##### 



EXHIBIT 2

Cameco Corporation

2002 Consolidated Audited Financial Statements





---



##### 



(RESILIENT LOGO)




Index




Report of Managements Accountability
    
    2Auditors Report
    
    2Consolidated Balance Sheets
    
    3Consolidated Statements of Earnings (Loss)
    
    4Consolidated Statements of Retained Earnings
    
    4Consolidated Statements of Cash Flows
    
    5Notes to Consolidated Financial Statements
    
    61.
    
    Cameco Corporation
    
    62.
    
    Accounting Policies
    
    63.
    
    Inventories
    
    64.
    
    Property, Plant and Equipment
    
    65.
    
    Long-Term Receivables, Investments and Other
    
    76.
    
    Long-Term Debt
    
    77.
    
    Provision for Reclamation
    
    88.
    
    Other Liabilities
    
    89.
    
    Preferred Securities
    
    910.
    
    Share Capital
    
    911.
    
    Cumulative Translation Account
    
    1012.
    
    Interest and Other
    
    1013.
    
    Provision for Waste Disposal
    
    10


14.
    
    
    Other Income (Expenses)
    
    1015.
    
    
    Income Taxes
    
    1116.
    
    
    Other Operating Items
    
    1217.
    
    
    Joint Ventures
    
    1218.
    
    
    Kumtor Gold Company (KGC) Joint Venture
    
    1319.
    
    
    Investment in Bruce Power L.P. (Bruce Power)
    
    1420.
    
    
    Stock Option Plan
    
    1521.
    
    
    Stock-Based Compensation
    
    1622.
    
    
    Pension and Other Post-Retirement Benefits
    
    1723.
    
    
    Property and Business Acquisitions
    
    1824.
    
    
    Commitments and Contingencies
    
    1925.
    
    
    Financial Instruments
    
    1926.
    
    
    Per Share Amounts
    
    2127.
    
    
    Segmented Information
    
    2128.
    
    
    New Accounting Pronouncements
    
    2429.
    
    
    Comparative Figures
    
    2430.
    
    
    Generally Accepted Accounting Principles
in Canada and the United States
    
    2431.
    
    
    Subsequent Event
    
    31Summary of Significant Accounting Policies
    
    28




---

1



---



##### 






FINANCIAL INFORMATION









Report of Managements Accountability The accompanying consolidated financial
statements have been prepared by management
in accordance with Canadian generally
accepted accounting principles. Management is also responsible for the
information disclosed in the managements
discussion and analysis including
responsibility for the existence of
appropriate information systems, procedures
and controls to ensure that the information
used internally by management and disclosed
externally is complete and reliable in all
material respects. The integrity and reliability of Camecos
reporting systems are achieved through the
use of formal policies and procedures, the
careful selection of employees and
appropriate delegation of authority and
division of responsibilities. Internal
accounting controls are monitored by the
internal auditor. Camecos code of ethics,
which is communicated to all levels in the
organization, requires employees to
maintain high standards in their conduct of
the corporations affairs. Our shareholders independent auditors, KPMG
LLP, whose report on their examination
follows, have audited the consolidated
financial statements in accordance with
Canadian generally accepted auditing
standards. The board of directors annually appoints an
audit committee comprised of directors who
are not employees of the corporation. This
committee meets regularly with management,
the internal auditor and the shareholders
auditors to review significant accounting,
reporting and internal control matters.
Both the internal and shareholders
auditors have unrestricted access to the
audit committee. The audit committee
reviews the financial statements, the
report of the shareholders auditors, and
managements discussion and analysis and
submits its report to the board of
directors for formal approval. Original signed by David M. Petroff Senior Vice-President, Finance and Administration
and Chief Financial Officer February 14, 2003


Auditors Report To the Shareholders of Cameco Corporation We have audited the consolidated balance
sheets of Cameco Corporation as at December
31, 2002 and 2001 and the consolidated
statements of earnings (loss), retained
earnings and cash flows for each of the
years in the three-year period ended
December 31, 2002. These financial
statements are the responsibility of the
corporations management. Our responsibility
is to express an opinion on these financial
statements based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing
standards. Those standards require that we
plan and perform an audit to obtain
reasonable assurance whether the financial
statements are free of material
misstatement. An audit includes examining,
on a test basis, evidence supporting the
amounts and disclosures in the financial
statements. An audit also includes assessing
the accounting principles used and
significant estimates made by management, as
well as evaluating the overall financial
statement presentation. In our opinion, these consolidated
financial statements present fairly, in
all material respects, the financial
position of the corporation as at December
31, 2002 and 2001 and the results of its
operations and its cash flows for each of
the years in the three-year period ended
December 31, 2002 in accordance with
Canadian generally accepted accounting
principles. Original signed by KPMGLLP Chartered Accountants
Saskatoon, Canada February 11, 2003, except as to note 19(c) which is as of
February 14, 2003 and note 31 which is as of April 16, 2003




---

2



---



##### 






FINANCIAL INFORMATION







Consolidated Balance Sheets

As at December 31
    
    2002
    
    
    2001(Thousands)AssetsCurrent assetsCash
    
    $
    58,096
    
    
    $
    33,737Accounts receivable
    
    
    186,369
    
    
    
    255,963Inventories [note 3]
    
    
    339,684
    
    
    
    354,384Supplies and prepaid expenses
    
    
    45,731
    
    
    
    44,574Current portion of long-term receivables, investments and other [note 5]
    
    
    20,163
    
    
    
    30,304650,043
    
    
    
    718,962Property, plant and equipment [note 4]
    
    
    2,037,613
    
    
    
    1,994,424Long-term receivables, investments and other [note 5]
    
    
    257,523
    
    
    
    233,961Total assets
    
    $
    2,945,179
    
    
    $
    2,947,347Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable and accrued liabilities
    
    $
    131,932
    
    
    $
    108,096Dividends payable
    
    
    6,998
    
    
    
    6,959Current portion of long-term debt [note 6]
    
    
    6,318
    
    
    
    26,189Current portion of other liabilities [note 8]
    
    
    16,931
    
    
    
    4,182Future income taxes [note 15]
    
    
    9,198
    
    
    
    21,311171,377
    
    
    
    166,737Long-term debt [note 6]
    
    
    218,290
    
    
    
    327,773Provision for reclamation [note 7]
    
    
    155,036
    
    
    
    139,583Other liabilities [note 8]
    
    
    9,523
    
    
    
    9,787Future income taxes [note 15]
    
    
    522,979
    
    
    
    480,5201,077,205
    
    
    
    1,124,400Minority interest
    
    
    18,078
    
    
    
    Shareholders equityPreferred securities [note 9]
    
    
    193,763
    
    
    
    195,229Share capital [note 10]
    
    
    680,934
    
    
    
    670,031Contributed surplus
    
    
    472,488
    
    
    
    472,488Retained earnings
    
    
    483,658
    
    
    
    465,420Cumulative translation account [note 11]
    
    
    19,053
    
    
    
    19,7791,849,896
    
    
    
    1,822,947Total liabilities and shareholders equity
    
    $
    2,945,179
    
    
    $
    2,947,347


Commitments and contingencies [notes 6, 7, 18, 19, 24, 25]

See accompanying notes to consolidated financial statements.

Approved by the board of directors

Original signed by Gerald W. Grandey and Nancy E. Hopkins

---

3



---



##### 






FINANCIAL INFORMATION







Consolidated Statements of Earnings (Loss)

For the year ended December 31
    
    2002
    
    
    2001
    
    
    2000(Thousands)Revenue fromProducts and services
    
    $
    748,334
    
    
    $
    700,839
    
    
    $
    688,940ExpensesProducts and services sold
    
    
    486,155
    
    
    
    422,067
    
    
    
    413,880Depreciation, depletion and reclamation
    
    
    112,755
    
    
    
    129,387
    
    
    
    117,005Administration
    
    
    41,693
    
    
    
    36,644
    
    
    
    38,232Exploration
    
    
    21,532
    
    
    
    18,203
    
    
    
    20,804Research and development
    
    
    2,257
    
    
    
    2,097
    
    
    
    2,452Interest and other [note 12]
    
    
    (1,957
    )
    
    
    (2,366
    )
    
    
    (5,657
    )Gain on property interests [note 23]
    
    
    (2,670
    )
    
    
    
    
    
    
    Writedown of mineral properties [note 4]
    
    
    
    
    
    
    
    
    
    
    127,738Provision for waste disposal [note 13]
    
    
    
    
    
    
    
    
    
    
    20,218659,765
    
    
    
    606,032
    
    
    
    734,672Earnings (loss) from operations
    
    
    88,569
    
    
    
    94,807
    
    
    
    (45,732
    )Earnings from Bruce Power
    
    
    15,769
    
    
    
    12,167
    
    
    
    Other income (expenses) [note 14]
    
    
    (878
    )
    
    
    590
    
    
    
    1,896Earnings (loss) before income taxes and minority interest
    
    
    103,460
    
    
    
    107,564
    
    
    
    (43,836
    )Income tax expense [note 15]
    
    
    48,871
    
    
    
    42,343
    
    
    
    34,501Minority interest
    
    
    (871
    )
    
    
    
    
    
    
    Net earnings (loss)
    
    
    55,460
    
    
    
    65,221
    
    
    
    (78,337
    )Preferred securities charges, net of tax [note 9]
    
    
    9,340
    
    
    
    9,325
    
    
    
    8,880Net earnings (loss) attributable to common shares
    
    $
    46,120
    
    
    $
    55,896
    
    
    
    ($87,217
    )Basic earnings (loss) per common share [note 26]
    
    $
    0.83
    
    
    $
    1.01
    
    
    $
    (1.57
    )Diluted earnings (loss) per common share [note 26]
    
    $
    0.83
    
    
    $
    1.01
    
    
    $
    (1.57
    )


Consolidated Statements of Retained Earnings

For the year ended December 31
    
    2002
    
    
    2001
    
    
    2000(Thousands)Retained earnings at beginning of year
    
    $
    465,420
    
    
    $
    437,328
    
    
    $
    552,154Net earnings (loss)
    
    
    55,460
    
    
    
    65,221
    
    
    
    (78,337
    )Dividends on common shares
    
    
    (27,882
    )
    
    
    (27,804
    )
    
    
    (27,609
    )Preferred securities charges, net of tax [note 9]
    
    
    (9,340
    )
    
    
    (9,325
    )
    
    
    (8,880
    )Retained earnings at end of year
    
    $
    483,658
    
    
    $
    465,420
    
    
    $
    437,328


See accompanying notes to consolidated financial statements.

---

4



---



##### 






FINANCIAL INFORMATION







Consolidated Statements of Cash Flows

For the year ended December 31
    
    2002
    
    
    2001
    
    
    2000(Thousands)Operating activitiesNet earnings (loss)
    
    $
    55,460
    
    
    $
    65,221
    
    
    $
    (78,337
    )Items not requiring (providing) cash:Depreciation, depletion and reclamation
    
    
    112,755
    
    
    
    129,387
    
    
    
    117,005Provision for future taxes [note 15]
    
    
    38,602
    
    
    
    32,757
    
    
    
    29,961Deferred charges (revenue) recognized
    
    
    1,375
    
    
    
    (10,373
    )
    
    
    (15,727
    )Earnings from Bruce Power [note 19]
    
    
    (15,769
    )
    
    
    (12,167
    )
    
    
    Equity in (earnings) loss from associated companies [note 14]
    
    
    1,083
    
    
    
    
    
    
    
    Gain on property interests [note 23]
    
    
    (2,670
    )
    
    
    
    
    
    
    Writedown of mineral properties [note 4]
    
    
    
    
    
    
    
    
    
    
    127,738Provision for waste disposal [note 13]
    
    
    
    
    
    
    
    
    
    
    20,218Minority interest
    
    
    (871
    )
    
    
    
    
    
    
    Other operating items [note 16]
    
    
    60,877
    
    
    
    (88,578
    )
    
    
    23,447Cash provided by operations [note 26]
    
    
    250,842
    
    
    
    116,247
    
    
    
    224,305Investing activitiesAdditions to property, plant and equipment
    
    
    (90,226
    )
    
    
    (58,275
    )
    
    
    (94,977
    )Increase in long-term receivables, investments and other
    
    
    (42,597
    )
    
    
    (94,808
    )
    
    
    (991
    )Decrease in long-term receivables, investments and other
    
    
    58,296
    
    
    
    21,963
    
    
    
    10,601Proceeds on sale of property, plant and equipment
    
    
    101
    
    
    
    403
    
    
    
    246Cash used in investing
    
    
    (74,426
    )
    
    
    (130,717
    )
    
    
    (85,121
    )Financing activitiesDecrease in debt
    
    
    (130,295
    )
    
    
    (25,485
    )
    
    
    (61,561
    )Increase in debt
    
    
    1,379
    
    
    
    79,932
    
    
    
    Restricted cash
    
    
    11,138
    
    
    
    409
    
    
    
    79Issue of shares, net of issue costs
    
    
    10,903
    
    
    
    5,208
    
    
    
    911Shares repurchased
    
    
    
    
    
    
    
    
    
    
    (46,484
    )Preferred securities charges
    
    
    (17,238
    )
    
    
    (17,268
    )
    
    
    (16,445
    )Dividends
    
    
    (27,944
    )
    
    
    (27,720
    )
    
    
    (28,022
    )Cash provided by (used in) financing
    
    
    (152,057
    )
    
    
    15,076
    
    
    
    (151,522
    )Increase (decrease) in cash during the year
    
    
    24,359
    
    
    
    606
    
    
    
    (12,338
    )Cash at beginning of year
    
    
    33,737
    
    
    
    33,131
    
    
    
    45,469Cash at end of year
    
    $
    58,096
    
    
    $
    33,737
    
    
    $
    33,131Supplemental cash flow disclosureInterest paid
    
    $
    16,572
    
    
    $
    22,860
    
    
    $
    28,601Income taxes paid
    
    $
    5,309
    
    
    $
    3,916
    
    
    $
    4,316


See accompanying notes to consolidated financial statements.

