| FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS | FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS ACCOUNTING POLICY Recognition We initially recognize cash and cash equivalents, bank advances, accounts receivable, financing receivables, debt securities, and accounts payable and accrued liabilities on the date they originate. All other financial assets and financial liabilities are initially recognized on the trade date when we become a party to the contractual provisions of the instrument. Classification and measurement We measure financial instruments by grouping them into classes upon initial recognition, based on the purpose of the individual instruments. We initially measure all financial instruments at fair value plus, in the case of our financial instruments not classified as fair value through profit and loss (FVTPL) or FVTOCI, transaction costs that are directly attributable to the acquisition or issuance of the financial instruments. For derivatives designated as cash flow hedges for accounting purposes, the effective portion of the hedge is recognized in accumulated other comprehensive income and the ineffective portion of the hedge is recognized immediately into net income. The classifications and methods of measurement subsequent to initial recognition of our financial assets and financial liabilities are as follows: Financial instrument Classification and measurement method Financial assets Cash and cash equivalents Amortized cost Accounts receivable Amortized cost Financing receivables Amortized cost Investments, measured at FVTOCI FVTOCI with no reclassification to net income 1 Financial liabilities Bank advances Amortized cost Short-term borrowings Amortized cost Accounts payable Amortized cost Accrued liabilities Amortized cost Long-term debt Amortized cost Lease liabilities Amortized cost Derivatives 2 Debt derivatives 3 FVTOCI and FVTPL Interest rate derivatives FVTOCI Expenditure derivatives FVTOCI Equity derivatives FVTPL 4 1 Subsequently measured at fair value with changes recognized in the FVTOCI investment reserve. 2 Derivatives can be in an asset or liability position at a point in time historically or in the future. 3 Debt derivatives related to our credit facility and commercial paper borrowings have not been designated as hedges for accounting purposes and are measured at FVTPL. Debt derivatives related to our senior notes and debentures are designated as hedges for accounting purposes and are measured at FVTOCI. 4 Subsequent changes are offset against stock-based compensation expense or recovery in operating costs. Offsetting financial assets and financial liabilities We offset financial assets and financial liabilities and present the net amount on the Consolidated Statements of Financial Position when we have a legal right to offset them and intend to settle on a net basis or realize the asset and liability simultaneously. Derivative instruments We use derivative instruments to manage risks related to certain activities in which we are involved. They include: Derivatives The risk they manage Types of derivative instruments Debt derivatives Impact of fluctuations in foreign exchange rates on principal and interest payments for US dollar-denominated senior and subordinated notes and debentures, credit facility borrowings, commercial paper borrowings, and certain lease liabilities Cross-currency interest rate exchange agreements Forward cross-currency interest rate exchange agreements Forward foreign exchange agreements Interest rate derivatives Impact of fluctuations in market interest rates on forecast interest payments for expected long-term debt Forward interest rate agreements Interest rate swap agreements Bond forwards Expenditure derivatives Impact of fluctuations in foreign exchange rates on forecast US dollar-denominated expenditures Forward foreign exchange agreements and foreign exchange option agreements Equity derivatives Impact of fluctuations in share price on stock-based compensation expense Total return swap agreements We use derivatives only to manage risk, and not for speculative purposes. When we designate a derivative instrument as a hedging instrument for accounting purposes, we first determine that the hedging instrument will be highly effective in offsetting the changes in fair value or cash flows of the item it is hedging. We then formally document the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy and the methods we will use to assess the ongoing effectiveness of the hedging relationship. We assess, on a quarterly basis, whether each hedging instrument continues to be highly effective in offsetting