GOVERNMENT NOTICES

DEPARTMENT OF THE ENVIRONMENT

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

Notice is hereby given that, pursuant to section 127 of the Canadian Environmental Protection Act, 1999, Disposal at Sea Permit No. 4543-2-06569 authorizing the loading for disposal and the disposal of waste or other matter at sea is approved.

 1. Permittee: St. Anthony Sea Foods Limited Partnership, St. Anthony, Newfoundland and Labrador.

 2. Waste or other matter to be disposed of: Fish waste and other organic matter resulting from industrial fish-processing operations.

2.1. Nature of waste or other matter: Fish waste and other organic matter consisting of fish and shellfish waste.

 3. Duration of permit: Permit is valid from May 20, 2009, to May 19, 2010.

 4. Loading site(s): St. Anthony, Newfoundland and Labrador, at approximately 51°21.71′ N, 55°34.41′ W (NAD83).

 5. Disposal site(s): St. Anthony Disposal Site, 51°21.49′ N, 55°32.28′ W (NAD83), at an approximate depth of 80 m.

 6. Method of loading: The Permittee shall ensure that the material is loaded onto floating equipment complying with all applicable rules regarding safety and navigation and capable of containing all waste cargo during loading and transit to the approved disposal site.

6.1. The Permittee shall ensure that the waste to be disposed of is covered by netting or other material to prevent access by gulls and other marine birds, except during direct loading or disposal of the waste.

6.2. Material loaded for the purpose of disposal at sea may not be held aboard any ship for more than 96 hours from the commencement of loading without the written consent of an enforcement officer designated pursuant to subsection 217(1) of the Canadian Environmental Protection Act, 1999.

6.3. The loading and transit shall be completed in a manner that ensures that no material contaminates the marine environment, notably the harbour and adjacent beaches. The Permittee shall also ensure that the loading sites are cleaned up and, if necessary, that spilled wastes are recovered.

 7. Route to disposal site(s) and method of transport: Most direct navigational route from the loading site to the disposal site.

 8. Method of disposal: The Permittee shall ensure that the waste to be disposed of shall be discharged from the equipment or ship while steaming within the disposal site boundaries and in a manner which will promote dispersion.

 9. Total quantity to be disposed of: Not to exceed 6 000 tonnes.

10. Inspection: By accepting this permit, the Permittee and their contractors accept that they are subject to inspection pursuant to Part 10 of the Canadian Environmental Protection Act, 1999.

11. Contractors: The loading or disposal at sea referred to under this permit shall not be carried out by any person without written authorization from the Permittee.

11.1. The Permittee shall ensure that all contractors involved in the loading or disposal activity for which the permit is issued are made aware of the conditions identified in the permit and of possible consequences of any violation of these conditions.

12. Reporting and notification: The Permittee shall provide the following information at least 48 hours before loading and disposal activities commence: the expected period of loading and disposal activities. The above-noted information shall be submitted to Mr. Rick Wadman, Environmental Protection Operations Directorate, Environment Canada, 6 Bruce Street, Mount Pearl, Newfoundland and Labrador A1N 4T3, 709-772-5097 (fax), rick.wadman@ec.gc.ca (email).

12.1. The Permittee shall submit a written report to the Minister, as represented by the Regional Director of the Environmental Protection Operations Directorate, c/o Mr. Rick Wadman, as identified in paragraph 12, within 30 days of either the completion of the work or the expiry of the permit, whichever comes first. This report shall contain the following information: the quantity of matter disposed of at the disposal site and the dates on which disposal activities occurred.

12.2. This permit shall be displayed in an area of the plant accessible to the public.

I. R. GEOFFREY MERCER
Environmental Protection Operations Directorate
Atlantic Region
On behalf of the Minister of the Environment

[15-1-o]

BANK OF CANADA

FINANCIAL STATEMENTS (YEAR ENDED DECEMBER 31, 2008)

FINANCIAL REPORTING RESPONSIBILITY

The accompanying financial statements of the Bank of Canada have been prepared by management in accordance with Canadian generally accepted accounting principles and contain certain items that reflect best estimates and judgment of management. The integrity and reliability of the data in these financial statements are management’s responsibility. Management is responsible for ensuring that all information in the Annual Report is consistent with the financial statements.

In support of its responsibility for the integrity and reliability of these financial statements and for the accounting system from which they are derived, management has developed and maintains a system of internal controls to provide reasonable assurance that transactions are properly authorized and recorded, that financial information is reliable, that the assets are safeguarded and liabilities recognized, and that the operations are carried out effectively. The Bank has an internal Audit Department whose functions include reviewing internal controls, including accounting and financial controls and their application.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal controls and exercises this responsibility through the Audit and Finance Committee of the Board. The Audit and Finance Committee is composed of members who are neither officers nor employees of the Bank and who are financially literate. The Audit and Finance Committee is therefore qualified to review the Bank’s annual financial statements and to recommend their approval by the Board of Directors. The Audit and Finance Committee meets with management, the Chief Internal Auditor, and the Bank’s external auditors who are appointed by Order-in-Council. The Audit and Finance Committee has established processes to evaluate the independence of the Bank’s external auditors and reviews all services provided by them. The Audit and Finance Committee has a duty to review the adoption of, and changes in, accounting principles and procedures that have a material effect on the financial statements, and to review and assess key management judgments and estimates material to the reported financial information.

These financial statements have been audited by the Bank’s external auditors, Ernst & Young LLP and PricewaterhouseCoopers LLP, and their report is presented herein. The external auditors have full and unrestricted access to the Audit and Finance Committee to discuss their audit and related findings.

Ottawa, Canada, January 23, 2009

M. CARNEY
Governor

S. VOKEY, CA
Chief Accountant

AUDITORS’ REPORT

To the Minister of Finance, registered shareholder of the Bank of Canada (the “Bank”)

We have audited the balance sheet of the Bank as at December 31, 2008, and the statements of net income, comprehensive income, changes in capital, and cash flows for the year then ended. These financial statements are the responsibility of the Bank’s management. 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 Bank as at December 31, 2008, and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.