---

5



---



##### 






FINANCIAL INFORMATION







Notes to Consolidated Financial Statements

| |  | For the years ended December 31, 2002, 2001 and 2000
| |  | ----------------------------------------------------

| |  | 
| |  | 

|1. |  | Cameco Corporation
|-- |  | ------------------

| |  | 
| |  | 

| |  | Cameco Corporation is incorporated under the Canada Business Corporations
Act. Cameco Corporation and its subsidiaries (collectively, Cameco or the
company) are primarily engaged in the exploration for and the development,
mining, refining and conversion of uranium for sale as fuel for generating
electricity in nuclear power reactors in Canada and other countries. The
company has an interest in the Bruce Power electrical generation plant in
Ontario. Cameco is also involved in the exploration for and the development,
mining and sale of gold.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|2. |  | Accounting Policies
|-- |  | -------------------

| |  | 
| |  | 

| |  | A summary of significant accounting policies follows the notes to the
consolidated financial statements.
| |  | --------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|3. |  | Inventories
|-- |  | -----------

| |  | 
| |  | 

2002
    
    
    2001(Thousands)UraniumConcentrate
    
    $
    284,052
    
    
    $
    305,252Broken ore
    
    
    8,586
    
    
    
    5,360292,638
    
    
    
    310,612Conversion
    
    
    39,097
    
    
    
    31,946GoldBroken ore
    
    
    4,189
    
    
    
    8,368Finished
    
    
    3,760
    
    
    
    3,4587,949
    
    
    
    11,826Total
    
    $
    339,684
    
    
    $
    354,384


|4. |  | Property, Plant and Equipment
|-- |  | -----------------------------

AccumulatedDepreciation
    
    
    2002
    
    
    2001Cost
    
    
    and Depletion
    
    
    Net
    
    
    Net(Thousands)UraniumMining
    
    $
    2,302,475
    
    
    $
    892,652
    
    
    $
    1,409,823
    
    
    $
    1,436,057Development
    
    
    347,206
    
    
    
    
    
    
    
    347,206
    
    
    
    314,602Conversion
    
    
    250,862
    
    
    
    124,577
    
    
    
    126,285
    
    
    
    126,898GoldMining
    
    
    229,612
    
    
    
    146,071
    
    
    
    83,541
    
    
    
    96,999Development
    
    
    55,384
    
    
    
    
    
    
    
    55,384
    
    
    
    3,916Other
    
    
    47,038
    
    
    
    31,664
    
    
    
    15,374
    
    
    
    15,952Total
    
    $
    3,232,577
    
    
    $
    1,194,964
    
    
    $
    2,037,613
    
    
    $
    1,994,424


| |  | In 2000, as a result of depressed uranium prices, Cameco recorded a writedown
of $127,738,000 relating to certain of its in situ leach mining assets located
in the United
States. The amount of the writedown was determined based on estimated future
net cash flows and uranium price forecasts.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

6



---



##### 






FINANCIAL INFORMATION







|5. |  | Long-Term Receivables, Investments and Other
|-- |  | --------------------------------------------

2002
    
    
    2001(Thousands)Kumtor Gold CompanySubordinated loan  principal [note 18]
    
    $
    64,276
    
    
    $
    80,307Subordinated loan  interest
    
    
    292
    
    
    
    501Restricted cash  debt reserve
    
    
    489
    
    
    
    11,723Investments in associated companiesInvestment in Technology Commercialization International, Inc.
    
    
    4,017
    
    
    
    4,703Investment in UEX Corporation
    
    
    3,455
    
    
    
    Portfolio investmentsEnergy Resources of Australia Ltd. (market $18,688)
    
    
    17,564
    
    
    
    17,564General Hydrogen Corporation
    
    
    6,323
    
    
    
    Interest in Bruce Power L.P. [note 19]
    
    
    130,218
    
    
    
    81,416Deferred charges
    
    
    17,808
    
    
    
    31,642Advances receivable
    
    
    22,704
    
    
    
    23,593Accrued pension benefit asset [note 22]
    
    
    1,817
    
    
    
    3,094Other
    
    
    8,723
    
    
    
    9,722277,686
    
    
    
    264,265Less current portion
    
    
    (20,163
    )
    
    
    (30,304
    )Net
    
    $
    257,523
    
    
    $
    233,961


| |  | The security agreement between Kumtor Gold Company (KGC) and its senior debt
lenders requires that in order to make certain payments to shareholders and
subordinated lenders, funds sufficient to meet those senior debt principal
and interest payments scheduled to occur over the ensuing six months to be
held in a debt reserve account until paid.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|6. |  | Long-Term Debt
|-- |  | --------------

2002
    
    
    2001(Thousands)Debentures
    
    $
    149,079
    
    
    $
    148, 830Commercial paper
    
    
    24,455
    
    
    
    145,498Kumtor Gold Company [note 18]Senior debt
    
    
    40,543
    
    
    
    49,017Subordinated debt
    
    
    10,531
    
    
    
    10,617224,608
    
    
    
    353,962Less current portion
    
    
    (6,318
    )
    
    
    (26,189
    )Net
    
    $
    218,290
    
    
    $
    327,773


| |  | Cameco has $50,000,000 outstanding in senior unsecured debentures that bear
interest at a rate of 7.0% per annum and will mature July 6, 2006. Cameco also
has $100,000,000 outstanding in senior unsecured debentures that bear interest
at a rate of 6.9% per annum and will mature July 12, 2006.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Cameco has a $200,000,000 three-year unsecured revolving credit facility that
is available until December 4, 2005 and a $225,000,000 364-day unsecured
revolving credit facility with a two-year term-out option. Cameco may also
borrow directly from investors by issuing commercial paper. Commercial paper
outstanding at December 31, 2002 was $15,482,000 (US) (2001  $62,945,000 (Cdn)
and $51,836,000 (US)) and bears interest at an average rate
of 1.4% (2001  2.1%). These amounts are classified as long-term debt up to the
limit available under the revolving credit facility.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Cameco has $293,638,000 ($143,800,000 (Cdn) and $94,858,000 (US)) in letter of
credit facilities. Outstanding letters of credit at December 31, 2002 amounted
to $208,975,000 (2001  $147,454,000). The majority of the letters of credit
relate to future reclamation and decommissioning liabilities [note 7].
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

7



---



##### 






FINANCIAL INFORMATION







| |  | The table below represents currently scheduled maturities of long-term debt
over the next five years including Camecos one-third share of Kumtor Gold
Company principal repayments on debt.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

(Thousands)2003
    
    $
    6,3182004
    
    
    12,6372005
    
    
    39,7242006
    
     
    163,2962007
    
    
    2,633Total
    
    $
    224,608


| |  | 
| |  | 

| |  | Cameco has guaranteed the repayment of KGC senior debt [note 18]. Camecos
contingent obligation under this guarantee exceeds the amount included in
the Cameco long-term debt as at December 31, 2002 by $81,086,000 (2001 -
$98,034,000).
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|7. |  | Provision for Reclamation
|-- |  | -------------------------

| |  | 
| |  | 

2002
    
    
    2001(Thousands)Uranium
    
    $
    70,244
    
    
    $
    55,429Conversion
    
    
    72,682
    
    
    
    73,601Gold
    
    
    12,110
    
    
    
    10,553Total
    
    $
    155,036
    
    
    $
    139,583


| |  | 
| |  | 

| |  | Camecos estimates of decommissioning and reclamation costs are based on
reclamation standards which meet or exceed regulatory requirements and are
stated in current dollars. Elements of uncertainty in estimating these
amounts include potential changes in regulatory requirements,
decommissioning and reclamation alternatives and amounts to be recovered
from other parties.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Cameco estimates total future decommissioning and reclamation costs for its
operating assets to be $253,000,000. These estimates are formally reviewed
by Cameco technical personnel at least every two years or more frequently as
required by regulatory agencies. These costs are accrued and charged to
operations using the unit-of-production method so that the estimated future
liability will be fully provided when decommissioning and reclamation
activities are undertaken. In connection with future decommissioning and
reclamation costs, Cameco has provided financial assurances of $204,823,000
in the form of letters of credit to satisfy current regulatory requirements.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|8. |  | Other Liabilities
|-- |  | -----------------

| |  | 
| |  | 

2002
    
    
    2001(Thousands)Borrowed product
    
    $
    12,952
    
    
    $
    Accrued post-retirement benefit liability [note 22]
    
    
    4,092
    
    
    
    3,809Deferred revenue
    
    
    2,102
    
    
    
    2,848Other
    
    
    7,308
    
    
    
    7,31226,454
    
    
    
    13,969Less current portion
    
    
    (16,931
    )
    
    
    (4,182
    )Net
    
    $
    9,523
    
    
    $
    9,787


---

8



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

|9. |  | Preferred Securities
|-- |  | --------------------

| |  | 
| |  | 

| |  | Cameco issued $125,000,000 (US), 8.75% preferred securities in denominations
of $25 (US) each due September 30, 2047, accruing interest from the date of
issuance payable quarterly commencing December 31, 1998.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | The preferred securities are redeemable, at the option of Cameco, in whole
or in part at any time on or after October 14, 2003, at a redemption price
equal to 100% of the principal amount of the preferred securities to be
redeemed plus any accrued and unpaid interest thereon to the date of
redemption.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | The principal amounts of the preferred securities, net of after-tax issue
costs of $4,330,000 (Cdn) have been classified as equity, and interest
payments on an after-tax basis are classified as distributions of equity, as
Cameco has the unrestricted ability to settle its obligations by delivering
common shares of Cameco.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|10. |  | Share Capital
|--- |  | -------------

| |  | 
| |  | 

| |  | Authorized share capital:
| |  | -------------------------

| |  | 
| |  | 

| | Unlimited number of first preferred shares
Unlimited number of second preferred shares
Unlimited number of voting common shares, and
One Class B share
| | ------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(a) |  | Common Shares
|--- |  | -------------

| |  | 
| |  | 

Number Issued
    
    2002
    
    
    2001
    
    
    2000(Number of Shares)Beginning of year
    
    
    55,671,440
    
    
    
    55,512,440
    
    
    
    57,238,469Issued:Shares repurchased
    
    
    
    
    
    
    
    
    
    
    (2,350,101
    )Share savings plan
    
    
    
    
    
    
    
    
    
    
    607,072Stock option plan [note 20]
    
    
    314,433
    
    
    
    159,000
    
    
    
    17,000Issued share capital
    
    
    55,985,873
    
    
    
    55,671,440
    
    
    
    55,512,440


Amount
    
    2002
    
    
    2001
    
    
    2000(Thousands)Beginning of year
    
    $
    676,404
    
    
    $
    672,487
    
    
    $
    693,560Issued:Shares repurchased
    
    
    
