MACC Annual Report 2002/03 - Manitoba Agricultural Services ...

BOARD OF DIRECTORS 

Bill Uruski, Chair 

Arborg 

Sandy Yanick, Vice-Chair 

Shoal Lake 

Norine Dohan 

Ethelbert 

Joe Eichler 

Minitonas 

Robert Friesen 

Wawanesa 

OFFICERS OF THE CORPORATION 

Charlene Kibbins 

Acting, Chief Executive Officer / 

Vice-President, Corporate and Program Development 

Ex-officio Member of the Board 

Karen McEachen 

Chief Financial Officer 

Albert Todosichuk 

Vice-President, Program Delivery 

Lester Vopni 

General Counsel / Corporate Secretary 

Goldwyn Jones 

Tilston 

Ron Kostesky 

Rossburn 

Frieda Krpan 

St. Laurent 

TABLE OF CONTENTS 

CORPORATE VALUES ........................................................................................................................... 1 

TRANSMITTAL LETTERS....................................................................................................................... 2 

MESSAGE FROM THE CEO & CHAIR................................................................................................... 4 

ORGANIZATION CHART ........................................................................................................................ 5 

OPERATING PHILOSOPHY ................................................................................................................... 6 

OPERATIONAL BACKGROUND ............................................................................................................ 7 

YEAR IN REVIEW ................................................................................................................................... 8 

STRATEGIC DIRECTION ...................................................................................................................... 10 

SUMMARY OF OPERATIONS .............................................................................................................. 14 

DIRECT LENDING PROGRAM ............................................................................................................. 15 

EMERGENCY AND/OR SPECIAL ASSISTANCE PROGRAMS ............................................................ 17 

GUARANTEED LOAN PROGRAMS ..................................................................................................... 18 

PROPERTY MANAGEMENT ................................................................................................................. 19 

LENDING PORTFOLIO ......................................................................................................................... 20 

GUARANTEE PORTFOLIO ................................................................................................................... 20 

PROGRAM PARTICIPATION BY SECTOR ........................................................................................... 21 

FINANCING OF THE CORPORATION ................................................................................................. 22 

MANAGEMENT REPORT ..................................................................................................................... 23 

AUDITOR’S REPORT ........................................................................................................................... 24 

FINANCIAL STATEMENTS ................................................................................................................... 25 

2002-2003 ANNUAL REPORT

CORPORATE VALUES 

OUR VISION: 

A sustainable Manitoba agricultural economy 

OUR PROMISE: 

To participate in meeting the financial requirements of the agricultural 

community, thereby contributing to a vibrant Manitoba economy that is globally 

competitive 

OUR COMMITMENT: 

Facilitate acquisition of credit for Manitoba farmers, especially young, beginning, 

low-equity farmers or those considering higher risk farm diversification, in 

establishing a viable farm operation. 

Provide the vehicle through which the Province of Manitoba can implement 

financial agricultural programs, determined by the government of the day as 

essential for the long-term viability of agricultural production, agricultural 

producers and rural development. 

Continue to develop MACC’s relationship with private lending institutions in 

order to provide Manitoba farmers with access to credit under reasonable terms 

and conditions. 

Administer some of the Province’s emergency and special assistance programs. 

1 


Unit 100 - 1525 First Street South 

Brandon, Manitoba R7A 7A1 

T 204.726.6850 F 204.726.6849 

The Honourable Rosann Wowchuk 

Minister of Agriculture and Food 

165 Legislative Building 

Winnipeg, Manitoba 

R3C 0V8 

Dear Mrs. Wowchuk: 

On behalf of the Board of Directors, I am pleased to submit the Annual Report of the Manitoba 

Agricultural Credit Corporation for the fiscal year ending March 31, 2003 

Yours truly, 

Bill Uruski 

Chair

4 

MESSAGE FROM THE CEO & CHAIR 

MACC has provided a range of financial services 

for Manitoba farmers for the past 44 years with a 

special emphasis on the needs of the young and 

beginning farmer. Todays operating environment 

presents many challenges for Manitoba 

producers. Awareness of these challenges helps 

MACC to enhance programs, to establish 

priorities and to improve responsiveness to the 

needs of our clients. 

Canadian export markets continue to be affected 

by international trade issues and disputes. 

Canada’s dairy industry received a severe blow to 

future expansion this past year when exports of 

dairy products to the United States (US) were 

determined to be unfairly subsidized. The US 

continues to challenge the Canadian Wheat 

Board and although each challenge to date has 

been decided in Canada’s favour, fighting these 

disputes comes at a high cost. The concept of the 

voluntary Country of Origin Labeling provision was 

released as part of the US Farm Security and 

Rural Act of 2002 (2002 Farm Bill) with mandatory 

labeling to be implemented in the fall of 2004. 

Over the last year, Canada’s livestock industries 

have realized that the mandatory component of 

the 2002 Farm Bill may not easily be repealed as 

was once thought. This leaves many questions 

as to the impact on Canada’s cattle and hog 

industries as well as other livestock sectors, all 

extremely reliant on the US export market, should 

the 2002 Farm Bill become mandatory. Canada’s 

grain producers also continue to struggle with 

tighter margins, brought on by higher operating 

costs and low commodity prices. Increased price 

supports for crops in the US, also part of the 2002 

Farm Bill, places further downward pressure on 

Canadian commodity prices. 

MACC has seen a great response in its first year 

of the Bridging Generations Initiative. Over $14 

million was made available to help establish a 

new generation of Manitoba farmers. MACC 

distributed 123 Bridging Generations Loans 

across the province, demonstrating the 

importance of accessible financing options for 

young and beginning, and retiring farmers. Most 

of the program’s clients are participating in the 

Management Training Credit component of the 

program. This program demonstrates our 

commitment to facilitating farm transfer between 

generations and providing Manitoba farmers with 

the financial options, training and skills vital for 

today’s farm families and their long-term viability. 

MACC recognizes that staff are a key resource in 

meeting its objectives and that teamwork is the 

foundation of the organization. MACC’s staff are 

collectively involved in the development and 

implementation of strategies to ensure successful 

outcomes. We value staff input from all levels, 

whether it is years of experience or a fresh 

perspective. We would like to thank all MACC 

staff for continuing to embrace the challenge of 

change. Their dedication, insight and collaborative 

spirit have contributed to the value we bring to our 

clients. 

To improve effectiveness and efficiency of 

operation, and increase the level of client service in 

the delivery of our programs, MACC has recently 

taken some key steps in reorganization. We have 

made several changes to the corporation’s 

organizational structure over the past year with 

more to follow in 2003-2004. 

This past year, MACC transitioned to centralized 

computing, managing MACC’s data in a manner 

that protects the integrity of our computer system 

as a whole. Centralized computing provides such 

benefits as centralized data storage and reduction 

of user downtime. The majority of MACC offices 

have seen a significant increase in line speeds 

through broadband bandwidth improvements 

enabled by the newly implemented secondgeneration 

Provincial Data Network. 

MACC fully supports and participates in Manitoba 

Agriculture and Food’s Sustainable Development 

Initiative under the Sustainable Development Act 

and encourages staff to do so with activities such 

as recycling, reducing, and returning items where 

applicable. We encourage the use of teleconferencing 

to minimize travel and incorporate 

sustainable development objectives when planning 

activities. 

MACC is continually making changes to improve 

our efficiency and effectiveness and strives to be 

innovative in our meeting clients’ needs. Making 

Manitobans aware of our products and services is 

also a key priority. Many thanks go to our Board 

and to our Minister, the Honourable Rosann 

Wowchuk, for their dedication, direction and 

assistance through out the year. 