the changes in the fair value or cash flows of the item it is hedging. We assess host contracts in order to identify embedded derivatives. Embedded derivatives are separated from the host contract and accounted for as separate derivatives if the host contract is not a financial asset and certain criteria are met. Hedge ratio Our policy is to hedge 100% of the foreign currency risk arising from principal and interest payment obligations on US dollar-denominated senior notes and debentures using debt derivatives. We also hedge up to 100% of the remaining lease payments when we enter into debt derivatives on our US dollar-denominated lease liabilities. We typically hedge up to 100% of forecast foreign currency expenditures net of foreign currency cash inflows using expenditure derivatives. From time to time, we hedge up to 100% of the interest rate risk on forecast future senior note issuances using interest rate derivatives. Hedging reserve The hedging reserve represents the accumulated change in fair value of our derivative instruments to the extent they were effective hedges for accounting purposes, less accumulated amounts reclassified into net income. Deferred transaction costs and discounts We defer transaction costs and discounts associated with issuing long-term debt and direct costs we pay to lenders to obtain certain credit facilities and amortize them using the effective interest method over the life of the related instrument. FVTOCI investment reserve The FVTOCI investment reserve represents the accumulated change in fair value of our equity investments that are measured at FVTOCI less accumulated impairment losses related to the investments and accumulated amounts reclassified into equity. Impairment (expected credit losses) We consider the credit risk of a financial asset at initial recognition and at each reporting period thereafter until it is derecognized. For a financial asset that is determined to have low credit risk at the reporting date and that has not had significant increases in credit risk since initial recognition, we measure any impairment loss based on the credit losses we expect to recognize over the next twelve months. For other financial assets, we will measure an impairment loss based on the lifetime expected credit losses. Certain assets, such as trade receivables, financing receivables, and contract assets without significant financing components, must always be recorded at lifetime expected credit losses. Lifetime expected credit losses are estimates of all possible default events over the expected life of a financial instrument. Twelve-month expected credit losses are estimates of all possible default events within twelve months of the reporting date or over the expected life of a financial instrument, whichever is shorter. Financial assets that are significant in value are assessed individually. All other financial assets are assessed collectively based on the nature of each asset. We measure impairment for financial assets as follows: • contract assets - we measure an impairment loss for contract assets based on the lifetime expected credit losses, which is allocated to an allowance for doubtful accounts and recognized as a loss in net income (see note 5); • accounts receivable - we measure an impairment loss for accounts receivable based on the lifetime expected credit losses, which is allocated to an allowance for doubtful accounts and recognized as a loss in net income (see note 15); • financing receivables - we measure an impairment loss for financing receivables based on the lifetime expected credit losses, which is allocated to an allowance for doubtful accounts and recognized as a loss in net income (see note 15); and • investments measured at FVTOCI - we measure an impairment loss for equity investments measured at FVTOCI as the excess of the cost to acquire the asset (less any impairment loss we have previously recognized) over its current fair value, if any. The difference is recognized in the FVTOCI investment reserve. We consider financial assets to be in default when, in the case of contract assets, accounts receivable, and financing receivables, the counterparty is unlikely to satisfy its obligations to us in full. Our investments measured at FVTOCI cannot default. To determine if our financial assets are in default, we consider the amount of time for which it has been outstanding, the reason for the amount being outstanding (for example, if the customer has ongoing service or, if they have been deactivated, whether voluntarily or involuntarily), and the risk profile of the underlying customers. We typically write off accounts