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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 : 0208U
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 7, 2007for the fiscal year ended March 31, 2007





Exhibit (99.2)






2 0 0 6

2 0 0 7


FINANCIAL 

STATEMENTS


FOR THE YEAR ENDED

MARCH 31, 2007


FINANCEMENT-QUÉBEC












Table of Contents



Management's Report....4

Auditor's Report....5

Financial Statements....7

Income and Retained Earnings....7

Balance Sheet....8

Cash Flows....9

Notes to the Financial Statements....10













[ This page intentionally left blank. ]



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.


Original signed

__________________________________ 

Executive Vice President 



Original signed

__________________________________ 

President and Chief Executive Officer




Québec City, June 8, 2007


Auditor's Report

To the Minister of Finance,



I have audited the balance sheet of Financement-Québec as at March 31, 2007 and the statement of income and retained earnings 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 Canadian generally 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, 2007 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,




 Original signed

Renaud Lachance, CA


Québec City, June 8, 2007



Financial Statements

Income and Retained Earnings

For the fiscal year ended March 31, 2007

(Thousands of dollars)



2007


2006

Net interest income





Interest on loans


555 561


517 404

Amortization of discounts and premiums on loans


683


668

Interest on borrowings and advances


(581 985)


(524 203)

Amortization of discounts and premiums on borrowings and advances


4 822


8 233

Interest on current investments


22 484


4 183



1 565


6 285

Other operations





Net issue expenses charged to borrowers


4 867


5 661

Administration expenses charged to borrowers


2 455


2 543



7 322


8 204



8 887


14 489

Operation and administration expenses 





Wages, salaries and allowances


283


245

Professional, administrative and other services


177


89

Transportation and communications


3


-

Agreement with the Financing Fund


698


577

Depreciation of tangible fixed assets


-


1

Other


45


10



1 206


922

Net earnings 


7 681


13 567

Retained earnings at the beginning


66 648


53 081

Retained earnings at the end


74 329


66 648


Balance Sheet 

(Thousands of dollars)



March 31, 
2007


March 31, 
2006

Assets





Loans (note 3)


12 096 002 


11 014 245 

Accrued interest on loans


190 410


171 082



12 286 412


11 185 327

Cash position


35


100

Current investments (note 4)


47 925


-

Accounts receivable


897


302



12 335 269


11 185 729

Liabilities





Borrowings (note 5)


11 056 000


9 914 680

Advances from the Consolidated Revenue Fund (note 6)


1 003 839


1 011 154

Accrued interest on borrowings and advances


180 978


168 852

Deferred premiums and discounts on borrowings and advances


7 660


12 534

Accounts payable


633


56

Deferred income


1 830


1 805



12 250 940


11 109 081

Equity





Capital stock (note 8)


100


100

Contributed surplus


9 900


9 900

Retained earnings


74 329


66 648



12 335 269


11 185 729

The notes are an integral part of the financial statements. 




For the board of directors



Original signed

__________________________________________

Executive Vice President



Original signed

_________________________________

President and Chief Executive Officer


  Cash Flows

For the fiscal year ended March 31, 2007

(Thousands of dollars)



2007


2006

Operating activities





Net earnings


7 681


13 567

Adjustments for:





    Amortization of discounts and premiums on loans


(683)


(668)

    Amortization of discounts and premiums on borrowings and advances


(4 822) 


(8 233) 

    Depreciation of tangible fixed assets





2 176 


4 667 

Changes in non-cash items related to operating activities





    Accrued interest on loans


(19 328)


(6 583)

    Accounts receivable


(595)


(80)

    Accrued interest on borrowings and advances


12 126


6 434

    Accounts payable


577


(7 460)

    Deferred income


25


 (562)



(7 195


(8 251) 

Cash flows from operating activities


(5 019) 


(3 584) 

Investing activities





Loans


(2 495 063) 


(2 548 898) 

Loan repayments


1 413 989 


1 074 292 

Cash flows from investing activities


(1 081 074) 


(1 474 606) 

Financing activities





Short-term borrowings


11 363 973 


7 896 285 

Long-term borrowings


2 526 848 


2 000 000 

Repayments of advances from the Consolidated Revenue Fund


(7 315)


(746 769)

Repayments of long-term borrowings


(998 180)


-

Repayments of short-term borrowings


(11 751 373) 


(7 677 185) 

Cash flows from financing activities


1 133 953


1 472 331

Change in cash and cash equivalents 


47 860


(5 859)

Cash and cash equivalents at the beginning  


100


5 959

Cash and cash equivalents at the end (note 9)


47 960


100

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 the 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

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 expenses 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 to cash flows. The 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.

Where the financial derivative is specified and proves effective in hedging both changes in fair values and changes in cash flows, the gains and losses are posted to the appropriate items in the income statement at the same time as those associated with the hedged assets or liabilities.

