Securities Law & Instruments

IN THE MATTER OF

ONTARIO SECURITIES COMMISSION

RULE 13-502 FEES

AND

IN THE MATTER OF

THE PROVINCE OF MANITOBA AND

THE MANITOBA HYDRO-ELECTRIC BOARD

 

ORDER

WHEREAS the Director has received an application from The Province of Manitoba (the Province) and its wholly owned Crown corporation, The Manitoba Hydro-Electric Board (Manitoba Hydro) for an order, pursuant to section 6.1 of OSC Rule 13-502 Fees (Fees Rule), that the requirement to pay a participation fee under section 2.2 of the Fees Rule shall not apply to the Province or Manitoba Hydro, subject to certain terms and conditions.

AND WHEREAS the Province and Manitoba Hydro have represented to the Director that:

1. The Province is formally described as The Crown in Right of the Province of Manitoba.

2. Manitoba Hydro is formally described as The Manitoba Hydro-Electric Board, a wholly-owned Crown corporation of the Province pursuant to The Manitoba Hydro Act, as amended by The Manitoba Hydro Amendment Act.

3. The Province and Manitoba Hydro have each been designated as a reporting issuer by The Manitoba Securities Commission (MSC) as of May 29, 2007.

4. The Province and Manitoba Hydro have been issuing either Manitoba Hydro Bonds or Manitoba Builder Bonds annually since 1989 (collectively, the Bonds). Bonds can only be sold to Manitoba residents in the first instance. Manitoba Hydro does not have any securities issued to the public except Manitoba Hydro Savings Bonds. Manitoba Builder Bonds are direct obligations of the Province and Manitoba Hydro Bonds are unconditionally guaranteed as to principal and interest by the Province.

5. All securities of the Province and Manitoba Hydro issued and outstanding in Canada, including the Bonds, are, at the time of issue, exempt securities which qualify pursuant to the exemption available in subsection 2.34(2) of National Instrument 45-106 Prospectus and Registration Exemption (NI 45-106).

6. The Bonds rank pari passu with all other debt issues of the Province of Manitoba. No Bonds other than those that rank pari passu will be issued in the future. The Bonds are currently rated based upon the long term debt rating assigned to the Province. Long term direct debt obligations of the Province or debt obligations guaranteed by the Province are rated as follows by the following rating agencies:

Standard & Poors:
"AA-"
Moody's:
"Aa1"
DBRS:
"A (high)"

7. Financial information concerning the Province and Manitoba Hydro is available as follows:

a. Disclosure sources for the Province, which includes budget information and the public accounts of the Province, are available at:

http://www.gov.mb.ca/finance/financialreports.html

b. and for Manitoba Hydro, which includes annual and interim financial statements, are available at:

http://www.hydro.mb.ca/corporate/financial.shtml
http://www.hydro.mb.ca/corporate/ar/archives.shtml and
http://www.hydro.mb.ca/corporate/qr/archives.shtml

8. The Province and Manitoba Hydro, responding in part to Manitoba based broker requests, wish to provide greater liquidity and transparency with respect to such Bonds and have agreed to list Bonds, and future issuances of such bonds, on the Canadian Trading and Quotation System (CNQ) to facilitate secondary trading of Bonds.

9. As a consequence of proceeding to list the Bonds on CNQ, the Province and Manitoba Hydro became reporting issuers, and, in the absence of relief, would be required to satisfy continuous disclosure and other requirements which apply to reporting issuers. As a consequence, the Province and Manitoba Hydro (i) applied to the MSC for deemed reporting issuer status in Manitoba, (ii) applied to the MSC and the Ontario Securities Commission (OSC) for relief under the Mutual Reliance Relief System for relief from the continuous reporting and other requirements imposed on reporting issuers, and (iii) applied to the OSC for an exemption from the requirement to pay participation fees, subject to conditions.

10. The securities for which the relief is sought are existing Bonds and future issues of such Bonds, listed on CNQ, and such Bonds will either be direct debt obligations of the Province (in the case of Manitoba Builder Bonds) or obligations guaranteed by the Province (in the case of Manitoba Hydro Bonds). The existing Bonds are as follows:

Bond Series

Bond Type

Maturity Date

 

Builder Bonds VII

Annual Fixed Rate

June 15, 2008

 

Builder Bonds VII

Compound Fixed Rate

June 15, 2008

 

Builder Bonds VII

Annual Floating Rate

June 15, 2008

 

Builder Bonds VIII

Annual Fixed Rate

June 15, 2009

 

Builder Bonds VIII

Compound Fixed Rate

June 15, 2009

 

Builder Bonds VIII

Annual Floating Rate

June 15, 2009

 

Builder Bonds IX

Annual Fixed Rate

June 15, 2008

 

Builder Bonds IX

Annual Fixed Rate

June 15, 2010

 

Builder Bonds IX

Compound Fixed Rate

June 15, 2010

 

Builder Bonds IX

Annual Floating Rate

June 15, 2010

 

Hydro Bonds 9

Annual Fixed Rate

June 15, 2009

 

Hydro Bonds 9

Annual Fixed Rate

June 15, 2011

 