receivable when they have been outstanding for a significant period of time. ESTIMATES Fair value estimates related to our derivatives are made at a specific point in time based on relevant market information and information about the underlying financial instruments. These estimates require assessment of the credit risk of the parties to the instruments and the instruments' discount rates. These fair values and underlying estimates are also used in the tests of effectiveness of our hedging relationships. JUDGMENTS We make significant judgments in determining whether our financial instruments qualify for hedge accounting. These judgments include assessing whether the forecast transactions designated as hedged items in hedging relationships will materialize as forecast, whether the hedging relationships designated as effective hedges for accounting purposes continue to qualitatively be effective, and determining the methodology to determine the fair values used in testing the effectiveness of hedging relationships. FINANCIAL RISKS We are exposed to credit, liquidity, market price, foreign exchange, and interest rate risks. Our primary risk management objective is to protect our income, cash flows, and, ultimately, shareholder value. We design and implement the risk management strategies discussed below to ensure our risks and the related exposures are consistent with our business objectives and risk tolerance. Below is a summary of our potential risk exposures by financial instrument. Financial instrument Financial risks Financial assets Cash and cash equivalents Credit and foreign exchange Accounts receivable Credit and foreign exchange Financing receivables Credit Investments, measured at FVTOCI Liquidity, market price, and foreign exchange Financial liabilities Bank advances Liquidity Short-term borrowings Liquidity, foreign exchange, and interest rate Accounts payable Liquidity Accrued liabilities Liquidity Long-term debt Liquidity, foreign exchange, and interest rate Lease liabilities Liquidity and foreign exchange Derivatives 1 Debt derivatives Credit, liquidity, and foreign exchange Interest rate derivatives Credit, liquidity, and interest rate Expenditure derivatives Credit, liquidity, and foreign exchange Equity derivatives Credit, liquidity, and market price 1 Derivatives can be in an asset or liability position at a point in time historically or in the future. CREDIT RISK Credit risk represents the financial loss we could experience if a counterparty to a financial instrument, from whom we have an amount owing, failed to meet its obligations under the terms and conditions of its contracts with us. Our credit risk exposure is primarily attributable to our accounts receivable, our financing receivables, and to our debt, interest rate, expenditure, and equity derivatives. Our broad customer base limits the concentration of this risk. Our accounts receivable and financing receivables on the Consolidated Statements of Financial Position are net of allowances for doubtful accounts. Accounts receivable Our accounts receivable do not contain significant financing components as defined by IFRS 15 and therefore we measure our allowance for doubtful accounts using lifetime expected credit losses related to our accounts receivable. We believe the allowance for doubtful accounts sufficiently reflects the credit risk associated with our accounts receivable. As at December 31, 2021, $442 million (2020 - $435 million) of gross accounts receivable are considered past due, which is defined as amounts outstanding beyond normal credit terms and conditions for the respective customers. Below is a summary of the aging of our customer accounts receivable, including financing receivables, net of the respective allowances for doubtful accounts. As at December 31 (In millions of dollars) 2021 2020 Customer accounts receivable Unbilled financing receivables 2,646 1,806 Less than 30 days past billing date 895 793 30-60 days past billing date 214 207 61-90 days past billing date 89 66 Greater than 90 days past billing date 66 76 Total customer accounts receivable (net of allowances of $240 and $222, respectively) 3,910 2,948 Total contract assets (net of allowance of $3 and $28, respectively) 204 621 Total customer accounts receivable and contract assets 4,114 3,569 Below is a summary of the activity related to our allowance for doubtful accounts on total customer accounts receivable and contract assets. Years ended December 31 (In millions of dollars) 2021 2020 Balance, beginning of year 250 114 Allowance for doubtful accounts expense 155 307 Net use (162) (171) Balance, end of year 243 