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0 | UBC IMANT 2018 Annual Report .

UNIVERSITY OF BRITISH COLUMBIA

INVESTMENT MANAGEMENT TRUST INC.

2018

Annual Report


Message from ................................................................................................. 2

the Board Chair .............................................................................................. 2

Message from the President ...................................................................... 4

Overview of IMANT ...................................................................................... 7

Responsible Investing ....................................................................................... 11

Risk Management ............................................................................................. 13

Manager Selection Process ............................................................................... 15

Market Commentary ........................................................................................ 16

Funds under Management ............................................................................... 18

Independent Auditor’s Report .......................................................................... 30

2017/18 IMANT Board of Directors .................................................................. 43

IMANT Staff ...................................................................................................... 44

Advisors and Service Providers ......................................................................... 45

Table of Contents


Message from

the Board Chair

On behalf of the Board of Directors,

management and staff of UBC Investment

Management Trust Inc. (IMANT), I am very

pleased to provide this annual update of

IMANT’s activities to the UBC community and

stakeholders.

IMANT continues to focus on strengthening

the long-term performance of the funds

under management commensurate with

their agreed upon level of risk. To that end, it

was another productive year for the board

and staff of IMANT with many projects

undertaken. Rajiv Silgardo, our President and

CEO, who has led the team since the start of

2017, continues to execute the five-year

business plan that he proposed and that the

board endorsed. The IMANT team continues

to strengthen the investment and operational

procedures at IMANT as well as relationships

within the UBC community, our clients and

the broader investment community through

various initiatives.

The IMANT team worked closely with the

UBC Staff Pension Plan (SPP) Board and their

consultant to review their long-term asset

mix to match the SPP’s risk/return

requirements. A revised asset mix has been

proposed and IMANT’s staff is providing

possible investment strategies across the

new asset classes and timelines for

implementation. It is anticipated that the

new policy asset mix and Statement of

Investment Policies and Procedures will be

approved by the SPP Board and the

University later in 2018.

For UBC’s main Endowment pool,

commitments were made to two new

investment strategies; global small cap

equities and private debt.

Another major initiative undertaken in

2017/18 was to review the IMANT Board’s risk

appetite/tolerance across several risk factors

which are broadly categorized as investment,

governance and operational risks. This work

will continue into 2018/19 and will be

reflected in the manager selection and

ongoing risk monitoring conducted by

IMANT’s staff and reported to the Board.

With uncertainty in the markets, lower long-

term expected returns and the return of

volatility, the IMANT team is focused on

ensuring that the funds under management

are invested with the goal of maximizing

return within the risk tolerances of the funds

and ensuring that the risk budgets are

utilized.


In my first year as Chair, I would like to

acknowledge the leadership of a number of

board members who have rotated off the

Board: IMANT’s past Chair Martin Glynn, who

has served UBC in various capacities over the

years; Vice-Chair Brian Kenning; and Michael

Korenberg, who has recently been appointed

to the role of Chair of the UBC Board of

Governors. We are grateful for their

contributions to IMANT and to their ongoing

support of the organization.

This year we welcomed a new board member,

Nancy McKenzie, who is a member of the

UBC Board of Governors. With her

background and her role on the Board of

Governors, Nancy will bring invaluable

insights to the IMANT Board. In addition, I

would like to acknowledge a board member

who has recently been appointed as Vice-

President, Finance and Operations for UBC –

Peter Smailes. Peter brings a wealth of

experience from his various roles within UBC.

We are grateful for his expertise and

congratulate him on his recent appointment.

To the IMANT team, thank you for your hard

work and commitment to our clients and the

UBC community.

We will continue to work diligently to fulfill

our mandates and to meet the return

objectives of the funds entrusted to us. We

look forward to continuing to strengthen the

working relationship with all UBC’s

stakeholders and beneficiaries.

Lisa Pankratz

Chair, IMANT Board of Directors


Message from

the President

It is my pleasure to present UBC Investment

Management Trust’s 2018 Annual Report on

the University of British Columbia’s

investment portfolios for the fiscal year

ended March 31, 2018.

Total assets managed by IMANT across the

five different funds aggregated to just over

$4.0 billion as of March 31, 2018. Within that

total the two largest portfolios accounted for

approximately $3.3 billion. UBC’s main

Endowment pool increased from $1.45 billion

to $1.62 billion year over year. And the

portfolio earned a substantial return of 7.7%

over the period net of external investment

management fees. The UBC Staff Pension

Plan (SPP) also posted a similarly strong net

return of 7.1% and grew its assets from $1.53

billion to $1.66 billion over this period.

While last year’s returns were appreciable,

our clients’ and IMANT’s focus is on the longer

term. And those results have remained very

healthy. For example, over the last five years

the Endowment’s main pool earned 9.6% per

annum while the SPP with its heavier fixed

income exposure gained 8.2% per annum.

Moreover, both portfolios have handily

outperformed their policy benchmarks, with

the combined value added being $55 million.

INVESTMENT HIGHLIGHTS

UBC STAFF PENSION PLAN

2018 return 5- Year return

7.1% 8.2%

UBC ENDOWMENT

Main Pool

2018 return 5- Year return

7.7% 9.6%

Sustainable Future Pool (Inception March 2017)

2018 return

7.5%

UBC IMANT Assets Under Management

$ 4,060 million

a s o f M ar ch 3 1 , 20 18


IMANT successfully invested the UBC

Sustainable Future Pool (Pool) at the

beginning of fiscal 2017/18. This Pool which is

a part of UBC’s Endowment has a mandate to

generate returns that maintain inter-

generational equity while investing in a

manner which mitigates climate change. As a

result, the equity component of the portfolio

is designed to exclude companies in fossil fuel

industries and in the other sectors to invest

only in companies with lower carbon dioxide

emissions. So far, the Pool has certainly

achieved its dual objectives. Its twelve-month

return was 7.5%, very similar to the 7.7%

return on the main Endowment pool, while

carbon dioxide emissions from portfolio

companies were over 80% lower than those

from the companies in its policy benchmark.

