or iformaio arta ars’ rirm f oar - alberta education · or iformaio arta ars’ rirm f oar...

2015-16 Education Annual Report273

ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

Alberta Teachers’ Retirement Fund Board

financial statements


ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d


Teachers’ Pension Plan and Private School Teachers’ Pension Plan

Financial Statements August 31, 2015


Teachers’ Pension Plan and Private School Teachers’ Pension Plan

Financial Statements August 31, 2015

Management’s Responsibility for Financial Reporting

Independent Auditor’s Report

Actuary’s Opinion

Statement of Financial Position

Statement of Changes in Net Assets Available for Benefits

Statement of Changes in Pension Obligations

Notes to the Financial Statements


ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

36 AT R F 2 0 1 5 A N N U A L R E P O R T

MANAGEMENT’S RESPONSIBILITY F O R F I N A N C I A L R E P O R T I N G

MANAGEMENT’S RESPONSIBILIT Y FOR FINANCIAL REPORTING


ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d

37AT R F 2 0 1 5 A N N U A L R E P O R T

I N D EP EN D EN T AU D I TO R ’ S R E P O R T

INDEPENDENT AUDITOR’S REPORT


ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

Teachers’ Pension Plan Private School Teachers’ Pension Plan

38 AT R F 2 0 1 5 A N N U A L R E P O R T

ACT UA RY ’ S O P I N I O N

ACTUARY’S OPINION


ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d

2015 2014

12 0 42 10 1 4

5 11 2 1 1 10 1 0 5

2 52 201

AT R F 2 0 1 5 A N N U A L R E P O R T 39

ATRF FINANCIAL STATE ME NTS

ATRF FINANCIAL STATEMENTS


ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

Statement of Changes in Net Assets Available for Benefits FortheYearEndedAugust31($Thousands)

2015 2014

Net assets available for benefits, beginning of year $ 10,716,794 $ 8,581,027

Investment operationsInvestmentincome(Note6) 330,601 281,118

Changeinfairvalueofinvestments(Note6) 639,024 1,436,071

Investmentexpenses(Note7) (75,650) (62,501)

Net investment operations 893,975 1,654,688

Member service operations

Contributions(Note8)

Teachers 429,539 421,489

TheProvince 399,527 388,677

Employers 2,592 2,098Transfersfromotherplans 10,983 11,501

842,641 823,765

Benefitspaid(Note9) (378,221) (337,036)

Memberserviceexpenses(Note7) (5,763) (5,650)

Net member service operations 458,657 481,079

Increase in net assets available for benefits 1,352,632 2,135,767

Net assets available for benefits, end of year $ 12,069,426 $ 10,716,794

Statement of Changes in Pension ObligationsFortheYearEndedAugust31($Thousands)

2015 2014

Accrued pension obligations, beginning of year $ 10,190,593 $ 9,406,344

Increase (decrease) in accrued pension obligations

Interestonaccruedbenefits 715,504 684,474

Benefitsaccrued 436,758 406,401

Changesinactuarialassumptions 203,484 —

Experiencelosses 113,019 30,410

Benefitspaid (378,221) (337,036)

1,090,544 784,249

Accrued pension obligations, end of year (Note 5) $ 11,281,137 $ 10,190,593

Theaccompanyingnotesarepartofthesefinancialstatements.

AT R F 2 0 1 5 A N N U A L R E P O R T40 ATRF FINANCIAL STATEMENTS


ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d

N OT E S TO T H E F I N A N C I A L S TAT E M E N T S

c) Funding

ThedeterminationofthevalueofthebenefitsandtherequiredcontributionsforthePlansismadeonthebasisofperiodicactuarialvaluations.

AllteachersundercontractwithschooljurisdictionsandcharterschoolsinAlbertaarerequiredtocontributetotheTeachers’PensionPlan.CurrentservicecostsandrelateddeficienciesarefundedbyequalcontributionsfromtheProvinceandtheteachers.Anadditional10percentcost-of-livingadjustmentforserviceearnedafter1992isfundedentirelybytheteachers.

CertainotherdesignatedorganizationsinAlbertaalsoparticipateintheTeachers’PensionPlanunderthesamefundingarrangements,excepttheseorganizationsmaketheemployercontributionsratherthantheProvince.