250 We use various controls and processes, such as credit checks, deposits on account, and billing in advance, to mitigate credit risk. We monitor and take appropriate action to suspend services when customers have fully used their approved credit limits or violated established payment terms. While our credit controls and processes have been effective in managing credit risk, they cannot eliminate credit risk and there can be no assurance that these controls will continue to be effective or that our current credit loss experience will continue. Derivative instruments Credit risk related to our debt derivatives, interest rate derivatives, expenditure derivatives, and equity derivatives arises from the possibility that the counterparties to the agreements may default on their obligations. We assess the creditworthiness of the counterparties to minimize the risk of counterparty default and do not require collateral or other security to support the credit risk associated with these derivatives. Counterparties to the entire portfolio of our derivatives are financial institutions with a S&P Global Ratings (or the equivalent) ranging from A to AA-. LIQUIDITY RISK Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due. We manage liquidity risk by managing our commitments and maturities, capital structure, and financial leverage (see note 3). We also manage liquidity risk by continually monitoring actual and projected cash flows to ensure we will have sufficient liquidity to meet our liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation. Below is a summary of the undiscounted contractual maturities of our financial liabilities and the receivable components of our derivatives as at December 31, 2021 and 2020. December 31, 2021 Carrying Contractual Less than 1 to 3 4 to 5 More than (In millions of dollars) amount cash flows 1 year years years 5 years Short-term borrowings 2,200 2,200 2,200 — — — Accounts payable and accrued liabilities 3,416 3,416 3,416 — — — Long-term debt 1 18,688 18,873 1,551 2,312 3,520 11,490 Lease liabilities 1,957 2,498 336 677 308 1,177 Other long-term financial liabilities 14 14 — 7 2 5 Expenditure derivative instruments: Cash outflow (Canadian dollar) — 1,374 1,240 134 — — Cash inflow (Canadian dollar equivalent of US dollar) — (1,354) (1,217) (137) — — Equity derivative instruments — (36) (36) — — — Debt derivative instruments accounted for as hedges: Cash outflow (Canadian dollar) — 11,313 1,297 1,504 1,607 6,905 Cash inflow (Canadian dollar equivalent of US dollar) 2 — (11,717) (1,084) (1,822) (1,521) (7,290) Debt derivative instruments not accounted for as hedges: Cash outflow (Canadian dollar) — 1,390 1,390 — — — Cash inflow (Canadian dollar equivalent of US dollar) 2 — (1,401) (1,401) — — — Interest rate derivatives — 243 243 — — — Net carrying amount of derivatives (asset) (895) 25,380 26,813 7,935 2,675 3,916 12,287 1 Reflects repayment of the subordinated notes issued in December 2021 on the five-year anniversary. 2 Represents Canadian dollar equivalent amount of US dollar inflows matched to an equal amount of US dollar maturities in long-term debt for debt derivatives. December 31, 2020 Carrying Contractual Less than 1 to 3 4 to 5 More than (In millions of dollars) amount cash flows 1 year years years 5 years Short-term borrowings 1,221 1,221 1,221 — — — Accounts payable and accrued liabilities 2,714 2,714 2,714 — — — Long-term debt 18,201 18,373 1,450 3,274 1,490 12,159 Lease liabilities 1,835 2,353 278 647 300 1,128 Other long-term financial liabilities 22 22 — 14 2 6 Expenditure derivative instruments: Cash outflow (Canadian dollar) — 2,134 1,305 829 — — Cash inflow (Canadian dollar equivalent of US dollar) — (2,024) (1,222) (802) — — Equity derivative instruments — (34) (34) — — — Debt derivative instruments accounted for as hedges: Cash outflow (Canadian dollar) — 11,114 86 2,516 937 7,575 Cash inflow (Canadian dollar equivalent of US dollar) 1 — (11,702) (81) (2,772) (891) (7,958) Debt derivative instruments not accounted for as hedges: Cash outflow (Canadian dollar) — 585 585 — — — Cash inflow (Canadian dollar equivalent of US dollar) 1 — (573) (573) — — — Net carrying amount of derivatives (asset) (1,011) 22,982 24,183 5,729 3,706 1,838 12,910 1 Represents Canadian dollar equivalent amount of US dollar inflows matched to an equal amount of US dollar maturities in long-term debt for debt derivatives. Below is a summary of the net interest payments over the life of the long-term debt, including the impact of the associated debt derivatives, as at December 31, 2021 and 2020. December 31, 2021 Less than 1 year 1 to 3 years 4 to 5 years