Additionally, during 2017/18 IMANT together

with UBC Finance, and with the UBC Board of

Governors’ approval, restructured the policy

asset mix for the Working Capital Fund. The

new asset mix maintains a similar risk profile

as before, however it adds asset classes that

are expected to drive a meaningful increase in

income. The restructured portfolio was fully

implemented as of the end of March 2018.

Other than the above, we had several key

objectives for fiscal 2017/18. Number one was

to update IMANT’s existing investment

beliefs and mission statement. This was

necessary to ensure that we continued to

deliver investment returns that are

appropriate to each of our clients’ evolving

needs and risk tolerances, especially in these

times of heightened capital markets and

geopolitical uncertainty. A second goal was to

enhance IMANT’s relationships with our

clients through regular support and

communications. As a result, we have worked

very closely with the SPP Board as they have

undertaken plan sustainability and asset mix

studies. That process is now nearing

completion and with very positive outcomes.

Our third priority was to build out IMANT’s

analytical toolkit and to streamline and

automate several of our processes. And our

final initiative for 2017/18 was to enhance the

overall visibility of IMANT within the broader

Canadian investment community via

purposeful participation in industry activities

and events. I am pleased to say that we have

either successfully completed or made

significant strides toward all these objectives

over this past year.

As mentioned in the Board Chair’s report, in

September 2017 we said good bye to two long

time directors at IMANT – Brian Kenning and

our Chair, Martin Glynn. In addition, Michael

Korenberg, ex-Chair of the Finance

Committee of the UBC Board of Governors

also left our Board upon becoming Chair of

the UBC Board of Governors. I feel very

fortunate to have had the opportunity to

work with and to learn from all of them. Their

dedication and passion for UBC and IMANT

will be missed. We thank them and wish them

continued success in the future. Our new

Chair, Lisa Pankratz, brings a long and

distinguished history in asset management

and in corporate and public sector

governance to the task. Her insights, energy

and enthusiasm for the role are already


having a significant impact on the

organization. We also welcomed two new

Board members recently. Peter Smailes, the

new Vice-President, Finance and Operations

at UBC, officially joined the IMANT Board in

September 2017. Nancy McKenzie, the new

Chair of the Finance Committee of the UBC

Board of Governors, officially started on April

1, 2018.

The IMANT team remains focused on

fulfilling the goals and objectives of the funds

under our care and to fully joining with our

clients and supporting them in all their

investments-related endeavours. And I look

forward to partnering with our reconfigured

Board and our UBC colleagues as we position

IMANT for continued success in the years to

come.

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 to provide comprehensive

portfolio management services and related

advice to UBC. IMANT's mission is to ensure

that assets under management are managed to

maximize net real returns commensurate with

each fund’s objectives, liability requirements

and risk parameters.

UBC, 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 IMANT. The UBC

Board of Governors discharges its fiduciary

responsibility by appointing the IMANT Board of

Directors, who in turn appoints the IMANT

President and CEO to manage the day-to-day

administration and investment of the funds.


Governance and

Organizational Structure

UBC Board of Governors

UBC IMANTBoard of Directors

Investment Committee

InvestmentSub-Committee

Governance & HR Committee

Audit Committee

UBC IMANT

President & CEO

Director, Manager Relations

& Investment Operations

Director, Quantitative

Analysis& Strategic Research

Associate Director, Analytics

& Research

Analyst, Investment

Management

Manager,Administration

UBC SPP Board of Directors

9 | UBC IMANT 2018 Annual Repor t .

IMANT’s

Board of Directors

IMANT’s Board is currently comprised of eight

directors - five unrelated members from the

business community and three UBC-related

members. Board members unrelated to UBC

are appointed by the UBC BOG on the

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 Investment Sub-Committee is an additional

committee of the Board but is struck on an ad

hoc basis for significant investments-related

projects undertaken at IMANT.

The IMANT Board discharges its main

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

• Approving individual asset-class

guidelines and certain investment

transactions

• Approving IMANT’s manager

selection process

• Monitoring and evaluating IMANT’s

investment performance and cost

effectiveness against objectives and

benchmarks

Responsibilities of

IMANT’s Staff

Return requirements and risk preferences are

established by IMANT’s clients (various groups

at the University) and factored into the

investment policy recommendation for each

portfolio. 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 IMANT

and 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, 2018, IMANT managed

approximately $4.0 billion of UBC and UBC-

related investment 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 staff’s responsibilities include:

• Preparing the long-term investment

policies appropriate for the relevant

funds’ obligations and risk

tolerances for recommendation to

the IMANT Board (for submission to

the UBC BOG);

• Implementing the long-term policy

asset mixes by recommending the

overall investment manager

structure, and asset class guidelines;

• 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;

• Monitoring and evaluating, as well as

appointing and terminating external

investment managers;

• Reporting regularly to the IMANT

Board, the SPP Board and UBC BOG;

and

• Ensuring efficient and cost-effective

day to day operations.


Responsible

Investing

In 2010, the UBC Responsible Investment Policy

Committee for the Endowment began

discussions with external experts and other

universities, as well as a review of best practices,

to determine an effective approach to

responsible investment for UBC’s endowment.

An initial strategy was adopted in June 2013. The

strategy identified ongoing investment in

campus environmental and social projects,

committed UBC to join the Canadian Coalition

for Good Governance, and appointed a task

group to recommend further policy changes to

the Board.

After discussion with industry experts and peer

institutions, the task group made several

recommendations outlining options for

incorporating ESG factors in the investment

process. The UBC Board of Governors approved

the policy on April 14, 2014.

The University’s Responsible Investment (RI)

Policy commits UBC and IMANT 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. All

public equity managers must incorporate


ESG considerations in their investment

decision making.

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 – where feasible,

UBC and IMANT will engage issuers,

regulators, and industry groups (through

third parties) when it is believed that a

collective approach to engagement will be

more effective than direct engagement in

addressing an issue.

