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

PROVINCE OF MANITOBA

2007/08 QUARTERLY FINANCIAL REPORT
APRIL TO SEPTEMBER 2007

NOTES TO THE QUARTERLY FINANCIAL REPORT

Budget 2007 is the first Summary Budget produced by the Government of Manitoba that aligns with the accounting standards set by the Public Sector Accounting Board (PSAB), which require provincial governments to report on the broader definition of government. It consolidates the budget plan for core government with projections for all Crown organizations, regional health authorities, hospitals, colleges, universities and school divisions in the province to fully reflect Generally Accepted Accounting Principles (GAAP). The consolidation of these entities and core government is the Government Reporting Entity (GRE).

The transition to Summary Budgeting and Reporting requires not only that the annual budget and financial statements (public accounts) be tabled on a summary basis, but that all financial reporting, including quarterly reporting, must be transitioned to represent the GRE. In addition, quarterly reporting must also be made consistent with GAAP. As noted in the 2007 Budget, the government’s quarterly financial reporting will remain largely unchanged for 2007/08. In 2008/09, appropriate changes will be introduced and the transformation of quarterly reporting will be completed by the end of 2009/10.

Consistent with the transition plan, this report presents an updated 2007/08 year-end forecast for the GRE consolidating information from entities directly and indirectly controlled by government, such as universities, public schools and government business enterprises. However as outlined in Budget 2007, the existing relationship between the government and the related entities does not change. The normal governance relationships between the government and these entities, and between the entities and their Boards and stakeholders, are not affected by the financial reporting process, other than that the entities must provide financial information to the government on a regular basis.

As in prior quarterly reports, the report also presents the unaudited financial results of the core government for the second quarter of the 2007/08 fiscal year. The core government figures are based on the structure established in the Estimates of Expenditure and Revenue for the fiscal year ending March 31, 2008. The comparative data provided for the 2006/07 fiscal year has been restated to reflect the current structure.

GOVERNMENT REPORTING ENTITY

YEAR END PROJECTION

Summary net income for the government reporting entity is currently projected to be $298.0 million, $123.2 million higher than the $174.8 million forecast in the 2007 Budget. The increase is primarily the result of higher projected net income from Government’s other reporting entities, most notably Manitoba Hydro and Manitoba Agricultural Services Corporation.

The core government continues to project revenues exceeding expenditures. The projected net result for the year is $75.3 million, down $0.7 million from the 2007 Budget, before budgeted transfers to the Debt Retirement Fund of $110.5 million and $37.0 million from the Fiscal Stabilization Fund for wait time initiatives.

Page 1 of 13

PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

Core government revenues are forecast to be $159.0 million higher than budget, primarily from updated projections for taxation revenues. Individual income taxes are up $119.7 million as a result of higher income projections, corporation income taxes are up $42.2 million based on revised estimates from Canada and retail sales tax has increased $40.0 million as Manitoba’s economy continues to be strong. Partially offsetting these increases is a reduction of $45.6 million in Government of Canada revenue as a result of slower than anticipated resolution of the agreement for infrastructure renewal funding.

Core government expenditures are forecast to be $160.0 million higher than budget. This forecast includes a projection of $43.0 million for additional payments to livestock producers under the Canadian Agriculture Income Stabilization Program as the result of declines in livestock prices and higher feed prices, $40.0 million to fulfill the previously announced commitment for the Canadian Museum for Human Rights and $8.3 million for emergency expenditures, primarily related to 2007 forest fire suppression activities. As well, cost pressures continue to exist in health care for Regional Health Authorities’ operations and medical remuneration, in family services programming related to child protection and in the Department of Justice to address increasing costs in corrections. Efforts have been implemented to manage discretionary expenditures in the second half of the fiscal year to ease the pressure. An update on the province’s financial position will be provided in the third quarter report.