In the event that a derivative no longer satisfies the hedging conditions, the realized and unrealized gains and losses associated with the derivatives that have expired or have ceased to be effective prior to maturity are deffered on the balance sheet items and recognized in the results of the period during which the underlying hedging operation is recognized. If a specified hedged item is sold, cancelled or matures before the related derivative matures, any realized or unrealized gain or loss on such derivative is recognized in the income statement. In the event that the financial derivative becomes eligible once again for hedge accounting, any fair value previously recorded in the balance sheet is amortized in the income statement over the remaining life of the hedged item.

  3. Loans

Borrowers

(Thousands of dollars)



March 31, 
2007


March 31,
2006

School boards


4 585 250


4 055 874

General and vocational colleges


1 485 858 


1 397 474 

Institutions and development agencies of the health and social services network


4 012 394


3 822 944

University institutions and others


2 012 500


1 737 953



12 096 002


11 014 245




Repayable in Canadian currency

(Thousands of dollars)

Due in
Fiscal year





2007


-


807 972

2008


326 057


350 455

2009


1 564 302


1 689 158

2010


1 818 582


1 952 933

2011


424 766


453 848

2012 - 2033


7 962 295


5 759 879



12 096 002


11 014 245


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. However, depending on the amounts available, the Corporation may make new loans from the repayments of matured 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 $1 234 949 as at March 31, 2007.


  4. Current Investments

Current investments, recorded at cost, consist of three discount notes at fixed interest rates of 4.1781%, 4.1970% and 4.2191% respectively. These investments will mature during the next fiscal year.

5. Borrowings

(Thousands of dollars)

Due in
Fiscal year


March 31, 2007


March 31, 2006



Amount


Rate (%)


Amount

Repayable in Canadian currency







2007


-




1 385 580

2008


500 000


3.74 to 4.107; variable1


500 000

2009


1 105 500


4.7814 to 5.9515; variable1


1 105 500

2010


1 500 000


3.849 to 4.8683; variable1


1 500 000

2011


400 000


3.779 to 4.2075


400 000

2012


1 900 000


4.16 to 5.2764; variable1 


1 900 000

2013


1 020 000


4.134 to 5.0625


200 000

2014


1 781 000


4.108 to 4.843; variable1


500 000

2015


400 000


4.3172 to 4.7203


200 000

2016


509 400


4.2978 to 6.393


509 400

2035


225 900


5.25; variable1


--



9 341 800




8 200 480

Plus: 
Currency swap contracts in Canadian currency


1 714 200




1 714 200

Total in Canadian currency


11 056 000




9 914 680

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


11 056 000




9 914 680






Due in
Fiscal year


March 31, 2007


March 31, 2006



Amount


Rate (%)


Amount

Balance forward


11 056 000




9 914 680

Repayable in euros





2009


932 200


4.9005 to 5.861; variable2


932 200

Less: 

Currency swap contracts in Canadian currency


932 200




932 200

Total in euros


-




-

Total borrowings


11 056 000




9 914 680

Note: All these borrowings are repayable solely at maturity. All borrowings are long-term borrowings and are guaranteed by Québec.

1    Rate of 3-month bankers' acceptances plus a spread varying between minus 0.0175% and plus 0.268%.

2    Rate of 3-month bankers' acceptances plus 0.387706% and 0.319%.




  6. Advances from the Consolidated Revenue Fund

(Thousands of dollars)

Due in
Fiscal year


March 31, 2007


March 31, 2006



Amount


Rate (%)


Amount

Repayable in Canadian currency







2008


395 508


6.50


395 508

2009


5 000


6.98


5 000

2010


388 498


5.50 to 11.00


389 073

2012


64 428


9.5


65 962

2023


150 405


9.375


152 145



1 003 839




1 007 688

Plus:     
Currency swap contracts in Canadian currency


-




3 466

Total in Canadian currency


1 003 839




1 011 154

Repayable in United States currency







2007 


-




3 466

Less: 
Currency swap contracts in Canadian currency


-




3 466

Total in United States currency


-




-

Total advances from the Consolidated Revenue Fund


1 003 839




1 011 154


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

2008


399 356

2009


8 848

2010


390 624

2011


3 274

2012


60 032


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, 2007 is $15 705 million (March 31, 2006: $13 960 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, 2007 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, 2007


March 31, 2006



Book value


Fair value


Book value


Fair value

Borrowings and Advances









Borrowings


11 056


11 104


9 915


9 856

Advances from the Consolidated Revenue Fund


1 004


1 113


1 011 


1 139 

Currency swap contracts


-


154


-


249

Interest rate swap contracts


-


(20)


-


(20) 

Total for borrowings and advances


12 060


12 351


10 926


11 224 

Loans









Total for loans


12 096


12 343


11 014 


11 230


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 face 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)


2007

2006

Cash and cash equivalents 


Cash position

35

100

Current Investments

47 925

-


47 960

100


Interest paid by the Corporation during the year amounted to $570 458 232 (2006: $518 362 498).


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.



Copies of Exhibit 99.2 of the Issuer's Annual Report (on Form 18-K/A) for the fiscal year ended March 31, 2007 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 7, 2007 for the fiscal year ended March 31, 2007.

http://www.rns-pdf.londonstockexchange.com/rns/0208U_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
The company news service from the London Stock Exchange
 
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