continuing to meet our clients’ investment challenges in...

Continuing to meet our clients’ investment challenges in the pension reform era

2013-2014Annual Report

BOARD OF DIRECTORS

CORPORATE LEADERSHIP TEAM John A. Sinclair Jan Imeson, CPA, CAPresident and Chief Executive Officer Chief Financial OfficerChief Investment Officer Vice-President, Finance and

Administration

Dan Goguen, CA, FRM James Scott, CFAVice-President Private Markets Vice-President Fixed Income

Mark Holleran, CFA Andrea MacDonald, CHRPVice-President Equities Human Resources Coordinator

CORPORATE OFFICER Inge DesprésCorporate Secretary

MEMBERS OF

CONTENTS

Fiscal 2013-14 NBIMC Highlights .........................1

Corporate Profile.....................................................1

Corporate Mission ...................................................2

Corporate Vision......................................................2

Corporate Values .....................................................2

Financial Highlights ...............................................3

NBIMC’s Investment Beliefs ..................................5

Chairperson Letter..................................................6

CEO Letter to Stakeholders ...................................8

Pension Plan Governance .....................................12

Management’s Discussion & Analysis .................13

Compensation Discussion and Analysis...............23

Corporate Governance..........................................33

Employee Activity in our Communities...............39

Communications and Accountability...................40

Public Interest Disclosure Act ..............................40

Unit Trust Fund Performance ..............................41

Financial Statements .............................................43Teachers’ Pension Fund .......................................46Judges’ Superannuation Fund ..............................47Notes to the Financial Statements........................48Corporate Financial Statements ...........................83

Michael W. WaltonChair of the Board,Director

Wiktor AskanasVice-chair of the BoardDirector

Jane GarbuttDirector (ex officio, non-voting)

Patricia LeBlanc-BirdDirector

Ronald B. MaloneyDirector

Darren MurphyDirector (ex officio)

Cathy RignanesiChair of Audit CommitteeDirector

John A. SinclairDirector (ex officio)

Richard C. Speight, Q.C.Chair of Governance CommitteeDirector

Reno ThériaultChair of Human Resources &Compensation CommitteeDirector

For a glossary of investment industry terms, please refer to www.nbimc.com/en/publications/glossary

New Brunswick Investment Management Corporation

440 King StreetYork Tower, Suite 581Fredericton, New BrunswickE3B 5H8 Canada

Tel: (506) 444-5800 Fax: (506) 444-5025Email: [email protected]: http://www.nbimc.com

Fiscal 2013-14 NBIMC Highlights

• Annual overall Pension Fund nominal return of 13.56% and real (after inflation) return of 12.37%.• Excess overall pension fund returns of 0.45%, or approximately $49 million, were realized versus investment policybenchmarks and net of investment expenses.

• Long-term overall pension fund nominal return since NBIMC inception of 7.15% per year and real (after inflationreturn) of 5.16% per year.

• Total assets under management as of March 31, 2014 of $ 11.6 billion. - $ 1,344 million of net gains realized from investment activities- $ 335 million of pension payments made to retirees- $ 507 million received from two new public sector clients

• The Public Service Pension Plan converted to the Public Service Shared Risk Plan on January 1, 2014. As part of theconversion, NBIMC is no longer Trustee for the Public Service Fund.

• The Province of New Brunswick and New Brunswick Teacher’s Federation announced an agreement to changes in theTeacher’s Pension Act. As of July 1, 2014, NBIMC will no longer be the Trustee for the Teacher’s Pension Fund.

• NBIMC will continue to provide investment management and other services to the Public Service Shared Risk Planand New Brunswick Teachers’ Pension Fund.

Corporate Profile

The New Brunswick Investment Management Corporation (NBIMC) is the investment manager for the pension assets ofover 51,000 members of the Public Service, Teachers’, and Provincial Court Judges’ pension plans. We were formed in 1996under the New Brunswick Investment Management Corporation Act by the Province of New Brunswick.

Our primary mission is to increase the long-term value of our clients’ funds under management.

To fulfill this mission NBIMC conducts the following activities:• Provides prudent, risk-controlled and cost effective investment management services for all funds under management.• Acts as fund trustee for the Teachers’ and Provincial Court Judges’ defined benefit pension plans. • Advises on and implements investment policy.• Adds value by generating higher returns through active investment strategies net of investment management costs.• Manages investment risks.• Provides administrative and support services such as accounting, performance measurement, and informationtechnology.

Located in Fredericton, New Brunswick, NBIMC is the largest institutional investment manager in Atlantic Canada withassets under management of approximately $11.6 billion at March 31, 2014.

NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATION 2013 - 2014 ANNUAL REPORT I 1

Corporate Mission

To provide innovative, cost effective and prudent investment management services that address the investment challengesof New Brunswick based public sector funds.

Key Goals:• To advance governance, management and organizational effectiveness.• To exceed client long-term investment objectives through prudent asset allocation and risk management strategies.• To maintain, develop and attract a highly skilled and experienced team of investment management professionals.• To strengthen and expand stakeholder communications and relationships.• To support effective and efficient information technology solutions.

Corporate Vision

New Brunswick Investment Management Corporation (NBIMC) is the provider of choice for investment managementservices to New Brunswick public sector investment funds.

NBIMC is recognized as a user of “best practices” by clients and peers. The company is:• Acknowledged as being able to exceed clients’ long-term investment performance objectives.• A provider of consistent value added for clients through a diverse range of multiple investment strategies. • Recognized by stakeholders as having strong governance practices and a long-term strategic vision.• Driven by a team of highly skilled investment management professionals working within a culture of innovation andrisk management.

• Viewed as an employer of choice by both recent graduates and experienced investment management professionals.• Seen as maintaining strong relationships and ongoing communication with key stakeholders.

Corporate Values

PRUDENCE – we guide investment activity within appropriate policy guidelines focused on asset allocation and riskmanagement in accordance with client objectives.

ACCOUNTABILITY – we act in the best interests of our clients and use the highest standard of financial reporting,compliance, auditing and performance measurement.

TEAMWORK – we develop and sustain a learning culture of engaged employees who share expertise, clear roles,coordinated activity and working together to achieve our goals.

TRANSPARENCY – we produce clear and frequent communications to all stakeholders on operations, strategies andresults.

INTEGRITY – we ensure honesty in all corporate undertakings guided by a Code of Ethics and Business Conduct.

INNOVATION – we encourage a diversity of innovative, well researched investment management strategies.

2 I NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATION 2013 - 2014 ANNUAL REPORT

INVESTMENTS BY PORTFOLIOAs of March 31, 2014

($ millions)

2014 2013 2012

Fixed IncomeNominal Bonds $ 804.4 $ 793.0 $ 985.0Corporate Bonds 352.1 283.5 113.2Short Term Assets 91.0 30.4 61.8

1,247.5 1,106.9 1,160.0

Public EquitiesCanadian 967.3 881.1 806.9U.S. 635.2 621.3 523.3International 821.9 757.9 676.2

2,424.4 2,260.3 2,006.4

Inflation Linked AssetsReal Return Bonds 449.1 428.1 384.6Real Estate and Infrastructure 379.0 356.2 337.4

828.2 784.3 722.0

Alternative InvestmentsAbsolute Return 170.0 155.6 144.9Private Equity 171.1 141.5 123.2

341.1 297.1 268.1

Total Investments $ 4,841.2 $ 4,448.5 $ 4,156.4

Amounts may not add due to rounding


One YearFour YearTen Year

13.36%9.47%6.83%

TOTALANNUALIZEDRETURNS(unadjusted)

30 %

20 %

10 %

0 %

-10 %

-20 %

-30 %

Annual Nominal Returns Cumulative Annualized Returns

ANNUAL TOTAL FUND RETURNS – 2005 - 2014

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

8.47%

15.67%

8.57%

0.83%

-18.24%

19.99%

10.41%5.21%

9.07%13.38%

2013-2014 Financial Highlights – as of March 31, 2014TEACHERS’

ASSET MIX (As of March 31, 2014)NominalBonds 16.6%

ShortTerm 1.9%

CorporateBonds 7.3%

CanadianEquity 20.0%

U.S. Equity 13.1%

InternationalEquity 17.0%

InflationLinked 17.1%

Alternative 7.0%

16%

14%

12%

10%

8%

6%

4%

2%

0%

0.50%

0.45%

0.40%

0.35%

0.30%

0.25%

0.20%

0.15%

0.10%

0.05%

0.00%1 year 4 years

Nominal return Real return, after inflation Value added

Ret

urns

Net

Val

ue A

dded

10 years

INVESTMENT PERFORMANCEFor the periods ended March 31

INVESTMENTS BY PORTFOLIOAs of March 31, 2014

($ millions)

2014 2013 2012

Fixed IncomeNominal Bonds $ 6.0 $ 5.6 $ 7.2Corporate Bonds 2.7 2.3 0.8Short Term Assets 0.7 0.2 0.5

9.4 8.2 8.5

Public EquitiesCanadian 7.8 7.0 6.3U.S. 5.0 4.8 4.0International 6.5 5.9 5.2

19.3 17.6 15.6

Inflation Linked AssetsReal Return Bonds 3.3 3.1 2.7Real Estate and Infrastructure 2.5 2.3 2.2

5.8 5.4 4.9

Alternative InvestmentsAbsolute Return 1.3 1.2 1.1Private Equity 1.4 1.1 0.9

2.7 2.3 2.0

Total Investments $ 37.2 $ 33.4 $ 31.1

Amounts may not add due to rounding


One YearFour YearTen Year

13.72%9.47%6.93%

TOTALANNUALIZEDRETURNS(unadjusted)

30 %

20 %

10 %

0 %

-10 %

-20 %

-30 %

Annual Nominal Returns Cumulative Annualized Returns

ANNUAL TOTAL FUND RETURNS – 2005 - 2014

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

8.89%

16.68%

8.76%

0.76%

-18.46%

19.89%

10.43%4.84%

9.09%13.72%

ASSET MIX (As of March 31, 2014)NominalBonds 16.1%

ShortTerm 1.9%

CorporateBonds 7.3%

CanadianEquity 21.0%

U.S. Equity 13.5%

InternationalEquity 17.5%

InflationLinked 16.5%

Alternative 7.2%

16%

14%

12%

10%

8%

6%

4%

2%

0%

0.50%

0.45%

0.40%

0.35%

0.30%

0.25%

0.20%

0.15%

0.10%

0.05%

0.00%1 year 4 years

Nominal return Real return, after inflation Value added

Ret

urns

Net

Val

ue A

dded

10 years

INVESTMENT PERFORMANCEFor the periods ended March 31

2013-2014 Financial Highlights – as of March 31, 2014JUDGES’

NBIMC’s Investment Beliefs

NBIMC operates under a few basic investment beliefs, upon which we continually reflect when setting investment strategy.These beliefs are:

1.NBIMC is a relatively low risk asset manager when compared to its peers.

2. Real Return Bonds, because of their long-term inflation-linked characteristics, are considered to be an excellent matchfor pension and other long-term liabilities.

3.New asset classes and strategies are introduced incrementally in order to progressively gain experience and to minimizetransition costs.

4. The establishment of the appropriate asset mix for each of the pension funds for which we are Trustee is heavilyinfluenced by both the actuarial profile and funding status of each plan.

5. NBIMC believes that market inefficiencies present opportunities to add value through active management.


Chairperson Letter

On behalf of the Board of Directors and management of the New Brunswick Investment Management Corporation(“NBIMC”), I am pleased to introduce the Fiscal 2013-2014 Annual Report, which marks the close of our eighteenth yearof successful operations.

The following report provides a detailed account of another year in which we have met the long-term investmentrequirements of the pension plans under our management and provides an update with respect to the significant changeswe have experienced largely as a result of the Government of New Brunswick’s pension reform initiatives. We are alsopleased to note that NBIMC has entered into new investment management relationships during the year with the NewBrunswick Power Corporation and University of New Brunswick’s Endowment Fund. These are the first new investmentmanagement mandates that NBIMC has undertaken since its inception back in 1996, and we look forward to working withother provincial public sector pools of capital that may be interested in benefiting from NBIMC’s investment capabilitiesin the future.

As detailed later in this Annual Report, management was able to continue to increase the total fund long-term annualizedreturn of each of the three pension funds under our management while also making good progress on the objectives outlinedin our Strategic Plan.

The Board of Directors was very active on a number of initiatives during the year which are also outlined in more detailthroughout this report. We are also pleased to provide our second annual report of specific corporate performance objectivesas outlined on pages 17-18.

Pension ReformAs noted in last year’s Chairperson Letter, NBIMC Directors and management have been making every effort to ensure thatthe Corporation is prepared to respond to any proposed changes that may occur through the Government of New Brunswick’sactivities in relation to their Task Force on Protecting Pensions.

On January 1, 2014 the Government repealed the Public Service Superannuation Act (“PSSA”) and the pension planconstituted under the PSSA was converted into the Public Service Shared Risk Plan (“PSSRP”). Through this process theNew Brunswick Investment Management Corporation Act was subsequently amended so that the NBIMC Board will nolonger serve as trustee for those funds and a separate Board of Trustees will act as the future Trustee for the PSSRP. ThePSSRP Board of Trustees subsequently executed a five year Investment Management Agreement with NBIMC, wherebywe will continue to provide investment advice and management services to the PSSRP.

As part of the Government’s process with respect to the conversion of this defined benefit pension plan into a shared riskplan, the Minister of Finance established a Governance Working Group. Its membership consists of a number of relatedStakeholders, including a representative from NBIMC, who are tasked with developing the best practices in pension plangovernance that will serve the PSSRP and possibly other shared risk plans well in achieving their goal of prudently managedand sustainable pensions. We are actively participating in and sharing our governance and investment related experiencewith this group.

On April 15th, 2014 the Government and the New Brunswick Teacher’s Federation announced that they had reached anagreement on changes to the governance and operation of the Teacher’s Pension Act (“TPA”). Our Board and managementteam look forward to sharing our experience and assisting with this conversion where warranted in the future.

In consideration of these changes, we expect that this will be the last year that we will be reporting on consolidated totalfund performance of the pension plans under our management. We anticipate that each of the new governance bodies forthe PSSRP and TPA will be reporting on their own total fund performance, while we will focus our reporting on theperformance of our separate unit trust funds in which each of our clients will have the opportunity to access.


Appreciation of Dedicated ServiceI would like to recognize our Board and senior management team for their commitment, contribution, and support to theCorporation during this very busy year. With the number of changes we have experienced in Fiscal 2013-14, it was atremendous help to have such stable, long-serving resources looking after NBIMC’s stakeholders’ best interests.

In particular I would also like to express our appreciation of the service of our Board’s Vice Chairperson, Mr. Joel Attis,whose term expired in August of 2013. Joel made a significant contribution to NBIMC during the challenging period inglobal financial markets that occurred during his six years as a Director.

On behalf of the Board we also wish to thank our team of New Brunswick based professionals at NBIMC for their continueddiligence and hard work in continuing to meet the goals of our clients. As our two largest pension fund clients transitionto a new joint trustee governance framework, we are very proud that the Corporation has been able to provide those fundswith long-term returns in excess of the actuarial return requirements that they had required.

Finally I would like to note that our Board of Directors plan to revisit the Corporation’s strategic plan during the upcomingfiscal year in order to ensure that we continue to provide an investment platform that exceeds our clients’ long-termrequirements, while best serving the needs of the new shared risk pension model and the interests of our other new clientgroups.

Sincerely,

Michael W. WaltonChairperson

June 30, 2014Fredericton, New Brunswick


CEO Letter to Stakeholders

The Corporation’s investment program continued to perform well in Fiscal 2013-2014 and once again surpassed both ourprimary investment objective of exceeding the long-term actuarial returns required to fund the pension plans under ourmanagement, and our secondary investment objective of producing value added returns that exceed the investment policybenchmarks and investment management expenses.

As noted in our Chairperson’s Letter, this past fiscal year was one of significant change. The Government’s pension reformactivities resulted in the former PSSA pension plan being converted into the PSSRP as of January 1, 2014, and the TPA looksto undergo changes later in 2014. Based on these changes, our detailed portfolio reporting activity in this Annual Reportwill include the Teachers’ and Judges’ pension funds for which we continued to have Trustee responsibilities as of March31, 2014. It is our understanding that PSSRP portfolio performance will be reported in the future by their Board of Trusteeson an independent basis.

We have however included one final consolidated total fund set of performance information in the discussion that followsin this letter and later in the Management’s Discussion & Analysis section of the Annual Report, which relates to NBIMC’sperformance against our investment objectives to March 31, 2014. In future Annual Reports we expect our investmentperformance reporting to be focused on the investment results of the separate pooled funds under our management that areused to provide the diversified mix of assets that each of our clients’ specifies in their investment policy statements.

We are also pleased to report that we have entered into two new investment management relationships with the NewBrunswick Power Corporation (“NB Power”) and the University of New Brunswick Endowment Fund. We look forwardto providing NB Power with long-term portfolio returns that will help provide the funds necessary to decommission andmanage the spent fuel related to the Point Lepreau power station, while the UNB mandate will provide their EndowmentFund with global public equity exposure through a low volatility investment approach.

Fiscal 2013-14The blended return during the year for the three pension funds that were under our management was 13.56%. We are verypleased to point out that this performance also exceeded our investment policy benchmarks by 0.61% before investmentmanagement costs.

Our pension portfolios remained well positioned to take advantage of the relatively slow economic rebound that has occurredsince the depths of the Fiscal 2008-09 financial markets crisis while at the same time providing protection against interimperiods of increased volatility and market declines.

Global financial markets strengthened significantly early in the fiscal year with the European and U.S. public equity marketleading the way thanks to the slowly improving economy and continued solid corporate earnings growth. Fixed incomemarkets began the year mixed due to uncertainty around central bank interest rate policy. Longer term bonds, and otherinterest rate sensitive securities, ultimately experienced a decline in value in the late spring as the U.S. Federal Reserve Boardbegun to outline a path to begin removing their more stimulative policies of recent years.

Developed market equities continued to perform well throughout the year, and generally outperformed the Canadian equitiesmarket. The Canadian market’s higher exposure to materials and energy held our equity market back due to a combinationof the declining growth rate concern in China and the successful development of the domestic energy market in the UnitedStates. Returns from our foreign investment exposure also benefited from the decline in value of the Canadian dollar laterin the year.

Market volatility levels were generally muted throughout the year, other than for brief periods of concern around the centralbank interest rate intentions noted above and developments in the ongoing geo-political challenges in the Middle East andEastern Europe.


As noted above, our overall gross nominal rate of return for the pension fund assets under management for the year endingMarch 31, 2014 was 13.56% while our long-term annualized return since NBIMC’s inception in 1996 closed at 7.15%. Mostimportantly our annualized real return (after adjusting for inflation) for these pension fund assets since inception is now5.16%. This real return is now well above the long-term 4% real return requirement that the pension funds’ independentActuary had believed to be necessary to fund the pension plans under our management.

Our relatively low risk investment approach continued to meet the long-term investment goals of the pension plan sponsorwhile also attempting to minimize the exposure to the potential of large swings from financial markets volatility in any oneperiod. The following table further summarizes our investment performance as of the end of the fiscal year:

Pension Fund Assets Under ManagementOverall Annualized Returns(as of March 31, 2014)

Real Return Nominal Return(vs. 4% Requirement) (vs. 6.6% Requirement)

1-Year Performance (F 2013-14) 12.37% 13.56%

4-Year Performance 7.57% 9.47%

Since NBIMC Inception (18 years) 5.16% 7.15%

Net assets under management increased to an all time high of $11.6 billion from $10.1 billion in the prior year. This increasein assets resulted from $1.344 billion in net investment earnings, net pension client payouts of $335 million, and the additionof new client assets of $507 million.

Management also successfully added approximately $66.2 million of investment earnings through active portfoliomanagement activities versus their benchmarks, which provided the funds with approximately $49.2 million in additionalnet earnings after covering the $17.0 million in NBIMC’s operating costs and the costs of third party service providers.

While not a primary consideration, our long-term investment returns on a risk adjusted basis also continue to be veryrespectable versus peer pension portfolio managers.

Important AccomplishmentsNBIMC achieved a number of important accomplishments during the year:• We successfully fulfilled the Key Performance indicators outlined in our corporate continuous performance objectives:

- As noted above, our long-term investment performance significantly exceeded the actuarial real return targetrequirement for the pension plans under our management.

- Management continued to add relative value added returns, after covering all expenses, for the portfolios throughactive investment management activities.

• We assisted the Province of New Brunswick’s Pension Task Force with their asset modeling analysis and relatedsimulations with respect to the PSSRP.

• Successfully transitioned the governance responsibilities of the PSSA to the PSSRP, including the finalization of anapplicable Investment Policy Statement and an initial five year investment management services agreement.

• Management developed and implemented a new Canadian Long-Term Bond portfolio, and conducted further researchand development work with respect to a low volatility public equity portfolio in emerging markets.

• We continued to expand our direct private markets investment activity on both a local and global basis.• Two new external clients were added to our investment platform, allowing for further investment diversification andcost efficiencies for our Stakeholders.

Further details on NBIMC’s mandate, activities and results are contained throughout later sections of this Annual Report.



Our Changing Environment As noted earlier in this letter, the governance of our two largest pension plan clients is undergoing a significant change thatwill result in the NBIMC Board of Directors no longer acting in the capacity of Trustee for the PSSA or the TPA pensionfunds. We do however expect that based on our successful long-term track record we will be working closely with each ofthe Funds’ new trustee boards to provide not only investment management services but also assistance with respect to theirinvestment policy development and monitoring processes.

While we expect that NBIMC will continue to bring a number of benefits to these pension funds that we have managed inthe past, we have also been approached by a number of other public sector investment pools of capital who have an interestin our services. These entities recognize that NBIMC provides a well-structured, experienced, independent and transparentfiduciary based governance process that has a solid track record of designing and implementing investment programs thatmeet specific requirements. They also recognize that our corporate goals and objectives are directly aligned with their bestinterests as they receive cost effective access to professional fund management services gained through the economies ofscale realized by pooling investment assets.

We look forward to continuing to be a provider of choice to a number of public sector funds who are looking for assistancein any or all of the following service offerings that we are capable of providing:• Investment Management ( Equity / Fixed Income / Inflation Linked / Alternatives)• Investment Strategy Advice• Compliance and Performance Measurement Services• Financial Reporting• Risk Management• Communications• Trustee Administration Services

Outlook The global economy has continued to show moderate but below trend growth since the Fiscal 2008-2009 financial marketcrisis, while financial markets conditions are generally back to pre-crisis levels. Economic activity is generally expectedto advance in 2014 as suggested by a number of recent economic indicators and production data improvements.Employment data continues to recover and consumer spending and confidence data has also been encouraging.

