Province Of Manitoba 18K Annual report (foreign governments) | SEC 17 Nov 06

PROVINCE OF MANITOBA


	This description of Province of Manitoba is dated as of November 17, 2006 and appears as Exhibit 99.1 to the Province of Manitoba’s Annual Report on Form 18-K to the U.S. Securities and Exchange Commission for the fiscal year ended March 31, 2006.

This document (otherwise than as part of a prospectus contained in a registration statement filed under the Securities Act of 1933) does not constitute an offer to sell or the solicitation of an offer to buy any Securities of the Province. The delivery of this document at any time does not imply that the information herein is correct as of any time subsequent to its date.

TABLE OF CONTENTS


		Page

Further Information			2
Summary			3
Map of the Province of Manitoba			5
Province of Manitoba			6
	General Information		6
	Constitutional Framework		6
	Provincial Government		6
Economy			7
	General		7
	Economic Structure		8
	Foreign Merchandise Exports		15
	Capital Investment		16
	Labor Force		17
	Energy		17
Government Finances			18
	Budget		21
	Operating Fund Revenue		23
	Operating Fund Expenses		25
Crown Organizations and Government Business Enterprises			27
Public Debt			29
	Borrowings Record		29
	Direct Funded Borrowings of the Province		29
	Guaranteed Borrowings of the Province		31
	Maturity Schedule		32
	Sinking Funds		32
	Unfunded Debt		32
	Consolidated Funded Borrowings of the Manitoba Public Sector		33
	Selected Borrowings Information		34
	Pension Liability		35
The Manitoba Hydro-Electric Board			36
	Operations		37
	Rate Matters		38
	Statistical Information		39
	Construction Program		40
	Export Power Sales		42
	Canadian Foreign Exchange		44
Tables of Supplementary Information			45

FURTHER INFORMATION

This document appears as an exhibit to Manitoba’s Annual Report to the U.S. Securities and Exchange Commission on Form 18-K for the fiscal year ended March 31, 2006. Additional information with respect to Manitoba is available in that Annual Report, in the other exhibits to that Annual Report and in amendments thereto. The Annual Report exhibits and amendments can be inspected and copied at the public reference facilities maintained by the Commission at: 100 F Street, N.E., Washington, D.C. 20549. Copies of those documents may also be obtained at prescribed rates from the Public Reference Section of the Commission at its Washington address or from the Province of Manitoba, Department of Finance, Treasury Division, Room 9, Legislative Building, Winnipeg, Manitoba R3C 0V8, Canada.

The fiscal year of Manitoba ends March 31. “Fiscal 2006” and “2005-2006” refer to the fiscal year ended March 31, 2006 and, unless otherwise indicated, “2005” means the calendar year ended December 31, 2005. Other fiscal years and calendar years are referred to in a corresponding manner.

In this document, unless otherwise specified or the context otherwise requires, all dollar amounts are expressed in Canadian dollars (“$” or “C$”) and all references to “dollars” are to Canadian dollars. See “Canadian Foreign Exchange” for information regarding the rates of conversion of U.S. dollars into Canadian dollars.

At November 16, 2006, the noon spot exchange rate for U.S. dollars as reported by Bank of Canada, expressed in Canadian dollars, was $1.1404.

Totals in the statistical tables set forth in this document may not add due to rounding.

SUMMARY

The following information is qualified in its entirety by the more

detailed information in this document.

PROVINCE OF MANITOBA

Economy


																	Compound
		Year Ended December 31,															Annual
																	Growth Rate
		2001			2002			2003			2004			2005			2001-2005

		(In millions of dollars unless otherwise indicated)
Nominal Gross Domestic Product			$35,129			$36,650			$37,798			$40,177			$42,112			4.6	%
Change in Real Gross Domestic Product
	Manitoba		0.8	%		2.1	%		2.0	%		2.7	%		2.9	%		—
	Canada		1.8			2.9			1.8			3.3			2.9			—
Manufacturing Shipments			$11,344			$11,820			$12,696			$13,517			$13,491			4.4
Farm Cash Receipts			3,701			3,848			3,574			3,903			3,743			0.3
Capital Investment			5,803			6,013			6,163			6,699			6,963			4.7
Personal Income			29,246			29,918			30,756			32,009			32,996			3.1
Population at July 1 (in thousands)			1,151			1,156			1,162			1,171			1,174			0.5
Average Unemployment Rate			5.1	%		5.1	%		5.0	%		5.3	%		4.8	%		—
Change in Consumer Price Index (Manitoba)			2.6			1.6			1.8			2.0			2.7			—
Average Exchange Rate (C$ per U.S.$)			1.5484			1.5704			1.4015			1.3015			1.2116			—

Revenue and Expenses of the Government Reporting Entity(1)


	Year Ended March 31,

	2002			2003			2004			2005			2006

	($ millions)
Total Revenue		8,350			8,320			8,491			10,140			10,725
Total Expenses		(8,360	)		(8,555	)		(9,070	)		(9,578	)		(10,350	)
Adjustment to estimate for Federal accounting error		—			51			—			—			—

Summary Net Income (Loss)		(10	)		(184	)		(579	)		562			375

(1) See “Statement of Revenue and Expense of the Government Reporting Entity” on page 20.

Net Direct Funded and Guaranteed Borrowings


		As of March 31,

		2002			2003			2004			2005			2006

		(In millions of dollars)
Consisting of
	Net Direct Funded Borrowings		$13,833			$13,601			$14,787			$15,496			$15,621
	Net Provincial Guaranteed Borrowings		570			953			892			652			491

			$14,403			$14,554			$15,679			$16,148			$16,112

Issued for
	General Government Programs (1)		$6,651			$6,650			$6,867			$6,958			$7,047
	Self-Sustaining Purposes		7,752			7,904			8,335			8,694			8,563
	Loans Payable to the Government of Canada and Government Business Enterprises (2)		—			—			477			496			502

			$14,403			$14,554			$15,679			$16,148			$16,112

General Government Programs Borrowings as a Percentage of Nominal Gross Domestic Product			18.9	%		18.1	%		18.2	%		17.3	%		16.7	%

(1) Total borrowings issued for Government General Programs includes borrowings for Capital Assets.

(2) Canadian generally accepted accounting principles (“GAAP”) for senior Governments as recommended by the Canadian Institute of Chartered Accountants require certain amounts owing to the Federal Government and Government Business Enterprises be recorded as loans payable. These amounts were first recorded in the 2003/04 Fiscal Year. See “Public Debt — Direct Funded Borrowings of the Province (note 5).”

Summary Net Debt


		As of March 31,

		2002			2003			2004			2005			2006

		(In millions of dollars)
Total Financial Assets (1)			$4,221			$4,044			$3,745			$4,758			$5,310

Liabilities:
	Net Borrowings (2)		8,665			8,789			9,116			9,362			9,465
	Accounts Payable and Other		2,328			2,180			2,187			2,305			2,397
	Pension Liability		3,237			3,430			3,571			3,761			3,967

Total Liabilities			14,230			14,399			14,874			15,428			15,839

Summary Net Debt			$10,009			$10,355			$11,129			$10,670			$10,519

Summary Net Debt as a Percentage of Nominal Gross Domestic Product			28.5	%		28.3	%		29.4	%		26.6	%		25.0	%

(1) Includes cash, accounts receivable, loans and investments, equity in government business enterprises and other financial assets.

(2) Borrowings less sinking funds. Excludes borrowings incurred for and repayable by the Manitoba Hydro-Electric Board and Manitoba Lotteries Commission. Also includes unamortized currency fluctuations. See “Tables of Supplementary Information — Table I”.

PROVINCE OF MANITOBA

General Information

The Province of Manitoba is located in the center of Canada, north of the States of Minnesota and North Dakota. It is the most easterly of the three Provinces of Manitoba, Saskatchewan and Alberta, which together constitute the Prairie Region of Canada. Manitoba is bounded on the east by the Province of Ontario, on the north by Hudson Bay and the Territory of Nunavut, and on the west by the Province of Saskatchewan. The Province has 400 miles of northern coastline bordering on Hudson Bay. The only seaport in the Prairie Region is located at Churchill on Hudson Bay.

Of Manitoba’s total area of 251,000 square miles, 39,000 square miles are lakes and rivers and 163,000 square miles are lands owned by the Province. Cultivated land comprises 30,000 square miles in the southern part of the Province. The northern part of the Province, which is part of the Canadian Shield, is composed largely of timberlands and extensive areas of mineralized rock structure.

The estimated population of Manitoba on July 1, 2006 was 1,177,765 of whom approximately 712,200 lived in the Winnipeg Census Metropolitan Area. Winnipeg, the capital of the Province, has a diversified economic base with significant activity in a variety of manufacturing and service sectors. The city is also a major rail, truck and air transportation hub by virtue of its geographical position in the center of the continent.

The second largest city in the Province is Brandon, with a population of approximately 40,000. Brandon, in western Manitoba, is a major supply center for the agriculture industry, as well as an agriculture-related manufacturing center.

Constitutional Framework

Canada consists of a federation of provinces and Federal territories. A constitutional division of powers between the Federal and provincial governments was established by the British North America Act, 1867, an Act of the Parliament of the United Kingdom. By later enactments, including the Constitution Act, 1982, the power to amend the Constitution of Canada (the “Constitution”) was transferred to Canada.

Under the Constitution, the Provinces are assigned jurisdiction over health care, education, municipal institutions, property and civil rights, natural resources and other matters of purely provincial or local concern. Each Province has exclusive jurisdiction over the borrowing of money on the sole credit of that Province. The Parliament of Canada has jurisdiction over all areas not assigned exclusively to the provincial legislatures, including such matters as aboriginal persons, the federal public debt and property, the regulation of trade and commerce, currency and coinage, banks and banking, national defense, foreign affairs, postal services, interprovincial transportation and communications undertakings.

Various Constitutional issues have been under discussion in Canada for a number of years. On August 20, 1998, in response to a reference from the Federal Government, the Supreme Court of Canada ruled that under the Constitution of Canada and international law, Quebec may not secede unilaterally from Canada, but that if the people of Quebec voted to secede by a clear majority vote on a clear question, the other Provinces and the Federal Government would be obliged to enter negotiations with Quebec with respect to secession, such negotiations to be guided by constitutional principles, including federalism, democracy, constitutionalism and the rule of law, and the protection of minorities.

Provincial Government

The Provincial Government has general responsibility for the administration of all governmental activities and functions within Manitoba, other than those which are under the jurisdiction of the Federal Government. It carries out certain of these responsibilities through Provincial agencies, boards, commissions and Crown organizations. Certain other responsibilities

have been delegated to municipalities and semi-autonomous bodies such as school boards and regional health authorities.

The executive power in the Province of Manitoba is vested in the Lieutenant Governor acting on the advice of the Executive Council, which is responsible to the Legislative Assembly. The Lieutenant Governor is appointed by the Governor General of Canada in Council.

The Executive Council, which includes the Premier and Ministers of Departments of the Provincial Government, is appointed by the Lieutenant Governor usually on the nomination of the leader of the party with the largest number of members in the Legislative Assembly. Members of the Executive Council are usually members of the Legislative Assembly.

The Legislative Assembly has 57 members who are elected for a term of five years subject to earlier dissolution of the Assembly by the Lieutenant Governor, usually on the recommendation of the Executive Council. In the latest general election of members of the Legislative Assembly, held on June 3, 2003, the New Democratic Party was elected to a majority of seats.

The following table sets forth the results of the three most recent elections of the Province.


	1995		1999		2003

New Democrat		23		32		35
Progressive Conservative		31		24		20
Liberal		3		1		2

Total		57		57		57

ECONOMY

General

Manitoba has a diversified economy. Its major industries are manufacturing; finance, insurance and real estate; transportation and storage; wholesale trade; retail trade; information and culture; construction; and agriculture. The largest components of manufacturing are food processing; transportation equipment; chemicals; machinery; wood products; fabricated metals; furniture; plastics and rubber; and printing. Agricultural production is diversified between crops and livestock. In transportation, Manitoba is a major center for truck, rail and air transport, and there is a deep-sea port at Churchill on Hudson Bay. The Province exports a large portion of its production.

The following table sets forth growth rates in 2005 for key economic indicators and selected sectors of the economy for Manitoba and Canada, as well as the unemployment rate for 2005.


	Manitoba			Canada

Housing Starts		6.6	%		-3.4	%
Retail Sales		6.4			6.1
Manufacturing Shipments		0.2			0.8
Gross Domestic Product		4.8			6.2
Real Gross Domestic Product		2.9			2.9
Capital Investment		3.9			7.1
Foreign Merchandise Exports		1.5			6.0
Farm Cash Receipts		-4.1			1.2
Value of Mineral Production		12.7			23.0
Consumer Price Index		2.7			2.2
Employment		0.6			1.4
Average Unemployment Rate		4.8			6.8

Year-to-date data for 2006 indicate that housing starts, foreign exports, retail sales, manufacturing shipments, utilities and employment are increasing. Farm cash receipts have decreased in 2006. According to the February 2006 Statistics Canada survey of investment intentions, capital investment is expected to increase by 14.6% to $8.0 billion, as public investment increases 27.1% and private investment increases 10.4% in 2006.

The following table sets forth selected indicators of economic activity and the compound annual growth rates for Manitoba and Canada for the calendar years 2001 through 2005. In this table and throughout this document, compound annual growth rates are calculated by distributing the aggregate amount of growth during the period on the basis of a constant annual rate of growth compounded annually.

SELECTED ECONOMIC INDICATORS


																		Compound
																		Annual
			Year Ended December 31,															Growth
																		Rate
			2001			2002			2003			2004			2005			2001-2005

			(In millions of dollars unless otherwise indicated)
Nominal Gross Domestic Product (1)
	Manitoba			$35,129			$36,650			$37,798			$40,177			$42,112			4.6	%
	Canada			1,108,048			1,152,905			1,213,408			1,290,788			1,371,425			5.5
Real Gross Domestic Product Manitoba (2)				$33,066			$33,747			$34,414			$35,360			$36,372			2.4
		Change		0.8	%		2.1	%		2.0	%		2.7	%		2.9	%		—
	Canada (2)			$1,038,702			$1,069,282			$1,088,773			$1,124,688			$1,157,705			2.7
		Change		1.8	%		2.9	%		1.8	%		3.3	%		2.9	%		—
Personal Income				$29,246			$29,927			$30,748			$32,009			$32,997			3.1
Personal Income Per Capita (in Dollars)				25,409			25,888			26,461			27,335			28,106			2.6
Retail Sales				9,878			10,570			10,953			11,692			12,441			5.9
Capital Investment				5,803			6,013			6,163			6,699			6,963			4.7
Housing Starts (Units)				2,963			3,617			4,206			4,440			4,731			12.4
Change in Consumer Price Index Manitoba				2.6	%		1.6	%		1.8	%		2.0	%		2.7	%		—
	Canada			2.6	%		2.2	%		2.8	%		1.9	%		2.2	%		—
Population (July 1) (in thousands)
	Manitoba			1,151			1,156			1,162			1,171			1,174			0.5
	Canada			31,021			31,373			31,676			31,990			32,300			1.0
Employment (in thousands)				554.3			567.2			570.3			576.6			580.3			1.2
Average Unemployment Rate				5.1	%		5.1	%		5.0	%		5.3	%		4.8	%		—
Average exchange rate (C$ per U.S.$)				$1.5484			$1.5704			$1.4015			$1.3015			$1.2116			—


	(1)	At market prices.

	(2)	Expressed in 1997 dollars.

Sources: Statistics Canada, Manitoba Bureau of Statistics and Manitoba Department of Finance.

Economic Structure

The Province has a diversified economy. In 2005, goods producing industries accounted for 26.2% of real gross domestic product at basic prices. Manufacturing accounted for 12.8% of real gross domestic product at basic prices, construction for 4.6% and agriculture for 3.5%. The commercial service sector accounted for 54.8% of real gross domestic product at basic prices, and the non-commercial service sector for 19.0%.

The following table sets forth the Real Gross Domestic Product by industry at basic prices and the compound annual growth rates for the calendar years 2001 through 2005.

REAL GROSS DOMESTIC PRODUCT AT BASIC PRICES BY INDUSTRY (1)


													Compound
													Annual
			Year Ended December 31,										Growth
													Rate
			2001		2002		2003		2004		2005		2001-2005

			(In millions of 1997 dollars)
Goods Producing Industries
	Manufacturing			$3,827		$3,898		$3,957		$4,144		$4,284		2.9	%
	Construction			1,334		1,320		1,406		1,470		1,551		3.8
	Agriculture			1,312		1,339		1,544		1,453		1,186		-2.5
	Utilities			1,009		996		864		943		1,108		2.4
	Mining			610		548		516		563		585		-1.0
	Forestry, Fishing and Trapping			68		75		78		84		83		5.1

Total Goods Producing Industries				8,160		8,176		8,365		8,657		8,797		1.9

Service Producing Industries
	Commercial Services
		Finance, Insurance and Real Estate		3,289		3,348		3,415		3,534		3,642		2.6
		Owner-Occupied Dwellings (2)		2,746		2,818		2,852		2,893		2,964		1.9
		Transportation and Storage		2,131		2,084		2,119		2,226		2,336		2.3
		Wholesale Trade		1,925		1,974		2,032		2,097		2,305		4.6
		Retail Trade		1,887		1,981		2,027		2,116		2,235		4.3
		Information and Culture		1,421		1,569		1,625		1,660		1,708		4.7
		Professional and Scientific		754		781		818		850		880		3.9
		Accommodation, Food and Beverage		843		833		834		820		828		-0.4
		Business Services		470		514		529		542		556		4.3
		Other Services		890		923		931		913		922		0.9

	Total Commercial Services Industries			16,356		16,825		17,182		17,651		18,376		3.0

	Non-commercial Services
		Health and Welfare		2,261		2,336		2,415		2,423		2,460		2.1
		Education		1,584		1,613		1,607		1,612		1,623		0.6
		Federal Administration		979		971		978		982		991		0.3
		Provincial Administration		745		767		734		744		748		0.1
		Municipal Administration		514		535		537		549		553		1.8

	Total Non-commercial Services
		Industries		6,083		6,222		6,271		6,310		6,375		1.2

Total Service Producing Industries				22,439		23,047		23,453		23,961		24,751		2.5

Real Gross Domestic Product at Basic Prices (3)				$30,603		$31,225		$31,819		$32,617		$33,551		2.3

(1) Real gross domestic product measures value added and therefore differs from the value of production or the value of shipments by industry. Real gross domestic product at basic prices is the sum of all factor incomes from production in the Province. Real gross domestic product at basic prices plus indirect taxes, minus subsidies, equals real gross domestic product at market prices. Amounts in the table are expressed in 1997 dollars.