Charlene Kibbins 

Acting, CEO 

2002-2003 ANNUAL REPORT 

Bill Uruski 

Chair

ORGANIZATION CHART 

MACC staff are located throughout the province, with the Head Office in Brandon. MACC is governed by a 

Board of Directors appointed by the Lieutenant Governor in Council. The CEO, who reports to the Board of 

Directors, is responsible for the management, direction, and control of the operations of MACC and the 

day-to-day administration of its affairs. The CEO is also a member of the Executive Management 

Committee of Manitoba Agriculture and Food. MACC is comprised of three main divisions being Finance 

and Administration, Program Delivery, and Corporate and Program Development. 

MACC has recently embarked on some major steps in reorganization to improve effectiveness and 

efficiency of operation, and increase the level of client service in the delivery of our programs. The 

continued progress of MACC and its contribution to Manitoba’s agricultural industry is facilitated through a 

restructuring plan, developed based on the corporation’s strengths and weaknesses, opportunities and 

challenges. A number of changes have been made to the corporation’s organizational structure over the 

past year and there are several enhancements in the upcoming year. 

Manitoba Agricultural Credit Corporation - March 31, 2003 

Minister of Agriculture 

and Food 

Board of Directors 

Acting Chief 

Executive Officer 

C. Kibbins 

Administrative 

Secretary 

Compliance 

Officer 

Vice-President, 

Program Delivery 

A. Todosichuk 

Vice-President, Corporate and 

Program Development 

C. Kibbins 

General Counsel / 

Corporate Secretary 

L. Vopni 

Chief Financial 

Officer 

K. McEachen 

Direct Lending 

Services 

Corporate & Program 

Development 

Financial Services 

Guarantees and 

Special Programs 

Information Technology 


Human Resources 

Loans 

Administration 

Administrative 


Legal Services 

5 


OPERATING PHILOSOPHY 

ALLIANCE BUILDING 

We are committed to building partnerships and relationships within the agricultural 

community. 

SERVICE 

We are committed to providing professional, prompt, respectful, orderly, efficient 

and ethical service. 

PRODUCTIVITY 

We are dedicated to providing a high volume of high quality products. 

PROGRESS 

We believe in the future of agriculture as a viable industry in Manitoba and are 

dedicated to program change and enhancement that addresses unserviced financial 

needs in the agricultural community. 

PROFESSIONAL GROWTH 

We are committed to employee development and advancement in an atmosphere of 

mutual trust that fosters initiative and creativity. 

ORGANIZATIONAL STRUCTURE 

We are committed to defining roles and responsibilities that will support efficient 

decision-making, orderly flow of information, and effective program delivery. 

COMMUNICATION 

We believe that effective and open communication, based on listening and 

responding, is integral to a successful organization. 

6 


OPERATIONAL BACKGROUND 

3-2004 STRATEGIC DIRECTION 

perational Background 

MACC recognizes that satisfied and knowledgeable staff are essential in providing quality 

customer service. In order to determine current levels of employee satisfaction, MACC initiated 

a process to track corporate performance in this area, ensuring the identification of staff 

concerns that may impede quality customer service. Better expanded access to our clients 

through email and the Internet will also improve customer service; and will only advance as rural 

communities become more accessible electronically. MACC looks forward to taking advantage 

of improved electronic access to rural communities to improve turnaround times and provide 

more efficient service for clients. 

Another goal for MACC is to be recognized for quality financing programs. Assessing and 

managing credit risk is essential in protecting MACC’s clients and the Province. Credit risk is 

inherent both in MACC's lending portfolio and its guarantee programs. MACC strives to provide 

quality programs with reasonable terms and conditions available to all sectors of agriculture 

ensuring a diversified portfolio. As well, MACC lending staff are highly skilled in credit risk 

assessment and management. 

MACC continually examines the current agricultural environment to ensure that financing gaps 

for rural economic development projects are being filled. Such gaps include the financing of 

larger production units necessary to take advantage of economies of scale, supply managed 

commodities, and supporting development projects complementing the government’s 

commitment to agriculture. 

MACC provides unique and essential financial assistance programs facilitating the 

establishment and development of value added and diversification activities of farms and 

agricultural enterprises. MACC compliments its traditional programming through guarantee 

partnerships, which provide support to financial institutions in rural communities by making 

agricultural financing an attractive option. A number of agricultural processing initiatives have 

begun or are being proposed in rural Manitoba. A recent example is Simplot’s potato 

processing operation in Portage. MACC’s Enhanced Diversification Loan Guarantee program 

has supported several clients in expanding and establishing potato production, in order to 

supply this facility. 

In many sectors of agriculture, costs for capital assets and other operating expenses continue to 

rise faster than gross revenues resulting in reduced debt service capacity and shrinking net 

margins. At the same time, access to credit from traditional lenders continues to be limited. 

This is reflected in increasingly restrictive eligibility requirements and a decreasing number of 

local branches. In order to increase the availability of credit, under reasonable terms and 

conditions, MACC offers guarantee programs to help producers access financing for capital 

intensive projects from the private sector. The client, the rural community, the lender and 

MACC all benefit from these partnerships. 

Delivery of emergency and special assistance programs for the province on a priority status 

makes MACC a valuable instrument in government. Through restructuring, MACC has better 

positioned itself to rapidly respond to emergency and special situations while maintaining our 

mandated services. 

7 


YEAR IN REVIEW 

The Manitoba Agriculture and Food’s Destination 

2010 – A Strategic Roadmap for Agriculture and 

Food document outlines the department’s six strategic 

routes, which identify the programs and activities, 

needed to realize their vision. Within these routes, 

MACC plays an important role in agriculture guided by 

our Vision and Goals. 

Manitoba Agriculture and Food has identified Farm 

Profitability and Sustainability as two of their routes. 

Due to an ever-shifting economic environment, 

producers must constantly update their competitive 

knowledge and skills while having access to effective 

risk-reduction measures. As well, the long-term well 

being of farm families requires an integrated 

environmental, social and economic approach to 

agriculture. MACC is striving to meet these needs by 

providing well-structured financial services with 

reasonable terms and conditions as an effective risk 

reduction method. MACC targets Manitoba’s young, 

beginning and lower equity producers and offers 

reasonable terms and conditions such as favorable 

interest rates and the Young Farmer Rebate. MACC 

encourages farm management training for young 

producers involved in family farm transfers with the 

Management Training Credit component of the 

Bridging Generations Initiative. 

In order to meet our goal “To provide quality 

customer services”, over the past year MACC 

improved access to its Head Office computer server by 

implementing centralized computing. This transition 

manages MACC’s data in a manner that better 

protects the integrity of the system as a whole. It 

reduces user downtime for maintenance and 

troubleshooting while enhancing remote user 

accessibility. It also provides centralized data storage, 

enhanced integration of data and reporting 

capabilities, and easier management, backup and 

recovery. MACC’s Head Office and the majority of 

field offices have now increased line speeds through 

the second-generation Provincial Data Network. 

MACC’s customized Electronic Client Loan Information 

Profile System was also enhanced throughout the year 

to include improvements to client information screens 

and access to MACC’s lease and property activity for 

data entry and viewing. MACC also integrated an 

electronic funds transfer system, enabling loan 

disbursements and refunds to be directly deposited 

into recipient’s bank accounts. 

This past year, MACC implemented the Producer 

Inquiry form. This form is aimed at ensuring 

consistent, high quality customer service, while 

providing MACC with critical information in areas such 

as unmet client needs and anticipated work volumes. 

A Client Comment sheet was also developed to 

encourage communication between MACC and our 

clients. This communication tool will help to assess 

qualitative aspects of service to enhance our existing 

programs and aid in program development. In order to 

ensure a positive customer service reputation into the 

future, MACC established a Service Standards Policy 

to make certain all clients across the province receive 

consistent service. 

