2003 Annual Report
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Schedule B - Financial Statements Prepared by Deloitte & Touche LLP
The 1986-1990 Hepatitis C Fund
Auditors' Report
To the Joint Committee of the 1986-1990 Hepatitis C Fund
We have audited the statement of financial position of the
1986-1990 Hepatitis C Fund as at March 31, 2003 and the statement
of expenses and revenue for the year then ended. These financial
statements are the responsibility of the Joint Committee of
the Fund. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with Canadian generally
accepted auditing standards. Those standards require that
we 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 our opinion, these financial statements present fairly,
in all material respects, the financial position of the Fund
as at March 31, 2003 and the results of its operations and
its cash flows for the year then ended in accordance with
Canadian generally accepted accounting principles.
Chartered Accountants
May 9, 2003
Statement of Financial Position
as at March 31, 2003, Prepared by Deloitte & Touche LLP
The 1986-1990 HEPATITIS C FUND
|
|
2003
|
2002
|
|
|
ASSETS |
|
|
Cash |
$ 304 |
$ 270 |
Investments (Note 3) |
794,879 |
788,034 |
Contributions receivable |
2,325 |
1,476 |
Amounts to be recovered (Note 4) |
788 |
788 |
|
|
$ 798,296 |
$ 790,568 |
|
LIABILITIES |
|
|
Accounts payable and accrued liabilities |
1,020 $ |
1,408 $ |
Accrued claims in process of payment |
7,106 |
9,100 |
Funding held for future expenses (Note 5) |
790,170 |
780,060 |
|
|
$ 798,296 |
$ 790,568 |
APPROVED BY THE JOINT COMMITTEE OF THE 1986-1990 HEPATITIS
C FUND
Statement of Expenses and Revenue
as at March 31, 2003, Prepared by Deloitte & Touche LLP
|
2003
|
2002
|
|
|
EXPENSES |
|
|
Claims (Note 6) |
$ 90,018 |
$ 135,096 |
Operating (Note 7) |
7,905 |
9,413 |
Start-up costs (Note 8) |
- |
6,644 |
|
|
97,923 |
151,153 |
|
REVENUE |
97,923 |
151,153 |
|
EXCESS OF REVENUE OVER EXPENSES |
$ - |
$ - |
|
Notes to the Financial Statements Year Ended
March 31, 2003, Prepared by Deloitte & Touche LLP
1. DESCRIPTION OF THE FUND
The 1986-1990 Hepatitis C Fund (the "Fund") was established
to hold and invest funds and administer their payment as compensation
to claimants who qualify as class members, all pursuant to
the terms of the January 1, 1986 -July 1, 1990 Hepatitis C
Settlement Agreement (the "Agreement") made as of June 15,
1999 and the Judgments of the Supreme Court of British Columbia,
Superior Court of Justice for Ontario and Superior Court of
Quebec (the "Courts").
The maximum obligations to the Fund established as at January 10, 2000 were
$1.203 billion, shared between the Government of Canada (72.7273%) and the governments
of the provinces and territories (27.2727%), plus interest accruing thereafter
on the unpaid obligations. The Government of Canada has made contributions to
the Fund, which totally satisfy its obligation to the Fund. The provincial and
territorial governments are required to contribute as and when required for
payment of their share of expenses. Provinces and territories may elect to prepay
their contributions. To the extent provinces and territories do not prepay their
contributions, interest is calculated on their outstanding obligations at treasury
bill rates applied quarterly.
The operations of the Fund are subject to various reviews
and approvals by the Courts.
The Fund is a trust that is exempt from income tax under
the Income Tax Act.
2. ACCOUNTING POLICIES
The financial statements have been prepared in accordance
with Canadian generally accepted accounting principles and
include the following significant accounting policies:
Liabilities and funding for future payments
These financial statements do not present liabilities for
payments to be made to class members in future years nor the
related future funding requirements of provincial and territorial
governments.