Global Central Banks have continued to provide very accommodative monetary policies and the U.S. Federal ReserveBoard has been able to prudently begin to taper their quantitative easing program. The tapering activity has been generallysuccessful in not negatively impacting the economy to date and has been supported by the continued low levels of inflationin most developed market economies.

Public equity volatility in developed markets continues to be close to record low levels and bond yields, while remainingat low levels, have generally traded in a fairly stable range. Emerging markets have been impacted in the first quarter ofthe year due to longer term interest rate concerns and the Russia Ukraine situation.

We expect equity markets to continue to provide favourable returns versus bonds, but most likely at lower levels thanwitnessed in 2013. We will however continue to closely monitor the impact of the Federal Reserve’s tapering activities andthe geo-political situation in Eastern Europe. One other ongoing area of potential concern we continue to monitor closelyis the declining economic growth rate in China.

As we discussed last year, equity and debt markets remain at very high levels while considerable bidding competition istypical in recent private asset sale processes. These conditions, compounded by market concerns around what looks to bethe early stage of central bank monetary policy moderation activities continue to make investment allocation decisionschallenging.

Even with the above noted challenges and the changes that we were faced with during the year, we look forward tocontinuing to work hard in meeting our clients’ needs and our fiduciary duties in the year ahead. We also remain confidentthat we have the strategy, people and processes in place that can continue to help our stakeholders meet their long-terminvestment goals.

Sincerely,

John A. SinclairPresident and Chief Executive OfficerChief Investment Officer

June 30, 2014Fredericton, New Brunswick


Pension Plan Governance

With the conversion of the Public Service Superannuation Act to a shared risk pension plan, that plan is now governed bya Board of Trustees comprised of an equal number of representatives of the plan members and the plan employers.

At March 31, 2014, the Province of New Brunswick remains the Plan Sponsor for two legislated pension plans:• New Brunswick Teachers’ Pension Act (“Teachers”); and • Provincial Court Judges’ Pension Act (“Judges”).

The Plan Sponsor is responsible for pension plan design, which includes setting the levels of contributions and benefits, andbenefit administration. The Minister of Finance, as Chair of the Board of Management, is the Plan Governor and PlanAdministrator.

The day to day administration of these pension plans is assigned to the Pensions and Employee Benefits Division of theOffice of Human Resources (OHR) for the Province. OHR is responsible for collection of employee contributions, paymentof benefits in accordance with the plan provisions and assisting plan members in understanding their pension entitlements.

Each of the pension plans undergoes a periodic actuarial valuation under the direction of an Actuarial ValuationCommittee. This Committee is made up of senior level public servants from the Department of Finance, Office of HumanResources and the Office of the Comptroller who are supported by a professionally accredited Actuary. An Actuary is anexpert in the mathematics of finance, statistics and risk theory. The Actuarial Valuation Committee approves the actuarialassumptions used for the accounting valuation of the pension plans, used for financial reporting purposes in the PublicAccounts.

The Independent Actuary is also engaged to provide an actuarial valuation of the pension plan on a going-concern basis(i.e. assumes the plan continues to operate normally) and on a solvency basis (i.e. the plan is assumed to be wound up onthe valuation date) in accordance with the standards set by the Canadian Institute of Actuaries. The Independent Actuaryobtains current membership data and asset mix information and considers the specific benefits available and contributionsrequired under the plan legislation. The actuarial process involves setting informed assumptions relating to interest rates,inflation, salary increases and longevity. The valuation process determines the long-term funding requirements for eachpension plan. The Independent Actuary is responsible for the assumptions used in the actuarial valuation on a going-concern basis and solvency basis.

NBIMC is a Crown corporation established under the New Brunswick Investment Management Corporation Act (the“NBIMC Act”) of 1994. NBIMC is primarily responsible for acting as investment manager for the funds under itsmanagement and is specifically appointed as Trustee for the pension fund assets of the Teachers’ and Judges’ plans.

As Trustee, NBIMC is responsible for development of an Investment Policy that meets the Independent Actuary’s requiredlong-term rate of return and implementing the Investment Policy within a risk-controlled framework. NBIMC uses thespecific pension plan cash flow data provided by the Independent Actuary as well as long-term market expectationassumptions to model the risks and returns of potential investment strategies. Assumptions as to economic factors, geo-political risks and demographic trends are also considered. From this work, NBIMC develops recommendations for an assetmix which are reviewed with the Board of Directors. The Board decides on the appropriate asset mix and delegates tomanagement its implementation.

NBIMC receives the employers’ and employees’ pension contributions collected by OHR and deploys them according toeach Pension Fund’s Investment Policy. NBIMC also transfers sufficient funds to OHR to fund the pension benefit paymentrequirements.


Management’s Discussion & Analysis

Management’s Discussion & Analysis (MD&A) is provided to enable the reader to interpret the material trends, the resultsand the financial condition of the pension funds. Key elements of the pension funds’ annual financial statements areexplained and this MD&A should be read in conjunction with these annual financial statements and related notes.

As well, this MD&A may contain forward-looking statements reflecting management’s objectives, outlook and expectationswhich involve risks and uncertainties. Forward-looking statements are usually preceded by words such as “believe”,“expect”, “may”, “could”, “intend”, “continue” and “estimate”. We caution readers not to place undue reliance on thesestatements as a number of important factors could cause our actual results to differ materially from the expectationsexpressed in such forward-looking statements.

Pension Assets Under ManagementRecent pension reform activities in New Brunswick have resulted in the Public Service Superannuation Plan converting toa shared risk plan pursuant to the New Brunswick Pension Benefits Act. Among other changes, the responsibility for thetrusteeship of the pension fund assets of that plan has now transferred from NBIMC to the new Public Service Shared RiskPlan (PSSRP) Board of Trustees. The PSSRP Board of Trustees has entered into a renewable investment managementagreement with NBIMC for a minimum term of five years.

Going forward, the PSSRP Board of Trustees will make the final decisions on the appropriate investment policy for thatplan, subject to specific risk management constraints set out in their Regulations and Funding Policy. NBIMC expects toassist the Trustees with these responsibilities through our investment policy research and risk management advisorycapabilities.

NBIMC’s Board of Directors remained the Trustee of the Teachers’ Pension Fund (“Teachers”) and the Judges’Superannuation Fund (“Judges’), although on April 15, 2014 the Province and the New Brunswick Teachers’ Associationsubsequently announced an agreement to implement certain changes to that plan which we understand is expected to takeeffect on July 1, 2014 and will involve transferring our Trustee responsibilities for the Teachers’ to another joint trusteeBoard.

New Investment Management RelationshipsDuring the year NBIMC entered into two new investment management agreements with other public sector entities, the NewBrunswick Power Corporation and University of New Brunswick Endowment Fund, adding approximately $507 millionto assets under management as at March 31, 2014. The addition of these new clients has presented an opportunity forNBIMC to share our locally based investment management expertise with other New Brunswick public sector groups whileat the same time providing further cost efficiencies and operational scale to our existing clients.

Each of these clients has invested in various NBIMC Pooled Funds based on their investment objectives and their ownInvestment Policies for which they are responsible. Separate Pooled Fund performance is provided later in this report.

Pension Fund Asset MixThe development of the asset mix for each pension fund of which NBIMC is Trustee is highly dependent on the actuarialliability profile of each underlying pension plan. The respective asset mix has been designed to provide annualized long-term returns that will exceed the actuarial return requirement for each plan, with a limited amount of risk.

During the year, NBIMC had received an actuarial valuation for the Teachers’ Pension Plan (“TPA”) as at April 1, 2012.While management was aware that the TPA was being reviewed as part of the Government’s pension reform activities, weconducted a preliminary review of the actuarial material to ensure that the asset mix and Investment Policy for the TPAremained appropriate pending the outcome of the review.


Pension Fund Investment PerformanceOur two main objectives, in terms of the investment performance that NBIMC focused on during the year, remained theactuarial return requirements of each pension fund and in adding value through active management strategies.

The first objective is in regards to both the nominal and real return of the funds compared to the actuarial return assumptionthat had been determined necessary to appropriately fund each of the three defined benefit pension plans (i.e. the PSSA,TPA, and JPF). Our overall nominal return of 13.56% and real return of 12.37% for the fiscal year was well above ournominal and real return actuarial hurdles for the year of 6.60% and 4.00% respectively, but more importantly, remainedabove their respective actuarial targets over the long term.

Investment returns across most major asset classes were generally positive during the year, however equity marketssignificantly outperformed other types of investments thanks to the slowly improving economy and continued solid corporateearnings growth. The only asset class that detracted from our overall portfolio performance was our longer term real returnbonds as they along with other longer-term interest rate sensitive securities were negatively impacted by concerns aboutchanging central bank interest rate policies.

We are particularly pleased that recent investment policy changes have helped to provide better returns to our investmentportfolios. In recent years, we have been reducing our longer-term government debt exposure to other asset classes that weexpected to provide similar long-term risk adjusted returns. In particular, we have reduced our real return bond exposurein favour of increased real estate exposure and have reduced nominal bond exposure in favour of low volatility publicequities.

The other recent investment policy change that paid off very well during the fiscal year was the funding of a new CorporateBond portfolio over the past two years from our nominal bond portfolio. As noted above fixed income markets wereimpacted due to uncertainty around central bank interest rate policy, particularly in the late spring of 2013 as the U.S.Federal Reserve Board begun to outline a path to begin removing their more stimulative policies of recent years. In thistype of environment the shorter duration and the additional credit spread gained in the corporate portfolio has providedsignificantly better returns than the government bonds held in the nominal bond portfolio.

The largest portfolio gains came from both our public and private global developed market equity exposure. The U.S. andEAFE markets provided the largest returns, as the Canadian market’s higher exposure to materials and energy held ourequity market back due to a combination of the declining growth rate concern in China and the successful development ofthe domestic energy market in the United States. Returns from our foreign investment exposure also benefited from thedecline in value of the Canadian dollar later in the year.

Real estate and infrastructure returns were solid once again during the year as they remained an attractive investmentalternative to many investors in the current low interest rate environment.


Fiscal 2013-14 Rates of Return, calculated in Canadian Dollars

Portfolio BenchmarkAggregated Asset Class Return Return

Fixed IncomeNominal Bonds 0.68 % 0.25 %Corporate Bonds 2.23 2.26Short-Term Assets 1.36 0.99

Public EquityCanadian 17.02 15.97United States 32.58 32.62International 28.95 27.67Low Volatility Canadian 17.96 15.97Low Volatility United States 26.67 32.62Low Volatility International 21.17 27.67

Inflation Linked AssetsReal Return Bonds -5.87 -6.02Real Estate / Infrastructure 7.77 5.95

Alternative AssetsAbsolute Return 6.59 0.99Private Equity 27.24 29.13

Total Investment Return for pension fund assets 13.56 % 12.94 %

The primary performance objective, as outlined by the plan actuary, was to achieve a long term real return (i.e. returnafter inflation) objective of at least 4%. This was the most significant hurdle that we measure our performance against andis the primary factor in the security of the pension plan benefits.


As shown in the chart below, we are very pleased to point out that our long-term annualized real return for the pension fundsunder management since NBIMC’s inception is now 5.16% which significantly exceeds this actuarial requirement.

Our second investment performance objective is to add value, above our various asset class benchmarks, through activemanagement strategies. This value added, relative to benchmark, is expected to first cover all investment managementcosts, and subsequently targets an additional 42 basis points (0.42%) per annum to each fund. A basis point is 1/100ths ofa percentage.

Our active management activities added 61 basis points of gross value and 45.3 basis points of net value, or approximately$49.2 million, after covering all investment management costs.

Our longer-term four year average annual value added return, net of costs, was approximately 37.9 basis points per annumor approximately $151 million in additional value over the four year period. The four-year term remains the most significantterm used to measure our active management performance and is selected to represent a more consistent longer termmeasure.

We are very pleased that we were able to achieve additional investment value added in excess of both investment policybenchmarks during the fiscal year and our longer-term four year measurement period. As we noted in last year’s AnnualReport, we have found that markets have continued to slowly normalize since the financial markets crisis although with shortinterim periods of volatility. These conditions have allowed us to increase our active investment risk, which has alsosubsequently led to improved relative performance in more recent years.

Our expectation remains to be that we should be able to deploy active risk levels closer to longer-term target levels as theglobal economy and financial markets continue to normalize. That being said we will remain vigilant through our riskmanagement processes on making sure that we do not take on an excessive amount of risk if market conditions reverse.


30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%

-5.00%

-10.00%

-15.00%

-20.00%

-25.00%

Ann

ualiz

ed R

eal R

ate

of R

etur

n (%

)

NBIMC Annual Real Return NBIMC Cumulative Real Return Actuarial Target + 4%

Current since inception Estimate = 5.16% / yr

1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2013-142012-132011-12

ACHIEVING THE LONG-TERM PENSION PROMISEReal Rate of Return vs. Target

Overall Total Funds

The following chart illustrates both the relative value added and success rate from NBIMC’s active management activitiesover the past ten years. It is broken down in terms of gross value added performance, investment management costs andexcess (or net) value added performance.

NBIMC also prepares and presents a Schedule of Composite Performance Results for the pension fund assets undermanagement. This schedule is prepared in compliance with the Global Investment Performance Standards (GIPS®) andis available on our website, www.nbimc.com, when completed.

Total Fund Performance ObjectivesThe Board of Directors, in an effort to improve the transparency and communication of our investment managementactivities, developed a series of specific goals and objectives during the 2013-2014 fiscal year in order to provide anoverview of the overall performance of our organization.

As noted in the prior section, the two main investment performance objectives that NBIMC focuses on can be summarizedas follows:

The primary investment performance objective is to achieve a long term real return of at least 4% per annum.Our second investment performance objective is to add value, above the various asset class benchmarks in eachpension funds’ respective investment policy, through active management strategies. This added value is expected tofirst cover all investment management costs and subsequently targets an additional 42 basis points (0.42%) per annumto each pension fund over the long term. It is important to note that this target has been selected to represent a firstquartile achievement amongst similar investment managers.

NBIMC has also developed a series of other key performance indicators, as continuous performance objectives, thatcorrespond to our 2011-2016 Strategic Plan. These indicators have been developed based on discussions and consultationswith stakeholders such as the Governor of the pension plans trusteed by NBIMC, the Province’s Board of Management, staffof Management Board and the Office of Human Resources, various plan member advisory groups, and direct plan memberfeedback.


90

80

70

60

50

40

30

20

10

0

-10

-20

Bas

is P

oint

s (1 /

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%)

Gross Value Added Costs Net Value Added

Adding Value after Covering Operating CostsResults of Active Management

F 2004-05 F 2005-06 F 2006-07 F 2007-08 F 2009-10 F 2010-11 F 2011-12 F 2012-13 F 2013-14F 2008-09

The NBIMC Board monitors these indicators on a quarterly basis. They are reported below for the current 2013-2014fiscal period for total funds under management (i.e. pension and other clients, excluding assets under transition):

Primary Investment Performance Objectives

Objective Long-Term F2013-14 4 Year AnnualizedTargets Actual Annualized Since Inception

Real Return (after inflation) >= 4.00% per annum 12.35% 7.56% 5.23%

Nominal Return >= 6.60% per annum 13.54% 9.47% 7.23%

Secondary Investment Performance Objective

Objective Long-Term F2013-14 4 Year AnnualizedTarget Actual Annualized Since Inception

Net Relative Return (after all investment management expenses) >= 42 bps per annum 45.3 bps 37.9 bps (0.1) bps

Continuous Performance Efficiency Objectives

Objective Targets F2013-14 4 YearActual Annualized

Trade-Matching Efficiency:Securities Custodian Industry avg + 2.5% 96.4% 94.1%Prime Broker #1 Industry avg + 2.5% 98.1% 93.7%Prime Broker #2 Industry avg + 2.5% 94.8% 93.8%

Industry Average Per Canadian CapitalMarkets Association 89.0% 87.7%

Budget Efficiency(excluding performance incentives) 100% 91.6% 89.4%

Absenteeism (%) <= 2% 2.2% 1.5%

Employee Turnover (#) <= 3/yr 0 2.25/year

IT System Availability 99% 99.8% 99.8%

Risk ManagementNBIMC and the funds that we manage face a number of risks in attempting to fulfill their mandates. Our disciplined riskmanagement focus is a critical part of NBIMC’s investment management activities. Risk management is a key element inhelping provide stability to both pension plan contributions and benefits, and making sure that our investment managementactivities do not bring undue risk to our clients’ assets. All investment decisions are made in a risk context that not onlyfocuses on the expected returns of our activities but also on the potential gains or losses that could be realized by thoseactivities.


Risk Management - Board Oversight

Although management has the primary responsibility for managing risk, under its terms of reference, the Board of Directorsis responsible for understanding the risks and the systems that management has put in place to mitigate and manage thoserisks. The Board is specifically responsible for the oversight of investment risk. The Board is also responsible for oversightof fiduciary and business strategy risks.

Within the Board structure, the Audit Committee focuses specifically on oversight of financial risks and risks relating tothe systems of internal controls and financial reporting as well as fraud risk. The Human Resources and CompensationCommittee focuses on risks relating to our employees and work environment. This includes the leadership of the Presidentand CEO, the ability to attract and retain qualified and motivated staff, leadership development and succession plans, andthe overall prudence and sound business practices in Human Resource matters. The Governance Committee focuses on theleadership and effectiveness of the Board and the reputation and public image of the Corporation.

Risk Management - Independent Audits

To assist in its oversight of risk management, the Audit Committee has engaged an independent internal audit serviceprovider (a firm external to NBIMC) to conduct reviews and provide advice on the effectiveness of NBIMC’s internalcontrols and processes. Internal audit reports received in the current fiscal year have covered Spreadsheet / End UserComputing and Board Reporting. These reviews did not uncover any significant weaknesses; however, they have beenhelpful in fine-tuning our processes and providing examples of best practices for consideration.

Risk Management - Management Activities

NBIMC has developed an Enterprise Risk Management Framework that can be found on our website athttp://nbimc.com/en/about_nbimc/enterprise_risk_management_framework. This Framework identifies three maincategories of risk: strategic risk, investment risk and operational risk. The Framework highlights seventeen specific riskelements within these three categories, including a definition of each element, the responsibility for risk oversight and themeasures taken by management and the Board to mitigate each risk.

NBIMC uses six internal Management Committees to monitor and address specific issues arising from the Enterprise RiskManagement Framework. These committees have cross-functional membership, including management and non-management positions as well as some overlap among the committees, providing a rich opportunity for sharing perspectivesand insights:

Enterprise Risk Management Council (ERMC)


In accordance with its Terms of Reference, the ERMC is responsible for reviewing the statusof the Enterprise Risk Management Framework on a quarterly basis in advance ofpresentation of the quarterly risk matrix report to the Board of Directors and advising thePresident & CEO of areas of emerging risk.

In fulfilling this mandate, the ERMC reviews:• Weekly Capital at Risk and Policy Asset Mix Capital at Risk analyses, includingidentification of risk proxies;

• Asset mix stress testing and back-testing results;• A quarterly Pension Fund liquidity analysis;• Monthly counterparty exposure reports;• Quarterly securities lending compliance reports;• Results from the annual fraud risk assessment; and• Recommendations from independent audit reviews.

Investment RiskManagement Committee(IRMC)

In accordance with its Terms of Reference, the IRMC is responsible for the following:• monitors investment risk measures;• considers risks associated with new investment strategies and products;• proposes procedures to measure and monitor investment risk, subject to the approvalof the Chief Investment Officer and within the parameters established by the Board.

Trade ManagementOversight Committee(TMOC)

In accordance with its Terms of Reference, the TMOC is responsible for the following:• monitors trading policies and practices;• approves broker selection to ensure best trade execution possible;• manages exposure to broker counterparty risk.

Information TechnologyRisk ManagementCommittee (ITRMC)

In accordance with its Terms of Reference, the ITRMC, which includes an external seniorIT executive, is responsible for the following:• assists in the development of IT strategy and future direction;• approves new application risk assessments;• monitors adherence to IT policies and processes.


Business Continuity PlanTeam (BCP)

In accordance with its Terms of Reference, the BCP is responsible for the following:• develops and implements the Business Continuity Plan including disaster recovery;• discusses possible disaster scenarios;• uses passive and active tests to practice response protocols.

Occupational Health &Safety Committee

In accordance with its Terms of Reference, the Occupational Health & Safety Committeeis responsible for the following:• considers physical environment risks.

Investment Management CostsOne of the most important considerations in assessing investment performance is the cost incurred. Although the industrystandard for investment performance is to report gross returns, it is the returns net of costs that contribute to asset growth.Lower costs result in higher comparative net returns and help to maximize the available assets.

Investment management costs are influenced by many factors. Generally, industry cost comparisons prove that it is generallymore efficient to manage assets internally than to outsource the investment process to third parties. Also, passive investmentstrategies – those strategies that are designed to mimic a market index – are less expensive than active strategies whichdepend on judgment and opportunity to differentiate returns from the benchmark.

The investment management costs to manage the $11.6 billion of assets under management for the year ended March 31,2014 consist of the following (in millions of Canadian dollars):

2014 2013

NBIMC Operational Expenses $ 10.1 $ 8.9

Third Party Service ProvidersInvestment counsel fees 6.2 2.8Securities custody - internally managed 0.7 0.6

- externally managed — 0.1

Total Investment Management Costs $ 17.0 $ 12.4

Total Assets Under Management (IFRS basis) $ 11,620.0 $ 10,100.0

NBIMC manages approximately 86% of the assets internally using our investment management professionals andtechnology systems that permit global trading activity from our location in Fredericton, New Brunswick. The costs incurredto manage investment strategies internally, measured over average assets, were 0.115% or 11.5 basis points (bps) for theyear ended March 31, 2014 (2013 - 11.4 bps). NBIMC has outsourced approximately 14% of the assets under managementwhere access to the desired investment opportunities or specific strategy expertise is not available internally. The cost ofmanaging investments through our external investment managers, also measured on average assets, was 42.5 bps for theyear ended March 31, 2014 (2013 – 20.6 bps). In total, investment management costs were approximately 15.7 basis pointsof average assets under management during the year, versus 12.7 last year.

The increase in both internal and external costs this year is attributable to the performance incentives earned on higherinvestment returns. In this way, both NBIMC as internal manager and any third party investment managers are aligned withthe performance objectives of our clients.

