Notes

8. Investments

During 2007, the company acquired an additional 1,011,062 shares of SQM for cash consideration of $16.8 which was financed by cash on hand. The company's ownership interest in SQM remained at approximately 32 percent. During July 2007, the company's ownership interest in Sinofert was diluted from 20 percent to approximately 19 percent due to issuance of shares of Sinofert.

There were no amounts accrued related to acquisitions of long-term investments as of December 31, 2007 or 2005. At December 31, 2006, the company had amounts in accounts payable related to the acquisition of SQM shares. As a result, the company reclassified $12.5 in its Consolidated Statements of Cash Flow from operating accounts payable to reduce the cash outflow related to the purchase of long-term investments for the year; the cash outflow was recognized in 2007.

At December 31, 2007, the difference between the carrying value of SQM and the proportionate share of net book value was $196.9 (2006 – $190.7). The differences were allocated to the fair value of the reserves and mining concessions and will be recognized as a reduction in the future share of earnings from SQM on a unit of production basis. The difference between the carrying value of APC and the proportionate share of net book value remaining to be amortized at year-end was $65.4 (2006 – $72.1). Differences were allocated to the fair value of fixed assets and mining concessions and will be recognized as a reduction in the future share of earnings from APC on a unit of production basis.

As noted in the above table, certain of the company's investments in international entities are accounted for under the equity method. Accounting principles generally accepted in those foreign jurisdictions may vary in certain important respects from Canadian GAAP. The company's share of earnings of these equity investees under the applicable foreign GAAP has been adjusted for the significant effects of conforming to Canadian GAAP.

The company's share of earnings of equity investees of $76.2 (2006 – $54.4; 2005 – $52.1) is included in other income (see Note 23). Dividends received from equity investees were $40.6 (2006 – $29.9; 2005 – $18.6).

Auction rate securities have original maturities in excess of three months. Interest rates are typically reset every 28 days through the sale of the securities in a dutch auction process; however, in the event of market illiquidity, the interest rate is reset based on a spread to LIBOR. As a result of worsening negative conditions in the global credit markets, auctions for the auction rate securities held in the company's account have continued to fail to settle on their respective settlement dates. Consequently, the investments are not currently liquid and the company will not be able to access these funds until a future auction of these securities is successful, a buyer is found outside of the auction process, the company settles an outstanding claim in respect of the investments, or upon maturity. The company has determined the fair value to be $56.0 as of December 31, 2007, representing an impairment of $76.5 as compared to the par value of the securities. Of the total impairment, $50.0 has been classified as temporary and $26.5 has been classified as other-than-temporary. The securities were reviewed on an individual basis to determine whether the impairment was temporary or other-than-temporary. Two securities were identified as being other-than-temporarily impaired based on the vintage of the underlying securities and complexity of the structures. The entire impairment on these two securities was therefore classified as other-than-temporary. For those investments for which the impairment in fair value is considered temporary, the company has the ability to hold the securities until the temporary impairment in fair value is recovered, which may not be until a recovery of the auction process or until maturity. Maturity dates for these investments range from 2017 to 2046 with principal distributions occurring on several securities prior to maturity. The investments are classified as long-term since they are not expected to be realizable within one year from the date of the Consolidated Statements of Financial Position.

Investments – Market Value

In prior years, auction rate securities were included with cash and cash equivalents. The company has not reclassified prior years as the adjustments are not considered material.

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