CertainprivateschoolsparticipateinthePrivateSchoolTeachers’PensionPlan.Plancostsarefundedbycontributionsfromtheemployers andtheteachers.

d) Retirement pensions

Retirementpensionsarebasedonthenumberofyearsofpensionableserviceandthehighestconsecutivefive-yearaveragesalary.Pensions arepayabletoteacherswhoretireafter completionofatleastfiveyearsofpensionableservice,withcertainrestrictions,andwhohaveattainedage65.Unreducedpensionsarealso payabletoteacherswhohavereachedatleast age55andthesumoftheirageandservice equals85.Withcertainrestrictions,reduced earlyretirementpensionsarepayabletoteachers whoretireonorafterage55withaminimum offiveyearsofpensionableservice.

NOTE 1 DESCRIPTION OF PLANS

ThefollowingdescriptionoftheTeachers’Pension PlanandthePrivateSchoolTeachers’PensionPlan (the“Plans”)isasummaryonly.

a) General

TheAlbertaTeachers’RetirementFundBoard(“ATRF”),acorporationoftheProvinceofAlberta(the“Province”)operatingundertheauthorityoftheTeachers’ Pension Plans Act,ChapterT-1,RSA2000,isthetrusteeandadministratorofthePlans.ThePlansarecontributorydefined-benefitpensionplansfortheteachersofAlberta.

ThePlansareregisteredpensionplansasdefinedintheIncome Tax Act(registrationnumber0359125)andarenotsubjecttoincometaxesinCanada.ThePlansmaybesubjecttotaxesinotherjurisdictionswherefulltaxexemptionsarenotavailable.

b) Obligations relating to the period before September 1992

TheTeachers’PensionPlan’sassetsand obligationsrelatedtopensionableserviceafterAugust31,1992(the“Post-1992period”)have beenaccountedforseparatelyfromtheassets andobligationsrelatedtopensionableservice priortoSeptember1,1992(the“Pre-1992period”)and,accordingly,thesefinancialstatementsandnotesincludeonlyPost-1992periodtransactions oftheTeachers’PensionPlanandtransactions ofthePrivateSchoolTeachers’PensionPlan.

EffectiveSeptember1,2009,theProvince assumedfullresponsibilityforobligationsrelated toPre-1992periodpensionableserviceandprovidestherequiredamountstoATRFtopay theobligationsonamonthlybasis.

AT R F 2 0 1 5 A N N U A L R E P O R T 41NOTES TO THE FINANCIAL STATEMENTS


ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of presentation

ThestatementspresenttheaggregatefinancialpositionofthePlans.ThesefinancialstatementsarepreparedinaccordancewithCanadianaccountingstandardsforpensionplans.Section4600–PensionPlans,oftheCPACanadaHandbook,prescribesaccountingpoliciesspecifictoinvestmentsandpensionobligations.Foraccountingpolicieswhichdonotrelatetoeitherinvestmentsorpensionobligations,InternationalFinancialReportingStandards(“IFRS”)areapplied.Totheextent thatIFRSisinconsistentwithSection4600, Section4600takesprecedence.

TherelevantnewguidanceIFRS9,FinancialInstruments,issuedbytheInternational AccountingStandardsBoardreplacesmostofguidanceinIAS39,FinancialInstruments:RecognitionandMeasurement,effective January1,2018.Thenewstandardisnot yetadoptedbythePlans.Managementis assessingthepotentialimpactonboththe Plans’financialpositionandtheirinvestmentincomewhenadoptingthenewstandard.

e) Disability benefits

TeacherswhoaredisabledafterAugust31,1992 arecreditedwithpensionableservicewhiledisabled.Teachersdonotcontributetothe Planswhiledisabled.

f) Termination benefits

Refundsorcommutedvaluetransfersare availablewhenateacherceasesemployment.

g) Death benefits

Deathbenefitsareavailableuponthedeathof ateacherandmaybeavailableuponthedeath ofapensioner.Thebenefitmaytaketheform ofalumpsumpaymentorasurvivorpension.

h) Other provisions

Purchaseofpastserviceandreinstatement ofrefundedserviceisallowedonabasisthat iscostneutraltothePlans.

i) Cost-of-living adjustments

Pensionspayableareincreasedeachyearby anamountequalto60percentoftheincrease intheAlbertaConsumerPriceIndex.Theportion ofpensionearnedafter1992isincreasedby anadditional10percentoftheincreaseintheAlbertaConsumerPriceIndex.