We benchmark our investment management costs against other peer pension fund managers annually. We continue tocompare favourably to publicly available information offered by other public sector peer funds. We also participate in anannual survey of defined benefit pension plans conducted by CEM Benchmarking Inc. Through this benchmarking activity,we conservatively believe that our costs are approximately 25 bps lower than our peers and 35 bps lower than private sectormanagers. This cost differential means that in the year ended March 31, 2014 the Pension Funds were able to retain over$26.4 million due to our low cost advantage. This cost advantage has been a cornerstone of our service delivery since ourinception eighteen years ago.

In addition to investment management costs, Pension Fund clients incur administrative expenses for costs associated withperiodic actuarial valuations, to administer plan member entitlements and pay benefits to plan beneficiaries. These serviceshave been provided through the Province of New Brunswick’s Office of Human Resources Pension and Employee BenefitsDivision. These costs are reported on the Statement of Changes in Net Assets Held in Trust in the accompanying auditedfinancial statements for each Pension Fund.

Future Accounting Policy ChangesPublic Sector Accounting Standards

The Public Sector Accounting Standards Board (PSAB) has a number of projects on its current agenda which, whenfinalized, may have an impact on NBIMC’s financial reporting. In particular, the PSAB has current projects examining not-for-profit organizations, revenue recognition standards and accounting for related party transactions, among others.Management continues to monitor progress on these projects.



Indirect Compensation

Compensation Program Exhibit ABase Salary

Eligibility All Staff

Objectives Reward level of responsibility, expertise, competency and relevant experience

Variable Compensation Program

Annual Incentive Long-Term Incentive(targets 15% -55% of base salary) (targets 15% -75% of base salary)

Short-term Long-term Deferred

Eligibility Investment and research staff and theChief Financial Officer provided aminimum of six months employment.

Investment and research staff and theChief Financial Officer provided aminimum of four years employment.

Align eligible employee compensationto team and total fund investmentperformance with an incentive toachieve sustained asset growth.

Strengthen team cooperation.

Align eligible employee compensationto total fund investment performancewith an incentive to achieve sustainedasset growth.


Total fund return in excess ofbenchmark, net of investmentmanagement expenses.

Investment team(s) active return inexcess of benchmark.


Full NBIMC cost recovery 42 bps after costs84 bps after costs


4 year (prorated) 4 year

Cash Cash

Investment and research staff and theChief Financial Officer provided aminimum of six months employment.

Align eligible employee compensationto team and total fund investmentperformance with an incentive toachieve sustained asset growth.


Reward individual performance.

Objectives


Investment team(s) active return inexcess of benchmark.

Individual performance versus Boardapproved pre-determined AnnualBusiness Plan Objectives.

Performancemetric(s)


Employee benefits and post-retirement benefits Perquisites

Membership in the Public ServiceShared Risk Pension Plan

Range:ThresholdTargetMaximum

Full-time staff. Full-time staff.Full-time staff.Eligibility

Provide staff and their families withassistance and security so that they canfocus on their professionalresponsibilities and achieving thecorporate mission.

Offers a limited number of benefits tocomplement total compensationincluding parking and a health spendingaccount allowance.

Encourage long-term retention byrewarding continued service andcontributing to post-retirement income.

Objectives

1 yearTime horizon

CashType of program


Compensation Discussion and Analysis

Compensation GovernanceThe Board of Directors is responsible for the oversight of NBIMC’s compensation principles, policies and programs. TheBoard approves the compensation program and awards, including the compensation of the President and CEO, based onrecommendations made by the Human Resources and Compensation Committee (HRCC).

HRCC Mandate

The HRCC assists the Board in fulfilling its obligations relating to the establishment of policies for compensation of directorsand employees, leadership succession planning, and setting of human resource policies and practices.

The Committee is composed of three directors and the Chairperson who acts on the Committee in an ex officio capacity.The Committee meets at a minimum three times a year. External human resources consultants may be used to assist theCommittee with fulfilling its mandate.

The HRCC’s Terms of Reference are available at:http://nbimc.com/en/governance/corporate_governance/human_resources_and_compensation_committee .

Key responsibilities include:• Participation in an annual performance appraisal process for the President & CEO, including establishment ofmeasureable goals and objectives, and recommendations for compensation arrangements including performanceincentive awards;

• Development of a Compensation Philosophy that articulates principles to follow in approaching compensation decisionsthat will align with NBIMC’s business objectives, operations and risks;

• Oversight of adjustments to competitive compensation ranges, incentive compensation plans, employee benefit plansand operational travel and expense policies;

• Recommendation of changes to the organization’s structure, appointment of officers, and amendments to jobdescriptions as well as any management severance arrangements;

• Consideration of NBIMC’s leadership development initiatives and succession plans for key employees;• Approval of a long range Human Resource Strategic Plan that includes appropriate strategies and policies to attract andretain talented employees; and

• Review of the year-end incentive compensation pool for eligible employees and recommend to the Board for approval.

Independent Advice

The HRCC has retained the help of independent compensation advisors from time to time. The role of the advisor is toperiodically review the Total Compensation levels offered to all employees within the context of NBIMC’s CompensationPhilosophy. This review typically uses a comparator group to represent the marketplace for employee positions. ForInvestment positions, the comparator group consists of pension funds of similar asset size and investment strategies. Financeand Administration positions are compared to similar positions in the Investment Comparator group, adjusted for regionaldifferences, and to other Atlantic Canada organizations.

NBIMC also participates in and uses compensation surveys conducted by various compensation consultants to ensure thatcompensation trends are monitored regularly and trends are identified and reported to the HRCC.


Corporate Compensation PhilosophyNBIMC believes that employees are key to the performance of the Corporation and is committed to providing a positiveworking environment and competitive compensation. NBIMC also believes that the achievement of its mission will befacilitated by having meaningful alignment between employees’ interests and the interests of its clients.

Accordingly, NBIMC has developed a Compensation Philosophy to address the following objectives:• Provide competitive, performance-based compensation based upon market practices; • Attract and retain high-quality people;• Reinforce the strategy, culture and investment policies of NBIMC;• Promote awareness and attainment of individual, team and corporate strategic objectives;• Enhance NBIMC’s reputation as an employer of choice; and• Treat employees fairly.

The principles on which this philosophy is based are summarized as follows:

Compensation Risk ManagementIn 2011, the Board of Directors and the HRCC jointly requested Deloitte & Touche LLP, an independent professionalservices firm serving as NBIMC’s Internal Auditor, to conduct an assessment of the alignment of NBIMC’s CompensationPolicies and Practices against the Financial Stability Board’s (FSB) Principles for Sound Compensation Practices andImplementation Standards. The FSB issued this guidance after the 2008-09 market crisis to encourage global financialinstitutions to avoid excessive risk-taking by virtue of the design of their compensation programs.

Deloitte’s subsequent report acknowledged that the Corporation’s compensation policies and practices are consistent with theFSB Principles and Standards. This report was subsequently shared with the Minister of Finance and is available athttp://nbimc.com/uploads/CompAssessment.pdf.

Compensation Principles

Pay for performance

culture

Aligned toclients’interests

Attracts, engages and retains talent

Correlation between

seniority and at risk

compensation

Base salaries paid at

median of comparator


Compensation Decision-MakingThe annual process for determining compensation includes the following steps:

Establish target compensation levels

The HRCC annually reviews the compensation program design and pay levels of its comparator groups to ensure thatNBIMC’s programs remain competitive. Market information received from various compensation and salary surveys isreviewed as it becomes available. An Independent Compensation Advisor is periodically asked to conduct a TotalCompensation Review. Compensation information from public disclosures is also considered.

The HRCC also annually considers whether changes may be required to the NBIMC Incentive Plan for Research Staff,Investment Staff and the Chief Financial Officer.

Set target compensation mix and pay at-risk

Total compensation is a mix of base salary, benefits and, for eligible employees, performance incentives. The mix variesby role and seniority, reflecting the opportunity to influence performance. In determining the mix, market practices areconsidered and NBIMC’s compensation principles, including alignment with clients’ interests. A significant portion of theperformance incentives are earned over a four year cycle to discourage short-term risk-taking.

Establish performance objectives

Early in the fiscal year, the Board approves an annual business plan designed to support achievement of the Corporation’sfive year Strategic Plan. This annual business plan contains a balanced mix of financial, investment strategy and operationalperformance objectives and key initiatives. Each of these performance objectives and key initiatives is then weightedaccording to its level of importance to the overall Strategic Plan. The President and CEO delegates the key initiativesamong the various functional teams based on their specific roles and responsibilities.

Evaluate performance against objectives

The performance of the Corporation is assessed against the objectives that are established early in the fiscal year. Realreturns (i.e. after inflation), nominal investment returns and other financial key performance indicators are assessedquantitatively against objectives, while achievement of key business plan initiatives are assessed both quantitatively andqualitatively. The President and CEO recommends to the HRCC the factors to be used in assessing achievement of eachelement of the annual business plan.

Establish target compensation levels

Set target compensation mix and pay at-risk

Establish performance objectives

Evaluate performance against objectives

Determine performance-based compensation awards

Determine performance based awards

The HRCC is responsible for recommending for board approval the amount of performance incentive compensation to beawarded to the President and CEO and the overall weighted factor based on the evaluations noted above. The Presidentand CEO does not participate in this discussion. The President and CEO in turn reviews performance evaluations for eachmember of the Incentive Plan and allocates the individual awards based on individual contribution.

Compensation ProgramThe Compensation Program is outlined in Exhibit A on page 22. The program takes the form of salary and benefits and forcertain staff, an annual investment and individual performance-based incentive plan, and a long-term investment-basedincentive plan.

The compensation program has been developed by the HRCC with the help of an independent compensation consultant toalign with the above Compensation Philosophy. Total compensation levels are periodically benchmarked using independentcompensation consultants and against external peer institutional funds or other relevant compensation surveys.

Salary and benefits

Base salary is determined as a range of pay for each job position, after giving recognition to specific job responsibilities.NBIMC provides full-time employees with benefits that include vacation and sick leave entitlement, life and disabilityinsurance, health and dental benefits, and an employee assistance plan.

NBIMC provided a retirement allowance for employees hired prior to September 1, 2011. The retirement allowance hada minimum vesting requirement of five years of service that paid five working days of salary for each full year of continuousemployment up to a maximum of one hundred and twenty five working days, calculated on the level of salary at time ofretirement or termination without cause. The Board of Directors discontinued this benefit effective April 30, 2013. Accruedbenefits owing were paid in the current fiscal year in an amount of approximately $842,000 (dollars).

Previously all full-time employees were members of the Public Service Superannuation Act (PSSA) pension plan. The PSSAprovided for a pension upon retirement equal to 1.3% of the annual average of the best five consecutive years of earningsup to the annual average Yearly Maximum Pensionable Earnings (“YMPE”) for the year of retirement and the two precedingyears plus 2% of the excess of the annual average of the best five consecutive years of earnings over the annual averageYMPE for the year of retirement and two preceding years, multiplied by the years of pensionable service. The plan wasintegrated with the Canada Pension Plan at age 65 and was indexed for inflation to a maximum of 5%. The plan requireda five year vesting period. Benefits earned under the PSSA up to January 1, 2014 have been converted as a provinciallyguaranteed base benefit under the PSSRP.

Effective January 1, 2014, all full-time employees now participate in the Public Service Shared Risk Plan (PSSRP). ThePSSRP provides a pension upon retirement equal to 1.4% of annualized earnings up to the YMPE for each year or partthereof plus 2% of annualized earnings in excess of YMPE. The plan is subject to an early retirement reduction factor ifretirement is prior to age 65. Indexing is contingent on PSSRP performance as outlined in the PSSRP Funding Policy.

Annual incentive plan

Full-time Investment and Research employees and the Chief Financial Officer are eligible for an Annual Incentive Plan (AIP)once employed for a minimum of six months.

The AIP is calculated as a percentage of salary, weighted to reflect the role and impact that each eligible employee has onachievement of Corporate Business Plan objectives. The AIP includes components based on quantitative investmentperformance and individual achievement. Investment performance is measured quantitatively as total fund net value addedinvestment returns on both a one year and four year cumulative basis, compared against an annual target set by the Board.Net value added investment returns represent the gross investment return in excess of the investment policy benchmarkreturns, after deducting all investment management costs. In previous years, total fund net value added investment returnsfor AIP purposes excluded private market investments made within the most recent five year period to best represent thelong-term nature of the asset class. This adjustment was discontinued in Fiscal 2012-13 for future periods in order toprovide better alignment with recent valuation changes in accounting standards and to reflect the more mature nature ofNBIMC’s private equity portfolio. The one year investment results have a relatively lower weighting relative to four yearresults to reinforce the importance of consistency over a longer period and to encourage employee retention.



The AIP also includes a team award for asset class value added returns of actively managed portfolios to promote teamworkwithin these asset classes. Investment employees are organized into one of three teams focused on asset class: Fixed Income,Equities or Private Markets. The President and CEO, the Chief Financial Officer and Investment Research employees donot participate in the team award due to the overarching focus of their responsibilities.

On the recommendation of the HRCC, the Board also approves an individual incentive component determined by comparingachievement of annual business plan targets established annually as part of the corporate strategic planning process. Theoverall individual component is then allocated by management based on team and individual contributions to the businessplan achievements.

Long-term incentive plan

NBIMC also has a long-term incentive plan (LTIP) for Investment and Research staff and the Chief Financial Officerprovided they have a minimum of four years of employment with NBIMC. The LTIP is designed to reinforce the alignmentof employee interests with long-term investment performance objectives and corporate strategy and assist in attracting andretaining key personnel. The LTIP is based on total fund investment performance in excess of Board-approved investmentpolicy benchmark returns measured over a retroactive period of four consecutive fiscal years.

Impact of Performance Results for Fiscal 2013-14NBIMCs’ investment program had a successful year in Fiscal 2013-14 as measured by a number of annual and longer termfour year investment performance metrics:• NBIMC’s total fund real return (after adjusting for inflation) was 12.3% during Fiscal 2013-14. This return, alongwith the annualized 7.5% four-year, and 5.2% since inception real returns continue to remain well in excess of thelong-term 4% per annum real return requirement that has been set out by the Board of Directors.

• The total fund nominal return in Fiscal 2013-14 was 13.5% and represents $1.4 billion in gross earnings from theoverall investment program during the year. The longer-term four-year annualized return to the end of the period was9.5%, which represented a cumulative $3.6 billion of investment earnings.

• Relative returns (net of all expenses) were 0.45% higher than the overall Investment Policy benchmarks during theyear. These excess investment returns resulted in an additional $49.2 million of active investment earnings during theyear, and have resulted in a total of $150.6 million of additional returns over a four-year period.

Compensation, excluding Directors’ remuneration (see page 33), for the fiscal year consists of:

(in thousands of Canadian dollars) F2014 F2013

Salaries and benefits $ 5,226.9 $ 4,574.4

Performance incentives:AIP – net investment relative performance $ 338.9 $ 564.8AIP - individual performance 764.8 345.3

Total AIP 1,103.7 910.1

LTIP 1,090.9 818.7

Total performance incentives $ 2,194.6 $ 1,728.8


Base Salaries and Benefits

For the year ended March 31, 2014, and after consideration of the continuing low inflation environment, the Board approveda 1.9% overall base salary increase. The Board also approved the addition of one permanent full-time equivalent positionto add an Investment Associate to the Private Markets team. This position was required to address the planned futuregrowth in exposure to that asset class.

Specific compensation information for the organization is published annually on a calendar year basis by the Office of theComptroller for the Province of New Brunswick in the Public Accounts.

Compensation Linked to Investment Performance

The objective of performance-based compensation is to encourage alignment of employee interests with those of clients,including an appropriate balance between maximizing long-term returns and minimizing risks. Investment performance withrespect to incentive compensation can be summarized into two categories: (i) long-term net relative investment returnsversus benchmarks, and (ii) long-term nominal total fund portfolio returns and other business plan achievements.

The following charts compare the respective incentive compensation payments awarded over time for each of these twocategories, commencing with a base value of $100. The resulting graphical correlation indicates a relatively strongrelationship between actual incentive compensation and investment performance as is intended in the design of the incentiveplan. i) Long-Term Net Relative Investment Returns versus Benchmarks:

$500

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Relative Investment Performance Incentives (LH) Net 4-year Annualized Value Added - bps (RH)

F 2003-2004 F 2004-2005 F 2005-2006 F 2006-2007 F 2007-2008 F 2008-2009 F 2009-2010 F 2013-2014F 2012-2013F 2011-2012F 2010-2011


ii) Long-Term Nominal Total Fund Returns:

Annual Incentive Plan (AIP) Overview

The AIP component of $1,103.7 consists of both an investment performance component and a business plan achievementcomponent.

The AIP related to the investment performance component was $338.9. One quarter of this component is based on theone year net value added result and the remainder is based on the four year annualized net value added. The one year netvalue added result was 45.3 bps, and the four year annualized net value added result was 37.9 bps. A basis point is 1/100thof one percent.

A summary table of prior period one year value added results used to determine the current four-year cumulative net valueadded AIP result is as follows:

One YearNet Value Added Percentage of Target

(bps) (%)

2010-11 21.7 51.7

2011-12 16.8 39.9

2012-13 68.6 163.2

2013-14 45.3 108.1

Annualized Four Year 37.9 90.2

The AIP related to business plan achievements is $764.8 for the year ended March 31, 2014. This component is basedon an achievement factor of 1.64 times overall target approved by the Board of Directors, compared to an achievement factorof 1.45 for the year ended March 31, 2013.

The individual component of the AIP is based on business plan accomplishments. The annual business plan includes bothkey performance indicators and specific action plans and initiatives focused on the five key goals in the Corporate Mission(see page 2). A specific weighting for each key goal is determined by the Board at the beginning of each year. The weightingreflects the Board’s direction to management for prioritization of its efforts to implement the business plan.

F 2003-2004 F 2004-2005 F 2005-2006 F 2006-2007 F 2007-2008 F 2008-2009 F 2009-2010 F 2012-2013 F 2013-2014F 2011-2012F 2010-2011

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Individual Performance Incentive (LH) 4-yr Annualized Nominal Return - % (RH)

Achievement of the 4% long-term real return (after adjusting for inflation) required by the Independent Actuary of thedefined benefit pension plans in a risk-controlled fashion was NBIMC’s primary investment performance objective forFiscal 2013-14 and accounts for the largest weighting proportion. As noted above, the overall total fund real return was12.35% in Fiscal 2013-14, an annualized 7.56% on a four-year basis, and most importantly 5.23% per annum since NBIMCs’inception in 1996.

Key Goals F2014 Weighting Achievement

To advance governance, management and organizational effectiveness. 25% Above expectations

To exceed client long-term investment objectives through prudent asset allocation and risk management strategies. 45% Above expectations

To maintain, develop, and attract a highly skilled and experienced team of investment management professionals. 10% Above expectations

To strengthen and expand stakeholder communications and relationships. 10% Above expectations

To support effective and efficient information technology solutions. 10% At expectations

In establishing the achievement factor, the Board considered the achievement of key performance indicators associatedwith each of the five key goals (see preceding page) as well as the following accomplishments:

Key Goals Fiscal 2013-14 Business Plan Accomplishments


To advance governance, management and organizational effectiveness.• Effectively responded to the changes brought about through Government’s Bill 11 An Act RespectingPensions under the Public Service Superannuation Act and its’ related directions.

• Successfully negotiated a five-year agreement to provide institutional investment expertise to the PublicService Shared Risk Plan Board of Trustees upon transition of NBIMC’s role as trustee and investmentmanager of the predecessor plan’s pension assets.

• Actively participated in the Government’s Pension Governance Working Group that was set-up toconsider future enhancements to the governance practices resulting from the adoption of shared riskpension plan models by the Province.

• Completed the implementation of all recommendations arising from the KPA Advisory Services’ 2012report to the Minister on NBIMC’s performance.

• Successfully negotiated investment management agreements with two new clients, transitioning anadditional $507 million of assets under management by March 31, 2014 and a further $10 million inFiscal 2014-15.

• Conducted an orientation session for one new director during the year.• Developed and presented an in-depth review of risks for the annual Board Education Day in September,including completion of an Internal Control Report to map key internal controls to the risks faced byNBIMC.

• Released Letter of Performance Objectives on website and reported on progress in F2012-13 AnnualReport and at the Crown Corporations Committee of the Legislature.

• Continued to meet or exceed key Performance Objectives during the fiscal year.


To exceed client long-term investment objectives through prudent asset allocation and risk management strategies.• Successfully generated long-term investment returns well in excess of pre-established targets in a risk-controlled fashion.

• Participated in a number of comparator asset class modeling exercises, at the request of the Ministerand the NB Pension Task Force, with two actuarial consulting firms as they tested asset mixrecommendations arising from their shared risk plan design models.

• Commenced development of an internal model, including dynamic liability profiles, for shared riskplans to enable us to provide asset mix design assistance to the PSSRP Board of Trustees

• Conducted significant research, and developed professional contacts for future collaboration, withrespect to target benefit pension plans

• Conducted research on structural, legal and tax requirements associated with expanding direct realestate and infrastructure activities on a global basis.

• Completed research into and monitored a test portfolio of low volatility emerging markets equity publicsecurities. This also included the completion of a significant documentation and registration effort toopen foreign jurisdiction accounts for future trading.

• Seeded the new NBIMC Canadian Long-Term Bond Fund to augment the selection of fixed incomeinvestment strategies available to clients.

Key Goals Fiscal 2013-14 Business Plan Accomplishments

To maintain, develop, and attract a highly-skilled and experienced team of investment management professionals.

To strengthen and expand stakeholder communications and relationships.

• Finalized the implementation of F2013-14 Board-approved Compensation Plan changes.• Presented an update to NBIMC’s Human Resources Strategic Plan which was subsequently approvedby the Human Resources and Compensation Committee. This included refreshing NBIMC’smanagement succession plan.

• Conducted the biennial Workplace Environment Survey to measure employee satisfaction andLeadership Surveys to provide employee feedback on leadership effectiveness.

• Conducted a number of stakeholder engagements throughout the year with respect to NBIMC’s ongoinginvestment performance and to address potential future impacts from Government’s pension reformactivities.

• Met with the senior management team at the NB Financial and Consumer Services Commission toensure pension reform developments affecting NBIMC’s investment management role and pendingnew client arrangements were appropriately communicated to this important regulatory stakeholder.

• Ongoing communications activities with the Province relating to implementation of shared risk pensionmodel. This included meetings with Board of Management, Minister and Department of Finance, andthe NB Pension Task Force.

To support effective and efficient information technology solutions.• Implemented an enhanced investment performance and attribution system. • Completed testing of all applications for compatibility with Office 2010.• Upgraded all server equipment for both main and back-up facilities ensuring continued systemredundancy.