More than 5 years (In millions of dollars) Net interest payments 804 1,444 1,321 7,789 December 31, 2020 Less than 1 year 1 to 3 years 4 to 5 years More than 5 years (In millions of dollars) Net interest payments 747 1,322 1,167 8,331 MARKET PRICE RISK Market price risk is the risk that changes in market prices, such as fluctuations in the market prices of our investments measured at FVTOCI or our share price will affect our income, cash flows, or the value of our financial instruments. The derivative instruments we use to manage this risk are described in this note. Market price risk - publicly traded investments We manage risk related to fluctuations in the market prices of our investments in publicly traded companies by regularly reviewing publicly available information related to these investments to ensure that any risks are within our established levels of risk tolerance. We do not engage in risk management practices such as hedging, derivatives, or short selling with respect to our publicly traded investments. Market price risk - Class B Non-Voting Shares Our liability related to stock-based compensation is remeasured at fair value each period. Stock-based compensation expense is affected by changes in the price of our Class B Non-Voting Shares during the life of an award, including stock options, restricted share units (RSUs), and deferred share units (DSUs). We use equity derivatives from time to time to manage the exposure in our stock-based compensation liability. As a result of our equity derivatives, a one-dollar change in the price of a Class B Non-Voting Share would not have a material effect on net income. FOREIGN EXCHANGE RISK We use debt derivatives to manage risks from fluctuations in foreign exchange rates associated with our US dollar-denominated long-term debt, short-term borrowings, and lease liabilities. We designate the debt derivatives related to our senior notes and debentures and lease liabilities as hedges for accounting purposes against the foreign exchange risk associated with specific debt instruments and lease contracts, respectively. We have not designated the debt derivatives related to our US CP program as hedges for accounting purposes. We use expenditure derivatives to manage the foreign exchange risk in our operations, designating them as hedges for certain of our forecast operational and capital expenditures. As at December 31, 2021, all of our US dollar-denominated long-term debt, short-term borrowings, and lease liabilities were hedged against fluctuations in foreign exchange rates using debt derivatives. With respect to our long-term debt and US CP program, as a result of our debt derivatives, a one-cent change in the Canadian dollar relative to the US dollar would have no effect on net income. A portion of our accounts receivable and accounts payable and accrued liabilities is denominated in US dollars. Due to the short-term nature of these receivables and payables, they carry no significant risk from fluctuations in foreign exchange rates as at December 31, 2021. INTEREST RATE RISK We are exposed to risk of changes in market interest rates due to the impact this has on interest expense for our short-term borrowings and bank credit facilities. As at December 31, 2021, 89.3% of our outstanding long-term debt and short-term borrowings was at fixed interest rates (2020 - 93.6%). Sensitivity analysis Below is a sensitivity analysis for significant exposures with respect to our publicly traded investments, expenditure derivatives, debt derivatives, interest rate derivatives, short-term borrowings, senior notes, and bank credit facilities as at December 31, 2021 and 2020 with all other variables held constant. It shows how net income and other comprehensive income would have been affected by changes in the relevant risk variables. Net income Other comprehensive income (Change in millions of dollars) 2021 2020 2021 2020 Share price of publicly traded investments $1 change — — 17 14 Debt derivatives 0.1% change in interest rates — — 46 — Interest rate derivatives 0.1% change in interest rates — — 76 — Expenditure derivatives - change in foreign exchange rate $0.01 change in Cdn$ relative to US$ — — 8 12 Floating interest rate senior notes 1% change in interest rates 7 7 — — Short-term borrowings 1% change in interest rates 16 9 — — DERIVATIVE INSTRUMENTS As at December 31, 2021 and 2020, all of our US dollar-denominated long-term debt instruments were hedged against fluctuations in foreign exchange rates for accounting purposes. Below is a summary of our net asset (liability) position for our various derivatives. As at December 31, 2021 (In