In response to the corporation’s Change Readiness 

Survey completed in 2001-2002, MACC made 

additional efforts this past year to enhance internal 

communications. MACC established an annual 

employee survey process and completed the first 

survey. MACC will use this initial survey as a tool to 

measure and benchmark employee satisfaction within 

the corporation. 

An Electronic Environment Policy was developed and 

presented to staff, providing information and direction 

regarding rights and responsibilities in an electronic 

environment. Several corporate calendars were 

designed to display staff availability, highlight 

corporate events and ensure deadlines are met. We 

also initiated monthly feature employee articles in 

order to share success stories and provide personal 

insights. 

A Field Representative Workshop was held to make 

certain new staff are made aware of and understand 

MACC policies and to re-affirm our policies with 

existing, longer term staff. The workshop focused on 

customer service standards, and analysis and 

preparation of loan recommendations. Further training 

was provided on the Freedom of Information and 

Protection of Privacy Act (FIPPA). MACC strives to 

provide an environment that supports continuous 

learning as a means of ensuring our positive customer 

service reputation into the future. 

Another MACC goal is “To be recognized for quality 

financing programs.” In 2002-2003 MACC took 

steps to build program awareness with producer 

groups, financing partners and other stakeholders. 

8 


YEAR IN REVIEW 

MACC conducted many information sessions on our 

guarantee, Bridging Generations Initiative and direct 

lending programs. In conjunction with Manitoba 

Agriculture and Food, an information pamphlet on the 

Bridging Generations Initiative was published. We 

completed updates on our promotional material and 

procedures manuals in order to have the most 

accurate and current information available. Over 

3,000 hours were logged in networking activities 

including trade shows, seminars, conferences, client 

focus groups, federal/provincial relations, and 

meetings with agriculture producer leaders, lenders 

and industry groups. 

Within our Direct Lending program, many 

enhancements occurred over the year. MACC 

implemented a policy allowing clients to borrow in 

more than one capacity. Producers can now use 

Direct Loans to purchase supply-managed quota and 

shares in primary agriculture production enterprises. 

Also, MACC increased the lending limits for hog biotech 

shelters and removed lending restrictions based 

on production allotments for Pregnant Mares Urine 

(PMU) operators. 

One of MACC’s goals is “To increase the availability 

of credit, under reasonable terms and conditions, 

from traditional financial institutions to Manitoba 

farmers” by guaranteeing loans from other financial 

institutions. Agriculture and Food Minister, the 

Honourable Rosann Wowchuk, announced March 27, 

2003 that effective April 1, 2003, MACC’s Operating 

Credit Guarantee (OCG) program is available to assist 

Manitoba farmers obtain more affordable financing. 

This new program responds to the changing needs of 

farmers and the industry, and assists producers who 

experience difficulty securing sufficient operating credit 

by reducing the risk for participating lenders. The 

Operating Credit Guarantee replaces the Guaranteed 

Operating Loan program, which expired March 31, 

2003. MACC also continued to provide the Enhanced 

Diversification Loan Guarantee and the Manitoba 

Cattle Feeder Associations Loan Guarantee programs 

to help Manitoba producers obtain financing that may 

otherwise not be available to them. 

while providing retiring farmers with a reliable payment 

schedule. 

Included in this initiative is the Management Training 

Credit, which helps young farmers increase their farm 

business management skills. MACC provided a total 

of $14.6 million in loans this past year to applicants 

under the Bridging Generations Initiative to help 

establish a new generation of Manitoba farmers. 

Another strategic route for Manitoba Agriculture and 

Food is Diversification and Adding Value. MACC 

can contribute by providing a more stable economic 

foundation for Manitoba producers interested in 

pursuing economic expansion and prosperity through 

increased diversification and value-added activities. 

Since 1995, MACC has been able “To provide unique 

and essential financial assistance programs 

facilitating the establishment, development, valueadded 

and diversification activities of farms and 

agricultural enterprises” through its Diversification 

Loan Guarantee (DLG) programming. Use of the DLG 

program has seen continued growth year after year 

with an increase of 40% in the number of loans 

guaranteed and a 74% increase in the dollar value 

over 2001-2002. 

As new agricultural market opportunities emerge, 

MACC is prepared to assist in meeting client needs 

and in doing so, aid in Manitoba Agriculture and 

Food’s strategic route of Market Development. With 

the recent construction of the Simplot potato 

processing plant in Portage la Prairie, MACC 

responded with greater maximums in our guarantee 

programs to address the higher capital and operating 

costs of potato production. Over the 2002-2003 fiscal 

year, the Enhanced Diversification Loan Guarantee 

program guaranteed 6 potato production projects for 

$6.0 million with a guarantee of $1.5 million. MACC 

also provided a $5 million guarantee for Brett-Young 

Seeds Limited, a company that specializes in grass, 

canola and forage seeds. The company's research 

will expand on its existing expertise in seed 

development, such as producing varieties of canola 

with specific oil profiles preferred by consumers and 

canola yield enhancing products. 

As always, MACC is ready “To deliver emergency 

and special assistance programs for the Province 

on a priority status.” In April 2002, 

MACC piloted the Bridging Generations Initiative; a 

unique direct lending and guarantee product designed 

to assist young farmers purchase a farm operation 

9 


STRATEGIC DIRECTION 

MACC believes in the future of agriculture as a viable industry in Manitoba. The Vision, which 

is the driving force of the corporation, is that of “A sustainable Manitoba agricultural economy”. 

In order to do its part in achieving this vision, the corporation Promises “To participate in 

meeting the financial requirements of the agricultural community, thereby contributing to a 

vibrant Manitoba economy that is globally competitive”. 

MACC was established in 1958 and has a Commitment to: 

• facilitate acquisition of credit for Manitoba farmers, especially young, beginning, low-equity 

farmers or those considering higher risk farm diversification, in establishing a viable farm 

operation 

• provide the vehicle through which the Province of Manitoba can implement financial 

agricultural programs, determined by the government of the day as essential for the longterm 

viability of agricultural production, agricultural producers and rural development 

• continue to develop MACC’s relationship with private lending institutions in order to provide 

Manitoba farmers with access to credit under reasonable terms and conditions 

• administer some of the Province’s emergency and special assistance programs 

MACC operates in a setting that is influenced by a number of factors. Some of the dynamics 

faced by the corporation and its clients include a volatile financial situation, an export driven 

market, a public that is increasingly food safety and environmentally conscious and 

knowledgeable, a declining rural population, the attendant loss of political influence, and 

agricultural production and processing that is expensive and rapidly changing. For the 

corporation specifically there are challenges and opportunities offered by new technology and 

the need to operate in the political spectrum. 

Within this setting and the structure provided by its Vision, Promise and Commitment, MACC is 

dedicated to cooperation within the financial community in order to offer program development, 

change and enhancement that address the unserviced financial needs in the agricultural 

community. 

Goals have been established to focus the work of the corporation. Within each goal, MACC 

challenges itself to accomplish specific initiatives for the 2003 – 2004 year. 

Within the December 2002 report on Performance Reporting in Annual Reports: Current 

Practices Among Crown Entities, the Auditor General has presented many guidelines to 

incorporate into our annual reporting. Over the next three to five years, MACC plans to 

implement these recommendations by including the expected results, the actual results 

achieved with explanations of the variance between the two, and future strategies to address 

any shortcomings in performance. 