• Had both an annual network security assessment and a wireless security assessment conducted byindependent IT consultants. Implemented a two-factor authentication process to improve security forall mobile equipment.

• Released a version, scalable for new clients, of the internally developed application that produces thedaily internal management report used by the investment team professionals.

• Exceeded the Performance Objective target of 99% IT systems availability.


Long-Term Incentive Plan (LTIP) Overview

The LTIP component is $1,090.9 for the year ended March 31, 2014. One quarter of this component is based on the one-year net value added result and the remainder is based on the four year annualized net value added. The one-year net valueadded result was 45.3 bps, and the four year annualized net value added result was 46.9 bps.

Four-year LTIP results differ from the four-year AIP results in Fiscal 2010-11 and 2011-12 due to the previously discussedprivate equity adjustment in those years.

A summary table of the one year value added results used to determine the four-year cumulative net value added LTIPresult is as follows:

One YearNet Value Added Percentage of Target

(bps) (%)

2010-11 32.5 77.4

2011-12 41.2 98.0

2012-13 68.6 163.2

2013-14 45.3 108.1

Annualized Four Year 46.9 111.7

Directors’ RemunerationDirectors’ remuneration is established in NBIMC’s By-Laws and includes an annual retainer for the Chairperson and a perdiem allowance for meeting attendance and preparation time. Directors who are ex-officio are not paid. Directors who travelto attend meetings receive a reimbursement for reasonable accommodation costs, and other out of pocket expenses as wellas an automobile expense reimbursement based on the number of kilometers traveled.

The cost of the Board function, including per diems, director orientation and Board education, for the year ended March31, 2014 was $87.3 (March 31, 2013 - $132.9) plus travel and accommodation reimbursements of $16.3 (March 31, 2013- $13.8).


Corporate Governance

As a Crown corporation, NBIMC is accountable to the Crown Corporations Committee of the Legislative Assembly.NBIMC most recently appeared before the Crown Corporations Committee at their invitation in October 2013 to presentand discuss our objectives and performance results for the fiscal years 2011-2012 and 2012-2013.

The selection process and duties of the NBIMC Board of Directors are outlined in the NBIMC Act. Governance of theorganization is the primary consideration of the Board which acts solely in a fiduciary capacity as investment manager andas Trustee for certain of the funds under management. Board members do not represent any specific stakeholder interest.The Board ensures that all of NBIMC’s transactions are conducted on a purely commercial basis, and that decisions andactions are based on sound business practices.

The Board is responsible for the stewardship and strategic direction of NBIMC and its investments. Its duties includeestablishment of the corporate mission, vision and values, maintaining an effective relationship with the President, andoversight of the business planning process, financial position and results, risk management, internal controls and informationsystems, human resources, communications and stakeholder relations. To ensure its on-going effectiveness, the Boardperforms a biennial self-assessment against these responsibilities.

The Board is assisted in its endeavors by the efforts of three Committees: the Audit Committee, the Human Resources andCompensation Committee and the Governance Committee, whose reports follow. Day-to-day management of NBIMC isdelegated to the Chief Executive Officer, while investment-related matters are delegated to the Chief Investment Officer.

Additional information about our corporate governance practices is available on our website at www.nbimc.com. Thisincludes: our governing statutes, Board composition, Board and Committee Terms of Reference, Nomination Guidelines,Director Orientation and Education Policy and Code of Ethics and Business Conduct.

Board ofDirectors

AuditCommittee

Human Resources& Compensation

CommitteeGovernanceCommittee

Board AttendanceBoard members are expected to attend the board meetings and meetings of committees of which they are a member. Thefollowing table provides the number of meetings held and attendance by each of the appointed directors in Fiscal 2013-14:

Audit Governance Human Resources &Appointed Director¹ Board Committee Committee Compensation Committee

Michael Walton 5/6 3/4 3/4 4/4Wiktor Askanas 6/6 4/4 2/2 4/4Joel Attis3 2/2 n/a 1/1 1/2Patricia LeBlanc-Bird² 5/5 2/3 n/a n/aRonald Maloney 6/6 n/a n/a 3/4Cathy Rignanesi 6/6 4/4 4/4 n/aRichard Speight 6/6 n/a 4/4 n/aReno Thériault 6/6 n/a 2/2 4/4

¹ The Board of Directors also includes three ex-officio members: the President & CEO of NBIMC, the Deputy Minister of Finance (non-voting), andthe Vice-President of Finance of New Brunswick Power Corporation.² appointed May 1, 2013.3 term expired August 2013.

The Director Orientation Program assists new directors in understanding the mandate and stakeholders of NBIMC. Asignificant focus of the initial new director orientation is to explain the roles and responsibilities of the Board and the Boardcommittees. It also outlines NBIMC’s organizational structure, introduces the senior leadership team, and provides a primeron the pension and investment industries.

On-going director education includes exposure to relevant news and articles of interest as well as a program of educationalsessions. Structured education sessions included: a comprehensive full day review of the Corporation’s Enterprise RiskManagement Framework including a risk determination exercise, periodic updates on the activities of the Government’sPension Task Force specific to NBIMC, and a review of the final PSSRP funding policy and risk management tests and its’implications on Investment Policy development.

Major decisions made by the Board during the year, in addition to the matters referred to it by the Board Committees (seeCommittee reports following) included:• Approval of the decision to add a Canadian long-term bond strategy to the current Pooled Fund structure, togetherwith consequent changes to the Investment Policy Statements for the Pooled Funds;

• Reviewed and executed an Agreement to Transfer Trust Assets and Indemnity with the Province to effect the transferof trustee responsibilities for the PSSF to a newly constituted Board of Trustees upon conversion of the PSSA to ashared risk plan;

• Approval of the Fiscal 2013-14 Annual Business Plan;• Approval of the Fiscal 2014-15 Annual Budget.



Board Committee ReportsReport of the Audit Committee

The Audit Committee oversees the financial affairs of NBIMC and the funds under management, including the selectionof accounting policies to be followed in the preparation of financial statements, the systems of internal control andmanagement information, financial risks, and the relationships with the external and internal auditors.

Management is responsible for the preparation of the financial statements and for maintaining appropriate accountingpolicies, processes, procedures and systems of internal control to ensure compliance with accounting standards andapplicable laws and regulations. The external auditor is responsible for planning and carrying out an audit of the annualfinancial statements.

The Committee assesses its effectiveness annually to ensure that it has fulfilled its responsibilities as set out in its Terms ofReference.

Fiscal 2013-14 Highlights In accordance with its Terms of Reference, the Committee accomplished, among otherthings, the following in or relating to Fiscal 2013-14:• Reviewed the annual audited financial statements for the Teachers’ and Judges’ PensionFunds, the NBIMC Unit Trust Funds and NBIMC for the year ended March 31, 2014and recommended their approval by the Board;

• Reviewed the Schedules of Composite Performance in accordance with GlobalInvestment Performance Standards for the year ended March 31, 2014 andrecommended their approval by the Board;

• Received the draft Annual Report material for the year ended March 31, 2014 andapproved the financial content and earnings press release;

• Reviewed the quarterly unaudited financial statements for internal use for the PensionFunds, Unit Trust Funds and NBIMC together with management’s certificationsregarding changes in accounting policies, significant accounting estimates, errors,material weaknesses in internal controls over financial reporting, fraud or illegal actsand subsequent events;

• Reviewed the mid-year financial press release and recommended its approval by theBoard;

• Received the audited financial statements for the year ended March 31, 2013 for awholly-owned subsidiary of the NBIMC Canadian Real Estate Fund;

• Reviewed quarterly status reports from management concerning the conversion offinancial reporting for the Pension Funds and Unit Trust Funds to InternationalFinancial Reporting Standards, including decision to early adopt IFRS upon theresumption of an external audit of the unit trust fund financial statements;

• Approved the External Auditor’s engagement, audit plan, timing, staffing and fees forthe year ended March 31, 2014 and pre-approved all non-audit, tax or other services tobe performed by the External Auditor in accordance with the Audit Committee’s Pre-Approval Policy for Audit and Non-Audit Services;

• Reviewed the External Auditor’s Audit Findings Report for the year ended March 31,2014 and obtained confirmation of the External Auditor’s independence;

• With the assistance of the Committee members and the Finance staff, conducted anassessment of the Quality of the External Audit and met with the External Auditor toreview the results of this assessment;

• Approved the Internal Auditor’s annual plan and budget for the upcoming year endingMarch 31, 2015;


This report has been approved by the members of the Audit Committee.

C. Rignanesi (Chair), W. Askanas, P. LeBlanc-Bird, D. Murphy, M. Walton (ex-officio).

Report of the Governance Committee

The Governance Committee annually reviews the terms of reference for the Board and each committee, all Board policiesand the Nomination Guidelines for new directors to ensure that they continue to meet evolving corporate governance bestpractices. They also oversee the Director Orientation and Education programs and the Code of Ethics and Business Conduct.The biennial Board self-assessment process is facilitated by the Governance Committee.


• Received the Internal Audit recommendations and management’s responses for twointernal audits: the Spreadsheet / End User Computing and Board Reporting Reviews;

• Reviewed the September 2013 Follow-Up Report from the Internal Auditor concerningmanagement’s responses to previous internal audit recommendations;

• Each quarter met in-camerawith each of the External Auditor, the Internal Auditor andmanagement;

• Monitored key performance indicators for management related to timely resolution ofall external and internal audit recommendations;

• Following a comprehensive Board-level review of inherent risks facing the Corporation,assisted in the determination of residual risks after consideration of key internalcontrols;

• Completed an annual review of the Enterprise Risk Management Framework;• Reviewed a quarterly risk coverage chart highlighting independent reviews of risk areasin order to ensure appropriate focus on key risks;

• Reviewed a quarterly risk matrix showing trends in key risk areas;• Reviewed management’s reporting of their annual fraud risk assessment;• Received an update to the Five Year IT Strategic Plan and status report;• Completed a review of the Valuation Policies for investment securities and agreed withmanagement’s recommendation to change the unit trust funds’ accounting policy formeasurement of financial instruments from using bid/ask prices to market close pricingto better align with the Trust Declaration provisions for purchases and redemptions ofunits;

• Received quarterly reporting of legal and regulatory compliance;• Received a quarterly status report of class action litigation in which NBIMC hasparticipated;

• Reviewed the insurance coverage of significant business risks and uncertainties;• Completed an annual review of the Committee’s terms of reference, accomplishmentsfor the year ended March 31, 2014 and set objectives for the upcoming fiscal year.

This report has been approved by the members of the Governance Committee.

R. Speight (Chair), W. Askanas, J. Garbutt (ex-officio), C. Rignanesi, R. Thériault, M. Walton (ex-officio)


Fiscal 2013-14 Highlights In accordance with its Terms of Reference, the Committee accomplished, among otherthings, the following in Fiscal 2013-14:• Established Board Goals for Fiscal 2013-14; • Recommended the appointment of a new director to the Audit Committee and a newchairperson for the Human Resources & Compensation Committee;

• Reviewed the Director Orientation and Education program and Fiscal 2013-14 Boardeducation plan;

• Reviewed quarterly compliance with the Code of Ethics and Business Conduct;• Received a quarterly status report of progress made in addressing the Board GovernanceImprovement Objectives arising out of the 2011 Board and Committee self-assessmentprocess;

• Conducted a review of the governance of related party subsidiaries and holdingcompanies and compared against peer investment entity practices;

• Reviewed quarterly status reports of progress made at addressing the recommendationsfrom an external review of NBIMC’s performance as reported to the Minister of Financein connection with government’s structural review process;

• Conducted an annual review of the Governance Committee’s mandate andeffectiveness;

• Received a presentation on Bill-60 Accountability and Continuous Improvement Act;• Reviewed and approved a new format for Investment Team Board reporting;• Monitored publicly available information concerning efforts by the Public SectorPension Task Force to introduce a shared risk pension model in New Brunswick;

• Created an Ad Hoc Special Committee on Pension Reform to address matters arisingfrom the planned conversion of the PSSA to a shared risk plan. The Ad Hoc Committeeprovided an initial transition plan to the Minister for transferring trustee responsibilities,and reviewed a new investment management agreement;

• Reviewed the Communications Strategy including public policy; • Received a discussion paper on potential evolution of pension services followingconversion of defined benefit plans to shared risk plans.

• Reviewed the annual confirmation of the Code of Ethics and Business Conduct atMarch 31, 2014 for employees and directors;

• Sponsored an annual review sign-off procedure for the Enterprise Risk ManagementFramework;

• Reviewed Director compensation and a summary of expense claims for each Directorand the President and CEO for the year ended March 31, 2014; and

• Reviewed the draft Plan and Corporate Governance disclosure for the Fiscal 2013-14Annual Report and recommended its approval by the Board.


Fiscal 2013-14 Highlights In accordance with its Terms of Reference, the Committee accomplished, among otherthings, the following in Fiscal 2013-14:• Reviewed the Committee’s Terms of Reference Business;• Set the Committee’s objectives for Fiscal 2013-14 and reviewed subsequentachievements;

• Recommended to the Board a change to the Incentive Plan target for private equity andabsolute return strategies to 3.5% from 5.0% commencing in the fiscal year 2014-15;

• Reviewed the individual business plan weightings of the NBIMC Fiscal 2013-14Annual Business Plan and recommended their approval by the Board;

• Reviewed the Succession Plans for the President & CEO and senior managementpositions and recommended approval by the Board;

• Reviewed the Annual Compensation Report, including comparisons to variouscompensation surveys conducted by independent consultants;

• Upon reviewing the Board Compensation Policy of a one day preparation per diem,recommended to the Board that the volume of material required to be reviewed by theAudit Committee warranted two days of preparation;

• Reviewed the organizational structure and recommended its approval by the Board;• Reviewed the Human Resources Strategic Plan and recommended its approval by theBoard;

• Reviewed the Travel Expense Policy and recommended approval by the Board;• Received quarterly certification from management as to regulatory compliance withvarious legislative requirements;

• Reviewed Fiscal 2013-14 corporate results versus the Annual Business Plan andrecommended approval by the Board of the individual incentive performance award;

• Reviewed and approved the performance of the President and CEO against annualtargets;

• Reviewed the overall Incentive Compensation Pool for Fiscal 2013-14; and• Reviewed the Compensation Discussion and Analysis section of the Fiscal 2013-14Annual Report and recommended its approval by the Board.

Report of the Human Resources & Compensation Committee

The Human Resources and Compensation Committee annually conducts a performance appraisal for the President and CEO.It also oversees changes to the Compensation Philosophy, compensation and benefits, incentive plans and organizationalstructure as well as monitors management’s compliance with employment-related regulatory and legislative matters.


This report has been approved by the members of the Human Resources & Compensation Committee.

R. Thériault (Chair), W. Askanas, R. Maloney, M. Walton (ex-officio)

Employee Activity in our Communities

NBIMC Management and staff continued to be very active with a number of important causes in both our local and the largernational community. These efforts can vary from volunteering time, sharing professional expertise, or the donation ofpersonal financial resources.

Local Charitable Causes

During the year, staff continued to exceed their target contribution level for the annual corporate United Way campaign,while at the same time provided an average of over 45 hours per volunteer to 41 non-profit organizations. Three additionalcharitable causes were also supported through other internal corporate fund-raising initiatives.

Of particular note, NBIMC recognized four individuals: Mr. M. Hunter, Mr. M. MacPherson, Mr. S. Bishop and Mr. T.McBride as our “Volunteer of the Year” for the significant contributions that they have made to our community. We werealso pleased to recognize our corporate teams this year: “Bowl for Kids Sake” team (Big Brothers and Big Sisters) and the“CIBC Run for the Cure” Team.

A nominal donation to each of their causes was made in thanks.

Investment Industry Relationships

NBIMC’s investment professionals are recognized nationally as a constructive resource with respect to investment industryrelated Board or Executive Committee participation. The following list outlines a number of relationships in which NBIMCmanagement has actively participated in this type of capacity during the fiscal year:• Pension Investment Association of Canada (PIAC)• Canadian Coalition of Good Governance (CCGG)• S&P/TSX Canada Index Committee• CFA Society Atlantic Canada• University of New Brunswick Investments Committee• Université de Moncton – Comité de placements• Fredericton Community Foundation Investment Committee


Communications and Accountability

As a Crown Corporation, NBIMC is accountable to the Legislature of the Province of New Brunswick through the CrownCorporations Committee of the Legislature.

As the investment manager and trustee of the pension funds, NBIMC reports to the Plan Governor, the Minister of Financeas the Chair of the Board of Management, via this Annual Report, as well as an annual budget presentation and quarterlyperformance reports.

As the investment manager for certain other public sector funds, NBIMC reports those funds’ investment performanceregularly to their governing bodies.

NBIMC also reports to a number of stakeholder groups at least annually through the following means:• PSSRP Board of Trustees• NBTA / AEFNB Pension Committee• NB Teachers Federation• TPA Echo Newsletters (jointly with the Office of Human Resources)• Annual and semi-annual press releases on financial results• http://www.nbimc.com

Public Interest Disclosure Act

As required under Section 18 – Report about disclosures of the Public Interest Disclosure Act, we hereby report that forFiscal 2013-14:• there were no disclosures received or enacted upon,• no investigations were therefore commenced due to disclosure receipt,• no claims had been referred from the Commissioner under section 23, and• no investigations were therefore commenced due to a referral receipt.



Unit Trust Fund Performance

The specific performance of each NBIMC unit trust fund and its respective benchmark return for the period indicated toMarch 31, 2014 is outlined in the table below.

Unit Trust Fund 1 Yr 2 Yrs 3 Yrs 4 Yrs 5 Yrs 10 Yrs Since Inception¹% % % % % % %

NBIMC Nominal Bond Fund 0.65 2.38 4.82 4.97 4.81 5.22 5.78Benchmark 0.25 2.04 4.58 4.70 4.08 4.90 5.62

NBIMC Corporate Bond Fund 2.21 4.24 4.79Benchmark 2.26 4.27 4.42

NBIMC Canadian Long-Term Bond Fund 0.62Benchmark 1.14

NBIMC New Brunswick Fixed Income Opportunity Fund 1.15 3.02 5.12 5.45 4.66 6.00 6.83Benchmark 0.25 2.04 4.58 4.70 4.08 4.90 5.62

NBIMC Money Market Fund 1.35 1.41 1.39 1.32 1.33 2.37 3.10Benchmark 1.00 1.01 0.99 0.93 0.81 2.02 2.79

NBIMC Student Investment Fund 8.44 6.83 4.00 5.89 8.67 7.23 7.43Benchmark 7.93 6.60 4.07 5.77 8.24 6.79 7.16

NBIMC Canadian Equity Index Fund 16.29 11.65 4.12 7.68 13.55 8.85 6.92Benchmark 15.97 10.93 3.55 7.53 13.71 8.29 6.58

NBIMC Low Volatility Canadian Equity Fund 17.96 16.80Benchmark 15.97 12.54

NBIMC External Canadian Equity Fund 18.87 12.62 5.27 8.65 14.77 9.49 11.85Benchmark 15.97 10.93 3.55 7.53 13.71 8.29 10.69

NBIMC S&P/TSX Completion Index Fund 17.81 10.66 3.78 9.71 18.61 7.61 7.59Benchmark 16.57 10.31 3.58 9.61 18.54 6.83 7.79

NBIMC Canadian Equity Active Long Strategy Fund 16.51 11.24 3.23 7.06 13.17 3.06Benchmark 15.97 10.93 3.55 7.53 13.71 3.35

NBIMC External International Equity Fund 34.17 24.26 13.90 12.76 14.83 4.54Benchmark 27.67 20.18 11.83 10.31 13.01 3.22

NBIMC EAFE Equity Index Fund 27.66 20.28 11.99 10.49 13.13 3.60Benchmark 27.67 20.18 11.83 10.31 13.01 3.22

NBIMC Low Volatility International Equity Fund 21.17 19.88 19.93Benchmark 27.67 20.18 21.15

NBIMC U.S. Equity Index Fund 32.40 23.81 19.67 17.33 17.95 9.51Benchmark 32.62 23.95 19.68 17.36 18.02 9.65

Unit Trust Fund 1 Yr 2 Yrs 3 Yrs 4 Yrs 5 Yrs 10 Yrs Since Inception¹% % % % % % %

NBIMC Low Volatility U.S. Equity Fund 26.67 24.65 23.72Benchmark 32.62 23.95 25.06

NBIMC Inflation Linked Securities Fund (5.90) (1.86) 3.83 5.53 6.81 6.12 7.87Benchmark (6.02) (2.05) 3.76 5.42 6.41 5.95 7.68

NBIMC Canadian Real Estate Fund 2.40 7.13 9.37 11.63 8.48 12.61 12.07Benchmark 1.84 5.84 6.31 6.01 5.84 5.97 6.00

NBIMC Canadian Real Estate Investment Trust Fund 5.81Benchmark 5.78

NBIMC International Real Estate Fund 13.04 14.56 15.23 16.02 23.84 7.65Benchmark 12.37 15.66 15.25 16.33 24.98 7.74

NBIMC Infrastructure Fund 3.73 5.39 8.04 7.75Benchmark 5.00 5.58 5.91 5.79

NBIMC North American Market Neutral Fund 6.33 3.42 0.35 (0.34) (0.25) 2.25 2.47Benchmark 1.00 1.01 0.99 0.93 0.81 2.02 2.08

NBIMC Quantitative Strategies Fund 6.78 5.87 5.03 4.34 4.32 3.53Benchmark 1.00 1.01 0.99 0.93 0.81 1.07

NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 0.71 22.51 42.26 41.57 34.29 16.64 10.92Benchmark 5.00 5.57 5.90 5.69 5.59 9.38 7.25

NBIMC Private Equity Fund 27.24 18.36 16.46 15.73 8.43 6.32Benchmark 29.13 21.40 14.91 13.21 15.11 6.35

¹ On April 1, 2008, NBIMC implemented Canadian dollar benchmarks for international exposures. Prior to that date, the benchmarks for internationalexposures were reflected in the local currencies. To ensure comparative information is presented for performance and benchmarks, the since inceptioncolumn above reflects the returns from the later of the first day of trading in the Fund or, if an international Fund, April 1, 2008.


FINANCIAL STATEMENTSYEAR ENDED MARCH 31, 2014

TABLE OF CONTENTSMANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

PENSION FUNDS’ FINANCIAL STATEMENTS:

Teachers’ Pension Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46

Judges’ Superannuation Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

CORPORATE FINANCIAL STATEMENTS:

New Brunswick Investment Management Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83


MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTSNew Brunswick Investment Management Corporation (“NBIMC” or the “Corporation”) was created on March 11, 1996pursuant to the New Brunswick Investment Management Corporation Act of the New Brunswick Legislature (the “NBIMCAct”) and was appointed as trustee of the pension fund assets of each of the New Brunswick Public Service SuperannuationAct, the New Brunswick Teachers’ Pension Act and the New Brunswick Provincial Court Judges’ Act. Although continuingto serve as the investment manager, NBIMC ceased to be the trustee of the New Brunswick Public Service SuperannuationAct when it was converted to the Public Service Shared Risk Plan on January 1, 2014.