Ottawa, Canada, January 23, 2009

ERNST & YOUNG LLP
Chartered Accountants
Licensed Public Accountants

PRICEWATERHOUSECOOPERS LLP
Chartered Accountants
Licensed Public Accountants

BANK OF CANADA

Balance sheet

As at December 31 (Millions of dollars)

M. CARNEY
Governor

M. L. O’BRIEN, FCA
Chair, Audit and Finance Committee

S. VOKEY, CA
Chief Accountant

W. A. BLACK
Lead Director

On behalf of the Board

(See accompanying notes to the financial statements.)

BANK OF CANADA

Statement of net income

Year ended December 31 (Millions of dollars)

BANK OF CANADA

Statement of comprehensive income

Year ended December 31 (Millions of dollars)

(See accompanying notes to the financial statements.)

BANK OF CANADA

Statement of changes in capital

Year ended December 31 (Millions of dollars)

(See accompanying notes to the financial statements.)

BANK OF CANADA

Statement of cash flows

Year ended December 31 (Millions of dollars)

(See accompanying notes to the financial statements.)

BANK OF CANADA

Notes to the financial statements

Year ended December 31, 2008

(Amounts in the notes to the financial statements are in millions of Canadian dollars, unless otherwise stated.)

1. The business of the Bank

The Bank of Canada’s responsibilities focus on the goals of low and stable inflation, financial system stability, a safe and secure currency, and the efficient management of government funds and public debt. These responsibilities are carried out as part of the broad functions described below. Expenses in the Statement of net income are reported on the basis of these four corporate functions as derived through the Bank’s allocation model.

Monetary policy

Contributes to solid economic performance and rising living standards for Canadians by keeping inflation low, stable, and predictable.

Financial system

Promotes a safe, sound, and efficient financial system, both within Canada and internationally.

Currency

Designs, produces, and distributes Canada’s bank notes, focusing on counterfeit deterrence through research on security features, public education, and partnership with law enforcement; replaces and destroys worn notes.

Funds management

Provides high-quality, effective and efficient fundsmanagement services: for the Government of Canada, as its fiscal agent; for the Bank; and for other clients.

2. Significant accounting policies

The financial statements of the Bank are in accordance with Canadian generally accepted accounting principles (GAAP) and conform to the disclosure and accounting requirements of the Bank of Canada Act and the Bank’s bylaws. The significant accounting policies of the Bank are summarized as follows:

(a) Change in accounting policies

Effective January 1, 2008, and in accordance with standards issued by the Canadian Institute of Chartered Accountants (CICA), the Bank adopted the following new accounting standards:

Financial instruments – disclosure and presentation

CICA Handbook, Sections 3862, Financial Instruments – Disclosure, and 3863, Financial Instruments – Presentation replace Section 3861, Financial Instruments – Disclosure and Presentation. These new sections place increased emphasis on disclosures about the nature and extent of the risks arising from financial instruments and how the entity manages those risks (note 6).

Capital disclosures

CICA Handbook, Section 1535, Capital Disclosures, specifies the disclosure of (i) an entity’s objectives, policies, and processes for managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with any capital requirements; and (iv) if it has not complied, the consequences of such non-compliance (note 13).

Other significant changes to accounting standards

In October 2008, the CICA issued amendments to CICA Handbook Section 3855, Financial Instruments – Recognition and Measurement. The amendments permit, under specific circumstances, financial assets to be reclassified from held-for-trading to the available-for-sale classification or from available-for-sale to the loans and receivables classification. The amendments were effective August 1, 2008.

The Bank has not made any reclassifications permitted under these amendments.

(b) Use of estimates

The preparation of financial statements in accordance with Canadian GAAP requires management to make estimates and assumptions based on information available at the financial statement date. Actual results could differ from these estimates. These estimates are primarily in the area of pension and other employee future benefits.

(c) Revenue recognition

Interest revenue earned on treasury bills and bonds is recorded using the effective interest method. Dividend revenue on the Bank for International Settlements (BIS) shares is recorded as dividends are declared.

Realized gains on the sale of treasury bills of Canada are recorded at the time of sale as a reclassification from Other Comprehensive Income and are calculated as the excess of proceeds over the amortized cost.

Interest earned on securities purchased under resale agreements is recorded using the effective interest method.

Other revenue is comprised mostly of interest earned on advances to members of the Canadian Payments Association and is recorded using the effective interest method.

(d) Employee benefit plans

The Bank sponsors a number of defined-benefit plans that provide pension and other post-retirement and post-employment benefits to its eligible employees. The Bank accrues its obligations under these benefit plans and the related costs, net of plan assets. The costs and the obligations of the plans are actuarially determined using the projected benefit method and using management’s best estimate of the expected investment performance of the plans, salary escalation, retirement ages of employees, and expected health-care costs.

The benefit plan expense (income) for the year consists of the current service cost, the interest cost, the expected return on plan assets, and the amortization of unrecognized past service costs, actuarial losses (gains), as well as the transitional obligation (asset). Calculation of the expected return on assets for the year is based on the market value of plan assets using a market-related value approach. The market-related value of plan assets is determined using a methodology where the difference between the actual and expected return on the market value of plan assets is amortized over five years.

The excess of the net accumulated actuarial loss (gain) over 10% of the greater of the benefit obligation and the market-related value of plan assets is amortized over the expected average remaining service lifetime (EARSL) of plan members. Past service costs arising from plan amendments are deferred and amortized on a straight-line basis over the EARSL at the date of amendments.

On January 1, 2000, the Bank adopted the new accounting standard on employee future benefits using the prospective application method. The initial transitional balances are amortized on a straight-line basis over the EARSL, as at the date of adoption.

(e) Translation of foreign currencies

Investment income is translated at the rate in effect at the date of the transaction.

Assets and liabilities denominated in foreign currencies are translated to Canadian dollars at the rates of exchange prevailing at the balance sheet dates. The resulting gains and losses are included in Other revenue.

