Financement Quebec

Annual Financial Report

RNS Number : 8140R
Financement Quebec
09 November 2011
 



Regulatory Announcement

 

Re: Financement-Québec (the "Issuer")

U.S.$2,000,000,000 Euro Medium Term Note Programme

(unconditionally and irrevocably guaranteed by Québec (the "Guarantor"))

 

Issuer Financial Statements 2010-2011, Guarantor Public Accounts 2010-2011, Guarantor's Update and Guarantor's additionnal disclosure

 

Copies of :

 

(i)     the Issuer's Exhibit 99.1 of the Amendment dated November 9, 2011 to the Issuer's Annual Report (on Form 18‑K/A) for the fiscal year ended March 31, 2011 (containing the Financial Statements 2010-2011) filed with the United States Securities and Exchange Commission (the "SEC") on November 9, 2011 (the "Issuer Financial Statements 2010-2011");

(ii)    the Guarantor's Exhibits 99.6 and 99.7 of the Amendment dated November 1, 2011 to the Guarantor's Annual Report (on Form 18‑K/A) for the fiscal year ended March 31, 2011 (containing the Consolidated Financial Statements - Volume 1 of the Public Accounts 2010‑2011 and excerpts from Update on Québec's economic and financial situation) filed with the SEC on November 1, 2011 (the "Guarantor Public Accounts 2010-2011" and the "Guarantor's Update", respectively).

 

 

Table of Contents

 

Management's Report...............................................................................................................4

Independent Auditor's Report.................................................................................................5

Financial Statements..............................................................................................................6

Income and Accumulated Surplus.....................................................................................6

Statement of Financial Position.......................................................................................7

Cash Flows............................................................................................................................8

Notes to the Financial Statements..................................................................................9

 

Management's Report

The financial statements of Financement-Québec have been drawn up by the management of the Corporation, which is responsible for their preparation and their presentation, including significant judgements and estimates. This responsibility includes choosing appropriate accounting practices that satisfy Canadian generally accepted accounting methods. The financial information contained in the rest of the operational report agrees with the information given in the financial statements.

 

To carry out its responsibilities, the management of the Corporation maintains a system of internal accounting controls designed to provide reasonable assurance that assets are protected and that operations are correctly accounted for in a timely fashion, are duly approved and are such as to produce reliable financial statements.

 

The Corporation acknowledges that it is responsible for managing the affairs of the Corporation in accordance with the laws and regulations that govern it.

The Board of Directors must oversee how the Corporation's management carries out the responsibilities incumbent on it in terms of financial information and it has approved the financial statements.

 

The Auditor General of Québec has audited the Corporation's financial statements in accordance with Canadian generally accepted auditing standards, and his independent auditor's report sets out the nature and extent of this audit and expresses his opinion.

The Auditor General may, without restriction, meet with the Board of Directors to discuss any matter related to the audit.

 

 

 

__________________________________

Executive Vice President

 

 

 

 

 

__________________________________

President and Chief Executive Officer

 

 

Québec City, June 13t, 2011,

 

Independent Auditor's Report

 

To the Minister of Finance

 

Report on the Financial Statements

 

I have audited the accompanying financial statements of Financement-Québec, which comprise the statement of financial position as at March 31, 2011, statement of income and accumulated surplus and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information included in the notes to the financial statements.

 

Management's Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor's Responsibility

 

My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. These standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

 

Opinion

 

In my opinion, the financial statements present fairly, in all material respects, the financial position of Financement-Québec as at March 31, 2011, and its results of operations and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

 

Report on Other Legal and Regulatory Requirements

 

As required by Auditor General Act (R.S.Q., c. V-5.01), I report that, in my opinion, these standards have been applied on a basis consistent with those of the preceding year.