PROJECTION OF NET INCOME FOR THE
YEAR ENDED MARCH 31, 2008

(UNAUDITED)
($millions)

	2007/08 FORECAST								2007/08 BUDGET
				OTHER								OTHER
	CORE			REPORTING(1)					CORE			REPORTING(1)
	GOVERNMENT			ENTITIES			SUMMARY		GOVERNMENT			ENTITIES*			SUMMARY
Revenue		9,461			2,692			12,153		9,302			2,507			11,809
Expenditure		9,386			2,469			11,855		9,226			2,408			11,634
Net Result for the Year		75			223			298		76			99			175
Transfer to Debt Retirement Fund		(110	)		110			—		(110	)		110			—
Transfer from Fiscal Stabilization Fund		37			(37	)		—		37			(37	)		—
Net Income		2			296			298		3			172			175

1. This column includes consolidation impacts and the revenues and expenditures of other reporting entities.

Page 2 of 13

PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

CORE GOVERNMENT

SECOND QUARTER — ACTUAL TO ESTIMATE

The second quarter net result of expenditure exceeding revenue by $6.4 million was $93.0 million lower than the estimate of $99.4 million. Second quarter revenue was $5.3 million higher than estimated and second quarter expenditure was $87.7 million lower than estimated primarily as a result of differences in the timing of expenditures and receipts.

SECOND QUARTER COMPARED TO PREVIOUS YEAR’S RESULTS

The net result for the second quarter was $51.8 million higher than for the same period last year. Total revenues were $270.3 million more than the same period last year, reflecting budgeted increases in both own source revenue and transfers from the Government of Canada.

Total expenditures were $218.6 million higher than the previous year. Program expenditures were $196.2 million higher, reflecting budgeted increases while debt servicing costs were $22.4 million higher primarily as a result of timing. The largest increases in program expenditures occurred in the departments of Health, Education, Citizenship and Youth and Family Services and Housing. As well, statutory election costs of $7.4 million were included in the second quarter program expenditures.

SECOND QUARTER — CAPITAL INVESTMENT

Expenditures for tangible capital assets were $241.2 million, $38.3 million less than estimated at the end of the second quarter primarily due to the deferral of some components of the Manitoba Floodway Expansion to 2008/09 and timing variances for highway related activities. Total expenditures related to tangible capital assets were $98.7 million higher than the same period last year, primarily related to increased construction on provincial highways and roads and the Manitoba Floodway Expansion.

DEBT/PENSION REPAYMENT

The 2007 Budget provides for a $110.5 million contribution to the Debt Retirement Fund. An allocation committee will determine the share of those funds directed to pension or general purpose debt. In the 2007 Budget, the allocation is $85.5 million to the pension liability and $25.0 million for general purpose debt.

FISCAL STABILIZATION FUND

The fund is projected to have a balance of $655.1 million at the end of the fiscal year. The projected status of the Fiscal Stabilization Fund is provided on page 13.

BORROWING ACTIVITY

Original estimate of borrowing requirements identified in the 2007 Budget were $2,946.2 million including refinancing of maturing debt, the funding of the Province’s pension liability for the Teachers’ Retirement Allowances Fund (TRAF), funding for Manitoba Hydro, Capital Investments, Health’s capital programs and new self sustaining requirements. This requirement has decreased to $2,773.2 million as a result of lower capital requirements for Manitoba Hydro and other self sustaining programs.

At September 30, 2007 outstanding Provincial Borrowings, Guarantees and Obligations were $18,286.9 million, $1,720.2 million higher than the March 31, 2007 balance of $16,566.7 million, primarily reflecting the government’s decision to borrow $1,500.0 to pay down a significant part of the unfunded Teachers’ Retirement Allowances Fund pension liability.