We are pleased to report an ongoing increase in

the number of our external public and private

asset managers who incorporate ESG principles

in their investment decisions. Additionally, all

but one public equity managers provide us with

regular reports that describe their engagement

activities. The much-improved engagement

transparency enables us to better understand

issues and enhance our direct engagement

efforts.

Furthermore, it has been gratifying for UBC and

IMANT to see a number of our external

investment managers being recognized by the

investment community as leaders in advancing

ESG principles.

As active investors we continue to serve on the

Pension and Investment Association of Canada

(PIAC) Investment Stewardship Committee to

add our voice to responsible investment

initiatives advanced by PIAC. As well, we remain

a full member of the Canadian Coalition for

Good Governance.

Our efforts have been recently recognized by

the Canadian Association of University Business

Officers (CAUBO) with an article in January 2018

on the creation of the UBC Endowment

Sustainable Future Pool as a separate and

significant part of the UBC Endowment.

The Sustainable Future Pool aims to deliver

required returns that support academic

programs while avoiding investments in fossil

fuel energy and materially reducing the amount

of carbon dioxide emitted by portfolio

companies. The Pool was established as an

option for donors that wish to add non-financial

objectives to return objectives.

The Sustainable Future Pool had a successful

first year of operation earning required returns

and achieving its sustainability goals by not

investing in fossil fuel energy sector and

reducing carbon dioxide emissions by over 80%

compared to traditional approaches.


Risk Management

IMANT’s approach to risk management begins

with a robust governance structure,

implemented by experienced staff and

supported by detailed analytics. It is based on

current holdings information and informs us

where different risks are deployed and how they

benefit the portfolios.

Governance

IMANT’s risk management framework is

grounded in explicit recognition of investment

and business risks. Each type of risk is evaluated

with respect to its return generating potential.

And all risks are assigned a specific level of risk

appetite that forms the basis for establishing

their risk limits and steps for risk mitigation.

We utilize a “traffic light” approach to escalating

governance requirements in managing the

endowment and pension assets. When risk

estimates are comfortably below their risk limits

IMANT’s staff exercise their investment

discretion without involvement from the IMANT

Board. As risk estimates come closer to risk

limits, governance requirements increase and

IMANT’s staff are required to involve IMANT’s

Board. This is typically done by providing explicit

risk mitigation steps in case a given risk

parameter reaches its limit. In case of a limit

breach, governance escalates further and

IMANT’s Board must decide to either

implement measures to mitigate that risk or to

authorize a higher limit.


Implementation

Investment returns required to support

endowment and pension commitments come

with a degree of uncertainty and a risk of loss.

The overall risk profile of the endowment and

the pension portfolio is expressed by their

respective policy asset mixes which in turn

reflect different financial commitments and risk

appetites. When designing these policy asset

mixes our risk management process relies on a

combination of qualitative and quantitative

approaches, realistic assumptions and multiple

sets of analyses. The goal is to generate robust

asset mixes with high probabilities of delivering

investment outcomes.

Risk management at the asset mix level involves

regular rebalancing of assets to remain within

asset class portfolio weight ranges and

monitoring realized volatility of returns to

ensure that future volatility remains below

established limits. Other risk metrics include

loss estimates during adverse markets and

during a market crisis.

Since IMANT implements a manager-of-

managers model where external investment

managers specializing in specific asset classes

and strategies are responsible for day-to-day

investment decisions, our risk management

process is based on transparency and

aggregation of holdings and exposures across

multiple managers.

Oversight, Monitoring and

Reporting

To ensure that our analysis is based on current

information rather than relying on historical

data, each manager provides us with their

portfolio holdings. All manager holdings are

recorded in a portfolio analytics system which

enables us to form a detailed understanding of

the types of holdings that a manager is invested

in. This technology also allows us to evaluate

individual portfolios against the relevant

benchmark for a given asset class and confirm

the manager’s consistency with the investment

style that they implement.

Our risk management efforts extend beyond

this manager oversight role. We aggregate

investment holdings of managers within an

asset class and across the entire portfolio to

monitor for a buildup of concentrated exposures

or unintended exposures. In the case of liquid

assets, this process enables us to adjust

portfolio holdings by changing the amounts

invested in the different strategies. Since more

than a third of our investments are in illiquid,

private assets we can also use holdings-level

transparency to guide our decisions on where to

invest next to ensure that appropriate portfolio

diversification is maintained.

To be able to combine exposures from both

public and private investments we use public

securities as proxies for our private holdings.

This enables us to estimate the total amount of

risk in our portfolios and to evaluate differences

between our portfolios and the policy asset mix.

Those active exposures are intended to improve

the risk-return profile of the portfolio. Currently,

we are developing a framework for constraining

the amount of active risk and evaluating the

benefits of active management with a goal of

greater efficiency in utilizing the limited risk

budget.

15 | UBC IMANT 2018 Annual Report

Manager Selection Process

A major component of IMANT’s ongoing

operations and day-to-day activities involves

the monitoring, measuring and evaluation of

existing and potential investment managers. A

manager search may be initiated for several

reasons including the addition of a new asset

class to a fund’s asset mix, being underweight to

an asset class and in the private assets classes

vintage year diversification considerations.

Unfortunately, another reason is for manager

issues whether related to persistent

underperformance, key staff changes, changes

in investment philosophy, style or even

ownership.

When a search is undertaken potential

managers are sourced from a number of areas.

In certain cases, we will consider using the

consulting community to assist in the search

particularly if the universe of potential

managers is very broad, i.e. non-Canadian

public equity managers. In addition, we also use

internal and industry databases, conference

networking, discussions with peers, particularly

for private assets and feedback from our

existing managers.

Whether for public or private asset classes, we

begin with a long list of potential managers that

we review to see how well they may fit with our

current investment programs from a risk

perspective, for diversification purposes and

potential to add return. For public assets from

our long list of managers we generally

undertake more in-depth reviews of between

three and five firms. In the private asset classes

the short list may be longer and the time for a

commitment can also be stretched, since these

relationships can last for ten years or more.