millions of dollars, except exchange rates) Notional Exchange Notional Fair value Debt derivatives accounted for as cash flow hedges: As assets 5,859 1.1369 6,661 1,453 As liabilities 5,383 1.3025 7,011 (343) Short-term debt derivatives not accounted for as hedges: As assets 1,104 1.2578 1,389 11 Net mark-to-market debt derivative asset 1,121 Interest rate derivatives accounted for as cash flow hedges: As assets (Cdn$) — — 3,250 40 As liabilities (Cdn$) — — 500 (6) As liabilities (US$) 2,000 — — (277) Net mark-to-market interest rate derivative liability (243) Expenditure derivatives accounted for as cash flow hedges: As assets 438 1.2453 545 11 As liabilities 630 1.3151 829 (30) Net mark-to-market expenditure derivative liability (19) Equity derivatives not accounted for as hedges: As assets — — 265 36 Net mark-to-market asset 895 As at December 31, 2020 (In millions of dollars, except exchange rates) Notional Exchange Notional Fair value Debt derivatives accounted for as cash flow hedges: As assets 4,550 1.0795 4,912 1,405 As liabilities 4,642 1.3358 6,201 (307) Short-term debt derivatives not accounted for as hedges: As liabilities 449 1.2995 583 (12) Net mark-to-market debt derivative asset 1,086 Expenditure derivatives accounted for as cash flow hedges: As liabilities 1,590 1.3421 2,134 (109) Equity derivatives not accounted for as hedges: As assets — — 238 34 Net mark-to-market asset 1,011 Below is a summary of the net cash (payments) proceeds on debt derivatives. Years ended December 31 (In millions of dollars) 2021 2020 Proceeds on debt derivatives related to US commercial paper 2,911 5,542 Proceeds on debt derivatives related to credit facility borrowings 1,003 1,364 Total proceeds on debt derivatives 3,914 6,906 Payments on debt derivatives related to US commercial paper (2,926) (5,441) Payments on debt derivatives related to credit facility borrowings (1,005) (1,385) Total payments on debt derivatives (3,931) (6,826) Net (payments) proceeds on settlement of debt derivatives (17) 80 Below is a summary of the changes in fair value of our derivative instruments for 2021 and 2020. Year ended December 31, 2021 Debt derivatives (hedged) Debt derivatives (unhedged) Interest rate derivatives Expenditure derivatives Equity derivatives Total instruments (In millions of dollars) Derivative instruments, beginning of year 1,098 (12) — (109) 34 1,011 Proceeds received from settlement of derivatives — (3,914) (9) (1,201) (3) (5,127) Payment on derivatives settled — 3,931 — 1,305 — 5,236 Increase (decrease) in fair value of derivatives 12 6 (234) (14) 5 (225) Derivative instruments, end of year 1,110 11 (243) (19) 36 895 Mark-to-market asset 1,453 11 40 11 36 1,551 Mark-to-market liability (343) — (283) (30) — (656) Mark-to-market asset (liability) 1,110 11 (243) (19) 36 895 Year ended December 31, 2020 Debt derivatives (hedged) Debt derivatives (unhedged) Expenditure derivatives Equity derivatives Total instruments (In millions of dollars) Derivative instruments, beginning of year 1,412 (29) 1 55 1,439 Proceeds received from settlement of derivatives — (6,906) (1,261) 1 (8,166) Payment on derivatives settled — 6,826 1,221 — 8,047 (Decrease) increase in fair value of derivatives (314) 97 (70) (22) (309) Derivative instruments, end of year 1,098 (12) (109) 34 1,011 Mark-to-market asset 1,405 — — 34 1,439 Mark-to-market liability (307) (12) (109) — (428) Mark-to-market asset (liability) 1,098 (12) (109) 34 1,011 Below is a summary of the derivative instruments assets and derivative instruments liabilities reflected on our Consolidated Statements of Financial Position. As at December 31 (In millions of dollars) 2021 2020 Current asset 120 61 Long-term asset 1,431 1,378 1,551 1,439 Current liability (467) (110) Long-term liability (189) (318) (656) (428) Net mark-to-market asset 895 1,011 As at December 31, 2021, US$11.2 billion notional amount of our outstanding debt derivatives have been designated as hedges for accounting purposes (2020 - US$9.2 billion). As at December 31, 2021, 100% of our outstanding expenditure derivatives and interest rate derivatives have been designated as hedges for accounting purposes (2020 - 100% of our outstanding expenditure derivatives). Debt derivatives We use cross-currency interest rate agreements and foreign exchange forward agreements (collectively, debt derivatives) to manage risks from fluctuations in foreign exchange rates and interest rates associated with our US dollar-denominated senior notes and debentures, lease liabilities, credit facility borrowings, and US CP borrowings (see note 19). We designate the debt derivatives related to our