(f) Financial instruments

Financial instruments are measured at fair value on initial recognition. Subsequent to initial recognition, they are accounted for based on their classification. Transaction costs are expensed as incurred for all classes of financial instruments. The Bank accounts for all financial instruments using settlement date accounting.

Subsequent to initial recognition, financial assets classified as available-for-sale (AFS) are measured at fair value using quoted market prices or at cost if the instruments are not traded in an active market. Unrealized changes in values of AFS financial assets held at fair value are recognized in Other Comprehensive Income. The Bank’s financial assets designated as AFS consist of the Treasury bills of Canada and Other investments portfolios.

Subsequent to initial recognition, financial assets classified as held-to-maturity (HTM) are measured at amortized cost using the effective interest method. The Government of Canada bonds portfolio is classified as HTM.

All other financial assets, excluding cash and foreign deposits, are classified as loans and receivables. Subsequent to initial recognition, these are measured at amortized cost using the effective interest method of amortization.

The Bank has not classified any of its financial assets as held-for-trading.

All financial assets, other than treasury bills of Canada, are measured at the lower of cost or net recoverable amount.

Subsequent to initial recognition, financial liabilities are measured at amortized cost using the effective interest method, with the exception of bank notes in circulation, which are measured at face value.

The Bank has not classified any of its financial liabilities as held-for-trading.

The transition adjustment to retained earnings in the Statement of changes in capital reflects the impact of the adoption of CICA Handbook Section 3855, Financial Instruments – Recognition and Measurement on January 1, 2007. The transition adjustment relates to the adoption of the effective interest method for the bond portfolio, and the remeasurement of assets classified as available-for-sale. The adoption of the effective interest method for the bond portfolio resulted in an increase of $26.6 million to their amortized cost at January 1, 2007. Adjustments arising from the remeasurement of financial assets classified as available-for-sale resulted in an increase to Accumulated Other Comprehensive Income of $2.0 million at January 1, 2007.

(g) Securities Lending Program

The Bank operates a Securities Lending Program to support the liquidity of Government of Canada securities by providing a secondary and temporary source of these securities to the market. These securities-lending transactions are fully collateralized by securities and are generally one business day in duration. The securities loaned continue to be accounted for as investment assets. Lending fees charged by the Bank on these transactions are included in Other revenue at the maturity date of the transaction.

(h) Property and equipment

Property and equipment consists of land, buildings, computer hardware/software, other equipment, and projects in progress. Property and equipment is recorded at cost less accumulated amortization except for land, which is recorded at cost and projects in progress, which are recorded at cost but not amortized until the asset is put into service. Amortization is calculated using the straight-line method and is applied over the estimated useful lives of the assets, as shown below.

When completed, projects in progress are classified according to the above categories.

(i) Securities purchased under resale agreements

Securities purchased under resale agreements are reverse repo-type transactions in which the Bank purchases securities from designated counterparties with an agreement to sell them back at a predetermined price on an agreed transaction date. For accounting purposes, these agreements are treated as collateralized lending transactions and are recorded on the balance sheet at the amounts at which the securities were originally acquired plus accrued interest.

(j) Securities sold under repurchase agreements

Securities sold under repurchase agreements are repo-type transactions in which the Bank sells Government of Canada securities to designated counterparties with an agreement to buy them back at a predetermined price on an agreed transaction date. For accounting purposes, these agreements are treated as collateralized borrowing transactions and are recorded on the balance sheet at the amounts at which the securities were originally sold plus accrued interest.

(k) Cash and foreign deposits

Cash and foreign deposits comprises cash on hand as well as highly liquid demand deposits in foreign currencies with other central banks or international institutions.

(l) Future accounting changes

Intangible Assets

In October 2008, the CICA issued Handbook Section 3064, Goodwill and Intangible Assets, replacing Section 3062 of the same name and Section 3450, Research and Development Costs. This new standard provides guidance for the identification, recognition, and measurement of externally acquired or internally developed intangible assets and requires separate disclosure thereon. The standard is effective for the Bank as of January 1, 2009. The Bank does not expect the new standard to have a significant impact on its financial statements.

International Financial Reporting Standards (IFRS)

In March 2008, the Canadian Accounting Standards Board confirmed its decision to require all publicly accountable enterprises to report under IFRS for years beginning on or after January 1, 2011. As a publicly accountable enterprise, the Bank will be required to report under IFRS commencing with the year ended December 31, 2011, and will be required to restate its 2010 comparative figures to be compliant with IFRS.

The Bank is currently undertaking a comprehensive evaluation of the impact of these new standards on the recognition, measurement, presentation, and disclosure of financial statement items.

3. Cash and foreign deposits

Included in Cash and foreign deposits is CAN$108.3 million (CAN$2.1 million in 2007) of U.S. dollars.

4. Loans and receivables

Loans and receivables are comprised primarily of securities purchased under resale agreements and advances to members of the Canadian Payments Association. In 2008, the Bank provided exceptional term liquidity to the Canadian financial system through both of these instruments. These transactions are fully collateralized in accordance with publicly disclosed collateral eligibility and margin requirements. Financial risks related to these instruments are discussed in note 6.

(a) Securities purchased under resale agreements

Balances outstanding at December 31 are comprised of agreements with original terms to maturity ranging from 28 to 91 days. (Balances outstanding at December 31, 2007, are comprised of agreements with original terms to maturity of 28 days.) Securities purchased under resale agreements for terms of longer than one business day are acquired through an auction process. Details of these auctions are announced by the Bank in advance. Bids are submitted on a yield basis, and funds are allocated in descending order of bid yields.

(b) Advances to members of the Canadian Payments Association

Advances to members of the Canadian Payments Association are comprised of liquidity loans made under the Bank’s standing liquidity facility as well as term advances made under the Bank’s commitment to provide term liquidity to the Canadian financial system.

Term advances, which comprise $1,901.6 million ($nil in 2007) of the outstanding balance, have terms to maturity of 28 days. Term advances are extended through an auction process with a minimum bid yield of the Bank Rate.

The remaining balance of $0.7 million ($1.5 million in 2007) are advances maturing the next business day. Interest on overnight advances is calculated at the Bank Rate.

