Province Of Manitoba 18K/A Annual report (foreign governments) (amended) | SEC 24 Dec 02

Exhibit 99.1

PROVINCE OF MANITOBA
NOTES TO THE QUARTERLY FINANCIAL REPORT
FOR THE SIX MONTHS — APRIL TO SEPTEMBER 2002

This report presents the unaudited financial results of the Province of Manitoba for the second quarter of the 2002/03 fiscal year. The comparative data provided for the 2001/02 fiscal year has been restated to reflect the organizational structure of departments established in the 2002/03 Estimates as well as the in-year reorganization of departments announced on September 25, 2002.

As noted in the First Quarter Financial Report, a $150.0 million payment from Manitoba Hydro related to export profits that was to have been received in 2001/02 was recorded as revenue to the Province in the 2002/03 fiscal year. This payment was received in August 2002 and is identified as an extraordinary revenue item in this quarterly financial report.

SECOND QUARTER — ACTUAL TO ESTIMATE

The Net Expenditure for the six months ended September 30, 2002 of $134.8 million was $90.4 million lower than the second quarter projection of $225.2 million, primarily as a result of lower than anticipated expenditures. This variance is primarily attributable to differences in timing in the flow of disbursements.

SECOND QUARTER COMPARED TO PREVIOUS YEAR’S RESULTS

Total revenues, before the extraordinary revenue of $150.0 million from Manitoba Hydro, were $60.3 million lower than for the same period last year. The reduction in revenue mainly reflects the levels projected in the 2002 Budget (Corporation Income Tax and Water Power Rentals) as well as some softening in both Equalization and Personal Income Tax receipts. Year over year increases in Retail Sales Tax and Tobacco Tax are consistent with budgeted levels.

Second quarter operating expenditures of $3,344.7 million were $79.2 million higher than for the same period last year. The increase in expenditures mainly reflects the increased level of spending authority approved in the 2002 Budget for the departments of Health, Family Services and Housing, Justice and Education and Youth as well as differences in timing of payments. These program increases were offset by a reduction of $43.4 million in public debt servicing costs consistent with the 2002 Budget.

CAPITAL INVESTMENT

Expenditure for the acquisition of tangible assets was $1.2 million less than estimated for the second quarter and $0.5 million more than expenditures incurred during the same period last year, mainly due to differences in timing of project requirements.

YEAR END PROJECTION

Recent federal estimates for Manitoba’s Individual Income Tax and Equalization receipts indicate that 2002/03 payments will be approximately $122.0 million less than estimated in the 2002 Budget. These reductions are partially offset by projected improvements in Corporation Income Tax and Capital Tax receipts. In total, revenues are projected to be $54.3 million less than the budget level. While revenues from Retail Sales Tax continue to be strong (6.4% growth year over year to date), the year-end projection may be slightly lower than the budget estimate. Revenues from the Manitoba Lotteries Corporation are expected to exceed budget projections by $8.0 million.

The projected reduction in equalization receipts of $106.3 million represents the major component of the lower revenue estimate. This reduction arises from a national economic downturn resulting in negative adjustments to estimates of national corporate income tax receipts for the 2001/02 and 2002/03 fiscal years and an adjustment related to the equalization ceiling calculation for the 2000/01 fiscal year as well as a downward adjustment to population estimates.

Province of Manitoba — Financial Quarterly

YEAR END PROJECTION (continued)

Expenditures face upward pressure primarily in health care and emergency expenditures. Total expenditures are projected to increase by $71.1 million from the budgeted level. The increase in health care spending (estimated at $70.0 million) illustrates the significant and growing need for improved federal support for health care as outlined in the Romanow report on the Future of Health Care in Canada. Health care spending is projected to increase as a result of wage settlements and continued price and volume pressures including pharmacare and medical services. Emergency expenditures are higher as a result of forest fire suppression and flood related costs. A Special Warrant of $9.0 million was approved by Cabinet in November 2002 to provide additional funding in support of emergency expenditures. These additional costs have been included in the revised year-end projection. Spending in most other departments is anticipated to be on or below the budget as the government continues to implement measures to manage discretionary expenditures while making vital front-line services a priority. Public debt servicing costs are projected to be $27.3 million less than budgeted as a result of a lower U.S. dollar debt exposure and lower interest rates.