Thus, more due diligence is required. As with

most investors, when reviewing either private or

public managers we consider several factors,

including the firm, the people, the investment

philosophy and process, fit with our investment

programs, performance and fees. We also have

to consider whether the manager has an

investment vehicle that is suitable for Canadian

institutional investors.

Depending on the asset class, a different

member of the investment team will lead the

search process and present their work to the rest

of the team for ultimate approval. Prior to any

funding or commitment all questions from the

investment team must be satisfied. Once a

manager is funded or committed to, the

individual originally conducting the search will

generally be responsible for the ongoing

relationship with the manager. This includes

meetings with the manager, monitoring

performance and reporting on any significant

events at the firm. All manager changes are

reported to IMANT’s Board.


Market Commentary

Ten years after the start of the Great Recession,

global economic growth seems to be on a

synchronized upturn, with the US, China and the

rest of Asia driving the growth story. However,

an extended period of market calm was

disrupted during the first calendar quarter of

2018, as investors feared higher interest rates

and borrowing costs could “derail global growth

and erode corporate profitability”. Some major

headlines during the last 12 months included

NAFTA re-negotiations, protectionist and

global trade war rhetoric, weak Canadian oil

prices, and ongoing political issues in Europe.

Thus, the twelve-month period ending March

2018 was a year of mixed equity returns as

capital markets diverged between developing

countries and developed countries. Emerging

markets outpaced developed markets returning

20.8% over one year, as growth was supported

by strong commodity prices that aided large

export countries such as Brazil and Russia.

Canada’s S&P/TSX Composite hit all-time highs

in January 2018 but finished with a difficult

quarter and a disappointing return of 1.7% for

the one year ended in March 31, 2018

overshadowed by uncertainty over NAFTA.

Meanwhile, the US market gained 10.2%,

propelled by the Trump administration’s 2017

Tax Cut and Jobs Act. However, changes in trade

policy and the prospect of rising rates added to

that market’s volatility in the first quarter of

2018.

Other international developed market (EAFE)

equities have benefited from positive economic

growth, which has led to both the European

Central Bank and the Bank of Japan indicating

the possible winding down of economic

stimulus.

Among risk factors, growth strongly

outperformed value, whereas sentiment and

momentum strategies did not generate their

typically expected returns. Within market

sectors, technology and healthcare performed

very well while energy struggled to generate

positive returns.

Domestically, the Bank of Canada pushed its

overnight rate to a nine-year high of 1.25%.

However, Canadian bond yield curves flattened

while corporate spreads widened as concerns

grew over the prospects for the Canadian

economy, causing investors to shift into the

safety of bonds and away from volatile equity

markets.

Currently the consensus view remains that all

alternative assets are expensive. Private equity

and infrastructure assets have been trading at

high price multiples. And in real estate,

estimated returns are low in Canada and

globally. Moreover, the number of managers

and funds as well as the size of funds raised


across the private markets has grown very

significantly in recent years.

At the start of 2018, including private debt

funds, there was an estimated $1.4 trillion USD

of uninvested cash available to managers across

the private markets. Finding investments that

match return objectives has therefore been

more difficult and return expectations are lower.

That said, returns across the private markets are

still expected to exceed those generally

available in the public markets.

Within alternatives, private debt has been one of

the faster growing asset classes as banks have

continued to back away as lenders to small and

mid-cap companies and private debt funds have

become the source of loans to these companies.

While this has been the case in the US since the

late 1990s, private debt is now also a growing

source of capital for small and mid-cap

companies in Europe. With the increasing

number of managers in the private debt market,

over 150 in the US and over 50 in Europe,

competition for deals has increased. Even with

this competition, return expectations are higher

relative to other fixed income products and

investor appetite remains strong.

Absolute return strategies have lagged equity

markets, delivering mid-single digit returns over

the last 12 months. Within this asset class equity

strategies provided stronger returns while

macro focused approaches were not even able

to keep up with inflation.

ASSET CLASS INDEX 1 YR 4 YR 10 YR

CASH FTSE TMX CAN 91 DAY T-BILLS 0.8 0.7 0.9

UNIVERSE BONDS FTSE TMX CAN UNIVERSE BOND 1.4 3.4 4.4

LONG BONDS FTSE TMX LONG TERM BOND 5.1 6.2 6.5

REAL RETURN BONDS FTSE TMX CAN REAL RETURN BOND 3.4 3.6 4.5

CANADIAN EQUITIES S&P/TSX 1.7 4.8 4.5

US EQUITIES S&P 500 10.2 15.7 12.0

INTERNATIONAL EQUITIES MSCI EAFE 11.0 8.0 5.1

GLOBAL EQUITIES MSCI WORLD 9.8 11.7 8.3

EMERGING MARKETS EQUITIES MSCI EMERGING 20.8 10.9 5.4

ABSOLUTE RETURN STRATEGIES HFRI FOF: CONSERVATIVE -0.1 6.2 3.6

CAD/USD CHANGE 3.3 -3.8 -2.2

CAD/EUR CHANGE -10.2 -1.0 0.2

CAD/JPY CHANGE -1.3 -3.0 -1.6

CAD/GBP CHANGE -7.8 0.4 1.2

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.


Funds under Management

At March 31, 2018, IMANT provided oversight on

$4.1 billion of assets across five portfolios (listed

in the chart on the left). Each portfolio has

different risk and return objectives and varies in

policy asset mix as well as corresponding

performance results. The Working Capital Fund

is part of the University’s working capital and is

a shorter-term fixed-income portfolio. The

other four are all balanced pools 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 in the Endowment

and Staff Pension Plan portfolios.

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.