 

 

 

 

Renaud Lachance, FCA Auditor

Auditor General of Québec

Quebec City, June 13 2011

 

Financial Statements

Income and Accumulated Surplus

For the fiscal year ended March 31, 2011

(Thousands of dollars)



 2011


 2010

Net interest income





Interest on loans


732 456


644 928

Amortization of discounts and premiums on loans


47


139

Interest on borrowings and advances


(700 978)


(611 665)

Amortization of discounts and premiums on borrowings and advances


(1 508)


(1 935)

Interest on short-term investments


5 949


2 524



35 966


33 991

Other operations





Net issuance expenses charged to borrowers


10 363


8 899

Administration expenses charged to borrowers


4 099


3 726



14 462


12 625



50 428


46 616

Operation and administration expenses





Wages, salaries and allowances


711


669

Professional, administrative and other services


285


203

Service agreement with the Financing Fund


(67)


231

Other


62


46



991


1 149


49 437


45 467

Accumulated surplus at the beginning


150 326


104 859

Accumulated surplus at the end


199 763


150 326

The notes are an integral part of the financial statements.

 

Statement of Financial Position

As at March 31, 2011

(Thousands of dollars)



2011


2010

Assets





Loans (note 3)


21 858 995


16 850 464

Accrued interest on loans


231 071


177 235



22 090 066


17 027 699

Cash position


39


8

Short-term investment, at the rate of 1%, maturing April 1st, 2011


125 800


-

Accounts receivable


736


819

Fixed assets


454


-



22 217 095


17 028 526

Liabilities





Borrowings and advances (note 4)


21 784 386


16 691 839

Accrued interest on borrowings and advances


220 757


174 756

Accounts payable


1 119


981

Deferred income


1 070


624



22 007 332


16 868 200

Net assets





Capital stock (note 6)


100


100

Contributed surplus


9 900


9 900

Accumulated surplus


199 763


150 326



22 217 095


17 028 526

The notes are an integral part of the financial statements.

 

For the board of directors

 

 

 

__________________________________

Executive Vice President

 

 

 

 

__________________________________

President and Chief Executive Officer

 

Cash Flows

For the fiscal year ended March 31, 2011

(Thousands of dollars)



2011


2010

Operating activities





Surplus for the year


49 437


45 467

Adjustments for:





    Amortization of discounts and premiums on loans


(47)


(139)

    Interest income charged to loans


(15 714)


(1 854)

Amortization of discounts and premiums on borrowings and advances


22 604


5 561



56 280


49 035

Change in non-cash items related to operating activities (note 7)


(8 288)


11 057

Cash flows from operating activities


47 992


60 092

Investing activities





Loans


(13 808 734)


(8 670 823)

Loan repayments


8 967 699


6 111 159

Acquisition of fixed assets


(455)


-

Cash flows used in investing activities


(4 841 490)


(2 559 664)

Financing activities





Short-term borrowings


41 260 817


13 259 015

Long-term borrowings


4 349 306


3 318 224

Repayments of advances from the Consolidated Revenue Fund


(3 274)


(390 624)

Repayments of long-term borrowings


(400 000)


(1 500 000)

Repayments of short-term borrowings


(40 287 520)


(12 556 447)

Cash flows from financing activities


4 919 329


2 130 168

Change in cash and cash equivalents


125 831


(369 404)

Cash and cash equivalents at the beginning 


8


369 412

Cash and cash equivalents at the end (note 7)


125 839                   


8                   

The notes are an integral part of the financial statements.

 

Notes to the Financial Statements

1. Constitution, Purpose and Financing

Financement-Québec (the Corporation) was incorporated under An Act respecting Financement-Québec (R.S.Q., c. F-2.01) which entered into force on October 1, 1999. The Corporation is a legal person with share capital and is a mandatary of the State.

The Corporation's main mission is to supply financial services to public organizations covered by its act of incorporation. It finances them directly by granting them loans or by issuing debt securities on their behalf. It advises them to facilitate their access to credit and to minimize their financing costs and, to that end, it develops financing programs. It may also manage the financial risks of these organizations, in particular cash flow risks and exchange risks. The Corporation may also provide public organizations with technical services regarding financial analysis and management.

The Corporation charges loan issuance expenses to borrowers to offset those incurred by the Corporation on borrowings made. The Corporation also charges administration expenses to borrowers. The level of expenses charged is subject to government approval.

Financement-Québec issues debt securities that are guaranteed by the Québec government.

Financement-Québec is not subject to Québec or Canadian income tax.

 

2. Accounting Methods

For the purposes of preparing its financial statements, the Corporation primarily uses the CICA Public Sector Accounting Handbook. Use of any other source of generally accepted accounting principles is consistent with that Handbook.