10 



To provide quality customer services 

2003-2004 Strategies 2003-2004 Targets 

Enhance efficiency, accuracy, and turnaround 

time in responding to client requests 

• analyze research results and make 

recommendations for development of a 

client satisfaction measurement system 

• research external credit scoring systems 

and make recommendation for appropriate 

system for MACC 

• develop infrastructure for remote data 

entry 

• provide improved access to program 

information by implementing the on-line 

Producer Inquiry Form 

Enhance MACC’s client accessibility • provide 24 hr multi-location accessibility to 

MACC on the internet 

• encourage staff to perform on-site data 

entry for clients 

To be recognized for quality financing programs 


Enhance awareness of MACC programs and 

accomplishments 

• conduct program awareness training for 

lenders and extension staff 

• add a regular MACC piece to the District 

newsletters in the four Manitoba 

Agriculture and Food regions 

• continue to hold program delivery sessions 

for MACC staff with semi-annual credit 

meetings and conduct program awareness 

with producers 

• initiate development of lenders’ manuals 

for the Enhanced Diversification Loan 

Guarantee Program 

• deliver procedural guidelines to 

participating lenders for the new Operating 

Credit Guarantee Program 

11 



To provide unique and essential financial assistance programs 

facilitating the establishment, development, value-added and 

diversification activities of farms and agricultural enterprises 


Analyze the marketplace and report on 

identified gaps and emerging needs 

• make recommendations on financing 

needs in the following areas: 

- rural development focus/financing gaps 

- bio-fuels 

- marketing co-ops 

- custom operations 

• measure activity relating to established 

target groups under the Client Profile 

System 

Develop or enhance existing products to fill 

gaps and meet needs 

Implement new products or program 

enhancements 

• establish / refine criteria and guidelines for 

- modest farms (in Statistics Canada 

profiling) 

- agricultural product processing 

- specialized environmental 

infrastructures 

• provide financing related to: 

- grass and forage seed processing 

- modest farms (in Statistics Canada 

profiling) 

- manure management 

12 



To increase the availability of credit, under reasonable terms and 

conditions, from traditional financial institutions, 

to Manitoba farmers 


Analyze the marketplace and report on 

identified gaps and emerging needs 

Develop or enhance existing products to fill 

gaps and meet needs 

• evaluate potential for non-participating 

financial institutions to become involved in 

guarantee programs 

• establish criteria and guidelines for breeder 

financing 

• complete Treasury Board Submission for 

breeder financing 

Implement new products or program 

enhancements 

• provide loan guarantees under a new 

guarantee program for operating loans 

• introduce enhancements to Manitoba Cattle 

Feeder Associations Loan Guarantee 

Program for breeder financing 

To deliver emergency and special assistance programs for the 

Province on a priority status 


Have a vehicle to address the needs of 

Manitoba farm families to facilitate 

intergenerational farm transfers 

• deliver the Bridging Generations Initiative 

Identify trends through our networking strategy • meet with lenders, stakeholders and 

clients 

Establish an archive system to provide ready 

access to emergency and special assistance 

program information 

• develop a system format using the Flood 

Proofing Loan Assistance Program 

information as a template 

13 


SUMMARY OF OPERATIONS 

MACC has a reputation for proactive financial programs meeting the challenges and 

opportunities faced by the agricultural industry. We continually monitor farm financial services 

in order to provide financing in gap areas that are not served by other institutions. MACC works 

in cooperation, not in competition, with other financial institutions to ensure that Manitoba’s 

farming community is fully serviced. MACC provides short, intermediate and long-term credit to 

agricultural producers serving a wide variety of purposes. We work with Manitoba farmers to 

find the financial management answers to help them achieve their goals. 

MACC’s farm lending products include: 

DIRECT LENDING PROGRAM 

• Direct Loans 

• Stocker Loans 

• Bridging Generations Initiative 

• Young Farmer Rebate 

EMERGENCY AND/OR SPECIAL ASSISTANCE PROGRAMS 

• Flood Proofing Loan Assistance 

• Comprehensive Refinancing Loans 

• Manitoba Farm Mediation Loan Guarantee 

GUARANTEED LOAN PROGRAMS 

• Enhanced Diversification Loan Guarantee 

• Manitoba Cattle Feeder Associations Loan Guarantee 

• Guaranteed Operating Loan 

PROPERTY MANAGEMENT 

• Short Term Leases 

• Land Lease Option Program 

14 




MACC’s Direct Lending Program provides eligible Manitoba producers with short, intermediate 

and long term financing, competitive interest rates and no prepayment penalties. Clients also 

have the control and flexibility of locking the interest rate for the full amortization period or by 

selecting a five-year renewable interest term. 

DIRECT LOANS 

In 1959-1960, the first year of its inception, MACC made available Direct Loans to provide 

financial assistance to Manitoba producers in establishing, developing and operating their farms. 

Direct Loans are available for a variety of purposes such as the purchase of land / buildings, 

permanent improvements to land/buildings, traditional or alternative breeding stock, construction 

and renovation of production buildings or debt consolidation. 

During 2002-2003, there were 334 loans approved totalling $18.8 million as compared to 653 

loans approved totalling $45.4 million during 2001-2002. The major allocation of agricultural 

lending activities in 2002-2003 went to land purchase loans of 41% and debt consolidation loans 

of 27%. 

APPROVED DIRECT LOANS BY PURPOSE 

2002-2003 

Building 

Improvements 

10% 

Land 

Improvements 

2% 

Land Purchases 

41% 

Livestock 

Purchases 

20% 

Debt 

Consolidation 

27% 

15 



STOCKER LOANS 

In 1974-1975, MACC introduced Stocker Loans to provide livestock inventory financing to 

qualified livestock producers. This includes the purchase of feeder steers, feeder heifers, 

feeder cows and equine growers. 

During 2002-2003, MACC approved 337 loans for 34,961 head, totalling $19.5 million as 

compared to 425 loan approvals for 41,596 head, totalling $27.6 million for 2001-2002. 

BRIDGING GENERATIONS INITIATIVE 

In 2002-2003, MACC implemented a five-year pilot project, the Bridging Generations Initiative to 

assist in the transferring of farm assets between retiring and next generation farmers. The 

initiative is comprised of six key elements: 

• Bridging Generations Loan 

• Bridging Generations Mortgage Guarantee 

• Livestock Herd Establishment Loan 

• Land Lease Guarantee 

• Lifestyle Transition Loan 

• Management Training Credit 

In its first year, MACC approved 123 Bridging Generations Loans, totaling $14.6 million. 

YOUNG FARMER REBATE 

Direct Loans and Bridging Generations Loans can include a Young Farmer Rebate for qualifying 

clients. MACC introduced the Young Farmer Rebate in 1978-1979 to assist young, beginning 

and expanding farmers in the development, re-organization and expansion of their farm 

operations. The rebate is aimed at reducing the cost of borrowing during the critical start-up 

stage of production. Eligible young farmers, under the age of 40, receive a rebate of 2% on the 

first $100,000 of principal on Direct Loans or Bridging Generations Loans, with an interest term 

of five years or greater. The maximum lifetime rebate is $10,000. 

During 2002-2003, MACC distributed $1.9 million of young farmer rebates as compared to 

rebates of $1.7 million during 2001-2002. Young farmers were approved for 70% of the loan 

dollar volume as compared to 72% for 2001-2002. 

16 


EMERGENCY AND/OR SPECIAL ASSISTANCE PROGRAMS 

As required, MACC plays a vital role in delivering financial assistance and/or programming in 

specialized areas that are identified as critical by the Province for Manitobans. 

FLOOD PROOFING LOAN ASSISTANCE 

In cooperation with Manitoba Conservation, MACC enhanced the Flood Proofing Loan 

Assistance Program in 1998-1999. Financial assistance was provided to Manitobans affected 

by the 1997 Red River Valley flood to undertake raising, moving and diking of buildings 

necessary for flood proofing. In January 2001, in cooperation with Manitoba Conservation, 

MACC administered the City of Winnipeg Flood Proofing program allowing property owners in 

the City of Winnipeg to obtain financing for the raising, moving and diking necessary for flood 

proofing. The deadline for completion of all flood-proofing projects was March 31, 2003. 