The Manitoba government is committed to balanced budgets, as demonstrated by the Balanced Budget, Debt Repayment and Taxpayer Accountability Act. The Province continues to press the federal government for appropriate levels of support for health care spending and is optimistic that a federal response to the Romanow Report will provide much needed additional funding starting this fiscal year. As noted previously, a $150.0 million payment from Manitoba Hydro related to export profits, which was to have been received in the 2001/02 fiscal year, has been received and recorded as revenue in the 2002/03 fiscal year. If necessary, the Province is prepared to direct this extraordinary revenue to support a balanced budget for the 2002/03 fiscal year. This will reduce the planned transfer from the Fiscal Stabilization Fund from $93.0 million to $62.0 million in this fiscal year. A positive $3.5 million year-end balance would therefore be achieved for the operating fund compared to the $9.8 million forecast in the 2002 Budget.

DEBT RETIREMENT

The 2002 Budget provided for a $96.4 million contribution to the Debt Retirement Fund. As required by the balanced budget legislation, an allocation committee determines the share of those funds directed to pension or general purpose debt. For 2002/03, the Committee has allocated $48.2 million for retirement of pension obligations, leaving $48.2 million for the retirement of general purpose debt. The status of the Debt Retirement Fund is outlined on page 9.

FISCAL STABILIZATION FUND

Based on the projected results for 2002/03, the transfer from the Fiscal Stabilization Fund of $62.0 million will be $31.0 million lower than the budgeted transfer of $93.0 million. The status of the Fiscal Stabilization Fund is outlined on page 10. As noted in the First Quarter Financial Report, a $150.0 million transfer was made in the 2001/02 fiscal year as a transitional measure related to the planned $150.0 million payment from Manitoba Hydro. As noted previously, this payment from Manitoba Hydro has now been recorded as revenue to the Province in the 2002/03 fiscal year. If this funding is not needed to support the Province’s financial position for the 2002/03 fiscal year, it will be transferred to the Fiscal Stabilization Fund to reverse the transitional 2001/02 transfer from the fund. As shown on the table on page 10, if this does not occur, the Fiscal Stabilization Fund will have a balance of $194.6 million at March 31, 2003.

BORROWING ACTIVITY

The original estimate of borrowing requirements identified in the 2002 Budget was $2,260.2 million, including refinancing and funding for Manitoba Hydro and Health’s capital programs. This requirement has increased to $2,463.1 million to accommodate debt called prior to maturity and to fund an allocation to the Provincial Sinking Fund for the purchase of foreign debt.

For the period April 1, 2002 to September 30, 2002, $1,376.2 million has been borrowed of which $982.8 million was raised in the public market.

Province of Manitoba — Financial Quarterly

PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF REVENUE AND EXPENDITURE FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2002 (with
comparative figures for September 30, 2001)
(UNAUDITED)


										2002/03

2001/02			2002/03			INCREASE
ACTUAL			ACTUAL			(DECREASE)				ACTUAL			ESTIMATE			VARIANCE

(thousands of dollars)										(thousands of dollars)
									Revenue
	2,149,189			2,084,892			(64,297	)	Own Source Revenue		2,084,892			2,078,300			6,592
	971,068			975,052			3,984		Government of Canada		975,052			981,579			(6,527	)
									Extraordinary Revenue
	—			150,000			150,000		- Manitoba Hydro (2001/02)		150,000			150,000			—