    
    
    
    
    
    
    
    (28,201
    )Share savings plan
    
    
    
    
    
    
    
    
    
    
    6,830Stock option plan [note 20]

    
    9,087
    
    
    
    3,917
    
    
    
    298Issued share capital
    
    
    685,491
    
    
    
    676,404
    
    
    
    672,487Less loans receivable [note 20]
    
    
    (4,557
    )
    
    
    (6,373
    )
    
    
    (6,836
    )End of year
    
    $
    680,934
    
    
    $
    670,031
    
    
    $
    665,651


| |  | 
| |  | 

| |  | Shares repurchased relate to an open market share repurchase program for a
one-year period ending September 28, 2000. The difference of $18,283,000
between the share repurchase price and the book value of the Cameco shares
acquired during 2000 has been charged to contributed surplus.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | On December 31, 1990, Cameco issued 10-year, 11% redeemable and exchangeable
bonds registered to subscribing employees under a share savings plan. The plan
matured in 2000 and all outstanding bonds were exchanged for Cameco shares or
redeemed.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(b) |  | Class B Share
|--- |  | -------------

| |  | 
| |  | 

| |  | One Class B share issued during 1988 and assigned $1 of share capital, entitles
the shareholder to vote separately as a class in respect of any proposal to
locate the head office of Cameco to a place not in the province of
Saskatchewan.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

9



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

|11. |  | Cumulative Translation Account
|--- |  | ------------------------------

| |  | 
| |  | 

| |  | The balance of $19,053,000 (2001  $19,779,000) represents the cumulative
unrealized net exchange gain on Camecos net investments in foreign
operations, and on the foreign currency debt and preferred securities
designated as hedges of the net investments.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|12. |  | Interest and Other
|--- |  | ------------------

| |  | 
| |  | 

2002
    
    
    2001
    
    
    2000(Thousands)Interest on long-term debt
    
    $
    14,478
    
    
    $
    20,116
    
    
    $
    26,521Other interest and financing charges
    
    
    2,039
    
    
    
    1,616
    
    
    
    1,792Interest income
    
    
    (6,842
    )
    
    
    (10,773
    )
    
    
    (15,903
    )Foreign exchange gains
    
    
    (1,648
    )
    
    
    (791
    )
    
    
    (2,279
    )Mark-to-market loss
    
    
    1,811
    
    
    
    
    
    
    
    Capitalized interest
    
    
    (11,795
    )
    
    
    (12,534
    )
    
    
    (15,788
    )Net
    
    $
    (1,957
    )
    
    $
    (2,366
    )
    
    $
    (5,657
    )


| |  | 
| |  | 

| |  | As a result of the Kumtor pit wall failure, certain gold contracts
designated as hedges of Kumtors gold production were no longer effective.
Mark-to-market losses on these contracts have been expensed.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|13. |  | Provision for Waste Disposal
|--- |  | ----------------------------

| |  | 
| |  | 

| |  | The terms of the agreement to transfer assets from Canada Eldor Inc. to
Cameco on October 5, 1988 included a formula for sharing any future costs
related to certain specified wastes accumulated by Canada Eldor Inc. and
transferred to Cameco.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | In 2000, an agreement was reached between the government of Canada and the
communities of Port Hope, Hope Township and Clarington for the cleanup,
storage and long-term management of certain specified wastes covered under
the agreement. Accordingly, Cameco recognized a liability of $20,218,000
representing its maximum remaining obligation.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|14. |  | Other Income (Expenses)
|--- |  | -----------------------

| |  | 
| |  | 

2002
    
    
    2001
    
    
    2000(Thousands)Dividends on portfolio investments
    
    $
    205
    
    
    $
    590
    
    
    $
    1,896Equity in earnings (loss) of associated companies
    
    
    (1,083
    )
    
    
    
    
    
    
    Net
    
    $
    (878
    )
    
    $
    590
    
    
    $
    1,896


---

10



---



##### 



| |  | 
| |  | 

|15. |  | Income Taxes
|--- |  | ------------

| |  | 
| |  | 

| |  | The significant components of future income tax assets and liabilities at
December 31 are as follows:
| |  | -----------------------------------------------------------------------------------------------------

2002
    
    
    2001(Thousands)AssetsProperty, plant and equipment
    
    $
    52,638
    
    
    $
    40,718Provision for reclamation
    
    
    52,464
    
    
    
    47,000Foreign exploration and development
    
    
    27,771
    
    
    
    26,120Other
    
    
    4,634
    
    
    
    4,989Future income tax assets before valuation allowance
    
    
    137,507
    
    
    
    118,827Valuation allowance
    
    
    (69,505
    )
    
    
    (45,790
    )Future income tax assets, net of valuation allowance
    
    $
    68,002
    
    
    $
    73,037LiabilitiesProperty, plant and equipment
    
    $
    584,321
    
    
    $
    544,957Inventories
    
    
    9,198
    
    
    
    21,311Long-term investments
    
    
    6,660
    
    
    
    8,600Future income tax liabilities
    
    $
    600,179
    
    
    $
    574,868Net future income tax liabilities
    
    $
    532,177
    
    
    $
    501,831Less current portion
    
    
    (9,198
    )
    
    
    (21,311
    )$
    522,979
    
    
    $
    480,520


| |  | 
| |  | 

| |  | The provision for income taxes differs from the amount computed by applying the
combined expected federal and provincial income tax rate to earnings before
income taxes. The reasons for these differences are as follows:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001
    
    
    2000(Thousands)Earnings (loss) before income taxes and minority interest
    
    $
    103,460
    
    
    $
    107,564
    
    
    $
    (43,836
    )Combined federal and provincial tax rate
    
    
    45.4
    %
    
    
    45.5
    %
    
    
    45.6
    %Computed income tax expense (recovery)
    
    
    46,971
    
    
    
    48,942
    
    
    
    (20,000
    )Increase (decrease) in taxes resulting from:Provincial royalties and other taxes
    
    
    8,883
    
    
    
    10,212
    
    
    
    13,959Federal resource allowance
    
    
    (5,918
    )
    
    
    (6,710
    )
    
    
    (10,152
    )Difference between Canadian rate and rates
applicable to subsidiaries in other countries
    
    
    (7,379
    )
    
    
    (12,895
    )
    
    
    (9,045
    )Writedown of mineral properties
    
    
    
    
    
    
    
    
    
    
    52,003Large corporations and other taxes
    
    
    4,521
    
    
    
    4,558
    
    
    
    5,303Other
    
    
    1,793
    
    
    
    (1,764
    )
    
    
    2,433Income tax expense
    
    $
    48,871
    
    
    $
    42,343
    
    
    $
    34,501


2002
    
    
    2001
    
    
    2000(Thousands)Current income taxesCanada
    $
    7,895
    
    
    $
    7,704
    
    
    $
    3,552Other
    
    
    2,374
    
    
    
    1,882
    
    
    
    988$
    10,269
    
    
    $
    9,586
    
    
    $
    4,540Future income taxes (recovery)Canada
    $
    39,419
    
    
    $
    31,047
    
    
    $
    33,301United States
    
    
    
    
    
    
    
    
    
    
    (4,284
    )Other
    
    
    (817
    )
    
    
    1,710
    
    
    
    944$
    38,602
    
    
    $
    32,757
    
    
    $
    29,961Net
    
    $
    48,871
    
    
    $
    42,343
    
    
    $
    34,501


---

11



---



##### 






FINANCIAL INFORMATION







|16. |  | Other Operating Items
|--- |  | ---------------------

| |  | 
| |  | 

2002
    
    
    2001
    
    
    2000(Thousands)Changes in non-cash working capital:Accounts receivable
    
    $
    27,396
    
    
    $
    (82,094
    )
    
    $
    (6,162
    )Interest receivable
    
    
    205
    
    
    
    515
    
    
    
    10,954Inventories
    
    
    10,932
    
    
    
    7,469
    
    
    
    19,709Supplies and prepaid expenses
    
    
    (1,157
    )
    
    
    (24
    )
    
    
    1,703Accounts payable and accrued liabilities
    
    
    18,342
    
    
    
    5,992
    
    
    
    9,654Other liabilities
    
    
    279
    
    
    
    (2,117
    )
    
    
    (2,745
    )Hedge position settlements
    
    
    14,794
    
    
    
    (11,328
    )
    
    
    (11,746
    )Reclamation payments
    
    
    (6,878
    )
    
    
    (5,655
    )
    
    
    (4,011
    )Other
    
    
    (3,036
    )
    
    
    (1,336
    )
    
    
    6,091Total
    
    $
    60,877
    
    
    $
    (88,578
    )
    
    $
    23,447


| |  | 
| |  | 

|17. |  | Joint Ventures
|--- |  | --------------

| |  | 
| |  | 

| |  | Cameco conducts a portion of its development, mining and milling activities
through joint ventures.
| |  | ---------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Camecos significant uranium joint venture interests are comprised of:
| |  | ----------------------------------------------------------------------

Producing:McArthur River
    
    
    69.81
    %Key Lake
    
    
    83.33
    %Non-producing:Cigar Lake
    
    
    50.03
    %


| |  | 
| |  | 

| |  | Uranium joint ventures allocate inventory production to each joint venture
participant and the joint venture participant derives revenue directly from the
sale of such inventory. Mining and milling expenses incurred by the joint
venture are included in the cost of inventory. Camecos share of assets and
liabilities held through uranium joint ventures is as follows:
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001(Thousands)Current assets
    
    $
    16,327
    
    
    $
    14,776Property, plant and equipment, at cost
    
    
    1,141,576
    
    
    
    1,121,915$
    1,157,903
    
    
    $
    1,136,691Current liabilities
    
    $
    12,693
    
    
    $
    11,966Net investment
    
    
    1,145,210
    
    
    
    1,124,725$
    1,157,903
    
    
    $
    1,136,691


---

12



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

| |  | Camecos gold joint venture interests are comprised of a 33.33% participation
interest in Kumtor Gold Company. Kumtor Gold Company obtains revenue directly
from the sale of products. Camecos share of the assets and liabilities,
revenue and expenses, and cash flows relating to the Kumtor joint venture is as
follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001(Thousands)Current assets
    
    $
    28,933
    
    
    $
    41,422Property, plant and equipment
    
    
    89,678
    
    
    
    104,822$
    118,611
    
    
    $
    146,244Current liabilities
    
    $
    6,772
    
    
    $
    4,742Long-term liabilities
    
    
    85,352
    
    
    
    104,721Equity
    
    
    26,487
    
    
    
    36,781$
    118,611
    
    
    $
    146,244


2002
    
    
    2001
    
    
    2000(Thousands)Revenues
    
    $
    82,361
    
    
    $
    110,225
    
    
    $
    104,983Expenses
    
    
    (91,848
    )
    
    
    (81,523
    )
    
    
    (101,838
    )Net earnings (loss)
    
    $
    (9,487
    )
    
    $
    28,702
    
    
    $
    3,145Cash provided by (used in)Operating activities
    
    $
    13,142
    
    
    $
    39,804
    
    
    $
    31,821Investing activities
    
    
    (4,716
    )
    
    
    (2,492
    )
    
    
    (1,242
    )Financing activities
    
    
    (16,013
    )
    
    
    (44,517
    )
    
    
    (29,970
    )Increase (decrease) in cash during the year
    
    $
    (7,587
    )
    
    $
    (7,205
    )
    
    $
    609


| |  | 
| |  | 

|18. |  | Kumtor Gold Company (KGC) Joint Venture
|--- |  | ---------------------------------------

| |  | 
| |  | 

| |  | On May 26, 1994, Cameco, the Republic of Kyrgyzstan and Kyrgyzaltyn, an
instrumentality of the Republic, signed an amended joint venture master
agreement that provided for the exploration, development, operation and
arrangement of financing, of the Kumtor gold project by Cameco. KGC was
formed in the Republic of Kyrgyzstan as a joint stock company to hold the
assets of the Kumtor gold project pursuant to a master agreement among the
parties. Kyrgyzaltyn holds a two-thirds interest in KGC and Cameco holds a
one-third interest.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | During 2002, KGC entered into a new credit agreement with commercial banks
to refinance its senior debt. The shares and offshore bank accounts of KGC
secure the senior debt. Cameco has guaranteed the repayment of KGC senior
debt and has purchased political risk insurance to support the guarantee.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Cameco has proportionately consolidated its one-third interest in KGC.
| |  | ----------------------------------------------------------------------

| |  | 
| |  | 

---

13



---



##### 






FINANCIAL INFORMATION









| |  | KGCs long-term debt at December 31, is as follows:
| |  | ---------------------------------------------------

2002
    
    
    2001(Thousands)Senior debt (US dollar denominated):
    
    
    Commercial banks $77,000,000 (US) repayable in six semi-annual installments
on June 1 and December 1 commencing December 1, 2003. Interest is based on
LIBOR plus an applicable percentage based on credit rating ranging from 0.8%
to 1.55%.
    