COMPREHENSIVE REFINANCING LOANS 

MACC introduced Comprehensive Refinancing Loans in 1985-1986 to provide loans to farmers 

who were in financial difficulty. MACC enhanced the program in 1998-1999 when $5 million 

was made available specifically for lending to existing MACC clients in financial difficulty. The 

interest rate was set at 6.50% for the first five years of each loan. An additional $5 million was 

made available in 2001-2002 with the same interest rate. 

During 2002-2003, MACC approved 9 loans totaling $957,481 as compared to 8 approvals for 

$757,062 in 2001-2002. 

MANITOBA FARM MEDIATION LOAN GUARANTEE 

During 1987-1988, loan assistance to clients of the Manitoba Farm Mediation Board was 

identified to be in the category of “special programs.” The Manitoba Farm Mediation Board has 

funds, which it may use to provide guarantees to lenders to assist farmers experiencing financial 

difficulties. 

In 2002-2003, there were Manitoba Farm Mediation Guarantees associated with 5 loans totaling 

$582,568 as compared to 5 loans totaling $474,726 during 2001-2002. 

17 


GUARANTEED LOAN PROGRAMS 

MACC is committed to meeting the financing requirements of Manitoba’s agricultural producers 

by working in partnership with the major chartered banks, credit unions and caisse populaires. 

These partnerships provide agricultural producers with access to credit where it would not 

otherwise be available due to factors such as insufficient equity or security and unproven 

projects. MACC’s guarantees encourage private lenders to participate in areas that they may 

otherwise consider higher risk. 

ENHANCED DIVERSIFICATION LOAN GUARANTEE 

In order to assist Manitoba producers in diversifying their current operation and/or add value to 

commodities produced on the farm, MACC introduced the Diversification Loan in 1995-1996. 

The Enhanced Diversification Loan Guarantee program replaced the original program in 2001- 

2002. MACC bases the guarantee on 25% of the principal amount of the loan with no maximum 

loan cap. 

During 2002-2003, MACC approved 52 Enhanced Diversification Loan Guarantees for a total of 

$73.3 million as compared to 38 approvals with a total of $42.4 million during 2001-2002. At the 

end of 2002-2003, MACC’s total portfolio for the Diversification Loan Guarantee programs 

included 170 active guarantees totaling $182.4 million as compared to 126 active guarantees 

totaling $113.5 million at the end of 2001-2002. 

MANITOBA CATTLE FEEDER ASSOCIATIONS LOAN GUARANTEE 

In 1991-1992, the Manitoba Cattle Feeder Associations Loan Guarantees was introduced to 

assist Manitoba residents in establishing Feeder Associations and enable them to borrow funds 

on the strength of a government guarantee to lenders. For each association, the corporation 

provides a guarantee to the individual lending institution, based on 25% of the amount of the 

loan. The maximum guarantee is $1,250,000 per association. 

At the end of 2002-2003 there were 10 Feeder Associations with a total of $24.4 million 

in approved guaranteed loans (for 150 active members) as compared to 10 Feeder Associations 

with $26.6 million in approved guaranteed loans (for 174 active members) at the end of 2001- 

2002. 

GUARANTEED OPERATING LOAN 

In 1983-1984, MACC introduced Guaranteed Operating Loans to provide new lines of credit for 

operating expenses. The corporation guarantees each participating lending institution 12 1/ 2% of 

the respective total value of loans made under this program. All participating lending institutions 

have a $100 million combined total maximum. Note: This program expired March 31, 2003. 

During 2002-2003, MACC provided 90 loan guarantees totaling $13.4 million approved as 

compared to 100 loan guarantees approved totaling $14.0 million during 2001-2002. 

18 


PROPERTY MANAGEMENT 

Currently, MACC acquires property as a result of debt settlement negotiations or by foreclosure 

proceedings. In the case of debt settlement, MACC endeavors to provide an opportunity to the 

original owner to acquire back their land. Any land not leased or sold in the course of debt 

settlement is advertised to the general public for sale or lease. 

PROPERTY ACTIVITY 

Beginning of 

Year 

12,623 

15,396 

Sales 

Acquisitions 

75 

1,036 

2,085 

3,809 

2003 

2002 

End of Year 

10,613 

12,623 

0 5,000 10,000 15,000 20,000 

Acres 

SHORT TERM LEASES 

MACC offers properties with expired leases for sale by public tender. Properties that are not 

sold are tendered for lease with terms up to five years. 

As at March 31, 2003, there were 7 Short Term Leases consisting of 1,561 acres and 480 acres 

committed to new tenants with lease agreements starting April 1, 2003. 

LAND LEASE OPTION PROGRAM 

From 1974 to 1977, MACC purchased farmland from willing sellers and leased it to qualifying 

farmers. The corporation acquired a total of 223,600 acres for $22.6 million. 

As at March 31, 2003, there were 20 Long Term Leases and Agreements for Sale on 8,252 

acres. 

19 


LENDING PORTFOLIO 

As at March 31, 2003, MACC’s total loan portfolio decreased by 495 loans, $11.4 million under 

last year. This decrease can be attributed to variety of issues Manitoba producers are facing, 

such as uncertain commodity markets, ongoing trade issues, reduced margins due to declining 

prices and higher input costs, and areas suffering from low yields. As well, MACC’s activity 

level has been affected by the more aggressive approach being taken by other agricultural 

lenders, typically seen when interest rates are low. 

Approvals 

Approvals 

Active and 

2002/2003 2001/2002 

Outstanding 

March 31, 2003 

# of Loans $M. # of Loans $M. # of Loans $M. 

DIRECT LENDING 

Direct Loans 334 18.8 653 45.4 4,766 238.5 

Stocker Loans 337 19.5 425 27.6 312 14.9 

Bridging Generations Loans 123 14.6 - - 123 11.2 

Total Direct Lending 794 52.9 1,078 73.0 5,201 264.6 

EMERGENCY / SPECIAL ASSISTANCE 

Enhanced Flood Proofing Assistance Loans - - 31 2.1 489 2.4 

Comprehensive Refinancing Loans 9 1.0 8 0.8 91 5.7 

Producer Recovery Loans - - - - 509 19.0 

Total Emergency / Special Assistance 9 1.0 39 2.9 1,089 27.1 

TOTAL LENDING PORTFOLIO 803 $ 53.9 1,117 $ 75.9 6,290 $ 291.7 

GUARANTEE PORTFOLIO 

Although the Direct Loan portfolio has declined, both the number and dollar value of the 

Diversification Loan Guarantee portfolio continues to increase. This may indicate a shift toward 

larger production units, requiring the broader eligibility criteria and limits available in the DLG 

program. 

Active and 

Approvals Approvals Outstanding 

2002/2003 2001/2002 March 31, 2003 

# of Loans $M. # of Loans $M. # of Loans $M. 

GUARANTEES 

Enhanced Diversification Loan Guarantees 52 73.3 38 42.4 170 182.4 

Guaranteed Operating Loans 90 13.4 100 14.0 70 9.8 

Manitoba Cattle Feeder Associations Loan 

Guarantees 10 24.4 10 26.6 10 24.4 

TOTAL GUARANTEE PORTFOLIO 152 $ 111.1 148 $ 83.0 250 $ 216.6 

20 


PROGRAM PARTICIPATION BY SECTOR 

MACC’s clients span all sectors of agriculture from grains and oilseeds to beef and supply managed 

commodities. Similar to Manitoba’s gross farm receipts, 1. grains and oilseeds, hogs and beef represent 

the greatest proportion of MACC’s poltfolio. 