	3,120,257			3,209,944			89,687		Total Revenue		3,209,944			3,209,879			65

									Expenditure
	3,084,069			3,206,680			122,611		Program Expenditure		3,206,680			3,296,981			(90,301	)
	181,411			138,028			(43,383	)	Debt Servicing		138,028			138,102			(74	)

	3,265,480			3,344,708			79,228		Total Expenditure		3,344,708			3,435,083			(90,375	)

	(145,223	)		(134,764	)		(10,459	)	Net Revenue/(Expenditure)		(134,764	)		(225,204	)		(90,440	)
									Interfund Transfers
	—			—			—		Debt/Pension Repayment		—			—			—
	—			—			—		Fiscal Stabilization Fund		—			—			—

	—			—			—		Total Interfund Transfers		—			—			—

									Balance Under Balanced Budget Legislation
	(145,223	)		(134,764	)		(10,459	)			(134,764	)		(225,204	)		(90,440	)

Province of Manitoba — Financial Quarterly

PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF REVENUE
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2002
(with comparative figures for September 30, 2001)
(UNAUDITED)


								2002/03

2001/02		2002/03		INCREASE
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE

(thousands of dollars)								(thousands of dollars)
							Taxation:
							Finance
	832,255		782,754		(49,501	)	- Individual Income Tax		782,754		782,754		—
	183,480		107,397		(76,083	)	- Corporation Income Tax		107,397		107,397		—
	72,066		85,039		12,973		- Corporation Capital Tax		85,039		82,535		2,504
	67,740		67,387		(353	)	- Gasoline Tax		67,387		68,915		(1,528	)
	20,078		22,140		2,062		- Insurance Corporations Tax		22,140		21,831		309
	97,349		103,780		6,431		- Levy for Health and Education		103,780		100,739		3,041
	7,358		8,478		1,120		- Land Transfer Tax		8,478		7,310		1,168
	16,056		50		(16,006	)	- Mining Tax		50		—		50
	26,832		27,741		909		- Motive Fuel Tax		27,741		28,107		(366	)
	408,130		434,181		26,051		- Retail Sales Tax		434,181		436,673		(2,492	)
	24,113		23,738		(375	)	- Revenue Act, 1964, Part I		23,738		24,546		(808	)
	63,085		83,363		20,278		- Tobacco Tax		83,363		82,863		500
	1,593		1,399		(194	)	- Environmental Protection Tax		1,399		1,152		247

	1,820,135		1,747,447		(72,688	)			1,747,447		1,744,822		2,625
							Industry, Trade and Mines
	1,963		1,412		(551	)	- Oil and Natural Gas Tax		1,412		1,671		(259	)

	1,822,098		1,748,859		(73,239	)			1,748,859		1,746,493		2,366
							Other Revenue:
	56,566		48,238		(8,328	)	Conservation — Water Power Rentals		48,238		46,695		1,543
	13,377		13,854		477		Conservation — Other		13,854		14,651		(797	)
	38,481		42,831		4,350		Transportation and Government Services		42,831		44,449		(1,618	)
	—		—		—		Manitoba Hydro (2002/03)		—		—		—
	64,600		62,700		(1,900	)	Manitoba Liquor Commission		62,700		62,000		700
	118,000		130,000		12,000		Manitoba Lotteries Corporation		130,000		126,000		4,000
	36,067		38,410		2,343		Other Departments		38,410		38,012		398

	327,091		336,033		8,942				336,033		331,807		4,226

	2,149,189		2,084,892		(64,297	)	Total Own Source Revenue		2,084,892		2,078,300		6,592

							Government of Canada
	600,888		577,608		(23,280	)	Equalization		577,608		577,610		(2	)
	338,916		364,416		25,500		Canada Health and Social Transfer		364,416		364,416		—
	—		3,519		3,519		Medical Equipment Fund		3,519		2,655		864
	31,264		29,509		(1,755	)	Other Departments		29,509		36,898		(7,389	)

	971,068		975,052		3,984		Total Government of Canada		975,052		981,579		(6,527	)