5. Investments

There were no securities loaned under the Securities Lending Program at December 31, 2008 ($nil in 2007).

Comprising Other investments, the Bank holds 9 441 shares in the BIS in order to participate in the BIS and in international initiatives generally. Ownership of the BIS shares is limited to central banks, and new shares can only be acquired following an invitation to subscribe extended by the BIS Board of Directors. The shares are non-transferable unless prior written consent is obtained from the BIS.

Financial risks relating to these financial instruments are discussed in note 6.

6. Financial instruments and risk

The Bank’s financial instruments consist of cash and foreign deposits, securities purchased under resale agreements, advances to members of the Canadian Payments Association, other receivables, investments, bank notes in circulation, deposits, and other liabilities (net of post-employment and post-retirement obligations).

Fair values of financial instruments

Fair values of securities purchased under resale agreements are determined using market yields-to-maturity for similar instruments available at the balance sheet date.

Fair values of treasury bills of Canada and Government of Canada bonds are based on quoted market prices.

The calculation of fair value for BIS shares (Other investments) is based on recent share issues and is estimated as being 70% of the Bank’s interest in the BIS shareholders’ equity. BIS shares are classified as AFS but are carried at cost since they do not have a quoted market value in an active market.

The amortized cost of cash and foreign deposits, advances to members of the Canadian Payments Association, other receivables, deposits, and other financial liabilities (which is composed of other liabilities, excluding the portion representing accrued post-retirement and post-employment benefits liabilities as described in note 12) approximates fair value, given their short-term nature. The face value of bank notes in circulation is equal to their fair value.

The fair values of financial assets and liabilities are presented in the following table:

Financial Risk

The Bank is exposed to credit risk, market risk, and liquidity risk as a result of holding financial instruments. The following is a description of those risks and how the Bank manages its exposure to them.

(a) Credit risk

Credit risk is the risk that a counterparty to a financial contract will fail to discharge its obligations in accordance with agreed-upon terms.

The Bank is exposed to credit risk through its investment portfolio, advances to members of the Canadian Payments Association, and through market transactions conducted in the form of securities purchased under resale agreements and loans of securities. The maximum exposure to credit risk is estimated to be the carrying value of the items listed above. There are no past due or impaired amounts.

Advances to members of the Canadian Payments Association and securities purchased under resale agreements are fully collateralized loans. Collateral is taken in accordance with the Bank’s publicly disclosed eligibility criteria and margin requirements accessible on its Web site. In the unlikely event of a counterparty default, collateral can be liquidated to offset credit exposure. The credit quality of collateral is managed through a set of restrictions based on asset type, term to maturity, and the credit ratings of the securities pledged.

Term advances to members of the Canadian Payments Association are fully collateralized with non-mortgage-loan portfolios.

Concentration of credit risk

The Bank’s investment portfolio, representing 52% of the carrying value of its total assets, is essentially free of credit risk because the securities held are primarily direct obligations of the Government of Canada. The Bank’s advances to members of the Canadian Payments Association and securities purchased under resale agreements, representing 45% of the carrying value of its total assets, are collateralized obligations of various Canadian-based financial institutions.

The fair value of collateral pledged against securities purchased under resale agreements at the balance sheet date is $37,753.5 million, representing 107% of the amortized cost of $35,326.9 million.

Collateral is concentrated in the following major categories:

(b) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk, and other price risk.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Bank’s investment in treasury bills and bonds acts as a counterpart to the non-interest-bearing bank notes in circulation liability, and supports the Bank’s operational independence to conduct monetary policy. These assets are acquired in proportions to broadly resemble the structure of the Government of Canada’s domestic debt outstanding to reduce interest rate risk from the perspective of the Government of Canada.

The Bank’s exposure to fair-value interest rate risk arises principally through its investment in treasury bills. Fair-value interest rate risk also arises with Government of Canada deposits and other deposits. All of the aforementioned instruments are short-term in duration. The fair value of the treasury bills of Canada portfolio held by the Bank is exposed to fluctuations owing to changes in market interest rates since these securities are classified as AFS and measured at fair value. Unrealized gains and losses on the treasury bills of Canada portfolio are recognized in Accumulated Other Comprehensive Income in the Capital section of the balance sheet until they mature or are sold. All other financial assets or liabilities are carried at amortized cost or at face value.

The figures below show the effect at December 31, 2008, of an (increase)/decrease of 25 basis points in interest rates on the fair value of the treasury bill portfolio and other comprehensive income:

The Bank’s exposure to interest rate risk in the form of fluctuations in future cash flows of existing financial instruments is limited to Government of Canada deposits and cash and foreign deposits, since these instruments are subject to variable interest rates. The remainder of the Bank’s financial assets and liabilities have either fixed interest rates or are non-interest-bearing.

For all financial instruments, except bank notes in circulation, future cash flows of the Bank are dependent on the prevailing market rate of interest at the time of renewal.

The following table illustrates interest rate risk relative to future cash flows by considering the expected maturity or repricing dates of existing financial assets and liabilities.

As at December 31, 2008

¹ Carrying amounts of Government of Canada bonds include accrued interest.

The Bank’s revenue will vary over time in response to future movements in interest rates; these variations would not affect the ability of the Bank to fulfill its obligations since its revenues greatly exceed its expenses.

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

At the balance sheet date, the Bank holds CAN$108.3 million in U.S. dollars. This balance is offset by an equivalent U.S.-dollar-denominated deposit liability. Given the small size of the net foreign currency exposure compared with the total assets of the Bank, currency risk is not considered material.

Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from changes in interest and exchange rates), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Bank is not exposed to significant other price risk.

(c) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities. As shown in the following table, the Bank’s largest liability is Bank notes in circulation. As a counterpart to this non-interest-bearing liability with no fixed maturity, the Bank holds a portfolio of highly liquid, interest-bearing securities. In the event of an unexpected redemption of bank notes, the Bank has the ability to settle the obligation by selling its assets.

