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

Exhibit 99.1

PROVINCE OF MANITOBA
NOTES TO THE QUARTERLY FINANCIAL REPORT
FOR THE NINE MONTHS — APRIL TO DECEMBER 2003

This report presents the unaudited financial results of the Province of Manitoba for the third quarter of the 2003/04 fiscal year. The comparative data for the 2002/03 fiscal year has been restated to reflect the organizational structure of departments established in the 2003/04 Estimates as well as the in-year reorganization of departments announced on November 4, 2003.

THIRD QUARTER — ACTUAL TO ESTIMATE

The third quarter net expenditure (excess expenditure over revenue) of $238.4 million was $110.0 million less than the projection of $348.4 million. Expenditures were $94.7 million lower and revenues were $15.3 million higher than estimated for the nine month period.

THIRD QUARTER COMPARED TO PREVIOUS YEAR’S RESULTS

The third quarter net expenditure was $37.0 million more than the same period last year.

Total revenues were $295.0 million more than the same period last year primarily reflecting budgeted increases in own-source revenue and the timing of federal equalization transfers occurring earlier than the previous year. These higher revenues are offset by reduced water power rentals and the non-recurring payments from Manitoba Hydro of $150.0 million related to 2001/02 and $50.0 million related to 2002/03 export profits.

Total expenditures were $332.0 million higher than the same period last year, reflecting approved budget increases primarily in the departments of Health, Education, Citizenship and Youth, Advanced Education and Training, Family Services and Housing and Justice. Emergency Expenditures were also higher in 2003/04 as a result of disaster costs related to the second worst forest fire season on record and agricultural support related to the inability to export cattle due to bovine spongiform encephalopathy (BSE). Costs related to the 2003 General Election are also reflected.

CAPITAL INVESTMENT

Departmental expenditures for tangible capital assets were $11.6 million less than estimated for the third quarter and $11.4 million less than the same period last year primarily due to differences in timing as well as the level of funding required for various approved projects.

YEAR END PROJECTION

The year end positive balance for the operating fund is forecast to be $4.8 million, no change from the balance projected in the second quarter financial report and down $5.2 million from the $10.0 million positive balance projected in the 2003/04 Budget.

The second quarter report indicated that Equalization revenue was projected to increase $141.5 million from budget due to revised population estimates. Since the second quarter report, the province’s fiscal situation has deteriorated as a result of a $115.2 million downward revision to the Equalization projection based on revised federal estimates. This revision includes the previously reported increase due to stronger population growth. However, this increase is now offset by declines in Canadian economic performance, notably in Ontario, that have lowered national Equalization payments. Projections for all other revenue sources and expenditures remain on track with the projections in the second quarter report.

Province of Manitoba — Financial Quarterly

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YEAR END PROJECTION (continued)

As reported at the close of the second quarter, revenues dependent on water flows are down from budget due to dry and drought conditions that were experienced this past spring and summer throughout Manitoba (Water Power Rentals — $18.8 million decrease, Manitoba Hydro — $52.0 million decrease). In addition, Manitoba Lotteries Corporation revenue is projected to decline by $23.5 million, or 9.1%, primarily due to the impact of Winnipeg’s ban on smoking in public places. Revenue from other provincial sources is projected to be slightly above budget projections primarily as a result of higher than anticipated projected own source taxation revenue. In total, revenues are projected to be $22.6 million lower than the budget level.

Expenditures are projected to increase $151.5 million from the budgeted level. This represents a decrease of $23.0 million from the second quarter projection primarily due to continued efforts to manage discretionary expenditures. The increase in projected expenditures from budget includes $37.1 million in Health, $8.8 million for election costs, $5.9 million in Agriculture, Food and Rural Initiatives and $5.8 million in Justice. Public debt servicing costs are projected to be $15.5 million lower than budget.

The expenditure forecast includes all of the expenditure requirements that were approved in supplementary estimates in September 2003 and the recently approved special warrant.

As noted in previous reports, unforeseen natural disasters negatively impacted the province’s finances in 2003/04. In addition to the revenues impacted by drought conditions, the BSE crisis and one of the worst forest fire seasons on record combined to result in a projected increase in expenditures. As a result, Emergency Expenditures are projected to require $74.8 million in additional authority in 2003/04 — $46.0 million to provide BSE disaster relief for the livestock sector and $28.8 million more than budgeted for forest fire suppression and other expenditures. The livestock industry and the Manitoba economy has faced a large challenge with closing of the U.S. border to Canadian cattle. The loss of forested area due to fires was the highest experienced by any province this past year.