In accordance with Canadian generally accepted accounting principles, the preparation of the Corporation's financial statements requires that management make use of accounting estimates and assumptions. These have an impact on the recognition of assets and liabilities, the presentation of assets and contingent liabilities on the date of the financial statements and the recognition of proceeds and charges during the period covered by the financial statements. The actual results may differ from these estimates.

Loans

Loans are recorded at the amount received at the time of issue, adjusted by the premium or discount amortization over the remaining term of each security using the straight-line method.

 

Public organizations that receive a subsidy for the repayment of long-term borrowings contracted with Financement-Québec must pledge as collateral such subsidy in favour of Financement-Québec.

 

For other loans that do not carry a subsidy, the Minister responsible for the organization commits to act in the event of the organization's default so that it remedied the situation as quickly as possible.

Short-term Investments

Short-term investments are recorded at the lesser of cost and market value.

Borrowings and Advances

Borrowings and advances from the Consolidated Revenue Fund are recorded at the amount received at the time of issue, adjusted by the premium or discount amortized over the remaining term of each security using the straight-line method, to obtain the amount of principal repayable at maturity.

Currency Translation

Borrowings denominated in foreign currencies and repayable in Canadian currency under currency swap contracts are valued at the exchange rate stipulated in such contracts.

Cash and Cash Equivalents

The Corporation presents, under cash and cash equivalents, bank balances and short‑term investments that are easily convertible in the short term into a known amount of cash whose value is not likely to change significantly.

Financial Derivatives

Financement-Québec uses financial derivatives to manage interest rate and exchange risks. It is the policy of the Corporation not to use financial derivatives for trading or speculative purposes.

The Corporation documents in due form the relations between hedging instruments and hedged items by associating all the financial derivatives used in hedging operations with specific assets and liabilities shown on the balance sheet or the statement of cash flows. The exchange risk management strategy and objective on which the various hedging operations are based are also documented. It also methodically determines both when implementing the hedge and subsequently, whether the derivatives used in hedging operations effectively offset the changes in currencies of the hedged items.

Gains and losses realized on derivatives by the Corporation are posted to the income statement at the same time as those associated with the hedged assets or liabilities.

 

3. Loans

Borrowers

(Thousands of dollars)



 2011


 2010

School boards


6 321 628


5 453 604

General and vocational colleges


1 822 952


1 503 330

Health and social services institutions and agencies


9 227 811


6 920 395

University institutions and others


3 278 494


2 973 135

Municipalities


1 208 110


-



21 858 995


16 850 464

 

 

 

Due in


 2011


 2010

2011


-


1 836 701

2012


4 068 647


1 811 716

2013


1 673 204


1 801 967

2014


2 812 665


2 878 477

2015


4 196 005


4 236 989

2016


2 146 342


1 943 760

2017-2036


6 962 132


2 340 854



21 858 995


16 850 464

 

Loans maturing during the fiscal year ending March 31, 2012 include $2 393 564 873 of short-term loans. For the long-term loans, maturities and interest rates on loans made by the Corporation are, with a few exceptions, identical to those of advances received from the Consolidated Revenue Fund and the borrowings contracted for this purpose taking into consideration currency and interest rate swap contracts, if any. However, depending on the amounts available, the Corporation may make new loans from repayments of loans. These new loans are made at interest rates and maturities that may differ from the conditions of the advance or borrowing initially received. The balance of discounts and premiums on loans to be amortized over subsequent years was $2 587 221 as at March 31, 2011 (March 31, 2010: $134 539)

 

4. Borrowings and advances

Summary

(Thousands of dollars)


 2011

 2010

Borrowings on markets

20 221 257

16 482 266

Advances from the Consolidated Revenue Fund

204 404

209 573

Canada  Mortgage and Housing Corporation (CMHC)

1 208 110

-

Financing Fund

76 591

-

Corporation d'hébergement du Québec (CHQ)

74 024

-

Total

           21 784 386

16 691 839

 

Schedule and interest rates

Borrowings on markets(1) 

(Thousands of dollars)



2011


2010

Due in


Amount


Rate (%)(2)


Amount

Repayable in Canadian currency




 