Page 3 of 13

PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

CORE GOVERNMENT
STATEMENT OF REVENUE AND EXPENDITURE
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007

(UNAUDITED)
($000s)

	2007/08			Comparison to 2007/08						Comparison to 2006/07
	ACTUAL			Estimate			Variance			Actual			Variance
Revenue
Own Source Revenue		2,794,509			2,760,911			33,598			2,645,436			149,073
Government of Canada		1,649,462			1,677,754			(28,292	)		1,528,223			121,239
Total Revenue		4,443,971			4,438,665			5,306			4,173,659			270,312
Expenditure
Program Expenditure		4,313,885			4,426,283			(112,398	)		4,117,729			196,156
Debt Servicing		136,517			111,805			24,712			114,123			22,394
Total Expenditure		4,450,402			4,538,088			(87,686	)		4,231,852			218,550
Net Result Sepember 30, 2007		(6,431	)		(99,423	)		92,992			(58,193	)		51,762
Transfer to Debt Retirement Fund		—			—			—			—			—
Transfer from the Fiscal Stabilization Fund		—			—			—			—			—
Net Income (Loss)		(6,431	)		(99,423	)		92,992			(58,193	)		51,762

Page 4 of 13

PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

CORE GOVERNMENT
STATEMENT OF REVENUE
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007

(UNAUDITED)
($000s)

	2007/08		Comparison to 2007/08					Comparison to 2006/07
	ACTUAL		Estimate		Variance			Actual		Variance
Taxation:
Finance
— Individual Income Tax		1,063,463		1,062,797		666			996,762		66,701
— Corporation Income Tax		156,058		151,104		4,954			188,600		(32,542	)
— Corporation Capital Tax		87,112		83,820		3,292			83,965		3,147
— Gasoline Tax		66,237		64,274		1,963			65,284		953
— Insurance Corporations Tax		30,579		30,806		(227	)		29,777		802
— Land Transfer Tax		26,454		22,444		4,010			21,525		4,929
— Levy for Health and Education		136,381		130,897		5,484			126,511		9,870
— Mining Tax		72,087		79,786		(7,699	)		27,928		44,159
— Motive Fuel Tax		39,056		35,440		3,616			35,930		3,126
— Retail Sales Tax		576,195		564,325		11,870			531,420		44,775
— Tax Administration and Miscellaneous Tax Act		28,097		27,734		363			26,721		1,376
— Tobacco Tax		83,492		88,982		(5,490	)		88,726		(5,234	)
— Other Taxes		1,491		1,420		71			1,453		38
		2,366,702		2,343,829		22,873			2,224,602		142,100
Science, Technology, Energy and Mines
— Oil and Natural Gas Tax		5,026		6,811		(1,785	)		7,710		(2,684	)
		2,371,728		2,350,640		21,088			2,232,312		139,416
Other Revenue:
Automobile and Motor Carrier Licenses and Fees		50,908		50,547		361			50,963		(55	)
Justice		21,189		21,504		(315	)		18,962		2,227
Water Power Rentals		58,439		50,449		7,990			60,203		(1,764	)
Manitoba Lotteries Corporation		137,000		137,000		—			133,000		4,000
Manitoba Liquor Control Commission		84,200		83,700		500			84,200		—
Other Sources		71,045		67,071		3,974			65,796		5,249
		422,781		410,271		12,510			413,124		9,657
Total Own Source Revenue		2,794,509		2,760,911		33,598			2,645,436		149,073

Page 5 of 13

PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

CORE GOVERNMENT
STATEMENT OF REVENUE
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007

(UNAUDITED)
($000s)

	2007/08		Comparison to 2007/08					Comparison to 2006/07
	ACTUAL		Estimate		Variance			Actual		Variance
Government of Canada:
Equalization		892,490		892,490		—			845,986		46,504
Bill C-48		—		—		—			48,911		(48,911	)
Canada Health Transfer (CHT)		403,514		403,514		—			385,024		18,490
Canada Social Transfer (CST)		170,470		170,470		—			166,060		4,410
EcoTrust Fund		53,820		53,820		—			—		53,820
Child Care		8,998		8,998		—			23,683		(14,685	)
Health Funds		38,704		45,690		(6,986	)		2,496		36,208
Departments
— Labour Market Agreements		54,617		54,617		—			32,975		21,642
— Other Agreements		26,849		48,155		(21,306	)		23,088		3,761
Total Government of Canada		1,649,462		1,677,754		(28,292	)		1,528,223		121,239
Total Revenue		4,443,971		4,438,665		5,306			4,173,659		270,312