Primary Enterprise Direct Feeder Guaranteed Diversification Enhanced TOTAL 

Loans Association Operating Loan Diversification PORTFOLIO 

Loan Guarantee Loan Guarantee 

% of % of % of % of % of Mar. 31/03 

Portfolio ($) Portfolio ($) Portfolio ($) Portfolio ($) Portfolio ($) 

Grains/Oilseeds 

Potatoes 

Other Crops 

Beef 

Hogs 

Poultry 

Dairy 

53.7% 66.9% 0.0% 0.0% 45.6% 

0.1% 10.8% 7.0% 2.2% 0.7% 

1.9% 8.6% 0.0% 0.0% 1.6% 

32.4% 100.0% 9.5% 0.0% 0.2% 29.2% 

6.3% 1.4% 68.0% 69.1% 14.5% 

1.0% 0.0% 7.0% 5.9% 1.7% 

1.3% 1.5% 13.7% 4.3% 2.2% 

Other 

3.3% 1.2% 4.3% 18.2% 4.5% 

TOTAL OF PORTFOLIO 

*Guarantees representative of contingent liability 

84.5% 1.8% 0.4% 4.9% 8.4% 100.0% 

$ OF PORTFOLIO (MILLIONS) 

*Guarantees represent total value of loans 

289.3 24.4 9.8 66.8 115.6 505.9 

1. 

Source: Manitoba Agriculture Yearbook 2001 

21 


FINANCING OF THE CORPORATION 

Beginning in 1959-1960, its first full year of operation, the corporation borrowed its capital 

requirements from the Province of Manitoba. The capital funds at that time remained with the 

corporation to be reused for lending purposes and the interest charged on this debt was paid 

annually to the Province. 

In 1977, arrangements were made to repay these capital funds and the fixed interest charges 

over an amortization period as consistent as possible with the term over which these funds were 

loaned to farmers. Subsequent capital advance requirements and terms of repayment were 

determined annually based on the lending activity of the corporation for that year. 

FINANCIAL STATEMENTS 

BALANCE SHEET 

DEFICIT ACCOUNT 

1985-1986 brought about a change in the method of funding provided by the Province for the 

corporation's operations. This change eliminated any further funding of MACC’s allowance for 

impaired loans and required a return to the Province of funds provided for this allowance prior to 

March 31, 1985. 

Because of this funding change, the corporation continues to operate from an accumulated 

deficit position which is now $26,796,299. This is essentially the allowance for impaired loans 

total of $20,885,101 at March 31, 2003, less the reserve for working capital and other provisions 

in the amount of $5,911,198. 

STATEMENT OF REVENUE AND EXPENDITURE 

The net costs of operation of the corporation were $5,643,886 (expenditures of $27,836,787 

less revenue of $22,192,901) in 2002-2003 as compared with $5,657,978 (expenditures of 

$28,340,466 less revenue of $22,682,488) in the previous fiscal year. 

To offset these net costs of operation, the Province provided $4,944,276 ($4,659,030 from 

appropriations of Manitoba Agriculture and Food and $285,246 from Manitoba Finance 

valuation account) resulting in an operating excess of expenditures over revenue of $699,610 

for 2002-2003. 

22 


Unit 100 - 1525 First Street South 

Brandon, Manitoba R7A 7A1 

T 204.726.6850 F 204.726.6849 

July 4, 2003 

MANAGEMENT REPORT 

The accompanying financial statements are the responsibility of management and have been 

prepared in accordance with Canadian generally accepted accounting policies. In 

management’s opinion, the financial statements have been properly prepared and of 

necessity include some amounts based upon management’s best estimates and judgments. 

The financial information presented elsewhere in the Annual Report is consistent with that in 

the financial statements. 

As management is responsible for the integrity of the financial statements, management has 

established systems of internal control to provide assurance that reliable financial information 

is produced and assets are properly accounted for and safeguarded from loss. The Board of 

Directors, which oversees management’s responsibilities for financial reporting, reviews and 

approves the financial statements. The Board of Directors meets with management and the 

auditors to discuss the audit, financial reporting, and related matters. 

Charlene Kibbins Karen McEachen 

Acting, Chief Executive Officer 

Chief Financial Officer

The Manitoba Agricultural Credit Corporation 

Balance Sheet 

As at March 31, 2003 


$ (000s) 


$ (000s) 

Assets 

Cash (Note 3) $ 9,868 $ 12,645 

Receivables (Notes 2 and 6) 

Mortgages (Note 4) 269,753 275,809 

Other (Note 5) 14,093 19,254 

Long-term funding commitments – Province of Manitoba (Note 7) 5,581 5,346 

Real estate (Notes 2 and 12) 1,521 1,972 

$ 300,816 $ 315,026 

Liabilities and Deficit 

Accounts payable 

Unearned real estate revenue $ 12 $ 28 

Other 998 1,132 

Provision for Young Farmer Rebate 549 524 

Provision for losses on guaranteed loans (Notes 2 and 11) 9,075 7,899 

Provision for employee pension benefits (Notes 2 and 9) 5,352 5,117 

Advances from Province of Manitoba (Note 8) 311,627 326,423 

327,613 341,123 

Deficit 

Balance, beginning of year (26,097) (24,672) 

Excess of expenditure over revenue (700) (1,425) 

Balance, end of year (Note 17) (26,797) (26,097) 

$ 300,816 $ 315,026 

Contingent Liabilities (Note 11) 

APPROVED BY THE BOARD 

DIRECTOR 

DIRECTOR 

25 



Statement of Revenue and Expenditure 

for the year ended March 31, 2003 


$ (000s) 


$ (000s) 

Revenue 

Interest (Note 13) 

Mortgages $ 20,027 $ 20,509 

Other 940 

1,225 

Cash on deposit with Province of Manitoba 857 

574 

21,824 

22,308 

Province of Manitoba – Net Funding (Note 15) 5,179 

4,639 

Services donated by Province of Manitoba (Note 2) 72 

109 

Real estate (Note 10) 239 

188 

Change in provision for decline in real estate values (Note 12) 20 

35 

Other 38 

43 

27,372 

27,322 

Expenditure 

Administration costs 

Salaries and benefits (Note 2) 3,670 

4,064 

Impaired loan (recoveries) losses (Notes 2 and 6) (168) 

766 

Change in provision for losses on guaranteed loans (Notes 2 and 11) 1,419 

685 

Assistance under the Manitoba Farm Mediation Board Program 56 

95 

Young Farmer Rebate 1,854 

1,682 

Flood proofing initiative administration 89 

152 

Other administration costs 936 

1,037 

7,856 

8,481 

Financing charges 

Interest on advances from Province of Manitoba (Note 13) 20,216 

20,266 

28,072 

28,747 

Excess of expenditure over revenue 

$ 700 $ 

1,425 

26 



Statement of Cash Flows 

for the year ended March 31, 2003 


$ (000s) 


$ (000s) 

Cash Provided By (Used for) 

Operating activities 

Excess of expenditure over revenue $ (700) $ (1,425) 

Items not involving cash 

Change in provision for impaired loan losses (457) 423 

Gain on disposal of real estate (96) (18) 

Change in provision for decline in real estate value (20) (35) 

Change in provision for Young Farmer Rebate 25 13 

Change in provision for losses on guaranteed loans 1,176 1,037 

Change in provision for employee pension benefits 235 406 

Mortgage loans disbursed (35,169) (48,889) 

Mortgage principal received 41,304 42,763 

6,998 (4,300) 

Decrease (increase) in other receivables 5,020 (1,592) 

Decrease in mortgage receivables 284 376 

(Decrease) increase in accounts payable (150) 60 

5,154 (1,156) 

Cash provided by (used for) operating activities 11,452 (6,881) 

Investing activities 

Proceeds from real estate disposals 613 750 

Real estate acquisitions (46) (484) 

Cash provided by investing activities 567 266 

Financing activities 

Advances received from Province of Manitoba 42,000 81,800 

Advances repaid to Province of Manitoba (56,796) (69,922) 

Cash (used for) provided by financing activities (14,796) 11,878 

Net (decrease) increase in cash (2,777) 5,263 

Cash, beginning of year 12,645 7,382 

Cash, end of year $ 9,868 $ 12,645 

27 



Notes to the Financial Statements 


1. Nature of Operations 

The Manitoba Agricultural Credit Corporation was incorporated under The Agricultural Credit Corporation 

Act of Manitoba. Under this Act, the corporation provides and administers financial assistance to farmers 

to assist in the development of farms in Manitoba. 