(2) Imputed rent value of Owner-Occupied Dwellings.

(3) Total real gross domestic product at basic prices does not equal the sum of real gross domestic product by industry due to the chaining of dollars.

Source: Manitoba Bureau of Statistics.

Manufacturing. Manufacturing is the largest sector of the Manitoba economy and is well diversified with the four largest industries accounting for only 50.8% of the value of total shipments in 2005.

The largest industry, food, accounts for 25.7% of total shipments, and produces a broad range of products. The next largest industries are: transportation equipment, primarily buses and aerospace equipment (11.3% of shipments); machinery, mainly agricultural implements (7.2% of shipments) and chemicals, primarily industrial chemicals and pharmaceuticals (6.6% of shipments). The remaining industries range in size from 5.4% to 1.5% of shipments.

In 2005, manufacturing shipments decreased 0.2% due primarily to lower shipments in transportation equipment and printing offset by increased shipments in electrical and electronics equipment, fabricated metals and beverages industries.

The following table sets forth the gross value of manufacturing shipments and the compound annual growth rates of the principal Manitoba manufacturing industries for the calendar years 2001 through 2005.

GROSS VALUE OF MANUFACTURING SHIPMENTS


												Compound
												Annual
		Year Ended December 31,										Growth
												Rate
		2001		2002		2003		2004		2005		2001-2005

		(In millions of dollars)
Non-durables
	Food		$2,442.7		$2,554.4		$2,885.5		$3,405.9		$3,464.4		9.1	%
	Chemicals		635.9		685.9		792.0		923.2		1,892.8		8.8
	Plastics and Rubber		511.9		509.1		540.2		575.8		589.4		3.6
	Printing		547.2		606.3		559.0		528.4		445.4		-5.0
	Beverages		211.9		197.2		236.7		272.2		284.0		7.6
	Clothing		293.3		455.2		371.5		275.5		197.4		-9.4
	Other Non-durables		715.1		716.7		660.0		656.3		645.2		-2.5
Durables
	Transportation Equipment		1,789.8		1,534.0		1,971.5		1,708.9		1,524.1		-3.9
	Machinery		788.5		928.1		851.7		940.6		976.2		5.5
	Wood Products		597.3		615.0		667.5		759.8		734.1		5.3
	Fabricated Metals		582.0		581.1		599.7		672.5		711.9		5.2
	Furniture		498.9		674.6		730.2		670.0		621.3		5.6
	Electrical and Electronics		233.1		176.0		124.0		153.3		201.2		-3.6
	Other Durables		1,496.3		1,586.4		1,706.2		1,975.0		2,203.3		10.2

Total			$11,343.8		$11,820.1		$12,695.8		$13,517.5		$13,490.7		4.4

Source: Statistics Canada.

In the first nine months of 2006, the value of manufacturing shipments increased 3.2% compared to the first nine months of 2005. The increase is principally due to a 17.3% increase in electrical and electronics equipment, a 14.3% increase in printing and publishing, an 8.3% increase in food and an 8% increase in beverages. Overall, eight of fourteen categories of manufacturing shipments reported increases.

Agriculture. Farm cash receipts are divided between crops and livestock and are well diversified within these major sectors of production.

In 2005, farm cash receipts decreased 4.1%. Crop receipts decreased 28.3% due to lower receipts from oilseeds, specialty and forage, wheat, and other grains reflecting excessive precipitation and low commodity prices. Livestock receipts increased 6.6% as a result of an increase of 64.0% in cattle receipts which was partially offset by a 3.2% decline in hogs. Direct payments increased 51.4%.

The following table sets forth farm cash receipts and the compound annual growth rates for the calendar years 2001 through 2005.

FARM CASH RECEIPTS


												Compound
												Annual
		Year Ended December 31,										Growth
												Rate
		2001		2002		2003		2004		2005		2001-2005

		(In millions of dollars)
Crops
	Oilseeds		$416.1		$587.7		$626.6		$669.3		$394.9		-1.3	%
	Wheat		586.3		658.4		457.8		555.1		389.3		-9.7
	Vegetables		202.4		204.4		206.1		220.9		226.6		2.9
	Other Grains		193.5		212.2		165.9		149.9		110.3		-13.1
	Specialty and Forage		154.1		206.9		227.1		163.9		96.7		-11.0
	Other (1)		-33.0		43.3		20.6		28.5		64.6		N/M

Total Crops			1,519.3		1,912.8		1,704.0		1,787.6		1,282.4		-4.1

Livestock
	Hogs		805.7		719.0		762.7		929.3		899.4		2.8
	Cattle and Calves		573.5		555.8		340.7		265.4		435.3		-6.7
	Dairy		158.0		163.9		174.4		178.8		184.0		3.9
	Poultry and Eggs		149.5		149.8		153.7		161.0		154.5		0.8
	Other Livestock		113.0		128.1		129.8		121.9		92.6		-4.9

Total Livestock			1,799.7		1,716.5		1,561.3		1,656.3		1,765.8		-0.5

Direct Payments			382.1		219.0		308.1		458.7		694.5		16.1

Total			$3,701.1		$3,848.3		$3,573.5		$3,902.7		$3,742.6		0.3

Net Cash Income (2)			$911.6		$929.2		$505.4		$763.1		$625.6		-9.0

(1) Includes other crops, and, as a negative amount, deferred payments on all crops.

(2) Represents farm cash receipts less operating expenses.

Source: Statistics Canada.

In 2001, Direct Payments include payments under the temporary disaster income assistance programs for farm producers implemented by the provincial and Federal Governments in respect of poor weather conditions in the Province. These weather conditions prevented or delayed crop seeding in some regions. These payments were $117.6 million in 2001. In 2004, Direct Payments to Manitoba agriculture producers increased mainly due to $86.6 million in income support payments provided to crop and livestock producers under the new Federal Transitional Industry Support Program (“TISP”), $79.0 million from the Canadian Agricultural Income Stabilization (“CAIS”) program, an increase of $38.0 million in Net Income Stabilization Account (“NISA”) payments and an increase of $26.1 million in crop insurance payments. In 2005, Direct Payments to Manitoba agriculture producers increased mainly due to $118.9 million in income support payments provided to crop and livestock producers under the new Federal Farm Income program, an increase of $107.8 million from the CAIS program, and an increase of $181.9 million in crop insurance payments. Payments under the NISA declined by $60.0 million while the Federal TISP declined $85.6 million.

On May 20, 2003, the Canadian Food Inspection Agency (“CFIA”) announced that tests had confirmed that a case of Bovine Spongiform Encephalopathy (“BSE”) had been found in a single beef cow in the Province of Alberta. The inspection system prevented the meat from entering the food chain. More than 2,700 animals were destroyed and tested as part of the CFIA’s investigation, which is now concluded. All test results for BSE were negative and the investigation did not identify any additional cases.

On May 20, 2003, the United States Department of Agriculture (“USDA”) placed Canada under its BSE restriction guidelines and announced that it would not accept any live ruminants (cattle, sheep and certain other hoofed animals) or ruminant products from Canada pending further investigation. Several other countries also imposed import restrictions. On August 8, 2003, the USDA announced that it would begin to accept applications for import permits for certain boneless ruminant products, including boneless bovine meat from cattle under 30 months of age. Several other countries followed the U.S. lead and resumed the import of certain Canadian beef products.

The closure of the Canada-U.S. border to Canadian ruminants and ruminant products adversely impacted the Canadian ruminant industry. The Canadian Government and certain provincial governments, including the Government of Manitoba, implemented various programs to provide support to the industry. In July 2005, the border was reopened for cattle under 30 months of age.

On March 5, 2004, the National Pork Producers Council in the United States, along with state pork producer organizations, filed anti-dumping and countervailing duty petitions with the United States government against Canadian swine exporters. On October 15, 2004, the U.S. Department of Commerce announced that, as a result of their investigations, a preliminary duty of 14.06% will be applied to live swine exports from Canada. Manitoba accounts for approximately half of Canada’s live swine exports to the United States, and, in 2004 exported live swine valued at approximately $352 million to that country. The International Trade Commission officially found that Canadian swine exporters were causing no injury to the U.S. industry resulting from alleged “dumping” in April 2005. The 14.06% duty on swine exports has been lifted.

In the first six months of 2006, farm cash receipts decreased 7.8% from the same period in 2005. Crop cash receipts decreased 21.6%, primarily due to lower production volumes associated with the 2005 growing year, with the decreases occurring across all the major crop categories except specialty and forage. Livestock cash receipts decreased 5.5% with cattle and calves increasing 26.7% and hog receipts decreasing 14.0%. Direct Payments increased $50.4 million or 13.9%.

In 2006, crop production volumes are expected to be above 2005 levels, as a result of good conditions during the planting and growing season in Manitoba which should lead to higher production values. The value of livestock production in Manitoba is expected to continue to increase following the reopening of the Canada-U.S. border to cattle.

Minerals. The principal metals produced in Manitoba are nickel, zinc, copper, and gold. Other metals include cobalt, silver, tantalum and platinum. Industrial minerals produced consist principally of sand and gravel, stone, peat moss and lime.

The two companies with the largest mining operations in Manitoba, accounting for approximately 66% of all mineral production, are Inco Limited, which produces mainly nickel, copper and cobalt, and Hudson Bay Mining and Smelting Co., Limited, which produces mainly copper and zinc.

In 2005, the gross value of mineral production in Manitoba increased 12.7% to $1,585 million. The value of metal production increased 3.3% in 2005 as a result of higher prices for nickel. Nickel accounted for 44% of the gross value of mineral production in 2005. The value of zinc and copper production increased as a result of higher production volumes and higher prices. The value of petroleum production increased 67.1%, reflecting higher prices and increased production volume, while the value of industrial mineral production increased 10.5%.

The following table sets forth the gross value of mineral production and the compound annual growth rates for the calendar years 2001 through 2005.

GROSS VALUE OF MINERAL PRODUCTION


												Compound
												Annual
		Year Ended December 31,?										Growth
												Rate
		2001		2002		2003		2004		2005		2001-2005

		(In millions of dollars)
Metals
	Nickel		$412.2		$403.4		$523.0		$673.1		$697.4		14.0	%
	Zinc		129.3		118.3		97.3		136.4		167.6		6.7
	Copper		97.1		96.0		69.6		147.1		152.6		12.0
	Gold		86.3		85.6		63.1		76.0		49.6		-12.9
	Other Metals		66.5		50.7		44.3		72.4		74.2		2.8

Total Metals			791.5		754.0		797.2		1,105.1		1,141.3		9.6
Petroleum			135.0		154.1		157.4		195.7		327.1		24.8
Industrial Minerals			93.6		96.5		95.0		105.2		116.3		5.6

Total			$1,020.1		$1,004.5		$1,049.6		$1,406.1		$1,584.7		11.6

Sources: Statistics Canada and Manitoba Department of Energy and Mines.

Overall mining values are expected to increase in 2006. Higher prices for metals especially zinc and copper, combined with production volumes near 2005 levels are expected to increase the overall value of production in the province.

In 2005, gold production fell due to the closure of the New Britannia mine in Snow Lake. San Gold Corporation began gold production at their Rice Lake mine near Bissett in August, 2006. The company has announced plans to produce approximately 60,000 ounces of gold in 2007.

Services. The service sector comprises a wide range of activities including transportation, finance, trade, tourism and personal services. From 2001 through 2005, commercial service industries accounted for 49.1% of average total employment in Manitoba, and non-commercial (primarily publicly funded) services accounted for 26.6%.

Winnipeg is an air, rail and trucking hub, connected to Canadian and international markets. Both of Canada’s national railways pass through Winnipeg where they have large operations. Several of Canada’s largest trucking firms are headquartered in Manitoba. Because Winnipeg International Airport is one of the few that does not have nighttime landing restrictions, and is centrally located in North America, it is a major hub for courier services.

Commodity trading and financial services are important components of Winnipeg’s economy. In particular, the city is the center of Canada’s grain trade. The Canadian Wheat Board is located in Winnipeg. The Winnipeg Commodity Exchange is the only commodity exchange, and the second largest futures exchange, in Canada. Nine grain companies have their head office or Canadian head office in Winnipeg. Winnipeg is also the headquarters of Canada’s largest mutual fund company, Investors Group, and one of Canada’s largest life insurance companies, Great-West Life.

Manitoba’s central location, low-cost office space and multilingual labor force have contributed to the expansion of call centers (telemarketing and customer service centers) in the Province. Data processing and engineering are important extra-provincial export-oriented industries. Winnipeg is the headquarters for Canwest Global Communications Corp., one of the largest media companies in Canada.

Winnipeg serves as a regional shopping center for all of southern Manitoba. In 2005, retail sales in Manitoba increased 6.4% to $12.4 billion. In the first eight months of 2006, retail sales increased 6.0% compared to the same period of 2005.

The Province has a well-developed tourism industry. As a result of Manitoba’s central location, the Province attracts national and international convention activity. Winnipeg serves as a regional entertainment center for portions of North Dakota, Minnesota and northwestern Ontario. Manitoba has an excellent resource base for outdoor recreational activities and has many public and private tourism facilities. In 2005, estimated tourism expenditures by both residents of Manitoba and visitors were $1,475 million, an increase of 2.4% from 2004.

Total Exports and Imports

In 2005, total exports of Manitoba goods and services to foreign markets and other provinces increased 4.0% to $25.3 billion. Total imports increased 4.1% to $26.7 billion. The trade deficit was $1.4 billion. Total exports were equal to 60.1% of GDP while total imports were equal to 63.4%.

The following table sets forth categories of Selected Trade indicators for the calendar years 2001 through 2005.

SELECTED TRADE INDICATORS


		Year ended December 31,

		2001			2002			2003			2004			2005

		(In millions of dollars unless otherwise indicated)
Exports of Goods and Services
	International		$11,009			$11,393			$11,185			$12,012			$12,559
	Interprovincial		11,235			11,287			11,639			12,297			12,729

Total Exports of Goods and Services			22,244			22,680			22,824			24,297			25,290
Ratio of total exports to Nominal Gross Domestic Product			63.3%			61.9%			60.4%			60.5%			60.1%
Imports of Goods and Services
	International		10,414			11,390			11,075			11,385			11,664
	Interprovincial		12,466			12,703			13,370			14,240			15,024

Total Imports of Goods and Services			22,881			24,093			24,445			25,625			26,688
Ratio of total imports to Nominal Gross Domestic Product			65.1%			65.7%			64.7%			63.8%			63.4%

Trade Balance			$(637	)		$(1,413	)		$(1,621	)		$(1,329	)		$(1,398	)

Source: Statistics Canada and the Manitoba Bureau of Statistics.

Goods exports accounted for 91.2% of all international exports in 2005 (90.8% in 2004), while services exports accounted for 8.8% in 2005 (9.2% in 2004).

Goods exports accounted for 50.4% of all interprovincial exports in 2005 (51.6% in 2004), while services accounted for 49.6% in 2005 (48.4% in 2004).

Goods imports accounted for 85.9% of all international imports in 2005 (85.6% in 2004), while services accounted for 14.1% in 2005 (14.4% in 2004).

Goods imports accounted for 59.3% of all interprovincial imports in 2005 (59.9% in 2004), while services imports accounted for 40.7% in 2005 (40.1% in 2004).

Foreign Merchandise Exports

In 2005, foreign merchandise exports amounted to $9.7 billion, an increase of 1.5% from 2004, and were equal to 23.0% of GDP at market prices. In 2005, of the total foreign merchandise exports, 76.1% were to the United States, 15.1% to Asia, 4.7% to Europe and 2.1% to Mexico.

Over the five years 2001 to 2005, exports to the United States decreased by 0.6% (representing a compound annual growth rate of - -0.2%) and exports to all other countries increased by 7.3% (representing a compound annual growth rate of 1.8%).

The following table sets forth foreign exports by commodity and the compound annual growth rates for the calendar years 2001 through 2005.