Page 6 of 13

PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

CORE GOVERNMENT
STATEMENT OF PART A — OPERATING EXPENDITURE
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007

(UNAUDITED)
($000s)

	2007/08		Comparison to 2007/08					Comparison to 2006/07
	ACTUAL		Estimate		Variance			Actual		Variance
Legislative Assembly		21,046		21,416		(370	)		13,412		7,634
Executive Council		1,582		1,618		(36	)		1,610		(28	)
Aboriginal and Northern Affairs		16,280		18,236		(1,956	)		21,634		(5,354	)
Advanced Education and Literacy		264,128		270,993		(6,865	)		259,002		5,126
Agriculture, Food and Rural Initiatives		39,711		45,706		(5,995	)		40,711		(1,000	)
Civil Service Commission		2,649		2,823		(174	)		2,153		496
Competitiveness, Training and Trade		40,560		46,159		(5,599	)		41,681		(1,121	)
Conservation		64,517		66,610		(2,093	)		59,285		5,232
Culture, Heritage, Tourism and Sport		45,794		46,749		(955	)		44,495		1,299
Education, Citizenship and Youth		691,503		693,257		(1,754	)		643,618		47,885
Employee Pensions and Other Costs		36,787		35,948		839			34,531		2,256
Family Services and Housing		521,660		533,752		(12,092	)		495,724		25,936
Finance — Departmental Costs		70,880		72,385		(1,505	)		70,863		17
Finance — Debt Servicing Costs		136,518		111,805		24,713			114,123		22,395
Health		1,894,157		1,933,587		(39,430	)		1,791,256		102,901
Healthy Child Manitoba		11,410		12,194		(784	)		11,657		(247	)
Infrastructure and Transportation		230,710		238,944		(8,234	)		217,989		12,721
Intergovernmental Affairs		136,179		139,104		(2,925	)		140,221		(4,042	)
Justice		135,472		142,867		(7,395	)		131,172		4,300
Labour and Immigration		17,016		21,119		(4,103	)		14,298		2,718
Manitoba Seniors and Healthy Aging Secretariat		441		626		(185	)		450		(9	)
Science, Technology, Energy and Mines		42,903		43,460		(557	)		41,651		1,252
Water Stewardship		12,077		13,572		(1,495	)		13,165		(1,088	)
Enabling Appropriations		804		1,872		(1,068	)		833		(29	)
Other Appropriations		15,619		23,286		(7,667	)		26,318		(10,699	)
Total Expenditure		4,450,402		4,538,088		(87,685	)		4,231,852		218,550

Page 7 of 13

PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

CORE GOVERNMENT
STATEMENT OF PART B — CAPITAL INVESTMENT
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007

(UNAUDITED)
($000s)

	2007/08		Comparison to 2007/08					Comparison to 2006/07
	ACTUAL		Estimate		Variance			Actual		Variance
Legislative Assembly		—		—		—			6		(6	)
Agriculture, Food and Rural Initiatives		—		—		—			—		—
Competitiveness, Training & Trade		890		—		890			—		890
Conservation
General Assets		292		603		(311	)		790		(498	)
Infrastructure Assets		2,461		4,755		(2,294	)		2,348		113
Total Conservation		2,753		5,358		(2,605	)		3,138		(385	)
Culture, Heritage, Tourism and Sport		—		30		(30	)		—		—
Education, Citizenship and Youth		151		151		—			—		151
Family Services & Housing		683		854		(171	)		658		25
Finance		507		562		(55	)		—		507
Health		190		200		(10	)		60		130
Infrastructure and Transporation
General Assets		27,620		40,140		(12,520	)		12,505		15,115
Infrastructure Assets		206,387		227,313		(20,926	)		123,081		83,306
Total Infrastructure and Transportation		234,007		267,453		(33,446	)		135,586		98,421
Justice		295		441		(146	)		288		7
Science, Technology, Energy and Mines		1,696		4,482		(2,786	)		2,752		(1,056	)
Water Stewardship		19		—		19			49		(30	)
Total Capital Assets		241,191		279,531		(38,340	)		142,537		98,654

