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Financement Quebec (81QJ)

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Wednesday 17 June, 2009

Financement Quebec

Annual Report-Exhibit 99.2 da

RNS Number : 0207U
Financement Quebec
17 June 2009
 



Regulatory Announcement





Re: Financement-Québec - U.S.$2,000,000,000 EMTN Programme



Exhibit 99.2 of the Issuer's Annual Report (on Form 18-K/A) dated November 20, 2008 for the fiscal year ended March 31, 2008







Table of Contents



Management's Report....3

Auditor's Report....4

Financial Statements....5

Income and Accumulated Surplus....5

Statement of Financial Position....6

Cash Flows....7

Notes to the Financial Statements....8













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 principles. 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 management of 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 report sets out the nature and extent of this audit and expresses his opinion.



_/s/ Nathalie Parenteau________________ 

Executive Vice President 






_/s/ Bernard Turgeon__________________ 

President and Chief Executive Officer






Québec City, May 30, 2008, 


Auditor's Report

To the Minister of Finance,


I have audited the statement of financial position of Financement-Québec as at March 31, 2008 and the statement of income and accumulated surplus as well as the statement of cash flows for the year then ended. These financial statements are the responsibility of the Corporation's management. My responsibility is to express an opinion on these financial statements based on my audit.


I conducted my audit in accordance with generally Canadian accepted auditing standards. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.


In my opinion, these financial statements present fairly, in all material respects, the financial position of the Corporation as at March 31, 2008 and the results of its operations and its cash flows for the year then ended, in accordance with Canadian generally accepted accounting principles. As required by the Auditor General Act (R.S.Q., c. V-5.01), I report that, in my opinion, these principles have been applied on a basis consistent with that of the preceding year. 


Auditor General of Québec





/s/ Renaud Lachance

Renaud Lachance, CA




Québec City, May 30, 2008, 



Financial Statements

Income and Accumulated Surplus

For the fiscal year ended March 31, 2008

(Thousands of dollars)



 2008


 2007

Net interest income





Interest on loans


602 250


555 561

Amortization of discounts and premiums on loans


639


683

Interest on borrowings and advances


(652 645)


(581 985)

Amortization of discounts and premiums on borrowings and advances


4 186


4 822

Interest on current investments


47 536


22 484



1 966


1 565

Other operations





Net issue expenses charged to borrowers


6 935


4 867

Administration expenses charged to borrowers


2 242


2 455



9 177


7 322



11 143 


8 887

Operation and administration expenses 





Wages, salaries and allowances


394


283

Professional, administrative and other services


51


177

Transportation and communications


-


3

Service agreement with the Financing Fund


756


698

Other


26


45



1 227


1 206

Surplus for the year 


 9 916


7 681

Accumulated surplus at the beginning


74 329


66 648

Accumulated surplus at the end


84 245


74 329


Statement of Financial Position

As at March 31, 2008

(Thousands of dollars)



2008


2007

Assets





Loans (note 3)


13 397 751 


12 096 002 

Accrued interest on loans


185 734


190 410



13 583 485


12 286 412

Cash position


7


35

Current investments (note 4)


1 031 762


47 987

Accounts receivable


791 


835



14 616 045


12 335 269

Liabilities





Borrowings (note 5)


13 725 550


11 056 000

Advances from the Consolidated Revenue Fund (note 6)


604 483


1 003 839

Accrued interest on borrowings and advances


172 824 


180 978

Deferred premiums and discounts on borrowings and advances


17 333


7 660

Accounts payable


363


633

Deferred income


1 247


1 830



14 521 800


12 250 940

Net assets 





Capital stock (note 8)


100


100

Contributed surplus


9 900


9 900

Accumulated surplus 


84 245


74 329



14 616 045


12 335 269

The notes are an integral part of the financial statements. 