The financial statements of the Teachers’ Pension Fund and the Judges’ Superannuation Fund (the “Pension Funds”) andof NBIMC have been prepared by management of the Corporation. They have been approved by the Board of Directors.

Management prepared the Pension Funds’ financial statements to comply with section 27(1) of the NBIMC Act. The PensionFund financial statements are special purpose financial statements and reflect the net assets available for benefits andchanges in net assets available for benefits in accordance with the basis of accounting as disclosed in note 2 to the financialstatements.

Management prepared the Corporation’s financial statements in accordance with public sector accounting standards. TheNBIMC financial statements are general purpose financial statements and include a Statement of Financial Position,Statement of Operations and Changes in Accumulated Deficit, Statement of Changes in Net Debt and Statement of CashFlow.

Management is responsible for the integrity and fair presentation of the financial statements, including amounts based onbest estimates and judgments. NBIMC maintains systems of internal control and supporting procedures to providereasonable assurance that accurate financial information is available, that assets are protected and that resources are managedefficiently.

Ultimate responsibility for the financial statements rests with the Board of Directors of the Corporation. The Board isassisted in its responsibilities by the Audit Committee, consisting of five Board members the majority of whom areindependent of NBIMC and the Plan Sponsor. The Audit Committee reviews the financial statements and recommends themfor approval by the Board. The Audit Committee also reviews matters related to accounting, auditing, internal controlsystems, financial risk management and the scope, planning and audit findings of the internal and external auditors.

KPMG LLP, the external auditors of the financial statements, are directly accountable to the Audit Committee. They haveconducted an independent examination of the financial statements in accordance with Canadian generally accepted auditingstandards, performing such tests and other procedures as they consider necessary to express an opinion to the Board ofDirectors.

John A. Sinclair Jan Imeson, CPA, CAPresident and Chief Executive Officer Chief Financial Officer


INDEPENDENT AUDITORS’ REPORTTO THE DIRECTORS OF NEW BRUNSWICK INVESTMENT MANAGEMENTCORPORATIONWe have audited the accompanying financial statements of the Teachers’ Pension Fund and the Judges’ SuperannuationFund held in trust by the New Brunswick Investment Management Corporation, which comprise the statements of net assetsavailable for benefits as at March 31, 2014, March 31, 2013 and April 1, 2012, the statements of changes in net assetsavailable for benefits for the years ended March 31, 2014 and March 31, 2013, and notes, comprising a summary ofsignificant accounting policies and other explanatory information. The financial statements have been prepared bymanagement to comply with Subsection 27(1) of the New Brunswick Investment Management Corporation Act.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance withSubsection 27(1) of the New Brunswick Investment Management Corporation Act; this includes determining that the basisof accounting is an acceptable basis for the preparation of these financial statements in the circumstances, and for suchinternal control as management determines is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits inaccordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethicalrequirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatementof the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controlrelevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’sinternal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonablenessof 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 in our audits is sufficient and appropriate to provide a basis for ouraudit opinion.

Opinion

In our opinion, these financial statements present fairly, in all material respects, the net assets available for benefits of theTeachers’ Pension Fund and the Judges’ Superannuation Fund as at March 31, 2014, March 31, 2013 and April 1, 2012 andthe changes in net assets available for benefits for the years ended March 31, 2014 and March 31, 2013 in accordance withSubsection 27(1) of the New Brunswick Investment Management Corporation Act.

Basis of Accounting and Restriction of Use

Without modifying our opinion, we draw attention to note 1(a) to the financial statements, which describes the basis ofaccounting. The financial statements are prepared to assist the Directors of New Brunswick Investment ManagementCorporation and the Minister of Finance for the Province of New Brunswick for complying with Subsection 27(1) of theNew Brunswick Investment Management Corporation Act. As a result, the financial statements may not be suitable foranother purpose. Our report is intended solely for the Directors and the Minister of Finance and should not be used by partiesother than the specified users.

CHARTERED ACCOUNTANTS

JUNE 9, 2014FREDERICTON, CANADA


TEACHERS’ PENSION FUNDStatements of Net Assets Available for Benefits(In thousands of Canadian dollars)

March 31, 2014 March 31, 2013 April 1, 2012

ASSETSInvestments (note 3) $ 4,841,185 $ 4,448,486 $ 4,156,431Contributions receivable from employers (note 8) 4,299 4,087 4,234Contributions receivable from employees (note 8) 1,028 803 803Other receivable 93 171 —Total assets 4,846,605 4,453,547 4,161,468LIABILITIESAccounts payable and accrued liabilities (note 8) 3,162 2,694 2,060NET ASSETS AVAILABLE FOR BENEFITS $ 4,843,443 $ 4,450,853 $ 4,159,408See accompanying notes to financial statements.

TEACHERS’ PENSION FUNDStatements of Changes in Net Assets Available for Benefits(In thousands of Canadian dollars)

YEAR ENDED MARCH 31

2014 2013

INCREASE IN NET ASSETSNet investment income (note 6) $ 579,120 $ 371,920 Employee pension contributions 47,691 47,877 Employer pension contributions 46,490 46,139 Employer special contributions — 98,627

673,301 564,563 DECREASE IN NET ASSETSPayments to sponsor for benefits 271,257 265,565 Payments to sponsor for expenses 1,385 1,561 Fees paid to third party suppliers 2,998 1,627 Fees paid to NBIMC 4,575 4,164 Harmonized sales tax, net of rebates 496 201

280,711 273,118 NET INCREASE FOR THE YEAR 392,590 291,445

NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR 4,450,853 4,159,408 NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $ 4,843,443 $ 4,450,853 See accompanying notes to financial statements.Commitments (note 9)Subsequent events (note 11)Approved on behalf of the Board:

Michael W. Walton John A. SinclairChairman of the Board President and Chief Executive Officer


JUDGES’ SUPERANNUATION FUNDStatements of Net Assets Available for Benefits(In thousands of Canadian dollars)

March 31, 2014 March 31, 2013 April 1, 2012

ASSETSInvestments (note 3) $ 37,215 $ 33,433 $ 31,091Contributions receivable from employer (note 8) 177 25 36Other receivable 1 1 —Total assets 37,393 33,459 31,127LIABILITIESAccounts payable and accrued liabilities (note 8) 45 26 12NET ASSETS AVAILABLE FOR BENEFITS $ 37,348 $ 33,433 $ 31,115See accompanying notes to financial statements.

JUDGES’ SUPERANNUATION FUNDStatements of Changes in Net Assets Available for Benefits(In thousands of Canadian dollars)

YEAR ENDED MARCH 31

2014 2013

INCREASE IN NET ASSETSNet investment income (note 6) $ 4,524 $ 2,788 Employee pension contributions 374 398 Employer pension contributions 306 326 Employer special contributions 153 153

5,357 3,665 DECREASE IN NET ASSETSPayments to sponsor for benefits 1,343 1,278 Payments to sponsor for expenses 39 27 Fees paid to third party suppliers 23 11 Fees paid to NBIMC 34 30 Harmonized sales tax, net of rebates 3 1

1,442 1,347 NET INCREASE FOR THE YEAR 3,915 2,318

NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR 33,433 31,115 NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $ 37,348 $ 33,433 See accompanying notes to financial statements.Commitments (note 9)

Approved on behalf of the Board:



NET ASSETS AVAILABLE FOR BENEFITSNotes to Financial Statements(In thousands of Canadian dollars)

YEARS ENDED MARCH 31, 2014 AND MARCH 31, 2013

The assets of the Teachers’ Pension Fund (“Teachers”) and Judges’ Superannuation Fund (“Judges”), (collectively “theFunds”) are held in trust by the New Brunswick Investment Management Corporation (“NBIMC”). NBIMC was appointedas trustee on March 11, 1996, pursuant to the New Brunswick Investment Management Corporation Act of the NewBrunswick Legislature (the “NBIMC Act”) and assumed responsibility for the management of the Funds’ assets effectiveApril 1, 1996.

On April 1, 1998, the assets of the Funds were transferred to unit trust funds established by NBIMC. This portfolio structurefacilitates the collective investment management and administration of the assets. There were 25 active unit trust funds inplace at year-end, each pool with a specific investment mandate. Each of the Funds holds units of certain of the unit trustfunds in accordance with its Statement of Investment Policies.

1. Summary Description of the Pension Plans

The Teachers’ Pension Act (“TPA”), and the combined Provincial Court Act (“PCA”) and Provincial Court Judges’ PensionAct (“JPA”) are legislated defined benefit pension plans. Below is a summary comparison of the features of each plan. Formore complete information, reference should be made to the plans’ legislation.


Feature TPA PCA JPA

Contributions -employee

7.3% of earnings up to theYearly MaximumPensionable Amount(“YMPE”), 9.0% of earningsin excess of YMPE

8.0% of earnings up to YMPE,8.0% of earnings in excess ofYMPE

8.0% of earnings up to YMPE,8.0% of earnings in excess ofYMPE

Contributions -employer

Equal to employee plusspecial payments asdetermined by an actuary.

Determined by an actuary, plusspecial payments determinedby an actuary.

Determined by an actuary, plusspecial payments determinedby an actuary.

Unreduced benefits Sum of age and years ofservice of 87; orUpon 35 years of service; orAge 65 with 5 years service;orAge 60 with 20 yearsservice.

Age 60 with 25 years service;or Age 65 with 10 years service.

Age 60 with 2 years service

Reduced benefits Sum of age and service 80;or Age 60 with 5 years service.

N/A 2 years of service.

Basic benefit 2% of salary times years ofservice. Integrated withCPP.

60% of salary. Integrated withCPP.

3% per year of service up to65% of salary. Not integratedwith CPP.

Annual benefitindexing

Up to 4.75% Up to 6.0% Up to 5.0%

NOTES TO FINANCIAL STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

2. Significant Accounting Policies

(a) Accounting entity and basis of presentation

These special purpose financial statements provide information on the net assets available for benefits of the Funds managedby NBIMC. They do not include the pension liabilities of the TPA or the JPA (collectively “the Plans”). Consequently, thesefinancial statements do not purport to show the adequacy of the Funds’ assets to meet the Plans’ pension obligations. Suchan assessment requires additional information, such as the Plans’ actuarial reports.

These financial statements have been prepared in accordance with Canadian accounting standards for pension plans in PartIV of the Chartered Professional Accountants’ (CPA) Handbook excluding pension obligations and any resulting surplusor deficit. They are prepared solely for the information and use of the Board of Directors of NBIMC and the Minister ofFinance for the Province of New Brunswick for complying with Subsection 27(1) of the NBIMC Act. As a result, thefinancial statements may not be suitable for another purpose.

The Funds adopted Canadian accounting standards for pension plans excluding pension obligations and any resulting surplusor deficit on April 1, 2013 with a transition date of April 1, 2012. Canadian accounting standards for pension plans alsorequire the Funds to follow general standards for financial presentation with respect to comparative information andretrospectively apply accounting changes. Accordingly, these standards were applied retroactively by management to thecomparative information in these financial statements including the statement of net assets available for benefits as at March31, 2013 and the statement of changes in net assets available for benefits for the year ended March 31, 2013 and relateddisclosure.

All investment assets and liabilities are measured at fair value in accordance with IFRS 13, Fair Value Measurements. Inselecting or changing accounting policies that do not relate to its investment portfolio, Canadian accounting standards forpension plans requires the Funds to comply on a consistent basis with either International Financial Reporting Standards(“IFRS”) in Part I of the CPA Handbook or with Canadian accounting standards for private enterprises in Part II of the CPAHandbook. The Funds have chosen to comply on a consistent basis with IFRS.

(b) Transition to CPA Section 4600 and IFRS

These financial statements are the Funds’ first in compliance with CPA Section 4600 and IFRS. The comparative resultsas at April 1, 2012 and for the year ended March 31, 2013 have been restated accordingly and the classification of the unitholdings in the NBIMC unit trust funds has been revised.

Coincident with the Funds’ adoption of Section 4600 and IFRS, the NBIMC unit trust funds also adopted IFRS. As part oftheir transition, the NBIMC unit trust funds adopted IFRS 13, Fair Value Measurement, on a prospective basis commencingApril 1, 2012. They applied the measurement requirements under IFRS 13 consistently to the fair value of all underlyingfinancial assets and financial liabilities in the periods presented in the unit trust fund financial statements, which in turnaffects the NBIMC unit trust funds’ net asset values reported as investments in these Funds financial statements.

Note 10 provides further information on the impacts of adopting Section 4600 and IFRS.

(c) Basis of measurement

The Funds’ financial statements have been prepared on the historical cost basis except for investments, which are measuredat fair value.




2. Significant Accounting Policies (continued)

(d) Financial instruments

(i) Recognition and measurement

Financial assets and financial liabilities are recognized and derecognized, as applicable, in the Statement of NetAssets Available for Benefits on the trade date, which is the date on which the Funds become a party to thecontractual provisions of the instrument.

All investments of the Funds consist of units of NBIMC unit trust funds. The Funds designate all investments asfair value through profit or loss (“FVTPL”) upon initial recognition.

The fair value of each investment in units of the NBIMC unit trust funds is based on the calculated daily net assetvalue per unit multiplied by the number of units held, and represents the Funds’ proportionate share of theunderlying net assets at fair values determined using closing market prices.

The underlying investments held in the NBIMC unit trust funds are valued at fair value as of the date of thefinancial statements. Fair value is the price that would be received to sell an asset or paid to transfer a liability inan orderly transaction between market participants at the measurement date in the principal or, in its absence, themost advantageous market to which the unit trust funds have access at that date.

The fair value of the financial assets and liabilities traded in active markets (such as exchange-traded derivativesand debt and equity securities) are based on quoted market prices at the close of trading on the reporting date.

If there is no quoted price in an active market, then the NBIMC unit trust funds use valuation techniques thatmaximize the use of the relevant observable inputs and minimize the use of unobservable inputs. The chosenvaluation technique incorporates all of the factors that market participants would take into account in pricing atransaction.

Certain of the Funds’ financial assets and financial liabilities such as contributions and other receivables andaccounts payable and accrued liabilities are measured at amortized cost, which is the cost at initial recognition,minus any reduction for impairment. The carrying amount of these assets and liabilities approximates fair valuedue to their short settlement period. At the reporting date, the Funds assess whether there is objective evidencethat a financial asset at amortized cost is impaired. If such evidence exists, the Funds recognize an impairmentloss as the difference between the amortized cost of the financial asset and the present value of the estimated futurecash flows, discounted using the instrument’s original effective interest rate.

(ii) Derecognition

The Funds derecognize a financial asset when the contractual rights to the cash flows from the asset expire, or aretransferred in a transaction in which substantially all of the risks and rewards of ownership of the financial assetare transferred.

On derecognition of a financial asset, the difference between the carrying amount of the asset and the considerationreceived (including any new asset obtained less any new liability assumed) is recognized in profit or loss.

The Funds derecognize a financial liability when its contractual obligations are discharged or cancelled or expire.

(e) Functional and presentation currency

The financial statements are presented in Canadian dollars, which is the functional currency of each of the Funds. Monetaryassets and liabilities denominated in foreign currencies are translated at the prevailing rates of exchange at the date of theStatement of Net Assets Available for Benefit.


2. Significant Accounting Policies (continued)

(f) Use of estimates and judgments

The preparation of the Funds’ financial statements requires judgments, estimates and assumptions that affect the applicationof accounting policies and the reported amounts of assets and liabilities at the date of the Statement of Net Assets Availablefor Benefits. Significant estimates and judgments are required in determining the reported estimated fair value of privateinvestments since these determinations may include estimates of expected future cash flows, rates of return and the impactof future events. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed onan ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and inany future years affected.

(g) Taxes

The Funds are Registered Pension Plan Trusts as defined in the Income Tax Act and are not subject to income taxes.

(h) Contributions

Contributions from the Plan Sponsor and pension plan members are recorded in the period that payroll deductions are made.

(i) Net investment income

Investment transactions are recognized by the underlying unit trusts as of their trade date. Net investment income includesrealized and unrealized gains and losses in the value of the units held in each of the unit trusts.

(j) Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing rates of exchange at thedate of the Statements of Net Assets Available for Benefits. Investment income and expenses are translated at the exchangerates prevailing on the transaction date. Realized and unrealized exchange gains and losses are included in investmentincome.

(k) New standards not adopted

The following new standards, interpretations and amendments to published standards that are mandatory for futureaccounting periods, but where early adoption is permitted now, have not been duly adopted:

IFRS 9 (effective not earlier than 2017) - Financial instruments

Management is in the process of assessing the impact of the amendment to this standard and believes that this amendmentwill not significantly affect the Funds’ net assets available for benefits but may affect the disclosures in the financialstatements.

3. Investments

Investment assets of the Funds are held in the unit trust funds for which NBIMC is trustee.

Following is a description of each unit trust fund in which an interest is held by the Funds during the year ended March 31,2014:

NBIMC Nominal Bond Fund

This fund invests primarily in investment grade bonds (a minimum of triple-B rated by a major rating agency) of G-7countries and Canadian provinces paying a nominal rate of interest. The performance objective is to add 20 basis points toits benchmark, the FTSE TMX Canada All Government Bond Index, over a four-year moving average.




3. Investments (continued)

NBIMC Corporate Bond Fund

This fund invests primarily in investment grade corporate bonds (a minimum of triple-B rated by a major rating agency)paying a nominal rate of interest. The performance objective is to add 20 basis points to its benchmark, the FTSE TMXAll Corporate Bond Index, over a four-year moving average.

NBIMC New Brunswick Fixed Income Opportunity Fund

This fund invests primarily in fixed income issues to finance economic activity in New Brunswick. The performanceobjective is to add 20 basis points to its benchmark, the FTSE TMX Canada All Government Bond Index, over a four-yearmoving average.

NBIMC Money Market Fund

This fund invests primarily in fixed income securities having a maturity of less than one year. The performance objectiveis to add 20 basis points to its benchmark. The benchmark is calculated as 93% of the FTSE TMX Canada 91-Day TreasuryBill Index and 7% of the Call Loan Rate.

NBIMC Student Investment Fund

This fund is managed by students at the University of New Brunswick who are registered in the Student Investment FundProgram. Its initial capital of $1 million, funded in 1998, has been invested using the same general investment policies andguidelines as are used by NBIMC. The overall benchmark for this fund is composed of 50% S&P/TSX Total ReturnComposite Index, 45% FTSE TMX Canada All Government Bond Index, 4.65% FTSE TMX Canada 91-Day Treasury BillIndex and 0.35% Call Loan Rate. NBIMC staff closely monitor the activities of this fund, including executing andprocessing all transactions on behalf of the students.

NBIMC Foreign Exchange Hedging Funds

Each of the Funds has settled a separate grantor trust (the “Hedging Trust”), designed to facilitate hedging policy decisionswith respect to exposure to foreign currencies. The Hedging Trusts are currently inactive.

NBIMC Canadian Equity Index Fund

This fund invests in physical securities and derivative strategies to gain exposure to various segments of the S&P/TSXComposite Index. Leverage on derivative products is avoided by ensuring each derivative product is supported by anappropriate value of short-term investments. The performance objective is to match the return of the S&P/TSX Total ReturnComposite Index over four year rolling periods.

NBIMC Low Volatility Canadian Equity Fund

This fund actively invests in securities to gain exposure to the S&P/TSX Composite Index. The objective is to achieve along-term rate of return equivalent to this index with less annual volatility.

NBIMC External Canadian Equity Fund

This fund is managed by external managers and invests in publicly traded Canadian equities. The performance objectiveis to add 150 basis points to its benchmark, the S&P/TSX Total Return Composite Index, over a four-year moving average.

NBIMC S&P/TSX Completion Index Fund

Managed by an external manager, this fund invests primarily in the companies of the S&P/TSX Completion Index. Theperformance objective is to exceed the performance of its benchmark, the S&P/TSX Completion Total Return Index, by 150basis points (after fees).



NBIMC Canadian Equity Active Long Strategy Fund

This fund seeks to add value through prudent selection of individual securities and sector allocations through over andunder weighting of the index. The performance objective is to add 150 basis points to its benchmark, the S&P /TSX TotalReturn Composite Index.

NBIMC External International Equity Fund

This fund is managed by external managers and invests in publicly traded equities in markets in Europe, Australasia andthe Far East. The performance objective is to exceed the performance of the benchmark, which is a weighting of therespective country or regional indices (CAD$) by 150 basis points over a four-year moving average.

NBIMC EAFE Equity Index Fund

This fund invests in securities in the MSCI EAFE (Developed Markets) Index (CAD$). The objective is to achieve a rateof return equivalent to the MSCI EAFE (Developed Markets) Net Dividends.

NBIMC Low Volatility International Equity Fund

This fund actively invests in securities in the MSCI EAFE (Developed Markets) Net Dividends Index (CAD$). Theobjective is to achieve a long-term rate of return equivalent to this index with less annual volatility.

NBIMC U.S. Equity Index Fund

This fund passively invests in physical securities and derivatives to gain exposure to the S&P 500 Index. Leverage onderivative products is avoided by ensuring each derivative product is supported by an appropriate value of short-terminvestments. The performance objective is to match the return of the S&P 500 Total Return Index (CAD$).

NBIMC Low Volatility U.S. Equity Fund

This fund actively invests in securities to gain exposure to the S&P 500 Total Return Index (CAD$). The objective is toachieve a long-term rate of return equivalent to this index with less annual volatility.

NBIMC Inflation Linked Securities Fund

This fund invests primarily in fixed income instruments that are adjusted for inflation of G-7 countries. The performanceobjective is to add 10 basis points to its benchmark, the FTSE TMX Canada Real Return Bond Index, over a four-yearmoving average.

NBIMC Canadian Real Estate Fund

This fund invests in private Canadian real estate investments, directly through a wholly owned subsidiary, NBIMC RealtyCorp., or indirectly through limited partnerships or similar investment vehicles. The benchmark is inflation, as measuredby the percentage change in the twelve-month CPI-Canada All Items Index, plus 4%.

NBIMC Canadian Real Estate Investment Trust Fund

This fund invests in publicly-traded Canadian real estate investment trust securities. The performance objective is to matchthe return of the S&P/TSX Capped REIT Index.





