Consolidation of Variable Interest Entities definition

Consolidation of Variable Interest Entities published January 2003 by the Financial Accounting Standards Board, as the same may be amended from time to time.

Consolidation of Variable Interest Entities by the Financial Accounting Standards Board on January 17, 2003 as revised from time to time, (b) a party other than Borrower, a Consolidated Entity or an Unconsolidated Entity has primary control over day-to-day management of such Person (responsibilities under management agreements shall not constitute control), and (c) none of the Borrower, any Consolidated Entity or any Unconsolidated Entity is directly or contingently liable for indebtedness of such Person, except for standard and customary recourse carve-outs commonly included in non-recourse financings in the form of guarantees or indemnities. For a list of the entities which are Investment Entities of the Borrower as of the Closing Date, see Schedule 1.1(b) attached hereto.

Consolidation of Variable Interest Entities as revised.

Consolidation of Variable Interest Entities. (FIN 46R), as amended by FASB Statement of Financial Standards No. 167, “Amendments to FASB Interpretation No. 46(R)”, and any subsequent FASB statements or interpretations. Unless the context shall otherwise require, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Guarantor, including the Borrower and the Subsidiaries of the Borrower.

Consolidation of Variable Interest Entities. ("FIN 46") and FASB Statement No. 150, "Accounting for Certain Financial Instruments with both Characteristics of Liabilities and Equity" ("FAS 150"), with respect to periods beginning after the date of the last interim financial statements including in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2003, except as disclosed in such quarterly report and except as previously disclosed to the Underwriters, the Company has no knowledge of any material increase in its total liabilities, as compared with amounts shown in the September 30, 2003 unaudited condensed consolidated balance sheet incorporated by reference in the Registration Statement, as a result of the application of FIN 46 and FAS 150.

Consolidation of Variable Interest Entities as outlined in Note 4. All amounts are presented in Canadian dollars unless otherwise stated.

Consolidation of Variable Interest Entities. (“FIN 46”) (revised on December 17, 2003). The objective of FIN 46 is to improve financial reporting by companies involved with variable interest entities. A variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. FIN 46 also requires disclosures about variable interest entities that the company is not required to consolidate but in which it has significant variable interest. The consolidation requirements of FIN 46 are required in financial statements of public entities that have interests in variable interest entities for periods ending after December 15, 2003. The consolidation requirements for all other types of entities are required in financial statements for periods ending March 15, 2004. The adoption of the new pronouncement did not have a material effect on the Company’s financial position or results of operations.

Consolidation of Variable Interest Entities. (FIN 46). In January 2003, the FASB issued FIN 46 which requires the primary beneficiary of a variable interest entity’s activities to consolidate the variable interest entity. FIN 46 defines a variable interest entity as an entity in which the equity investors do not have substantive voting rights and there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The primary beneficiary absorbs a majority of the expected losses and/or receives a majority of the expected residual returns of the variable interest entity’s activities. In December 2003, the FASB issued FIN 46 (Revised December 2003), “Consolidation of Variable Interest Entities—An Interpretation of ARB No. 51” (FIN 46R), which supersedes and amends the provisions of FIN 46. While FIN 46R retains many of the concepts and provisions of FIN 46, it also provides additional guidance and additional scope exceptions, and incorporates FASB Staff Positions related to the application of FIN 46. The provisions of FIN 46 applied immediately to variable interest entities created, or interests in variable interest entities obtained, after January 31, 2003, while the provisions of FIN 46R were required to be applied to those entities, except for special purpose entities, by the end of the first reporting period ending after March 15, 2004 (March 31, 2004 for Duke Energy). For variable interest entities created, or interests in variable interest entities obtained, on or before January 31, 2003, FIN 46 or FIN 46R was required to be applied to special-purpose entities by the end of the first reporting period ending after December 15, 2003 (December 31, 2003 for Duke Energy), and was required to be applied to all other non-special purpose entities by the end of the first reporting period ending after March 15, 2004 (March 31, 2004 for Duke Energy). Duke Energy has not identified any material variable interest entities created, or interests in variable entities obtained, after January 31, 2003, which require consolidation or disclosure under FIN 46R. Under the provisions of FIN 46R, effective March 31, 2004, Duke Energy has consolidated certain non-special purpose operating entities, previously accounted for under the equity method of accounting. These entities, which are substantive entities, had an immaterial amount of total assets as of December 31, 2005 and approximately $230 million as of December 31, 2004. In addition, as of December 31, 2...

Consolidation of Variable Interest Entities by the Financial Accounting 4887-6582-6072 v.11 Standards Board on January 17, 2003 as revised from time to time, (b) a party other than the Borrower, the Parent, a Consolidated Entity or an Unconsolidated Entity has primary control over day-to-day management of such Person (responsibilities under management agreements shall not constitute control), and (c) none of the Borrower, the Parent, any Consolidated Entity or any Unconsolidated Entity is directly or contingently liable for indebtedness of such Person, except for standard and customary recourse carve-outs commonly included in non-recourse financings in the form of guarantees or indemnities. For a list of the entities which are Investment Entities of the Borrower and the Parent as of the Closing Date, see Schedule 1.01(b) attached hereto.