FOREIGN EXPORTS BY COMMODITY (1)


												Compound
												Annual
		Year Ended December 31,?										Growth
												Rate
		2001		2002		2003		2004		2005		2001-2005

		(In millions of dollars)
Manufacturing
	Food	$	996.0	$	1,058.6	$	1,085.8	$	1,139.4	$	1,080.4		2.1%
	Transportation Equipment		1,139.7		944.9		878.4		932.0		1,007.2		-3.0
	Primary Metals		803.5		847.1		870.2		963.0		920.2		3.4
	Machinery		535.9		679.8		620.8		728.0		776.3		9.7
	Wood Products		531.4		573.3		553.0		638.4		623.0		4.1
	Chemicals		418.1		396.3		459.7		457.7		459.9		2.4
	Paper and Allied		254.9		267.1		298.6		300.5		294.2		3.6
	Plastics		210.5		221.4		229.1		233.9		242.3		3.6
	Electrical and Electronic		273.8		188.2		187.9		192.3		238.2		-3.4
	Printing and Publishing		165.6		195.2		182.7		183.9		189.4		3.4
	Fabricated Metal		126.1		119.2		116.2		130.8		163.1		6.6
	Furniture and Fixtures		171.5		166.8		125.2		111.1		94.9		-13.8
	Clothing and Textiles		130.9		120.7		98.4		74.0		53.5		-20.0
	Other		271.4		324.3		352.9		358.0		267.6		-0.4

Total Manufacturing			6,029.3		6,103.0		6,058.7		6,443.0		6,410.4		1.5

Agriculture
	Oilseeds		445.2		397.5		694.0		603.6		460.6		0.9
	Hogs		247.5		246.0		276.4		352.4		418.2		14.0
	Wheat		690.4		582.6		621.8		677.1		412.2		-12.1
	Other Grains		179.7		136.0		176.2		152.6		147.2		-4.9
	Vegetables		166.4		152.5		161.6		143.4		142.9		-3.7
	Cattle		257.7		273.2		106.7		0.0		119.1		-17.5
	Other Agriculture		43.1		51.0		35.5		32.6		23.4		-14.2

Total Agriculture			2,030.0		1,838.9		2,072.2		1,961.6		1,723.6		-4.0

Electricity			534.7		390.5		263.7		379.7		572.1		1.7
Other Primary			50.4		35.8		31.4		30.2		46.5		-2.0
Oil Trans Shipment			664.1		756.5		488.6		400.9		550.3		-4.6
Other			267.8		279.5		279.7		322.7		376.0		8.9

Total		$	9,576.2	$	9,404.3	$	9,194.3	$	9,538.2	$	9,678.8		0.3

(1) Most export data, except for some principal grains, are based on port-of-exit information; consequently, data for several categories do not reflect the true value of provincial foreign exports. The above data for 2005 include two items that do not truly reflect foreign exports of Manitoba products. Oil Trans Shipment represents crude oil production that originated in Alberta and Saskatchewan and was

shipped through the Province. The value of nickel exports is $464.7 million. This does not include an estimated $93.2 million of nickel which was exported through Ontario.

Source: Statistics Canada.

Total foreign exports for the first eight months of 2006 were up 10.1% compared to the first eight months of 2005. On a year-to-date basis, exports to the United States have increased by 9.6% while exports to other countries have increased by 11.5%.

Capital Investment

In 2005, capital investment increased 3.9%. The largest percentage increases in capital investment occurred in: utilities; minerals; transportation and storage; and professional and scientific. The largest decreases in capital investment occurred in other capital (primarily accommodation, food services, arts, entertainment and recreation); retail trade; education; health care and social; services; and wholesale trade. The Statistics Canada survey of investment intentions published in February 2006 indicates that capital investment in 2006 is expected to increase by 14.6%. Private capital investment is expected to increase 10.4% and public investment to increase 27.1%. The largest increases are expected to occur in manufacturing; education; public administration; construction; and utilities. The largest decreases are expected to occur in health care and social services; professional and scientific; information and culture; and other capital, (primarily accommodation, food services, arts, entertainment and recreation).

The following table sets forth categories of capital investment and the compound annual growth rates for the calendar years 2001 through 2005.

CAPITAL INVESTMENT


											Compound
											Annual
	Year Ended December 31,										Growth
											Rate
	2001		2002		2003		2004		2005		2001-2005

	(In millions of dollars)
Housing	$	1,018.9	$	1,136.9	$	1,256.8	$	1,517.6	$	1,592.1		11.8	%
Utilities		524.0		500.3		475.2		574.1		795.4		11.0
Public Administration		560.0		570.8		619.2		647.6		672.1		4.7
Finance and Insurance		407.0		446.2		407.5		518.3		502.4		5.4
Transportation and Storage		422.2		387.3		401.2		375.5		473.1		2.9
Manufacturing		583.7		551.7		461.4		449.1		409.9		-8.5
Agriculture		355.6		436.8		414.4		381.2		379.0		1.6
Minerals		250.9		266.0		285.4		250.9		319.4		6.2
Information and Culture		364.0		355.8		299.1		298.2		300.1		-4.7
Retail Trade		209.8		173.6		269.2		306.4		252.6		4.8
Real Estate		240.2		344.6		293.6		239.4		244.9		0.5
Health Care and Social Services		159.2		152.9		213.3		203.8		181.0		3.3
Construction		135.0		142.4		149.9		167.8		172.2		6.3
Wholesale Trade		142.2		152.6		165.5		167.9		149.8		1.3
Education		149.5		142.7		155.4		163.9		145.3		-0.7
Professional and Scientific		94.0		74.8		89.7		109.6		121.2		6.6
Other		186.4		177.1		206.0		327.6		252.3		7.9

Total	$	5,802.6	$	6,012.5	$	6,162.8	$	6,698.9	$	6,962.8		4.7

Private	$	4,442.0	$	4,649.2	$	4,720.7	$	5,082.0	$	5,192.5		4.0
Public		1,360.6		1,363.3		1,442.1		1,616.9		1,770.3		6.8

Source: Statistics Canada.

Labor Force

In 2005, employment increased by 0.6% with growth occurring in finance, insurance and real estate; accommodation and other services, construction; information, culture and recreation; and education and health services . There was no change in employment in agriculture and forestry, fishing and mining. Declines were recorded in public administration; professional and administrative services; transportation and storage; wholesale and retail trade; utilities; and manufacturing. In 2005, the average unemployment rate in Manitoba was 4.8%, the second lowest of any province in Canada and significantly lower than Canada’s rate of 6.8%.

The following table sets forth selected labor force statistics for Manitoba and Canada for the calendar years 2001 through 2005.

LABOR FORCE


	Annual Averages

	2001		2002		2003		2004		2005

	(In thousands unless otherwise indicated)
Labor Force		583.7		597.8		600.3		608.9		609.4
Employment		554.3		567.2		570.3		576.6		580.3
Participation Rate (%)		67.8		69.0		68.7		69.1		68.6
Participation Rate (Canada) (%)		65.9		66.9		67.5		67.5		67.2
Unemployment Rate (%)		5.1		5.1		5.0		5.3		4.8
Unemployment Rate (Canada) (%)		7.2		7.7		7.6		7.2		6.8

Source: Statistics Canada.

In the first ten months of 2006, seasonally adjusted employment in Manitoba increased 1.3% compared to the same period for 2005, reaching 587,300. Employment increases were recorded in forestry, fishing and mining; construction; wholesale and retail trade; finance, insurance and real estate; transportation and storage; and education and health services. Declines were recorded in utilities; professional and administrative services; manufacturing; information, culture and recreation; agriculture; accommodation and other services; and public administration.

In the first ten months of 2006, the seasonally adjusted unemployment rate in Manitoba averaged 4.3%, down from 4.9% in the same period in 2005. In the first ten months of 2006, the seasonally adjusted unemployment rate in Canada averaged 6.3%. Manitoba’s seasonally adjusted labor force participation rate over the first ten months of 2006 averaged 68.8%, up from 68.6% in the same period of 2005.

Energy

Refined petroleum and natural gas provided 39.2% and 32.2%, respectively, of the Province’s total energy needs in 2004, while 26.4% was provided by hydro-electric energy generated in the Province. For more information on hydro-electric energy generated in the Province, see “The Manitoba Hydro-Electric Board.”

GOVERNMENT FINANCES

Under the Constitution, the Province has the power to impose direct taxation within the Province in order to raise revenue for Provincial purposes. It also has exclusive jurisdiction over the borrowing of money on the sole credit of the Province.

Under the statutes of the Province, public money is deposited to the credit of the Minister of Finance and forms part of the Consolidated Fund of the Province. Money necessary to carry out the operations of the Province in each fiscal year is voted by the Legislative Assembly, with the exception of those expenses for which provision has already been made by special legislation, such as amounts required to service the debt of the Province and to fulfill guarantees made by the Province. In addition, the Lieutenant Governor in Council may, when the Legislative Assembly is not in session, authorize expenses that are urgently and immediately required for the public good through the issuance of special warrants.

The Summary Financial Statements of the Government of the Province of Manitoba (See “Tables of Supplementary Information — Tables I and II”) reflect the financial results of the Government Reporting Entity, which consists of the Consolidated Fund plus Crown organizations and Government Business Enterprises (i.e. entities whose principal activity is carrying on a business, such as The Manitoba Hydro-Electric Board (“Manitoba Hydro”), Manitoba Public Insurance Corporation, Manitoba Liquor Control Commission and Manitoba Lotteries Corporation). These financial statements consolidate the financial statements of all of the organizations comprising the Government Reporting Entity, except for Government Business Enterprises, which are accounted for by the modified equity method of accounting. The purpose of the Summary Financial Statements is to report fully the nature and extent of the financial affairs and resources for which the Government is ultimately responsible.

In order to be considered a part of the Government’s Reporting Entity for the “Summary Financial Statements”, an organization must be controlled by the Government. Control, as defined by the Canadian Institute of Chartered Accountants (“CICA”) Public Sector Accounting Standards Board, is the power to govern the financial and operating policies of another organization with the expected benefits or the risk of loss to the Government from the other organization’s activities.

Crown organizations are consolidated after adjusting their accounting policies to a basis consistent with the accounting policies of the Government Reporting Entity. Inter-entity accounts and transactions are eliminated upon consolidation, except for retail sales tax and the levy for health and education. Where the fiscal year-end dates of Crown organizations are not the same as that of the Government Reporting Entity and their transactions significantly affect the financial statements, their financial results are updated to March 31.

Government Business Enterprises, whose principal activity is carrying on a business, maintain their accounts in accordance with accounting principles which are generally accepted for business enterprises and which are considered appropriate to their individual objectives and circumstances. They derive the majority of their revenue from sources outside the Government Reporting Entity. They are reported in the Summary Financial Statements using the modified equity method of accounting without adjusting their accounting policies to a basis consistent with that of the Government Reporting Entity. Under the modified equity method, the Province includes the Government Business Enterprises’ net assets and net income by adjusting the investment shown in the Province’s Summary Statement of Financial Position and by presenting the net income as a separate item on the Province’s Summary Statement of Revenue and Expense. The financial results of business enterprises are not updated to March 31 where their fiscal year-end is not the same as that of the Government Reporting Entity except when transactions which would significantly affect the Summary Financial Statement occur during the intervening period. Inter-entity accounts and transactions are not eliminated, nor are normal inter-entity operating transactions disclosed separately.

As of fiscal year 2005, all health care facilities were included in the Summary Financial Statements. Prior years’ revenue and expenses have been restated on this basis.

The Consolidated Fund of the Province reflects, on a combined basis, the transactions and balances of the Operating Fund (which records the operations of government departments and programs), the Trust Fund (which records the trust administration function) and other special funds of the Province, such as the Fiscal Stabilization Fund and the Debt Retirement Fund, on a combined basis. The Legislative Assembly’s budgeting process is based on the Operating Fund, and compliance with the Province’s balanced budget legislation is measured by reference to the Operating Fund.

The revenues and expenses of the Provincial Government are recorded in the Summary Financial Statements on an accrual basis with the following specific account policies:


	a)	Government of Canada Receipts — Generally, entitlements from the Government of Canada for transfer payments, the transfer having been authorized and any eligibility criteria met, as well as for the Province’s share of individual and corporation income tax pursuant to the Federal-Provincial Tax Collection Agreements, are recorded on a cash basis for cash receipts received up to March 31 plus an accrual of prior period adjustments determined before June 15 each year.


	b)	Other Revenue — all other revenues are recorded on an accrual basis except when the accruals cannot be determined with a reasonable degree of certainty or when their estimation is impracticable. Recoveries of the debt servicing costs on self-supporting debt of government business enterprises are recorded as a reduction of debt servicing expense.


	c)	Expenses — all expenses incurred for goods and services received are recorded on an accrual basis. Exceptions to this policy involve the acquisition of inventories acquired for the government’s use that are reflected as expenses when incurred.


	Expenses include provisional amounts recorded in anticipation of costs which are quantifiable and have been identified as obligations. Government transfers are recognized as expenses in the period during which the transaction is authorized and any eligibility criteria are met.

The Summary Financial Statements do not include revenue and expenses of local government bodies such as municipalities which carry out certain responsibilities delegated by the Province, except that provincial assistance provided to those entities is included in the accounts of the Province as an expense.

The Summary Financial Statements have been prepared in accordance with GAAP for senior Governments as recommended by the CICA except that they do not reflect the financial position for public school divisions. The financial operations of these divisions are reflected only to the extent that their operations were financed from or contributed to the Summary Financial Statements. Changes to the GAAP definition of the Government Reporting Entity (“GRE”) required that the school divisions, and other organizations that were previously not included, become part of the GRE effective April 1, 2005. While the other organizations have been included in the financial statements, the school divisions will not be included until the March 31, 2008 fiscal year. The accounting system currently adopted by the school divisions does not provide sufficient information to allow for the consolidation of the school divisions into the Summary Financial Statements in accordance with GAAP. Changes to the school divisions accounting systems are presently underway and the impact of those changes will be reflected in the financial reporting for the year ended March 31, 2008.

The accounts and financial statements of the Province are examined by the Auditor General who is responsible to the Legislative Assembly and is required to make a report to the Legislative Assembly with respect to each fiscal year.

STATEMENT OF REVENUE AND EXPENSE

OF THE GOVERNMENT REPORTING ENTITY (1)


			Year Ended March 31,

			2002			2003			2004			2005		2006

			(In millions of dollars)
Revenue
	Manitoba Collections:
		Retail sales tax	$	966		$	1,007		$	1,064		$	1,125	$	1,198
		Fuel taxes		223			231			233			235		236
		Levy for health and education		244			257			268			287		303
		Mining Tax		9			18			22			41		39
		Other taxes		401			461			480			531		509
		Fees and other revenue		1,668			1,669			1,710			1,842		2,057
	Income taxes:
		Corporation income tax		306			160			289			402		373
		Individual income tax		1,659			1,636			1,720			1,842		1,949
	Net income from Government business enterprises			524			476			(11	)		679		958
	Federal transfers:
		Equalization		1,399			1,338			1,414			1,699		1,601
		Canada Health and Social Transfer		685			756			917			1,006		1,108
		Medical Equipment Fund		3			16			21			30		—
		Health Reform Fund		—			—			37			55		—
		Bill C-48		—			—			—			—		49
		Primary Health Care Transition Fund		—			1			7			9		—
		Shared cost and other		263			294			320			357		345

Total Revenue				8,350			8,320			8,491			10,140		10,725

Expenses
	Health			2,837			3,058			3,408			3,560		3,849
	Education			1,998			2,059			2,168			2,309		2,366
	Family Services and Housing			893			930			961			1,020		1,075
	Community, Economic and Resource Development			908			960			979			1,169		1,448
	Justice and Other Government			685			724			755			755		822
	Debt Servicing			1,039			824			799			765		790

Total Expenses				8,360			8,555			9,070			9,578		10,350

Net Revenue (Expenses) Before Extraordinary Item				(10	)		(235	)		(579	)		562		375
Adjustment to estimate for Federal accounting error				—			51			—			—		—

Summary Net Income (Loss)			$	(10	)	$	(184	)	$	(579	)	$	562	$	375


	(1)	Earlier years are restated to conform with the 2006 presentation.

Budget

The Provincial Government prepares a budget for each fiscal year, which estimates revenue and expenses for the Operating Fund. The Fiscal Stabilization Fund serves to cushion fluctuations in provincial revenue and provide a more stable basis for fiscal decisions. The Fund is also available for special initiatives. The Fiscal Stabilization Fund earns interest. Transfers to and from the Fiscal Stabilization Fund are determined by the Minister of Finance, subject to approval by the Lieutenant Governor in Council. At March 31, 2006, the Fiscal Stabilization Fund had $532 million in liquid assets.

In 2004, the Government of Manitoba announced its plan to implement Summary Budgeting and Reporting on a full generally accepted accounting principles (GAAP) basis for the fiscal year ending March 31, 2008. The consulting firm of Deloitte & Touche was hired to work with a steering committee to advise on how to manage this transition. This summary budgeting and reporting will encompass the core operations and activities of government, the results of Crown enterprises like Manitoba Hydro and Manitoba Public Insurance, and other entities including health care institutions, universities, school boards and community colleges.

The Balanced Budget, Debt Repayment and Taxpayer Accountability Act (the “Balanced Budget Act”) requires the total expenses of the Operating Fund (both current and amortization of capital assets) (including transfers to the Debt Retirement Fund) to be no greater than revenue (including transfers from the Fiscal Stabilization Fund). Debt repayments in the Debt Retirement Fund also include payments toward the pension liability of the government. The exceptions in the determination of a positive or negative balance for the Balanced Budget Act include war, disaster or a single year decline in revenue of 5.0% or more which is not the result of change in Manitoba taxation laws. Proceeds from the sale of a Crown corporation may not be used in determining whether there is a positive or negative balance for a fiscal year.

If a deficit not allowed under the Balanced Budget Act is incurred, the salaries of all members of the Executive Council will be reduced, and the shortfall is required to be made up in the subsequent year. These provisions do not apply in the fiscal year during which an election results in a change in the party forming the Government. The Balanced Budget Act requires minimum, annual payments to the Debt Retirement Fund, which currently are at a level of $110 million per year, for the purpose of retiring the net general-purpose debt and pension liability of the Province. The Balanced Budget Act limits tax increases by requiring the approval of voters in a referendum before the rates of four major taxes may be increased. In the fiscal year ended March 31, 2006, these four taxes accounted for 71% of own source revenue and 46% of total revenue. Exceptions are allowed for revenue-neutral rebalancing of Provincial tax rates, and for offsetting changes in federal and provincial taxes.