AT R F 2 0 1 5 A N N U A L R E P O R T42 NOTES TO THE FINANCIAL STATEMENTS


ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d

b) Investments

Investments,investmentreceivablesandinvestmentliabilitiesarerecognizedonatradedatebasis andarestatedatfairvalue.

i)VALUATIONOFINVESTMENTS

Fairvalueisthepriceatwhichaninvestmentassetwouldbesoldorinvestmentliabilitytransferredthrough anorderlytransactionbetweenmarketparticipantsatthemeasurementdateundercurrentmarketconditions.

Fairvaluesaredeterminedasfollows:

CATEGORY BASIS OF VALUATION

Money-market securities Costplusaccruedinterestapproximatesfairvalueduetotheshort-termnature ofthesesecurities.

Bonds and debentures Closingquotedmarketprice.Wherequotedpricesarenotavailable,estimated valuesarecalculatedusingdiscountedcashflowsbasedoncurrentmarketyields forcomparablesecurities.

Public equity Closingquotedmarketprice.Whereamarketpriceisnotavailable,marketvalue isdeterminedusingappropriatevaluationmethods.

Real estate Realestateassetsandliabilitiesarehelddirectlyandthroughlimitedpartnerships. Fairvaluefordirectinvestmentsisdeterminedusingappropriatevaluationtechniques suchasdiscountedcashflowsandcomparablepurchasesandsalestransactions. Fairvalueisindependentlyappraisedatleastonceeverythreeyears.Investments heldthroughfundinvestmentsarevaluedusingcarryingvaluesreportedbythe investmentmanagerusingsimilaracceptedindustryvaluationmethods.

Private equity/

infrastructure

Investmentsinprivateequity/infrastructureareheldthroughlimitedpartnerships,investmentfundsand/orotherappropriatelegalstructuresalongsideourinvestmentmanagers.Fairvalueisdeterminedbasedoncarryingvaluesandotherrelevant informationreportedbytheinvestmentmanagerusingacceptedvaluationmethods.

Derivatives Marketpricesareusedforexchange-tradedderivatives.Wherequotedmarketprices arenotavailable,appropriatevaluationtechniquesareusedtodeterminefairvalue.

Absolute return Absolutereturnfundsarerecordedatfairvalueobtainedfromexternalfundmanagers.



ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

ii)INCOMERECOGNITION

Incomeisrecognizedasfollows:

CATEGORY BASIS OF VALUATION

Interest income Accrualbasis

Dividend income Accrualbasisontheex-dividenddate

Income from real estate,

private equity, infrastructure

and absolute return

Incomeincludesdistributionsrecognizedasinterestincome,dividendincome orotherincome,asappropriate

Realized gains and losses

on investments

Differencebetweenproceedsondisposalandtheaveragecost

Unrealized gains and losses on investments

Changeinthedifferencebetweenestimatedfairvalueandtheaveragecost

iii)EXTERNALINVESTMENTMANAGEMENTEXPENSES

Managementexpensesandperformancefees forexternalinvestmentmanagersareexpensed asincurred.

iv)TRANSACTIONCOSTS

Transactioncostsareincrementalcosts attributabletotheacquisition,issueordisposal ofinvestmentassetsorliabilities.Transaction costsareexpensedasincurred,oninitial recognitionofinvestmentsacquired.

c) Fair value disclosures

Allfinancialinstrumentsmeasuredatfairvalue arecategorizedintooneofthefollowingthreehierarchylevels.Eachlevelreflectstheavailability ofobservableinputswhichareusedtodeterminefairvalues:

Level1–Unadjustedquotedpricesinactive marketsforidenticalassetsorliabilities;

Level2–ThoseinvolvinginputsotherthanquotedpricesincludedinLevel1thatareobservablefor theassetorliability,eitherdirectlyorindirectly;

Level3–Thosewithinputsfortheassetorliabilitythatarenotbasedonobservablemarketdata.