Section 3(2) of The Balanced Budget, Debt Repayment and Taxpayer Accountability Act states that the government is not required to include “...an expenditure required in the fiscal year as a result of a natural or other disaster in Manitoba that could not have been anticipated and affects the province or a region of the province in a manner that is of urgent public concern”, in determining whether there is a positive or negative balance for a fiscal year. The province will declare that the $74.8 million in incremental disaster-related costs for BSE and forest fires meet the requirements of this section.

The Province is projecting a positive balance $4.8 million that includes an increase of up to $44.7 million in the required draw from the Fiscal Stabilization Fund from the amount projected in the second quarter report. The status of the Fiscal Stabilization Fund is provided on page 12.

COMPLIANCE WITH BALANCED BUDGET LEGISLATION

The Balanced Budget, Debt Repayment and Taxpayer Accountability Act includes a requirement for the Minister of Finance to report on compliance with the Act in the government’s Third Quarter Financial Report (for the period ending December 31). Based on the year end projection of a $4.8 million positive balance, the government will be in compliance with this Act.

DEBT RETIREMENT

The 2003 Budget provides for a $96.4 million contribution to the Debt Retirement Fund. As required by balanced budget legislation, an allocation committee determines the share of those funds directed to pension or general purpose debt. The 2003/04 allocation is $75.0 million to pension liability and $21.4 million against General Purpose Debt. The status of the Debt Retirement Fund is outlined on page 11.

Province of Manitoba – Financial Quarterly

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BORROWING ACTIVITY

The original estimate of borrowing requirements identified in the 2003 Budget was $2,032.6 million including refinancing, funding for Manitoba Hydro’s and Health’s capital programs and new self sustaining requirements. This requirement has increased to $2,618.3 million to accommodate debt called prior to maturity and additional requirements for Manitoba Hydro and BSE.

For the period April 1, 2003 to December 31, 2003, $2,286.8 million has been borrowed of which $315.6 million was raised through the issue of Builder Bonds and $1,971.2 million was raised in the public market.

Province of Manitoba — Financial Quarterly

 4 

PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF REVENUE AND EXPENDITURE
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003
(with comparative figures for December 31, 2002)
(UNAUDITED)

2002/03			2003/04			INCREASE				2003/04
ACTUAL			ACTUAL			(DECREASE)				ACTUAL			ESTIMATE			VARIANCE
(thousands of dollars)										(thousands of dollars)
									Revenue
	3,449,141			3,365,705			(83,436	)	Own Source Revenue		3,365,705			3,365,681			24
	1,476,714			1,855,171			378,457		Government of Canada		1,855,171			1,839,894			15,277
	4,925,855			5,220,876			295,021		Total Revenue		5,220,876			5,205,575			15,301
									Expenditure
	4,850,013			5,184,113			334,100		Program Expenditure		5,184,113			5,274,002			(89,889	)
	277,237			275,169			(2,068	)	Debt Servicing		275,169			280,021			(4,852	)
	5,127,250			5,459,282			332,032		Total Expenditure		5,459,282			5,554,023			(94,741	)
	(201,395	)		(238,406	)		(37,011	)	Net Revenue/(Expenditure)		(238,406	)		(348,448	)		110,042
									Interfund Transfers
	—			—			—		Debt/Pension Repayment		—			—			—
	—			—			—		Fiscal Stabilization Fund		—			—			—
	(201,395	)		(238,406	)		(37,011	)	Balance Under Balanced Budget Legislation		(238,406	)		(348,448	)		110,042

Province of Manitoba – Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF REVENUE
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003
(with comparative figures for December 31, 2002)
(UNAUDITED)