BALANCED BUDGET ACT COMPLIANCE AND BUDGETED FINANCING REQUIREMENT


		Year Ending March 31,												Budget
														Estimate
		2003			2004			2005			2006			2007

		(In millions of dollars)
Total Revenue before Transfer from Fiscal Stabilization Fund and Extraordinary Item			$6,970			$7,306			$8,223			$8,425			$8,651

Extraordinary Item — Adjustment to estimate for Federal accounting error			51			—			—			—			—

Total Revenue before Transfer from Fiscal Stabilization Fund			7,021			7,306			8,223			8,425			8,651
Total Expenses Before Transfer to Debt Retirement Fund			6,943			7,440			7,718			8,284			8,622

Operating Fund Surplus (Deficit) Before Transfers			78			(133	)		505			141			29
Transfer from Fiscal Stabilization Fund			23			171			—			—			84
Transfer to Debt Retirement Fund			(96	)		(96	)		(99	)		(110	)		(110	)

Operating Fund Surplus (Deficit)			5			(59	)		406			31			3
Adjustment for Balanced Budget Legislation purposes:
	Disaster Expenditures (1)		—			71			—			—			—

Budgetary Surplus for Balanced Budget Legislation purposes			$5			$13			$406			$31			$3


Financing Requirements
Refinancing
For General Government Programs															$1,482
For Manitoba Hydro															657
For Other Self-Sustaining Programs															40
New Cash Requirements
For General Government Capital Investments															153
For Manitoba Hydro															280
For Other Self-Sustaining Programs															149

Total Provincial Financing Requirement (2)															$2,761

(1) Under The Balanced Budget Act, the Government is not required to include in the determination of the annual operating balance, 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 2004 expenditures totaling $71 million that relate primarily to exceptional costs incurred from forest fire suppression activities and BSE are considered to qualify for exemption under this provision.

(2) The original Provincial Financing Requirement of $2.761 billion identified in the Budget has been reduced to $2.1 billion as a result of lower capital requirements for Manitoba Hydro and market conditions resulting in lower than anticipated debt issues called prior to maturity.

In the fiscal year 2006, total Operating Fund Revenue was $8,425.6 million or $249.0 million higher than the budget estimate of $8,176.6 million, due to higher than budgeted revenue from the Government of Canada of $118.0 million, in addition to increases in own source taxation revenue of $69.0 million due to higher than budgeted revenue in Individual and Corporation Income Tax.

Total Operating Fund expenses before transfers to the Debt Retirement Fund for the year ended March 31, 2006 were $8,284.0 million, up $220.1 million from the budget estimate of $8,063.9 million, reflecting increases in the department of Agriculture, Food and Rural Initiatives of $91.0 million; increased health care expenses of $53.0 million; and higher than budgeted expenses for forest fire suppression and other unbudgeted emergencies such as spring flooding of $42.0 million.

After a transfer to the Debt Retirement Fund of $110.0 million, the Budgetary Surplus for Balanced Budget Legislation purposes was $31.0 million, $28.0 million higher than budgeted.

The budget for the fiscal year ending March 31, 2007 was presented to the Legislature on March 6, 2006.

The following discussion of Operating Fund Revenue and Operating Fund Expenses reflects budgeted and actual amounts used in the budgetary process of the Legislative Assembly and for

purposes of the Balanced Budget Act, which may differ from corresponding amounts reflected in the Summary Financial Statements.

Operating Fund Revenue

Provincial Source Revenues. Of its Total Revenue Before Transfer from Fiscal Stabilization Fund budgeted for the fiscal year ending March 31, 2007 of $8,651.0 million, the Province expects to derive $5,651.2 million or about 65.3% from provincial sources. In the fiscal year ending March 31, 2006, Total Revenue before Transfer from Fiscal Stabilization Fund was $8,425.6 million, of which $5,517.0 million, or about 65.5%, was derived from provincial sources.

Taxation in Canada is constitutionally divided between the Federal and Provincial Governments. The Federal Government collects taxes partly for its own expenditures and partly for distribution to the provinces. The Federal Government has authority to apply both direct and indirect taxes while provinces generally may apply direct taxes only. However, provinces may apply limited indirect taxation in the resource field. Local governments derive their taxing powers from the provinces.

The personal income tax field is shared by the Federal and Provincial Governments. The Province has a personal income tax with 3 brackets and rates ranging up to 17.4% applied directly to taxable income, subject to certain tax credits which are generally recorded as expenses. The personal income tax is collected on the Province’s behalf by the Federal Government. Personal income tax revenue in the fiscal year ending March 31, 2007 is budgeted at $2,004.2 million, up from $1,948.9 million received in the previous fiscal year.

The Province levies a tax on the taxable income of corporations. The tax rate on taxable income of small businesses (currently with active business income of less than $400,000) is 4.5% with a planned reduction to 3.0% on January 1, 2007. The rate for large businesses was reduced from 15.0% of taxable income to 14.5% on January 1, 2006, with a further reduction to 14.0% on January 1, 2007. Corporation income tax revenue for the fiscal year ending March 31, 2007 is budgeted at $396.1 million, compared to $373.6 million received in the previous fiscal year.

The Province applies a tax at a general rate of 7% on retail sales of most tangible personal property, with major exemptions in respect of food for home consumption, children’s clothing under $150, custom software, most farm machinery and prescription drugs. Retail sales tax revenue in the fiscal year ending March 31, 2007 is budgeted at $1,244.1 million, up from $1,197.5 million received in the previous fiscal year.

The Province levies a tax of 11.5¢ per litre on gasoline and motive fuels. For the fiscal year ending March 31, 2007, the revenues from gasoline and motive fuel taxes are budgeted at $235.8 million, down from $236.0 million received in the previous fiscal year. There is also a tobacco tax of 17.5¢ per cigarette and 16.5¢ per gram of fine-cut tobacco. Total tobacco tax revenue for the fiscal year ending March 31, 2007 is budgeted at $195.0 million, up from $191.6 million received in the previous fiscal year.

A levy for financing health and post-secondary education is applied to total compensation paid to employees by Manitoba employers. Employers with annual payrolls under $1 million are exempt and those with payrolls between $1 million and $2 million are subject to reduced rates. The tax rate on taxable payroll is 2.15%. For the fiscal year ending March 31, 2007, the levy is budgeted to yield $312.1 million, up from $303.1 million received in the previous fiscal year.

Federal Government Transfers. Transfer payments from the Federal Government are budgeted to provide $2,999.8 million, or approximately 34.7% of the Province’s Total Revenue before Transfer from Fiscal Stabilization Fund budgeted in the fiscal year ending March 31, 2007. This compares to $2,913.8 million obtained in the previous fiscal year. Unconditional transfers, primarily receipts under a Federally funded provincial revenue equalization formula and cash payments under the Canada Health Transfer (“CHT”) and Canada Social Transfer (“CST”), account for $2,824.7 million, or approximately 32.6% of total budgetary revenue. Conditional transfers, consisting mainly of federal cost-sharing payments in respect of programs for social and

economic development, account for the remainder of Federal Government transfers. Unconditional transfers in the fiscal year ending March 31, 2006 were $2,658.9 million.

The largest and most important of these Federal-provincial financing arrangements are authorized by the Federal-Provincial Fiscal Arrangements Act,(the “Federal Act”). The Federal Act establishes the concept of tax revenue equalization on a per capita basis to a value established by a formula incorporating a representative average tax system of the provinces. The Province budgeted unconditional revenue of $1,690.3 million from Federal equalization payments in the fiscal year ending March 31, 2007, up from $1,601.0 million received in the previous fiscal year.

During the First Ministers’ Meeting of September 13-15, 2004, the Federal Government announced changes to the Equalization Program. These changes included establishing the total entitlement to the Equalization receiving provinces at $10.9 billion for the 2005/06 entitlement year, and increasing the entitlement by 3.5% per annum in each subsequent entitlement year.

The Federal Government has announced intentions to adopt a new funding formula for the allocation of Equalization among the provinces to be introduced in the 2007/08 entitlement year. The Federal Government convened a panel of experts to provide advice on the future allocation of equalization payments among the provinces. The panel reported to the Federal Government in May 2006. If accepted, the expert panel’s recommendations would result in a slight increase in Manitoba’s entitlement relative to the existing program.

The CHT and CST arrangements provide Federal assistance to the Province in respect of its health care, post-secondary education, early learning and childcare and social service programs through transfers of taxing authority and cash payments. The amount of Federal assistance is not determined in relation to actual program costs, but rather is calculated on the basis of per capita entitlements. The total cash component of these arrangements is budgeted at $1,158.0 million for Manitoba for the fiscal year ending March 31, 2007 compared to $1,083.3 million received in the previous fiscal year. In addition $19.8 million for other health funds is budgeted in fiscal year 2006/07.

On September 16, 2004, the Federal, Provincial and Territorial governments reached an agreement to provide additional Federal assistance in respect of Provincial and Territorial health care programs. Under this agreement the Federal Government committed increased funding to Provincial and Territorial governments of $2.1 billion in the fiscal year ending March 31, 2005, $3.1 billion in the fiscal year ending March 31, 2006 and $3.4 billion in the fiscal year ending March 31, 2007. Manitoba’s share of the increase in Federal funding will be in proportion to its share of the national population, which in 2006 was approximately 3.6%.

The new agreement also provides an escalator clause for the CHT. The new national CHT payment to Provincial and Territorial governments, $19.0 billion for the fiscal year ending March 31, 2006, will be escalated by 6.0% per annum beginning in the fiscal year ending March 31, 2007.

As part of this agreement, Provincial and Territorial governments have committed to an action plan to improve access to health care, including reduced waiting times for procedures, improved home care coverage, cooperation on a national pharmaceutical strategy and a pan-Canadian public health strategy.

The Federal Act includes a stabilization formula, which provides for federal grants and interest-free loans if revenue from a province’s own sources plus equalization falls below 95% of the previous year’s level, excluding variations of natural resource revenue. The Federal Act also provides a limited guarantee arrangement to compensate provinces for certain losses incurred during the calendar year in which a national personal income tax change results in provincial income tax reductions.

In January 2002, the Federal Government discovered a long-standing error with respect to personal income tax remittances to provinces for taxes collected by the Federal Government on behalf of the provinces. Several provinces, including Manitoba, received overpayments. Transfer payments of most provinces were also impacted by this error. The Federal Government has

recovered from Manitoba a total of $168 million related to the 2000 tax year remittances and has recovered a further $61 million for the 2001 tax year. In September 2002, the Federal Government announced a settlement with the provinces affected by this error and an amendment to equalization regulations which resulted in Manitoba receiving an additional $138 million for 2001/02. In accordance with the settlement, Manitoba will reimburse the Federal Government $91 million, to be paid in ten equal annual installments beginning in 2004/05. Also, as part of the settlement, Manitoba received a $140 million transitional payment in 2002/03. This payment offset a similar amount which had been budgeted as equalization revenue in the Budget Estimate 2003 and which was not received.

Operating Fund Expenses

Health and Community Services. For the fiscal year ending March 31, 2007, expenditure on Health and Community Services is budgeted at $4,668.3 million, an increase of 4.8% over the prior year. This is the largest single expense category and represents 53.5% of the Province’s total budgeted Expenses and Transfer to Debt Retirement Fund. Health and Community Services includes the Universal Health Benefits Plan under which hospital and medical care is available to Manitoba residents without charge. Under this Plan, the Province pays all the operating costs as well as the debt servicing costs of approved capital construction for hospitals and personal care institutions. The Province has budgeted the gross cost of services under the Plan at $3,606.9 million for the fiscal year ending March 31, 2007, an increase of 4.9% over the prior year’s budget.

Also included in this category is $1,034.5 million budgeted for the Province’s social security program which provides income security, financial assistance to the elderly, rehabilitation services for physically and mentally handicapped persons and child welfare services.

Education. Education expenditure for the fiscal year ending March 31, 2007 is budgeted at $1,654.8 million, an increase of 6.6% over the prior year, and represents 19.0% of Manitoba’s total budgeted Expenses and Transfer to Debt Retirement Fund. The major portion of this expense, amounting to $1,014.0 million, is for providing direct financial support to local school divisions for the approved cost of public schools in the Province as well as the debt servicing costs of approved capital construction for schools. The additional funds required to operate the public schools, plus any special projects undertaken by the school divisions, are derived from a property tax on the residents of the divisions.

This expenditure also includes financial support for the four universities and the three community colleges in the Province, which is budgeted to amount to $596.4 million for the fiscal year ending March 31, 2007.

Economic and Resource Development. Expenditure on economic and resource development is budgeted at $944.5 million for the fiscal year ending March 31, 2007, an increase of 6.2% from the prior year. This represents 10.8% of Manitoba’s total budgeted Expenses and Transfer to the Debt Retirement Fund. The largest item in this category is Transportation and Government Services, amounting to $408.4 million.

Consumer Services, Public Protection and Other Government Services. Expenditure for Consumer Services, Public Protection and Other Government Services is budgeted at $648.3 million, a decrease of 3.2% over the prior year.

Other. The Province also provides property and cost-of-living tax credits to residents of Manitoba, budgeted at $237.0 million for the fiscal year ending March 31, 2007.

Expenditure for Provincial assistance to local governments is budgeted at $251.4 million for the fiscal year ending March 31, 2007 and includes $111.9 million for grants to the City of Winnipeg and $14.5 million for grants in lieu of taxes to municipalities.

The net cost of servicing total direct public borrowings after deducting recoveries from Crown organizations and Government Business Enterprises, investment earnings and interest recovery on departments’ capital asset purchases is budgeted at $282.0 million, an increase of 8.6% over the prior year, primarily due to higher interest rates. For the fiscal year ending March 31, 2007, the gross interest expense for the Province’s direct funded borrowings is estimated to be $1,252.1 million, which is reduced by $189.9 million of interest income, $688.4 million of borrowings on which interest is recovered from Crown organizations and other government entities and $91.8 million in interest recovery on departments’ capital asset purchases.

CROWN ORGANIZATIONS AND GOVERNMENT BUSINESS ENTERPRISES

The Province provides certain services and promotes certain types of social and economic development through Crown organizations and Government Business Enterprises (“Crown organizations”) which have access to financial assistance from the Province through advances, equity investments, guaranteed borrowings, loans and grants. Crown organizations such as Manitoba Hydro are intended to operate on a commercial basis, rather than being subsidized by the Province. The Province also operates other Crown organizations, such as The Manitoba Agricultural Services Corporation and The Manitoba Housing and Renewal Corporation, on a partially subsidized basis with funds provided from departmental appropriations. With the exception of The Liquor Control Commission and The Manitoba Lotteries Corporation, the profits of which are transferred to the Province, Crown organizations generally retain their profits for their own requirements. However, Manitoba Hydro was authorized to distribute retained earnings to the Province for the fiscal year ended 2003. Loans, advances, investments and grants are made as required for the operations of the organizations pursuant to appropriations in the Provincial Budget or through specific enactment by the Legislative Assembly.

A valuation allowance is provided in the accounts of the Province for decreases in the value of loans and advances made to Crown organizations, and is adjusted annually for changes that occur in the estimated realizable value of these assets, based on financial results applicable to the most recent fiscal year completed prior to April 1. The allowance is intended to provide for any accumulated operating and capital deficits of Crown organizations. This allowance as at March 31, 2006, was $335.5 million in respect of the Province’s total loans and advances to its Crown organizations in the amount of $7,761.0 million at such date.

The following table summarizes the loans and advances of the Province’s principal Crown organizations for the years 2002 through 2006 and the allowance for losses on realization of assets as at March 31, 2006:

LOANS AND ADVANCES TO

CROWN ORGANIZATIONS AND GOVERNMENT BUSINESS ENTERPRISES (1)


	As at March 31,

											2006
											Valuation
	2002		2003		2004		2005		2006		Allowance

	(In thousands of dollars)
The Manitoba Hydro-Electric Board (2)	$	7,221,434	$	6,374,894	$	6,492,818	$	6,547,535	$	6,624,445	$	—
The Manitoba Housing and Renewal Corporation (3)		351,968		345,052		336,739		328,654		323,883		243,890
The Manitoba Agricultural Services Corporation		326,423		311,627		373,388		364,477		342,820		41,207
The Manitoba Lotteries Corporation		170,000		173,700		173,076		246,095		237,105		—
Manitoba Development Corporation		104,378		107,184		122,407		118,788		90,796		45,749
Other		90,022		77,666		64,487		138,434		141,938		4,673

Total	$	8,264,225	$	7,390,123	$	7,562,915	$	7,743,983	$	7,760,987	$	335,519

(1) Crown organizations and Government Business Enterprises also have debt not guaranteed by the Province which consists of $171.0 million held by Canada Mortgage and Housing Corporation, an agency of the Federal Government, $11.2 million held by various First Nation Bands and $2.9 million of assumed mortgages on existing property.

(2) Provincial advances have been adjusted by the foreign currency fluctuation on the direct borrowings of the Province for which Manitoba Hydro is responsible.

(3) It is the policy of the Government to create or change valuation allowances to reflect the estimated realizable value of loans made to crown agencies, boards and commissions. This assessment is based on a

review of the organization’s most recent financial statements and any accumulated deficit adjusted by prospective recoveries from future operations. Because it was determined that Manitoba Housing and Renewal Corporation (“MHRC”), in prior years, had not been amortizing its tangible capital assets in accordance with GAAP, MHRC’s accumulated deficit, for the year ended March 31, 2003, was understated and had to be increased to reflect additional accumulated amortization. As a result, there was an increase made to the MHRC valuation allowance of $229 million, an increase in accumulated deficit of $230 million and a decrease in expenses of $1 million.

The Manitoba Hydro-Electric Board provides for a supply of electrical power adequate for the needs of Manitoba, and promotes economy and efficiency in the generation, distribution, supply and use of electrical power within Manitoba. See “The Manitoba Hydro-Electric Board.” Pursuant to legislation enacted in 2001, the Government may not privatize Manitoba Hydro unless approved by the voters of Manitoba in a referendum.