As the central bank, the Bank is the ultimate source of liquid funds to the Canadian financial system, and has the power and operational ability to create Canadian-dollar liquidity in unlimited amounts at any time. This power is exercised within the Bank’s commitment to keep inflation low, stable, and predictable.

The following table presents a maturity analysis for the Bank’s financial assets and liabilities. The balances in this table do not correspond to the balances in the Balance Sheet, since the table presents all cash flows on an undiscounted basis.

As at December 31, 2008

¹ Interest payments on Government of Canada bonds are classified according to their coupon date.

In the table above, liabilities with no fixed maturity include Bank notes in circulation and Government of Canada Deposits. Historical experience has shown that bank notes in circulation provide a stable source of long-term funding for the Bank. Government of Canada Deposits are comprised of deposits held in the Bank’s capacity as the Government of Canada’s fiscal agent, as well as funds advanced to the Bank to support the provision of exceptional liquidity to the Canadian financial system.

7. Property and equipment

Projects in progress in 2008 consist primarily of investments in the Analytic Environment Program ($5.3 million; $nil in 2007) and upgrades to bank-note-processing equipment ($1.9 million; $1.8 million in 2007). The High Availability project in progress at December 31, 2007, was completed during the year.

During the year, the Bank’s work in preparation for the Canadian Payments Association’s Truncation and Electronic Cheque Presentment initiative, which was in progress at December 31, 2007, was terminated prior to completion. The Bank’s decision to terminate this work reflects the Canadian Payments Association’s conclusion that anticipated enhancements to efficiency could not be fully realized. Accumulated project costs to the date of ter-mination, totalling $2.4 million, were written off and included in Funds management on the statement of net income.

The net carrying amount of property and equipment is reviewed when events or changes in circumstances indicate that future benefits may no longer be reasonably assured, and is adjusted if required. No such adjustments, except as noted above, were recorded during the years ended December 31, 2008, and December 31, 2007.

8. Other assets

Other assets include the pension accrued benefit asset of $53.3 million ($59.1 million in 2007) and other items related to the administrative functions of the Bank.

9. Bank notes in circulation

In accordance with the Bank of Canada Act, the Bank has the sole authority to issue bank notes for circulation in Canada. A breakdown by denomination is presented below.

Other bank notes include denominations that are no longer issued but remain as legal tender.

10.Deposits

The liabilities within this category primarily consist of CAN$97.3 million ($nil in 2007) in U.S.-dollar demand deposits and $24,315.9 million in Canadian-dollar demand deposits ($2,981.1 million in 2007). The Bank pays interest on the deposits for the Government of Canada, banks, and other financial institutions at market-related rates. Interest paid on deposits is included in the Statement of net income.

11. Other liabilities

This category primarily includes accrued post-retirement and post-employment benefits liabilities of $125.2 million ($110.5 million in 2007), an accrued transfer payment to the Receiver General for Canada of $52.2 million ($36.0 million in 2007), accounts payable and accrued liabilities of $48.4 million ($34.5 million in 2007), and payroll liabilities of $0.3 million ($11.0 million in 2007).

12. Employee benefit plans

The Bank sponsors a number of defined-benefit plans that provide pension and other post-retirement and post-employment benefits to its eligible employees.

The pension plans provide benefits under a Registered Pension Plan and a Supplementary Pension Arrangement. The pension calculation is based mainly on years of service and average pensionable income and is generally applicable from the first day of employment. The pension is indexed to reflect changes in the consumer price index on the date payments begin and each January 1, thereafter.

The Bank sponsors post-retirement health, dental, and life insurance benefits, as well as post-employment self-insured long-term disability and continuation of benefits to disabled employees. The Bank also sponsors a long-service benefit program for employees hired before January 1, 2003.

The Bank measures its accrued benefits obligations and fair value of plan assets for accounting purposes as at December 31 of each year. The most recent actuarial valuation for funding purposes of the Registered Pension Plan was done as of January 1, 2008, and the next required valuation will be as of January 1, 2011.

The total cash payment for employee future benefits for 2008 was $13.8 million ($10.7 million in 2007), consisting of $7.2 million ($4.4 million in 2007) in cash contributed by the Bank to its funded pension plans and $6.6 million ($6.3 million in 2007) in cash payments directly to beneficiaries for its unfunded other benefits plans.

Information about the employee benefit plans is presented in the tables below.

Plan assets, benefit obligation, and plan status

¹ For the Supplementary Pension Arrangement, in which the accrued benefit obligation exceeds plan assets, the accrued benefit obligation and fair value of plan assets totalled $71.0 million ($54.1 million in 2007) and $40.3 million ($37.5 million in 2007), respectively.

² The assets of the pension benefit plans were composed as follows: 52%equities; 28% bonds; 6% real return Government of Canada bonds; 4% other real return investments; 6% real estate assets; and 4% short-term securities and cash (55%, 28%, 6%, 2%, 5%, and 4%, respectively, in 2007).

The accrued benefit asset for the defined-benefit pension plans is included in the balance sheet category, Other assets. The accrued benefit liability for the other benefits plans is included in the balance sheet category, Other liabilities.

Benefit plan expense

Significant assumptions

The significant assumptions used are as follows (on a weighted-average basis).

13. Capital

The Bank’s objective in managing its capital is compliance with the externally imposed capital requirements of the Bank of Canada Act, which are outlined below. Capital is composed of share capital, a statutory reserve, a special reserve, retained earnings, and accumulated other comprehensive income. The Bank is not in violation of any externally imposed capital requirements at the balance sheet date.

Share capital

The authorized capital of the Bank is $5.0 million divided into 100 000 shares with a par value of $50 each. The shares are fully paid and have been issued to the Minister of Finance, who is holding them on behalf of the Government of Canada.

Statutory reserve

The statutory reserve was accumulated out of net income until it reached the stipulated maximum amount of $25.0 million in 1955.

Special reserve

The special reserve was created in 2007 further to an amendment to the Bank of Canada Act to offset potential unrealized valuation losses due to changes in fair value of the Bank’s available-for-sale portfolio. The amount held in the special reserve is reviewed regularly for appropriateness using Value-at-Risk analysis and scenario-based stress tests and may be amended, pursuant to a resolution passed by the Board of Directors. The Value-at-Risk analysis uses historical data to estimate the maximum possible extent of unrealized valuation losses of the Bank’s Treasury bill portfolio. The scenario-based stress tests assess the impact of a rapid increase in interest rates on the value of the Bank’s Treasury bill portfolio. This reserve is subject to a ceiling of $400 million; an initial amount of $100 million was established in September 2007.

Retained earnings

The Bank does not hold retained earnings. The net income of the Bank, less any allocation to reserves, is remitted to the Receiver General for Canada.

Accumulated other comprehensive income

Accumulated other comprehensive income records and tracks unrealized valuation gains and losses on the Bank’s available-for-sale portfolio, excluding BIS shares, which are recorded at cost.

14. Expense by class of expenditure

The recovery of the cost of retail debt services from the Government of Canada’s Department of Finance was discontinued as of January 1, 2008. Other recoveries represent the amounts charged by the Bank for rental of premises, sales of optical security materials, and fees for a variety of other services.

In 2007, the Bank began restructuring its information technology organization in order to optimize processes and enhance the delivery of services, and recorded an expense of $5.1 million in special termination benefits related to this activity. This restructuring initiative commenced in late 2007 and was completed in the current year. No adjustments to these costs are considered necessary.

15. Commitments, contingencies, and guarantees

(a) Operations

The Bank has a long-term contract with an outside service provider for retail debt services, expiring in 2021. At December 31, 2008, fixed payments totalling $248.1 million remained, plus a variable component based on the volume of transactions.

The Bank occupies leased premises in Halifax, Montréal, Toronto, Calgary, and Vancouver. At December 31, 2008, the future minimum payments are $8.0 million for rent, real estate taxes, and building operations. The expiry dates vary for each lease, from August 2009 to September 2018.

Minimum annual payments for long-term commitments

(b) Foreign currency contracts

The Bank is a counterparty to several foreign currency swap facilities as follows:

The US$30 billion facility with the Federal Reserve Bank of New York expires on April 30, 2009. The other facilities have indefinite terms and are subject to annual renewal.

The Bank is also party to a standing foreign currency swap facility with the Exchange Fund Account of Canada. There is no stated maximum amount under this agreement. This swap facility was not used in 2008 or 2007.

These swap facilities were not used in 2008 or 2007 and, therefore, there were no related commitments at December 31, 2008.

(c) Contingency

The 9,441 shares in the BIS have a nominal value of 5,000 special drawing rights (SDRs) per share, of which 25%, i.e. SDR1,250, is paid up. The balance of SDR3,750 is callable at three months’ notice by decision of the BIS Board of Directors. The Canadian equivalent of this contingent liability was $66.8 million at December 31, 2008, based on prevailing exchange rates.

(d) Legal proceedings

In 2004, legal proceedings were initiated against the Bank relating to the Bank of Canada Registered Pension Plan. Since the Bank’s legal counsel is of the view that the plaintiff’s claims for compensation do not have a sound legal basis, management does not expect the outcome of the proceedings to have a material effect on the financial position or operations of the Bank.

(e) Guarantees

In the normal course of operations, the Bank enters into certain guarantees, which are described below.

Large Value Transfer System (LVTS) Guarantee

The LVTS is a large-value payment system, owned and operated by the CPA. The system’s risk-control features, which include caps on net debit positions and collateral to secure the use of overdraft credit, are sufficient to permit the system to obtain the necessary liquidity to settle in the event of the failure of the single LVTS participant having the largest possible net amount owing. The Bank guarantees to provide this liquidity, and in the event of the single participant failure, the liquidity loan will be fully collateralized. In the extremely unlikely event that there were defaults by more than one participant during the LVTS operating day, in an aggregate amount in excess of the largest possible net amount owing by a single participant, there would not likely be enough collateral to secure the amount of liquidity that the Bank would need to provide to settle the system. This might result in the Bank having unsecured claims on the defaulting participants in excess of the amount of collateral pledged to the Bank to cover the liquidity loans. The Bank would have the right, as an unsecured creditor, to recover any amount of its liquidity loan that was unpaid. The amount potentially at risk under this guarantee is not determinable, since the guarantee would be called upon only if a series of extremely low-probability events were to occur. No amount has ever been provided for in the liabilities of the Bank, and no amount has ever been paid under this guarantee.

Other indemnification agreements

In the normal course of operations, the Bank provides indemnification agreements with various counterparties in transactions such as service agreements, software licences, leases, and purchases of goods. Under these agreements, the Bank agrees to indemnify the counterparty against loss or liability arising from acts or omissions of the Bank in relation to the agreement. The nature of the indemnification agreements prevents the Bank from making a reasonable estimate of the maximum potential amount that the Bank would be required to pay such counterparties.

(f) Insurance

The Bank does not insure against direct risks of loss to the Bank, except for potential liabilities to third parties and where there are legal or contractual obligations to carry insurance. Any costs arising from risks not insured are recorded in the accounts at the time they can be reasonably estimated.

16. Related party transactions

The Bank is related in terms of common ownership to all Government of Canada departments, agencies, and Crown corporations. To achieve its monetary policy objectives, the Bank maintains a position of structural and functional independence from the Government of Canada through its ability to fund its own operations without external assistance and through its management and governance structures.

All related party transactions are recorded at their exchange amounts, which is the amount of consideration established and agreed upon by the related parties. Related party transactions with the Government of Canada are disclosed as part of the financial statements or the relevant notes.

17. Comparative figures

Certain comparative figures for 2007 have been reclassified to conform to the current year’s presentation.

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DEPARTMENT OF HEALTH

FOOD AND DRUGS ACT

Notice of Intent — Food and Drug Regulations — Project No. 1594 — Schedule F

This revised Notice of Intent (NOI) is to provide an opportunity for comment on the proposal to amend Part I of Schedule F to the Food and Drug Regulations to revise the listing for fluconazole to allow nonprescription status for fluconazole 150 mg for oral use for the treatment of vaginal candidiasis.

An initial NOI was published in the Canada Gazette, Part I, on January 10, 2009, that requires modification. The January 10, 2009, NOI stated that the amendment would come into force on the date of registration. As there are multiple manufacturers of products containing fluconazole 150 mg for the treatment of vaginal candidiasis, a coming into force at a date later than the date of publication of the amendment in the Canada Gazette, Part II, is needed to allow these manufacturers the opportunity to have nonprescription labelling approved for their products. This revised NOI reflects these considerations.

Fluconazole is currently listed in Part I of Schedule F without any qualifying phrases or exceptions. This means that all strengths of fluconazole currently require a prescription in order to be sold in Canada.

Schedule F is a list of medicinal ingredients, the sale of which is controlled under sections C.01.041 to C.01.049 of the Food and Drug Regulations. Part I of Schedule F lists ingredients that require a prescription for human use and for veterinary use. Part II of Schedule F lists ingredients that require a prescription for human use, but do not require a prescription for veterinary use if so labelled or if in a form unsuitable for human use.

Description

Fluconazole is a triazole antifungal agent indicated for the treatment of vaginal yeast infections due to Candida. Vaginal candidiasis is a common vaginal yeast infection affecting many women. The proposed nonprescription fluconazole 150 mg would have exactly the same indications for use as the currently available prescription fluconazole 150 mg. Single-dose orally administered fluconazole 150 mg has been available in Canada as a prescription drug for treatment of vaginal candidiasis since 1994.

A number of related antifungal products (e.g. clotrimazole, miconazole) that are administered vaginally have been available in Canada without a prescription since 1993. The risk/benefit profile of single-dose orally administered fluconazole 150 mg is comparable to that of nonprescription vaginally administered antifungal products. As with the labelling of the nonprescription vaginally administered antifungal products, labelling for the proposed nonprescription fluconazole 150 mg will advise women experiencing a first vaginal infection to see their doctor to confirm the diagnosis of a yeast infection. Similarly, the product labelling for the proposed nonprescription fluconazole 150 mg will include a list of symptoms that are not associated with yeast infections; patients will be advised to contact their physician immediately if any of these symptoms are present.

Alternatives

The alternative option would be to leave fluconazole on Schedule F for all dosages and conditions of use. As measured against the factors for listing drugs in Schedule F, it has been determined that maintaining fluconazole in Schedule F for all strengths and conditions of use is not appropriate.

Single-dose orally administered fluconazole 150 mg is intended to be used as a stand-alone therapeutic. No adjunctive therapy with scheduled drugs or routine laboratory monitoring are required for the safe use of this drug.

Post-marketing experience has shown that single-dose orally administered fluconazole 150 mg is not associated with significant adverse effects. There are no dose-related or age-related adverse effects, no special populations at risk and no clinically significant drug or food interactions. In addition to its large safety margin, side effects associated with the use of single-dose orally administered fluconazole 150 mg are minor and transient in nature, with incidence and severity being equivalent to that observed in placebo-treated groups.

Benefits and costs

The proposed amendment would impact on the following sectors:

• Public

The availability of non-prescription single-dose orally administered fluconazole 150 mg would provide consumers with another option for the treatment of vaginal candidiasis.

Product labels would be required to include directions for use and applicable cautionary statements. This would help to provide information to the public about the product’s safe and proper use.

The public would be required to pay directly for the product, as products which do not require a prescription are not usually covered by drug insurance plans.

• Health insurance plans

There would be no anticipated cost for privately funded drug benefit plans, since most do not cover the cost of non-prescription drugs.

• Provincial health care services

There would be no anticipated cost to provincial drug benefit plans, since most do not cover the costs of non-prescription drugs.

• Pharmaceutical industry

Following implementation of this initiative, fluconazole 150 mg for oral use for the treatment of vaginal candidiasis could no longer be sold with prescription labelling. Notice of this change in regulatory status is being communicated to the pharmaceutical industry through this NOI. This advance notice, plus a delayed coming into force, would allow manufacturers of these products sufficient time to obtain approval of non-prescription labelling. Draft guidance will be sent to manufacturers affected by this proposed regulatory amendment which may assist them in beginning preparation of non-prescription labelling.

Compliance and enforcement

This amendment would not alter existing compliance mechanisms under the provisions of the Food and Drugs Act and the Food and Drug Regulations enforced by the Health Products and Food Branch Inspectorate.

Consultation

The process for this consultation with stakeholders is described in the Memorandum of Understanding (MOU) to streamline regulatory amendments to Schedule F, which came into effect on February 22, 2005. The MOU is posted on the Health Canada Web site.

This NOI is being sent by email to stakeholders and is also being posted on the Health Canada Web site and the “Consulting With Canadians” Web site.

Any comments regarding this proposed amendment should be sent within 75 days following the date of publication in the Canada Gazette, Part I. Please note that any comments received during the first consultation period will be addressed along with comments received during this second comment period. The policy analyst for this project, Karen Ash, may be contacted at the following address: Refer to Project No. 1594, Policy Division, Bureau of Policy, Science and International Programs, Therapeutic Products Directorate, Health Canada, Holland Cross, Tower B, 2nd Floor, 1600 Scott Street, Address Locator 3102C5, Ottawa, Ontario K1A 0K9, 613-948-4623 (telephone), 613-941-6458 (fax), regaff-affreg@hc-sc.gc.ca (email).

Final approval

In accordance with the MOU process, it is anticipated that this amendment will proceed directly from this consultation to consideration for final approval by the Governor in Council, approximately six to eight months from the date of publication of this NOI in the Canada Gazette, Part I. If the amendment is approved by the Governor in Council, publication in the Canada Gazette, Part II, would follow. The amendment will come into force 90 days after the date of publication in the Canada Gazette, Part II.

MEENA BALLANTYNE
Assistant Deputy Minister

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DEPARTMENT OF INDUSTRY

OFFICE OF THE REGISTRAR GENERAL

Appointments

April 2, 2009

DIANE BÉLANGER
Acting Manager

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DEPARTMENT OF INDUSTRY

RADIOCOMMUNICATION ACT

Notice No. DGRB-001-09 — Consultation on revisions to the framework for spectrum auctions in Canada

This notice announces the release of the above-mentioned consultation.

Two recently released consultations, Consultation on a Framework to Auction Spectrum in the 2 GHz Range including Advanced Wireless Services and Consultation on the Renewal of 24 and 38 GHz Spectrum Licences and Spectrum Licence Fees for 24, 28 and 38 GHz Bands, indicated that Industry Canada would be launching this consultation to provide clarification on the renewal of long-term licences.

Although comments are being accepted on all aspects of the Framework, input is sought on three areas in particular:

• the use of auction types other than simultaneous multiple-round ascending;
• the use of auctions as a means of awarding satellite licences; and
• the renewal of long-term spectrum licences.

Revisions are also being made to sections 5 and 6 of the 2001 Framework by significantly reducing the level of detail provided, noting that the consultation published prior to each auction will provide detailed information on the auction process, design and rules.

The Department is also taking the opportunity to seek comments on two other issues related to long-term spectrum licences: the research and development condition of licence and tier areas for spectrum licensing.

Submitting comments

Respondents are requested to provide their comments in electronic format (XHTML, WordPerfect, Microsoft Word or Adobe PDF) to the following email address: spectrum.operations@ic.gc.ca.

Written submissions should be addressed to the Director, Spectrum Management Operations, Radiocommunications and Broadcasting Regulatory Branch, Industry Canada, 300 Slater Street, Ottawa, Ontario K1A 0C8.

All submissions should cite the Canada Gazette, Part I, the publication date, the title and the notice reference number DGRB-001-09. Parties should submit their comments no later than June 15, 2009, to ensure consideration. Soon after the close of the comment period, all comments received will be posted on Industry Canada’s Spectrum Management and Telecommunications Web site at www.ic.gc.ca/spectrum.

The Department will also provide interested parties with the opportunity to reply to comments from other parties. Reply comments will be accepted until July 15, 2009.

Obtaining copies

Copies of this notice and of documents referred to herein are available electronically on Industry Canada’s Spectrum Management and Telecommunications Web site at www.ic.gc.ca/spectrum.

Official versions of Canada Gazette notices can be viewed at www.gazette.gc.ca/rp-pr/p1/index-eng.html. Printed copies of the Canada Gazette can be ordered by telephoning the sales counter of Canadian Government Publishing at 613-941-5995 or 1-800-635-7943.

April 2, 2009

MICHAEL D. CONNOLLY
Director General
Radiocommunications and
Broadcasting Regulatory Branch

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DEPARTMENT OF INDUSTRY

RADIOCOMMUNICATION ACT

Notice No. DGRB-008-09 — Consultation on a New Spectrum Licensing Approach and Fee for Narrowband Multipoint Communication Systems (N-MCS)

This notice invites public comment on all aspects of the paper titled Consultation on a New Spectrum Licensing Approach and Fee for Narrowband Multipoint Communication Systems (N-MCS). This document outlines Industry Canada’s proposed spectrum licensing approach and fee for future N-MCS, including Automated Meter Reading (AMR) and Automated Meter Infrastructure (AMI) networks. Proposals outlined in this paper seek to address eligibility, licensing requirements, fees and other issues associated with N-MCS networks.

Submitting comments

Interested parties are invited to submit comments on proposals in the consultation no later than June 12, 2009, in electronic format (WordPerfect, Microsoft Word, Adobe PDF or XHTML) to the following email address: Spectrum.Operations@ic.gc.ca, along with a note specifying the software, version number and operating system used.

Written submissions should be addressed to the Manager, Operational Policies, Radiocommunications and Broadcasting Regulatory Branch, Industry Canada, 300 Slater Street, 15th Floor, Ottawa, Ontario K1A 0C8.

All submissions should cite the Canada Gazette, Part I, the publication date, the title and notice reference number DGRB-008-09.

Obtaining copies

Copies of this notice and of documents referred to herein are available electronically on Industry Canada’s Spectrum Management and Telecommunications Web site at http://ic.gc.ca/spectrum.

Official versions of Canada Gazette notices can be viewed at www.gazette.gc.ca/rp-pr/p1/index-eng.html. Printed copies of the Canada Gazette can be ordered by telephoning the sales counter of Canadian Government Publishing at 613-941-5995 or 1-800-635-7943.

April 2, 2009

MICHAEL D. CONNOLLY
Director General
Radiocommunications and
Broadcasting Regulatory Branch

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DEPARTMENT OF TRANSPORT

CANADA MARINE ACT

Vancouver Fraser Port Authority — Supplementary letters patent

BY THE MINISTER OF TRANSPORT, INFRASTRUCTURE AND COMMUNITIES

WHEREAS effective January 1, 2008 the port authorities of Vancouver, Fraser River and North Fraser amalgamated to continue as the Vancouver Fraser Port Authority (“Authority”);

WHEREAS Letters Patent were issued by the Minister of Transport, Infrastructure and Communities for the Authority pursuant to paragraph 59.7(k) of the Port Authorities Management Regulations effective January 1, 2008;

WHEREAS in support of port operations the Authority wishes to acquire from A.C. Gilmore & Sons (Farms) Ltd. the real property described below;

WHEREAS Schedule C of the Letters Patent describes the real property, other than federal real property, held or occupied by the Authority;

WHEREAS the board of directors of the Authority has requested the Minister of Transport, Infrastructure and Communities to issue Supplementary Letters Patent to add to Schedule C of the Letters Patent the real property described below;

NOW THEREFORE under the authority of section 9 of the Canada Marine Act, the Letters Patent are amended by adding to Schedule C of the Letters Patent the real property described as follows:

These Supplementary Letters Patent are to be effective on the date of registration in the New Westminster Land Title Office of the transfer documents evidencing the transfer of the real property described above from A.C. Gilmore & Sons (Farms) Ltd. to the Authority.

Issued under my hand this 24th day of March, 2009.

______________________
John Baird, P.C., M.P.
Minister of Transport, Infrastructure and Communities

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