For the board of directors




_/s/ Nathalie Parenteau________________

Executive Vice President





_/s/ Bernard Turgeon__________________

President and Chief Executive Officer

  Cash Flows

For the fiscal year ended March 31, 2008

(Thousands of dollars)



2008


2007

Operating activities





Surplus for the year


9 916


7 681

Adjustments for:





    Amortization of discounts and premiums on loans


(639)


(683)

    Amortization of discounts and premiums on borrowings and advances


(4 186) 


(4 822) 



5 091 


2 176 

Changes in non-cash items related to operating activities:





    Accrued interest on loans


4 676


(19 328)

    Accounts receivable


44


(533)

    Accrued interest on borrowings and advances


(8 154)


12 126

    Accounts payable


(270)


577

    Deferred income


(582)


25



(4 286


(7 133) 

Cash flows from operating activities


805 


(4 957) 

Investing activities





Loans


(2 490 462


(2 495 063) 

Loan repayments


1 189 352 


1 413 989 

Cash flows used for investing activities


(1 301 110) 


(1 081 074) 

Financing activities





Short-term borrowings


12 301 282 


11 363 973 

Long-term borrowings


2 009 063 


2 526 848 

Repayments of advances from the Consolidated Revenue Fund


(395 561)


(7 315)

Repayments of long-term borrowings


(500 000)


(998 180)

Repayments of short-term borrowings


(11 130 732) 


(11 751 373)

Cash flows from financing activities


2 284 052


1 133 953

Change in cash and cash equivalents 


983 747


47 922

Cash and cash equivalents at the beginning  


48 022


100

Cash and cash equivalents at the end (note 9)


1 031 769


48 022

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 purpose 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 subject neither to Québec nor to Canadian income tax.









  2. Accounting Principles

For the purposes of preparing its financial statements, the Corporation primarily uses the 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 contingency 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.

Current Investments

Current investments are recorded at the lesser of cost and market value.

Deferred Income and Expenses

Deferred income and expenses are amortized over the remaining term of each security using the straight-line method.

Currency Translation

Borrowings and advances from the Consolidated Revenue Fund denominated in foreign currencies and repayable in Canadian currency under currency swap contracts are determined at the exchange rate stipulated in such contracts.

Cash and cash equivalents 

The Corporation presents, under cash and cash equivalents, bank balances and current 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 fair values or cash flows 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)



March 31, 2008


March 31, 2007

School boards


4 794 388


4 585 250

General and vocational colleges


1 542 037


1 485 858 

Health and social services institutions and agencies


4 833 570


4 012 394

University institutions and others


2 227 756


2 012 500



13 397 751


12 096 002




Due in
Fiscal year





2008


-


326 057

2009


1 554 815


1 564 302

2010


1 682 352


1 818 582

2011


393 727


424 766

2012


2 010 104


2 138 653

2013 


1 893 555


2 000 417

2014-2034


5 863 198


3 823 225



13 397 751


12 096 002


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 $595 998 as at March 31, 2008.


  4. Current Investments

Current investments, recorded at cost, consist of six discount notes at fixed interest rates ranging from 3.6100% to 4.8102respectively and a note at par at 3.5%. These investments will mature during the next fiscal year.

5. Borrowings

(Thousands of dollars)

Due in
Fiscal year


March 31, 2008


March 31, 2007



Amount


Rate (%)


Amount

Repayable in Canadian currency







2008






500 000

2009


2 276 050


4.7814 to 5.9515; variable1,2


1 105 500

2010


1 500 000


3.849 to 4.8683; variable2


1 500 000

2011


400 000


3.779 to 4.2075


400 000

2012


1 900 000


4.16 to 5.2764; variable2


1 900 000

2013


1 020 000


4.134 to 5.0625


1 020 000

2014


3 056 000


3.718 to 5.123; variable2


1 781 000

2015


1 000 000


3.839 to 4.7203


400 000

2016


509 400


4.2978 to 6.393


509 400

2035


349 900


5.25 


225 900



12 011 350




9 341 800

Plus: 
Currency swap contracts in Canadian currency


1 714 200




1 714 200

Total in Canadian currency


13 725 550




11 056 000

Repayable in United States currency







2013 


782 000


5.391 to 5.82


782 000

Less: 
Currency swap contracts in Canadian currency


782 000




782 000

Total in United States currency


-




-

Amount carried forward


13 725 550




11 056 000



Due in
Fiscal year


March 31, 2008


March 31, 2007



Amount


Rate (%)