Note: Changes in market values reflect

investment earnings as well as cash flows into

and out of the portfolios. There are an additional

$220 million of endowed assets at other

foundations that support programs at UBC that

are not listed in the chart (see page 23). IMANT

reviews the performance results of these

investments on behalf of the University but does

not have discretion over these assets.

$1.661 $1.525

2018 2017

Staff Pension Plan

Billion

$10

2018 2017

Sustainable Future Pool

$95 $90

2018 2017

Supplemental Plan

$1.621 $1.449

2018 2017

Endowment Main Pool

$677 $493

2018 2017

Working Capital Fund

Million

Billion Billion

Million

Million

Million

Million NA

Billion


Endowment Funds

UBC’s Endowment Funds are 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 benefits over

3,000 specific areas throughout all faculties at UBC, helping to support learning, teaching, and research

for the current and future generations. Of the five different pools that comprise UBC’s Endowment Funds

IMANT oversees the Main Pool and the Sustainable Future Pool.

Main Pool

$1.622 billion

The Endowment Main Pool 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, 2018.

ASSET CLASS ACTUAL MIX LONG TERM POLICY

CASH 0.4% 2.0%

UNIVERSE BONDS 6.0% 6.0%

PRIVATE DEBT & MORTGAGES 7.0% 5.0%

UBC DEBENTURE 6.3% 7.0%

TOTAL FIXED INCOME 19.7% 20.0%

CANADIAN EQUITIES 8.9% 10.0%

GLOBAL EQUITIES 19.6% 15.0%

GLOBAL SMALL CAP EQUITIES 5.7% 5.0%

EMERGING MARKETS EQUITIES 10.8% 10.0%

TOTAL EQUITIES 44.9% 40.0%

PRIVATE EQUITY 4.6% 10.0%

REAL ESTATE 9.0% 10.0%

INFRASTRUCTURE EQUITY 14.0% 12.5%

ABSOLUTE RETURN STRATEGIES 7.8% 7.5%

TOTAL ALTERNATIVES 35.4% 40.0%

TOTAL 100% 100% Numbers may not add due to rounding.

As the table shows, the Main Pool is underweight alternatives by approximately 5% and similarly

overweight public equities by 5%. 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. The above underweight in alternatives is driven by the very slow pace of capital

calls primarily in private equity through calendar 2017. Because of this slow take up of our commitments,

IMANT has created additional exposure to public equities as the closest possible hedge to the

underweight in private equity exposure. Hence the almost mirror image overweight in public equities.


Additionally, as a consequence of this pattern of capital flows, the Endowment tends to make

commitments that exceed its target policy mix to try to come close to its policy allocation to these asset

classes. Combining actual investments and outstanding commitments, the Endowment has 12.9%

allocated to private equity, 12.1% allocated to real estate and 14.6% allocated to infrastructure equity

compared to policy weights of 10.0% each for private equity and real estate and 12.5% for infrastructure.

As alternative investment commitments are drawn by investment managers, funds will be provided from

the overweight allocation in global equities. During 2017/18, IMANT also commenced transitioning the

portfolio to the long-term policy asset mix, which was approved in the fall of 2016. This includes the

addition of private debt and global small cap equities and an increased allocation to infrastructure

equities. Below are new investments and commitments made in 2017/18:

• Global equities: investment in a large cap index fund and an active small cap equity fund

• Private debt: commitment to a US junior debt fund and a European levered senior debt fund

• Private equity: commitments to US, European and global co-investment funds

Performance Analysis and Comparison

For the Endowment 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 required return is equal to the sum of the Endowment’s spend rate,

administrative expenses, and inflation.

1 YEAR 2 YEARS 3 YEARS 4 YEARS 10 YEARS

REQUIRED RETURN 7.0% 6.4% 6.7% 5.6% 6.0%

ACTUAL RETURNS* 7.7% 9.9% 6.4% 8.2% 6.1%

INV. POLICY BENCHMARK 8.5% 9.9% 6.4% 8.2% 6.3%

VALUE ADDED -0.8% -0.1% 0.1% 0.0% -0.2% *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’s actual return for the one year ended March 31, 2018 and for all periods other than the

10-year period has been consistently above the required return objective for the Fund. On a 10-year basis,

the Endowment Main Pool narrowly missed its required return target due to the 2008/09 Global Financial

Crisis and the higher spend rate requirement prior to 2009. The Main Pool’s return is also compared to

its policy benchmark portfolio return to gauge the effectiveness of asset mix implementation. The policy

benchmark portfolio consists of the 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.

As can be seen in the table and may occur from time to time, the Main Pool’s one-year return of 7.7% was

80 basis points behind its policy benchmark return of 8.5%. This underperformance was mainly

attributable to the underweight in private equity, and private equity and emerging market equity


managers trailing very strong public market benchmarks (20.8% and 20.7% respectively). In addition, the

Endowment’s absolute return strategy investments also lagged their benchmarks. Underperformance in

these asset classes was largely offset by outperformance achieved by Canadian equities, real estate and

infrastructure investments. Over the two through five-year periods, the Main Pool either matched or

outperformed its benchmark portfolio return. However, it did lag its benchmark slightly over the 10-year

period.

The Endowment’s currency hedging policy includes hedging back to Canadian dollars non-equity foreign

investment currency exposures (i.e. foreign real estate, infrastructure, private debt and absolute return

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.

1-Year Performance

ASSET CLASS ENDOWMENT MAIN POOL BENCHMARK VALUE ADDED FIXED INCOME UNIVERSE BONDS 1.5% 1.4% 0.2% PRIVATE DEBT & MORTGAGES 2.5% 0.7% 1.8% UBC DEBENTURE 5.1% 5.1% 0.0% EQUITIES CANADIAN EQUITIES 3.9% 1.7% 2.1% GLOBAL EQUITY 9.6% 9.8% -0.2% EMERGING MARKETS EQUITIES 15.3% 20.8% -5.5% ALTERNATIVES PRIVATE EQUITY 4.2% 20.7% -16.5% REAL ESTATE 9.3% 5.8% 3.5% INFRASTRUCTURE EQUITY 10.0% 6.4% 3.7% ABSOLUTE RETURN STRATEGIES 1.4% 5.8% -4.4%

Numbers may not add due to rounding.