	3,120,257		3,059,944		(60,313	)	Total Before Extraordinary Revenue		3,059,944		3,059,879		65

							Extraordinary Revenue
	—		150,000		150,000		Manitoba Hydro (2001/02)		150,000		150,000		—

	3,120,257		3,209,944		89,687		Total Revenue		3,209,944		3,209,879		65

Province of Manitoba — Financial Quarterly

PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF PART A — OPERATING EXPENDITURE
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2002
(with comparative figures for September 30, 2001)
(UNAUDITED)


								2002/03

2001/02		2002/03		INCREASE
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE

(thousands of dollars)								(thousands of dollars)
	10,714		11,765		1,051		Legislative Assembly		11,765		12,086		(321	)
	1,559		1,671		112		Executive Council		1,671		1,675		(4	)
	14,465		14,432		(33	)	Aboriginal and Northern Affairs		14,432		16,863		(2,431	)
	244,391		240,162		(4,229	)	Advanced Education and Training		240,162		245,758		(5,596	)
	42,837		44,978		2,141		Agriculture and Food		44,978		45,651		(673	)
	2,089		2,043		(46	)	Civil Service Commission		2,043		2,211		(168	)
	3,083		2,728		(355	)	Community Support Programs		2,728		2,847		(119	)
	71,834		73,000		1,166		Conservation		73,000		80,988		(7,988	)
	29,914		30,741		827		Culture, Heritage and Tourism		30,741		31,305		(564	)
	511,413		530,808		19,395		Education and Youth		530,808		528,030		2,778
	23,963		26,063		2,100		Employee Pensions and Other Costs		26,063		27,123		(1,060	)
	6,822		5,173		(1,649	)	Energy, Science and Technology		5,173		8,522		(3,349	)
	384,998		414,284		29,286		Family Services and Housing		414,284		405,561		8,723
	78,462		79,051		589		Finance — Departmental Costs		79,051		79,440		(389	)
	181,411		138,028		(43,383	)	Finance — Debt Servicing Costs		138,028		138,102		(74	)
	1,308,878		1,361,544		52,666		Health		1,361,544		1,397,668		(36,124	)
	5,703		9,636		3,933		Healthy Child Initiative		9,636		8,917		719
	10,061		9,559		(502	)	Industry, Trade and Mines		9,559		14,755		(5,196	)
	55,530		59,984		4,454		Intergovernmental Affairs		59,984		65,733		(5,749	)
	85,821		90,602		4,781		Justice		90,602		105,813		(15,211	)
	11,557		12,377		820		Labour and Immigration		12,377		12,457		(80	)
	287		338		51		Seniors Directorate		338		346		(8	)
	5,184		5,171		(13	)	Sport		5,171		5,159		12
	519		496		(23	)	Status of Women		496		492		4
	157,110		155,968		(1,142	)	Transportation and Government		155,968		174,727		(18,759	)
							Services
	551		4,585		4,034		Enabling Appropriations		4,585		4,209		376
	16,324		19,521		3,197		Other Appropriations		19,521		18,645		876

	3,265,480		3,344,708		79,228		Total Expenditure		3,344,708		3,435,083		(90,375	)

Province of Manitoba — Financial Quarterly

PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF PART B — CAPITAL
INVESTMENT FOR THE SIX MONTHS ENDED SEPTEMBER
30, 2002 (with comparative figures for September 30, 2001)
(UNAUDITED)


								2002/03

2001/02		2002/03		INCREASE
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE

(thousands of dollars)								(thousands of dollars)
	24		—		(24	)	Agriculture and Food		—		129		(129	)
	428		47		(381	)	Conservation		47		232		(185	)
	—		663		663		Family Services and Housing		663		803		(140	)
	61		133		72		Finance		133		190		(57	)
	89		349		260		Health		349		315		34
	526		760		234		Justice		760		866		(106	)
	6,287		6,971		684		Transportation and Government Services		6,971		7,509		(538	)
	6,245		5,269		(976	)	Enabling Appropriations		5,269		5,359		(90	)