Page 8 of 13

PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

CORE GOVERNMENT
STATEMENT OF PROVINCIAL BORROWINGS, GUARANTEES AND OBLIGATIONS
September 30, 2007
(with comparative figures for March 31, 2007)

(UNAUDITED)
($000s)

	Canadian			Canadian			Increase
	Dollar			Dollar			(Decrease)
	Valuation			Valuation			September 30, 2007
	(Note 1)			(Note 1)			over
	September 30, 2007			March 31, 2007			March 31, 2007
Provincial Borrowings Payable in:
Canadian Dollars		15,009,107			13,661,521			1,347,586
Issues Hedged to Canadian Dollars		3,393,450			3,482,100			(88,650	)
U.S. Dollars		1,896,009			2,194,026			(298,017	)
Issues Hedged to U.S. Dollars		526,995			609,829			(82,834	)
Subtotal Provincial Borrowings		20,825,561			19,947,476			878,085
Guarantees and Obligations Payable in:
Canadian Dollars		1,238,243			1,406,776			(168,533	)
U.S. Dollars		—			—			—
Subtotal Guarantees and Obligations (Note 2)		1,238,243			1,406,776			(168,533	)
Subtotal Provincial Borrowings, Guarantees and Obligations (Note 3)		22,063,804			21,354,252			709,552
Less: Sinking Fund Investments		(3,725,858	)		(4,736,510	)		(1,010,652	)
Less: Debt Retirement Fund		(51,000	)		(51,000	)		—
Total Provincial Borrowings, Guarantees and and Obligations Outstanding (Note 4)		18,286,946			16,566,742			1,720,204

Note to Reader:

Outstanding provincial borrowings will fluctuate during the fiscal year as a result of the timing of borrowing activities of the Province. While current accounting standards identify Net Debt as the best presentation of a government’s financial position, certain valuations used in the calculation of Net Debt are not available on a quarterly basis. Net Debt is defined as total liabilities less the financial assets available to repay those liabilities. The Public Accounts for the year ended March 31, 2007 reflected Net Debt of core government operations (the operating fund) to be $8.3 billion (see Public Accounts, Volume 1, Page 107) and for the government reporting entity to be $10.4 billion (see Public Accounts, Volume 1, page 56).

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PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

CORE GOVERNMENT
STATEMENT OF PROVINCIAL BORROWINGS, GUARANTEES AND OBLIGATIONS
September 30, 2007
(with comparative figures for March 31, 2007)

	NOTES:
1.	The Canadian Dollar Valuation is calculated using the foreign currency exchange rates in effect at September 30, 2007 and at March 31, 2007. As at September 30, 2007, the U.S. dollar exchange rate was $0.9963 ($1.1529 at March 31, 2007).
2.	Includes borrowings of Manitoba Hydro which has been guaranteed by the Province, Government Enterprises and other payables and third party debt of health care facilities.
3.	Provincial Borrowings and Guarantees are payable in Canadian and U.S. dollars. As at September 30, 2007, total provincial borrowings and guarantees were payable 89% in Canadian dollars and 11% in U.S. dollars. Of this total, General Government Program borrowing and Other Crown Organizations borrowings was 100% payable in Canadian dollars. Manitoba Hydro borrowings was payable 67% in Canadian dollars (62% at March 31, 2007) and 33% in U.S. dollars (38% at March 31, 2007).
4.	The above borrowings, guarantees and obligations were outstanding for the following purposes:

	September 30, 2007				March 31, 2007
	($ Thousands)		($ Per Capita)		($ Thousands)		($ Per Capita)
			(Note 5)				(Note 5)
Government Programs — General		6,530,474		5,503		6,564,303		5,547
Government Programs — TRAF (Note 6)		1,500,000		1,264		—		—
Manitoba Hydro		6,724,000		5,666		6,636,123		5,608
Capital Investments		957,249		807		749,221		633
Health Facilities		827,219		697		780,219		659
Government Enterprises and Other (Note 7)		533,152		449		533,152		451
Other Crown Organizations		1,214,852		1,024		1,303,724		1,102
		18,286,946		15,410		16,566,742		14,000
	(Note 8)