2011


-




1 860 082

2012


4 354 475


4.16 to 5.28


1 900 000

2013


1 020 000


4.13 to 5.06


1 020 000

2014


3 656 000


3.14 to 5.12


3 656 000

2015


3 442 000


2.82 to 4.72


3 442 000

2016


1 809 400


3.07 to 6.39


1 809 400

2017


3 034 000


2.52 to 3.84


724 000

2018


600 000


3.50 to 3.87


-

2035


1 522 350


4.88 to 5.58


1 276 150



19 438 225




15 687 632

Plus:

Currency swap contracts
in Canadian currency

Unamortized

discounts and premiums


782 000

 

 

1 032




782 000

 

 

12 634

Total in Canadian currency


20 221 257




16 482 266

Repayable in United States currency







2013


782 000


5.39 to 5.82


782 000

Less:
Currency swap contracts in Canadian currency


782 000




782 000

Total in United States currency


-




-

Total borrowings


20 221 257




16 482 266

 

 

(1)        All these borrowings are repayable solely at maturity. Borrowings maturing during the fiscal year ending March 31, 2012 include $2 454 474 833 of short-term borrowings. All borrowings are guaranteed by the Québec government. Short-term borrowings bear interest at rates varying from 0.99% to 1.40%. (March 31, 2010: rates varying from 0.18% to 0.48%)

(2)        Also includes floating rate borrowings, at the rate of 3-month bankers' acceptances plus a spread varying between minus 0.67% and plus 1.80%.

 

Advances from the Consolidated Revenue Fund

(Thousands of dollars)



2011


 2010

Due in


Amount


Rate (%)


Amount

Repayable in Canadian currency







2012


58 292


9.50


59 826

2023


143 445


9.38


145 185

 

 

 

Plus:
Unamortized discounts and premiums


 

201 737

 

 

2 667




 

205 011

 

 

4 562

Total advances from the Consolidated Revenue Fund                       

 

 

 

 

204 404

 

 



 

 

209 573

 

Borrowings from CMHC

(Thousands of dollars)



2011


 2010

Due in


Amount


Rate (%)


Amount

 

Repayable in Canadian currency







 

2021


272 892


2.77 to 3.54


-

 

2026


376 423


3.28 to 3.92


-

 

2031


558 795


3.50 to 4.12

-

 

 

Total borrowings from CMHC

 

 

 

1 208 110

 

 



 

            -

 

 

Borrowings from the Financing Fund

(Thousands of dollars)



2011


2010

Due in


Amount


Rate (%)


Amount

 

Repayable in Canadian currency







 

2018


1 596


9.38


-

 

2021


8 961


9.38


-

 

2023


66 184


6.79

-

 

 

Minus:

Unamortized discounts and premiums.


 

76 741

 

(150)



 

-

 

-

 

 

Total Borrowings from Financing Fund

 

 

 

76 591

 

 



 

            -

 

 

Borrowings from CHQ

(Thousands of dollars)



2011


2010

Due in


Amount


Rate (%)


Amount

 

Repayable in Canadian currency







 

2015


74 024


10.03


-

 

 

Total borrowings from CHQ

 

 

 

74 024

 

 



 

            -

 

The amounts of principal payments to be made on borrowings and advances over the next five fiscal years are as follows:

(Thousands of dollars)


2012

2013

2014

2015

2016

Borrowings on markets

4 354 475

1 802 000

3 656 000

3 442 000

1 809 400

Advances from the Consolidated Revenue Fund

60 032

1 740

1 740

1 740

1 740

Borrowings from CMHC

61 774

63 985

66 276

68 650

71 110

Borrowings from the Financing Fund

5 852

5 852

5 852

5 852

5 852

Borrowings from CHQ

16 955

17 216

18 962

20 890

-

Total

4 499 088

1 890 793

3 748 830

3 539 132

1 888 102

 

5. Complementary information on financial risks

Financement-Québec uses interest rate swap contracts to manage interest rate risks on its financial intermediation activities. Interest rate swap contracts give rise to the periodic exchange of interest payments without an exchange of the reference face amount on which the payments are based and are recorded as an adjustment to the interest expense on the hedged borrowing instrument. The volume of interest rate swap contracts in Canadian currency as at March 31, 2011 is $17 240 million (March 31, 2010: $14 882 million).