2002/03		2003/04		INCREASE				2003/04
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE
(thousands of dollars)								(thousands of dollars)
							Taxation:
							Finance
	1,204,552		1,257,509		52,957		- Individual Income Tax		1,257,509		1,262,010		(4,501	)
	181,457		198,376		16,919		- Corporation Income Tax		198,376		199,865		(1,489	)
	107,928		104,278		(3,650	)	- Corporation Capital Tax		104,278		103,450		828
	109,655		109,325		(330	)	- Gasoline Tax		109,325		109,715		(390	)
	33,544		38,935		5,391		- Insurance Corporations Tax		38,935		38,105		830
	12,203		15,179		2,976		- Land Transfer Tax		15,179		13,522		1,657
	167,592		177,996		10,404		- Levy for Health and Education		177,996		174,843		3,153
	4,550		17,887		13,337		- Mining Tax		17,887		17,887		—
	47,016		46,962		(54	)	- Motive Fuel Tax		46,962		47,271		(309	)
	695,568		725,746		30,178		- Retail Sales Tax		725,746		729,057		(3,311	)
	38,987		39,987		1,000		- Revenue Act, 1964, Part I		39,987		38,853		1,134
	124,391		130,580		6,189		- Tobacco Tax		130,580		129,921		659
	2,178		2,191		13		- Environmental Protection Tax		2,191		2,149		42
	131		71		(60	)	- Other		71		72		(1	)
	2,729,752		2,865,022		135,270				2,865,022		2,866,720		(1,698	)
							Industry, Economic Development and Mines
	2,252		2,290		38		- Oil and Natural Gas Tax		2,290		2,356		(66	)
	2,732,004		2,867,312		135,308				2,867,312		2,869,076		(1,764	)
							Other Revenue:
	13,364		17,918		4,554		Justice		17,918		17,467		451
	62,551		69,004		6,453		Transportation and Government Services		69,004		68,974		30
	72,317		45,609		(26,708	)	Water Stewardship — Water Power Rentals		45,609		49,080		(3,471	)
	193,000		181,000		(12,000	)	Manitoba Lotteries Corporation		181,000		184,000		(3,000	)
	107,000		117,200		10,200		Manitoba Liquor Control Commission		117,200		110,200		7,000
	200,000		—		(200,000	)	Manitoba Hydro		—		—		—
	68,905		67,662		(1,243	)	Other Departments		67,662		66,884		778
	717,137		498,393		(218,744	)			498,393		496,605		1,788
	3,449,141		3,365,705		(83,436	)	Total Own Source Revenue		3,365,705		3,365,681		24

Province of Manitoba – Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF REVENUE
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003
(with comparative figures for December 31, 2002)
(UNAUDITED)

2002/03		2003/04		INCREASE				2003/04
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE
(thousands of dollars)								(thousands of dollars)
							Government of Canada:
	862,900		1,085,356		222,456		Equalization		1,085,356		1,085,670		(314	)
	544,394		576,088		31,694		Canada Health and Social Transfer (CHST)		576,088		575,797		291
	—		90,679		90,679		CHST Supplement		90,679		90,679		—
	43		2,048		2,005		Primary Health Care Transition Fund		2,048		1,323		725
	14,811		10,467		(4,344	)	Medical Equipment Fund		10,467		10,273		194
	—		1,108		1,108		Diagnostic Medical Equipment Fund		1,108		2,000		(892	)
	—		27,456		27,456		Health Reform Fund		27,456		18,216		9,240
							Departments
	33,338		38,370		5,032		- Advanced Education and Training		38,370		38,316		54
	1,140		7,552		6,412		- Justice		7,552		5,650		1,902
	4,288		3,917		(371	)	- Transportation and Government Services		3,917		215		3,702
	15,800		12,130		(3,670	)	- Other Departments		12,130		11,755		375
	1,476,714		1,855,171		378,457				1,855,171		1,839,894		15,277
	4,925,855		5,220,876		295,021		Total Revenue		5,220,876		5,205,575		15,301

Province of Manitoba – Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF PART A – OPERATING EXPENDITURE
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003
(with comparative figures for December 31, 2002)
(UNAUDITED)

2002/03		2003/04		INCREASE				2003/04
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE
(thousands of dollars)								(thousands of dollars)
	17,001		24,739		7,738		Legislative Assembly		24,739		25,894		(1,155	)
	2,163		2,222		59		Executive Council		2,222		2,222		—
	21,732		20,935		(797	)	Aboriginal and Northern Affairs		20,935		23,999		(3,064	)
	352,318		388,243		35,925		Advanced Education and Training		388,243		388,488		(245	)
	81,747		72,876		(8,871	)	Agriculture, Food and Rural Initiatives		72,876		73,144		(268	)
	3,199		3,212		13		Civil Service Commission		3,212		3,418		(206	)
	76,394		75,181		(1,213	)	Conservation		75,181		77,338		(2,157	)
	48,657		49,379		722		Culture, Heritage and Tourism		49,379		51,359		(1,980	)
	759,997		795,864		35,867		Education, Citizenship and Youth		795,864		797,407		(1,543	)
	42,262		43,618		1,356		Employee Pensions and Other Costs		43,618		43,345		273
	23,035		31,419		8,384		Energy, Science and Technology		31,419		32,431		(1,012	)
	614,238		623,662		9,424		Family Services and Housing		623,662		635,056		(11,394	)
	82,179		81,389		(790	)	Finance — Departmental Costs		81,389		82,563		(1,174	)
	277,237		275,169		(2,068	)	Finance — Debt Servicing Costs		275,169		280,021		(4,852	)
	2,100,156		2,285,052		184,896		Health		2,285,052		2,307,086		(22,034	)
	12,441		13,982		1,541		Healthy Child Manitoba		13,982		14,593		(611	)
	16,082		16,098		16		Industry, Economic Development and Mines		16,098		15,693		405
	80,653		81,552		899		Intergovernmental Affairs and Trade		81,552		110,430		(28,878	)
	168,753		177,779		9,026		Justice		177,779		180,074		(2,295	)
	19,056		20,078		1,022		Labour and Immigration		20,078		20,268		(190	)
	503		524		21		Seniors Directorate		524		531		(7	)
	8,043		7,955		(88	)	Sport		7,955		7,969		(14	)
	787		721		(66	)	Status of Women		721		781		(60	)
	248,956		252,294		3,338		Transportation and Government Services		252,294		258,389		(6,095	)
	43,806		33,139		(10,667	)	Water Stewardship		33,139		32,834		305
	1,537		1,717		180		Enabling Appropriations		1,717		2,402		(685	)
	24,318		80,483		56,165		Other Appropriations		80,483		86,288		(5,805	)
	5,127,250		5,459,282		332,032		Total Expenditure		5,459,282		5,554,023		(94,741	)