Revenue recognition
The Fund follows the deferral method of accounting for contributions.
Revenue is recognized as expenses are incurred and shares
of such expenses are allocated to governments, as set out
in the Agreement. To the extent that contributions are paid
to the Fund in advance of expenses being incurred and allocated,
the contributions and the investment earnings thereon are
deferred and recorded as funding held for future expenses.
Accordingly, the funding held for future expenses includes:
- Funding contributed in payment of the Government of Canada
obligation;
- Contributions prepaid by provinces and territories, if
any; and
- Investment earnings for the period.
As expenses are incurred and allocated, amounts are deducted
from the balance of the funding held for future expenses and
are recognized as revenue.
Where provincial and territorial governments have not prepaid
contributions and expenses are allocated to them, such amounts
are requisitioned by the Fund and are recognized directly
as revenue of the Fund.
Claims
A claim is recognized as an expense in the period in which
the claim approval process has been completed.
Operating expenses
Operating expenses are recorded in the period in which they
are incurred. Operating expenses are subject to approval by
the Courts.
Investments
Investments are recorded at market value including interest
and dividend revenue receivable. Realized and unrealized gains
(losses) together with interest and dividend revenue are reported
as investment earnings and are deferred, pending their allocation
to pay expenses.
Foreign currency
Transactions denominated in foreign currencies are translated
into Canadian dollars at the rates of exchange prevailing
at the dates of the transactions. Investments and cash balances
denominated in foreign currencies are translated at the rates
in effect at year-end. Resulting gains or losses from changes
in these rates are included in investment earnings.
3. INVESTMENTS
|
2003
|
2002
|
Investments are
summarized as follows: |
Market Value |
Cost |
Market Value |
Cost |
|
|
|
(000's)
|
Cash |
$382 |
$382 |
$275 |
$275 |
Investment earnings receivable |
8,116 |
8,116 |
8,667 |
8,667 |
Fixed income |
721,215 |
608,124 |
692,211 |
654,015 |
Equities |
65,166 |
99,392 |
86,881 |
98,763 |
|
|
|
$794,879 |
$716,014 |
$788,034 |
$761,720 |
|
|
Determination of market values
Fixed income consists of debt obligations of governments
and corporate bodies paying interest at rates appropriate
to the market at the date of their purchase. Bonds are recorded
at prices based upon published market quotations. The fixed
income portfolio's sensitivity to a change in market rates
is represented by the duration of the portfolio. As at March
31, 2003, the average duration of the bonds and debentures
in the portfolio, weighted on market values, was 19 years.
Equities consist of pooled fund units. Pooled fund units
are valued at prices based on the market value of the underlying
securities held by the pooled funds.
Investment risk
Investment in financial instruments renders the Fund subject
to investment risks. These include the risks arising from
changes in interest rates, in rates of exchange for foreign
currency, and in equity markets both domestic and foreign.
They also include the risks arising from the failure of a
counterparty to a financial instrument to discharge an obligation
when it is due.
The Fund has adopted investment policies, standards and procedures
to control the amount of risk to which it is exposed. The
investment practices of the Fund are designed to avoid undue
risk of loss and impairment of assets and to provide a reasonable
expectation of fair return given the nature of the investments.
The maximum investment risk to the Fund is represented by
the market value of the investments.
a) Concentration risk
Concentration risk exists when a significant proportion of
the portfolio is invested in securities with similar characteristics
or subject to similar economic, political or other conditions.