NBIMC International Real Estate Fund

This fund is managed by an external manager that invests primarily in publicly traded securities of international Real EstateInvestment Trusts (REITs). The performance objective is to add 150 basis points to the countries’ blended REIT EquityIndices (CAD$), net of fees, over the long-term.

NBIMC Infrastructure Fund

This fund was created to provide additional investment diversification through direct investment in infrastructure throughco-investment structures. The benchmark is inflation, as measured by the percentage change in the twelve-month CPI-Canada All Items Index, plus 4%.

NBIMC North American Market Neutral Fund

This fund focuses on adding value through security selection within its universe of the S&P/TSX Composite Index as wellas certain publicly traded US-listed stocks. Favored securities are purchased and offset by a corresponding short positionin another security within the same sector. The portfolio is supported by a cash underlay and its performance objective isto add 500 basis points annually over a four-year moving average basis to its benchmark. The benchmark is calculated as93% of the FTSE TMX Canada 91-Day Treasury Bill Index and 7% of the Call Loan Rate.

NBIMC Quantitative Strategies Fund

This fund seeks to add value by investing in either long or short positions where announced mergers or dual class sharestructures present arbitrage potential. Short positions are supported by cash underlay. The objective is to add 500 basispoints over its benchmark. The benchmark is calculated as 93% of the FTSE TMX Canada 91-Day Treasury Bill Index and7% of the Call Loan Rate.

NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund

This fund invests in public and private equities or instruments convertible into equities of New Brunswick and AtlanticCanada companies. The performance objective is to achieve a 4% real rate of return over a long-term investment horizon.

NBIMC Private Equity Fund

This fund is managed by external managers that invest primarily in non-publicly traded securities of U.S. and Europeancompanies. The performance objective is to exceed the performance of its benchmark, a blend of the respective countries’total return indices (CAD$).



Following are details of unit trust holdings by each of the Funds:

Unit Fair ValueTeachers’ Units Value March 31,($ thousands) (# rounded) (in dollars) 2014

Fixed Income:NBIMC Nominal Bond Fund 340,571 $ 2,337 $ 796,036NBIMC Corporate Bond Fund 316,937 1,111 352,131NBIMC New Brunswick Fixed Income Opportunity Fund 2,437 2,792 6,803NBIMC Money Market Fund 58,269 1,561 90,976NBIMC Student Investment Fund 528 3,002 1,586

1,247,532Equities:NBIMC Canadian Equity Index Fund 161,512 2,888 466,510NBIMC Low Volatility Canadian Equity Fund 84,589 1,214 102,708NBIMC External Canadian Equity Fund 56,855 3,430 195,017NBIMC S&P/TSX Completion Index Fund 30,169 3,180 95,923NBIMC Canadian Equity Active Long Strategy Fund 87,239 1,228 107,158NBIMC External International Equity Fund 70,032 1,720 120,421NBIMC EAFE Equity Index Fund 449,697 1,236 555,923NBIMC Low Volatility International Equity Fund 96,705 1,505 145,563NBIMC U.S. Equity Index Fund 277,528 1,725 478,719NBIMC Low Volatility U.S. Equity Fund 96,901 1,614 156,443

2,424,385Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 140,600 3,194 449,134NBIMC Canadian Real Estate Fund 26,216 3,265 85,591NBIMC Canadian Real Estate Investment Trust Fund 90,226 1,058 95,464NBIMC International Real Estate Fund 33,067 4,659 154,041NBIMC Infrastructure Fund 34,919 1,259 43,957

828,187Alternative Investments:NBIMC North American Market Neutral Fund 53,723 1,303 70,020NBIMC Quantitative Strategies Fund 81,224 1,231 100,005NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 2,767 4,683 12,958NBIMC Private Equity Fund 81,441 1,941 158,098

341,081$ 4,841,185





Unit Fair ValueTeachers’ Units Value March 31,($ thousands) (# rounded) (in dollars) 2013

Fixed Income:NBIMC Nominal Bond Fund 377,685 $ 2,322 $ 784,199 NBIMC Corporate Bond Fund 260,795 1,087 283,500 NBIMC New Brunswick Fixed Income Opportunity Fund 2,663 2,760 7,351 NBIMC Money Market Fund 19,718 1,540 30,377 NBIMC Student Investment Fund 528 2,767 1,462

1,106,889 Equities:NBIMC Canadian Equity Index Fund 181,604 2,484 451,071 NBIMC Low Volatility Canadian Equity Fund 86,365 1,029 88,904 NBIMC External Canadian Equity Fund 57,755 2,885 166,658 NBIMC S&P/TSX Completion Index Fund 30,516 2,698 82,356 NBIMC Canadian Equity Active Long Strategy Fund 87,377 1,054 92,118 NBIMC External International Equity Fund 70,993 1,281 90,983 NBIMC EAFE Equity Index Fund 542,638 968 525,495 NBIMC Low Volatility International Equity Fund 113,809 1,242 141,377 NBIMC U.S. Equity Index Fund 368,983 1,302 480,744 NBIMC Low Volatility U.S. Equity Fund 110,287 1,274 140,568

2,260,274 Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 126,117 3,394 428,109 NBIMC Canadian Real Estate Fund 56,754 3,188 180,957 NBIMC International Real Estate Fund 34,381 4,121 141,686 NBIMC Infrastructure Fund 27,623 1,213 33,516

784,268 Alternative Investments:NBIMC North American Market Neutral Fund 52,222 1,226 64,023 NBIMC Quantitative Strategies Fund 79,377 1,153 91,530 NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 2,879 4,308 12,404 NBIMC Private Equity Fund 84,617 1,525 129,098

297,055 $ 4,448,486



Unit Fair ValueTeachers’ Units Value April 1,($ thousands) (# rounded) (in dollars) 2012

Fixed Income:NBIMC Nominal Bond Fund 436,780 $ 2,230 $ 973,964NBIMC Corporate Bond Fund 110,685 1,022 113,185NBIMC New Brunswick Fixed Income Opportunity Fund 3,670 2,631 9,656NBIMC Money Market Fund 40,686 1,518 61,765NBIMC Student Investment Fund 528 2,630 1,390

1,159,960Equities:NBIMC Canadian Equity Index Fund 191,126 2,317 442,871NBIMC External Canadian Equity Fund 57,788 2,704 156,296NBIMC S&P/TSX Completion Index Fund 30,533 2,596 79,282NBIMC Canadian Equity Active Long Strategy Fund 129,404 992 128,455NBIMC External International Equity Fund 71,033 1,113 79,102NBIMC EAFE Equity Index Fund 599,406 854 512,159NBIMC Low Volatility International Equity Fund 81,099 1,047 84,947NBIMC U.S. Equity Index Fund 390,468 1,125 439,365NBIMC Low Volatility U.S. Equity Fund 80,753 1,039 83,906

2,006,383Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 115,960 3,316 384,574NBIMC Canadian Real Estate Fund 49,714 2,845 141,434NBIMC International Real Estate Fund 48,644 3,549 172,657NBIMC Infrastructure Fund 20,599 1,133 23,344

722,009Alternative Investments:NBIMC North American Market Neutral Fund 54,385 1,218 66,277NBIMC Quantitative Strategies Fund 71,602 1,098 78,630NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 2,530 3,119 7,893NBIMC Private Equity Fund 83,193 1,385 115,279

268,079$ 4,156,431





Unit Fair ValueJudges’ Units Value March 31,($ thousands) (# rounded) (in dollars) 2014

Fixed Income:NBIMC Nominal Bond Fund 2,538 $ 2,337 $ 5,932 NBIMC Corporate Bond Fund 2,436 1,111 2,707 NBIMC New Brunswick Fixed Income Opportunity Fund 19 2,792 52 NBIMC Money Market Fund 449 1,561 701 NBIMC Student Investment Fund 4 3,002 11

9,403 Equities:NBIMC Canadian Equity Index Fund 1,368 2,888 3,951 NBIMC Low Volatility Canadian Equity Fund 650 1,214 790 NBIMC External Canadian Equity Fund 436 3,430 1,494 NBIMC S&P/TSX Completion Index Fund 231 3,180 735 NBIMC Canadian Equity Active Long Strategy Fund 682 1,228 838 NBIMC External International Equity Fund 537 1,720 923 NBIMC EAFE Equity Index Fund 3,612 1,236 4,464 NBIMC Low Volatility International Equity Fund 743 1,505 1,119 NBIMC U.S. Equity Index Fund 2,205 1,725 3,804 NBIMC Low Volatility U.S. Equity Fund 745 1,614 1,203

19,321 Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 1,023 3,194 3,267 NBIMC Canadian Real Estate Fund 201 3,265 657 NBIMC Canadian Real Estate Investment Trust Fund 694 1,058 734 NBIMC International Real Estate Fund 176 4,659 822 NBIMC Infrastructure Fund 261 1,259 329

5,809 Alternative Investments:NBIMC North American Market Neutral Fund 413 1,303 538 NBIMC Quantitative Strategies Fund 624 1,231 769 NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 21 4,683 100 NBIMC Private Equity Fund 657 1,941 1,275

2,682 $ 37,215



Unit Fair ValueJudges’ Units Value March 31,($ thousands) (# rounded) (in dollars) 2013

Fixed Income:NBIMC Nominal Bond Fund 2,394 $ 2,322 $ 5,559 NBIMC Corporate Bond Fund 2,114 1,087 2,298 NBIMC New Brunswick Fixed Income Opportunity Fund 20 2,760 56 NBIMC Money Market Fund 149 1,540 229 NBIMC Student Investment Fund 4 2,767 10

8,152 Equities:NBIMC Canadian Equity Index Fund 1,495 2,484 3,712 NBIMC Low Volatility Canadian Equity Fund 649 1,029 668 NBIMC External Canadian Equity Fund 434 2,885 1,251 NBIMC S&P/TSX Completion Index Fund 229 2,698 618 NBIMC Canadian Equity Active Long Strategy Fund 670 1,054 707 NBIMC External International Equity Fund 533 1,281 683 NBIMC EAFE Equity Index Fund 4,264 968 4,128 NBIMC Low Volatility International Equity Fund 855 1,242 1,063 NBIMC U.S. Equity Index Fund 2,864 1,302 3,731 NBIMC Low Volatility U.S. Equity Fund 829 1,274 1,056

17,617 Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 899 3,394 3,050 NBIMC Canadian Real Estate Fund 427 3,188 1,361 NBIMC International Real Estate Fund 179 4,121 738 NBIMC Infrastructure Fund 203 1,213 246

5,395 Alternative Investments:NBIMC North American Market Neutral Fund 392 1,226 481 NBIMC Quantitative Strategies Fund 597 1,153 688 NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 22 4,308 93 NBIMC Private Equity Fund 660 1,525 1,007

2,269 $ 33,433





Unit Fair ValueJudges’ Units Value April 1,($ thousands) (# rounded) (in dollars) 2012

Fixed Income:NBIMC Nominal Bond Fund 3,197 $ 2,230 $ 7,129NBIMC Corporate Bond Fund 828 1,022 847NBIMC New Brunswick Fixed Income Opportunity Fund 27 2,631 72NBIMC Money Market Fund 305 1,518 463NBIMC Student Investment Fund 4 2,630 11

8,522Equities:NBIMC Canadian Equity Index Fund 1,564 2,317 3,624NBIMC External Canadian Equity Fund 432 2,704 1,168NBIMC S&P/TSX Completion Index Fund 228 2,596 593NBIMC Canadian Equity Active Long Strategy Fund 968 992 961NBIMC External International Equity Fund 531 1,113 591NBIMC EAFE Equity Index Fund 4,685 854 4,003NBIMC Low Volatility International Equity Fund 607 1,047 636NBIMC U.S. Equity Index Fund 3,022 1,125 3,401NBIMC Low Volatility U.S. Equity Fund 604 1,039 628

15,605Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 821 3,316 2,721NBIMC Canadian Real Estate Fund 372 2,845 1,059NBIMC International Real Estate Fund 278 3,549 986NBIMC Infrastructure Fund 149 1,133 169

4,935Alternative Investments:NBIMC North American Market Neutral Fund 407 1,218 496NBIMC Quantitative Strategies Fund 536 1,098 588NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 19 3,119 59NBIMC Private Equity Fund 640 1,385 886

2,029$ 31,091


4. Fair Value of Financial Instruments

Investments are valued at fair value with changes in fair values over time recognized in net investment income.

The determination of fair value is dependent upon the use of measurement inputs with varying degrees of subjectivity. Thelevel of subjectivity can be classified and is referred to as the fair value hierarchy. The fair value hierarchy levels are:

Level 1 - Quoted market prices in active markets. This is considered to be the most reliable input for fair value measurement.A financial instrument is regarded as quoted in an active market if quoted prices are readily or regularly available from anexchange or prices represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2 – Inputs (other than quoted prices included within Level 1) that are observable for the investment, either directlyor indirectly. These inputs include quoted prices for similar investments in active markets, quoted prices for identical orsimilar investments in markets that are not active, and inputs other than quoted prices that are observable for the investment.These are inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.

Level 3 – Inputs that are unobservable that are used to measure fair value when observable inputs are not available.Unobservable inputs reflect subjective assumptions that market participants may use in pricing the investment.

Investments that are classified as Level 2 include the units held in each unit trust fund provided the valuation of theunderlying securities held by those unit trust funds are themselves based on either Level 1 or Level 2 inputs. Level 1investments include publicly traded fixed income securities, publicly traded equity securities, real estate investment trusts(REITs) and exchange-traded funds and futures. Level 2 investments held by the unit trust funds include: short-termsecurities, non-publicly traded fixed income and equity securities as well as derivatives traded over-the-counter. Theseinvestments are valued based on a quotation from a recognized dealer, or by applying a spread to a similarly termedinstrument.

Investments that are classified as Level 3 include the units held in the unit trust funds which are based on Level 3 inputs.Level 3 investments include private equity, real estate and infrastructure investments, as well as certain fixed incomeinstruments that are typically private market investments. For these investments, fair value is derived by using valuationtechniques. The significant inputs and assumptions used in these valuation models are not observable and may involvesignificant subjectivity.




4. Fair Value of Financial Instruments (continued)

The levels of input for valuation of the Funds’ financial instruments as at March 31, 2014, March 31, 2013 and April 1, 2012are shown in the following tables:

Teachers’ Fair Value ($ thousands) March 31, 2014 Level 2 Level 3

Fixed Income:NBIMC Nominal Bond Fund $ 796,036 $ 796,036 $ — NBIMC Corporate Bond Fund 352,131 352,131 — NBIMC New Brunswick Fixed Income Opportunity Fund 6,803 — 6,803NBIMC Money Market Fund 90,976 90,976 — NBIMC Student Investment Fund 1,586 1,586 —

1,247,532 1,240,729 6,803Equities:NBIMC Canadian Equity Index Fund 466,510 466,510 — NBIMC Low Volatility Canadian Equity Fund 102,708 102,708 — NBIMC External Canadian Equity Fund 195,017 195,017 — NBIMC S&P/TSX Completion Index Fund 95,923 95,923 — NBIMC Canadian Equity Active Long Strategy Fund 107,158 107,158 — NBIMC External International Equity Fund 120,421 120,421 — NBIMC EAFE Equity Index Fund 555,923 555,923 — NBIMC Low Volatility International Equity Fund 145,563 145,563 — NBIMC U.S. Equity Index Fund 478,719 478,719 — NBIMC Low Volatility U.S. Equity Fund 156,443 156,443 —

2,424,385 2,424,385 — Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 449,134 449,134 — NBIMC Canadian Real Estate Fund 85,591 — 85,591NBIMC Canadian Real Estate Investment Trust Fund 95,464 95,464 — NBIMC International Real Estate Fund 154,041 154,041 — NBIMC Infrastructure Fund 43,957 — 43,957

828,187 698,639 129,548Alternative Investments:NBIMC North American Market Neutral Fund 70,020 70,020 — NBIMC Quantitative Strategies Fund 100,005 100,005 — NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 12,958 — 12,958

NBIMC Private Equity Fund 158,098 — 158,098341,081 170,025 171,056

Contributions receivable 5,327 5,327 —Other receivables 93 93 — Accounts payable and accrued liabilities (3,162) (3,162) —

Total $ 4,843,443 $ 4,536,036 $ 307,407



Teachers’ Fair Value ($ thousands) March 31, 2013 Level 2 Level 3


1,106,889 1,099,538 7,351Equities:NBIMC Canadian Equity Index Fund 451,071 451,071 — NBIMC Low Volatility Canadian Equity Fund 88,904 88,904 — NBIMC External Canadian Equity Fund 166,658 166,658 — NBIMC S&P/TSX Completion Index Fund 82,356 82,356 — NBIMC Canadian Equity Active Long Strategy Fund 92,118 92,118 — NBIMC External International Equity Fund 90,983 90,983 — NBIMC EAFE Equity Index Fund 525,495 525,495 — NBIMC Low Volatility International Equity Fund 141,377 141,377 — NBIMC U.S. Equity Index Fund 480,744 480,744 — NBIMC Low Volatility U.S. Equity Fund 140,568 140,568 —

2,260,274 2,260,274 — Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 428,109 428,109 — NBIMC Canadian Real Estate Fund 180,957 — 180,957NBIMC International Real Estate Fund 141,686 141,686 — NBIMC Infrastructure Fund 33,516 — 33,516



Contributions receivable 4,890 4,890 — Other receivables 171 171 — Accounts payable and accrued liabilities (2,694) (2,694) — Total $ 4,450,853 $ 4,087,527 $ 363,326





Teachers’ Fair Value($ thousands) April 1, 2012 Level 2 Level 3


1,159,960 1,150,304 9,656Equities:NBIMC Canadian Equity Index Fund 442,871 442,871 — NBIMC External Canadian Equity Fund 156,296 156,296 — NBIMC S&P/TSX Completion Index Fund 79,282 79,282 — NBIMC Canadian Equity Active Long Strategy Fund 128,455 128,455 — NBIMC External International Equity Fund 79,102 79,102 — NBIMC EAFE Equity Index Fund 512,159 512,159 — NBIMC Low Volatility International Equity Fund 84,947 84,947 — NBIMC U.S. Equity Index Fund 439,365 439,365 — NBIMC Low Volatility U.S. Equity Fund 83,906 83,906 —

2,006,383 2,006,383 — Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 384,574 384,574 — NBIMC Canadian Real Estate Fund 141,434 — 141,434NBIMC International Real Estate Fund 172,657 172,657 — NBIMC Infrastructure Fund 23,344 — 23,344



Contributions receivable 5,037 5,037 — Accounts payable and accrued liabilities (2,060) (2,060) — Total $ 4,159,408 $ 3,861,802 $ 297,606



Judges’ Fair Value ($ thousands) March 31, 2014 Level 2 Level 3

Fixed Income:NBIMC Nominal Bond Fund $ 5,932 $ 5,932 $ — NBIMC Corporate Bond Fund 2,707 2,707 — NBIMC New Brunswick Fixed Income Opportunity Fund 52 — 52NBIMC Money Market Fund 701 701 — NBIMC Student Investment Fund 11 11 —

9,403 9,351 52Equities:NBIMC Canadian Equity Index Fund 3,951 3,951 — NBIMC Low Volatility Canadian Equity Fund 790 790 — NBIMC External Canadian Equity Fund 1,494 1,494 — NBIMC S&P/TSX Completion Index Fund 735 735 — NBIMC Canadian Equity Active Long Strategy Fund 838 838 — NBIMC External International Equity Fund 923 923 — NBIMC EAFE Equity Index Fund 4,464 4,464 — NBIMC Low Volatility International Equity Fund 1,119 1,119 — NBIMC U.S. Equity Index Fund 3,804 3,804 — NBIMC Low Volatility U.S. Equity Fund 1,203 1,203 —

19,321 19,321 — Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 3,267 3,267 — NBIMC Canadian Real Estate Fund 657 — 657NBIMC Canadian Real Estate Investment Trust Fund 734 734 — NBIMC International Real Estate Fund 822 822 — NBIMC Infrastructure Fund 329 — 329

5,809 4,823 986Alternative Investments:NBIMC North American Market Neutral Fund 538 538 — NBIMC Quantitative Strategies Fund 769 769 — NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 100 — 100


Contributions receivable 177 177 — Other receivables 1 1 — Accounts payable and accrued liabilities (45) (45) —

Total $ 37,348 $ 34,935 $ 2,413





Judges’ Fair Value ($ thousands) March 31, 2013 Level 2 Level 3

Fixed Income:NBIMC Nominal Bond Fund $ 5,559 $ 5,559 $ — NBIMC Corporate Bond Fund 2,298 2,298 — NBIMC New Brunswick Fixed Income Opportunity Fund 56 — 56NBIMC Money Market Fund 229 229 — NBIMC Student Investment Fund 10 10 —

8,152 8,096 56Equities:NBIMC Canadian Equity Index Fund 3,712 3,712 — NBIMC Low Volatility Canadian Equity Fund 668 668 — NBIMC External Canadian Equity Fund 1,251 1,251 — NBIMC S&P/TSX Completion Index Fund 618 618 — NBIMC Canadian Equity Active Long Strategy Fund 707 707 — NBIMC External International Equity Fund 683 683 — NBIMC EAFE Equity Index Fund 4,128 4,128 — NBIMC Low Volatility International Equity Fund 1,063 1,063 — NBIMC U.S. Equity Index Fund 3,731 3,731 — NBIMC Low Volatility U.S. Equity Fund 1,056 1,056 —

17,617 17,617 — Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 3,050 3,050 — NBIMC Canadian Real Estate Fund 1,361 — 1,361NBIMC International Real Estate Fund 738 738 — NBIMC Infrastructure Fund 246 — 246

5,395 3,788 1,607Alternative Investments:NBIMC North American Market Neutral Fund 481 481 — NBIMC Quantitative Strategies Fund 688 688 — NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 93 — 93


Contributions receivable 25 25 — Other receivables 1 1 — Accounts payable and accrued liabilities (26) (26) — Total $ 33,433 $ 30,670 $ 2,763



Judges’ Fair Value ($ thousands) April 1, 2012 Level 2 Level 3

Fixed Income:NBIMC Nominal Bond Fund $ 7,129 $ 7,129 $ — NBIMC Corporate Bond Fund 847 847 — NBIMC New Brunswick Fixed Income Opportunity Fund 72 — 72NBIMC Money Market Fund 463 463 — NBIMC Student Investment Fund 11 11 —

8,522 8,450 72Equities:NBIMC Canadian Equity Index Fund 3,624 3,624 — NBIMC External Canadian Equity Fund 1,168 1,168 — NBIMC S&P/TSX Completion Index Fund 593 593 — NBIMC Canadian Equity Active Long Strategy Fund 961 961 — NBIMC External International Equity Fund 591 591 — NBIMC EAFE Equity Index Fund 4,003 4,003 — NBIMC Low Volatility International Equity Fund 636 636 — NBIMC U.S. Equity Index Fund 3,401 3,401 — NBIMC Low Volatility U.S. Equity Fund 628 628 —

15,605 15,605 — Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 2,721 2,721 — NBIMC Canadian Real Estate Fund 1,059 — 1,059NBIMC International Real Estate Fund 986 986 — NBIMC Infrastructure Fund 169 — 169

4,935 3,707 1,228Alternative Investments:NBIMC North American Market Neutral Fund 496 496 — NBIMC Quantitative Strategies Fund 588 588 — NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 59 — 59

NBIMC Private Equity Fund 886 — 8862,029 1,084 945

Contributions receivable 36 36 — Accounts payable and accrued liabilities (12) (12) — Total $ 31,115 $ 28,870 $ 2,245





The reconciliations for investments in Level 3 of the fair value hierarchy for the years ended March 31 are as follows:

Gains /Fair Value (losses) in net Transfers Fair Value

Teachers’ March 31, investment out of March 31,($ thousands) 2013 income Purchases Settlements Level 3 2014

NBIMC New Brunswick Fixed Income Opportunity Fund $ 7,351 $ 75 $ 4 $ 627 $ — $ 6,803

NBIMC Canadian Real Estate Fund 180,957 7,432 11,658 114,456 — 85,591

NBIMC Infrastructure Fund 33,516 1,577 11,206 2,342 — 43,957 NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 12,404 1,074 1,086 1,606 — 12,958 NBIMC Private Equity Fund 129,098 34,499 21,521 27,020 — 158,098


Teachers’ April 1, investment out of March 31,($ thousands) 2012 income Purchases Settlements Level 3 2013

NBIMC New Brunswick Fixed Income Opportunity Fund $ 9,656 $ 378 $ 91 $ 2,774 $ — $ 7,351

NBIMC Canadian Real Estate Fund 141,434 17,748 33,028 11,253 — 180,957

NBIMC Infrastructure Fund 23,344 1,734 9,852 1,414 — 33,516 NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 7,893 3,577 2,230 1,296 — 12,404

NBIMC Private Equity Fund 115,279 11,960 16,135 14,276 — 129,098




Judges’ March 31, investment out of March 31,($ thousands) 2013 income Purchases Settlements Level 3 2014

NBIMC New Brunswick Fixed Income Opportunity Fund $ 56 $ — $ 1 $ 5 $ — $ 52

NBIMC Canadian Real Estate Fund 1,361 56 107 867 — 657

NBIMC Infrastructure Fund 246 12 87 16 — 329 NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 93 8 10 11 — 100 NBIMC Private Equity Fund 1,007 273 193 198 — 1,275


Judges’ April 1, investment out of March 31,($ thousands) 2012 income Purchases Settlements Level 3 2013

NBIMC New Brunswick Fixed Income Opportunity Fund $ 72 $ 4 $ — $ 20 $ — $ 56

NBIMC Canadian Real Estate Fund 1,059 132 255 85 — 1,361

NBIMC Infrastructure Fund 169 13 74 10 — 246 NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 59 27 17 10 — 93

NBIMC Private Equity Fund 886 92 141 112 — 1,007




5. Financial Instrument Risk Management

Financial instruments are exposed to risks such as market, interest rate, credit and liquidity risk.