Province of Manitoba – Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF PART B – CAPITAL INVESTMENT
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003
(with comparative figures for December 31, 2002)
(UNAUDITED)

2002/03		2003/04		INCREASE				2003/04
ACTUAL		ACTUAL		(DECREASE)				ACTUAL		ESTIMATE		VARIANCE
(thousands of dollars)								(thousands of dollars)
	—		81		81		Legislative Assembly		81		85		(4	)
	13		28		15		Agriculture, Food and Rural Initiatives		28		26		2
	383		266		(117	)	Conservation		266		361		(95	)
	—		488		488		Energy, Science and Technology		488		2,840		(2,352	)
	1,046		1,308		262		Family Services and Housing		1,308		1,300		8
	152		268		116		Finance		268		392		(124	)
	662		1,020		358		Health		1,020		2,694		(1,674	)
	1,272		713		(559	)	Justice		713		799		(86	)
	19,681		12,572		(7,109	)	Transportation and Government Services		12,572		17,662		(5,090	)
	7,797		2,817		(4,980	)	Other Appropriations		2,817		4,981		(2,164	)
	31,006		19,561		(11,445	)	Total Capital Investment		19,561		31,140		(11,579	)

Province of Manitoba – Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF VALUATION AND PURPOSE OF
DIRECT AND GUARNTEED DEBT OUTSTANDING
DECEMBER 31, 2003
(with comparative figures for March 31, 2003)
(UNAUDITED)

Canadian		Canadian
Dollar		Dollar		Increase				Canadian		Canadian		Increase
Equivalent		Equivalent		(Decrease)				Dollar		Dollar		(Decrease)
at Date of		at Date of		Dec. 31/03				Valuation		Valuation		Dec. 31/03
Issue		Issue		over				(Note 1)		(Note 1)		over
Dec. 31/03		Mar 31/03		Mar 31/03				Dec. 31/03		Mar 31/03		Mar 31/03
(thousands of dollars)								(thousands of dollars)
							Direct Debt Payable in:
	12,308,272		11,840,549		467,723		Canadian Dollars		12,280,472		11,812,749		467,723
	2,942,952		3,209,198		(266,246	)	Issues Swapped to Canadian Dollars		3,088,842		3,348,799		(259,957	)
	2,721,169		2,702,851		18,318		U.S. Dollars		2,649,420		3,305,925		(656,505	)
	1,088,839		1,224,167		(135,328	)	Issues Swapped to U.S. Dollars		944,682		939,179		5,503
	19,061,232		18,976,765		84,467		Total Direct Debt		18,963,416		19,406,652		(443,236	)
							Guaranteed Debt Payable in:
	1,030,683		979,202		51,481		Canadian Dollars		1,030,683		979,202		51,481
					—		U.S. Dollars						—
	1,030,683		979,202		51,481		Total Guaranteed Debt		1,030,683		979,202		51,481
	20,091,915		19,955,967		135,948		Total Direct and Guaranteed Debt (Note 2)		19,994,099		20,385,854		(391,755	)
	4,997,275		5,679,730		(682,455	)	Less: Sinking Fund Investments		4,997,275		5,679,730		(682,455	)
	177,603		151,850		25,753		Less: Debt Retirement Fund		177,603		151,850		25,753
	14,917,037		14,124,387		792,650		Net Direct and Guaranteed Debt (Note 3)		14,819,221		14,554,274		264,947

See notes on following page.