The Manitoba Housing and Renewal Corporation undertakes the construction of housing projects and administers various provincially subsidized housing programs, including rental subsidies for low income families, housing grants for elderly persons and housing improvement programs.

At March 31, 2006, the Corporation had total assets of $363.1 million represented by $73.0 million of projects completed or under construction, owned land held for development and/or sale having a book value of $14.9 million, loans and mortgages receivable of $156.0 million and other assets of $117.5 million.

The Manitoba Agricultural Services Corporation, On September 1, 2005, the Manitoba Agricultural Services Corporation (“MASC”) was created through the merger of the Manitoba Crop Insurance Corporation and the Manitoba Agricultural Credit Corporation. MASC provides credit for farmers principally through direct loans for capital purposes secured by first mortgages held by MASC and through guarantees of loans by chartered banks. MASC also provides crop insurance to farmers.

At March 31, 2006, MASC had total assets of $475.8 million, of which $314.6 million represented receivables secured by first mortgages on farm land and buildings. For the fiscal year ended March 31, 2006, MASC’s operating deficit was $130.6 million, after Provincial operating grants of $47.3 million. The operating deficit resulted from losses due to drought and crop insurance claims and were offset by existing reserves. As at March 31, 2006, the accumulated surplus of MASC was $87.7 million.

PUBLIC DEBT

Borrowing Record

The Province has always paid the full face amount of the principal of and premium and interest on (a) every direct obligation issued by it and (b) every indirect obligation on which it has been required to implement its guarantee, all promptly when due in the currency in which and country where payable at the time of payment thereof, subject during wartime to any applicable laws and regulations forbidding trading with the enemy.

Direct Funded Borrowings of the Province

The Province borrows to fund its net cash requirement. The following table summarizes the direct funded borrowings of the Province by currency as at March 31 for the years 2002 through 2006.

DIRECT FUNDED BORROWINGS OF THE PROVINCE (1)


		As at March 31,

		2002			2003			2004			2005			2006 (2)

		(In thousands of dollars)
Direct Funded Borrowings Payable in:
Canadian Dollars (3)			$11,807,490			$11,812,749			$13,120,739			$14,162,084			$14,449,925
	Issues hedged to Canadian Dollars		3,221,628			3,348,799			3,210,936			2,946,914			2,834,264
U.S. Dollars			3,734,567			3,305,925			2,227,850			2,056,320			2,221,050
	Issues hedged to U.S. Dollars		1,555,051			939,179			957,913			884,160			617,340

Total Direct Funded Borrowings			20,318,736			19,406,652			19,517,438			20,049,478			20,122,579
	Less: Sinking Funds		(6,485,514	)		(5,805,288	)		(4,730,421	)		(4,553,259	)		(4,500,996	)

	Net Direct Funded Borrowings		$13,833,222			$13,601,364			$14,787,017			$15,496,219			$15,621,583

Raised for the purpose of:
	General Government Programs (4)		$6,643,283			$6,641,425			$6,859,058			$6,952,033			$7,041,338
	The Manitoba Hydro-Electric Board		5,701,237			5,398,925			5,764,322			5,968,455			6,038,950
	Other Self-Sustaining Borrowings		1,488,702			1,561,014			1,685,995			2,079,217			2,038,959
	Loans Payable to Government Business Enterprises and Other (5)		—			—			477,642			496,514			502,336

	Net Direct Funded Borrowings		$13,833,222			$13,601,364			$14,787,017			$15,496,219			$15,621,583

(1) Debentures payable in U.S. dollars and other foreign currencies are stated at the Canadian dollar equivalent using the exchange rates in effect on March 31 each year adjusted for any foreign currency contracts entered into for settlement after those dates. All U.S. dollar borrowing has either been hedged to Canadian dollars or is the responsibility of Manitoba Hydro, which has significant U.S. dollar revenues.

(2) For additional information as to the direct funded borrowings of the Province, see “Tables of Supplementary Information — Table III.” Subsequent to March 31, 2006, the Province issued funded borrowings of $776.4 million in Canadian dollars, which was issued to finance maturing issues and for self-sustaining programs.

(3) Direct funded borrowings payable in Canadian dollars includes debentures held by the Canada Pension Plan Investment Fund. Such securities are payable 20 years after their respective dates of issue, are not negotiable, transferable or assignable, but are redeemable in whole or in part before maturity at the option of the Minister of Finance of Canada, on six months’ prior notice, when he deems it necessary in order to meet the requirements of the Canada Pension Plan. At March 31, 2005 and 2006, the amounts of such debentures were $883 million and $757 million, respectively.

(4) Borrowings for general government programs, including capital assets, consist of the total direct funded borrowings of the Province less borrowings issued for self-sustaining purposes.

(5) In Fiscal Year 2004, the Province, in accordance with GAAP, changed its accounting treatment for certain amounts owed to the Federal Government and for debentures issued by certain school boards and hospitals, the debt service of which is paid with grants from the Government.

Amounts owed to the Federal Government over time, which were previously treated as accounts payable are now accounted for as loans payable.

With respect to debentures issued by school boards and hospitals, previously the Province recognized expense over the life of the debentures as grants for debt service were made. Now the obligation to fund debt service is expensed in full at the time the debenture is issued. The debentures are held by the Provincial Sinking Fund and Manitoba Public Insurance (“MPI”), a provincial crown corporation. Debentures held by MPI are recorded as “Loans Payable to Government Business Enterprises”.

The Government also recognized a loan payable in respect of the pension liability of the Manitoba Liquor Control Commission.

The Province has not restated the financial statements of previous years. The effect of this change for prior years was reflected in the accumulated deficit and in the increase in loans payable recorded by the Province.

Guaranteed Borrowings of the Province

The following table summarizes the guaranteed borrowings of the Province by currency and purpose of issue as at March 31 for the years 2002 through 2006.

GUARANTEED BORROWINGS OF THE PROVINCE


				As at March 31,

				2002		2003		2004		2005		2006 (1)

				(In thousands of dollars)
Guaranteed Borrowings Payable in:
	Canadian Dollars				$595,190		$979,202		$910,083		$660,075		$490,512
	U.S. Dollars (2)				—		—		12,450		—		—

		Total Guaranteed Borrowings			595,190		979,202		922,533		660,075		490,512
			Less: Sinking Funds		25,447		26,292		30,217		7,890		—

	Net Guaranteed Borrowings (3)				$569,743		$952,910		$892,316		$652,185		$490,512

Issued by:
	The Manitoba Hydro-Electric Board				$562,014		$944,831		$884,281		$646,560		$485,339
	Other				7,729		8,079		8,035		5,625		5,173

		Net Guaranteed Borrowings (3)			$569,743		$952,910		$892,316		$652,185		$490,512

(1) Subsequent to March 31, 2006, Manitoba Hydro raised $115.7 million through the issue of Manitoba Hydro Savings Bonds.

(2) Debentures payable in U.S. dollars are stated at the Canadian dollar equivalent using the exchange rate in effect on March 31 each year adjusted for any foreign currency contracts entered into for settlement after those dates.

(3) The table does not include contingent obligations in the amount of $13.6 million as at March 31, 2006, comprised of $0.4 million of mortgages, and $13.2 million of bank lines of credit.

For additional information as to guaranteed borrowings, see “Tables of Supplementary Information — Table IV.”

Maturity Schedule

The following table sets forth the maturity schedule by currency of the direct funded and guaranteed borrowings of the Province as at March 31, 2006:

MATURITY SCHEDULE

DIRECT AND GUARANTEED BORROWINGS (1)


							Estimated
	Canadian		U.S.		Gross		Sinking Funds		Net
Years Ending March 31,	Dollars (2)		Dollars (2)(3)		Maturities		Withdrawal		Maturities

	(In millions of dollars)
Short-Term Borrowings (4)		$325		$—		$325		$—		$325
2007 (4)		1,584		584		2,168		265		1,903
2008		1,860		—		1,860		267		1,593
2009		2,046		288		2,334		407		1,927
2010		853		463		1,316		443		873
2011		1,019		292		1,311		174		1,137

		7,687		1,627		9,314		1,556		7,758
2012-2016		3,566		396		3,962		1,150		2,812
2017-2026		3,449		815		4,264		1,500		2,764
2027-2045		2,343		—		2,343		230		2,113
2007-2026 Government Business Enterprises		375		—		375		—		375
2007-2026 Health Care Facilities		237		—		237		65		172
2007-2015 Government of Canada		118		—		118		—		118

		$17,775		$2,838		$20,613		$4,501		$16,112

(1) The table does not include contingent obligations in the amount of $13.6 million as at March 31, 2006, comprised of $0.4 million of mortgages, and $13.2 million of bank lines of credit.

(2) Borrowings payable in Canadian dollars and U.S. dollars includes borrowings swapped from other currencies.

(3) Borrowings payable in U.S. dollars (U.S. $2.43 billion) is stated at the Canadian dollar equivalent at March 31, 2006.

(4) Short Term Borrowing represents 90-day Treasury bills. Short Term Borrowing together with the 2007 maturities represents the total direct and guaranteed borrowings with a residual maturity of less than one year.

Sinking Funds

The Minister of Finance may provide for the creation and management of sinking funds for the orderly retirement of borrowings. The Minister of Finance may authorize, by directive, the amount, if any, to be allocated to the Province’s sinking fund. The amount allocated to the sinking fund by the Province for the fiscal year ended March 31, 2006, was $27.8 million. Currently, the Province’s sinking fund is invested principally in securities issued or guaranteed by Canadian provinces.

Manitoba Hydro is required by statute to provide, prior to its fiscal year end in each year, amounts for sinking funds which are not less than the sum of (a) 1% of the borrowings of and Provincial advances to Manitoba Hydro outstanding at the preceding fiscal year end and (b) 4% of the balance of cash and book value of securities in the sinking fund at such date. Interest earned on money and securities in the sinking fund is paid to Manitoba Hydro.

Unfunded Debt

The unfunded Debt of the Province as at March 31, 2006 amounted to $1,574 million, including $434 million of accounts payable, $227 million of accrued interest and $913 million of

other accrued charges. This unfunded Debt was offset by current assets of the Province in the amount of $1,341.3 million, represented by $407 million of March 2006 tax revenue receivables, $202.5 million of other receivables, $28.4 million of interest receivable and $173.3 million of accounts receivable from the Federal and other governments and $604.7 million in cash and equivalents, less a valuation allowance of $74.8 million.

Consolidated Funded Borrowings of the Manitoba Public Sector

The Province supervises all financial activities of the Manitoba public sector. Certain public sector entities issue debt in their own names, which is not guaranteed by the Province. Accordingly, not all funding within the public sector is reflected in the Province’s financial statements. The following table sets forth the consolidated funded borrowings of the Manitoba public sector at March 31 for each of the years 2002 through 2006.

CONSOLIDATED FUNDED BORROWINGS OF THE MANITOBA PUBLIC SECTOR


			As at March 31,

			2002			2003			2004			2005			2006

			(In millions of dollars)
Issued for the purpose of:
	General Government Programs		$	10,147		$	10,373		$	10,055		$	10,181		$	10,285
		Less Sinking Funds		(3,496	)		(3,723	)		(3,188	)		(3,223	)		(3,238	)

	Net General Government Programs			6,651			6,650			6,867			6,958			7,047

	The Manitoba Hydro-Electric Board			7,845			7,382			7,422			7,215			7,121
		Less Sinking Funds		(1,547	)		(1,004	)		(761	)		(587	)		(586	)

	Net Manitoba Hydro-Electric Board			6,298			6,378			6,661			6,628			6,535

	Other Crown Organizations, Public Sector Entities and Loans Payable			5,062			4,502			4,196			4,293			4,078
		Less Sinking Funds		(1,976	)		(1,578	)		(1,179	)		(1,016	)		(883	)

	Net Other Crown Organizations, Public Sector Entities and Loans Payable			3,086			2,924			3,017			3,277			3,195

	Net Public Sector Borrowings		$	16,035		$	15,952		$	16,545		$	16,863		$	16,777

Consisting of:
	Direct Borrowings of the Province (1)		$	19,920		$	18,959		$	18,539		$	18,695		$	18,714
	Guaranteed Borrowings of the Province (1)			595			979			923			660			490
	Non-Guaranteed Borrowings of Crown Organizations, Other Public Sector Entities and Loans Payable			2,539			2,319			2,211			2,334			2,280

Total Public Sector Borrowings			��	23,054			22,257			21,673			21,689			21,484
	Less: Accumulated Sinking Funds			(7,019	)		(6,305	)		(5,128	)		(4,826	)		(4,707	)

		Net Public Sector Borrowings	$	16,035		$	15,952		$	16,545		$	16,863		$	16,777

(1) U.S. and other foreign currency borrowings included in the direct borrowings of the Province and the guaranteed borrowings of the Province are stated at the Canadian dollar equivalent using the exchange rates in effect on March 31 each year.

Selected Borrowings Information

The following table sets forth certain information as to the funded borrowings of the Province as well as borrowings issued for general government programs, including capital assets (all net of accumulated sinking funds) as at March 31 for the years 2002 through 2006, including per capita data based upon population at July 1 of the preceding calendar year:

PUBLIC SECTOR BORROWINGS INFORMATION


		As at March 31,

		2002			2003			2004			2005			2006

Total Net Consolidated Funded Borrowings of the Manitoba Public Sector (in millions)			$16,035			$15,952			$16,545			$16,863			$16,777
	Per Capita		13,931			13,799			14,238			14,401			14,290
	As a Percent of Personal Income		54.8	%		53.3	%		53.8	%		52.7	%		50.8	%
	As a Percent of Gross Domestic Product		45.6			43.5			43.8			42.0			39.8
Total Net Direct Funded Borrowings of the Province (in millions)			$13,833			$13,601			$14,787			$15,496			$15,622
	Per Capita		12,018			11,766			12,725			13,233			13,307
	As a Percent of Personal Income		47.3	%		45.3	%		48.1	%		48.4	%		47.3	%
	As a Percent of Gross Domestic Product		39.4			37.1			39.1			38.6			37.1
Net Borrowings Issued for General Government Programs (in millions)			$6,651			$6,650			$6,867			$6,958			$7,047
	Per Capita		5,778			5,753			5,910			5,942			6,003
	As a Percent of Personal Income		22.7	%		22.2	%		22.3	%		21.7	%		21.4	%
	As a Percent of Gross Domestic Product		18.9			18.1			18.2			17.3			16.7
Net Cost of Servicing General Government Program Borrowings as a Percent of Provincial Revenue			5.3	%		4.1	%		3.7	%		2.5	%		2.7	%

Summary Net Debt

A measure of the Province’s financial position is its ability to apply financial resources and future revenues to finance its activities and meet its liabilities and contractual obligations. GAAP recommends that net debt is the measure to be used in determining whether a government’s position has improved or deteriorated. The following table summarizes the net debt position of the Province as at March 31 for the years 2002 through 2006:


		As of March 31,

		2002			2003			2004			2005			2006

		(In millions of dollars)
Total Financial Assets (1)			$4,221			$4,044			$3,745			$4,758			$5,310

Liabilities:
	Net Borrowings (2)		8,665			8,789			9,116			9,362			9,465
	Accounts Payable and Other		2,328			2,180			2,187			2,305			2,397
	Pension Liability		3,237			3,430			3,571			3,761			3,967

Total Liabilities			14,230			14,399			14,874			15,428			15,839

Summary Net Debt			$10,009			$10,355			$11,129			$10,670			$10,519

Summary Net Debt as a Percentage of Nominal Gross Domestic Product			28.5	%		28.2	%		29.4	%		26.6	%		25.0	%

(1) Includes cash, accounts receivable, loans and investments, equity in government business enterprises and other financial assets.

Pension Liability

The Government is required by legislation to pay 50% of the pension disbursements made to retired Provincial employees (with the exception of the share payable by Government agencies for their employees) and to retired contributors to the Teachers’ Retirement Allowances Fund (TRAF). Such payments are charged to departmental appropriations as incurred. Prior to March 31, 2001, no provision was made to fund current or past service obligations of the Government to the Civil Service Superannuation Fund (CSSF) or to the TRAF. The reserves held in these Funds represent only the employees’ obligation towards the total pension liability, except as described in the following paragraph.

Certain amendments to the Civil Service Superannuation Act were made in 1992, which required that the CSSF establish and fund a separate account in an amount sufficient to cover the Province’s actuarial costs of the 1992 amendments to the Act. The CSSF account maintained on behalf of the Province at March 31, 2006 was $44 million ($38 million in 2005).

An actuarial valuation and report of the Government’s liability to the CSSF was completed as at December 31, 2004. The report also provided a formula to update the liability on an annual basis. In accordance with this formula, the Government’s actuarial liability to the CSSF has been calculated on an indexed basis at $1,717 million as at March 31, 2006 ($1,625 million in 2005).

An actuarial report for TRAF was completed as of January 1, 2004 and provides a formula to update the Government’s pension liability, resulting in an actuarial liability on an indexed basis of $2,189 million at March 31, 2006 ($2,078 million in 2005).

The Pension Plan for Members of the Legislative Assembly (MLAs) provides MLAs elected prior to April 25, 1995 defined pension benefits based on years of service. For those elected after April 25, 1995, the Act provides for defined contribution benefits as well as defined pension benefits for service prior to April 25, 1995. An actuarial valuation was completed as of March 2003 and provides a formula to update the liability on an annual basis. The Government’s liability is calculated to be $32 million at March 31, 2006 ($33 million in 2005).

An actuarial report was completed for the Judge’s Supplemental Plan as at March 31, 2003 and provides a formula to update the Government’s pension liability, resulting in an actuarial liability on an indexed basis of $26 million at March 31, 2006 ($23 million in 2005).