Amount

Balance forward


13 725 550




11 056 000

Repayable in euros





2009


932 200


4.9005 to 5.861; variable3


932 200

Less: 

Currency swap contracts in Canadian currency


932 200




932 200

Total in euros


-




-

Total borrowings


13 725 550




11 056 000 

Note: All these borrowings are repayable solely at maturity. Borrowings maturing during the fiscal year ending March 31, 2009 include $1 170 550 000 of short-term borrowings. All long-term borrowings are guaranteed by the Québec government.

1    Short-term borrowings bear interest at rates varying from 1.5517% to 3.9808%.

2    Rate of 3-month bankers' acceptances plus a spread varying between minus 0.0175% and plus 0.2680%.

3    Rate of 3-month bankers' acceptances plus 0.3877% and 0.3190%.




  6. Advances from the Consolidated Revenue Fund

(Thousands of dollars)

Due in
Fiscal year


March 31, 2008


March 31, 2007



Amount


Rate (%)


Amount

Repayable in Canadian currency







2008






3

95 508

2009


5 000


6.98


5 000

2010


387 924


5.50 to 11.00


388 498

2012


62 894


9.5


64 428

2023


148 665


9.375


150 405



604 483




1 003 839

Total advances from the Consolidated Revenue Fund


604 483




1 003 839


The amounts of principal payments to be made on advances from the Consolidated Revenue Fund over the next five fiscal years are as follows:

(Thousands of dollars)

Fiscal year 


Amount

2009


8 848

2010


390 624

2011


3 274

2012


60 032

2013


1 740







  7. Financial Instruments 

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, 2008 is $17 047 million (March 31, 2007: $15 600 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, 2008 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.

(Millions of dollars)



March 31, 2008


March 31, 2007



Book value


Fair value


Book value


Fair value

Borrowings and Advances









Borrowings


13 726


13 901


11 056


11 104

Advances from the Consolidated Revenue Fund


604


704


1 004


1 113

Currency swap contracts


-


121


-


154

Interest rate swap contracts


-


140


-


(20)

Total for borrowings and advances


14 330


14 866


12 060


12 351

Loans









Total for loans


13 398


13 886


12 096


12 343


The value of other asset and liability financial instruments corresponds essentially to book value in view of their nature or the short-term maturity of these instruments.

  8. 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.


9. Cash Flows

(Thousands of dollars)


2008

2007

Cash and cash equivalents 


Cash position

7

35

Current Investments

1 031 762

47 987


1 031 769

48 022


Interest paid by the Corporation during the year amounted to $655 312 807 (2007: $570 458 232).


10. 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.


11. Comparative Figures

Some figures for the preceding fiscal year have been reclassified for consistency with the presentation adopted in the current fiscal year.







Copies of Exhibit 99.2 of the Issuer's Annual Report (on Form 18-K/A) for the fiscal year ended March 31, 2008 have been lodged with, and are available for inspection at, the Document Viewing Facility at the Financial Services Authority, 25 The North Colonnade, London E14.


A copy of the full document can also be accessed on the link below or, alternatively, by pasting the following URL into the address bar of your internet browser:


Exhibit 99.2 of the Issuer's Annual Report (on Form 18-K/A) dated November 20, 2008 for the fiscal year ended March 31, 2008.

http://www.rns-pdf.londonstockexchange.com/rns/0207U_1-2009-6-17.pdf




For further information, please contact:

Nathalie Parenteau
Executive Vice President and Secretary
Financement-Québec
T
elephone 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



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This information is provided by RNS
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