senior notes, debentures, and lease liabilities as hedges for accounting purposes against the foreign exchange risk or interest rate risk associated with specific issued and forecast debt instruments. Debt derivatives related to our credit facility and US CP borrowings have not been designated as hedges for accounting purposes. During 2021 and 2020, we entered and settled debt derivatives related to our credit facility borrowings and US CP program as follows: Year ended December 31, 2021 Year ended December 31, 2020 (In millions of dollars, except exchange rates) Notional (US$) Exchange rate Notional (Cdn$) Notional (US$) Exchange rate Notional (Cdn$) Credit facilities Debt derivatives entered 1,200 1.253 1,503 970 1.428 1,385 Debt derivatives settled 800 1.254 1,003 970 1.406 1,364 Net cash paid on settlement (2) (21) US commercial paper program Debt derivatives entered 2,568 1.260 3,235 3,316 1.329 4,406 Debt derivatives settled 2,312 1.259 2,911 4,091 1.330 5,441 Net cash (paid) received on settlement (15) 101 We did not enter into any debt derivatives in 2021 on issued senior notes. We entered into US$2 billion of forward starting cross-currency swaps to hedge the foreign exchange and interest risk associated with debt instruments we expect to issue in the future related to the Transaction. In 2020, we entered into debt derivatives to hedge the foreign currency risk associated with the principal and interest components of the US dollar-denominated senior notes issued (see note 21). Below is a summary of the debt derivatives we entered to hedge senior notes issued during 2020. (In millions of dollars, except for coupon and interest rates) US$ Hedging effect Effective date Principal/Notional amount (US$) Maturity date Coupon rate Fixed hedged (Cdn$) interest rate 1 Equivalent (Cdn$) 2020 issuances June 22, 2020 750 2022 USD LIBOR + 0.60% 0.955 % 1,019 1 Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate. During 2021 and 2020, we entered and settled debt derivatives related to our outstanding lease liabilities as follows: Year ended December 31, 2021 Year ended December 31, 2020 (In millions of dollars, except exchange rates) Notional (US$) Exchange rate Notional (Cdn$) Notional (US$) Exchange rate Notional (Cdn$) Debt derivatives entered 132 1.273 168 115 1.374 158 Debt derivatives settled 81 1.333 108 43 1.372 59 As at December 31, 2021, we had US$193 million notional amount of debt derivatives outstanding related to our outstanding lease liabilities (2020 - US$142 million) with terms to maturity ranging from January 2022 to December 2024 (2020 - January 2021 to December 2023), at an average rate of $1.301/US$ (2020 - $1.352/US$). Interest rate derivatives From time to time, we use bond forward derivatives or interest rate swap derivatives (collectively, interest rate derivatives) to hedge interest rate risk on current and future debt instruments. Our interest rate derivatives are designated as hedges for accounting purposes. We have entered into interest rate swap derivatives during the year ended December 31, 2021, including: • $1,250 million bond forwards to hedge the underlying Government of Canada (GoC) interest rate risk that will form a portion of the interest rate risk associated with anticipated future debt issuances; • interest rate swap derivatives to hedge the interest rate risk on an additional $3.25 billion of debt instruments we expect to issue in the future; and • interest rate swap derivatives to hedge the interest rate risk on US$2 billion of debt instruments we expect to issue in the future. Concurrent with our issuance of $2 billion subordinated notes in December 2021 (see note 21), we terminated $750 million of bond forwards and received $9 million upon settlement. As at December 31, 2021, we had $500 million of bond forwards outstanding. Concurrent with our issuance of US$750 million subordinated notes in February 2022 (see note 21), we terminated $950 million of interest rate swap derivatives and received $33 million upon settlement. Expenditure derivatives Below is a summary of the expenditure derivatives we entered and settled during 2021 and 2020 to manage foreign exchange risk related to certain forecast expenditures. Year ended December 31, 2021 Year ended December 31, 2020 (In millions of dollars, except exchange rates) Notional (US$) Exchange rate Notional (Cdn$) Notional (US$) Exchange rate Notional (Cdn$) Expenditure derivatives entered 438 1.244 545 1,560 1.343 2,095 Expenditure derivatives settled 960 1.360 1,306 940 1.299 1,221 As at December 31, 2021, we had US$1,068 million of expenditure derivatives outstanding (2020 - US$1,590 |