Sustainable Future Pool

$10.4 million AUM

The newly established UBC Sustainable Future Pool expands the goals of the Main Pool of the UBC

Endowment to include two non-financial considerations; (i) exclusion, or a meaningful reduction of

investments in companies that derive a significant portion of their profits from fossil fuels, and (ii) a focus

on material reduction in CO2 emissions by portfolio companies.

Long-Term Policy Asset Mix

Because of its small size it is not practically feasible to invest the assets of the Sustainable Future Pool in

alternative financial assets including real estate, infrastructure or private equity. Therefore, its long-term

policy asset mix is restricted to public equity and fixed income assets (please refer to the March 31, 2018


asset mix below). The Pool is underweight fixed income as part of its active investment strategy

reflecting an expected increase in interest rates. The following table contains the actual and long-term

policy asset mix as of March 31, 2018.

ASSET CLASS ACTUAL MIX LONG TERM POLICY

BONDS & CASH 26.9% 30.0%

GLOBAL LOW CO2 EMISSION EQUITIES 73.1% 70.0%

TOTAL 100.0% 100% Numbers may not add due to rounding.


As with the Main Endowment Pool, the Sustainable Future Pool needs to maintain its inflation-adjusted

value to be sustainable and generate required returns while maintaining intergenerational equity for its

beneficiaries. Due to a narrower investment opportunity set that does not include alternative assets, the

spend rate of the Sustainable Future Pool is set to 3.5%.

1 YEAR

REQUIRED RETURN 6.5%

ACTUAL RETURNS* 7.5%

INV. POLICY BENCHMARK 7.2%

VALUE ADDED 0.3% *Returns reported net of external investment management fees. Numbers may not add due to rounding.

Over the last 12 months, the Sustainable Future Pool delivered returns that are in-line with the returns of

the Endowment Main Pool, notably ahead of its required return and higher than its investment policy

benchmark. In addition, the Sustainable Future Pool did not invest in fossil fuels companies and

succeeded in reducing CO2 emissions by over 80%.

1-Year Performance

ASSET CLASS SUSTAINABLE FUTURE POOL BENCHMARK VALUE ADDED

BONDS 0.9% 1.2% -0.3%

EQUITIES 10.5% 9.8% 0.7%

Returns are reported gross of investment management fees.

Endowments with Investment Restrictions

$220.1 million AUM

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, 2018, they totaled $220.1 million.


MARKET VALUE ($ MILLIONS)

ENDOWMENTS HELD AT MANDATE MARCH 31, 2018 MARCH 31, 2017

UBC FOUNDATION CANADIAN EQUITY 162.5 127.1

VANCOUVER FOUNDATION BALANCED 53.9 54.0

JARISLOWSKY FRASER BALANCED 3,7 3.8

TOTAL $ 220.1 $ 184.9 Numbers may not add due to rounding.

UBC Foundation

$162.5 million AUM

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 $162.5 million on March 31, 2018.

Vancouver Foundation

$53.9 million AUM

At March 31, 2018, there was $53.9 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.

ASSET CLASS ACTUAL MIX LONG TERM POLICY MIX

FIXED INCOME 19.6% 20.0%

EQUITIES 59.8% 55.0%


ABSOLUTE RETURN STRATEGY 16.2% 17.0%

TOTAL 100% 100%


ACTUAL RETURN 4.4% 8.3% 6.0% 7.5% 7.0%


VALUE ADDED -1.2% 0.1% 0.1% 0.6% 0.8% 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)

$3.7 million AUM

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.

ASSET CLASS ACTUAL MIX LONG TERM POLICY MIX FIXED INCOME 39.3% 43.5% EQUITIES 60.8% 56.5% TOTAL 100.0% 100.0% Numbers may not add due to rounding.


1 YEAR 2 YEARS 3 YEARS 4 YEARS 10 YEARS ACTUAL RETURN 4.1% 7.3% 5.0% 7.5% 7.4% INV. POLICY BENCHMARK 4.5% 7.4% 4.4% 6.4% 5.9% VALUE ADDED -0.4% -0.1% 0.6% 1.1% 1.5%

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.


Staff Pension Plan $1.661 billion AUM

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. Plan assets are the property of the plan members and beneficiaries.

The SPP funds are invested to provide stable lifetime retirement pensions in accordance with the

Statement of Policies and Procedures approved by the SPP Board and UBC Board of Governors. The

following table contains the actual and long-term policy mix as of March 31, 2018. Investments in real

estate and private equity will continue to be made to achieve a diversified portfolio by vintage year and

investment type.

ASSET CLASS ACTUAL MIX LONG TERM POLICY CASH 2.1% 1.0%

LONG TERM FIXED INCOME 28.6% 29.0%

REAL RETURN BONDS 3.9% 5.0%

INFRASTRUCTURE DEBT 9.6% 10.0% TOTAL FIXED INCOME 44.3% 45.0% CANADIAN EQUITIES 9.4% 10.0%

GLOBAL EQUITIES 15.1% 10.0%

EMERGING MARKET EQUITIES 4.7% 5.0% TOTAL EQUITIES 29.2% 25.0% PRIVATE EQUITY 2.4% 5.0%


INFRASTRUCTURE EQUITY 13.2% 12.5% TOTAL ALTERNATIVES 26.5% 30.0% TOTAL 100% 100%


As with the Endowment Fund and for the same reasons, the Staff Pension Plan is underweight

alternatives and overweight public equities, and it will also typically commit more to alternative asset

classes than its target policy mix. Combining actual investments and outstanding commitments, the