 

Financement-Québec also uses currency swap contracts to manage its risk exposure under certain borrowing instruments denominated in foreign currencies. The Corporation shows currency swap contracts as hedging of its firm commitments to pay the principal and interest on the debt denominated in foreign currencies, failing which it would be exposed to a foreign exchange risk. Exchange gains and losses on the principal covered by swap contracts are offset by corresponding exchange losses and gains on the debt denominated in foreign currencies.

 

The fair value of Financement-Québec's assets and liabilities as at March 31, 2011 was valued by discounting cash flows at the market rate for similar fixed-rate securities. Interest rate and currency swap contracts are used solely for hedging purposes and are valued in the same way as assets and liabilities.

 

(Thousands of dollars)



2011


2010



Book
value


Fair
value


Book value


Fair
value

Borrowings and Advances









Borrowings on markets


20 221 257


20 387 068


16 482 266


16 540 589

Advances from the Consolidated Revenue Fund


204 404


267 957


209 573


275 601

Borrowings from CMHC


1 208 110


1 170 557


-


-

Borrowings from the Financing Fund


76 591


92 391


-


-

Borrowings from CHQ


74 024


91 544


-


-

Currency swap contracts


-


269 964


-


237 754

Interest rate swap contracts


-


75 717


-


182 165

Total for borrowings
and advances


21 784 386


22 355 198


16 691 839


17 236 109

Loans









Total for loans


21 858 995


22 454 189


16 850 464


17 439 899

 

The fair value of short-term financial instruments presented in this table and the value of the other financial instruments corresponds essentially to book value in view of their nature or maturity.

 

6. Capital Stock

Description

Authorized:

1 000 000 shares with a par value of $100 each.

Issued and paid for:

1 000 shares: $100 000

The Corporation's shares are held by the Minister of Finance of Québec.

 

7. Cash Flows

(Thousands of dollars)


2011

2010

Cash and cash equivalents


Cash position

39

8

Short-term investments

125 800

-


125 839

8

 

Change in non-cash items related to operating activities

(Thousands of dollars)

   


2011


2010

    Accrued interest on loans


(53 836)


4 652

    Accounts receivable


82


29

    Accrued interest on borrowings and advances


44 882


6 640

    Accounts payable


138


266

    Deferred income


446


(530)



(8 288)


11 057

 

Interest paid by the Corporation during the year amounted to $646 797 297 (March 31,2010: $610 188 002).

Operations not affecting cash flows

During the fiscal year, a long-term loan portfolio amounting $151 735 286 was transferred to the Corporation from CHQ. In return, it assumes repayment of the long-term debt related to these loans amounting $150 614 863, and accrued interest on borrowings for an amount of $1 120 423.

8. Related Party Transactions

In addition to the related party transactions already disclosed in the financial statements and recorded at exchange value, the Corporation is related to all the ministries and special funds as well as all the organizations and enterprises controlled directly or indirectly by the Québec government or subject either to joint control or to significant common influence by the Québec government. All the Corporation's business transactions with these related parties were carried out in the normal course of its activities and under usual business conditions. These transactions are not separately disclosed in the financial statements.

9. Comparative Figures

Some figures for 2010 have been reclassified for consistency with the presentation adopted in 2011.

 

Copies of the full documents can also be accessed on the link below or, alternatively, by pasting the following URLs into the address bar of your internet browser:

 

Issuer Financial Statements 2010-2011

 http://www.rns-pdf.londonstockexchange.com/rns/8140R_2-2011-11-9.pdf

 

Guarantor Public Accounts 2010-2011 
http://www.rns-pdf.londonstockexchange.com/rns/8140R_-2011-11-9.pdf

 

Excerpts from Guarantor's economic and financial situation

 http://www.rns-pdf.londonstockexchange.com/rns/8140R_1-2011-11-9.pdf

 

A copy of the above documents has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.hemscott.com/nsm.do

 

 

 

 

 

 

 

 

 

 

For further information, please contact:

Nathalie Parenteau
Executive Vice President and Secretary
Financement-Québec
Telephone Number:  1-418-691-2203
Fax Number:  1-418-643-4700
Email:  [email protected]

This information is provided by RNS

The company news service from the London Stock Exchange

END

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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