    $
    121,629
    
    
    $
    
    
    
    Commercial banks (2001 - $46,500,000) (US) repayable in
three equal semi-annual installments, with interest based on LIBOR plus 0.9%
Political risk insurance was purchased separately by KGC.
    
    
    
    
    
    
    74,056
    
    
    Export Development Corporation (EDC)
(2001 - $20,833,333) (US)
    
    
    
    
    
    
    33,179
    
    
    International Finance Corporation (IFC)
(2001 - $12,500,000) (US)
    
    
    
    
    
    
    19,908
    
    
    European Bank for Reconstruction and Development (EBRD)
(2001 - $12,500,000) (US)
    
    


    
    
    
    19,908The EDC, IFC and EBRD interest rate was based on LIBOR plus 3%
which included a premium for political risk insurance. These loans
were repayable in five equal semi-annual installments.Total senior debt
    
    $
    121,629
    
    
    $
    147,051Subordinated debt (US dollar denominated):
    
    
    Shareholder loan from Cameco $61,037,276 (2001 - $75,637,276) (US) with
interest based on LIBOR plus 6%, repayable in 12 equal semi-annual
installments commencing on December 2, 1999. In accordance with the terms
of the loan agreement, certain installments have been deferred amounting
to $16,272,000 (2001 - $12,965,000) (US).
    
    
    96,414
    
    
    
    120,460
    
    
    EBRD $10,000,000 (2001 - $10,000,000) (US)
    
    
    15,796
    
    
    
    15,926
    
    
    IFC $10,000,000 (2001 - $10,000,000) (US)
    
    
    15,796
    
    
    
    15,926The IFC and EBRD subordinated debt is repayable in four equal
semi-annual installments commencing on December 2, 2005, extendable at
the option of EBRD or IFC to commence no later than December 2,
2013. The interest rate applicable to the EBRD and IFC subordinated debt is
based on the cash generated by the project subject to a minimum interest
rate. The annualized rate for 2002 was approximately 4.6% (2001 -
5.8%).Total KGC debt
    
    $
    249,635
    
    
    $
    299,363


| |  | 
| |  | 

| |  | Camecos one-third proportionate share of KGC senior debt is $40,543,000
(2001  $49,017,000) and of KGCs third party subordinated debt is
$10,531,000 (2001  $10,617,000) [note 6].
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|19. |  | Investment in Bruce Power L.P. (Bruce Power)
|--- |  | --------------------------------------------

| |  | 
| |  | 

|(a) |  | On May 12, 2001, Bruce Power finalized a long-term lease with Ontario
Power Generation Inc. (OPG) to operate the Bruce nuclear power facility. The
term of the lease is 18 years with an option to extend the lease for up to
an additional 25 years.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Cameco holds a 15% limited partnership interest in Bruce Power and has
committed to invest up to an aggregate of $100,000,000 in the project.
The equity method is being used to account for this investment.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Under the lease agreement, OPG, as the owner of the Bruce nuclear plants,
is responsible to decommission the Bruce facility and to provide funding
and meet other requirements that the Canadian Nuclear Safety Commission
(CNSC) may require of Bruce Power as licensed operator of the Bruce
facility. OPG is also responsible to manage radioactive waste associated
with decommissioning of the Bruce nuclear plants.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

14



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

| |  | In addition to investment commitments, Cameco has provided the following
guarantees relating to Bruce Power:
| |  | ------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(i) |  | Licensing assurances to Canadian Nuclear Safety Commission of
$41,686,000.
|--- |  | --------------------------------------------------------------------------

| |  | 
| |  | 

|(ii) |  | Guarantees to customers under power sale agreements of up to
$15,790,000.
|---- |  | -------------------------------------------------------------------------

| |  | 
| |  | 

|(iii) |  | Termination payments to OPG pursuant to the lease agreement of
$26,250,000.
|----- |  | ---------------------------------------------------------------------------

| |  | 
| |  | 

|(b) |  | Cameco has entered into fuel supply agreements with Bruce Power for the
procurement of fabricated fuel. Under these agreements, Cameco will supply
uranium and conversion services and finance the purchase of fabrication
services.
Contract terms are at market rates and on normal trade terms. During
2002, sales of uranium and conversion services to Bruce Power amounted to
approximately 2% of Camecos total revenue. At December 31, 2002, amounts
receivable under these agreements totalled $18,349,000 (2001 -
$39,572,000).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(c) |  | On December 23, 2002, Cameco, TransCanada PipeLines Limited
(TransCanada) and BPC Generation Infrastructure Trust (BPC), amongst others,
signed a heads of agreement with British Energy plc (British Energy) to
purchase its share of Bruce Power. The master purchase agreement with
respect to the transaction was completed on January 17, 2003. The
transaction closed on February 14, 2003.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Upon closing, Cameco increased its ownership interest in Bruce Power from
15% to 31.6%. Each of Cameco,
TransCanada and BPC will hold, directly or indirectly, a 31.6% interest
in Bruce Power with the Power Workers Union Trust holding a 4% interest
and the Society of Energy Professionals Trust holding a 1.2% interest.
Camecos purchase price for the additional interest in Bruce Power was
approximately $209,000,000 subject to final closing adjustments. The
purchase price was financed with cash and debt.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | In addition, Cameco, TransCanada and BPC loaned Bruce Power funds to
repay $225,000,000, plus accrued interest, in deferred lease payments to
OPG. Camecos share was $75,000,000 plus accrued interest. Cameco,
TransCanada and BPC have assumed the obligations to provide financial
guarantees required by the operator licences, the lease agreement and the
power sales contracts. It is estimated that Camecos financial assurances
to Bruce Power, subsequent to closing, will be approximately
$200,000,000.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | 
| |  | 

|20. |  | Stock Option Plan
|--- |  | -----------------

| |  | 
| |  | 

| |  | Cameco has established a stock option plan under which options to purchase
common shares may be granted to directors, officers and other employees of
Cameco. Options granted under the stock option plan have an exercise price
of not less than the closing price quoted on the Toronto Stock Exchange for
the common shares of Cameco on the trading day prior to the date on which
the option is granted. The options under the original plan expire 10 years
from the date of the grant of the option.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Prior to 1999, participants were eligible to receive loans from Cameco to
assist in the purchase of common shares pursuant to the exercise of options.
The maximum term of the loans was 10 years from the date of the grant of the
related option. The loans bear interest at a rate equivalent to the regular
dividends paid on the common shares to which the loans were provided. Common
shares purchased by way of a company loan are held in escrow in the account
of the option holder and are pledged as security for the respective loan
until the loan has been repaid in full.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | The aggregate number of common shares that may be issued, after December 5,
1995, pursuant to the Cameco stock option plan shall not exceed 5,243,403,
of which 995,729 shares have been issued.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Outstanding loans are shown as a reduction of share capital.
| |  | ------------------------------------------------------------

| |  | 
| |  | 

| |  | During 1999, Cameco amended the stock option plan and ceased to offer loans
to assist in the purchase of common shares pursuant to the exercise of
options. The options available under the amended stock option plan vest over
three years and expire eight years from the date granted.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

15



---



##### 






FINANCIAL INFORMATION







| |  | Stock option transactions for the respective years were as follows:
| |  | -------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001
    
    
    2000(Number of Shares)Beginning of year
    
    
    2,195,783
    
    
    
    1,987,883
    
    
    
    1,763,933Options granted
    
    
    489,050
    
    
    
    482,850
    
    
    
    404,800Options exercised [note 10]
    
    
    (314,433
    )
    
    
    (159,000
    )
    
    
    (17,000
    )Options cancelled
    
    
    (146,650
    )
    
    
    (115,950
    )
    
    
    (163,850
    )End of year
    
    
    2,223,750
    
    
    
    2,195,783
    
    
    
    1,987,883Exercisable
    
    
    1,331,550
    
    
    
    1,362,983
    
    
    
    1,122,133


| |  | 
| |  | 

| |  | Upon exercise of certain existing options, additional options in respect of
272,550 shares would be granted.
| |  | ------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Weighted average exercise prices were as follows:
| |  | -------------------------------------------------

2002
    
    
    2001
    
    
    2000Beginning of year
    
    $
    37.34
    
    
    $
    38.72
    
    
    $
    43.12Options granted
    
    
    43.88
    
    
    
    28.98
    
    
    
    18.76Options exercised
    
    
    28.90
    
    
    
    24.64
    
    
    
    17.51Options cancelled
    
    
    52.33
    
    
    
    43.52
    
    
    
    39.06End of year
    
    $
    38.98
    
    
    $
    37.34
    
    
    $
    38.72Exercisable
    
    $
    41.41
    
    
    $
    44.09
    
    
    $
    46.66


| |  | 
| |  | 

| |  | Total options outstanding and exercisable at December 31, 2002 were as follows:
| |  | -------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    
    
    
    Options Outstanding
    
    
    Options ExercisableWeighted
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    Average
    
    
    
    
    
    AverageOption Price
    
    
    
    
    
    Remaining
    
    Exercisable
    
    
    
    
    
    ExercisablePer Share
    
    Number
    
    
    Life
    
    
    Price
    
    
    Number
    
    
    Price$
    15.00-35.00
    
    
    1,055,000
    
    
    
    5.7
    
    
    $
    26.84
    
    
    
    632,000
    
    
    $
    27.4335.01-55.00
    
    
    968,800
    
    
    
    7.0
    
    
    
    44.99
    
    
    
    499,600
    
    
    
    46.0855.01-75.50
    
    
    199,950
    
    
    
    4.0
    
    
    
    73.92
    
    
    
    199,950
    
    
    
    73.92


| |  | 
| |  | 

|21. |  | Stock-Based Compensation
|--- |  | ------------------------

| |  | 
| |  | 

| |  | Effective January 1, 2002, Cameco adopted the new CICA Handbook Section
3870, which requires that a fair value based method of accounting be applied
to direct awards of stock to employees. Under the new standard, Cameco is
allowed to continue its existing policy of recording no compensation cost on
the grant of stock options to employees with the addition of pro forma
information. Cameco has applied the pro forma disclosure provisions of the
new standard to awards granted on or after January 1, 2002. The pro forma
effect of awards granted prior to January 1, 2002, has not been included.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | The standard requires the disclosure of pro forma net earnings and earnings
per share information as if the entity had accounted for employee stock
options under the fair-value method. The fair value of options issued was
determined using the Black-Scholes option pricing model with the following
assumptions: risk-free rate of 5.0%; dividend yield of 1.2%; a volatility
factor of the expected market price of Camecos shares of 20.0%; and a
weighted-average expected option life of five years. On February 26, 2002,
Cameco granted 489,050 options at a strike price of $43.84. The fair value
of these options was determined to be $10.83 per share. For purposes of pro
forma disclosures, the estimated fair value of the options is being
amortized to earnings over the vesting period. The total charge has been
adjusted for an expected forfeiture rate of 17%. For the year ended December
31, 2002, Camecos pro forma net earnings attributable to common shares were
$43,900,000, basic earnings per share were $0.79 and diluted earnings per
share were $0.79.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

16



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

|22. |  | Pension and Other Post-Retirement Benefits
|--- |  | ------------------------------------------

| |  | 
| |  | 

| |  | Cameco maintains both defined benefit and defined contribution plans
providing pension and post-retirement benefits to substantially all of its
employees.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Pension Plans
| |  | -------------

| |  | 
| |  | 

| |  | The pension expense for Camecos defined contribution plans was $4,989,000
(2001  $4,411,000; 2000  $4,268,000).
| |  | ------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | The status of defined benefit pension plans are as follows:
| |  | -----------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001(Thousands)Accrued Benefit ObligationBalance at beginning of year
    
    $
    13,330
    
    
    $
    11,882Current service cost
    
    
    743
    
    
    
    743Interest cost
    
    
    835
    
    
    