Currently, the Province allocates a portion of its annual payments to the Debt Retirement Fund to fund its unfunded pension liability and sets aside funding for the pension costs of all new employees. These amounts have been transferred to the Pension Asset Fund which was established to provide for the future retirement of the government’s pension liability. The Pension Asset Fund is invested with CSSF and TRAF proportionally with the amounts set aside for the two pension plans. These investments earn the respective Fund’s annual rate of return and reflect both the realized gains (losses) on the sale of investments and unrealized market gain (loss) for the year of the respective Fund.

The following table summarizes the estimated actuarial pension liability for the Government and Crown organizations excluding Government Business Enterprises such as Manitoba Hydro and the balance of the pension assets fund:


	As at March 31,

	2005		2006

	(In millions of
	dollars)
Civil Service Superannuation Fund		$1,625		$1,717
Members of Legislative Assembly		33		32
Teachers’ Retirement Allowances Fund		2,078		2,189
Judge’s Supplemental Pension Plan and Other Plans		25		28

Pension Liability (1)		$3,761		$3,967

Pension Asset Fund		$(382)		$(537)

Net Pension Liability		$3,379		$3,430

(1) Includes unamortized actuarial gains and losses

Manitoba Hydro employees are eligible for pensions under the Civil Service Superannuation Act, which requires Manitoba Hydro to contribute 50% of the pension disbursements made to retired employees. Based on an actuarial formula, Manitoba Hydro and its subsidiaries have a liability for pension obligations at March 31, 2006 of approximately $679 million ($639 million in 2005), and pension assets of $787 million as at March 31, 2006 ($674 million in 2005). These amounts are not included in the above totals.

THE MANITOBA HYDRO-ELECTRIC BOARD

The Manitoba Hydro-Electric Board (“Manitoba Hydro”) was established in 1949 by an Act of the Legislature of the Province as an agent of the Crown of the Province to provide for a supply of electrical power adequate for the needs of Manitoba, and to promote economy and efficiency in the generation, distribution, supply and use of electrical power within Manitoba.

In 1997, amendments were made to the Manitoba Hydro Act to allow wholesale competition and transmission access in the Manitoba electrical market and allow Manitoba Hydro to offer new products and services, create subsidiaries and enter into joint ventures and business alliances. The amendments also provided Manitoba Hydro with explicit authority to build new generation for export.

In 1999, Manitoba Hydro purchased Centra Gas Manitoba Inc. (“Centra Gas”), the primary gas distribution utility in Manitoba.

In 2002, Manitoba Hydro purchased all of the assets and liabilities of Winnipeg Hydro from the City of Winnipeg. Winnipeg Hydro operated two hydraulic generating stations which add 144 megawatts to system capacity. As part of the terms of the purchase, Manitoba Hydro was obligated to commence construction of a complex in downtown Winnipeg within five years of the date of purchase. A full city block in downtown Winnipeg has been acquired for a 690,000 square foot office complex; construction has begun on an energy-efficient building design and late 2007 is the estimated completion date.

As a result of the Winnipeg Hydro acquisition, Manitoba Hydro is now serving electric customers throughout the entire Province of Manitoba. The electrical systems of Manitoba Hydro and the former Winnipeg Hydro are interconnected and operate as an integrated system.

Manitoba Hydro currently provides electricity to approximately 510,000 customers and natural gas service to approximately 258,000 customers within the province. In addition, it exports electricity to approximately 40 electric utilities in the United States, Ontario and Saskatchewan.

At March 31, 2006, Manitoba Hydro’s total generating capability was 5,478 megawatts. Of this generating capability, hydro-electric stations represented 91.3%, thermal-electric stations 8.5% (6.7% natural gas and 1.8% coal) and diesel-electric stations 0.2%. The diesel electric stations serve four isolated communities in northern Manitoba that are too remote to be served from the integrated system.

For the fiscal year ended March 31, 2006, 96.0% of the Manitoba integrated system energy supply of 38.8 billion kilowatt-hours was provided by self-renewing hydro-electric generation. The portion of total supply provided by thermal generation was 1.0%, by imports was 2.7% and by wind purchase 0.3%.

Operations

Net income from consolidated operations for the fiscal year ended March 31, 2006 was $415 million, compared to net income of $136 million in the previous fiscal year. The increase was attributable to above-average hydraulic generation stemming from exceptional water conditions in the Province compared to the prior year. Electricity sales to extraprovincial customers reached a record $881 million during the year.

Electricity

As at March 31, 2006, Manitoba Hydro owned and operated 14 hydro-electric generating stations having a total installed electric generating capability of 5,001 megawatts, including five stations with a total capability of 3,928 megawatts located on the Nelson River. Manitoba Hydro also operated two thermal-electric generating stations having a total installed capability of 468 megawatts and four isolated diesel sites having an installed capacity of 9 megawatts.

As at March 31, 2006, the high voltage transmission facilities of Manitoba Hydro consisted of approximately 11,823 circuit kilometers, representing a total investment of $745 million.

For purposes of exporting firm energy and for the interchange of power on a short-term basis to provide for economy of operations and system emergencies, Manitoba Hydro maintains interconnections with power facilities in the Provinces of Saskatchewan and Ontario and in the States of North Dakota and Minnesota. Manitoba Hydro’s interconnections with Ontario have a transfer capability of 300,000 kilowatts. The interconnections with Saskatchewan have a total export transfer capability of 525,000 kilowatts and import transfer capability of 550,000 kilowatts. The interconnections with the United States have a total export transfer capability of 2,250,000 kilowatts and import transfer capability of 1,050,000 kilowatts.

During the fiscal year ended March 31, 2006, Manitoba Hydro sold a total of 33.7 billion kilowatt-hours of electricity, representing an increase of 15.1% from the fiscal year ended March 31, 2005. Scheduled extraprovincial sales accounted for 13.8 billion kilowatt-hours, or 40.9% of total electricity sales for the fiscal year ended March 31, 2006. Scheduled imports accounted for 1.0 billion kilowatt-hours, a decrease of 18.5% from the fiscal year ended March 31, 2005. Wind purchases accounted for 0.1 billion kilowatt-hours.

Natural Gas

Manitoba Hydro’s subsidiary, Centra Gas provides natural gas distribution and related energy services to approximately 258,000 customers that are located in nearly 100 communities throughout southern Manitoba. Centra Gas owns a network of transmission (1,741 kilometers) and distribution (6,972 kilometers) mains to meet the natural gas requirements of its customers.

For the year ended March 31, 2006, Centra Gas had total gas deliveries of 69.9 billion cubic feet. These gas deliveries were comprised of 20.4 billion cubic feet to residential customers, 28.4 billion cubic feet to commercial and industrial customers and 21.1 billion cubic feet of transportation deliveries.

Rate Matters

Manitoba Hydro’s rates for electricity sales within the province are set on a cost of service basis and are subject to review and approval by The Public Utilities Board of Manitoba (“PUB”). In order to address the financial impacts of the drought experienced during the 2003-04 fiscal year, the PUB approved a general rate increase of 5% effective August 1, 2004 and two conditional increases of 2.25% effective April 1, 2005 and October 1, 2005 across all customer classes. Manitoba Hydro withdrew the request for the second 2.25% rate increase scheduled for October 1, 2005 as improved water conditions significantly improved financial results for the 2005-06 fiscal year. Prior to these rate increases, residential rates had not increased since 1997 for residential and large industrial customer rates had not increased since 1992.

Centra Gas files quarterly rate applications with the PUB based on the twelve-month forward price for Western Canadian gas supplies, which are designed to pass through to customers the impact of primary gas price changes. Centra Gas also makes periodic rate applications for changes in non-commodity costs. In July 2005, the PUB approved general rate increases of 2.0% effective February 1, 2005 and 1.0% effective May 1, 2006 for gas customers.

STATISTICAL INFORMATION

The following table sets forth certain statistical information for the last five years.


		Year Ended March 31,

		2002		2003		2004		2005		2006

Electricity
Installed Generating Capability Including Winnipeg Hydro (in megawatts)			5,240		5,475		5,481		5,480		5,478
Manitoba Firm Peak Demand (in Megawatts)			3,760		3,916		3,959		4,146		4,054
Manitoba & Winnipeg Hydro System Electric Energy (in millions of kilowatt- hours)
	Generated		32,643		29,178		19,349		31,554		37,632
	Purchased		1,512		3,043		7,053		1,279		1,043
	Wind Purchases		0		0		0		0		116

			34,155		32,221		26,402		32,833		38,791

Electric Energy Sales (1) (in millions of kilowatt-hours)
	Manitoba		16,916		18,907		19,280		19,735		19,935
	Extraprovincial		12,091		9,459		4,395		9,569		13,792

Total Electric Energy Sales			29,007		28,366		23,675		29,304		33,727

Revenue from Sale of Power (in thousands of dollars)
	Manitoba		$786,036		$875,841		$918,231		$938,756		$983,654
	Extraprovincial		587,893		463,428		350,994		553,727		880,786

Total Revenue from Sale of Power			$1,373,929		$1,339,269		$1,269,225		$1,492,483		$1,864,440

Number of Customers (at end of period)			405,535		497,725		501,650		505,666		509,791
Average Revenue per kilowatt-hour
	Manitoba		4.65¢		4.63¢		4.76¢		4.76¢		4.93¢
	Extraprovincial		4.86		4.90		5.03		5.79		6.39
Average Cost per kilowatt-hour of Electric Energy Sold (excluding finance expense)			2.46¢		2.95¢		4.79¢		3.04¢		2.93¢
Natural Gas Gas Deliveries (in billions of cubic feet)
	Residential		22.8		25.2		23.0		24.0		20.4
	Commercial/ Industrial		31.7		34.6		31.5		32.4		28.4
	Transportation		17.7		22.6		20.4		19.7		21.1

	Total Gas Deliveries		72.2		82.4		74.9		76.1		69.9

	Number of Customers (at end of period)		249,351		251,273		253,631		255,925		257,817
Revenue from Sale of Natural Gas (in thousands of dollars)
	Residential		$224,704		$247,413		$234,781		$244,178		$244,937
	Commercial/ Industrial		248,045		260,832		251,994		257,995		266,634
	Transportation		4,127		4,016		4,354		4,440		3,611
	Other		2,471		2,587		2,517		2,228		2,199

Total Revenue from the Sale of Natural Gas			$479,347		$514,848		$493,646		$508,841		$517,381

(1) Manitoba energy sales are based on the net energy transfer to Winnipeg Hydro to the September 3, 2002 acquisition date and exclude internal energy use. Extraprovincial energy sales and power purchased are based on scheduled energy deliveries and exclude energy supplied out of province for delivery out of province.

For information with respect to the operating financial results, balance sheet and statement of changes in financial position of Manitoba Hydro, see “Tables of Supplementary Information — Tables V, VI, VII.”

Construction Program

The following table summarizes Manitoba Hydro’s capital expenditure for improvements and expansion of its facilities during the four-year period ended March 31, 2006, and the estimated capital expenditure to meet future demands for electricity and natural gas in the province during the five-year period ending March 31, 2011.

CAPITAL EXPENDITURE


	Year Ending March 31,

									Estimated

	2003		2004		2005		2006		2007		2008		2009-2011

Electricity
Generating Plant		$153,982		$110,644		$136,555		$171,454		$279,950		$337,084		$1,146,675
Major Transmission & Stations		116,447		128,500		142,395		116,705		83,366		101,102		281,219
Distribution & Other		192,366		213,523		185,398		175,578		281,240		303,242		631,771
Natural Gas
Distribution & Other		21,658		31,572		22,695		26,985		32,056		39,472		131,852

		$484,453		$484,239		$487,043		$490,723		$676,612		$780,900		$2,191,517

Capital expenditures, excluding new generation and transmission expenditures, are estimated to total $1,994 million for the five-year period ending March 31, 2011. Manitoba Hydro expects internally generated funds to be $1,857 million or approximately 93% of these capital expenditures during this period. These amounts do not include any of the possible new hydraulic projects discussed below.

During the fiscal year 2005-06, the last of 63 wind turbines were erected at the St. Leon Wind Farm. Manitoba Hydro has signed a 25-year Power Purchase Agreement with AirSource Power to purchase the entire output of the wind farm. The Corporation intends to make a formal request for proposals this winter calling for 300 megawatts of wind power by 2009, followed by calls for the development of an additional 600 megawatts of generating capacity by 2018.

Manitoba Hydro has five generating stations with a total installed generating capability of 3,928 megawatts along the Nelson River. Manitoba Hydro estimates the total potential hydro-electric generating capacity of the overall Nelson River development to be in excess of 7,100 megawatts.

Based on Manitoba electricity needs, and after including the resources provided by existing and new wind generation, conservation initiatives, and upgrading of existing facilities, it is projected that no new major hydraulic generation will be required to serve the Manitoba domestic market and committed export requirements until at least 2021. However, Manitoba Hydro is actively exploring the feasibility of building one or more new hydro-electric generating stations prior to 2021 in order to take advantage of export market opportunities. Agreements in principle that involve partnership arrangements and equity participation have been reached with First Nations in the vicinity of these projects. Manitoba Hydro and Nisichawayasihk Cree Nation (NCN) have signed a Project Development Agreement for the joint development of the Wuskwatim Generating Station. Through this agreement, NCN can acquire up to a 33% partnership interest in the station. Construction of the access road to the generating station site has begun which will allow for a 2012/13 in-service date for the project. The cost of completion for this project is estimated to be $1.4 billion.

On November 15, 2006, the Government announced that the Conawapa dam will be built. The schedule for this project has not yet been announced. Costs for preliminary work on this project are included in the capital expenditures projections in the table on the preceding page.

Manitoba Hydro is pursuing major export sale opportunities in Ontario and the U.S. Sufficiently large sales could require the development of additional hydraulic stations and interconnection facilities.

As a result of Manitoba Hydro’s generation and transmission activities in the past, a number of communities have experienced adverse impacts. To provide fair compensation to these communities, Manitoba Hydro has been engaged in discussions to reach settlement agreements. As of March 31, 2006, Manitoba Hydro has committed nearly $600 million for remedial works, compensation and/or mitigation initiatives, negotiated settlement agreements with four of the five communities covered by the 1977 Northern Flood Agreement (“NFA”) and reached compensation/mitigation agreements with numerous communities outside the NFA.

On December 16, 2002, a plan was announced between Manitoba, Manitoba Hydro and Pimicikamak Cree Nation representatives from the Cross Lake First Nation, the fifth NFA community, containing NFA implementation initiatives. To date, approximately $101 million of the funds committed for compensation and mitigation initiatives has been spent at Cross Lake. Manitoba Hydro and Manitoba continue to work with Cross Lake First Nation to develop and implement an action plan for fulfillment of obligations under the NFA. In addition, discussions are ongoing to reach concluding arrangements with the remaining communities not covered by the NFA.

MANITOBA INTEGRATED SYSTEM

EXISTING AND POTENTIAL GENERATING STATIONS

EXISTING GENERATING STATIONS


Generating Station	River	Winter Capability

		(in Megawatts)
Jenpeg	Nelson		132
Kelsey	Nelson		225
Kettle	Nelson		1,220
Long Spruce	Nelson		1,010
Limestone	Nelson		1,340
Pine Falls	Winnipeg		88
Great Falls	Winnipeg		133
McArthur Falls	Winnipeg		55
Seven Sisters	Winnipeg		165
Slave Falls	Winnipeg		67
Pointe Du Bois	Winnipeg		77
Grand Rapids	Saskatchewan		479
Laurie River I and II	Laurie		10

Total Hydraulic Capability			5,001
Brandon & Selkirk Thermal			468

Total Integrated System Capability			5,469


POTENTIAL HYDRAULIC SITES (1)

Conawapa	Nelson		1,250
Gillam Island	Nelson		820
Gull	Nelson		620
Whitemud	Nelson		310
Red Rock	Nelson		190
Wuskwatim (2)	Burntwood		200
Manasan	Burntwood		195
First Rapids	Burntwood		225
Notigi	Burntwood		100

			3,910

Total			9,379

(1) Net capacity addition to the integrated system.

(2) Manitoba Hydro and Nisichawayasihk Cree Nation (NCN) have signed an agreement for the joint development of the Wuskwatim Generating Station. Construction of the access road to the generating station site has begun.

Export Power Sales

Manitoba Hydro has a contract with Northern States Power Company (“NSP”), (a subsidiary of Xcel Energy), for the export of 500 megawatts of firm power until 2015. On November 3, 2006 Manitoba Hydro announced the signing of a ‘term sheet’ with NSP for the export of approximately $2.2 billion in hydro power over 10 years between 2015 and 2025. The new arrangement would provide for the export of 375 megawatts of power commencing in 2015, with the potential to increase to 500 megawatts after 2021. Prior to the contract being finalized, the Minnesota Public Utilities Commission, as well as the National Energy Board of Canada, must approve the arrangement.

Manitoba Hydro has signed 150 megawatt Seasonal Diversity Exchange Agreements with United Power Association and with NSP, which will continue until 2015 and 2019, respectively. A third Seasonal Diversity Exchange for 200 megawatts with NSP will continue until 2016. These

Seasonal Diversity Exchange Agreements provide that power may be exported from Manitoba in the summer months and returned to Manitoba in the winter months.

Other long-term export power sales include:


	•	50 megawatt sale to Otter Tail Power 2000-2010

	•	Sale to Minnesota Municipal Power Agency 2000-2012:


	•	60 megawatts from 2000-2009

	•	30 megawatts from 2010-2012


	•	100 megawatt sale to Wisconsin Public Service 2002-2007

	•	50 megawatt sale to Great River Energy 2002-2007

	•	50 megawatt sale to Minnesota Power 2005-2009

	•	50 megawatt sale to Minnesota Power 2009-2015

Manitoba Hydro makes short-term and long-term power sales on an on-going basis to numerous utilities and marketers in the upper mid-west United States and in Canada. Manitoba Hydro monitors the creditworthiness of and exposures to export sales customers in order to minimize credit risk.