	13,660		14,192		532		Total Capital Investment		14,192		15,403		(1,211	)

Province of Manitoba — Financial Quarterly

PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF VALUATION AND PURPOSE OF
DIRECT AND GUARANTEED DEBT OUTSTANDING
SEPTEMBER 30, 2002
(with comparative figures for March 31, 2002)
(UNAUDITED)


Canadian		Canadian
Dollar		Dollar		Increase				Canadian		Canadian		Increase
Equivalent		Equivalent		(Decrease)				Dollar		Dollar		(Decrease)
at Date of		at Date of		Sept. 30/02				Valuation		Valuation		Sept. 30/02
Issue		Issue		over				(Note 1)		(Note 1)		over
Sept. 30/02		March 31/02		Mar. 31/02				Sept. 30/02		March 31/02		March 31/02

(thousands of dollars)								(thousands of dollars)

							Direct Debt Payable in:
	11,525,896		11,835,290		(309,394	)	Canadian Dollars		11,498,096		11,807,490		(309,394	)
	2,770,478		2,962,401		(191,923	)	Issues Swapped to Canadian Dollars		2,912,355		3,221,628		(309,273	)
	2,736,775		3,055,916		(319,141	)	U.S. Dollars		3,298,213		3,734,567		(436,354	)
	1,403,111		1,403,111		—		Issues Swapped to U.S. Dollars		1,547,537		1,555,051		(7,514	)

	18,436,260		19,256,718		(820,458	)	Total Direct Debt		19,256,201		20,318,736		(1,062,535	)

							Guaranteed Debt Payable in:
	1,127,178		595,190		531,988		Canadian Dollars		1,127,178		595,190		531,988
	—		—		—		U.S. Dollars		—		—		—

	1,127,178		595,190		531,988		Total Guaranteed Debt		1,127,178		595,190		531,988

	19,563,438		19,851,908		(288,470	)	Total Direct and (Note 2)		20,383,381		20,913,926		(530,545	)
							Guaranteed Debt
	5,580,260		6,410,517		(830,257	)	Less: Sinking Fund Investments		5,580,260		6,410,517		(830,257	)
	149,825		100,444		49,381		Less: Debt Retirement Fund		149,825		100,444		49,381

	13,833,353		13,340,947		492,406		Net Direct and Guaranteed Debt (Note 3)		14,653,296		14,402,965		250,331

See notes on following page.

Province of Manitoba — Financial Quarterly

PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF VALUATION AND PURPOSE OF
DIRECT AND GUARANTEED DEBT OUTSTANDING
SEPTEMBER 30, 2002
(with comparative figures for March 31, 2002)
(UNAUDITED)

NOTES:

1.		The Canadian Dollar Valuation is calculated using the foreign currency exchange rates in effect at March 31, 2002 and September 30, 2002.

2.		Direct and Guaranteed Debt are payable in Canadian and U.S. dollars. As at September 30, 2002, total gross debt was payable 76% in Canadian dollars and 24% in U.S. dollars. Of this total, General Government Program Debt and Other Debt was payable 95% in Canadian dollars (94% at March 31, 2002) and 5% in U.S. dollars (6% at March 31, 2002) while Manitoba Hydro debt was payable 44% in Canadian dollars (42% at March 31, 2002) and 56% in U.S. dollars (58%at March 31, 2002).