    998Benefits paid
    
    
    (313
    )
    
    
    (293
    )Balance at end of year
    
    $
    14,595
    
    
    $
    13,330Plan AssetsFair value at beginning of year
    
    $
    10,915
    
    
    $
    10,925Actual return on plan assets
    
    
    (528
    )
    
    
    (297
    )Employer contributions
    
    
    610
    
    
    
    580Benefits paid
    
    
    (313
    )
    
    
    (293
    )Fair value at end of year
    
    $
    10,684
    
    
    $
    10,915Funded status
    
    $
    (3,911
    )
    
    $
    (2,415
    )Unamortized net actuarial loss
    
    
    2,670
    
    
    
    1,757Unamortized transitional obligation
    
    
    3,058
    
    
    
    3,752Accrued pension benefit asset
    
    $
    1,817
    
    
    $
    3,094


| |  | 
| |  | 

| |  | Significant actuarial assumptions used in calculating the net pension expense
for Camecos funded plans were as follows:
| |  | ------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001
    
    
    2000Discount rate
    
    
    6.0
    %
    
    
    7.5
    %
    
    
    8.0
    %Long-term rate of return on assets
    
    
    8.0
    %
    
    
    8.0
    %
    
    
    8.0
    %Rate of increase in compensation levels
    
    
    4.5
    %
    
    
    4.5
    %
    
    
    4.5
    %


| |  | 
| |  | 

| |  | Net pension expense for the defined benefit pension plans has been determined
as follows:
| |  | -----------------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001
    
    
    2000(Thousands)Cost of benefits earned by employees
    
    $
    743
    
    
    $
    743
    
    
    $
    743Interest cost on benefits earned
    
    
    835
    
    
    
    998
    
    
    
    890Expected return on pension plan assets, net
    
    
    (443
    )
    
    
    (885
    )
    
    
    (774
    )Net amortization
    
    
    752
    
    
    
    694
    
    
    
    648Net pension expense
    
    $
    1,887
    
    
    $
    1,550
    
    
    $
    1,507


---

17



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

| |  | Other Post-Retirement Benefits
| |  | ------------------------------

| |  | 
| |  | 

| |  | Cameco provides post-retirement benefits to substantially all employees. The
costs are accrued over the expected service lives of employees. No funding is
provided. The status of the plan is as follows:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001(Thousands)Accrued Benefit ObligationBalance at beginning of year
    
    $
    3,809
    
    
    $
    3,465Current service cost
    
    
    147
    
    
    
    147Interest cost
    
    
    230
    
    
    
    263Benefits paids
    
    
    (94
    )
    
    
    (66
    )Accrued post-retirement benefit liability
    
    $
    4,092
    
    
    $
    3,809


| |  | 
| |  | 

|23. |  | Property and Business Acquisitions
|--- |  | ----------------------------------

| |  | 
| |  | 

| |  | 
| |  | 

|(a) |  | AGR Limited
|--- |  | -----------

| |  | 
| |  | 

| |  | On March 5, 2002, Cameco acquired a 52% interest in AGR Limited (AGR).
AGR is an Australia-based exploration company whose principal asset is a
95% interest in the Boroo gold deposit located in Mongolia. The Boroo
project is currently in the development stage. The purchase price was
financed with $12,000,000 (US) in cash and the contribution of a
neighbouring property. In exchange, AGR issued 240 million shares to
Cameco. The acquisition was accounted for using the purchase method and
the results of operations are included in Camecos consolidated financial
statements from the effective date of the purchase.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | The values assigned to the net assets acquired are as follows:
| |  | --------------------------------------------------------------

| |  | 
| |  | 

(Millions)Cash and other working capital
    
    $
    13.9Property, plant and equipment
    
    
    27.0Minority interest
    
    
    (19.0
    )Net assets acquired
    
    $
    21.9Financed by:Cash
    
    $
    19.6Property, at carrying value
    
    
    2.3$
    21.9


| |  | 
| |  | 

| |  | Subsequent to the acquisition, Cameco provided an additional $3,000,000 (US)
of further exploration in the area in exchange for an incremental 4%
interest in AGR (43 million shares), increasing its total interest to 56% at
December 31, 2002.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(b) |  | Smith Ranch
|--- |  | -----------

| |  | 
| |  | 

| |  | On July 22, 2002, Cameco acquired the assets comprising the Smith Ranch in
situ leach (ISL) operation and various other ISL properties from Rio Algom
Mining LLC. In exchange for these assets, Cameco assumed the decommissioning
liabilities associated with the Smith Ranch operation. At the acquisition
date, the value of the liabilities was estimated to be $9,157,000 (US).
Cameco also secured forward sales commitments for more than 900,000 pounds
of uranium concentrates which will yield prices in excess of current
long-term indicators. The acquisition was accounted for using the purchase
method and the results of operations are included in Camecos consolidated
financial statements from the effective date of the purchase.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(c) |  | UEX Corporation
|--- |  | ---------------

| |  | 
| |  | 

| |  | On July 18, 2002, Cameco acquired a 35.3% ownership interest in UEX
Corporation (UEX); a company traded on the Toronto Stock Exchange (TSX). The
principal assets of UEX consist of several uranium exploration properties
located in the Athabasca region of Northern Saskatchewan. In acquiring this
interest, Cameco transferred its Hidden Bay exploration properties to UEX in
exchange for approximately 31 million shares. In addition, Cameco purchased
another 2 million shares at a price of $0.25 per share.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Cameco recorded a gain of $2,670,000 on the transfer of its Hidden Bay
properties to UEX. The equity method is being used to account for this
investment.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

18



---



##### 






FINANCIAL INFORMATION







|24. |  | Commitments and Contingencies
|--- |  | -----------------------------

| |  | 
| |  | 

|(a) |  | An action against Cameco, Cameco Gold Inc., Kumtor Operating Company and
certain other parties commenced in a Canadian court by certain dependants of
nine persons seeking damages, in the amount of $20,700,000 plus interest and
costs, and punitive damages, in connection with the death of the said nine
persons in a helicopter accident in Kyrgyzstan on October 4, 1995, is
continuing. This action is being defended by the insurers of Cameco.
Management is of the opinion, after review of the facts with counsel, that
the outcome of this action will not have a material financial impact on
Camecos financial position, results of operations or liquidity.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(b) |  | An action against Cameco was filed by Oren Benton on November 28, 2000
in the State of Colorado, U.S.A.. The action alleges breach of contract and
tortious interference and sets forth a claim for purported damages in excess
of $200,000,000 (US). Camecos motion to dismiss was granted by order filed
November 15, 2002 and Mr. Bentons claim was dismissed. Mr. Benton has
appealed this decision.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Management is of the opinion, after review of the facts with counsel,
that the claim is completely without merit and that the outcome of this
action will not have a material financial impact on Camecos financial
position, results of operations or liquidity.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(c) |  | Commitments
|--- |  | -----------

| |  | 
| |  | 

| |  | At December 31, 2002, Camecos purchase commitments, the majority of
which are fixed-price uranium and conversion purchase arrangements, were
as follows:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

(Millions (US))2003
    
    $
    1182004
    
    
    1022005
    
    
    1142006
    
    
    1142007
    
    
    117thereafter
    
    
    561Total
    
    $
    1,126


| |  | 
| |  | 

|25. |  | Financial Instruments
|--- |  | ---------------------

| |  | 
| |  | 

| |  | The majority of revenues are derived from the sale of uranium products.
Camecos financial results are closely related to the long- and short-term
market price of uranium sales and conversion services. Prices fluctuate and
can be affected by demand for nuclear power, worldwide production and
uranium inventory levels, and political and economic conditions in uranium
producing and consuming countries. Revenue from gold operations is largely
dependent on the market price of gold, which can be affected by political
and economic factors, industry activity and the policies of central banks
with respect to their levels of gold held as reserves. Financial results are
also impacted by changes in foreign currency exchange rates, interest rates
and other operating risks.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | To hedge risks associated with fluctuations in the market price for uranium,
Cameco seeks to maintain a portfolio of uranium sales contracts with a
variety of delivery dates and pricing mechanisms that provide a degree of
protection from price volatility. Cameco employs a number of financial
instruments to hedge risks associated with gold prices and foreign currency
exchange rates. Put and call options are used to establish a minimum and
maximum price range for gold sales and exchange rates for cash flows
denominated in a foreign currency. Cameco also enters into forward sales
contracts to establish a price for future deliveries of gold and US dollars.
Net realized gains (losses) on contracts designated as hedges are recorded
as deferred revenues (deferred charges) and recognized in earnings when the
related hedged transactions occur.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Cameco also uses instruments such as swaps, puts and calls and forward rate
agreements to manage funding costs and reduce the impact of interest rate
volatility.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Financial assets that are subject to credit risks include cash and
securities, accounts receivable and commodity and currency instruments.
Cameco mitigates credit risk on these financial assets by holding positions
with a variety of large creditworthy institutions. Sales of uranium, with
short payment terms, are made to customers that management believes are
creditworthy.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Except as disclosed below, the fair market value of Camecos financial
assets and financial liabilities approximates net book value as a result of
the short-term nature of the instrument or the variable interest rate
associated with the instrument.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

19



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

| |  | Currency
| |  | --------

| |  | 
| |  | 

| |  | At December 31, 2002, Cameco had hedged $498,704,000 (US) at an average spot
exchange rate of $1.56 designated to various dates through 2006 as follows:
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

(Thousands)2003
    
    $
    268,7042004
    
     
    110,0002005
    
    
    85,0002006
    
    
    35,000Total
    
    $
    498,704


| |  | 
| |  | 

| |  | These hedge positions consist entirely of spot-deferred forward contracts. The
average exchange rate reflects contract prices as at December 31, 2002, to
their initial maturity date which is earlier than the designation date in many
cases. The realized exchange rate will
depend on the forward premium (discount) that is earned (paid) as hedge
contracts are extended to their final designation date.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | At December 31, 2002, Camecos net mark-to-market loss on these foreign
currency instruments was $10,124,000 (Cdn).
| |  | -------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Interest
| |  | --------

| |  | 
| |  | 

| |  | At December 31, 2002, Cameco had in place $40,000,000 (Cdn) of interest rate
swaps whereby Cameco receives fixed interest rates ranging from 4.1% to 6.1%.
These positions are designated over various dates maturing as follows:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

(Thousands)2005
    
    $
    25,0002006
    
    
    15,000Total
    
    $
    40,000


| |  | 
| |  | 

| |  | At December 31, 2002, Camecos net mark-to-market gain on these interest rate
swaps was $2,066,000 (Cdn).
| |  | ---------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | Commodity
| |  | ---------

| |  | 
| |  | 

| |  | At December 31, 2002, Camecos share of gold hedging positions consisted of:
| |  | ----------------------------------------------------------------------------

| |  | 
| |  | 

Amount Hedged
    
    Average Price(000s oz)
    
    (US$/oz)Spot deferred forward contracts
    
    
    371
    
    
    $
    307Puts
    
    
    85
    
    
    $
    285Calls
    
    
    85
    
    
    $
    310


| |  | 
| |  | 

| |  | Average prices reflect contract prices as at December 31, 2002, to their
initial maturity date which is earlier than the designation date in many cases.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | These positions have been designated against deliveries as follows:
| |  | -------------------------------------------------------------------

| |  | 
| |  | 

Forwards
    
    
    Puts
    
    
    CallsAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AveragePrice
    
    
    
    
    
    Price
    
    
    
    
    
    PriceOunces
    
    (US$/oz)
    
    Ounces
    
    (US$/oz)
    
    Ounces
    
    (US$/oz)2003
    
    
    105,000
    
    
    $
    307
    
    
    
    30,000
    
    
    
    281
    
    
    
    30,000
    
    
    $
    3002004
    
    
    110,000
    
    
    
    311
    
    
    
    43,000
    
    
    
    285
    
    
    
    43,000
    
    
    
    3122005
    
    
    93,000
    
    
    
    305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2006
    
    
    43,000
    
    
    
    303
    
    
    
    12,000
    
    
    
    294
    
    
    
    12,000
    
    
    
    3242007
    
    
    20,000
    
    
    
    307
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    371,000
    
    
    
    
    
    
    
    85,000
    
    
    
    
    
    
    
    85,000


| |  | 
| |  | 

| |  | From the initial maturity date to the designation date contract prices are
expected to accrue contango. The rate of contango earned will depend on the
difference between future US interest rates and gold lease rates.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | At December 31, 2002, the net mark-to-market loss on the above instruments was
$14,491,000 (US).
| |  | ------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