Province of Manitoba – Financial Quarterly

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PROVINCE OF MANITOBA
OPERATING FUND
STATEMENT OF VALUATION AND PURPOSE OF
DIRECT AND GUARNTEED DEBT OUTSTANDING
DECEMBER 31, 2003
(with comparative figures for March 31, 2003)
(UNAUDITED)

NOTES:

1.	The Canadian Dollar Valuation is calculated using the foreign currency exchange rates in effect at December 31, 2003 and March 31, 2003.
2.	Direct and Guaranteed Debt are payable in Canadian and U.S. dollars. As at December 31, 2003, total Gross Debt was payable 82% in Canadian dollars and 18% in U.S. dollars. Of this total, General Government Program Debt and Other Debt was 100% payable in Canadian dollars (97% at March 31, 2003) while U.S. dollars exposure was nil (3% at March 31, 2003). Manitoba Hydro Debt was payable 53% in Canadian dollars (47% at March 31, 2003) and 47% in U.S. dollars (53% at March 31, 2003).
3.	The above debt was issued for the following purposes:

	December 31, 2003				March 31, 2003
	(in thousands)		(per capita)		(in thousands)		(per capita)
			(Note 6)				(Note 6)
General Government Programs		6,449,417		5,532		6,354,604		5,479
The Manitoba Hydro-Electric Board		6,487,179		5,564		6,343,756		5,469
Capital Investments (Note 4)		294,900		253		294,900		254
Manitoba Hospital Facilities (Note 4)		454,000		389		445,000		384
Other		1,133,725		972		1,116,014		962
Total (Note 5)		14,819,221		12,710		14,554,274		12,548

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 167 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 $264.9 million increase in total debt is primarily due to prefunding debt prior to maturity, funding Manitoba Hydro’s additional borrowing requirements, offset by a net increase in the Debt Retirement Fund and the impact of a stronger Canadian dollar. General government programs prefunding will be offset by maturities in the last quarter of the year resulting in no change from March 31, 2003.
6.	Per capita debt is based upon population figures at January 1, 2004 as reported by Statistics Canada. Taxpayer supported debt including debt for general government programs increased as a result of prefunding maturing debt, offset by a net increase in the Debt Retirement Fund. Self sustaining debt including Manitoba Hydro increased due to funding Hydro’s additional requirements offset by a stronger Canadian dollar. 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

11

PROVINCE OF MANITOBA
DEBT RETIREMENT FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2004
(with comparative figures for March 31, 2003)

(UNAUDITED)

	2003/04			2002/03
	Projection (1)			Actual
	(thousands of dollars)
Fund Balance, Beginning of Year		151,850			100,444
Revenue:
Interest Earnings		6,944			3,228
Transfer from Operating Fund		96,357			96,357
		103,301			99,585
Expenditure:
Transfer to Operating Fund for:
- Pension Obligation (2)		(75,000	)		(48,179	)
Fund Balance, End of Year		180,151			151,850

Notes:

(1)	Based on projected transfers included in the 2003 Budget.
(2)	The actual allocation of funds for 2003/04 of $75.0 million toward the pension obligation and $21.4 million toward the retirement of general purpose debt was determined by the Allocation Committee as per The Balanced Budget, Debt Repayment and Taxpayer Accountability Act.

Province of Manitoba – Financial Quarterly

12

PROVINCE OF MANITOBA
FISCAL STABILIZATION FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2004
(with comparative figures for March 31, 2003)

(UNAUDITED)

	2003/04			2002/03
	Projection			Actual (1)
	(thousands of dollars)
Fund Balance, Beginning of Year		235,514			247,254
Revenue
Interest Earnings		3,035			7,003
Interfund Transfers
Transfer to the Operating Fund		(142,700	)		(22,262	)
Transfer from the Operating Fund
- Re: Year-end surplus		4,758			3,519
		(137,942	)		(18,743	)
Fund Balance, End of Year		100,607			235,514

NOTE:

(1) Based on the 2002/03 Public Accounts.

Province of Manitoba – Financial Quarterly

13

PROVINCE OF MANITOBA
OPERATING FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2004

(UNAUDITED)

	Revised			Budget
	Projection			Projection
	(thousands of dollars)
Revenue		7,291,240			7,313,882
Expenditure		7,407,625			7,256,127
Net Revenue		(116,385	)		57,755
Adjustment for Disaster Related Expenditure		74,800			—
Interfund Transfers
Debt/Pension Repayment		(96,357	)		(96,357	)
Fiscal Stabilization Fund		142,700			48,600
		46,343			(47,757	)
Balance Under Balanced Budget Legislation		4,758			9,998

Province of Manitoba – Financial Quarterly