Staff Pension Plan has 6.7% allocated to private equity compared to a policy weight of 5%, 14.0%

allocated to real estate compared to a policy weight of 12.5%, 13.8% allocated to infrastructure equity

compared to a policy weight of 12.5% and 13.2% allocated to infrastructure debt compared to a policy

weight of 10%. As alternative investment commitments are drawn by investment managers, funds will

be provided from the overweight allocation in global equities. Below are new investments and

commitments made in 2017/18:

• Private equity: commitments to US, European and global co-investment funds




ACTUAL RETURN 7.1% 8.0% 5.4% 7.9% 5.9%


VALUE ADDED 0.4% 1.1% 0.8% 0.6% -0.2% 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 SPP return is compared to its benchmark portfolio return to gauge the effectiveness of asset mix

implementation. For the one year ending March 31, 2018, the SPP returned 7.1% and was ahead of the

policy benchmark return of 6.7% by 40 basis points. Over the two through five-year periods, the SPP

either matched or outperformed its benchmark portfolio return. However, it did lag slightly over the ten-

year period. This outperformance was mainly attributable to infrastructure debt investments, real estate

and infrastructure equity, while the underweight in private equity and its underperformance against a

very strong public benchmark (20.8%) detracted value in the portfolio. Investments across all asset

classes outperformed their respective benchmarks except for private equity, emerging market equities

and long bonds.

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.

1-Year Performance

ASSET CLASS STAFF PENSION PLAN BENCHMARK VALUE ADDED FIXED INCOME LONG TERM FIXED INCOME 4.9% 5.1% -0.1% REAL RETURN BONDS 3.4% 3.4% -0.1% INFRASTRUCTURE DEBT 7.1% 3.0% 4.1% EQUITIES CANADIAN EQUITIES 3.6% 1.7% 1.8% GLOBAL EQUITY 9.3% 9.8% -0.5% EMERGING MARKETS EQUITIES 15.1% 20.8% -5.7% ALTERNATIVES PRIVATE EQUITY -3.8% 20.7% -24.5% REAL ESTATE 8.5% 5.8% 2.7% INFRASTRUCTURE EQUITY 14.1% 6.4% 7.7% HEDGE FUNDS -14.0% 0.0% -14.0%



Supplemental Arrangement $ 94.5 million AUM

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 Fund is invested passively in the BlackRock

Balanced Moderate Index Fund. The Blackrock Fund consists of a combination of Canadian and foreign

equity, bond and real estate income trust (REIT) index funds. The policy asset mix and actual asset mix

at March 31, 2018 are presented below:


FIXED INCOME 39.7% 40.0%

EQUITIES 55.3% 55.0%


TOTAL 100.0% 100.0%


ACTUAL RETURN 5.1% 7.8% 4.6% 7.1% 6.3%


VALUE ADDED 0.0% 0.0% 0.1% 0.0% 0.1% 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 5.1%. Over a four-year period, the Fund returned

7.1%. 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.


Working Capital Fund $676.5 million AUM

The Working Capital Fund (WCF) 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 WCF investments

were restructured during the year and rather than being invested through a segregated account of short-

term Federal and Provincial bonds, the fund is now invested in three institutional bond and mortgage

funds managed by Phillips Hager & North. A higher return is targeted while still focusing on capital

preservation and liquidity. 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, 2018.


MONEY MARKET 21.3% 10.0%

SHORT-TERM BONDS & MORTGAGES 67.4% 55.0%

MORTGAGES 11.3% 35.0%

TOTAL FIXED INCOME 100.0% 100.0%

TOTAL 100.0% 100.0% Numbers may not add due to rounding.

1 YEAR 2 YEARS 3 YEARS 4 YEARS

ACTUAL RETURN 0.2% 0.4% 0.7% 2.7%

INV. POLICY BENCHMARK -0.5% -0.3% 0.2% 2.2%

VALUE ADDED 0.7% 0.6% 0.5% 0.5% 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 WCF returned 0.2% and was ahead of the policy benchmark return of -0.5% (see the

above table). Over a four-year period, the WCF returned 2.7% also ahead of its benchmark return of 2.2%.


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-related 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 the

investment managers.

ENDOWMENT FUND STAFF PENSION PLAN

TRADITIONAL ASSETS

BASE FEES 0.26% 0.17%

INCENTIVE FEES 0.01% 0.00%

SUBTOTAL 0.27% 0.18%

ALTERNATIVE ASSETS

BASE FEES 1.08% 0.85%

INCENTIVE FEES 0.30% 0.17%

SUBTOTAL 1.37% 1.01%

OVERALL 0.64% 0.48%

Infrastructure debt is classified as an alternative asset in the table above. Numbers may not add due to rounding.

Compared to the previous fiscal year, fees on traditional assets were lower (both base and incentive fees)

for both portfolios, as a result of IMANT’s fee renegotiations with these managers. However, overall fees

were higher on alternative assets for both portfolios as a result of higher incentive fees paid on stronger

performance in the current year.

External investment management fees for the Supplemental Arrangement and 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 the UBC portfolios on a cost recovery basis. For the fiscal year, IMANT’s fees totaled

$2.1 million, representing a cost of 5 basis points (0.05%) to UBC IMANT portfolio assets


Independent Auditor’s Report

INDEPENDENT AUDITORS' REPORT - Continued

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 Inc., which

comprise the balance sheet as at 31 March 2018, 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.


INDEPENDENT AUDITORS' REPORT – Continued

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.