20



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

| |  | Gold Commitment                                                                                                                                                                                                                                                                                               
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                               
| |  | As of December 31, 2002, Cameco agreed to provide credit support to a
maximum of $70 (US) per ounce to the counter-parties of KGC and AGR. At
December 31, 2002, Camecos maximum financial exposure under these
arrangements based on outstanding commitments was $61,000,000 (US) (2001 -
$53,000,000 (US)).
| |  |                                                                                                                                                                                                                                                                                                               
| |  | At December 31, 2002, Camecos actual exposure under these arrangements,
including its share of the net mark-to-market losses mentioned above, was
$37,838,000 (US) (2001  nil).                                                                                                                             

| |  | 
| |  | 

|26. |  | Per Share Amounts
|--- |  | -----------------

| |  |                                                                                                                                                                                                                                                                                                                          
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Per share amounts have been calculated based on the weighted average number
of common shares outstanding during the year net of shares held as security
for employee loans to purchase such shares. The weighted average number of
paid shares outstanding in 2002 was 55,780,978 (2001 - 55,398,552; 2000 -
55,522,935).

| |  | 
| |  | 

2002
    
    2001
    
    2000(Thousands)Basic earnings per share computationEarnings (loss) available to common shareholders
    
    $
    46,120
    
    
    $
    55,896
    
    
    $
    (87,217
    )Weighted average common shares outstanding
    
    
    55,781
    
    
    
    55,399
    
    
    
    55,523Basic earnings (loss) per common share
    
    $
    0.83
    
    
    $
    1.01
    
    
    $
    (1.57
    )Diluted earnings per share computationEarnings (loss) available to common shareholders
    
    $
    46,120
    
    
    $
    55,896
    
    
    $
    (87,217
    )Weighted average common shares outstanding
    
    
    55,781
    
    
    $
    55,399
    
    
    $
    55,523Dilutive effect of:Stock options
    
    
    35
    
    
    
    203
    
    
    
    Other stock-based arrangements
    
    
    24
    
    
    
    16
    
    
    
    Weighted average common shares outstanding,
assuming dilution
    
    
    55,840
    
    
    
    55,618
    
    
    
    55,523Diluted earnings (loss) per common share
    
    $
    0.83
    
    
    $
    1.01
    
    
    $
    (1.57
    )


| |  | 
| |  | 

| |  | Options whose exercise price was greater than the average market price were
excluded from the calculation.
| |  | ----------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    2001
    
    
    2000(Per Share)Other per share amountsCash provided by operations (basic and diluted)
    
    $
    4.50
    
    
    $
    2.10
    
    
    $
    4.04Earnings (loss) from operations (basic and diluted)
    
    $
    1.59
    
    
    $
    1.71
    
    
    $
    (0.82
    )


| |  | 
| |  | 

|27. |  | Segmented Information                                                                                                                                                                                                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                     
|    |  | Cameco has three reportable segments: uranium, conversion and gold. The
uranium segment involves the mining, milling, purchase and sale of uranium
concentrate. The conversion segment involves the refining and conversion of
uranium concentrate and the purchase and sale of conversion services. The
gold segment involves the mining, milling and sale of gold.
|    |  |                                                                                                                                                                                                                                                                                                                                                                     
|    |  | Camecos reportable segments are strategic business units with different
products, processes and marketing strategies.                                                                                                                                                                                                                                              
|    |  |                                                                                                                                                                                                                                                                                                                                                                     
|    |  | Accounting policies used in each segment are consistent with the policies
outlined in the summary of significant accounting policies.                                                                                                                                                                                                                               

| |  | 
| |  | 

---

21



---



##### 






FINANCIAL INFORMATION







|(a) |  | Business Segments
|--- |  | -----------------

2002
    
    Uranium
    
    
    Conversion
    
    
    Gold
    
    
    Total(Millions)Revenue
    
    $
    523.7
    
    
    $
    137.4
    
    
    $
    87.2
    
    
    $
    748.3Products and services sold
    
    
    345.1
    
    
    
    82.7
    
    
    
    58.3
    
    
    
    486.1Depreciation, depletion and reclamation
    
    
    82.7
    
    
    
    10.2
    
    
    
    20.0
    
    
    
    112.9Exploration
    
    
    11.8
    
    
    
    
    
    
    
    9.7
    
    
    
    21.5Research and development
    
    
    
    
    
    
    2.3
    
    
    
    
    
    
    
    2.3Earnings from Bruce Power
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15.8
    )Other
    
    
    (0.2
    )
    
    
    
    
    
    
    1.8
    
    
    
    1.6Gain on property interests
    
    
    (2.7
    )
    
    
    
    
    
    
    
    
    
    
    (2.7
    )Non-segmented expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39.0Earnings before income taxes
and minority interest
    
    
    87.0
    
    
    
    42.2
    
    
    
    (2.6
    )
    
    
    103.4Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48.9Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55.4Preferred securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.3Net earnings attributable to common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    46.1Assets
    
    $
    2,427.2
    
    
    $
    173.6
    
    
    $
    344.4
    
    
    $
    2,945.2Capital expenditures for the year
    
    $
    55.5
    
    
    $
    6.9
    
    
    $
    27.8
    
    
    $
    90.2




2001
    
    Uranium
    
    
    Conversion
    
    
    Gold
    
    
    Total(Millions)Revenue
    
    $
    471.4
    
    
    $
    114.4
    
    
    $
    115.0
    
    
    $
    700.8Products and services sold
    
    
    298.0
    
    
    
    72.0
    
    
    
    52.1
    
    
    
    422.1Depreciation, depletion and reclamation
    
    
    85.7
    
    
    
    14.5
    
    
    
    29.2
    
    
    
    129.4Exploration
    
    
    10.1
    
    
    
    
    
    
    
    8.1
    
    
    
    18.2Research and development
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    2.1Earnings from Bruce Power
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12.2
    )Other
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    (0.6
    )Non-segmented expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34.3Earnings before income taxes
and minority interest
    
    
    78.2
    
    
    
    25.8
    
    
    
    25.6
    
    
    
    107.5Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42.3Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65.2Preferred securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.3Net earnings attributable to common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    55.9Assets
    
    $
    2,456.7
    
    
    $
    166.8
    
    
    $
    323.8
    
    
    $
    2,947.3Capital expenditures for the year
    
    $
    51.1
    
    
    $
    4.8
    
    
    $
    2.4
    
    
    $
    58.3


---

22



---



##### 






FINANCIAL INFORMATION







2000
    
    Uranium
    
    
    Conversion
    
    
    Gold
    
    
    Total(Millions)Revenue
    
    $
    464.8
    
    
    $
    114.9
    
    
    $
    109.2
    
    
    $
    688.9Products and services sold
    
    
    298.1
    
    
    
    66.4
    
    
    
    49.4
    
    
    
    413.9Depreciation, depletion and reclamation
    
    
    71.0
    
    
    
    14.9
    
    
    
    31.1
    
    
    
    117.0Exploration
    
    
    11.6
    
    
    
    
    
    
    
    9.2
    
    
    
    20.8Research and development
    
    
    
    
    
    
    2.5
    
    
    
    
    
    
    
    2.5Writedown of mineral properties
    
    
    127.7
    
    
    
    
    
    
    
    
    
    
    
    127.7Provision for waste disposal
    
    
    
    
    
    
    20.2
    
    
    
    
    
    
    
    20.2Other
    
    
    (1.9
    )
    
    
    
    
    
    
    
    
    
    
    (1.9
    )Non-segmented expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32.5Earnings before income taxes
and minority interest
    
    
    (41.7
    )
    
    
    10.9
    
    
    
    19.5
    
    
    
    (43.8
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34.5Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (78.3
    )Preferred securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.9Net earnings attributable to common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (87.2
    )Assets
    
    $
    2,317.0
    
    
    $
    162.5
    
    
    $
    321.0
    
    
    $
    2,800.5Capital expenditures for the year
    
    $
    75.3
    
    
    $
    3.4
    
    
    $
    5.4
    
    
    $
    84.1


| |  | 
| |  | 

|(b) |  | Geographic Segments
|--- |  | -------------------

2002
    
    
    2001
    
    
    2000(Millions)Revenue from products and servicesCanada  domestic
    
    $
    62.8
    
    
    $
    50.1
    
    
    $
    41.1 export
    
    
    381.6
    
    
    
    413.3
    
    
    
    474.2United States
    
    
    216.7
    
    
    
    122.4
    
    
    
    64.3Central Asia
    
    
    87.2
    
    
    
    115.0
    
    
    
    109.3$
    748.3
    
    
    $
    700.8
    
    
    $
    688.9AssetsCanada
    
    $
    2,420.4
    
    
    $
    2,472.8
    
    
    $
    2,365.2United States
    
    
    189.4
    
    
    
    179.8
    
    
    
    123.0Central Asia
    
    
    335.4
    
    
    
    294.7
    
    
    
    312.3$
    2,945.2
    
    
    $
    2,947.3
    
    
    $
    2,800.5


| |  | 
| |  | 

|(c) |  | Major Customers
|--- |  | ---------------

| |  | 
| |  | 

| |  | Cameco relies on a small number of customers to purchase a significant
portion of its uranium concentrates and uranium conversion services. During
2002, revenues from one customer of Camecos uranium and conversion segments
represented approximately $92,000,000 (14%) of Camecos total revenues. In
2001, revenues from one customer of Camecos uranium and conversion segments
represented approximately $84,000,000 (12%) of Camecos total revenues.
During 2000, sales to any one customer did not exceed 10% of revenue. As
customers are relatively few in number, accounts receivable from any
individual customer may periodically exceed 10% of accounts receivable
depending on delivery schedules.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

23



---



##### 






FINANCIAL INFORMATION







|28. |  | New Accounting Pronouncements
|--- |  | -----------------------------

| |  | 
| |  | 

|(a) |  | Effective January 1, 2004, Cameco will be required to adopt the new
Canadian Accounting Guideline, Hedging Relationships that establishes new
criteria for hedging relationships in effect on or after January 1, 2004. To
qualify for hedge accounting, the hedging relationship must be appropriately
documented at the inception of the hedge and there must be reasonable
assurance, both at the inception and throughout the term of the hedge, that
the hedging relationship will be effective.
Effectiveness requires a high degree of correlation of changes in fair
values or cash flows between the hedged item and the hedge. Cameco does
not believe that the adoption of this accounting guideline will have a
material impact on its consolidated financial statements.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(b) |  | In December 2002, the CICA issued Handbook section 3063, Impairment of
Long-Lived Assets. Section 3063 establishes standards for the recognition,
measurement and disclosure of the impairment of long-lived assets held for
use. Under the new standard, an impairment loss is recognized when the
carrying amount of an asset held for use exceeds the sum of undiscounted
cash flows expected from its use and eventual disposition. An impairment
loss is measured as the amount by which the assets carrying amount exceeds
its fair value.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | The new accounting recommendations contained in Handbook section 3063 are
required to be applied for fiscal years beginning on or after April 1,
2003. Cameco does not believe that adoption of these recommendations will
have a material impact on its consolidated financial statements
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | 
| |  | 

|29. |  | Comparative Figures                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------
|   
|    |  | Certain prior year balances have been reclassified to conform to the current
financial statement presentation.

| |  | 
| |  | 

|30. |  | Generally Accepted Accounting Principles in Canada and the United States                                                                                                                                                                                                                                                                                                                   
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The consolidated financial statements of Cameco are expressed in Canadian
dollars in accordance with Canadian generally accepted accounting principles
(Canadian GAAP). The following adjustments and disclosures would be required
in order to present these consolidated financial statements in accordance
with accounting principles generally accepted in the United States (US
GAAP).

| |  | 
| |  | 

|(a) |  | Reconciliation of earnings in accordance with Canadian GAAP to earnings
determined in accordance with US GAAP.
|--- |  | --------------------------------------------------------------------------------------------------------------

2002
    
    
    2001
    
    
    2000(Thousands)Net earnings (loss) under Canadian GAAP
    
    $
    55,460
    
    
    $
    65,221
    
    
    $
    (78,337
    )Add (deduct) adjustments for:Interest on preferred securities (i)
    
    
    (17,238
    )
    
    
    (17,268
    )
    