In September 2001, Manitoba Hydro announced it had reached a Coordination Agreement with the Midwest Independent Transmission System Operator, Inc. (“the Midwest ISO”) which allows Manitoba Hydro to participate in the Midwest ISO. The Midwest ISO began full operations in February 2002. The relationship with the Midwest ISO provides Manitoba Hydro with non-discriminatory transmission access to the membership base of the Midwest ISO. From its headquarters in central Indiana, the Midwest ISO serves as an independent agent for its transmission-owning members, and, with the inclusion of committed operations, controls an interconnected transmission grid encompassing more than 122,000 megawatts of generation capacity over 111,000 miles of high voltage transmission lines in all or parts of 15 states and parts of Canada. Effective April 1, 2005, the Midwest ISO began operation of a new centrally operated electricity market referred to as MISO Day II. This new market operates similarly to other trading exchanges where power sales and purchases are transacted directly with the exchange rather than utilities transacting directly with one another. The new market offers a broader range of electricity products, thereby providing more sales opportunities to Manitoba Hydro.

CANADIAN FOREIGN EXCHANGE

Canada maintains a floating exchange rate. Average noon spot exchange rates against the U.S. dollar, in which direct and guaranteed borrowings of the Province is denominated, expressed in Canadian dollars, are shown in the table below for the calendar year 2001 through 2005.

Average Noon Spot Rates

Foreign Currency

2001

2002

2003

2004

2005

(Canadian dollars per unit of foreign currency)

United States Dollars (1)

$1.5484

$1.5704

$1.4015

$1.3015

$1.2116

(1) The high and low spot rates for the U.S. dollar expressed in Canadian dollars are as follows:


	2001		2002		2003		2004		2005

High		$1.6050		$1.6132		$1.5747		$1.3968		$1.2734
Low		1.4901		1.5110		1.2924		1.1774		1.1427

Source: Bank of Canada.

At March 31, 2006, the noon spot exchange rate for U.S. dollars as reported by Bank of Canada, expressed in Canadian dollars, was $1.1671.

TABLES OF SUPPLEMENTARY INFORMATION


		Page

I.	Summary Financial Statements
	— Summary Statement of Financial Position		46
	— Summary Statement of Revenue and Expense		48
	— Summary Statement of Cash Flow		49
II.	Summary Financial Statements — Government Business Enterprises
	— Summary of Operating Results and Financial Position		50
III.	Statement of Direct Funded Borrowings of the Province		51
IV.	Statement of Securities Guaranteed by the Province		57
V.	The Manitoba Hydro-Electric Board Consolidated Statement of Operations		59
VI.	The Manitoba Hydro-Electric Board Consolidated Balance Sheet		60
VII.	The Manitoba Hydro-Electric Board Consolidated Statement of Changes in Financial Position		61

I. SUMMARY FINANCIAL STATEMENTS —

SUMMARY STATEMENT OF FINANCIAL POSITION

AS AT MARCH 31, 2006

(with comparative figures for 2005)


				2005			2006

				(millions)
FINANCIAL ASSETS
	Cash and cash equivalents				$1,137			$1,088
	Temporary investments				267			323
	Amounts receivable				900			900
	Inventories				36			40
	Prepaid expense				19			22
	Portfolio investments				545			608
	Loans and advances				626			585
	Equity in Government Business Enterprises				1,224			1,740
	Other long-term investments				4			4

TOTAL ASSETS					4,758			5,310

LIABILITIES
	Borrowings				18,390			18,559
		Less: Sinking funds			(2,729	)		(2,739	)
		Less: Borrowings incurred for and repayable by The Manitoba Hydro-Electric Board and Manitoba Lotteries Corporation			(6,215	)		(6,276	)

					9,446			9,544
		Less: Unamortized foreign currency fluctuation			(84	)		(79	)

	Net borrowings				9,362			9,465
	Accounts payable, accrued charges, provisions and deferrals				2,305			2,397
	Pension liability				3,761			3,967

TOTAL LIABILITIES					15,428			15,829

NET DEBT					$(10,670	)		$(10,519	)

NON-FINANCIAL ASSETS
			Tangible capital assets		$3,915			$4,170

ACCUMULATED DEFICIT (1)					$(6,755	)		$(6,349	)

(1) Material adjustments may result from changes in accounting policy or from the correction of an error which are attributable to and identifiable with prior periods. In accordance with GAAP changes in accounting policies and correction of errors have resulted in changes in the comparative figures of the financial statements and the opening balance of the accumulated deficit. In the March 31, 2006 fiscal year, restatements to the March 31, 2005 accumulated deficit and loss for the year were made to apply changes in accounting policies and due to correction of errors.

A. Adjustments were made to the opening accumulated deficit for the March 31, 2005 fiscal year to recognize the impact of changing in accounting policies. These adjustments were made to recognize environmental liabilities ($142 million increase) and to recognize the liability associated with the recognition of prepaid expense in accordance with changes to public sector accounting standards ($19 million decrease).

B. Adjustments were made to the opening accumulated deficit for the March 31, 2005 fiscal year to apply changes due to correction of errors. An adjustment was made to recognize the liability associated with certain tax refunds that had not been identified and corrected in the 2005 fiscal year ($6 million increase).

C. Adjustments were made to the opening accumulated deficit for the March 31, 2005 fiscal year to account for the inclusion of eight additional entities into the Government Reporting Entity in accordance with changes to public sector accounting standards ($93 million decrease). These entities included; College universitaire de Saint-Boniface, First Nations of Northern Manitoba Child and Family Services Authority, First Nations of Southern Manitoba Child and Family Services Authority, Metis Child and Family Services Authority, Sport Manitoba Inc., St. Amant Centre Inc. (a component of the Winnipeg Regional Health Authority), Tire Stewardship Board and the University of Winnipeg.

D. In the March 31, 2006 fiscal year the Manitoba Public Insurance Corporation changed its accounting policies on the recognition of pension plan experience gains to recognize these gains and losses in the year in which they occur. Previously the policy was to amortize these gains and losses over the expected average remaining service life of the employee group. As a result of this change, the accumulated deficit for March 31, 2005 increased by 12 million.

The net effect of these adjustments is a $48 million increase to March 31, 2005 opening accumulated deficit.

E. In the March 31, 2005 fiscal year the Workers Compensation Board elected to change its accounting policies on the recognition of gains and losses (other comprehensive income) in accordance with changes to accounting standards on their recognition of these gains and losses. As a result of this change the accumulated deficit for March 31, 2005 decreased by $28 million. In the March 31, 2006 fiscal year, the Government adopted the policy to recognize this other comprehensive income as a charge to the accumulate deficit in accordance with new public sector accounting policy standards. The net effect of these changes is a $37 million decrease to the March 31, 2005 summary net income. The net effect of these adjustments is a $65 million increase to the March 31, 2005 accumulated deficit.

I. SUMMARY FINANCIAL STATEMENTS —

SUMMARY STATEMENT OF REVENUE AND EXPENSE (1)

FOR THE YEAR ENDED MARCH 31, 2006

(with comparative figures for 2005)


			2005		2006

			(In millions
			of dollars)
REVENUE
	Manitoba Collections:
		Retail sales tax		1,125		1,198
		Fuel taxes		235		236
		Levy for health and education		287		303
		Mining tax		41		39
		Other taxes		531		509
		Fees and other revenue		1,842		2,057
	Income taxes:
		Corporation income tax		402		373
		Individual income tax		1,842		1,949
	Net Income from Government business enterprises			679		958
	Federal transfers:
		Equalization		1,699		1,601
		Canada Health and Social Transfer		1,045		1,108
		Health Reform Fund		55		—
		Bill C-48		—		49
		Shared cost and other		357		345

TOTAL REVENUE				10,140		10,725

EXPENSES
	Health			3,560		3,849
	Education			2,309		2,366
	Family Services and Housing			1,020		1,075
	Community, Economic and Resource Development			1,169		1,448
	Justice and Other Government			755		822
	Debt Servicing			765		790

TOTAL EXPENSES				9,578		10,350

SUMMARY NET INCOME				562		375

(1) Earlier years are restated to conform with the 2006 presentation.

I. SUMMARY FINANCIAL STATEMENTS

SUMMARY STATEMENT OF CASH FLOW (1)

AS AT MARCH 31, 2006

(with comparative figures for 2005)


			2005			2006

			($ millions)
Cash and cash equivalents provided by (used in)
Operating activities:
	Summary net income for the year			562			375
	Changes in non-cash items:
		Temporary investments		(60	)		(56	)
		Amounts receivable		(124	)		20
		Valuation allowance		4			(31	)
		Inventories		2			(4	)
		Prepaids		—			3
		Portfolio investments		(156	)		(63	)
		Accounts payable, accrued charges, provisions and deferrals		117			92
		Pension liability		190			206
		Amortization of foreign currency fluctuation		6			5
		Amortization of debt discount		8			7
		Amortization of investment discounts and premiums		(1	)		2
		Workers Compensation Board Investment premium		28			—
		Other Comprehensive Income		37			31
		Disposal of tangible capital assets		4			10
		Amortization of tangible capital assets		254			266

				871			863
		Changes in equity in Government business enterprises		(286	)		(516	)

Cash provided by operating activities				585			347

Tangible capital assets
	Acquisition of tangible capital assets			(426	)		(531	)

Cash used in capital activities				(426	)		(531	)

Investing activities:
	Made			(584	)		(91	)
	Realized			140			499

Cash used in capital activities				(444	)		(91	)

Financing activities:
	Debt issued			2,671			2,901
	Debt redeemed			(2,180	)		(2,777	)
	Changes in sinking funds			197			102

Cash provided by financing activities				688			226

Increase (decrease) in cash and cash equivalents				403			(49	)
Cash and cash equivalents, beginning of year				734			1,137

Cash and cash equivalents, end of year				1,137			1,088

(1) Earlier years are restated to conform with the 2006 presentation.

II. SUMMARY FINANCIAL STATEMENTS — GOVERNMENT BUSINESS ENTERPRISES (1)

SUMMARY OF OPERATING RESULTS AND FINANCIAL POSITION

FOR THE YEAR ENDED MARCH 31, 2006 *

(with comparative figures for 2005)


										Resources		Total			Total
			Utilities		Insurance		Finance			Development		2006			2005

			(In millions of dollars)
Results of Operations
	Revenues from operations
		From operations		2,399		1,254		1,170			—		4,823			4,217

	Expenses:
		From operations		1,481		1,183		684			—		3,348			3,024
		Debt servicing		503		—		14			—		517			514

	Total Expenses			1,984		1,183		698			—		3,865			3,538

	Net Income			415		71		472			—		958			679
	Transfers to the government			—		—		(473	)		—		(473	)		(458	)

				415		71		(1	)		—		485			221
	Other comprehensive income			—		31		—			—		31			37

Net increase (decrease) in equity in Government Business Enterprises				415		102		(1	)		—		516			258


	*	For enterprises whose fiscal year is prior to March 31, the amounts reflected are as at their fiscal year end.


	(1)	Government Business Enterprises consist of the following as at March 31, 2006:

Utilities:

Manitoba Hydro-Electric Board

Insurance:

Manitoba Public Insurance Corporation

Workers Compensation Board

Finance:

Manitoba Liquor Control Commission

Manitoba Lotteries Corporation

Manitoba Product Stewardship Corporation

Resource Development:

Leaf Rapids Town Properties Ltd.

Manitoba Hazardous Waste Management Corporation

III. STATEMENT OF DIRECT FUNDED BORROWINGS OF THE PROVINCE

AS AT MARCH 31, 2006


					Interest
Series	Date of Maturity		Year of Issue		Rate %		Amount Outstanding		Ref

							($ thousands)
Debenture Loans
(A) Payable in Canadian Dollars:
DX		5-Jun-06		1996		7.750		250,000	(1)
EQ		7-Jun-06		2002		5.250		100,000	(1)
EJ		1-Dec-06		1999		5.100		250,000	(1)
EC		16-May-07		1997		6.625		300,000	(1)
EB		21-May-07		1997		7.000		125,000	(1)
ES		29-Jun-07		2002		4.250		300,000	(1)
ED		2-Jun-08		1997		5.750		676,746	(1)
EX		1-Dec-08		2003		4.450		250,000	(1)
EG		2-Mar-09		1998		5.250		550,000	(1)
EL		1-Sep-09		1999		6.250		250,000	(1)
EO		25-Jan-11		2001		5.85		575,000	(1)
CM		15-May-11		1991		10.000		299,827	(1)
FB		22-Sep-11		2004		4.625		150,000	(1)
ER		3-Dec-12		2002		5.250		250,000	(1)
EW		17-Apr-13		2003		5.500		125,000	(1)
FG		3-Jun-13		2006		4.250		300,000	(1)
DE		22-Jul-13		1993		8.50		300,000	(1)(3)
EZ		3-Dec-13		2003		5.05		500,000	(1)(3)
FC		3-Dec-14		2004		4.800		400,000	(1)
EY		3-Dec-15		2003		5.200		450,000	(1)
FF		1-Mar-16		2005		4.300		250,000	(1)
DT		22-Dec-25		1995		7.75		300,000	(1)
CL		5-Mar-31		1991		10.50		599,945	(1)
FA		5-Mar-37		2004		5.70		350,000	(1)

Total Debenture Loans								7,901,518

Medium-Term Notes
C069-MTN		5-Jan-07		2004		Floating		50,000	(1)
C025-MTN		12-Mar-07		1999		Floating		20,000	(1)
C008-MTN		24-Apr-07		1997		Floating		9,000	(1)
C064-MTN		3-May-07		2004		Floating		50,000	(1)
C048-MTN		17-May-07		2002		Floating		100,000	(1)
C066-MTN		15-Jun-07		2004		Floating		100,000	(1)
C047-MTN		8-Aug-07		2002		Equity		10,000	(1)
C050-MTN		15-Oct-08		2002		Step		12,500	(1)
C057-MTN		20-Oct-08		2003		Floating Step		100,000	(5)
C061-MTN		23-Mar-09		2004		Floating		100,000	(5)
C065-MTN		10-May-09		2004		3.325		60,955	(5)
C075-MTN		26-Oct-09		2004		Floating Step		25,000	(6)
C062-MTN		30-Apr-10		2004		Step		13,000	(1)
C022-MTN		15-Jul-10		1998		5.50		40,000	(1)
C056-MTN		31-Mar-11		2003		5.29		3,406	(1)
C081-MTN		27-Sep-13		2005		Portfolio		100,000	(1)
C083-MTN/RRB		1-Dec-13		2006		1.753		23,061	(1)
C078-MTN		15-Mar-15		2005		Step		15,000	(5)
C079-MTN		15-Jul-15		2005		4.35		15,000	(5)
C080-MTN		31-Jul-17		2005		Step		10,000	(1)
C011-MTN		22-Sep-17		1997		6.50		280,454	(1)
C012-MTN		22-Sep-17		1997		6.50		100,000	(1)

III. STATEMENT OF DIRECT FUNDED BORROWINGS OF THE PROVINCE — (continued)


					Interest
Series	Date of Maturity		Year of Issue		Rate %		Amount Outstanding		Ref

							($ thousands)
C082-MTN		15-Dec-17		2005		Step		15,000	(5)
C023-MTN		15-Nov-18		1998		5.50		250,000	(1)
C084-MTN/RRB		1-Dec-18		2006		1.738		85,227	(1)
C077-MTN		11-Feb-20		2005		Step		75,000	(5)
C074-MTN		3-Dec-29		2004		Step		100,000	(6)
C049-MTN		26-Jul-32		2002		4.31		50,000	(1)
C052-MTN		29-Oct-32		2002		5.975		30,000	(1)
C076-MTN		19-Jan-35		2005		Step		75,000	(5)
C031-MTN		5-Mar-40		2001		6.20		276,000	(1)
C040-MTN		5-Mar-42		2002		6.00		350,000	(1)
C068-MTN		5-Mar-44		2004		5.80		50,000	(1)

								2,593,603

L005-MTN		17-Jan-08		2002		Floating Step		30,000	(1)
L008-MTN		10-May-09		2004		3.325		60,955	(5)
L009-MTN		28-Feb-17		2005		Step		35,000	(5)
L004-MTN		22-Sep-17		2000		6.50		25,000	(1)
L003-MTN		15-Nov-18		2000		5.50		75,000	(1)

								255,995

H010-MTN		30-Nov-06		2001		STEP		40,000	(5)
H008-MTN		25-Jun-07		2001		S&P TSE 60		15,000	(5)
H011-MTN		17-Jan-08		2002		Floating Step		106,000	(1)
H015-MTN		1-Dec-08		2003		BA-5		6,000	(1)
H024-MTN		30-Jun-15		2005		STEP		15,000	(5)
H029-MTN		30-Nov-15		2005		STEP		25,000	(5)
H021-MTN		28-Feb-17		2005		STEP		35,000	(5)
H022-MTN		31-May-17		2005		STEP		25,000	(5)
H023-MTN		31-May-17		2005		STEP		20,000	(5)
H025-MTN		25-Aug-17		2005		STEP		45,000	(5)
H026-MTN		30-Sep-17		2005		STEP		45,000	(5)
H028-MTN		31-Oct-17		2005		STEP		27,000	(5)
H030-MTN		31-Jan-18		2006		STEP		20,000	(4)
H027-MTN		31-Oct-35		2005		STEP		11,000	(1)