3.		The debt was issued for the following purposes:


	September 30, 2002				March 31, 2002

	(in thousands)		(per capita)		(in thousands)		(per capita)
			(Note 6)				(Note 6)

General Government Programs		6,357,116		5,524		6,406,112		5,571
The Manitoba Hydro-Electric Board		6,530,704		5,675		6,263,251		5,446
Capital Investments (Note 4)		244,900		213		244,900		213
Manitoba Hospital Facilities (Note 4)		390,000		339		390,000		339
Other		1,130,576		982		1,098,702		955

Total (Note 5)		14,653,296		12,733		14,402,965		12,524

4.		Capital Investments are the stock of tangible capital assets held by government. These are paid off over the useful life of the assets (see Main Estimates page 161 for details). Manitoba Hospital Facilities debt was recorded as Provincial debt for the first time in 2000/01. Previously, this debt was held in the name of individual health facilities at a higher overall cost to taxpayers. Hospital Facilities debt is repaid over terms up to 20 years.

5.		The $250 million increase in total debt is comprised of prefunding of self sustaining debt including Manitoba Hydro’s capital requirements which was offset by a net increase in sinking funds.

6.		Per capita data is based upon population figures at July 1, 2002 as reported by Statistics Canada. Taxpayer supported debt, including debt for general government programs, decreased as a result of a net increase to the Debt Retirement Fund. Self sustaining debt, including Manitoba Hydro, increased due to prefunding of self sustaining debt and Manitoba Hydro’s capital requirements offset by a net increase in Manitoba Hydro’s sinking fund. Manitoba Hydro’s U.S. dollar revenues are sufficient to pay the interest and principal on all outstanding U.S. dollar debt.

Province of Manitoba — Financial Quarterly

PROVINCE OF MANITOBA DEBT
RETIREMENT FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2003
(with comparative figures for March 31, 2002)
(UNAUDITED)


		2002/03			2001/02
		Projection (1)			Actual

		(thousands of dollars)

Fund Balance, Beginning of Year			100,444			75,227


Revenue:

	Interest Earnings		3,200			3,860
	Transfer from Operating Fund		96,357			96,357

			99,557			100,217

Expenditure:

	Transfer to Operating Fund for:
	- Debt Retirement		—			—
	- Pension Obligation (2)		(48,179	)		(75,000	)

			(48,179	)		(75,000	)



Fund Balance, End of Year			151,822			100,444

Notes:

(1)		Based on 2002 Budget
(2)		The actual allocation of funds has been determined by the Allocation Committee as per Balanced Budget, Debt Repayment and Taxpayer Accountability Act.

Province of Manitoba — Financial Quarterly

PROVINCE OF MANITOBA
FISCAL STABILIZATION FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2003
(with comparative figures for March 31, 2002)
(UNAUDITED)


		2002/03			2001/02
		Projection			Actual

		(thousands of dollars)

Fund Balance, Beginning of Year			247,254			320,494

Revenue:

	Interest Earnings		5,780			13,923

Interfund Transfers

	Transfer to the Operating Fund
	- Re: Payment from Manitoba Hydro (2001/02)		—			(150,000	)
	Transfer to the Operating Fund		(62,000	)		—
	Transfer from the Operating Fund
	- Re: Year-End Surplus		3,518			62,837

			(58,482	)		(87,163	)



Fund Balance, End of Year			194,552			247,254

Province of Manitoba — Financial Quarterly

PROVINCE OF MANITOBA
OPERATING FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2003
(UNAUDITED)


		Revised			Budget
		Projection			Projection

		(thousands of dollars)

Revenue
	Total Before Extraordinary Revenue		6,887,013			6,941,290
	Extraordinary Revenue re: Manitoba Hydro (2001/02)		150,000			—

Total Revenue			7,037,013			6,941,290

Expenditure
	Program		6,658,120			6,559,749
	Debt Servicing		341,018			368,310

Total Expenditure			6,999,138			6,928,059

Net Revenue / (Expenditure)			37,875			13,231

Interfund Transfers
	Debt/Pension Repayment		(96,357	)		(96,357	)
	From Fiscal Stabilization Fund		62,000			93,000

Total Interfund Transfers			(34,357	)		(3,357	)



Balance Under Balanced Budget Legislation			3,518			9,874

Province of Manitoba — Financial Quarterly

Province Of Manitoba 18-K/AAnnual report (foreign governments) (amended)