    
    (16,445
    )Capitalized interest (ii)
    
    
    3,768
    
    
    
    
    
    
    
    3,312Writedown of mineral properties (iii)
    
    
    
    
    
    
    
    
    
    
    (35,716
    )Depreciation and depletion (iii)
    
    
    2,579
    
    
    
    2,895
    
    
    
    2,579Mineral property costs (iv)
    
    
    (6,188
    )
    
    
    (6,806
    )
    
    
    (2,548
    )Pre-operating costs (v)
    
    
    (2,578
    )
    
    
    (6,232
    )
    
    
    (5,488
    )Hedges and derivative instruments (vi)
    
    
    1,928
    
    
    
    1,810
    
    
    
    Realization of cumulative translation account (vii)
    
    
    (1,585
    )
    
    
    (3,273
    )
    
    
    (3,725
    )Earnings from Bruce Power (v)(vi)
    
    
    (12,481
    )
    
    
    
    
    
    
    Income tax effect of adjustments
    
    
    14,116
    
    
    
    14,542
    
    
    
    11,424Net earnings (loss) under US GAAP
    
    
    37,781
    
    
    
    50,889
    
    
    
    (124,944
    )Hedges and derivative instruments (vi)
    
    
    (6,203
    )
    
    
    (22,253
    )
    
    
    Foreign currency translation adjustments
    
    
    859
    
    
    
    1,509
    
    
    
    5,884Unrealized gain (loss) on available-for-sale securities (viii)
    
    
    (334
    )
    
    
    (8,300
    )
    
    
    469Comprehensive income (loss) under US GAAP
    
    $
    32,103
    
    
    $
    21,845
    
    
    $
    (118,591
    )Net earnings (loss) per share under US GAAP
    
    $
    0.68
    
    
    $
    0.92
    
    
    $
    (2.25
    )


---

24



---



##### 



| |  | 
| |  | 

|(b) |  | Comparison of balance sheet items determined in accordance with Canadian
GAAP to balance sheet items determined in accordance with US GAAP.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(i) |  | Balance Sheets
|--- |  | --------------

| |  | 
| |  | 

2002
    
    
    2001Canadian
    
    
    US
    
    
    Canadian
    
    
    USGAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP(Thousands)
    
    
    (Thousands)Current assets
    
    $
    650,043
    
    
    $
    644,105
    
    
    $
    718,962
    
    
    $
    715,402Property, plant and equipment
    
    
    2,037,613
    
    
    
    2,000,993
    
    
    
    1,994,424
    
    
    
    1,955,437Long-term receivables, investments and other
    
    
    257,523
    
    
    
    237,013
    
    
    
    233,961
    
    
    
    228,674Total assets
    
    $
    2,945,179
    
    
    $
    2,882,111
    
    
    $
    2,947,347
    
    
    $
    2,899,513Current liabilities
    
    $
    171,377
    
    
    $
    167,258
    
    
    $
    166,737
    
    
    $
    166,737Long-term debt
    
    
    218,290
    
    
    
    412,053
    
    
    
    327,773
    
    
    
    523,002Provision for reclamation
    
    
    155,036
    
    
    
    155,036
    
    
    
    139,583
    
    
    
    139,583Other liabilities (vi)
    
    
    9,523
    
    
    
    57,999
    
    
    
    9,787
    
    
    
    48,809Deferred income taxes
    
    
    522,979
    
    
    
    485,447
    
    
    
    480,520
    
    
    
    450,2661,077,205
    
    
    
    1,277,793
    
    
    
    1,124,400
    
    
    
    1,328,397Minority interest
    
    
    18,078
    
    
    
    18,078
    
    
    
    
    
    
    
    Shareholders equityPreferred securities
    
    
    193,763
    
    
    
    
    
    
    
    195,229
    
    
    
    Share capital
    
    
    680,934
    
    
    
    680,934
    
    
    
    670,031
    
    
    
    670,031Contributed surplus
    
    
    472,488
    
    
    
    472,488
    
    
    
    472,488
    
    
    
    472,488Retained earnings
    
    
    483,658
    
    
    
    418,546
    
    
    
    465,420
    
    
    
    408,906Accumulated other comprehensive income- cumulative translation account
    
    
    19,053
    
    
    
    40,275
    
    
    
    19,779
    
    
    
    39,416- available-for-sale securities
    
    
    
    
    
    
    2,454
    
    
    
    
    
    
    
    2,528- hedges and derivative instruments (vi)
    
    
    
    
    
    
    (28,457
    )
    
    
    
    
    
    
    (22,253
    )1,849,896
    
    
    
    1,586,240
    
    
    
    1,822,947
    
    
    
    1,571,116Total liabilities and shareholders equity
    
    $
    2,945,179
    
    
    $
    2,882,111
    
    
    $
    2,947,347
    
    
    $
    2,899,513


| |  | 
| |  | 

|(ii) |  | Components of accounts payable and accrued liabilities are as
follows:
|---- |  | ----------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001Canadian
    
    US
    
    Canadian
    
    USGAAP
    
    GAAP
    
    GAAP
    
    GAAP(Thousands)
    
    
    (Thousands)Accounts payable
    
    $
    84,906
    
    
    $
    84,906
    
    
    $
    66,310
    
    
    $
    66,310Taxes and royalties payable
    
    
    26,340
    
    
    
    22,221
    
    
    
    24,660
    
    
    
    24,660Accrued liabilities
    
    
    20,686
    
    
    
    20,686
    
    
    
    17,126
    
    
    
    17,126Total accounts payable and
accrued liabilities
    
    $
    131,932
    
    
    $
    127,813
    
    
    $
    108,096
    
    
    $
    108,096


| |  | 
| |  | 

|(c) |  | The effects of these adjustments would result in the consolidated
statements of cash flows reporting the following under US GAAP:
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001
    
    
    2000(Thousands)Cash provided by operations
    
    $
    231,184
    
    
    $
    95,568
    
    
    $
    221,101Cash used in investing
    
    $
    (72,006
    )
    
    $
    (127,306
    )
    
    $
    (98,362
    )Cash provided by (used in) financing
    
    $
    (134,819
    )
    
    $
    32,344
    
    
    $
    (135,077
    )


---

25



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

|(d) |  | A description of certain significant differences between Canadian GAAP and
US GAAP follows:
|--- |  | -------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | (i) Preferred Securities
Preferred securities are classified as equity under Canadian GAAP and
interest payments, on an after-tax basis, are classified as distributions of
equity. Under US GAAP, the preferred securities are classified as debt and
interest payments are included in interest expense.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | (ii) Capitalized Interest
Camecos policy under both Canadian GAAP and US GAAP is to capitalize
interest on expenditures related to construction of development projects
actively being prepared for their intended use. Under US GAAP, a portion of
the interest on the preferred securities, classified as debt under US GAAP,
would be capitalized to development properties. Also under US GAAP, the
carrying value of development projects against which interest is capitalized
would be lower (see note (v) below).
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | (iii) Writedown of Mineral Properties
Under both Canadian and US GAAP, property, plant and equipment must be
assessed for potential impairment. Under Canadian GAAP, the impairment loss
is the difference between the carrying value of the asset and its
recoverable amount calculated as undiscounted estimated future net cash
flows. Under US GAAP, if the undiscounted estimated future net cash flows
are less than the carrying value of the asset, the impairment loss is
calculated as the amount by which the carrying value of the asset exceeds
its fair value. Fair value has been calculated as the present value of
estimated future net cash flows. The resulting difference in the writedown
between US and Canadian GAAP also results in a difference in the amount of
depreciation and depletion charged to earnings.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | (iv) Mineral Property Costs
Consistent with Canadian GAAP, Cameco defers costs related to mineral
properties once the decision to proceed to development has been made. Under
US GAAP, these costs are expensed until such time as a final feasibility
study has confirmed the existence of a commercially mineable deposit.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | (v) Pre-Operating Costs
Under Canadian GAAP, pre-operating costs incurred during the
commissioning phase of a new project are deferred until commercial
production levels are achieved. After such time, those costs are amortized
over the estimated life of the project. Under US GAAP, such costs are
expensed as incurred as required by AICPA Statement of Position 98-5,
Reporting on the Cost of Start-Up Activities. In 2000, these costs related
to the production of uranium concentrates at the McArthur River mine and
were charged to product inventory. Portions of this product inventory were
sold in 2001 and 2002.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | During 2002, $8,628,000 of costs related to the restart of two nuclear
reactors at Bruce Power were considered to be startup costs required to be
expensed under US GAAP.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | (vi) Hedges and Derivative Instruments
During 2002, $1,928,000 was excluded from the assessment of hedge
effectiveness. For amounts included in the balance sheet as accumulated
other comprehensive income as at December 31, 2002, a gain of $277,000
(after tax) relates to the hedging of interest-rate risk, a loss of
$18,076,000 (after tax) relates to the hedging of gold-price risk, and a
loss of
$10,658,000 (after tax) relates to the hedging of foreign-exchange-rate
risk. Of these amounts, $15,300,000 (after tax) would be recorded in
earnings during 2003 if market conditions remained unchanged. The impact on
other comprehensive income for 2002 is $6,203,000 after consideration of the
reversal of the 2001 amounts described below. During 2002, no net gains or
losses from the hedging of net investments were realized.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | During 2001, $16,000 was recognized in earnings for the ineffectiveness of
cash flow hedges and $1,794,000 was excluded from the assessment of hedge
effectiveness. For amounts included in other comprehensive income as at
December 31, 2001, a gain of $81,000 (after tax) relates to the hedging of
interest-rate risk, a loss of $743,000 (after tax) relates to the hedging of
gold-price risk, and a loss of $21,591,000 (after tax) relates to the
hedging of foreign-exchange-rate risk. Of these amounts, $11,402,000 (after
tax) would be recorded in earnings during 2002 if market conditions remained
unchanged. During 2001, no net gains or losses from the hedging of net
investments were realized.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | During 2002, $3,853,000 of losses related to Bruce Power energy contracts
did not qualify for hedge accounting under US GAAP as the documentation
required for hedge accounting was not contemplated at the time of entering
into the contracts.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

26



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

| |  | (vii)Realization of Cumulative Translation Account
Under Canadian GAAP, a proportionate amount of the cumulative translation
account is recognized in earnings when a portion of the net investment in a
subsidiary is realized. US GAAP does not allow for any of the cumulative
translation account to be taken to earnings unless a portion of the
investment has been sold or substantially liquidated.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (viii) Available-for-Sale Securities
Under Canadian GAAP, portfolio investments are accounted for using the cost
method. Under US GAAP, portfolio investments classified as
available-for-sale securities are carried at market values with unrealized
gains or losses reflected as a separate component of shareholders equity
and included in comprehensive income. Camecos investments in Energy
Resources of Australia Ltd., Menzies Gold NL and Tenke Mining Corp. are
classified as available-for-sale. The fair market value of these investments
at December 31, 2002 was $20,018,000 (2001  $20,352,000). The cumulative
unrealized gain at December 31, 2002 was $2,454,000.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|(e) |  | Stock-Based Compensation
|--- |  | ------------------------

| |  | 
| |  | 

| |  | Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation establishes financial accounting and reporting
standards for stock-based employee compensation plans. This statement
defines a fair value based method of accounting for employee stock options.
However, it also allows an entity to continue to measure compensation cost
for those plans using the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, which is similar to the method applied
under Canadian GAAP and followed by Cameco. Companies that continue to
follow the intrinsic value based method must disclose pro-forma earnings and
earnings per share information under the fair-value method.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | If the fair value based method of accounting had been applied, pro-forma net
earnings and earnings per share would have been as follows:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001
    
    
    2000(Thousands)Net earnings (loss) for the year in accordance
with US GAAP as calculated above
    
    $
    37,781
    
    
    $
    50,889
    
    
    $
    (124,944
    )Effect of recording compensation
expense under stock option plans
    
    
    (3,991
    )
    
    
    (4,168
    )
    
    
    (1,934
    )Pro-forma net earnings (loss) after application of SFAS 123
    
    $
    33,790
    
    
    $
    46,721
    
    
    $
    (126,878
    )Pro-forma net earnings (loss) per common share
after application of SFAS 123
    
    $
    0.61
    
    
    $
    0.84
    
    
    $
    (2.28
    )


| |  | 
| |  | 

| |  | In calculating the foregoing pro-forma amounts, the fair value of each option
grant was estimated as of the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

