riskCredit risk is the risk that one party to a transaction will fail to discharge an obligation and cause theother party to incur a financial loss. Concentration of credit risk relates to groups of customers orcounterparties that have similar economic or industry characteristics that cause their ability to meetcontractual obligations to be similarly affected by changes in economic or other conditions.Credit risk relates to customer accounts receivable and unbilled revenue, short-term investments, andcounterparties to financial hedges and commodity transactions. Customer accounts receivable andunbilled revenue is diversified among many residential, farm and commercial customers primarilythroughout Saskatchewan. In addition, the Corporation maintains credit policies and limits in respectto short-term investments and counterparties to financial and commodity transactions.f )Interest rate riskThe Corporation may be exposed to interest rate risk on the maturity of its long-term debt. However, inthe current low interest rate environment, these risks are considered low. As a result, the Corporationhas no financial contracts in place to offset interest rate risk as of December 31, 2004.g) Fair value of short-term financial instrumentsFor certain of the Corporation’s financial instruments including:i) cash;ii) short-term investments;iii) accounts receivable;iv) bank indebtedness;v) accounts payable and accrued liabilities;vi) notes payable; and,vii) dividend payable to General Revenue Fund,the carrying amounts approximate fair value due to their immediate or short-term maturity.87
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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
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GovernanceFor the purposes of this
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Strategic Direction and Performance
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Page 39 and 40: Strategic Direction and Performance
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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
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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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