MANAGEMENT’S DISCUSSION AND ANALYSIS Pension Obligations accrued obligations in the future. See Critical accounting estimates for more information. Our retiree pension plans had a funding deficit of approximately $172 million at December 31, 2013. We have been making special minimum monthly payments in addition to our regular contributions to eliminate the pension liability. During 2013, our funding deficit was reduced by $162 million. The special payments, including contributions associated with benefits paid from the plans, were approximately $7 million in 2013. We expect our total estimated funding requirements to be $96 million in 2014 and to be adjusted annually thereafter, based on various market factors such as interest rates and expected returns and staffing assumptions. Changes in factors such as the discount rate, increase in compensation and the expected return on plan assets can affect the accrued benefit obligation, pension expense and the deficiency of plan assets over We did not make any additional lump-sum contributions to our pension plans in 2013 or 2012, and the pension plans did not purchase additional annuities. From time to time we have made additional lump-sum contributions to our pension plans, and the pension plans have purchased annuities from insurance companies to fund the pension benefit obligations for certain groups of retired employees in the plans. Purchasing the annuities relieves us of our primary responsibility for that portion of the accrued benefit obligations for the retired employees and eliminates the significant risk associated with the obligations. Purchase of Annuities FINANCIAL RISK MANAGEMENT We normally use three categories of derivative instruments to manage risks related to our business activities: We also manage our exposure to fluctuating interest rates and we have fixed the interest rate on 95.3 % of our debt including short-term borrowings at December 31, 2013 (2012 – 100 % ). All of our Debt Derivatives currently outstanding have been designated as effective hedges against foreign exchange risk for accounting purposes as described below and in note 20 to the consolidated financial statements. Categories The risk it manages Types of derivative instruments Debt Derivatives GLYPH<129> Impact of fluctuations in foreign exchange rates on principal and interest payments for US denominated long-term debt GLYPH<129> Cross-currency interest rate exchange agreements GLYPH<129> Forward foreign exchange agreements (from time to time, as applicable) Expenditure Derivatives GLYPH<129> Impact of fluctuations in foreign exchange rates on forecasted US dollar denominated expenditures GLYPH<129> Forward foreign exchange agreements Equity Derivatives GLYPH<129> Impact of fluctuations in share price on stock-based compensation expense GLYPH<129> Total return swap agreements Debt Derivatives New Debt Derivatives to Hedge Senior Notes Issued In 2013 We use cross currency interest exchange agreements (Debt Derivatives), to hedge the foreign exchange risk on all of the principal and interest obligations of our US dollar denominated senior notes and debentures. At December 31, 2013 we used Debt Derivatives to hedge the foreign exchange risk on 100 % of the principal and interest obligations on all our US dollar denominated debt. We use Debt Derivatives for risk management purposes only. During 2013, we completed Debt Derivatives transactions as follows: GLYPH<129> entered into new Debt Derivatives to hedge senior notes issued in 2013 GLYPH<129> terminated existing Debt Derivatives and entered into Debt Derivatives with different terms to hedge existing senior notes GLYPH<129> settled Debt Derivatives related to senior notes that matured during the year. 1 Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate. Terminated and Replaced Existing Debt Derivatives Effective date US$ Principal/ notional amount (millions) US$ Hedging effect Maturity date Coupon rate Fixed hedged Cdn.$ interest rate 1 Cdn$ equivalent (millions) March 7, 2013 US$ 500 2023 3.00 % 3.60 % $ 515 March 7, 2013 US$ 500 2043 4.50 % 4.60 % $ 515 Subtotal US$ 1,000 $ 1,030 October 2, 2013 US$ 850 2023 4.10 % 4.59 % $ 877 October 2, 2013 US$ 650 2043 5.45 % 5.61 % $ 671 Subtotal US$ 1,500 $ 1,548 Terminated Debt Derivatives New Debt Derivatives Hedging effect Termination date Notional amount (millions) Original maturity date Cash settlement payment (millions) Date entered Derivative amount (millions) New maturity date Fixed weighted average 1 Fixed Cdn$ equivalent (millions) 2 Mar 6, 2013 US$ 350 2 2018 Nil Mar 6, 2013 US$ 350 2 2038 7.62 % $ 356 Sep 27, 2013 US$ 1,075 3,4 2014 – 2015 $ 263 Sep 27, 2013 US$ 1,075 3 2014-2015 7.42 % $ 1,110 1 Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate. 2 Converting from a fixed US$ principal amount to a fixed Cdn$ principal amount. 62 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT