2017 Annual Report - UBC IMANT · respective policy benchmarks has totaled $60.7 million. Personally, I am delighted to have joined UBC IMANT the end of towards 2016 and have found

University of British Columbia

Investment Management Trust Inc.

2017 Annual Report

Contents

Message from the Board Chair ..................................................................................................................... 1

Message from the President ......................................................................................................................... 3

Overview of IMANT ....................................................................................................................................... 5

Market Commentary ..................................................................................................................................... 8

Funds under Management.......................................................................................................................... 10

Endowment Fund ($1,449 million) ........................................................................................................ 11

Responsible Investing and Sustainable Future Pool ($10.0 million) ...................................................... 19

Endowments with Investment Restrictions ($184.9 million) ................................................................ 21

Staff Pension Plan ($1,525 million) ........................................................................................................ 23

Supplemental Arrangement ($89.7 million) .......................................................................................... 30

Core Working Capital Fund ($492.9 million) .......................................................................................... 31

Investment Management Fees ................................................................................................................... 32

Endowment Fund and Staff Pension Plan Investment Policy Benchmarks ................................................ 33

Independent Auditor’s Report .................................................................................................................... 34

Financial Statements and Notes ................................................................................................................. 36

2016-2017 IMANT Board of Directors ........................................................................................................ 46

Investment Managers by Mandate ............................................................................................................. 47

Advisors and Service Providers ................................................................................................................... 49

Cover: University of British Columbia, Vancouver Campus Credit: Hover Collective

1 | UBC IMANT 2017 Annual Report

Message from the Board Chair

On behalf of the IMANT board of directors, I am pleased to update the University community and stakeholders on IMANT’s recent activities over the past year. At the end of 2016, Jai Parihar retired as IMANT’s President and CEO after serving the University in that capacity since 2011 and previously as an IMANT board member. Under Jai’s guidance, the Endowment and Staff Pension Plan consistently performed well and his leadership was critical to improving many aspects of the organization. I would like to extend the Board’s sincere gratitude for Jai’s contributions during his term and wish him the very best in his retirement.

In December, I was pleased to welcome Rajiv Silgardo as IMANT’s new President and CEO. Rajiv brings extensive experience and leadership from within the investment industry and is well positioned to lead IMANT towards meeting its strategic and operating goals as outlined in IMANT’s new three to five-year plan. IMANT and the Board have been working to strengthen their relationship with the University and its stakeholders while at the same time ensuring the portfolios are well positioned to support the University’s research, scholarships and pension benefits. In the past year, IMANT conducted a comprehensive study of the long-term asset allocation of the Endowment Fund based on updated asset class return assumptions. One of the objectives of this study was to determine whether an increase to the 3.5% spend rate could be made without impairing intergenerational equity or significantly increasing the risk of the Fund. Based on the analysis, the IMANT Board recommended changes to the Endowment Fund’s policy asset mix and recommended that the spend rate be increased to 4.0%. The UBC Board of Governors approved these changes in December 2016 and the new spend rate was implemented on April 1, 2017. Another continuing area of focus includes consideration to Environmental, Social and Governance (ESG) factors in the investment process, while also ensuring IMANT delivers upon its investment mandate and fulfills its fiduciary duties. I am pleased to announce that IMANT successfully implemented a new Sustainable Future Pool, as approved by the UBC Board of Governors, this past fiscal year. This new fund will allow donors to invest in environmentally and socially responsible companies that are not in carbon producing sectors with sustainable investment returns. In accordance with Board term policy rules, I will be stepping down from my position as Board Chair and member this upcoming year. It has been my privilege serving on IMANT’s board of directors and to my fellow directors and IMANT staff, it has been an honor working with such dedicated and hardworking


individuals. I would like to recognize Brian Kenning, who will be retiring with me this year, and Ken Bancroft, Paul Haggis and Alice Laberge, our departing directors from last year. Thank you for your contributions during your terms. I am also pleased to welcome Alison Gould, Michael Korenberg, Gordon MacDougall and Kevin Smith who joined as new directors this year. Finally, on behalf of the Board, I would like to thank the UBC community and stakeholders for entrusting your portfolio assets with UBC IMANT. It is important that we share the same long-term vision and objective of delivering the investment returns commensurate with each fund’s objectives, liability requirements and risk parameters, while exercising the highest standard of prudence. IMANT will strive to prudently grow the University’s investment portfolios within agreed upon risk/return characteristics and continue to strengthen our relationship through regular communication.

Martin Glynn Chair of the IMANT Board of Directors


Message from the President

It is my pleasure to present UBC Investment Management Trust’s 2017 Annual Report on the University of British Columbia’s investment portfolios for the fiscal year ended March 31, 2017. The assets under IMANT’s management were $3.6 billion at March 31, 2017. The Endowment Fund had a robust return of 12.1% for the year, net of external investment management fees, and was ahead of its benchmark return of 11.4%. The Staff Pension Plan also posted a strong return of 8.9% for the year, net of external investment management fees, and was also well ahead of its benchmark return of 7.2%. For the last four years, the combined value added for the two portfolios over their respective policy benchmarks has totaled $60.7 million.

Personally, I am delighted to have joined UBC IMANT towards the end of 2016 and have found my first four months working with the University, the IMANT Board, and IMANT staff to be very productive. During this time, I have worked closely with the Board to develop IMANT’s business objectives and a longer-term vision and plan for the organization. One of our key objectives is to update IMANT’s existing investment beliefs and mission statement to ensure we are continuing to deliver investment returns appropriate to each of our clients’ evolving goals and risk tolerances. Another includes enhancing our relationships with our clients through regular communication and investment related education. Finally, we intend to do more to enhance the overall visibility of IMANT within the broader Canadian investment community. During the 2016/17 year, IMANT made additional commitments to alternative investment managers for the Endowment and Staff Pension Plan to reach their long-term policy asset mixes. This included private equity, real estate, infrastructure, absolute return strategies and a new asset class, private debt, for the Endowment. A search for a new global small-cap equity manager was also undertaken and funding for this new mandate will occur in fiscal 2017/18. As part of the University’s Responsible Investment Policy Committee initiatives, IMANT has incorporated more ESG factors to enhance our investment process and reporting with the intent of making the whole Endowment as sustainable as possible. During the year, IMANT worked with our investment managers to improve transparency with respect to their corporate engagement, and we are pleased with the level of cooperation and feedback that we received from all of the firms. As mentioned in the Board Chair’s message, IMANT also successfully established the UBC Sustainable Future Pool which excludes companies in fossil fuel industries and invests in companies with lower CO2 emissions in other sectors.


Several of last year’s accomplishments were achieved under Jai Parihar, IMANT’s past President & CEO. I would like to thank Jai for his dedication and leadership in building a solid organization at IMANT over the last six years. We are all very grateful to him and wish him continued success in the future. A number of interesting initiatives and projects, some described above, have been identified for the upcoming year 2017/18 which will continue to keep us very busy. As always, we remain focused on fulfilling the goals and objectives of the funds under our care and to fully partnering with all of our clients. I am looking forward to working with the IMANT team and Board to develop UBC IMANT into one of Canada’s premier investment organizations.

Rajiv Silgardo President and Chief Executive Officer


Overview of IMANT UBC Investment Management Trust Inc. (IMANT), a wholly owned subsidiary of the University of British Columbia (UBC), was established in 2003 in order to provide comprehensive portfolio management services and related advice to UBC. IMANT's mission is to deliver the investment returns agreed upon with our clients, commensurate with each fund's objectives, liability requirements and risk parameters, while exercising the highest standard of prudence. Governance Structure The University, through its Board of Governors (BOG), is the Administrator of the investment portfolios and is responsible for the overall management of the UBC Plans and funds. The BOG has established a governance structure and delegated certain responsibilities and powers for investing the portfolios to the IMANT Board of Directors. The IMANT Board is comprised of eleven directors - seven unrelated members from the business community and four UBC-related members. Board members unrelated to UBC are appointed by the UBC BOG on recommendation of the IMANT Board. UBC-related directors, including those who are UBC senior executives and representatives from the UBC BOG, are appointed directly by the UBC BOG. The Board meets at least quarterly and provides oversight and governance to IMANT through its three standing committees: Investment Committee, Audit Committee, and the Governance and Human Resources Committee. The IMANT Board discharges its investment related responsibilities through its Investment Committee, which consists of the entire Board. The responsibilities of the Investment Committee include:

• Formulating investment beliefs to guide the development of investment policies • Recommending investment policies for the UBC funds to the UBC BOG (with the exception of

the Staff Pension Plan), taking into account each fund’s objectives and risk tolerances. This includes asset allocation with ranges, benchmarks, and the currency hedging policy

• Ensuring the appropriateness of long-term policy asset mixes relative to obligations/liabilities and return objectives and advising the University if they are not aligned (with the exception of the Staff Pension Plan)

• Approving overall investment manager structures, asset-class guidelines, and certain investment transactions

• Approving the manager selection process and manager appointment/termination recommendations brought forward by the President and CEO

• Monitoring and evaluating investment performance and cost effectiveness against objectives and benchmarks


IMANT’s Responsibilities and Organizational Structure Return requirements and risk preferences are established by the client (various groups at the University) and factored into the investment policy recommendation. The investment policies for all portfolios are recommended by IMANT’s President to the IMANT Board with the exception of the Staff Pension Plan (SPP). All policies are reviewed by the IMANT Board and submitted to the UBC BOG for approval except the SPP’s investment policy, which is prepared by the SPP Board with assistance from their investment and pension consultants. The SPP investment policy is then recommended by the SPP Board to the UBC BOG for approval. After a fund’s investment policy is approved by the UBC BOG, IMANT is responsible for implementing the investment policy asset mix. Rather than making direct investments, IMANT concentrates on evaluating, hiring, monitoring, and replacing external investment managers as required. This “manager of managers” approach is both best practice and the most cost effective for the size of assets under management. At March 31, 2017, IMANT managed $3.6 billion of UBC and UBC-related portfolio assets. IMANT’s team of investment professionals works under the direction of the President and CEO with oversight by the IMANT Board of Directors.

IMANT BOARD OF DIRECTORS

President & CEO

Director, Manager Relations &

Investment Operations

Director, Quantitative Analysis & Strategic

Research

Associate, Analytics & Research

Analyst

Administration Manager


The President’s responsibilities include:

• Preparing the long-term investment policies appropriate for the funds’ obligations and risk tolerance for recommendation to the IMANT Board (for submission to the UBC BOG with the exception of the Staff Pension Plan)

• Implementing the long-term policy asset mixes by recommending the overall investment manager structure, asset-class guidelines, and appointment/termination of external investment managers

• Evaluating the investment performance of portfolios to ensure efficient implementation of the long-term policy asset mix

• Evaluating the appropriateness of the long-term policy asset mixes relative to liabilities and return objectives (with the exception of the Staff Pension Plan)

• Monitoring and evaluating external investment managers • Reporting regularly to the IMANT Board, SPP Board and UBC BOG • Ensuring the effective operations of IMANT


Market Commentary Over the past year, most asset classes provided solid returns with equity markets returning double digits to investors. This was despite geopolitical events ranging from Brexit, a new U.S. administration, and significant leadership changes across Europe and Asia. The S&P/TSX Composite Index grew by 18.6% led by strong returns from the Industrials and Materials sectors while Health Care dragged as a result of a major selloff in Valeant Pharmaceutical. Oil prices rebounded strongly in late 2016 following an agreement by OPEC members to cut oil production, however this sentiment moderated in the first quarter of 2017. The Bank of Canada kept its target overnight rate at 0.50% citing significant uncertainties around potential changes to U.S. trade policies and weak Canadian export data. The S&P 500 gained 20.8% in Canadian dollar terms (17.2% in US dollar terms) and economic confidence in the US economy prompted the Federal Reserve to raise interest rates for the first time in a decade. International (EAFE) markets returned 15.1% as economic conditions in Europe and Asia showed signs of improvement, although both the European Central Bank and the Bank of Japan continued to hold interest rates steady. Emerging markets surged following a sell-off at the end of 2016, returning 20.9% in Canadian dollar terms for the year. During the year, the Canadian dollar had mixed results against other major currencies with the most notable change being against the British pound which was hurt by Brexit.

Note: Asset class returns shown are annualized returns. Currency returns shown are cumulative returns, not annualized, and are based on Bank of Canada Noon Rates.

Asset Class Index 1 Year 4 Year 10 YearCash FTSE TMX 91 Day T-Bills 0.5% 0.7% 1.3%Universe Bonds FTSE TMX Universe Bond 1.5% 3.3% 4.8%Long Bonds FTSE TMX Long Bond 1.7% 4.6% 6.4%Real Return Bonds FTSE TMX Real Return Bond -0.5% 1.1% 4.8%Canadian Equities S&P/TSX 18.6% 8.3% 4.7%U.S. Equities S&P 500 20.8% 21.1% 9.1%International Equities MSCI EAFE 15.1% 11.9% 2.5%World Equities MSCI World 18.3% 16.4% 5.7%Emerging Market Equities MSCI Emerging 20.9% 7.6% 4.2%Hedge Fund of Funds HFRI FOF: Conservative 8.6% 10.1% 2.6%

CAD/USD Change -2.6% -23.8% -13.5%CAD/EUR Change 3.7% -8.5% 8.2%CAD/JPY Change -3.5% -9.7% -18.0%CAD/GBP Change 11.7% -7.7% 35.9%

Returns to March 31, 2017 (in Canadian Dollars)


Amid a low interest rate environment, competition by institutional investors for high quality real estate and infrastructure investments remains fierce, reflecting a desire for higher yields and stable cash flows. Both global and Canadian core infrastructure investments continue to be relatively expensive and expected returns are lower due to the strong supply of capital looking to invest. In private equity, returns have stabilized since the global financial crisis and fundraising by general partners (GP) have steadily increased. However, recent strength in debt and equity markets have driven prices to higher levels making it difficult for GPs to deploy capital in this asset class. For many institutional investors, distributions continue to outpace capital call activity and an increase in uninvested capital has driven up demand for portfolio companies and purchase price multiples. In this difficult, low yielding market environment, IMANT remains focused on our clients’ long-term objectives and continues to explore strategies to reduce risk and enhance net of fee returns across all of the portfolios.


Funds under Management At March 31, 2017, IMANT provided oversight on $3.6 billion of assets across five portfolios (listed in the table below). Each portfolio has different risk and return objectives and varies in policy asset mix as well as corresponding performance results. One of the portfolios is part of the University’s working capital and is a shorter-term fixed-income portfolio. Others are balanced funds that contain traditional public investments in bonds and equities, as well as alternative investments such as private equity, real estate, infrastructure and absolute return strategies.

Note: Changes in market values reflect investment earnings as well as external cash flows made into and out of the portfolios. There are an additional $185 million (2016: $144 million) of endowed assets at other foundations that support programs at UBC that are not listed in the above table (see page 21-22). IMANT reviews the performance results of these investments on behalf of the University, but does not have discretion over these assets.

Portfolios are constructed with multiple asset classes for risk diversification and to match assets to liabilities. Client preferences, time horizon, and other factors such as investment management fees are also considered during the asset allocation process.

Portfolio Mandate March 31, 2017 March 31, 2016Endowment Fund Balanced 1,449.1 1,311.5 Staff Pension Plan Balanced 1,524.9 1,382.5 Core Working Capital Fund Fixed Income 492.9 315.3 Supplemental Arrangement Plan Balanced 89.7 80.7 Sustainable Future Pool Balanced 10.0 - Total 3,566.6$ 3,089.9$

Market Value ($ millions)


Endowment Fund ($1,449 million) The Endowment Fund is the result of the accumulation of over 100 years of philanthropy from generous donors as well as prepaid endowment land lease sale proceeds. The Endowment Fund benefits over 3,000 specific areas throughout all faculties at UBC, helping to support learning, teaching, and research for the current and future generations. Long-Term Policy Asset Mix The Endowment Fund is invested in financial assets to generate annual distributions for various programs in accordance with the Statement of Policies and Procedures approved by the UBC Board of Governors. The following table contains the actual and long term policy asset mix as of March 31, 2017.

During the year, IMANT completed an asset mix review for the Endowment Fund to determine if based on long-term asset class return assumptions, the current spend rate could be maintained within prudent and acceptable risk levels while maintaining intergenerational equity. Following the analysis, a new long-term policy asset mix was submitted and approved by the IMANT Board and UBC Board of Governors. The asset mix changes include an addition of private debt, global small cap equities and an increased allocation to infrastructure equities. Existing allocations in mortgages, Canadian equities and absolute return strategies will be reduced to fund these changes. IMANT will transition to the new policy mix starting fiscal 2017/18. IMANT continues to make additional commitments in alternative asset classes to reach the Endowment’s long-term policy mix. In real estate, commitments of $22.5 million CAD were made to a new core Canadian fund and $15 million USD to a mezzanine debt fund. Within private equity, $20 million USD and €15 million EUR were committed to two global secondaries funds. Additionally, $15

Asset Class Policy Mix Actual MixFixed Income 20.0% 20.4%

Cash and Net Currency Forwards 2.0% 1.0%Bonds and UBC Debenture 13.0% 13.8%Mortgages 5.0% 5.6%

Equities 40.0% 45.0%Canadian Equities 15.0% 17.6%Global Equities 15.0% 17.8%Emerging Market Equities 10.0% 9.6%

Alternatives 40.0% 34.7%Private Equity 10.0% 5.4%Real Estate 10.0% 9.4%Infrastructure Equity 10.0% 12.5%Absolute Return Strategy 10.0% 7.4%

Total 100.0% 100.0%


million CAD was allocated to a Canadian brownfield infrastructure fund and $15 million USD committed to a global infrastructure fund. Within ARS, $25 million USD was invested with a US fund of funds. Commitments to private equity, real estate and infrastructure managers are drawn over time depending on their investment type and fund structure. The total commitment may not be fully drawn by the manager and later stage funds provide greater distributions back to their investors. As a result, the Endowment tends to make commitments that exceed its target policy mix to maintain a stable allocation to these asset classes. Combining actual investments and outstanding commitments, the Endowment has 10.8% allocated to private equity, 13.9% allocated to real estate and 13.2% allocated to infrastructure equity compared to policy weights of 10.0% each. Additional opportunities in private equity, real estate and infrastructure funds are currently being reviewed by IMANT’s investment team. Distributions from private equity funds were strong and pacing of new investments continued to be slow. As alternative investment commitments are drawn by investment managers, funds will be provided from the overweight allocations in Canadian and global equities. The table below summarizes major transactions completed and opportunities reviewed in 2016/2017:

Actual Return Compared to Required Return For the Endowment Fund to be sustainable, it needs to maintain its inflation-adjusted value to be able to achieve intergenerational equity for its beneficiaries. Therefore, its long-term returns must equal or exceed its required rate of return. The Endowment’s current required return objective is equal to the sum of the University’s spend rate of 4.0% (previously set at 3.5% in fiscal 2009/10 and increased for

Public Equities and Fixed Income

• made redemptions from Canadian and global equities to fund alternative asset classes

Alternatives

• In real estate, commited $22.5 million CAD to a core Canadian fund and $15 million USD to a mezzanine debt US fund

• In private equity, committed $20 million USD and €15 million EUR into two global secondaries funds

• In infrastructure, committed $15 million USD to a global fund and allocated $15 million CAD into a Canadian brownfield fund

• In ARS, invested $45 million US into a fund of funds


fiscal 2017/18), administrative expenses of 0.65%, and annual inflation as proxied by CPI, the Canadian Consumer Price Index.

*The Endowment’s 2016/17 1 Year required return is equal to Spend Rate + Expenses + Inflation (3.5% + 0.65% + 1.56% = 5.71%).

**The 10-year required return is higher as the spend rate was 5.0% prior to Apr 2009 and administrative expenses were 0.9% prior to Apr 2011.

Note: Returns are reported net of external investment management fees starting January 2010. Returns stated are annualized for periods greater than one year. Numbers may not add due to rounding.

The Endowment Fund’s actual return for the one year ended March 31, 2017 was 12.1% which was above the required return objective for the Fund. Additionally, this objective has been consistently met in recent years. However, on a 10-year basis, the Fund has not met the required return objective partly due to the 2008/09 Global Financial Crisis and higher spend rate requirement prior to 2009. Actual Return Compared to Policy Benchmark The Endowment Fund return is also compared to its policy benchmark portfolio return to gauge the effectiveness of asset mix implementation. The policy benchmark portfolio consists of a policy weighted average return of different asset class benchmarks. For public investments, public market indices are used. For alternatives, where investable indices are not available, other industry indices, combinations of relevant public indices, and inflation plus a premium are used as benchmarks. For the components of the Endowment investment policy portfolio benchmark, please see page 33.


The Endowment Fund’s 1-year return of 12.1% was 60 basis points ahead of its policy benchmark return of 11.4%. Over a four-year period, the Fund exceeded its benchmark portfolio return by 0.3% and over a ten-year period, the Fund lagged by 0.3%.

1 Year 2 Year 3 Year 4 Year 10 Year**

Actual Return 12.1% 5.8% 8.4% 10.1% 5.1%Required Return* 5.7% 5.0% 5.1% 5.3% 6.1%

6.4% 0.8% 3.3% 4.8% -1.0%

1 Year 2 Year 3 Year 4 Year 10 Year

Actual Return 12.1% 5.8% 8.4% 10.1% 5.1%Inv. Policy Benchmark 11.4% 5.3% 8.1% 9.9% 5.4%Value Added 0.6% 0.5% 0.3% 0.3% -0.3%


2016/17 investment performance (net of investment manager fees) for the Endowment Fund was in double digits and well ahead of the investment policy benchmark. All asset classes outperformed their respective benchmarks with the exception of emerging markets equity and absolute return strategies. At the total fund level, both manager selection and asset allocation added value to the portfolio. Canadian equities and global equities outperformed their respective equity benchmarks and an overweight in these asset classes strongly helped the portfolio. Managers in emerging market equities underperformed a strong market return of 20.9%. The results in alternative investments were also positive as investments in real estate and infrastructure equity performed well against their CPI-based benchmarks. Absolute return strategies was the only alternative asset class lagging its benchmark. The Endowment Fund’s currency hedging policy includes hedging back to Canadian dollars non-equity foreign investment currency exposures (e.g. foreign real estate, infrastructure and absolute return strategy investments). Currency hedging is managed passively by an external manager through currency forward contracts on major developed market currencies (e.g. US Dollar, Euro, Pound Sterling, and Japanese Yen) with investment grade counterparties.

5.5%

6.1%

5.5%

13.1%

20.9%

18.3%

18.6%

2.3%

1.5%

11.4%

2.8%

9.5%

8.0%

13.2%

14.7%

18.7%

19.8%

2.8%

2.0%

12.1%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Absolute Return Strategy

Infrastructure Equity

Real Estate

Private Equity

Emerging Market Equities

Global Equities

Canadian Equities

Mortgages

Universe Bonds

Total Fund

1 Year Performance to March 31, 2017

Endowment Fund Benchmark


Endowment Fund Exposures IMANT collects information on portfolio holdings to analyze the risk exposures of the Endowment Fund including company concentration risk, currency risk, credit rating risk and interest rate risk. This is monitored by IMANT and the IMANT Board to ensure that the fund is within established risk parameters. The information is aggregated from the underlying holdings in external manager pooled funds. Exposures at March 31, 2017 are provided for information below. Endowment Total Fund Exposure by Geographical Region

Canada 47%

United States 20%

Western Europe

10%

Asia Pacific 11%

South America

2%

Other 10%


Endowment Public Equity Exposure Geography Sector Breakdown

Endowment Fixed Income Exposure Credit Rating* Issuer Type*

Credit Rating AAA 8% AA 48% A 5% BBB 5% Other (mortgages/unrated) 33%

Sector Financials 23% Consumer Staples 16% Industrials 14% Consumer Discretionary 8% Telecommunications 8% Energy 8% Utilities 8% Technology 6% Materials 5% Real Estate 3% Health Care 1%

Federal 6%

Provincial 10%

Corporate 16%

UBC Debenture

37%

Mortgages 31%

Canada 37%

United States 23%

Asia Pacific 20%

Western Europe

12%

South America

4%

Other 4%


Endowment Private Equity Exposure Fund Type

Endowment Real Estate Exposure Geography Fund Type

Property Type

Property Type Industrial 30% Residential 23% Office 23% Retail 15% Hospitality 6% Mixed Use 2% Other 1%

Primary Funds 29%

Co-Investment

Funds 19%

Fund of Funds 26%

Secondary Funds 26%

Core RE 55%

Value Added RE

31%

Opportunistic RE

4%

Mezzanine Debt 9%

Canada 69%

USA 23%

Other 8%


Endowment Infrastructure Equity Exposure Geography Revenue Type*

* Excludes publicly listed infrastructure equity fund

Industry Sector

Industry Sector Transportation 31% Electric 22% Oil & Gas Services 10% Healthcare Services 8% Telecommunications 7% Water 6% Engineering & Construction 5% Municipal 4% Diversified/Other 7%

Contracted 36%

GDP Driven 29%

Regulated 24%

Other 11%

Canada 30%

USA 26%

UK 18%

Western Europe ex

UK 7%

South America

7%

Australia 7%

Other 5%


Responsible Investing and Sustainable Future Pool ($10.0 million)

The University’s Responsible Investment (RI) Policy was established in 2014 and included a three-year timeframe for integrating environmental, social and governance (ESG) factors in IMANT’s investment process. The policy commits UBC to incorporate ESG principles into its endowment investments through four main avenues:

1. Manager selection - When selecting and evaluating investment managers, UBC commits to integrate ESG factors. The University will expect all of their public equity managers to incorporate ESG principles in their portfolios within the next three years.

2. Investor engagement - UBC does not invest in companies directly, but rather through pooled funds, managed by external fund managers. Wherever possible, UBC will encourage its fund managers to use their proxy votes to encourage transparency on ESG policies, procedures, and other activities.

3. Direct engagement - While direct engagement with individual companies is not a practical option (as UBC does not invest directly in specific companies), where there is significant exposure to a company, industry, or nation that is facing a considerable ESG issue, UBC will encourage their investment managers to engage directly through available channels.

4. Collective engagement - On a selective basis, UBC will engage issuers, regulators, and industry groups (through third parties) where it is believed that a collective approach to engagement will be more effective than direct engagement.

Fiscal 2016/17 was the final year of the three-year implementation timeframe for the RI Policy. We are pleased to report that IMANT staff met the policy’s goals of incorporating ESG matters into the investment decision-making process in addition to promoting active ownership, engagement and transparency. With respect to manager selection, the key objective is to ensure that external investment managers retained by IMANT incorporate ESG factors in their investment decision-making process and that they actively engage with portfolio companies. Through ongoing monitoring and communication, we are pleased to report that all external managers consider ESG in their investment decision making process. We acknowledge that some managers are better than others in incorporating these factors and realize that areas for improvement do exist. If IMANT identifies an external manager that struggles with implementing best-in-class ESG practices or displays a shortfall in a particular area, IMANT will engage with that manager to close the gap. Further objectives of the RI Policy include active ownership. To meet that objective, IMANT expanded the breadth and depth of engagement with managers to include regular engagement reports that describe managers’ activity with respect to ESG monitoring of portfolio companies, direct contacts with companies or industry initiatives with respect to ESG matters. We are pleased to report that IMANT’s efforts paid off as some managers had begun to share this information with their investors for the first


time. It is also encouraging that managers have expended considerable resources to researching ESG matters and that the degree of transparency has significantly improved. This will allow for better understanding of ESG issues and their potential impact on portfolio performance. The above initiatives have translated to material results as actions undertaken by external managers, in aggregate, have resulted in a higher ESG score than passive index investments. Similarly, with respect to CO2 emissions, the companies held in our client’s portfolios are estimated to have notably lower CO2 emissions than passive equity indexes. Finally, IMANT supported the University in establishing a dedicated endowment asset pool that seeks to lower CO2 emissions from portfolio companies and to avoid investments in the fossil fuel energy sector. This separate investment pool was funded with $10 million from the University and is expected to attract additional donors that wish to express their non-financial preferences alongside donations supporting academic activities. At inception, this balanced portfolio of Canadian bonds and global stocks is estimated to reduce CO2 emissions by nearly 80% and shows strong performance with respect to other environmental, social and governance scores. The Sustainable Future Pool is invested in the Jarislowsky Fraser Fossil Fuel Free Pooled Fund. The following table contains the actual and long term policy asset mix as of March 31, 2017.

Asset Class Long Term Policy Mix Actual Mix

Bonds & Cash 30.0% 27.5% Cash 0.2% Bonds 27.3%

Global Low CO2 Emission Equities 70.0% 72.5%

U.S. Equities 45.3% International Equities 27.2%

Total 100.0% 100.0%

Sustainable Future Pool Public Equity Sector Breakdown Fixed Income Sector Breakdown

Sector Technology 22% Financials 18% Healthcare 17% Consumer Staples 15% Industrials 14% Consumer Discretionary 9% Materials 3% Telecommunications 2%

Sector Financials 38% Provincial 21% Federal 19% Infrastructure 9% Telecommunications 6% Industrials 5% Real Estate 2%


Endowments with Investment Restrictions ($184.9 million) Endowments with Investment Restrictions refer to the endowments specified for UBC at the Vancouver Foundation, UBC Foundation, and Jarislowsky Fraser Limited Investment Counsel. IMANT reviews their respective performance results on behalf of the University but does not have discretion over these investments. At March 31, 2017, they totaled $184.9 million.

UBC Foundation Assets held at the UBC Foundation consist of a donation of publicly traded common shares for Wall Financial Corporation, a Canadian real estate investment and development company. The assets were valued at $127.1 million on March 31, 2017. Vancouver Foundation At March 31, 2017, there was $54.0 million of endowment assets at Vancouver Foundation which were invested in Vancouver Foundation’s Consolidated Trust Fund, a balanced fund. The policy and actual asset mixes are provided in the table below along with performance information.

Endowments Held At Mandate March 31, 2017 March 31, 2016UBC Foundation Canadian Equity 127.1 90.7 Vancouver Foundation Balanced 54.0 50.1 Jarislowsky Fraser Balanced 3.8 3.7 Total 184.9$ 144.4$

Market Value ($ millions)

Asset Class Long Term Policy Mix

Actual Mix

Fixed Income 29.5% 21.8%Cash and Cash Equivalents 0.0% 1.1%Fixed Income 24.0% 17.5%Mortgages 5.5% 3.3%

Equities 53.5% 57.6%Canadian Equities 21.5% 23.7%Global Equities 32.0% 33.9%

Alternatives 17.0% 20.6%Real Estate 7.0% 4.3%Absolute Return Strategy 10.0% 16.3%

Total 100.0% 100.0%


Note: Returns are reported gross of investment management fees. Returns stated are annualized for periods greater than one year. Numbers may not add due to rounding.

Jarislowsky Fraser (Merilees Chair) Assets at Jarislowsky Fraser are invested in the JF Global Balanced Fund. The policy and actual asset mixes are provided in the table below along with performance information.

Note: Returns are reported gross of investment management fees. Returns stated are annualized for periods greater than one year. Numbers may not add due to rounding.

1 Year 2 Year 3 Year 4 Year 10 YearActual Return 12.5% 6.8% 8.6% 10.6% 6.2%Inv. Policy Benchmark 11.2% 5.2% 7.4% 8.9% 5.3%Value Added 1.3% 1.7% 1.2% 1.7% 0.9%

Asset Class Long Term Policy Mix

Actual Mix

Fixed Income 37.7% 38.1%Cash and Cash Equivalents 5.3% 4.6%Canadian Bonds 32.4% 33.5%

Equities 62.3% 61.9%Canadian Equities 23.0% 21.5%U.S. Equities 19.6% 21.6%International Equities 19.7% 18.8%

Total 100.0% 100.0%

1 Year 2 Year 3 Year 4 Year 10 YearActual Return 10.7% 5.5% 8.7% 10.6% 6.5%Inv. Policy Benchmark 10.3% 4.3% 7.0% 8.4% 5.2%Value Added 0.4% 1.2% 1.7% 2.2% 1.3%


Staff Pension Plan ($1,525 million) Established January 1, 1972, the Staff Pension Plan (SPP) is a target-benefit pension plan that provides retirement, termination, and death benefits for eligible staff of UBC and related employers. The Plan is funded by fixed contributions from Plan members and the University and serves over 10,000 UBC staff employees and retirees. The University has delegated the day-to-day administration of the Plan to the SPP Board. Assets are the property of the plan members and beneficiaries. Long Term Policy Asset Mix The SPP funds are invested to provide stable lifetime retirement pensions in accordance with the Statement of Policies and Procedures approved by the UBC Staff Pension Plan Board and UBC Board of Governors. The following table contains the actual and long-term policy mix as of March 31, 2017. Investments in real estate and private equity will continue to be made to achieve a diversified portfolio by vintage year and investment type.

During the year, IMANT continued to make additional commitments on behalf of the Staff Pension Plan to reach its long-term investment policy weights. In infrastructure debt, $70 million CAD was committed to a private infrastructure debt fund which will be funded from an existing public infrastructure debt fund. New commitments of $15 million USD and $22.5 million CAD were made to a mezzanine debt real estate fund and to a core Canadian real estate fund respectively. Within private equity, $10 million USD and €7.5 million EUR was committed to two global secondaries funds. Additionally, $25 million CAD was allocated to a Canadian brownfield infrastructure fund and $15 million USD committed to a global infrastructure fund. Commitments to private equity, real estate and infrastructure managers are drawn over time depending on its investment type and fund structure. The total commitment may not be fully


Cash and Net Currency Forwards 1.0% 0.9%Long Term Fixed Income 29.0% 26.6%Real Return Bonds 5.0% 3.7%Infrastructure Debt 10.0% 9.8%

Equities 25.0% 30.6%Canadian Equities 10.0% 12.8%Global Equities 10.0% 13.4%Emerging Market Equities 5.0% 4.4%

Alternatives 30.0% 28.4%Private Equity 5.0% 3.0%Real Estate 12.5% 11.2%Infrastructure Equity 12.5% 14.2%Absolute Return Strategy 0.0% 0.0%

Total 100.0% 100.0%


drawn by the manager and later stage funds provide greater distributions back to their investors. As a result, the Staff Pension Plan may commit more than its target policy mix to maintain a stable allocation to these asset classes. Combining actual investments and outstanding commitments, the Staff Pension Plan has 5.6% allocated to private equity compared to a policy weight of 5%, 15.5% allocated to real estate compared to a policy weight of 12.5%, 15.0% allocated to infrastructure equity compared to a policy weight of 12.5% and 14.1% allocated to infrastructure debt compared to a policy weight of 10%. Additional value-add real estate and infrastructure funds in the US and global markets are being reviewed by the investment team. As alternative investment commitments are drawn by investment managers, funds will be provided from the overweight allocations in Canadian and global equities. The table below summarizes major transactions completed and opportunities reviewed in 2016/2017:

Actual Return Compared to Policy Benchmark


The SPP return is compared to its benchmark portfolio return to gauge the effectiveness of asset mix implementation. For the year, the Staff Pension Plan returned 8.9% and was ahead of the policy benchmark return of 7.2%. Over a four-year period, the Plan outperformed the benchmark portfolio by

Public Equities and Fixed Income

• committed $70 million CAD to a private infrastructure debt fund

• made redemptions from Canadian and global equities to fund alternative asset classes

Alternatives

• In real estate, commited $22.5 million CAD to a core Canadian fund and $15 million USD to a mezzanine debt fund

• In private equity, committed $10 million USD and €7.5 million EUR into two global secondaries funds

• In infrastructure, allocated $15 million USD to a global fund and $25 million CAD into a Canadian brownfield fund

1 Year 2 Year 3 Year 4 Year 10 YearActual Return 8.9% 4.6% 8.2% 8.8% 4.9%Inv. Policy Benchmark 7.2% 3.6% 7.6% 7.9% 5.5%Value Added 1.8% 0.9% 0.6% 0.8% -0.5%


0.8% while over a ten-year period, it underperformed by -0.5%. For the components of the Staff Pension Plan investment policy portfolio benchmark, please see page 33.

In 2016/17, investments (net of investment manager fees) across all asset classes outperformed their respective benchmarks with the exception of real return bonds and emerging market equities. At the total fund level, both manager selection and asset allocation added value to the portfolio. Within fixed income, both infrastructure debt and long-term fixed income were outperformers. Canadian equities and global equities also outperformed their respective equity benchmarks and an overweight in these asset classes strongly helped the portfolio. Emerging market equities managers underperformed a strong market return of 20.9%. The results in alternative investments were also positive as investments in real estate and infrastructure equity performed well against their CPI-based benchmarks. The Staff Pension Plan follows the same currency hedging policy as the Endowment Fund in which only non-equity foreign investment currency exposures will be hedged back to Canadian dollars (e.g. foreign real estate and infrastructure investments). Currency hedging is managed passively by an external manager through currency forward contracts on major developed market currencies (e.g. US dollar, Euro, Pound Sterling, and Japanese Yen) with investment grade counterparties.

6.1%

5.5%

13.1%

20.9%

18.3%

18.6%

-0.6%

-0.5%

1.7%

7.2%

6.2%

10.1%

19.3%

14.6%

18.7%

19.6%

2.7%

-0.6%

2.2%

8.9%

-5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Infrastructure Equity

Real Estate

Private Equity

Emerging Market Equities

Global Equities

Canadian Equities

Infrastructure Debt

Real Return Bonds

Long Term Fixed Income

Total Fund

1 Year Performance to March 31, 2017

Staff Pension Plan Benchmark


Staff Pension Plan Risk Exposures IMANT collects information on portfolio holdings to analyze the risk exposures of the Staff Pension Plan including company concentration risk, currency risk, credit rating risk and interest rate risk. This is monitored by IMANT and the IMANT Board to ensure the fund is within established risk parameters. The information is aggregated from the underlying holdings in external manager pooled funds. Exposures at March 31, 2017 are provided for information below. Staff Pension Plan Total Fund Exposure by Geographical Region

Canada 65%

United States 16%

Western Europe

8%

Asia Pacific 6%

Other 5%


Staff Pension Plan Public Equity Exposure Geographical Region Sector Breakdown

Staff Pension Plan Fixed Income Exposure By Credit Rating Issuer Type

Sector Financials 22% Consumer Staples 15% Industrials 15% Utilities 10% Energy 9% Telecommunications 8% Consumer Discretionary 7% Technology 5% Materials 5% Real Estate 3% Healthcare 1%

Credit Rating AAA 20% AA 24% A 23% BBB 9% Other (mortgages/unrated) 24%

Federal 18%

Provincial 39%

Corporate 36%

Mortgages 7%

Canada 36%

United States 26%

Asia Pacific 17%

Western Europe

13%

Other 6%


Staff Pension Plan Private Equity Exposure

Fund Type

Staff Pension Plan Real Estate Exposure Geography Fund Type

Property Type

Property Type Office 28% Industrial 25% Residential 24% Retail 14% Hospitality 5% Other 3%

Primary Funds 20%

Co-Invest-ment Funds 29%

Fund of Funds 27%

Secondary Funds 30%

Canada 78%

USA 18%

Other 4%

Core RE 67%

Value Added RE

25%

Mezzanine Debt 7%

Opportun-istic RE

2%


Staff Pension Plan Infrastructure Exposure Geography Revenue Type*

* Excludes publicly listed infrastructure equity fund

Industry Sector Industry Sector

Transportation 25% Electric 23% Healthcare Services 13% Oil & Gas Services 8% Municipal 7% Telecommunications 5% Water 5% Engineering & Construction 5% Diversified/Other 9%

Contracted 42%

GDP Driven 23%

Regulated 22%

Other 13%

Canada 40%

USA 20%

UK 14%

Western Europe ex

UK 8%

South America

7%

Australia 7%

Other 4%


Supplemental Arrangement ($89.7 million) The Supplemental Arrangement, serving about 1,000 members, is a supplemental pension plan for UBC employees whose annual contributions exceed the limit allowed under the Income Tax Act for registered pension plans. The Plan is an extension of the UBC Faculty Pension Plan (FPP) and has a policy asset mix consisting of 60% equities and 40% fixed income. The policy asset mix and actual asset mix at March 31, 2017 are presented below.

Note: Returns are reported net of investment management fees starting April 2015. Returns stated are annualized for periods greater than one year. Numbers may not add due to rounding.

For the year, the Supplemental Arrangement returned 10.4% and was slightly behind the policy benchmark by 0.3%. Over a four-year period, the Fund returned 8.7% and was 0.1% behind the policy benchmark. There is no value add expected for the Fund as it is invested in an index fund structure to match the UBC Faculty Pension Plan asset mix to the best extent possible.


Cash and Cash Equivalents 0.0% 0.1%Bonds & Mortgages 40.0% 39.7%

Equities 60.0% 60.2%Canadian Equities 20.0% 19.7%Global Equities 35.0% 35.4%Real Estate (REITs) 5.0% 5.1%

Total 100.0% 100.0%

1 Year 2 Year 3 Year 4 Year 10 YearActual Return 10.4% 4.2% 7.7% 8.7% 5.4%Inv. Policy Benchmark 10.6% 4.3% 7.7% 8.8% 5.4%Value Added -0.3% -0.0% 0.0% -0.1% 0.0%


Core Working Capital Fund ($492.9 million) The Core Working Capital Fund (CWCF) consists of monies from the reserves of the University’s working capital pool. These include proceeds from provincial operating grants, tuition fees, private, corporate and government research grants, operating income, and funds for capital projects. The Fund is structured as a passive fixed income portfolio of Government of Canada, Provincial and agency bonds with a duration of approximately 2.5 years and a focus on capital preservation. Overall responsibility for the University's cash management rests with UBC Treasury. The following table contains the policy asset mix and actual asset mix at March 31, 2017.

Note: Returns are reported gross of investment management fees. Returns stated are annualized for periods greater than one year. Numbers may not add due to rounding. The policy benchmark consists of the combined return of 50% 2-year Canada bond and 50% 3-year Canada Bond. Prior to Oct 2014, the benchmark was 50% 3-year Canada bond and 50% 5-year Canada bond.

For the year, the CWCF returned 0.5% and was ahead of the policy benchmark return of 0.0% (see the above table). Over a four-year period, the Fund returned 1.7% and beat its benchmark return of 1.6%.


Bonds and Short Term Notes 100.0% 100.0%Total 100.0% 100.0%

1 Year 2 Year 3 Year 4 YearActual Return 0.5% 0.9% 1.9% 1.7%Inv. Policy Benchmark 0.0% 0.5% 1.7% 1.6%Value Added 0.5% 0.3% 0.2% 0.1%


Investment Management Fees Investment management fees charged by IMANT’s external investment managers can vary widely depending on the type of investments in the portfolios, the mandate size and whether there is a performance incentive fee. Below is a summary of total external investment management fees as a percentage of assets for the Endowment and Staff Pension Plan. The figures include base and incentive fees, some of which are invoiced and some of which are charged directly to the funds by investment managers.

Note: Infrastructure debt is classified as an alternative asset in the table above.

Overall fees are slightly higher for the Endowment Fund as a result of a larger allocation to alternative assets which typically charge higher base and incentive fees. Additionally, the Staff Pension Plan has an allocation to infrastructure debt (included in the alternative asset category), which charged higher front loaded fees in previous years and thus resulted in lower fees in later years. External investment management fees for the Supplemental Arrangement and Core Working Capital are 5 basis points (0.05%) and 3 basis points (0.03%), respectively.

In addition to the above, UBC portfolios also pay for other expenses including IMANT’s portfolio management fees, custody fees, transaction fees, performance measurement fees, and fund administration expenses. IMANT’s portfolio management fees are charged to UBC portfolios on a cost recovery basis. For the fiscal year, IMANT’s fees totaled $2.1 million, representing a cost of 7 basis points (0.07%) to UBC portfolio assets.

Endowment Fund Staff Pension Plan

Traditional Assets Base Fees 0.27% 0.20% Incentive Fees 0.07% 0.05% Subtotal 0.34% 0.25%Alternative Assets Base Fees 1.10% 0.86% Incentive Fees 0.00% 0.08% Subtotal 1.10% 0.94%

Overall 0.60% 0.50%


Endowment Fund and Staff Pension Plan Investment Policy Benchmarks The Endowment Fund and Staff Pension Plan investment policy benchmarks as of March 31, 2017 are provided below for reference. Endowment Fund

Asset Class Investment Policy Portfolio Benchmark Long Term

Policy Allocation

Fixed Income 20.0% Cash & Cash Equivalents FTSE TMX Canada 91 Day T-Bill Index 2.0% Bonds & UBC Debenture FTSE TMX Canada Universe Bond Index 13.0% Mortgages FTSE TMX Canada Short Term Bond Index + 1.0% 5.0%

Equities 40.0% Canadian Equities S&P/TSX Composite Index 15.0% Global Equities MSCI World Net Index (CAD) 15.0% Emerging Market Equities MSCI Emerging Markets Net Index (CAD) 10.0%

Alternatives 40.0% Private Equity MSCI World Net Index (CAD) + 2% (lagged 3 months) 10.0% Real Estate CPI + 4.0% 10.0% Infrastructure CPI + 4.5% 10.0% Absolute Return Strategy FTSE TMX CA 91 Day T-Bills + 5% 10.0%

Total 100.0% Staff Pension Plan

Asset Class Investment Policy Portfolio Benchmark Long Term

Policy Allocation

Fixed Income 45.0% Cash & Cash Equivalents FTSE TMX Canada 91 Day T-Bill Index 1.0% Long Term Fixed Income FTSE TMX Canada Long Term Overall Bond Index 29.0% Real Return Bonds FTSE TMX Canada Real Return Bond Index 5.0% Infrastructure Debt FTSE TMX Canada Long Term Federal Bond Index + 1.9% 10.0%

Equities 25.0% Canadian Equities S&P/TSX Composite Index 10.0% Global Equities MSCI World Net Index (CAD) 10.0% Emerging Market Equities MSCI Emerging Markets Net Index (CAD) 5.0%

Alternatives 30.0% Private Equity MSCI World Net Index (CAD) + 2% (lagged 3 months) 5.0% Real Estate CPI + 4.0% 12.5% Infrastructure Equity CPI + 4.5% 12.5% Absolute Return Strategy HFRI Fund of Funds: Conservative Index (CAD) 0.0%

Total 100.0%


Independent Auditor’s Report

INDEPENDENT AUDITORS' REPORT

To the Directors, UBC Investment Management Trust Incorporated Report on the Financial Statements

We have audited the accompanying financial statements of UBC Investment Management Trust Incorporated, which comprise the balance sheet as at 31 March 2017, and the statements of retained earnings (deficit), earnings and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for private enterprises, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility

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 comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the management's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the management's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.


INDEPENDENT AUDITORS' REPORT - Continued

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of UBC Investment Management Trust Incorporated as at 31 March 2017, and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for private enterprises.

CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, Canada 1 June 2017

The accompanying notes are an integral part of these financial statements.


Financial Statements and Notes

UBC INVESTMENT MANAGEMENT TRUST INCORPORATED Balance Sheet

31 March 2017

2017 2016 Assets

Current Cash $ 194,206 $ 192,849 Accounts receivable 18,858 1,913 Prepaid expenses 34,429 30,656

247,493 225,418 Equipment and leasehold improvements (Note 3) 29,843 34,050 Security deposit 5,941 5,941

$ 283,277 $ 265,409

Liabilities

Current Accounts payable and accrued liabilities (Note 4) $ 374,867 $ 334,878 Deferred lease inducement (Note 6) 15,855 284

390,722 335,162

Commitments (Note 7) Shareholder's Equity (Deficit)

Share capital (Note 8) 100 100 Retained earnings (deficit) (107,545) (69,853)

(107,445) (69,753)

$ 283,277 $ 265,409

APPROVED BY THE DIRECTORS: Director

Director



UBC INVESTMENT MANAGEMENT TRUST INCORPORATED Statement of Retained Earnings (Deficit)

For the year ended 31 March 2017

2017 2016 Balance - beginning of year $ (69,853) $ (70,713) Net earnings (loss) for the year (37,692) 860

Balance - end of year $ (107,545) $ (69,853)



UBC INVESTMENT MANAGEMENT TRUST INCORPORATED Statement of Earnings


2017 2016 Revenue Portfolio management fees (Note 5) $ 2,068,538 $ 1,746,447

Expenses Salaries and related benefits 1,358,434 1,081,693 Directors fees and expenses 224,312 196,414 Office lease 115,300 114,096 Executive search 116,032 64,052 Computer support and licenses 89,722 92,080 Travel, conferences, and seminars 84,742 64,665 Legal 37,696 4,919 Office 25,623 26,136 Audit and accounting 14,750 18,725 Telephone 11,427 12,259 Dues and memberships 8,560 10,418 Insurance 6,000 5,000 Advertising and promotion 2,107 2,314 Bank charges and interest 1,075 2,268 Consulting and research - 39,926 Amortization of equipment and leasehold improvements 10,450 10,622

2,106,230 1,745,587

Net earnings (loss) for the year $ (37,692) $ 860



UBC INVESTMENT MANAGEMENT TRUST INCORPORATED Statement of Cash Flows


2017 2016 Cash provided by (used in): Operating activities Net earnings (loss) for the year $ (37,692) $ 860 Items not involving cash Amortization of equipment and leasehold improvements 10,450 10,622 Amortization of deferred lease inducement (1,417) (3,409)

(28,659) 8,073 Changes in non-cash working capital balances Accounts receivable (16,945) 23,652 Prepaid expenses (3,773) (1,384) Accounts payable and accrued liabilities 39,990 10,813 Deferred lease inducement 16,988 -

7,601 41,154

Investing activity

Purchase of equipment (6,244) (5,406)

Net increase in cash 1,357 35,748 Cash - beginning of year 192,849 157,101

Cash - end of year $ 194,206 $ 192,849


UBC INVESTMENT MANAGEMENT TRUST INCORPORATED Notes to the Financial Statements


1. Incorporation

The Company was incorporated on 28 March 2003 under the provisions of the Company Act of British Columbia and commenced operations on that date. The Company is a wholly owned subsidiary of the University of British Columbia (UBC). The Company manages four of UBC’s investment funds and the Company earns a portfolio management fee for its services.

2. Summary of significant accounting policies

These financial statements are prepared in accordance with Canadian accounting standards for private enterprises. The significant policies are detailed as follows:

(a) Financial instruments (i) Measurement of financial instruments

The Company initially measures its financial assets and liabilities at fair value, except for certain non-arm’s length transactions. The Company subsequently measures all of its financial assets and financial liabilities at amortized cost, except for investments in equity instruments that are quoted in an active market, which are measured at fair value. Changes in fair value are recognized in net income. Financial assets measured at amortized cost include cash and accounts receivable. Financial liabilities measured at amortized cost include accounts payable and accrued liabilities.

(ii) Impairment Financial assets measured at cost are tested for impairment when there are indicators of impairment. The amount of the write-down is recognized in net income. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in net income.



2. Summary of significant accounting policies - Continued

(a) Financial instruments - Continued


(iii) Transaction costs The Company recognizes its transaction costs in net income in the period incurred. However, financial instruments that will not be subsequently measured at fair value are adjusted by the transaction costs that are directly attributable to their origination, issuance or assumption.

(b) Revenue recognition Fees for services are recognized as revenue when the services are rendered and billed. (c) Equipment

Equipment is recorded at cost and is being amortized over its estimated useful life on the following basis:

Furniture and fixtures 20% Declining balance Computer equipment 30% Declining balance

(d) Leasehold improvements

Leasehold improvements are recorded at cost and are amortized on a straight-line basis over six years.

(e) Impairment of long-lived assets

The Company tests for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability is assessed by comparing the carrying amount to the projected undiscounted future net cash flows the long-lived assets are expected to generate through their direct use and eventual disposition. When a test for impairment indicates that the carrying amount of an asset is not recoverable, an impairment loss is recognized to the extent carrying value exceeds its fair value.



2. Summary of significant accounting policies - Continued


(f) Income taxes

The Company follows the future income taxes payable method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Future income tax assets and liabilities are recognized for the estimated tax consequences attributable to temporary differences between the amounts reported in the financial statements and their respective tax basis, using enacted income tax rates. The effect of a change in income tax rates on future income tax assets and liabilities is recognized in operations in the period that the rate becomes substantially enacted.

(g) Use of estimates The preparation of financial statements in accordance with Canadian accounting standards

for private enterprises requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and revenues and expenses and disclosure of contingent assets and liabilities at the balance sheet date. Accounts subject to estimates include amortization rates of equipment and recognition of accrued liabilities. Management believes that the estimates utilized in preparing the financial statements are prudent and reasonable, however, actual results could differ from those estimates.

3. Equipment and leasehold improvements

Cost Accumulated Amortization

2017 Net

2016 Net

Furniture and fixtures $ 100,670 $ 87,107 $ 13,563 $ 16,317 Computer equipment 73,166 62,347 10,819 8,582 Leasehold improvements 73,606 68,145 5,461 9,151

$ 247,442 $ 217,599 $ 29,843 $ 34,050

4. Accounts payable and accrued liabilities

2017 2016

Accounts payable and accrued liabilities $ 354,016 $ 323,147 GST payable 20,851 11,731

$ 374,867 $ 334,878




5. Shareholder transactions

(a) During the year the Company entered into the following transactions with UBC:

2017 2016

Portfolio management fees $ 2,068,538 $ 1,746,447

Operating expenses $ 11,551 $ 8,107

These transactions were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the related parties.

(b) Included in accounts payable are amounts due to:

2017 2016 UBC $ 2,262 $ 1,269

6. Deferred lease inducement

2017 2016 Office lease $ 15,853 $ 284

The Company received a lease inducement of $16,988 as part of its office lease extension agreement during the year. This amount has been recorded as a deferred lease inducement and is being amortized as a reduction of rent expense on a straight-line basis over the term of the agreement. The deferred portion of the lease inducement will be amortized into income as follows:

2018 $ 3,397 2019 3,397 2020 3,397 2021 3,397 2022 2,265

$ 15,853




7. Commitments The Company has operating leases for the rental of equipment and office premises which expire April 2019 and November 2021 respectively. The minimum annual lease payments are as follows:

2018 $ 67,616 2019 68,371 2020 68,111 2021 67,950 2022 45,300

$ 317,348

8. Share capital

Authorized

100,000 common shares without par value

Issued

2017 2016 100 common shares $ 100 $ 100

9. Financial instruments

The Company is exposed to various risks through its financial instruments. The following analysis provides a measure of the Company’s risk exposure and concentrations at the balance sheet date, 31 March 2017.

(a) Liquidity risk Liquidity risk is the risk that a company will encounter difficulty in meeting obligations associated with financial liabilities. The Company is exposed to liquidity risk mainly in respect of its accounts payable and accrued liabilities. The Company manages liquidity risk by maintaining adequate cash. There has been no change to this risk exposure from 2016.


(b) Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company’s main credit risk relates to its cash and accounts receivable. Cash is in place with a major financial institution. The Company provides credit to its customers in the normal course of the operations. There has been no change to this risk exposure from 2016.

(c) 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: currency risk, interest rate risk and other price risk. The Company is mainly exposed to interest rate risk.

(d) Interest rate risk

Interest rate risk is the risk that the fair market value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its floating interest rate financial instruments. Floating-rate instruments subject the Company to a cash flow risk.

10. Non-capital losses

The Company has non-capital losses carried forward of $93,800 which are available to reduce the taxable income of future years. If not utilized, these non-capital losses will expire as follows:

2029 $ 30,050 2030 3,401 2031 10,032 2032 8,335 2036 2,358 2037 39,624

$ 93,800


2016-2017 IMANT Board of Directors

Orla Cousineau Executive Director, Pensions, UBC Staff and Faculty Pension Plans Diane Fulton Corporate Director Martin Glynn Corporate Director & Board Chair Alison Gould Chief Investment Officer, Insurance Corporation of BC Emilian Groch Corporate Director Brian Kenning Corporate Director & Vice Chair

Michael Korenberg Chair & Managing Director, The Wreath Group Member of the UBC Board of Governors Gordon MacDougall Corporate Director Lisa Pankratz Corporate Director Andrew Simpson Vice President, UBC Finance Kevin Smith Chief Financial Officer, Intracorp Member of the UBC Board of Governors

Standing (L-R): Michael Korenberg, Emilian Groch, Diane Fulton, Martin Glynn (Board Chair), Andrew Simpson, Kevin Smith, Lisa Pankratz Sitting (L-R): Brian Kenning (Vice Chair), Orla Cousineau, Alison Gould, Gordon MacDougall


Investment Managers by Mandate

As at March 31, 2017

Manager Mandate(s)Market Value

($ millions)

Canadian Fixed Income & Mortgages 1,264.4$ Cash and Cash Equivalents N/AACM Advisors Commerical MortgagesAddenda Capital Commerical MortgagesManulife Asset Management Long BondPhillips, Hager & North Investment Management Enhanced Long BondState Street Global Advisors Universe Bond Index, Real Return Bond Index

Currency Hedging N/AState Street Global Advisors Passive

Infrastructure Debt 149.2 Fiera Capital Corporation Infrastructure Debt - CanadianIAM Private Debt Group Infrastructure Debt - CanadianStonebridge Financial Corporation Infrastructure Debt - Canadian

Canadian Equity 449.3 Beutel, Goodman & Company Ltd. Canadian DividendBlackRock Asset Management Enhanced Canadian IndexLeith Wheeler Investment Counsel Ltd. Canadian Value

Global Equity (including Emerging Markets) 668.8 Acadian Asset Management Emerging Markets Managed VolatilityArrowstreet Capital EAFEState Street Global Advisors US IndexTD Asset Management Global Low VolatilityVontobel Asset Management Emerging Markets Growth at a Reasonable

Price

Private Equity 123.6 Commonfund Fund of funds - GlobalFulcrum Capital Partners Buyout/Mezzanine - GlobalState Street Global Advisors Buyout - GlobalHamilton Lane Co-investment - GlobalAzimuth Capital Management Energy - North AmericaLexington Capital Secondaries - GlobalMatlinPatterson Global Advisors Distressed - GlobalNB Alternatives Secondaries - GlobalNorthleaf Capital Fund of funds - GlobalPantheon Ventures Fund of funds - GlobalThe Carlyle Group Buyout - US and Asia


Manager Mandate(s)Market Value

($ millions)Real Estate 306.6 Aetos Capital Real Estate - AsiaBritish Columbia Investment Management Corporation (bcIMC)

Real Estate - Canada

Bentall Kennedy Real Estate - CanadaBrookfield Asset Management Real Estate - US, GlobalConcert Properties Real Estate - CanadaFiera Properties Ltd. Real Estate - CanadaGPM Investment Management Real Estate - CanadaLaSalle Investment Management Real Estate - Canada, Asia, JapanSecond City Real Estate Real Estate - USStarwood Capital Real Estate - US, Asia, EuropeWoodbourne Canada Management Real Estate - Canada

Infrastructure Equity 397.5 AMP Capital Infrastructure Equity - GlobalDirect co-investments (administered by Kindle Capital) Infrastructure co-investments - Worldwide

British Columbia Investment Management Corporation (bcIMC)

Infrastructure Equity - Global

Fengate Real Asset Investments Infrastructure Equity - Canada (public-private partnerships)

Macquarie Infrastructure Partners Infrastructure Equity - North AmericaDeutsche Asset Management Infrastructure Equity - EuropeIFM Investors Infrastructure Equity - GlobalRARE Infrastructure Infrastructure Equity - Global (listed equity)

Absolute Return Strategy 107.6 AQR Capital Management Quantitative Multi-StrategyBlackRock Alternative Advisors Hedge Fund of Funds (in wind up)Blackstone Alternative Asset Management Mortgage Credit (in wind up)Federal Way Asset Management Hedge Fund of FundsStandard Life Investments Fundamental Multi-Strategy

Balanced Funds 99.7 BlackRock Asset Management Passive IndexJarislowsky Fraser Balanced - Fossil Fuel Free

Total Assets Under Management 3,566.6$

Endowments with Investment Restrictions 184.9 UBC Foundation Canadian EquityVancouver Foundation BalancedJarislowsky Fraser Balanced

Grand Total 3,751.4$


Advisors and Service Providers Auditor Rolfe, Benson LLP Chartered Accountants Custodians/Administrators Northern Trust, Sun Life Financial Legal Counsel Bull, Housser & Tupper LLP Performance Consultant Northern Trust

UBC Investment Management Trust Inc. 1055 West Hastings Street, Suite 1188

Vancouver, BC V6E 2E9 Canada

Tel: +1 (604) 681-7858 Fax: +1 (604) 681-7895

www.ubcimant.ca

Documents

2017 Annual Report - UBC IMANT · respective policy benchmarks has totaled $60.7 million. Personally, I am delighted to have joined UBC IMANT the end of towards 2016 and have found