Hydro Bonds 9

Compound Fixed Rate

June 15, 2011

 

Hydro Bonds 9

Annual Floating Rate

June 15, 2011

 

Hydro Bonds 10

Annual Fixed Rate

June 15, 2010

 

Hydro Bonds 10

Annual Fixed Rate

June 15, 2012

 

Hydro Bonds 10

Compound Fixed Rate

June 15, 2012

 

Hydro Bonds 10

Annual Floating Rate

June 15, 2012

11. The Bonds must maintain a minimum "investment grade" rating to continue being listed on CNQ, being the following or better:

Standard & Poors:
"BBB"
Moody's:
"Baa"
DBRS:
"BBB"

12. Except for the Bonds, which are listed on CNQ, none of the securities of The Province or Manitoba Hydro are listed or proposed to be listed on any stock exchange in Canada, except that in 2002 the Province issued promissory notes maturing August 8, 2007, whose performance was linked to the Standard and Poor Index (S&P Notes), listed those S&P Notes on the Toronto Stock Exchange and obtained a local order from the OSC designating the Province as a non-reporting issuer to comply with securities regulatory requirements at that time. The S&P Notes are still listed as at the date hereof.

13. In connection with the listing, the CNQ web site provides a "home" page for the Bond issues of the Province and Manitoba Hydro where web links, as described above, to the disclosure information for the Province and for Manitoba Hydro appear, and where the Bond ratings of the Province and Manitoba Hydro also appear. Changes in the debt rating of the Province will be reported on the Province of Manitoba "home" page on CNQ and the links to disclosure information on that same page will provide updated information about the Province and Manitoba Hydro as it becomes available.

14. Pursuant to the MRRS Decision Document dated July 16, 2007 (the July 16, 2007 Continuous Disclosure Exemption) granted to the Province and Manitoba Hydro by the MSC, as principal regulator, on behalf of itself and the OSC (collectively, the Decision Makers), the Decision Makers made a decision:

(i) under section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) that the requirements of NI 51-102 shall not apply to the Province and Manitoba Hydro;

(ii) under section 4.5 of Multilateral Instrument 52-109 -- Certification of Disclosure in Issuers' Annual and Interim Filings (MI 52-109) that the requirements of MI 52-109 shall not apply to the Province and Manitoba Hydro;

(iii) under section 8.1 of Multilateral Instrument 52-110 -- Audit Committees (MI 52-110) that the requirements of MI 52-110 shall not apply to the Province and Manitoba Hydro;

(iv) under section 3.1 of National Instrument 58-101 -- Disclosure of Corporate Governance Practices (NI 58-101) that the requirements of Part 2 of NI 58-101 shall not apply to the Province and Manitoba Hydro;

(v) under section 7.1 of National Instrument 13-101 -- System for Electronic Document and Analysis and Retrieval (SEDAR) do not apply to the Province and Manitoba Hydro; and

(vi) under the securities legislation of the Province of Ontario and the Province of Manitoba and under section 6.1 of National Instrument 55-102 -- System for Electronic Disclosure by Insiders that the insider reporting requirements of the securities legislation of the Province of Ontario and the Province of Manitoba and the requirement to file an insider profile do not apply to the Province and Manitoba Hydro;

subject to the conditions contained in that decision as follows:

(a) The Bonds are listed on CNQ and will not be listed on any other exchange except CNQ, and no other securities of the Province or Manitoba Hydro, apart from the Bonds and the S&P Notes , are to be listed on an exchange in Canada.

(b) Changes in the debt rating of the Province are reported on the Province of Manitoba "home" page on CNQ on a timely basis and the links to disclosure information on that same page are maintained to provide updated information about the Province and Manitoba Hydro as it becomes available.

(c) The Bonds are fully guaranteed by the Province and maintain a minimum "investment grade" rating as described in paragraph 11 of this Order.

(d) All future debt issued by the Province or Manitoba Hydro will rank pari passu or be subordinate to the Bonds.

(e) The Bonds and any other securities issued by the Province and Manitoba Hydro are or will be issued on a basis which is exempt from the prospectus requirements of the Legislation and only issued relying upon s. 2.34(2) of NI 45-106.

15. No continuous disclosure documents concerning the Province of Manitoba and Manitoba Hydro will be filed with the OSC unless the conditions in the Continuous Disclosure Exemption are not satisfied.

16. The Province of Manitoba and Manitoba Hydro would be required (but for this order) to pay participation fees under the Fees Rule.

THE ORDER of the Director under the Fees Rule is that the requirement to pay a participation fee under section 2.2 of the Fees Rule does not apply to the Province of Manitoba and Manitoba Hydro, for so long as:

(i) Manitoba Hydro continues to be a wholly owned Crown corporation of the Province of Manitoba pursuant to The Manitoba Hydro Act, as amended by The Manitoba Hydro Amendment Act.

(ii) the Province of Manitoba and Manitoba Hydro continue to satisfy all of the conditions contained in the July 16, 2007 Continuous Disclosure Exemption.

DATED July 24, 2007.

"Jo-Anne Matear"
Assistant Manager, Corporate Finance
Ontario Securities Commission