2. Significant Accounting Policies 

a) Basis of Accounting 

The financial statements have been prepared by management in accordance with 

Canadian generally accepted accounting principles and include the following significant 

accounting policies: 

b) Allowances for Impaired Loans 

The allowances for impaired loans are determined annually by a review of individual accounts. 

The allowances represent management's best estimate of probable losses on receivables. 

Where circumstances indicate doubt as to the ultimate collectibility of principal or interest, 

specific allowances are established for individual accounts. These accounts are valued at the 

lower of their recorded value and the estimated net realizable value of the security held for the 

accounts. 

In addition to the allowances for impaired loans identified on an individual loan basis, the 

corporation establishes a further allowance for impaired loans. This additional allowance for loan 

impairment represents management’s best estimate of probable losses in its entire loan portfolio, 

due to potential future declines in the value of the real estate taken as the underlying security for 

these loans. 

Current year provisions for impaired loans are charged to administration expenditure as impaired 

loan losses. Actual accounts written off by Board resolution are charged to the allowances for 

impaired loans. 

c) Provision for Losses on Guaranteed Loans 

The provisions for losses on guaranteed loans are determined annually by a review of individual 

guarantees. The provisions represent management’s best estimate of probable claims against 

the guarantees. Where circumstances indicate the likelihood of claims arising, provisions are 

established for those loan guarantees. These provisions would cover principal, accrued and 

unpaid interest, and amounts recoverable. 

Current year provisions for losses on guaranteed loans are charged to administration 

expenditure. Actual claims paid are charged to the provisions for losses on guaranteed loans. 

Recoveries are credited against current year’s expenditure. 

28 





2. Significant Accounting Policies (continued) 

d) Real Estate Acquired in Settlement of Loans 

Real estate that is acquired in settlement of loans through foreclosures and voluntary transfers of 

title is recorded at the lower of the recorded value of the loan and the appraised value of the real 

estate at acquisition date. Subsequent declines or increases in estimated realizable value are 

not recorded. Real estate is stated net of a provision for decline in real estate value. 

e) Real Estate Under Long-Term Lease 

Real estate that was acquired under the land lease program for long-term leases is recorded at 

cost. 

f) Pension Plan 

Employees of the Corporation are pensionable under the Civil Service Superannuation Act. The 

Corporation accrues a provision for the liability for the employer’s share of employee pension 

benefits, including future cost of living adjustments, based on an actuarial valuation. The 

Corporation began to fund contributions for new employees beginning October 1, 2002. 

g) Financial Instruments 

Credit Risk 

The Corporation provides direct loans to its customers in the normal course of operations. It 

carries out, on a continuing basis, credit reviews on its customers and maintains provisions for 

contingent credit losses. 

Interest Rate Risk 

Interest rate risk is the risk to the company’s earnings that arises from fluctuations in interest 

rates, and the degree of volatility of these rates. During the year ended March 31, 2003, the 

Corporation did not utilize derivative financial instruments to reduce its exposure to interest rate 

risk. 

29 





2. Significant Accounting Policies (continued) 

g) Financial Instruments (continued) 

Fair Value of Financial Instruments 

Because of the relatively short period to maturity, short-term financial instruments are valued at 

cost and adjusted for any applicable allowance for doubtful accounts. This is considered to be 

equivalent to fair value and applies to cash, other receivables, long-term funding commitments, 

accounts payable, and accrued liabilities. Fair values of mortgages receivable and advances 

from the Province of Manitoba are disclosed in their respective notes. 

h) Donated Services 

The Province of Manitoba provides certain administrative services at no charge to the 

corporation. The estimated fair value of $72,100 for these services is included in salaries 

expenditure and donated services revenue in these financial statements. 

i) Measurement Uncertainty – Use of Estimates 

The preparation of financial statements in conformity with Canadian generally accepted 

accounting principles requires management to make estimates and assumptions that affect the 

reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the 

date of the financial statements and the reported amounts of revenues and expenses during the 

reporting period. Actual results could differ from those estimates. 

3. Cash 

2003 2002 

(000s) 

(000s) 

Cash on hand in bank $ 416 $ 265 

Cash on deposit with Province of Manitoba 9,452 12,380 

$ 9,868 $ 12,645 

30 





4. Mortgages Receivable 


(000s) 

(000s) 

Amounts are due over the following terms: 

1 year - Accrued interest $ 12,088 $ 12,134 

- Arrears 1,856 2,041 

- Prepayments (13,724) (12,617) 

- Regular instalments 24,457 23,516 

24,677 25,074 

2 years - Regular instalments 25,300 24,244 




Over 5 years - Regular instalments 161,224 169,647 

286,486 292,906 

Less: Allowance for impaired loans 16,733 17,097 

$ 269,753 $ 275,809 

The approximate fair value of mortgages receivable at March 31, 2003 is $276,821,000 (2002 - 

$279,403,000). Fair value is based on expected future cash flows discounted by rates equivalent to the 

market rates on loans with similar terms and credit risk. 

31 





4. Mortgages Receivable (continued) 

Terms of Mortgages Receivable 

Direct lending and special assistance program mortgages are fixed rate mortgages which have an average yield 

as follows: 

Direct 

Lending 

Mortgages 

(000s) 

Special 

Assistance 

Mortgages 

(000s) 

Total 

(000s) 

Less than 6.00% $ 11,964 $ 0 $ 

6.01% to 7.00% 111,658 23,337 

7.01% to 8.00% 118,070 1,955 

More than 8.00% 19,154 348 

$ 260,846 $ 25,640 $ 

11,964 

134,995 

120,025 

19,502 

286,486 

These mortgages have maturities as follows: 

Average 

Interest 

Rate 

Direct 

Lending 

Mortgages 

(000s) 

Special 

Assistance 

Mortgages 

(000s) 

Total 

(000s) 

1 to 4 years 7.782% $ 

14,029 $ 1,234 $ 

15,263 

5 to 9 years 7.070% 69,650 20,595 

10 to 14 years 7.146% 94,158 3,008 

15 to 19 years 7.238% 59,282 803 

20 to 24 years 7.476% 21,852 0 

More than 25 years 7.416% 

1,875 0 

$ 260,846 25,640 

90,245 

97,166 

60,085 

21,852 

1,875 

286,486 

32 





5. Other Receivables 


(000s) 

(000s) 

Stocker loan advances $ 15,193 $ 18,882 

Flood proofing loan initiative 2,505 3,859 

Lease revenue 58 80 

Miscellaneous 14 203 

17,770 23,024 

Less: Allowance for impaired loans 3,677 3,770 

$ 14,093 $ 19,254 

6. Allowances for Impaired Loans 


(000s) 

Provision 

(000s) 

Write-Offs 

(000s) 


(000s) 

Direct lending mortgages 

$ 

11,859 $ 540 $ 265 

$ 

11,584 

Special assistance mortgages 

4,874 (632) 7 

5,513 

16,733 (92) 272 

17,097 

Stocker loan advances 

2,632 29 13 

2,616 

Flood proofing loan initiative 

1,012 (100) 0 

1,112 

Other 

33 (5) 4 

42 

3,677 (76) 17 

3,770 

$ 

20,410 $ (168) $ 

289 

$ 

20,867 

7. Long-term Funding Commitments – Province of Manitoba 


(000s) 

(000s) 

Employee Severance $ 229 $ 229 

Employee Pension Benefits (Note 9) 

5,352 5,117 

$ 5,581 $ 5,346 

33 





8. Advances from Province of Manitoba 

In accordance with Province of Manitoba practices, the corporation must repay advances 

according to the amortization schedule or be subject to a prepayment penalty. The mark to 

market calculation for any principal prepayment will be the present value of the cash flows on 

the principal being repaid against the cash flows using a yield to maturity on the date of the 

payment compounded semi-annually that a non-callable Province of Manitoba Bond would 

carry, if issued in Canadian dollars in Canada, at 100% of its principal amount on the payment 

date with a term to maturity equal to the remaining term to maturity of the loan being repaid. 