2002
    
    
    2001
    
    
    2000Dividend
    
    $
    0.50
    
    
    $
    0.50
    
    
    $
    0.50Expected volatility
    
    
    20.0
    %
    
    
    39.6
    %
    
    
    44.8
    %Risk-free interest rate
    
    
    5.0
    %
    
    
    5.5
    %
    
    
    6.0
    %Expected life of option
    
    5 years
    
    8 years
    
    8 yearsExpected forfeitures
    
    
    17.0
    %
    
    
    20.0
    %
    
    
    20.0
    %


| |  | 
| |  | 

|(f) |  | New Accounting Pronouncements
|--- |  | -----------------------------

| |  | 
| |  | 

| |  | In June 2001, the FASB issued Statement 143, Accounting for Asset Retirement
Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and use of the asset.
Statement 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

27



---



##### 






FINANCIAL INFORMATION







| |  | 
| |  | 

| |  | made. The fair value is added to the carrying amount of the associated asset.
The liability is accreted at the end of each period through charges to
operating expenses. Cameco will adopt this standard on a prospective basis
beginning January 1, 2003.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | In October 2001, the FASB issued Statement 144 Accounting for the Impairment or
Disposal of Long-Lived Assets, which retain the fundamental provisions of
Statement 121 for recognizing and measuring impairment losses of long-lived
assets other than goodwill. Statement 144 also broadens the definition of
discontinued operations to include all distinguishable components of an entity
that will be eliminated from ongoing operations. This Statement is effective
for fiscal years commencing January 1, 2002, to be applied prospectively.
Adoption of this standard did not result in any differences between Canadian
and US GAAP. In December 2002, the CICA approved new standards for the
impairment and disposal of long-lived assets that are substantially equivalent
to the US standards. Cameco will adopt these standards for Canadian GAAP on a
prospective basis beginning January 1, 2003.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | In November 2002, the FASB issued Financial Interpretation 45 (FIN 45) that
will require the recognition of a liability for the fair value of certain
guarantees that require payments contingent on specified types of future
events. The measurement standards of FIN 45 are applicable to guarantees
entered into after January 1, 2003. For guarantees that existed at December 31,
2002, FIN 45 requires additional disclosures which have been included in these
financial statements to the extent applicable to Cameco.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| |  | In January 2003, the FASB issued Financial Interpretation 46 (FIN 46) that will
require the consolidation of certain entities that are controlled through
financial interests that indicate control (referred to as variable interests).
Variable interests are the rights or obligations that convey economic gains or
losses from changes in the values of the entitys assets and
liabilities. The holder of the majority of an entitys variable interests will
be required to consolidate the variable interest entity. Cameco believes it
does not have any variable interests that will result in the consolidation of
any additional entities that existed at December 31, 2002.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

Summary of Significant Accounting Policies





The consolidated financial statements are
prepared by management in accordance with
Canadian generally accepted accounting
principles and, except as described in note
30, conform in all material respects with
accounting principles generally accepted in
the United States. Management makes various
estimates and assumptions in determining the
reported amounts of assets and liabilities,
revenues and expenses for each year
presented, and in the disclosure of
commitments and contingencies. The most
significant estimates are related to the
lives and recoverability of mineral
properties, provisions for decommissioning
and reclamation of assets, future income
taxes, financial instruments and mineral
reserves. Actual results could differ from
these estimates. This summary of significant
accounting policies is a description of the
accounting methods and practices that have
been used in the preparation of these
consolidated financial statements and is
presented to assist the reader in
interpreting the statements contained
herein. Consolidation Principles
The consolidated financial statements
include the accounts of Cameco and its
subsidiaries. Interests in joint ventures
are accounted for by the proportionate
consolidation method. Under this method,
Cameco includes in its accounts its
proportionate share of assets, liabilities,
revenues and expenses.


Cash
Cash consists of balances with financial
institutions and investments in money
market instruments which have a term to
maturity of three months or less. Inventories
Inventories of broken ore, uranium
concentrates and refined and converted
products are valued at the lower of average
cost and net realizable value. Supplies
Consumable supplies and spares are
valued at the lower of weighted average
cost or replacement value. Investments
Investments in associated companies over
which Cameco has the ability to exercise
significant influence are accounted for by
the equity method. Under this method,
Cameco includes in earnings its share of
earnings or losses of the associated
company. Portfolio investments are carried
at cost or at cost less amounts written
off to reflect a decline in value that is
other than temporary.




---

28



---



##### 






FINANCIAL INFORMATION









Property, Plant and Equipment
Assets are carried at cost. Costs of
additions and improvements are capitalized.
When assets are retired or sold, the
resulting gains or losses are reflected in
current earnings. Maintenance and repair
expenditures are charged to cost of
production. The carrying values of property,
plant and equipment are periodically
assessed by management and if management
determines that the carrying values cannot
be recovered, the unrecoverable amounts are
written off against current earnings. Non-Producing Properties
The decision to develop a mine property
within a project area is based on an
assessment of the commercial viability of
the property, the availability of financing
and the existence of markets for the
product. Once the decision to proceed to
development is made, development and other
expenditures relating to the project area
are deferred and carried at cost with the
intention that these will be depleted by
charges against earnings from future mining
operations. No depreciation or depletion is
charged against the property until
commercial production commences. After a
mine property has been brought into
commercial production, costs of any
additional work on that property are
expensed as incurred, except for large
development programs, which will be deferred
and depleted over the remaining life of the
related assets. The carrying values of non-producing
properties are periodically assessed by
management and if management determines that
the carrying values cannot be recovered, the
unrecoverable amounts are written off
against current earnings. Property Evaluations
Cameco reviews the carrying values of its
properties when changes in circumstances
indicate that those carrying values may not
be recoverable. Estimated future net cash
flows are calculated using estimated
recoverable reserves, estimated future
commodity
prices and the expected future operating,
capital and reclamation costs. The carrying
value of a property is written down to the
extent that the estimated future net cash
flows, on an undiscounted basis, are less
than the carrying value of the property. Future Income Taxes
Future income taxes are recognized for the
future income tax consequences attributable
to differences between the carrying values
of assets and liabilities and their
respective income tax bases. Future income
tax assets and liabilities are measured
using enacted income tax rates expected to
apply to taxable income in the years in
which temporary differences are expected to
be recovered or settled. The effect on
future income tax assets and liabilities of
a change in rates is included in earnings in
the period which includes the enactment
date.


Future income tax assets are recorded in
the financial statements if realization
is considered more likely than not. Capitalization of Interest
Interest is capitalized on expenditures
related to construction or development
projects actively being prepared for their
intended use. Capitalization is
discontinued when the asset enters
commercial operation or development
ceases. Depreciation and Depletion
Conversion services assets, mine buildings,
equipment and mineral properties are
depreciated or depleted according to the
unit-of-production method. This method
allocates the costs of these assets to each
accounting period. For conversion services,
the amount of depreciation is measured by
the portion of the facilities total
estimated lifetime production that is
produced in that period. For mining, the
amount of depreciation or depletion is
measured by the portion of the mines
economically recoverable proven and probable
ore reserves which are recovered during the
period. Other assets are depreciated according to
the straight-line method based on estimated
useful lives, which generally range from
three to 10 years. Research and Development and Exploration Costs
Expenditures for applied research and
technology related to the products and
processes of Cameco and expenditures for
geological exploration programs are
charged against earnings as incurred. Environmental Protection and Reclamation Costs
The estimated costs for decommissioning and
reclaiming producing resource properties are
accrued and charged to operations according
to the unit-of-production method. Actual
costs of decommissioning and reclamation are
deducted against this accrual. Camecos
estimates of reclamation costs could change
as a result of changes in regulatory
requirements and cost estimates.
Expenditures relating to ongoing
environmental programs are charged against
earnings as incurred or capitalized and
depreciated depending on their relationship
to future earnings. Employee Future Benefits
Cameco accrues its obligations under
employee benefit plans. The cost of pensions
and other retirement benefits earned by
employees is actuarially determined using
the projected benefit method prorated on
service and managements best estimate of
expected plan investment performance, salary
escalation, retirement ages of employees and
expected health-care costs. For the purpose
of calculating the expected return on plan
assets, those assets are measured at fair
value. Past service costs




---

29



---



##### 






FINANCIAL INFORMATION









arising from plan amendments and net
actuarial gains and losses are amortized
on a straight-line basis over the expected
average remaining service life of the plan
participants. Stock-Based Compensation
Cameco has a stock option plan that is
described in note 20. No compensation
expense is recognized for this plan when
qualifying stock options are granted to
employees. Any consideration paid by
employees on exercise of stock options is
credited to share capital. Cameco accounts
for other stock-based compensation
arrangements in accordance with the fair
value based method of accounting. Revenue Recognition
Cameco supplies uranium concentrates and
uranium conversion services to utility
customers. Third-party fabricators process
Camecos products into fuel for use in
nuclear reactors. Cameco records revenue on the sale of its
nuclear products to utility customers when
title to the product transfers and delivery
is effected through book transfer. Since
nuclear products must be stored at licensed
storage facilities, Cameco may hold customer
owned product at its premises prior to
shipment of the product to third parties for
further processing. Cameco records revenue on the sale of gold
when title passes and delivery is
effected. Amortization of Financing Costs
Debt discounts and issue expenses
associated with long-term financing are
deferred and amortized over the term of
the issues to which they relate. Foreign Currency Translation
Monetary assets and liabilities denominated
in foreign currencies are translated into
Canadian dollars at year-end rates of
exchange. Revenue and expense transactions
denominated in foreign currencies are
translated into Canadian dollars at rates in
effect at the time of the transactions. The
applicable exchange gains and losses arising
on these transactions are reflected in
earnings. Foreign currency gains or losses arising on
translation of long-term monetary items
with a fixed or ascertainable life beyond
the end of the following fiscal year are
deferred and amortized to earnings over the
remaining life of the item. The United States dollar is considered the
functional currency of most of Camecos
uranium and gold operations outside of
Canada. The financial statements of these
operations are translated into Canadian
dollars using the current-rate method
whereby all assets and liabilities are
translated at the year-end rate of exchange
and all revenue and expense items are


translated at the average rate of exchange
prevailing during the year. Exchange gains
and losses arising from this translation,
representing the net unrealized foreign
currency translation gain (loss) on Camecos
net investment in these foreign operations,
are recorded in the cumulative translation
account component of shareholders equity.
Exchange gains or losses arising from the
translation of foreign debt and preferred
securities designated as hedges of a net
investment in foreign operations are also
recorded in the cumulative translation
account component of shareholders equity.
These adjustments are not included in
earnings until realized through a reduction
in Camecos net investment in such
operations. Derivative Financial Instruments and
Hedging Transactions
Cameco uses derivative financial and
commodity instruments to reduce exposure to
fluctuations in foreign currency exchange
rates, interest rates and
commodity prices. Cameco formally documents
all relationships between hedging
instruments and hedged items, as well as its
risk management objective and strategy for
undertaking various hedge transactions. This
process includes linking all derivatives to
specific assets and liabilities on the
balance sheet or to specific firm
commitments or forecasted transactions.
Cameco also formally assesses, both at the
hedges inception and on an ongoing basis,
whether the derivatives that are used in
hedging transactions are highly effective in
offsetting changes in fair values or cash
flows of hedged items. Gains and losses
related to hedging items are deferred and
recognized in the same period as the
corresponding hedged items. If derivative
financial instruments are closed before
planned delivery, gains or losses are
recorded as deferred revenue or deferred
charges and recognized on the planned
delivery date. In the event a hedged item is
sold, extinguished or matures prior to the
termination of the related hedging
instrument, any realized or unrealized gain
or loss on such derivative instrument is
recognized in earnings. Per Share Amounts
Per share amounts are calculated using the
weighted average number of paid common
shares outstanding.




---

30



---



##### 






FINANCIAL INFORMATION







|31. |  | Subsequent Event                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On April 6, 2003, production at McArthur River was suspended due to an increase in water inflow
caused by the collapse of a section of rock in a development area of the mine. All personnel were temporarily
evacuated and no one was injured. Shortly thereafter, mine personnel reentered the mine to assess the situation and
begin remedial measures. As of April 16, 2003, it was estimated that production would be suspended for four to
six months. However, events were still unfolding leaving some uncertainty as to the duration of the shutdown. It is
not expected that a material writedown of assets will be required.

| |  | 
| |  | 

---

31