The relative proportions of the types of investments, in the
portfolio are as follows:
|
2003
|
2002
|
|
% of Market Value |
% of Market Value |
Investment earnings receivable |
1 |
1 |
|
|
Fixed income |
|
|
Government of Canada |
79 |
73 |
Corporate |
4 |
6 |
Provinces of Canada |
2 |
4 |
Fixed income pooled fund units |
5 |
5 |
|
|
|
90 |
88 |
|
|
Equities |
|
|
Canadian |
|
|
Pooled fund Units |
5 |
6 |
Foreign |
|
|
U.S. pooled fund units |
2 |
2 |
International pooled fund units |
2 |
3 |
|
|
|
9 |
11 |
|
|
|
100 |
100 |
|
|
b) Foreign currency risk
Foreign currency exposure arises from the Fund's holdings
of non-Canadian denominated investments, as follows:
|
2003
|
2002
|
|
(000's) |
Equities |
|
|
U.S. pooled fund units |
$15,088 |
$21,569 |
International pooled fund units |
15,032 |
21,713 |
|
|
|
$30,120 |
$43,282 |
|
|
4. AMOUNTS TO BE RECOVERED
During the March 31 2002 fiscal year, the Administrator inadvertently
made payments to the estates of the persons who died prior
to January 1, 1999 in respect of loss of services and loss
of income in the period subsequent to their disability and
prior to the year of their death. Such payments are not permissible
under Section 5.01 of the Plan. The total amount of such payments
is $787,868 (2002-$787,868). The Administrator has agreed
to reimburse the Trust as follows:
|
(000's)
|
Current portion |
|
2004 |
$ 627 |
Long-term portion
|
|
2005 |
161 |
|
|
Total amount to be recovered
|
$ 788 |
|
|
5. FUNDING HELD FOR FUTURE EXPENSES
|
2003
|
2002
|
|
(000's) |
Balance beginning of year |
$ 780,060 |
$ 881,127 |
Changes during the year |
|
|
Investment earnings |
87,834 |
28,894 |
Amounts recognized as revenue |
(77,724) |
(129, 961) |
|
|
Balance end of year |
$ 790,170 |
$ 780,060 |
|
|
Comprised of: |
|
|
Funding contributed by Government of Canada |
$ 788,501 |
$ 771,985 |
Contributions prepaid by provincial governments |
1,669 |
8,075 |
|
|
|
$ 790,170 |
$ 780,060 |
|
|
6. CLAIMS
Claims recognized as expenses of the Fund during
the current year consist of the following:
|
2003
|
2002
|
|
(000's) |
Approved by the Administrator of the Fund |
|
|
Disbursed |
$ 91,532 |
$ 136,482 |
Net change in accrued claims in process of payment |
(1,994) |
(2,106) |
|
|
|
89,538 |
134,376 |
Approved by Court Order |
480 |
720 |
|
|
|
$ 90,018 |
$ 135,096 |
|
|
The claims include payments totalling $480,000 (2002 -$720,000)
for HIV secondary claimants. These amounts were approved by
Court Order and disbursed directly by Liberty Health.
In August 2002, the Courts instructed the Administrator to
release a $5,000 payment to all claimants who had previously
received payment( s), under section 4.01( 1)( b) of the Agreement,
between June 2000 and August 2002. As at March 31, 2003 these
payments totalled $14,685,287, of which $51,009 had not yet
been paid due to difficulties in contacting the claimants.
7. OPERATING EXPENSES
|
2003
|
2002
|
|
(000's) |
Administrator |
$ 4,130 |
$ 4,910 |
Legal (claims' appeal costs, fund counsel and joint committee) |
2,313 |
2,336 |
Traceback fees |
552 |
1,187 |
Investment management |
256 |
226 |
Custodial trustee |
102 |
104 |
Medical and other consulting |
126 |
405 |
Audit and related services |
121 |
101 |
Investment advisory |
- |
61 |
Actuarial |
305 |
83 |
|
|
|
$ 7,905 |
$ 9,413 |
|
|
Certain of the prior year's comparative figures have been
reclassified to conform with the current year's presentation.
8. START-UP COSTS
The $6,644,379 of start-up costs incurred during 2002 relate
to counsel fees for the Quebec class actions, which had not
been previously paid.
9. STATEMENT OF CASH FLOWS
A statement of cash flows has not been prepared as information
relating to cash flows is otherwise adequately disclosed.
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