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 Inc. as at 31 March 2018, 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

24 May 2018


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

UBC INVESTMENT MANAGEMENT TRUST INCORPORATED

Balance Sheet 31 March 2018

2018 2017

Assets

Current

Cash $ 49,022 $ 194,206

Accounts receivable 242,089 18,858

Prepaid expenses 29,158 34,429

320,269 247,493

Equipment and leasehold improvements (Note 3) 24,369 29,843

Security deposit 5,941 5,941

$ 350,579 $ 283,277

Liabilities Current

Accounts payable and accrued liabilities (Note 4) $ 357,333 $ 374,867

Deferred lease inducement (Note 6) 12,458 15,855

369,791 390,722

Commitments (Note 7)

Shareholder's Equity (Deficit) Share capital (Note 8) 100 100

Retained earnings (deficit) (19,312) (107,545)

(19,212) (107,445)

$ 350,579 $ 283,277

APPROVED BY THE DIRECTORS:

Director

Director




Statement of Retained Earnings (Deficit) For the year ended 31 March 2018

2018 2017

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

Net earnings (loss) for the year 88,233 (37,692)

Balance - end of year $ (19,312) $ (107,545)




Statement of Earnings For the year ended 31 March 2018

2018 2017

Revenue

Portfolio management fees (Note 5) $ 2,134,934 $ 2,068,538

Expenses

Salaries and related benefits 1,452,933 1,358,434

Directors fees and expenses 164,758 224,312

Office lease 117,413 115,300

Computer support and licenses 113,510 89,722

Travel, conferences, and seminars 64,500 84,742

Executive search 27,403 116,032

Office 26,910 25,623

Legal 18,677 37,696

Audit and accounting 14,900 14,750

Telephone 12,233 11,427

Dues and memberships 11,906 8,560

Insurance 6,000 6,000

Consulting and research 2,378 -

Advertising and promotion 1,717 2,107

Bank charges and interest 1,180 1,075

Amortization of equipment and leasehold improvements 10,283 10,450

2,046,701 2,106,230

Net earnings (loss) for the year $ 88,233 $ (37,692)




Statement of Cash Flows For the year ended 31 March 2018

2018 2017

Cash provided by (used in): Operating activities

Net earnings (loss) for the year $ 88,233 $ (37,692)

Items not involving cash

Amortization of equipment and leasehold improvements 10,283 10,450

Amortization of deferred lease inducement (3,398) (1,417)

95,118 (28,659)

Changes in non-cash working capital balances

Accounts receivable (223,231) (16,945)

Prepaid expenses 5,271 (3,773)

Accounts payable and accrued liabilities (17,533) 39,990

Deferred lease inducement - 16,988

(140,375) 7,601

Investing activity

Purchase of equipment (4,809) (6,244)

Net increase (decrease) in cash (145,184) 1,357

Cash - beginning of year 194,206 192,849

Cash - end of year $ 49,022 $ 194,206




Notes to the Financial Statements For the year ended 31 March 2018

1. Incorporation and operations The Company was incorporated on 28 March 2003 under the provisions of the Business

Corporations 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.

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 earnings. 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 earnings.

(iii) Transaction costs

The Company recognizes its transaction costs in net earnings 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.



2. Summary of significant accounting policies - Continued



(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.

(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.



2. Summary of significant accounting policies - Continued



(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

2018

Net

2017

Net

Furniture and fixtures $ 102,673 $ 90,020 $ 12,653 $ 13,563 Computer equipment 75,971 66,027 9,944 10,819 Leasehold improvements 73,606 71,834 1,772 5,461

$ 252,250 $ 227,881 $ 24,369 $ 29,843

4. Accounts payable and accrued liabilities

2018 2017

Accounts payable and accrued liabilities $ 347,264 $ 354,016

GST payable 10,070 20,851

$ 357,333 $ 374,867





5. Shareholder transactions

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

2018 2017

Portfolio management fees $ 2,134,934 $ 2,068,538

Operating expenses $ 11,023 $ 11,551

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 receivable are amounts due from:

2018 2017

UBC $ 225,000 $ -

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

2018 2017

UBC $ 3,135 $ 2,262





6. Deferred lease inducement

2018 2017

Office lease $ 12,458 $ 15,855

The Company received a lease inducement of $16,988 as part of its office lease extension

agreement in a prior 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:

2019 $ 3,397

2020 3,397

2021 3,397

2022 2,267

$ $ 12,458

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:

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

$ 249,732





8. Share capital

Authorized

100,000 common shares without par value

Issued

2018 2017

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 2018.

(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 the prior

year.

(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 the prior year. (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

currency risk.





9. Financial instruments - Continued

(d) 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. The Company incurs some expenses

in U.S. dollars and is therefore exposed to foreign exchange fluctuations. The Company does

not enter into any hedging instruments to manage its exposure to foreign currency risks.

10. Non-capital losses

The Company has a non-capital loss carried forward of $8,705 which is available to reduce the

taxable income of future years. If not utilized, this non-capital loss will expire in 2037.


2017/18 IMANT Board of Directors

Lisa Pankratz Board Chair &

Corporate Director

Alison Gould Chief Investment Officer

Insurance Corporation of BC

Diane Fulton Corporate Director

Emilian Groch Board Vice-Chair & Corporate Director

Orla Cousineau Executive Director, Pensions

UBC Staff and Faculty Pension Plans

Gordon MacDougall Corporate Director

Peter Smailes Vice President,

UBC Finance and Operations

Nancy McKenzie Corporate Director,

Member of UBC Board of Governors

Standing (L-R): Gordon MacDougall, Orla Cousineau, Diane Fulton, Alison Gould, Nancy McKenzie Sitting (L-R): Emilian Groch, Lisa Pankratz (Board Chair), Peter Smailes


IMANT Staff

Rajiv Silgardo

President &

Chief Executive Officer

Roger Polishak

Director,

Manager Relations

& Investment Operations

Maciek Kon

Director,

Quantitative Analysis

& Strategic Research

Sharon Siu

Associate Director,

Analytics

& Research

Julia Ferreira

Analyst,

Investment

Management

Susan Bibbs

Manager,

Administration

Standing (L-R): Roger Polishak, Susan Bibbs, Maciek Kon, Lisa Pankratz (Board Chair), Rajiv Silgardo Sitting (L-R): Julia Ferreira, Sharon Siu


Advisors and Service Providers

Auditor Rolfe, Benson LLP Chartered Professional Accountants Custodians/Administrators Northern Trust, Sun Life Financial Legal Counsel Norton Rose Fulbright Canada 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

university of british columbia investment management€¦ · university of british columbia (ubc),...

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