5.	Per Capita data is based upon population figures at July 1, 2007 and April 1, 2007 as reported by Statistics Canada.
6.	On October 1, 2007, the government will make a contribution of $1,002 million to the Teachers’ Retirement Allowances Fund (TRAF). This contribution, together with the initial contribution of $500 million on April 2, 2007 will reduce the government’s net pension liability for TRAF from $1,922 million to $420 million.
7.	Includes debentures issued by school boards and hospitals which are held by government enterprises, amounts owed to the federal government and other long term loans payable to government enterprises.
8.	Provincial borrowings, guarantees and obligations increased by $1,720.2 million. Increases in borrowings was primarily due to the funding of the Province’s contribution to its liability for TRAF, funding of capital programs including, Manitoba Hydro and Health Facilities borrowings. The increases in borrowings were offset by matured General Government program borrowings which have not yet been refinanced, the impact of a stronger Canadian dollar and an increase in Manitoba Hydro’s sinking fund contribution. Manitoba Hydro’s U.S. dollar revenues are sufficient to pay the interest and principal on all outstanding U.S. dollar borrowings.
9.	Manitoba’s net general purpose debt to GDP ratio is projected to be 13.7% in 2007/08, down from 14.7% in 2006/07 and from 20.9% in 1999/2000. GDP data reflects the latest information available from Manitoba Bureau of Statistics.

Page 10 of 13

PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

DEBT RETIREMENT FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2008
(with comparative figures for March 31, 2007)
($000s)

	2007/08			2006/07
	Projection (1)			Actual(2)
Fund Balance, Beginning of Year		51,000			25,000
Contribution		110,495			110,495
Interest		2,000			1,000
Transfer to Pension Assets Fund		(85,495	)		(85,495	)
Fund Balance, End of Year		78,000			51,000

Notes:

(1)	Based on projection included in the 2007 Budget.
(2)	Based on 2006/07 Public Accounts.

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PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

PENSION ASSETS FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2008
(with comparative figures for March 31, 2007)
($000s)

	2007/08			2006/07
	Projection (1)			Actual(2)
Fund Balance, Beginning of Year		699,264			536,986
Contributions:
Teachers’ Retirement Allowances Fund(3)		1,502,000			—
Debt Retirement Fund (4)		85,495			85,495
Net Investment Earnings		89,000			66,545
Current Service Contributions		79,300			10,238
		1,755,795			162,278
Transfers
Teachers’ Retirement Allowances Fund Pension Payments(3)		(134,000	)		—
Fund Balance, End of Year		2,321,059			699,264

Notes:

(1)	Based on YTD earnings and contributions (extrapolated to March 31, 2008).
(2)	Based on 2006/07 Public Accounts.
(3)	Reflects the impact of the government’s decision to fund 75% of the employer’s liability.
(4)	Based on projection included in the 2007 Budget.

Page 12 of 13

PROVINCE OF MANITOBA APRIL TO SEPTEMBER 2007

FISCAL STABILIZATION FUND
PROJECTION FOR THE YEAR ENDING MARCH 31, 2008
(with comparative figures for March 31, 2007)
($000s)

	2007/08			2006/07
	Projection			Actual (2)
Health Programs
Fund Balance, Beginning of Year		175,195			202,411
Interest Earnings		5,981			7,856
Wait Time Reduction (1)		(37,000	)		(27,419	)
Other Health Related Programming		—			(7,653	)
Fund Balance, End of Year		144,176			175,195
General Programs
Fund Balance, Beginning of Year		487,955			329,576
Interest Earnings		21,117			12,792
Recovered from Health Programs
— Wait Time Reduction Programming		—			27,419
— Other Health Related Programming		—			7,653
Year-end Core Government Result (1)		1,815			110,515
Fund Balance, End of Year		510,887			487,955
Total Fund Balance, End of Year		655,063			663,150

Notes:

(1)	Based on second quarter projections.
(2)	Based on 2006/07 Public Accounts.

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