Under its terms of reference, the NBIMC Board of Directors has overall responsibility for understanding the principal risksfacing the Funds and the systems that management has put in place to mitigate and manage those risks. Accordingly, theNBIMC Board of Directors is responsible for the establishment of a Statement of Investment Policies (“SIP”) for each ofthe Funds. Day-to-day investment activities and monitoring of risk controls are delegated to management, which acts inaccordance with the SIP. Management produces quarterly reporting of investment performance, policy compliance, andtrends and changes in investment risks for the Board.

Management, using information from independent actuarial valuations as well as expectations concerning financial markets,is responsible for the development of a recommended investment asset mix that seeks to deliver the long-term investmentreturn required in the actuarial valuation of each pension plan. This process has the intent of constructing the most efficientinvestment portfolio to meet the actuarial requirements in a risk controlled fashion. This recommended strategic assetallocation is prepared on at least a triennial basis for consideration by the Board. Once approved, management is responsiblefor the implementation of the asset mix decision.

An Investment Risk Management Committee, consisting of a cross-functional team of investment, finance andadministrative staff, review all proposed and modified investment strategies before implementation to ensure proceduresare designed to measure and monitor expected risk exposures. Following implementation, the Compliance, Risk andPerformance Measurement department provides independent regular oversight of all securities trading practices againstmanagement’s approved investment procedures.

As part of the risk management function, and supplemental to the SIP, NBIMC also uses a statistical modeling techniqueknown as Value at Risk (VaR) to estimate the probability of loss on investment portfolios. Using return, volatility, andcorrelation figures, VaR models attempt to aggregate the risks involved in separate investments into one cohesive measure.This aggregation involves certain simplifying assumptions, most notably with respect to the shape of the return distributionfor the assets being modeled, which can limit the ability of a VaR system to forecast risk in all market environments. Despitethese modeling challenges, well constructed VaR systems provide a valuable way to aggregate separate investment risks intoone cohesive measure, and therefore monitor and analyze these risks over time.

(a) Market Risk: Market risk is the risk that the value of an investment will fluctuate as a result of changes in market priceswhether those changes are caused by factors specific to the individual investment or factors affecting all securities tradedin the market. Market risk includes foreign currency risk, interest rate risk and pricing risk among others. The principallevel for managing market risk is to invest in widely diversified countries, sectors and issuers. The Funds hold investmentsin unit trust funds that invest in active and passive investment strategies and are diversified among domestic and internationalmarkets. For further information concerning the risk of the underlying investments, the reader is referred to the financialstatements of the NBIMC unit trust funds available at www.nbimc.com.

Investment strategies used by the unit trust funds may involve the use of financial derivatives such as forward foreignexchange contracts or total return swaps. Investment strategies also include “market neutral” strategies whereby aninvestment in a long position in one stock is matched with a short position in another stock, typically within the sameindustry sector. With the limited exception of prudent financing for investments in real property, the SIP for each Fundprecludes the use of leverage in the investment portfolio. Accordingly, to the extent that there is market exposure fromderivative investments and short positions, the Funds will hold cash underlay equal to the amount of market exposure.Market neutral strategies mitigate market risk through adherence to maximum investment limits and stop loss constraints,and have a lower correlation to broad market indices.


5. Financial Instrument Risk Management (continued)

NBIMC conducts certain of its investment activities in the unit trust funds on behalf of the Funds by trading through brokerchannels on regulated exchanges and in the over-the-counter market. Brokers typically require that collateral be pledgedagainst potential market fluctuations when trading in derivative financial instruments or when shorting security positions.As at March 31, 2014 the fair value of securities that have been deposited or pledged with various financial institutions ascollateral or margin (see also note 5(c)) are as follows:

March 31, March 31, April 1,($ thousands) 2014 2013 2012

Teachers’ $ 82,391 $ 103,458 $ 120,873Judges’ $ 634 $ 778 $ 906

Foreign currency risk arises from holding investments denominated in currencies other than the Canadian dollar. All of theFunds’ investments are in Canadian dollar denominated unit trust funds managed by NBIMC, however certain of the unittrust funds invest in assets denominated in foreign currencies or domiciled in foreign jurisdictions. The SIP for each Fundpermits hedging of foreign currency exposure at the portfolio manager’s discretion.

Approximately 35% of the Teachers’ and 36% of the Judges’ underlying investments are denominated in currencies otherthan the Canadian dollar (March 31, 2013 – 37% and 37% respectively; April 1, 2012 – 36% and 36% respectively), withthe largest foreign currency exposure being to the U.S. dollar (Teachers’: 20% at each of March 31, 2014, March 31, 2013and April 1, 2012; Judges’: March 31, 2014 -19%; March 31, 2013 – 20% and April 1, 2012 – 19%).

A 1% increase or decrease in the value of the Canadian dollar against all currencies would result in an approximate decreaseor increase in the value of the net investment assets at March 31, 2014 of the Teachers’ of $17,315 (March 31, 2013 -$16,256 and April 1, 2012 - $14,880) and Judges’ of $133 (March 31, 2013 - $122 and April 1, 2012 - $111).

Interest rate risk refers to the effect on the market value of investments due to fluctuation of interest rates. The Funds investin certain unit trust funds that invest in fixed income securities whose fair values are sensitive to interest rates. The SIPrequires NBIMC to adhere to guidelines on duration and yield curve, which are designed to mitigate the risk of interest ratevolatility.

If interest rates increased by 1%, and all other variables are held constant, the potential loss in fair value as for the year endedMarch 31, 2014 to the Teachers would be approximately $154,332 (March 31, 2013 - $143,324 and April 1, 2012 - $139,908)and Judges’ of $1,148 (March 31, 2013 - $1,040 and April 1, 2012 - $1,016).

Pricing risk is the risk that equity investments will change in value due to future fluctuations in market prices caused byfactors specific to an individual equity investment or other factors affecting all equities traded in the market. The Funds’are exposed to price risk associated with the underlying equity investments held in pools managed by NBIMC. If equitymarket price indices declined by 1%, and all other variables are held constant, the potential loss for the year ended March31, 2014 to the Teachers’ would be approximately $27,161 (March 31, 2013 - $24,751 and April 1, 2012 - $22,389) andJudges’ of $1,895 (March 31, 2013 - $1,727 and April 1, 2012 - $1,562).





(b) Credit Risk: The Funds are exposed to credit-related risk in the event that a unit trust investment in a derivative or debtsecurity counterparty defaults or becomes insolvent. NBIMC has established investment criteria which are designed to managecredit risk by establishing limits by issuer type and credit rating for fixed income and derivative credit exposure. NBIMCmonitors these exposures monthly. Such derivative and short and long-term debt securities are restricted to those havinginvestment grade ratings, as provided by a third party rating agency. In addition, each counterparty exposure is restricted tono more than 5% of total assets. Investment grade ratings are BBB and above for longer term debt securities and R-1 forshort-term debt. Any credit downgrade below investment grade is subject to review by the NBIMC Board of Directors.

The maximum credit exposure for each of the Funds is as follows:

Teachers’March 31, March 31, April 1,

($ thousands) 2014 2013 2012

Fixed Income:NBIMC Nominal Bond Fund $ 770,557 $ 754,088 $ 954,381NBIMC Corporate Bond Fund 350,282 274,768 104,138NBIMC New Brunswick Fixed Income Opportunity Fund 6,803 7,352 9,634NBIMC Money Market Fund 90,976 30,376 61,765NBIMC Student Investment Fund 681 617 581

1,219,299 1,067,201 1,130,499Equities:NBIMC Canadian Equity Index Fund 398,618 438,827 412,507NBIMC Low Volatility Canadian Equity Fund 368 301 — NBIMC External Canadian Equity Fund 144 138 152NBIMC S&P/TSX Completion Index Fund 237 215 191NBIMC Canadian Equity Active Long Strategy Fund 52,213 5,504 474NBIMC EAFE Equity Index Fund 3,171 2,894 2,927NBIMC Low Volatility International Equity Fund 768 819 254NBIMC U.S. Equity Index Fund 915 952 668NBIMC Low Volatility U.S. Equity Fund 238 368 152

456,672 450,018 417,325Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 443,822 425,761 380,005NBIMC Canadian Real Estate Fund — 421 3,920NBIMC Canadian Real Estate Investment Trust Fund 377 — — NBIMC International Real Estate Fund 432 340 359NBIMC Infrastructure Fund 4,533 4,564 4,354

449,164 431,086 388,638Alternative Investments:NBIMC North American Market Neutral Fund 114 255 167NBIMC Quantitative Strategies Fund 1,558 155 304NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 231 990 2,153

1,903 1,400 2,624Contributions receivable 5,327 4,890 5,037Other receivables 93 171 — Total $ 2,132,458 $ 1,954,766 $ 1,944,123



Judges’March 31, March 31, April 1,

($ thousands) 2014 2013 2012

Fixed Income:NBIMC Nominal Bond Fund $ 5,743 $ 5,346 $ 6,987NBIMC Corporate Bond Fund 2,693 2,227 779NBIMC New Brunswick Fixed Income Opportunity Fund 53 55 72NBIMC Money Market Fund 701 229 463NBIMC Student Investment Fund 5 5 4

9,195 7,862 8,305Equities:NBIMC Canadian Equity Index Fund 3,376 3,612 3,375NBIMC Low Volatility Canadian Equity Fund 3 2 —NBIMC External Canadian Equity Fund 1 1 1NBIMC S&P/TSX Completion Index Fund 2 2 1NBIMC Canadian Equity Active Long Strategy Fund 408 42 4NBIMC EAFE Equity Index Fund 25 23 23NBIMC Low Volatility International Equity Fund 6 6 2NBIMC U.S. Equity Index Fund 7 7 5NBIMC Low Volatility U.S. Equity Fund 2 3 1

3,830 3,698 3,412Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 3,230 3,035 2,689NBIMC Canadian Real Estate Fund — 3 29NBIMC Canadian Real Estate Investment Trust Fund 3 — —NBIMC International Real Estate Fund 2 2 2NBIMC Infrastructure Fund 34 34 31

3,269 3,074 2,751Alternative InvestmentsNBIMC North American Market Neutral Fund 1 2 1NBIMC Quantitative Strategies Fund 12 1 2NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 2 8 16

15 11 19Contributions receivable 177 25 36Other receivables 1 1 —Total $ 16,487 $ 14,671 $ 14,523





The quality of the maximum credit exposure is as follows:


($ thousands) 2014 2013 2012

AAA $ 723,248 $ 720,786 $ 815,494AA 617,279 564,111 622,132A 504,336 480,955 361,021BBB 95,908 61,736 22,835R-1 186,932 120,071 110,631Other 4,755 7,107 12,010

$ 2,132,458 $ 1,954,766 $ 1,944,123


($ thousands) 2014 2013 2012

AAA $ 5,331 $ 5,140 $ 5,900AA 4,871 4,392 4,811A 4,005 3,630 2,689BBB 737 498 170R-1 1,507 956 865Other 36 55 88

$ 16,487 $ 14,671 $ 14,523

The highest concentration of credit risk at each year end is with Government of Canada bonds.

(c) Liquidity Risk: Liquidity risk is the risk of not having sufficient funds available to meet cash demands. Sources ofliquidity include pension contributions collected from the employers and employees, cash and readily marketable assets suchas government bonds and publicly traded securities. Uses of liquidity include payments to the plan beneficiaries, purchasesof securities and settlement of prior commitments for private equity, real estate and infrastructure investments.

The Funds’ asset mix is specifically designed to ensure that sufficient liquid assets are available to meet pension benefitobligations as they are required. Other than cash including treasury bills and bankers’ acceptances, government bonds areconsidered the most liquid asset class whereas privately-held debt, equity, real estate and infrastructure investments areconsidered highly illiquid due to the lack of a readily available market and the longer term to maturity for these investments.

Net liquid assets are defined to include the fair value of all assets excluding private equity, private real estate andinfrastructure, New Brunswick regional investments, the fair value of collateral pledged with brokers and counterparties andany unfunded investment commitments. The following tables show the determination of net liquid assets:





($ thousands) 2014 2013 2012

Net assets available for benefits $ 4,843,443 $ 4,450,853 $ 4,159,408Less: investment in NBIMC New Brunswick Fixed Income Opportunity Fund (note 3) (6,803) (7,351) (9,656)

Less: non-publicly traded assets in NBIMC Canadian Real Estate Fund (note 3) (85,591) (87,074) (57,935)

Less: investment in NBIMC Infrastructure Fund (note 3) (43,957) (33,516) (23,344)Less: investment in NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund (note 3) (12,958) (12,404) (7,893)

Less: investment in NBIMC Private Equity Fund (note 3) (158,098) (129,098) (115,279)Less: collateral pledged (note 5(a)) (82,391) (103,458) (120,873)Less: investment commitments (note 9) (147,221) (108,179) (92,934)Net liquid assets $ 4,306,424 $ 3,969,773 $ 3,731,494


($ thousands) 2014 2013 2012

Net assets available for benefits $ 37,348 $ 33,433 $ 31,115Less: investment in NBIMC New Brunswick Fixed Income Opportunity Fund (note 3) (52) (56) (72)

Less: non-publicly traded assets in NBIMC Canadian Real Estate Fund (note 3) (657) (655) (434)

Less: investment in NBIMC Infrastructure Fund (note 3) (329) (246) (169)Less: investment in NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund (note 3) (100) (93) (59)

Less: investment in NBIMC Private Equity Fund (note 3) (1,275) (1,007) (886)Less: collateral pledged (note 5(a)) (634) (778) (906)Less: investment commitments (note 9) (1,179) (841) (712)Net liquid assets $ 33,122 $ 29,757 $ 27,877

(d) Securities Lending: The Funds’ SIP permits NBIMC to enter into a securities lending arrangement, externally withtheir securities custodian or internally among the unit trust funds that NBIMC manages, with the objective of enhancingportfolio returns.

Under the external program, the securities custodian, who is an independent third party, may loan securities owned by the unittrust funds to other approved borrowers in exchange for collateral in the form of readily marketable government-backed securitiesequal to at least 105% of the value of securities on loan and a borrowing fee. NBIMC has restricted the approved borrowersunder the external securities lending program to manage exposure to counterparty credit risk. As at March 31, 2014, underlyingsecurities in the amount of $583,518 (March 31, 2013 - $488,629; April 1, 2012 - $486,812) have been loaned on behalf of theTeachers’ and $4,392 (March 31, 2013 - $3,609; April 1, 2012 - $3,612) have been loaned on behalf of the Judges’.

Under the internal securities lending program, certain unit trust funds may loan securities to a borrowing unit trust fundsubject to an intra-fund collateral management agreement and a borrowing fee. As at March 31, 2014, underlying securitiesin the amount of $19,854 (March 31 2013 - $30,467; April 1, 2012 - $7,991) were loaned on behalf of the Teachers’ and$20,648 (March 31, 2013 - $30,844; April 1, 2012 - $8,153) were borrowed. As at March 31, 2014, underlying securitiesin the amount of $160 (March 31, 2013 - $233; April 1, 2012 - $62) were loaned on behalf of the Judges’ and $158 (March31, 2013 - $232; April 1, 2012 - $61) were borrowed.



6. Net Investment Income

Net investment income (loss) by unit trust fund for the year ended March 31, after allocating net gains (losses) oninvestments, is as follows:

Teachers’ Judges’($ thousands) 2014 2013 2014 2013

Fixed Income:NBIMC Nominal Bond Fund $ 5,521 $ 35,911 $ 43 $ 258NBIMC Corporate Bond Fund 7,550 11,767 59 93NBIMC New Brunswick Fixed Income Opportunity Fund 74 378 1 3

NBIMC Money Market Fund 517 452 4 3NBIMC Student Investment Fund 124 72 1 —

13,786 48,580 108 357Equities:NBIMC Canadian Equity Index Fund 72,753 35,309 609 286NBIMC Low Volatility Canadian Equity Fund 15,902 1,869 121 14NBIMC External Canadian Equity Fund 31,332 10,471 238 78NBIMC S&P/TSX Completion Index Fund 14,615 3,123 112 23NBIMC Canadian Equity Active Long Strategy Fund 15,186 8,504 118 66

NBIMC External International Equity Fund 31,025 11,948 235 89NBIMC EAFE Equity Index Fund 134,984 69,540 1,072 541NBIMC Low Volatility International Equity Fund 26,696 18,626 203 139NBIMC U.S. Equity Index Fund 134,964 69,502 1,061 537NBIMC Low Volatility U.S. Equity Fund 34,792 21,454 265 160

512,249 250,346 4,034 1,933Inflation Linked Assets:NBIMC Inflation Linked Securities Fund (23,165) 9,613 (164) 68NBIMC Canadian Real Estate Fund 7,432 17,747 57 133NBIMC Canadian Real Estate Investment Trust Fund 1,239 — 10 —

NBIMC International Real Estate Fund 20,243 23,670 108 129NBIMC Infrastructure Fund 1,578 1,734 12 13

7,327 52,764 23 343Alternative Investments:NBIMC North American Market Neutral Fund 4,012 365 30 3NBIMC Quantitative Strategies Fund 6,174 4,327 47 33NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 1,073 3,577 8 27

NBIMC Private Equity Fund 34,499 11,961 274 9245,758 20,230 359 155

Net investment income $ 579,120 $ 371,920 $ 4,524 $ 2,788


7. Capital and Annualized Long-Term Returns

The definition of capital, as it pertains to each of the Funds, is the net assets available for benefits. For purposes of preparingthese special purpose financial statements, net assets available for benefits do not include the pension liabilities andconsequently, these financial statements do not purport to show the adequacy of net assets available for benefits to meet thepension obligations.

As required for a defined benefit pension plan, each Fund’s objective is to achieve annualized long-term returns that willmeet or exceed the investment return assumptions contained in the actuarial valuation for each of the pension plans. Thecommentary in Note 3 – Investments, Note 4 – Fair Value of Financial Instruments and Note 5 - Financial Instrument RiskManagement provide qualitative descriptions of the investment management process and quality of investments.

The most recent actuarial valuation received for the Teachers’ is April 1, 2012 and for the Judges’ is April 1, 2010. Thesevaluations provide the long-term nominal and inflation adjusted return assumptions. The target long-term nominalinvestment return assumptions contained therein and a summary of the four year and ten year annualized long-term nominalreturns for each Fund is as follows:

2014 2013Annualized Nominal Returns Annualized Nominal Returns

Actuarial ActuarialRequirement 4 Year 10 Year Requirement 4 Year 10 Year

Teachers’ 6.60% 9.47% 6.83% 6.60% 11.04% 7.87%Judges’ 6.60% 9.47% 6.93% 6.60% 10.93% 8.13%

8. Related Party Transactions

The Minister of Finance is the Plan Governor for the TPA and each of the PCA and JPA and therefore the Funds are relatedto the Province of New Brunswick. The Plan Governor is the Plan Sponsor and is responsible for the administration ofcollections from and payments to the pension plan members and beneficiaries as shown in the Statement of Changes in NetAssets Available for Benefits.

NBIMC, as a Crown Corporation of the Province of New Brunswick and as the Trustee of the Funds, is also a related partyto each of the Funds. The Plan Sponsor and NBIMC charge fees for services rendered to the respective Funds on a costrecovery basis in amounts as shown in the Statements of Changes in Net Assets Available for Benefits.