(000s) 

(000s) 

Advances are repayable in equal annual blended 

instalments of principal and interest, with interest 

rates from 4.750% to 8.000%. Maturities of principal 

by fiscal year are as follows: 

2003 $ - $ 56,511 

2004 

47,891 28,097 

2005 30,014 27,604 

2006 30,316 27,783 

2007 30,950 28,288 

2008 26,304 23,507 

2009 through 2031 146,152 134,633 

$ 311,627 $ 

326,423 

The approximate fair value of advances from the Province of Manitoba at March 31, 2003 is 

$302,474,000 (2002 - $304,509,000). Fair values for the advances from the Province of Manitoba are 

based on the net present value of expected future cash flows, discounted by rates equivalent to the 

market rates on loans with similar terms and credit risk. 

9. Provision for Employee Pension Benefits 

Corporation employees are eligible for defined benefit pensions under The Manitoba Civil Service 

Superannuation Act. In accordance with the provisions of this Act, the corporation contributes 50% of 

the pension disbursements made to retired employees. 

Actuarial valuations are to be carried out every three years to provide an estimate of the accrued liability 

for unfunded pension benefits. The most recent actuarial valuation was performed as at December 31, 

2001. Based on the 2001 valuation for “Future Indexing”, the actuarial liability for unfunded pension 

benefits is estimated to be $5,351,288 at March 31, 2003 (2002 - $5,116,572). 

34 





10. Real Estate Revenue 

Proceeds 

Book Value 



(000s) 

(000s) 

(000s) 

(000s) 

Sales to lessees $ 277 $ 244 $ 33 $ 56 

Sales by public tender 336 273 63 (38) 

$ 613 $ 517 

Net gain on sale of real estate 96 18 

Lease revenue from real estate acquired 

in settlement of loans and from long-term leases 166 184 

Other revenue 0 2 

Interest revenue 3 15 

265 219 

Less: Real estate carrying costs 26 31 

$ 239 $ 188 

11. Contingent Liabilities 

a) The corporation introduced the Guaranteed Operating Loan Program beginning April 1, 1983. 

The corporation guarantees each participating lending institution 12 1/2% of the respective total 

value of loans made under this program. As of March 31, 2003, the corporation's contingent 

liability amounted to $9,627,779 (2002 - $9,615,631). Based on management's best estimate of 

probable losses, the corporation has made a provision for this contingency in the amount of 

$1,083,176 (2002 - $1,977,450). The corporation adjusts the provision to the level regarded by 

management as appropriate through a current provision charged or credited to administration 

expenditure for the year. 

b) The Manitoba Cattle Feeder Associations Loan Guarantee Program was introduced jointly by 

Manitoba Agriculture and Food and The Manitoba Agricultural Credit Corporation in November 

1991. In September 1997, The Manitoba Agricultural Credit Corporation assumed responsibility 

for administration of the program. For each association, the corporation provides a guarantee to 

the lending institutions, based on 25% of the amount of the loan to a maximum guarantee of 

$1,250,000. As of March 31, 2003 the corporation's contingent liability amounted to $6,096,324 

(2002 - $6,657,494). Based on management's best estimate of probable losses, a provision has 

been made for this contingency in the amount of $1,524,081 (2002 - $1,664,374). 

35 





11. Contingent Liabilities (continued) 

c) The Diversification Loan Guarantee Program was introduced in December 1995, to provide 

guarantees on loans made by participating lenders, for diversification or farm value-added 

activities. As at March 31, 2003, the corporation’s contingent liability under this program 

amounted to $16,701,431 (2002 - $17,785,514). Based on management’s best estimate of 

probable losses on this program, the corporation has established a provision in the amount of 

$2,505,213 (2002 - $2,667,826). 

d) The Enhanced Diversification Loan Guarantee Program (DLG+) was approved in 2001 

eliminating lender pooling of guarantees and the maximum of $3,000,000 for qualifying loans. As 

at March 31, 2003, the corporation’s contingent liability under the DLG+ program amounted to 

$28,889,337 (2002 - $10,595,163). Based on management’s best estimate of probable losses on 

this program, the corporation has established a provision in the amount of $3,962,987 (2002 - 

$1,589,273). 

e) The corporation has guaranteed performance bonds of certain agricultural marketing agencies in 

the amount of $250,270 (2002 - $248,422). No provision for this contingency has been made in 

the financial statements. Any payments arising from claims under these guarantees will be 

recorded as an expense in the period the claims occur. 

f) As at March 31, 2003 the corporation had approved but not disbursed mortgages and other loans 

in the amount of $11,863,107 (2002 - $16,868,220). 

12. Real Estate 

Based on a review of its current real estate portfolio, the corporation has established a provision of 

$18,000 for 2003 (2002 - $37,735) to provide for future declines in real estate values. This provision 

represents management’s best estimate of probable losses on sale of real estate. 


(000s) 

(000s) 

Real Estate $ 1,539 $ 2,010 

Provision for decline in real estate values 18 38 

$ 1,521 $ 1,972 

36 





13. Interest Paid and Received 

During the year, the corporation received interest of $21,941,666 (2002 - $22,808,060) and paid interest 

of $20,215,876 (2002 - $20,265,985). 

14. Related Party Transactions 

The corporation is related in terms of common ownership to all Province of Manitoba created 

departments, agencies and Crown corporations. The corporation enters into transactions with these 

entities in the normal course of business. 

15. Revenue – Province of Manitoba 


(000s) 

(000s) 

Grant $ 4,944 $ 4,233 

Increase in long-term funding commitment 235 406 

$ 5,179 $ 4,639 

16. Comparative Figures 

Certain 2002 figures have been reclassified to conform to the 2003 financial statement 

presentation. 

17. Economic Dependence 

The corporation is economically dependent on the Province of Manitoba. 

37 


MACC Field Offices 

Altona (Satellite) 

Ag Rep Office, 

Altona Mall 324-2810 

Arborg 

317 River Road 376-3305 

Ashern (Satellite) 

Ag Rep Office, Railway Street 768-2686 

Beausejour 

20-1 st Street S. 268-6016 

Brandon 

Unit 100 – 1525 1 st Street S. 726-6018 

Carman 

65-3 rd Avenue N.E. 745-5621 

Dauphin 

27-2 nd Avenue S.W. 622-2016 

Killarney 

411 Broadway Avenue 523-5270 

Lundar (Satellite) 

Ag Rep Office, Main Street 762-5649 

Melita 

139 Main Street 522-3443 

Morris 

229 Main Street S. 746-7506 

Neepawa 


Portage la Prairie 

2 nd Floor, 25 Tupper Street N. 239-3357 

Roblin 

117-2 nd Avenue N.W. 937-6470 

St. Pierre (Satellite) 

Municipal Building 433-7749 

Shoal Lake 

4 th Avenue E. 759-4064 

Steinbach 


Stonewall (Satellite) 


Swan River 

120-6 th Avenue N. 734-3172 

Teulon 


Treherne (Satellite) 

163 Smith Street E. 723-3232 

Virden 

247 Wellington W. 748-4779

MACC Annual Report 2002/03 - Manitoba Agricultural Services ...

Create successful ePaper yourself

Delete template?

Save as template?