Notes to the Consolidated Financial Statements
(Years ended December 31, 2007 and 2006 (In thousands of dollars, except per share amounts)

19.  Financial instruments:

In accordance with the new standards referenced in note 1, the Company has classified the significant impacts of its financial instruments as follows:

(a)  Marketable securites
 

The investment portfolio includes pooled fund investments managed by an external investment fund manager. Market values for securities held by the pooled funds are determined by reference to quoted market prices. There is no contractual maturity date for the investments.

The Company has designated its marketable securities as held-for-trading. At December 31, 2007, these investments have been measured at fair value and unrealized net losses of $3,142 have been reflected in net income in the consolidated financial statements for the year ended December 31, 2007.

The carrying and fair values of the investment portfolio are as follows:
               
As at December 31   2007     2006  
    Carrying Value   Fair value   Carrying value   Fair value
Money market fund $ 166,457 $ 166,457 $ 184,019 $ 184,019
Short-term bond and mortgage fund   82,942   82,942   101,036   101,790
  $ 249,399 $ 249,399 $ 285,055 $ 285,809

(b)  Swaps:
 

TSX has entered into total return swaps (“TRSs”) which synthetically replicate the economics of TSX purchasing the Company’s shares as a partial fair value hedge to the share appreciation rights of RSUs and deferred share units that are awarded to directors and employees of the Company and its designated subsidiaries (note 15). TSX marks to market the fair value of the TRSs as an adjustment to income, and simultaneously marks to market the liability to holders of the RSUs and deferred share units as an adjustment to income. The fair values of the TRSs and the obligation to unit holders are reflected on the balance sheet. The TRSs are settled in cash upon maturity.

The following tables represent the TRSs which are outstanding at December 31.
                 
As at December 31, 2007:   Remaining term to maturity (notional amount)     Fair value    
  Under 1 year 1 to 3 years   Total   Gain   Loss   Net
Equity Swap Contract #5 $ 695 $ - $ 695 $ 627 $ - $ 627
Equity Swap Contract #10   664   -   664   82   -   82
Equity Swap Contract #13   -   854   854   10   -   10
Equity Swap Contract #14   5,310   -   5,310   422   -   422
Equity Swap Contract #15   2,453   -   2,453   563   -   563
Equity Swap Contract #16   10,548   -   10,548   2,422   -   2,422
  $ 19,670 $ 854 $ 20,524 $ 4,126 $ - $ 4,126
                         
                         
As at December 31, 2006:   Remaining term to maturity (notional amount)     Fair value    
  Under 1 year 1 to 3 years   Total   Gain   Loss   Net
Equity Swap Contract #5 $ 695 $ - $ 695 $ 457 $ - $ 457
Equity Swap Contract #7   12,388   -   12,388   736   -   736
Equity Swap Contract #8   621   -   621   -   (11)   (11)
Equity Swap Contract #10   -   664   664   -   (13)   (13)
Equity Swap Contract #11   4,268   -   4,268   -   (333)   (333)
Equity Swap Contract #12   620   -   620   -   (22)   (22)
  $ 18,592 $ 664 $ 19,256 $ 1,193 $ (379) $ 814
                         
The unrealized gains reflected in net income during the twelve month period ended December 31, 2007 were $3,008 (2006 – $405).

(c)  NGX energy contracts:
 

NGX energy contract receivable and payable positions are recognized for all contracts where physical delivery has occurred or financial settlement amounts have been determined prior to the period end but payments have not yet been made.

The fair value at the balance sheet date of the undelivered physically settled trading contracts and the forward financially settled trading contracts is recognized in the consolidated assets and liabilities as open energy contracts. There is no impact on the consolidated statement of income.
 
(d)  Foreign currency risk:
Accounts receivable include U.S. $8,579 (2006 – U.S. $5,246), which are exposed to changes in the U.S. – Canadian dollar exchange rate.