All of the Funds’ investments included in the Statement of Net Assets Available for Benefits are in unit trust funds that aremanaged by NBIMC. The Funds have an undivided interest in the underlying assets of the unit trust funds (see note 3). Inaddition, the NBIMC Canadian Real Estate Fund has made certain of its direct and indirect real estate investments usingwholly-owned subsidiary company structures.

Included in the Statement of Net Assets Available for Benefits are investments in New Brunswick provincial and municipalbonds that are recorded at their fair values as follows:

March 31, March 31, April 1,($ thousands) 2014 2013 2012

Teachers’ $ 33,399 $ 30,454 $ 41,911Judges’ $ 249 $ 216 $ 307

Contributions receivable from employers and employees as at March 31, 2014, March 31, 2013 and April 1, 2012 are asshown in the Statement of Net Assets Available for Benefits.




8. Related Party Transactions (continued)

Accounts payable and accrued liabilities as shown in the Statement of Net Assets Available for Benefits include the followingamounts due to related parties:

Teachers’ March 31, March 31, April 1,($ thousands) 2014 2013 2012

Fees payable to NBIMC $ 1,101 $ 1,161 $ 809Fees payable to the Province of New Brunswick 1,086 970 728

Judges’ March 31, March 31, April 1,($ thousands) 2014 2013 2012

Fees payable to NBIMC $ 9 $ 11 $ 8Fees payable to the Province of New Brunswick 28 12 1

9. Commitments

The NBIMC Canadian Real Estate Fund and the NBIMC Private Equity Fund have committed to enter into investmentswhich may be funded over the next several years in accordance with the terms and conditions agreed to in various partnershipagreements. The Funds’ share of unfunded commitments are:

Teachers’ March 31, March 31, April 1,($ thousands) 2014 2013 2012

NBIMC Canadian Real Estate Fund $ 20,990 $ 6,975 $ 15,906NBIMC Private Equity Fund 126,231 101,204 77,028

$ 147,221 $ 108,179 $ 92,934

Judges’ March 31, March 31, April 1,($ thousands) 2014 2013 2012

NBIMC Canadian Real Estate Fund $ 161 $ 52 $ 119NBIMC Private Equity Fund 1,018 789 593

$ 1,179 $ 841 $ 712

10. Transition to Section 4600 and IFRS

The effect of the Funds’ transition to Section 4600 and IFRS is summarized in this note as follows:

Impact of changes in accounting policies due to transition to Section 4600 and IFRS

Coincident with the Funds’ adoption of Section 4600 and IFRS, the NBIMC unit trust funds also adopted IFRS. In applying IFRS13, the NBIMC unit trust funds changed their accounting policy for fair value measurement from using bid/ask prices for financialreporting purposes as required under previous Canadian Generally Accepted Accounting Principles (“GAAP”) to using marketclose prices as permitted under IFRS 13. As allowed under IFRS 13, if an asset or a liability measured at fair value has a bid andan ask price, the price within the bid-ask spread that is the most representative of fair value in the circumstances shall be used tomeasure fair value. The NBIMC unit trust funds use closing market price as a practical expedient for fair value measurement.


10. Transition to Section 4600 and IFRS (continued)

The Funds use the reported NBIMC unit trust funds’ net asset values for recording the fair value of their unit holdings forfinancial reporting purposes. Consequently, the Funds have retroactively reflected these revised net asset values in thesefinancial statements on a consistent basis in accordance with Section 4600 and IFRS.

The following tables show the adjustment made from previously reported results under Canadian GAAP to the resultsreported under Section 4600 and IFRS.

Adjustment Revised to Previously from bid/ask Section 4600

reported as at to market and IFRS Teachers’ March 31, 2013 close pricing March 31, 2013

ASSETSInvestments $ 4,446,152 $ 2,334 $ 4,448,486Contributions receivable from employers 4,087 — 4,087Contributions receivable from employees 803 — 803Other receivable 171 — 171

4,451,213 2,334 4,453,547LIABILITIESAccounts payable and accrued liabilities 2,694 — 2,694Net assets available for benefits $ 4,448,519 $ 2,334 $ 4,450,853


reported as at to market and IFRS Teachers’ March 31, 2013 close pricing March 31, 2013

INCREASE IN NET ASSETSNet investment income $ 371,486 $ 434 $ 371,920Employee pension contributions 47,877 — 47,877Employer pension contributions 46,139 — 46,139Employer special contributions 98,627 — 98,627

564,129 434 564,563

DECREASE IN NET ASSETSPayments to sponsor for benefits 265,565 — 265,565Payments to sponsor for expenses 1,561 — 1,561Fees paid to third party suppliers 1,627 — 1,627Fees paid to NBIMC 4,164 — 4,164Harmonized sales tax, net of rebates 201 — 201

273,118 — 273,118

Net increase for the year 291,011 434 291,445Net assets available for benefits, beginning of year 4,157,508 1,900 4,159,408Net assets available for benefits, end of year $ 4,448,519 $ 2,334 $ 4,450,853






reported as at to market and IFRS Teachers’ March 31, 2012 close pricing April 1, 2012

ASSETSInvestments $ 4,154,531 $ 1,900 $ 4,156,431Contributions receivable from employers 4,234 — 4,234Contributions receivable from employees 803 — 803Other receivable — — —

4,159,568 1,900 4,161,468LIABILITIESAccounts payable and accrued liabilities 2,060 — 2,060Net assets available for benefits $ 4,157,508 $ 1,900 $ 4,159,408


reported as at to market and IFRS Teachers’ March 31, 2012 close pricing April 1, 2012

INCREASE IN NET ASSETSNet investment income $ 206,093 $ 1,900 $ 207,993Employee pension contributions 47,847 — 47,847Employer pension contributions 46,367 — 46,367Employer special contributions 94,380 — 94,380

394,687 1,900 396,587DECREASE IN NET ASSETSPayments to sponsor for benefits 255,075 — 255,075Payments to sponsor for expenses 1,550 — 1,550Fees paid to third party suppliers 1,837 — 1,837Fees paid to NBIMC 3,929 — 3,929Harmonized sales tax, net of rebates 365 — 365

262,756 — 262,756

Net increase for the year 131,931 1,900 133,831Net assets available for benefits, beginning of year 4,025,577 — 4,025,577Net assets available for benefits, end of year $ 4,157,508 $ 1,900 $ 4,159,408




reported as at to market and IFRS Judges’ March 31, 2013 close pricing March 31, 2013

ASSETSInvestments $ 33,415 $ 18 $ 33,433Contributions receivable from employer 25 — 25Other receivable 1 — 1

33,441 18 33,459LIABILITIESAccounts payable and accrued liabilities 26 — 26Net assets available for benefits $ 33,415 $ 18 $ 33,433


reported as at to market and IFRS Judges’ March 31, 2013 close pricing March 31, 2013

INCREASE IN NET ASSETSNet investment income $ 2,785 $ 3 $ 2,788Employee pension contributions 398 — 398Employer pension contributions 326 — 326Employer special contributions 153 — 153

3,662 3 3,665DECREASE IN NET ASSETSPayments to sponsor for benefits 1,278 — 1,278Payments to sponsor for expenses 27 — 27Fees paid to third party suppliers 11 — 11Fees paid to NBIMC 30 — 30Harmonized sales tax, net of rebates 1 — 1

1,347 — 1,347

Net increase for the year 2,315 3 2,318Net assets available for benefits, beginning of year 31,100 15 31,115Net assets available for benefits, end of year $ 33,415 $ 18 $ 33,433






reported as at to market and IFRS Judges’ March 31, 2012 close pricing April 1, 2012

ASSETSInvestments $ 31,076 $ 15 $ 31,091Contributions receivable from employer 36 — 36Other receivable — — —

31,112 15 31,127LIABILITIESAccounts payable and accrued liabilities 12 — 12Net assets available for benefits $ 31,100 $ 15 $ 31,115


reported as at to market and IFRS Judges’ March 31, 2012 close pricing April 1, 2012

INCREASE IN NET ASSETSNet investment income $ 1,427 $ 15 $ 1,442Employee pension contributions 471 — 471Employer pension contributions 696 — 696Employer special contributions 305 — 305

2,899 15 2,914DECREASE IN NET ASSETSPayments to sponsor for benefits 1,167 — 1,167Payments to sponsor for expenses 32 — 32Fees paid to third party suppliers 12 — 12Fees paid to NBIMC 29 — 29Harmonized sales tax, net of rebates 2 — 2

1,242 — 1,242

Net increase for the year 1,657 15 1,672Net assets available for benefits, beginning of year 29,443 — 29,443Net assets available for benefits, end of year $ 31,100 $ 15 $ 31,115

11. Subsequent events

In May 2014, The Teachers’ Pension Act was repealed and replaced with the Teachers’ Pension Plan Act. The pension planunder the Teachers’ Pension Act will be converted on July 1, 2014.

NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATIONFINANCIAL STATEMENTS

March 31, 2014


INDEPENDENT AUDITORS’ REPORTTo the Directors of New Brunswick Investment Management Corporation

We have audited the accompanying financial statements of New Brunswick Investment Management Corporation, whichcomprise the statement of financial position as at March 31, 2014, the statements of operations and changes in accumulateddeficit, changes in net debt and its cash flow for the year then ended, and notes, comprising a summary of significantaccounting 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 withCanadian public sector accounting standards, and for such internal control as management determines is necessary to enablethe 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 inaccordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatementof the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controlrelevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’sinternal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonablenessof 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 New BrunswickInvestment Management Corporation as at March 31, 2014, and its results of operations and changes in accumulated deficit,changes in net debt and cash flow for the year then ended in accordance with Canadian public sector accounting standards.

Chartered AccountantsJune 30, 2014Fredericton, Canada


NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATIONStatement of Financial PositionAs at March 31, 2014(in thousands of Canadian dollars)

2014 2013

FINANCIAL ASSETSCash $ 82 $ 89Accounts receivable 2,487 2,522Other receivables 122 5

Total financial assets 2,691 2,616

FINANCIAL LIABILITIESAccounts payable and accrued liabilities 2,987 2,191Supplemental pension (note 5) 368 374Employee future benefits (note 6) 59 730

Total financial liabilities 3,414 3,295

NET DEBT (723) (679)

NON-FINANCIAL ASSETSTangible capital assets (note 3) 347 271Prepaid expenses 282 237

Total non-financial assets 629 508

ACCUMULATED DEFICIT $ (94) $ (171)

Contractual obligations and contingencies (note 4)Indemnifications (note 9)See accompanying notes to financial statements

Approved on behalf of the Board:



NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATIONStatement of Operations and Changes in Accumulated DeficitFor the year ended March 31, 2014(in thousands of Canadian dollars)

Budget 2014 Actual Actual(note 8) 2014 2013

REVENUEInvestment management fees $ 10,380 $ 10,257 $ 8,879Other — 2 2Total revenue 10,380 10,259 8,881

EXPENSESSalaries and benefits 7,183 7,422 6,415Information systems 1,543 1,491 1,409Office and business 578 377 351Professional services 553 478 301Office rent 323 307 309Amortization of tangible capital assets 135 107 140Total expenses 10,315 10,182 8,925ANNUAL SURPLUS / (DEFICIT) $ 65 $ 77 $ (44)

ACCUMULATED DEFICIT, beginning of year $ (171) $ (171) $ (127)Annual surplus / (deficit) 65 77 (44)

ACCUMULATED DEFICIT, end of year $ (106) $ (94) $ (171)See accompanying notes to financial statements

NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATIONStatement of Changes in Net DebtFor the year ended March 31, 2014(in thousands of Canadian dollars)

Budget 2014 Actual Actual(note 8) 2014 2013

NET DEBT, BEGINNING OF YEAR $ (679) $ (679) $ (742)CHANGES IN YEARAnnual surplus / (deficit) 65 77 (44)Purchases of tangible capital assets (200) (183) (96)Amortization of tangible capital assets 135 107 140Net change in prepaid expenses — (45) 63DECREASE (INCREASE) IN NET DEBT — (44) 63

NET DEBT, END OF YEAR $ (679) $ (723) $ (679)See accompanying notes to financial statements


NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATIONStatement of Cash FlowFor the year ended March 31, 2014(in thousands of Canadian dollars)

2014 2013

OPERATING ACTIVITIESAnnual surplus / (deficit) $ 77 $ (44)Non cash items:Amortization of tangible capital assets 107 140Decrease (increase) in accounts receivable 35 (777)(Increase) decrease in other receivables (117) 3Increase in accounts payable and accrued liabilities 796 662(Decrease) increase in supplemental pension 18 17(Decrease) increase in employee future benefits 171 88Decrease (increase) in prepaid expenses (45) 63

Net cash from operating activities 1,042 152

CAPITAL ACTIVITIESPurchases of tangible capital assets (183) (96)Net cash used in capital activities (183) (96)

FINANCING ACTIVITIESPayment of supplemental pension (24) (22)Payment of retirement allowance (842) —Net cash used in financing activities (866) (22)

(DECREASE) INCREASE IN CASH DURING YEAR (7) 34Cash, beginning of year 89 55

CASH, END OF YEAR $ 82 $ 89See accompanying notes to financial statements


NOTES TO FINANCIAL STATEMENTSYears ended March 31, 2014(in thousands of Canadian dollars)


1. Nature of Operations

New Brunswick Investment Management Corporation (“NBIMC”) was established pursuant to the New BrunswickInvestment Management Corporation Act which was proclaimed on March 11, 1996.

NBIMC is a non-share capital corporation. NBIMC recovers all operating expenses and capital expenditures on a costrecovery basis. As a crown corporation, NBIMC is exempt from federal and provincial income taxes.

NBIMC’s legislated mandate is to:

• Act as trustee for the Teachers’ Pension Fund and the Judges’ Superannuation Fund (“the Funds”);

• Provide investment counseling services and other services for certain trust funds;

• Promote the development of the financial services industry and capital markets in the Province of New Brunswick;

• Have regard to investment opportunities in the Province of New Brunswick in developing its investment policies; and

• Carry out such other activities or duties as may be authorized or required by the Act or as the Lieutenant-Governor inCouncil may direct.

At March 31, 2014, the estimated market value of assets managed by NBIMC was $11.6 billion (2013 - $10.1 billion).These assets are substantially held in separate pooled fund unit trust entities, managed by NBIMC. NBIMC does notconsolidate the financial results of the Funds or the pooled funds with these corporate financial statements.

2. Significant Accounting Policies

These financial statements have been prepared in accordance with Canadian public sector accounting standards for othergovernment organizations. The significant accounting policies used in the preparation of these financial statements are asfollows:

(a) Revenue recognition

Fees for services are recognized in revenue as services are performed and collection is probable.

(b) Tangible capital assets

Tangible capital assets are recorded at acquisition cost less accumulated amortization. Tangible capital assets are amortizedover their estimated useful lives, calculated on a straight-line basis, using the following rates:

Computer equipment - 3 years

Furniture and equipment - 5 to 12.5 years

Leasehold improvements - over the remaining lease term

Tangible capital assets are reviewed for impairment whenever events or changes in circumstances indicate that their valueof future economic benefits is less than their carrying amount. Useful lives are assessed annually and revisions to the usefullife are made as required.

2. Significant Accounting Policies (cont’d)

(c) Employee future benefits

(i) Pension benefits:

Full-time employees of NBIMC were covered by the Public Service Superannuation Act (the “PSSA”) of the Provinceof New Brunswick. The PSSA was a defined benefit multi-employer plan under which contributions were made byboth NBIMC and the employees. Effective January 1, 2014, the PSSA was converted to the Public Service Shared RiskPlan (“PSSRP”). Contributions continue to be made by both NBIMC and the employees. NBIMC has no direct liabilityor entitlement to any unfunded liability or surplus in either plan.

(ii) Sick leave benefits:

NBIMC provides a sick leave benefit for eligible employees that accumulate but do not vest. The benefits accrue overthe estimated service life of the employees and are expensed according to actuarial estimates and assumptions.

(d) Financial instruments

Financial instruments are contracts that establish rights and obligations to receive or deliver economic benefits. Financialassets consist of cash and accounts and other receivables. Financial liabilities include accounts payable and accruedliabilities. The determination of fair value is dependent upon the use of measurement inputs with varying degrees ofsubjectivity. The level of subjectivity can be classified and is referred to as the fair value hierarchy. Cash is recorded atfair value and is grouped into Level 1 fair value hierarchy. Accounts and other receivables are measured at the lower ofamortized cost and net recoverable amount. Accounts payable and accrued liabilities are measured at amortized cost.

(e) Measurement uncertainty

Measurement uncertainty is uncertainty in the determination of the amount at which an item is recognized or disclosed infinancial statements. Such uncertainty exists when there is a variance between the recognized or disclosed amount andanother reasonably possible amount. Examples of such uncertainty include the determination of the estimated useful lifeand selection of rates of amortization of tangible capital assets (note 3), the estimated actuarial liability for supplementalpension (note 5) and the actuarial estimates and assumptions used for the valuation of employee future benefits (note 6).


NOTES TO FINANCIAL STATEMENTS



3. Tangible Capital Assets

Computer Furniture and Leasehold March 31, 2014 equipment equipment Improvements Total

CostOpening balance $ 932 $ 398 $ 407 $ 1,737Purchases 152 24 7 183Closing balance 1,084 422 414 1,920

Accumulated amortizationOpening accumulated amortization 793 340 333 1,466Amortization expense 86 12 9 107Closing accumulated amortization 879 352 342 1,573Net book value $ 205 $ 70 $ 72 $ 347

Computer Furniture and Leasehold March 31, 2013equipment equipment Improvements Total

CostOpening balance $ 851 $ 383 $ 407 $ 1,641Purchases 81 15 — 96Closing balance 932 398 407 1,737

Accumulated amortizationOpening accumulated amortization 672 329 325 1,326Amortization expense 121 11 8 140Closing accumulated amortization 793 340 333 1,466Net book value $ 139 $ 58 $ 74 $ 271

4. Contractual Obligations and Contingencies

NBIMC leases its premises under a ten year operating lease which expires on January 31, 2022. The future minimum leasepayments are $256 per annum. Upon signing, NBIMC received a lease inducement in the amount of $25 which is beingamortized to office rent expense in the Statement of Operations on a straight-line basis over the term of the lease. A firstcharge on the leasehold improvements, furniture and equipment has been pledged to the landlord as collateral for the leaseinducement.

The lease contains two possible early termination clauses which would result in a retroactive increase to the minimum leasepayments made to reflect the shorter lease term. Early termination would also trigger repayment of the unamortized balanceof the lease inducement.

5. Supplemental Pension

NBIMC has an estimated liability of $368 (2013 - $374) for special supplemental pension relating to past service awardedduring 2003-2004. This amount is equivalent to the commuted value of the expected payments. The ultimate cost toNBIMC will vary based on the rise in the consumer price index and demographic factors. Changes in the expected liabilityare recorded in the period the change occurs. Payments to date and future payments will be received from an increase inthe fees charged to the Funds. NBIMC expects to make payments in the amount of $24 within the next twelve months.

6. Employee Future Benefits

a) Pension

For the year ended March 31, 2014, NBIMC expensed contributions of $439 under the terms of the PSSA and PSSRPpension plans (2013 - $362).

b) Retirement allowance

Full-time employees of NBIMC hired prior to September 1, 2011 were entitled to be paid a retirement allowance upontheir retirement based upon years of service. Over the service life of its employees, NBIMC accrued the estimated futureliability based upon actuarial estimates and assumptions. The accrued liability was reduced by actual payments made. Thiswas an unfunded program with no specific assets segregated to meet the obligations when they come due. In 2013, theaccrued benefit liability was $675.

On April 30, 2013, the Board of Directors approved a discontinuance of the retirement allowance benefit for all eligibleemployees effective April 30, 2013. Current benefit entitlements of approximately $842 were fully paid out during the year.

c) Sick leave

Full-time employees are provided a sick leave benefit that accumulates at a rate of 1.25 days per month to a maximum of240 days. An employee can take a sick leave with pay for an amount of time equal to the accumulated sick leave or can begranted up to a maximum of 15 working days of pay if the employee does not have enough sick leave and is expected tobe able to return to work within a short time. This is an unfunded program with no specific assets segregated to meet theobligations when they come due.

The significant assumptions used for the valuation of the sick leave benefit for the year ended March 31, 2014 were:

2014 2013

Annual discount rate 3.85% 3.39%Annual salary increases 2.75% 3.0%Mortality None NoneRetirement age 62 60Actuarial cost method Projected Unit Credit pro-rated on service

For purposes of the actuarial valuation, the assumption for the net excess (over 15 days) utilization rate of sick leave is 0 –2 days depending upon the individual’s age.





6. Employee Future Benefits (cont’d)

Information on the sick leave liability included in employee future benefits in the Statement of Financial Position is asfollows:

2014 2013

Accrued sick leave obligationBalance, beginning of year $ 72 $ 65Current service cost 11 10Benefit payments (10) (6)Interest cost 2 2Actuarial loss (2) 1Balance, end of year (unfunded) 73 72

Unamortized net actuarial gain (14) (17)Accrued sick leave liability $ 59 $ 55

7. Related Party Transactions

NBIMC is related to all Province of New Brunswick departments, agencies and Crown corporations by virtue of commonownership. In addition to its participation in the pension and supplementary pension plans, NBIMC obtains certain officeservices from related parties during its normal course of operations which are recorded at the exchange amount agreed toby the parties.

Amounts payable to a related party are included in accounts payable and accrued liabilities in the amount of $nil (2013 -$42). Included in office and business expenses are fees in the amount of $33 (2013 - $26).

NBIMC is economically dependent upon the revenue received from its clients by virtue of the cost recovery business modelunder which it operates.

8. Budget

The budget amounts included in these financial statements are the amounts consolidated into the Main Estimates for theProvince of New Brunswick. Management prepares the budget using best estimates that reflect past experience as well asexpected future plans. The budget was reviewed and approved on November 25, 2013 by NBIMC’s Board of Directors andsubmitted to the Minister of Finance in December.

9. Indemnifications

NBIMC provides indemnifications to its officers and directors pursuant to certain corporate by-laws. NBIMC may berequired to compensate these individuals in the event of a claim being made against them. The contingent nature of theseindemnification obligations prevents NBIMC from making a reasonable estimate of the maximum potential payments thatNBIMC would be required to make. To date, NBIMC has not received any claims nor made any payments pursuant to suchindemnifications.

10. Financial Instrument Risk Management

The Corporation has exposure to credit risk. Credit risk arises from the potential that a counterparty will fail to perform itsobligations. NBIMC is exposed to the carrying value of its accounts and other receivables, all of which have been collectedsubsequent to the date of the financial statements.

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