								435,000

D030-MTN		12-Dec-06		2001		Floating		40,000	(1)
D018-MTN		15-Mar-07		1999		Floating		11,000	(1)
D051-MTN		16-Dec-08		2002		Equity		15,000	(5)
D013-MTN		15-Nov-09		1999		4.71		25,000	(4)
D026-MTN		14-Apr-10		2000		Floating		15,000	(5)
D139-MTN		15-Sep-10		2005		Floating		15,000	(5)
D146-MTN		1-Apr-11		2005		STEP		15,000	(5)
D131-MTN		15-Jul-11		2005		STEP		15,000	(5)
D148-MTN		15-Dec-11		2006		4.28		15,000	(4)
D118-MTN		20-Feb-12		2005		STEP		10,000	(5)
D097-MTN		22-May-12		2004		STEP		10,000	(5)
D113-MTN		20-Nov-12		2004		STEP		10,000	(5)
D130-MTN		15-Jun-13		2005		STEP		25,000	(5)
D145-MTN		1-Dec-13		2005		STEP		15,000	(5)
D151-MTN/RRB		1-Dec-13		2006		1.753		42,112	(1)
D095-MTN		15-Apr-14		2004		STEP		25,000	(5)

III. STATEMENT OF DIRECT FUNDED BORROWINGS OF THE PROVINCE — (continued)


					Interest
Series	Date of Maturity		Year of Issue		Rate %		Amount Outstanding			Ref

							($ thousands)
D091-MTN		22-Aug-14		2004		STEP		35,000		(5)
D106-MTN		15-Sep-14		2004		STEP		25,000		(5)
D119-MTN		20-Feb-15		2005		STEP		15,000		(5)
D121-MTN		15-Mar-15		2005		4.70		25,000		(5)
D123-MTN		15-Apr-15		2005		STEP		15,000		(5)
D125-MTN		21-Apr-15		2005		STEP		15,000		(5)
D115-MTN		15-Jun-15		2005		STEP		25,000		(5)
D137-MTN		20-Aug-15		2005		STEP		10,000		(5)
D142-MTN		1-Oct-15		2005		STEP		10,000		(5)
D143-MTN		1-Oct-15		2005		STEP		15,000		(5)
D144-MTN		1-Dec-15		2005		STEP		15,000		(4)
D090-MTN		22-Feb-16		2004		STEP		10,000		(5)
D138-MTN		1-Sep-16		2005		STEP		15,000		(5)
D112-MTN		22-Nov-16		2004		STEP		25,000		(5)
D116-MTN		15-Jan-17		2005		STEP		25,000		(5)
D122-MTN		15-Mar-17		2005		STEP		30,000		(5)
D124-MTN		1-Apr-17		2005		5.00		15,000		(5)
D126-MTN		20-May-17		2005		STEP		20,000		(5)
D127-MTN		20-May-17		2005		STEP		15,000		(5)
D043-MTN		15-Jun-17		2001		STEP		27,000		(5)
D132-MTN		15-Jul-17		2005		STEP		25,000		(5)
D140-MTN		15-Sep-17		2005		STEP		20,000		(5)
D136-MTN		1-Oct-17		2005		STEP		15,000		(5)
D053-MTN		15-Jan-18		2002		STEP		18,000		(5)
D149-MTN		15-Jan-18		2006		STEP		10,000		(5)
D147-MTN		15-Nov-18		2005		STEP		50,000		(1)
D150-MTN/ RRB		1-Dec-18		2006		1.738		85,226		(1)
D114-MTN		1-Dec-19		2004		5.45		20,000		(5)
D117-MTN		20-Feb-20		2005		STEP		25,000		(5)
D120-MTN		15-Mar-20		2005		5.20		25,000		(5)
D128-MTN		22-Jun-20		2005		STEP		15,000		(5)
D096-MTN		1-Dec-20		2004		5.43		40,000		(5)
D133-MTN		15-Jul-25		2005		5.125		10,000		(5)
D134-MTN		1-Oct-30		2005		5.10		16,000		(6)
D135-MTN		1-Oct-30		2005		5.16		15,000		(6)
D141-MTN		1-Oct-30		2005		5.23		10,000		(5)
D025- MTN		5-Mar-31		2000		6.30		310,000		(5)
D129-MTN		5-Mar-31		2005		STEP		100,000		(5)

								1,499,338

Total Medium Term Notes								4,753,896

Canadian Issues Swapped to USD:
CAD $
DE		22-Jul-13		1993		N/A		300,000
EZ		3-Dec-13		2003		N/A		390,500

								(690,500	)

III. STATEMENT OF DIRECT FUNDED BORROWINGS OF THE PROVINCE — (continued)


					Interest
Series	Date of Maturity		Year of Issue		Rate %		Amount Outstanding			Ref

							($ thousands)
Foreign Issues Swapped to Canadian Dollars:
DW		14-Jun-06		1996		N/A		65,164
EP-1		20-Nov-06		2002		N/A		250,000
EV		17-Apr-07		2003		N/A		88,650
ET		10-Jan-08		2003		N/A		209,600
D087		15-Dec-08		2003		N/A		10,400
EM		22-Feb-10		2000		N/A		141,500
FD		12-Apr-10		2005		N/A		179,000
EZ-2-FX Hedge		3-Dec-13		2004		N/A		208,320
FE		1-Sep-15		2005		N/A		255,000
AZ		17-Jul-16		1986		N/A		200,630
C037		1-Nov-16		2001		N/A		13,110
C036		21-Nov-16		2001		N/A		39,340
BM		15-Jan-18		1988		N/A		254,960
BU		1-Dec-18		1988		N/A		136,375
CB		15-Jan-20		1990		N/A		369,400
CD		1-Apr-20		1990		N/A		412,815
								2,834,264

Total Canadian Dollars								14,799,178

(B) Payable in U.S. Dollars:
EP		20-Nov-06		2001		4.25		583,550		(1)
EP-1		20-Nov-06		2002		4.25		186,736		(1)(2)
EF		1-Oct-08		1998		5.500		291,775		(1)(2)
EM		22-Feb-10		2000		7.50		583,550		(1)(2)
FD		12-Apr-10		2005		4.45		408,485		(1)(2)
AZ		17-Jul-16		1986		7.75		174,353		(1)(2)
BM		15-Jan-18		1988		9.125		233,420		(1)(2)
EE		15-Sep-18		1988		9.50		233,420		(1)
BU		1-Dec-18		1988		9.625		350,130		(1)(2)
CB		15-Jan-20		1990		8.80		291,775		(1)(2)
CD		1-Apr-20		1990		9.25		350,130		(1)(2)
CO		15-Sep-21		1991		8.875		350,130		(1)

								4,037,454

Medium-Term Notes (Payable in U.S. Dollars)
D087		15-Dec-08		2003		STEP		9,337		(5)(2)

								9,337

Foreign Issues swapped to Canadian Dollars:
EP-1		20-Nov-06		2002		N/A		186,736
EF		1-Oct-08		1998		N/A		58,355
EM		22-Feb-10		2000		N/A		233,420
FD		12-Apr-10		2005		N/A		171,505
D087		15-Dec-13		2003		N/A		9,337
AZ		17-Jul-16		1986		N/A		174,353
BM		15-Jan-18		1988		N/A		233,420
BU		1-Dec-18		1988		N/A		116,710
CB		15-Jan-20		1990		N/A		291,775
CD		1-Apr-20		1990		N/A		350,130

								(1,825,741	)

Foreign Issues swapped to U.S. Dollars:
EF		1-Oct-08		1998		N/A		54,263
EM		22-Feb-10		2000		N/A		113,350

III. STATEMENT OF DIRECT FUNDED BORROWINGS OF THE PROVINCE — (continued)


					Interest
Series	Date of Maturity		Year of Issue		Rate %		Amount Outstanding			Ref

							($ thousands)
C032		12-Oct-10		2000		N/A		54,795
DE		22-Jul-13		1993		N/A		219,866
EZ		3-Dec-13		2003		N/A		175,065
								617,340

Total US Dollars								2,838,390

(C) Payable in Swiss Francs:
ET		10-Jan-08		2003		2.00		179,200		(1)(2)

								179,200

Swapped to Canadian Dollars:
ET		10-Jan-08		2003		N/A		179,200
								(179,200	)

Total Swiss Francs								0

(C) Payable in Australian Dollars:
EV		17-Apr-07		2003		5.00		83,620		(1)(2)

								83,620

Swapped to Canadian Dollars:
EV		17-Apr-07		2003		N/A		83,620

								(83,620	)

Total Australian Dollars								0

(D) Payable in Japanese Yen:
DW		14-Jun-06		1996		3.45		49,665		(1)(2)
C032		12-Oct-10		2000		1.8950		49,665		(1)(3)
C036		21-Nov-16		2001		2.00		29,799		(1)(2)
C037		21-Nov-16		2001		2.03		9,933		(1)(2)

								139,062

Japanese Yen Issues swapped to Canadian Dollars:
DW		14-Jun-06		1996		N/A		49,665
C036		21-Nov-16		2001		N/A		29,799
C037		21-Nov-16		2001		N/A		9,933

								(89,397	)

Japanese Yen Issues swapped to U.S. Dollars:
C032		12-Oct-10		2000		N/A		49,665

								(49,665	)

Total Japanese Yen								0

(E) Payable in New Zealand Dollars:
FE		1-Sep-15		2005		6.38		215,790		(1)(2)

								215,790

Swapped to Canadian Dollars:
FE		1-Sep-15		2005		N/A		215,790

								(215,790	)

Total New Zealand Dollars								0

III. STATEMENT OF DIRECT FUNDED BORROWINGS OF THE PROVINCE — (continued)


					Interest
Series	Date of Maturity		Year of Issue		Rate %		Amount Outstanding		Ref

							($ thousands)
Builder Bonds (Payable in Canadian Dollars)
BB # 7		15-Jun-08		2003		Floating		22,068	(6)
		15-Jun-06		2003		Fixed		111,208	(1)
		15-Jun-08		2003		Fixed		101,936	(1)
		15-Jun-08		2003		Fixed		30,306	(1)
BB # 8		15-Jun-09		2004		Floating		6,314	(6)
		15-Jun-07		2004		Fixed		82,776	(1)
		15-Jun-09		2004		Fixed		96,217	(1)
		15-Jun-09		2004		Fixed		33,000	(1)
BB # 9		15-Jun-10		2005		Floating		17,603	(6)
		15-Jun-08		2005		Fixed		63,643	(1)
		15-Jun-10		2005		Fixed		16,356	(1)
		15-Jun-10		2005		Fixed		7,860	(1)

								589,287

Total Bonds and Debentures								18,226,855

Canada Pension Plan (Payable in Canadian Dollars)
		2006-2019		Various		5.67-11.33		756,734	(9)

Government Business Enterprises
		2007-2026		Various		Various		384,158

Health Care Facilities
		2007-2026		Various		Various		236,727

Government of Canada
		2007-2015		Various		Various		118,178

Immigrant Investor Program (IIP)
		2009-2011		Various		3.35-4.35		74,928	(1)

Treasury Bills Payable in Canadian Dollars
		2006-2007		Various				325,000	(7)

TOTAL BORROWINGS								20,122,580

IV. STATEMENT OF SECURITIES GUARANTEED BY THE PROVINCE

AS AT MARCH 31, 2006

(In thousands)


					Interest
Series	Date of Maturity		Year of Issue		Rate %		Outstanding Amount		Ref.

							(In thousands of dollars)
BORROWINGS OF SELF-SUPPORTING UTILITIES:
The Manitoba Hydro-Electric Board
Savings Bonds: (Payable in Canadian Dollars)
1		15-Jun-92		1989		Matured		86
2		15-Jun-93		1990		Matured		27
3		15-Jun-96		1991		Matured		128
4		15-Jun-97		1992		Matured		450
5		15-Jun-01		1996		Matured		866
6		15-Jun-02		1997		Matured		168
		15-Jun-00		1997		Matured		212
		15-Jun-02		1997		Matured		275
7		15-Jun-06		2001		Floating		4,341	(6)
		15-Jun-06		2001		6.00		70,124	(1)
Series 8 5 yr floating		15-Jun-07		2002		Floating		12,094	(6)
5 yr fixed annual		15-Jun-07		2002		5.50		179,736	(1)
5 yr fixed compound		15-Jun-07		2002		5.50		81,077	(1)

								349,584

Manitoba Hydro Promissory Notes								—
City of Winnipeg Hydro Bonds								135,755	(1)

Total The Manitoba Hydro-Electric Board								485,339

Grow Bonds								5,173	(8)

Total Securities Guaranteed								490,512

References:


1.	Non-callable/redeemable.

2.	All or part swapped into Canadian dollars.

3.	All or part swapped to U.S. dollars.

4.	Callable as per terms.

5.	Extendable as per terms

6.	Redeemable at holder’s option, prior to maturity.

7.	91-day Treasury Bills issued by tender in the amount of $25,000,000 weekly.

8.	The Province has only guaranteed the principal portion of the issue.

9.	Held by and callable at par at the option of the Minister of Finance of Canada on 6 months’ notice, subject to the requirements of the Canada Pension Plan.

V. THE MANITOBA HYDRO-ELECTRIC BOARD

CONSOLIDATED STATEMENT OF OPERATIONS


			For the Year Ended March 31,

			2002			2003			2004			2005			2006

			(In thousands of dollars)
Revenues
	Electric
		Manitoba		$786,036			$875,841			$918,231			$938,756			$983,653
		Extraprovincial		587,893			463,430			350,994			553,727			880,786
	Other revenue			10,415			15,015			18,092			15,494			17,594
	Natural gas			479,346			514,847			493,645			508,841			517,381

				1,863,690			1,869,133			1,780,962			2,016,818			2,399,414

Expenses
	Operating and administrative			297,966			325,856			346,406			363,056			375,092
	Depreciation			259,774			281,348			295,975			310,824			321,807
	Water rentals			112,783			102,856			71,455			111,521			131,020
	Fuel and power purchased			71,423			151,169			568,897			135,456			178,862
	Capital and other taxes			61,361			65,510			72,469			74,557			76,745
	Cost of gas sold			364,882			392,273			374,449			383,215			397,396

				1,168,189			1,319,012			1,729,651			1,378,629			1,480,922

Net Income before Finance Expense				695,501			550,121			51,311			638,189			918,492

Finance Expense
	Interest on debt			586,798			589,118			572,366			571,631			578,431
	Amortization of debt discount and expense			11,138			726			(7,540	)		(5,399	)		(6,017	)
	Interest applied to construction			(25,212	)		(27,238	)		(34,738	)		(36,692	)		(38,241	)
	Investment income			(91,029	)		(83,776	)		(43,027	)		(27,656	)		(30,640	)

				481,695			478,830			487,061			501,884			503,533

	Net Income			$213,806			$71,291			$(435,750	)		$136,305			$414,959

VI. THE MANITOBA HYDRO-ELECTRIC BOARD

CONSOLIDATED BALANCE SHEET


		As at March 31,

		2005			2006

		(In thousands of dollars)
ASSETS
Capital Assets
	In service		$10,747,838			$11,065,142
	Less accumulated depreciation		3,446,745			3,657,082

			7,301,093			7,408,060
	Construction in progress		475,152			602,429

			7,776,244			8,010,489

Current Assets
	Bank balances and temporary investments		8,523			118,587
	Accounts receivable and accrued revenue		408,415			420,815
	Interest receivable		6,349			6,216
	Materials and supplies, at average cost		83,851			158,698

			507,138			704,316

Other Assets
	Pension assets		615,083			719,212
	Deferred debt costs		(19,497	)		31,239
	Other deferred expenses and receivables		466,662			461,455
	Sinking fund investments		561,513			555,199

			1,623,761			1,767,105

			$9,907,144			$10,481,910

LIABILITIES AND RETAINED EARNINGS
Long-term debt net of sinking fund			$6,486,063			$6,495,817
Sinking fund shown as an asset			561,513			555,199

			7,047,576			7,051,016

Current Liabilities
	Accounts payable and accrued liabilities		255,813			313,225
	Notes payable		59,000			—
	Accrued Interest		105,562			110,273
	Current portion of long-term debt		156,133			118,083

			576,508			541,581
Other Liabilities
	Deferred liabilities and credits		316,385			466,115
	Asset purchase obligation		242,553			235,624
	Pension obligation		559,540			606,251

			1,118,478			1,307,990

Contributions in aid of construction			295,648			297,405

Retained earnings			869,218			1,284,203

Share Capital			(284	)		(285	)

			$9,907,144			$10,481,910

VII. THE MANITOBA HYDRO-ELECTRIC BOARD

CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION

FOR THE YEAR ENDED MARCH 31,


		2005			2006

		(In thousands of dollars)
Cash Provided From (Used For) Operations
	Cash receipts from customers		$1,977,107			$2,386,878
	Cash paid to suppliers and employees		(1,045,281	)		(1,179,856	)
	Interest paid		(527,568	)		(530,480	)
	Interest received		29,114			32,785

			433,372			709,327

Cash Provided From (Used For) Financing
	Proceeds from long-term debt		299,558			180,015
	Retirement of long-term debt		(239,208	)		(109,947	)
	Premium (Discount) on long-term debt		(5,720	)		—
	Sinking fund withdrawal		236,178			84,213
	Distribution to Province of Manitoba		—			—
	Mitigation liability		(20,150	)		(19,038	)
	Notes payable		(35,451	)		(59,388	)
	Other		(578	)		1,848

			234,629			77,703

Cash Used For Investment
	Additions to capital assets net of contributions		(505,353	)		(498,298	)
	Sinking fund payment		(99,627	)		(103,235	)
	Net Obligation to the City of Winnipeg		(6,449	)		(6,930	)
	Other		(54,598	)		(68,504	)

			(666,027	)		(676,967	)

Increase in Cash			1,974			110,063
Cash (Deficiency) at Beginning of Year			6,549			8,523

Cash at End of Year			$8,523			$118,586

Province Of Manitoba 18-KAnnual report (foreign governments)