Determinationoffairvalueandtheresultinghierarchyrequirestheuseofobservablemarket datawheneveravailable.Theclassificationofafinancialinstrumentinthehierarchyisbaseduponthelowestlevelofinputthatissignificanttothemeasurementoffairvalue.

d) Foreign currency translation

AssetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedintoCanadiandollars attheexchangeratesprevailingontheyear-end date.IncomeandexpensesaretranslatedintoCanadiandollarsattheexchangeratesprevailing onthedatesofthetransactions.Therealized gainsandlossesarisingfromthesetranslations areincludedwithinchangeinfairvalueofinvestmentsininvestmentearnings.



ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d

MeasurementuncertaintyexistsinthecalculationofthePlans’actuarialvalueofaccruedbenefits.UncertaintyarisesbecausethePlans’actualexperiencemaydiffersignificantlyfromassumptionsusedinthecalculationofthePlans’accruedbenefits.

Measurementuncertaintyexistsinthevaluation ofthePlans’privateinvestmentsasvaluesmay differsignificantlyfromthevaluesthatwould havebeenusedhadareadymarketexistedfor theseinvestments.

j) Salaries and benefits

DetailsofseniorstaffcompensationandBoardmemberremunerationincludedin“salariesandbenefits”(Note7)arepresentedintheCompensationDiscussionandAnalysissection oftheAnnualReport.

ATRFparticipatesintheLocalAuthoritiesPensionPlan,adefinedbenefitpublicsectorpension plan,whichmeetstheaccountingrequirements fortreatmentasadefinedcontributionplan. Theemployercontributionsarerecordedasanexpenseundersalariesandbenefits(Note7).

ATRFprovidesaSupplementaryEmployeePensionPlan(SEPP)toexecutivesandmanagerswhoseearningsexceedthepensionbenefitlimitunder theIncome Tax Actregulations.Thepensionbenefit isrecordedasanexpenseundersalariesandbenefits(Note7)andasaliability(Note4).

e) Contributions

Contributionsfromthemembers,theProvince andtheemployersarerecordedonanaccrual basis.Cashreceivedfrommembersforcreditedserviceandcashtransfersfromotherpension plansarerecordedwhenreceived.

f) Benefits

Pensionbenefits,terminationbenefitsandtransferstootherplansarerecordedintheperiodinwhichtheyarepaid.Anybenefitpaymentaccrualsnot paidarereflectedinaccruedpensionbenefits.

g) Accrued pension benefits

Thevalueofaccruedpensionbenefitsandchangesthereinduringtheyeararebasedonanactuarialvaluationpreparedbyanindependentfirmofactuaries.ThevaluationismadeannuallyasatAugust31.Itusestheprojectedbenefitmethod pro-ratedonserviceandmanagement’sbestestimate,asatthevaluationdate,ofvariousfutureevents.

h) Capital assets

Capitalassetsarerecordedatcostandamortized onastraight-linebasisovertheirestimatedusefullives.Costsnetofaccumulatedamortizationareincludedwith‘otherassets’ontheStatementofFinancialPosition.

i) Use of estimates

Thepreparationoffinancialstatements,inconformitywithCanadianaccountingstandardsforpensionplans,requiresmanagementtomakeestimatesandassumptionsthataffecttheamountsreportedinthefinancialstatements.Actualresultscoulddifferfromthoseestimates.



ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

NOTE 3 INVESTMENTS

ThefollowingschedulesummarizesthecostandfairvalueofthePlans’investmentsbeforeallocating themarketexposurerelatedtoderivativefinancialinstruments.

($Thousands)2015 2014

Fair Value Cost Fair Value Cost

Fixed income

Cash $ 165,310 $ 165,310 $ 125,906 $ 125,906

Money-marketsecurities 413,545 413,545 345,117 345,117

Bondsanddebentures 2,670,374 2,522,071 2,509,531 2,363,536

3,249,229 3,100,926 2,980,554 2,834,559

Equity

Public 4,872,734 3,984,009 4,860,166 3,739,808

Private 1,145,886 745,256 855,390 623,723

6,018,620 4,729,265 5,715,556 4,363,531

Infrastructure 543,483 446,308 404,558 362,175

Real estate 1,090,145 846,571 725,933 656,877

Absolute return 1,297,873 1,027,329 864,814 866,133

2,931,501 2,320,208 1,995,305 1,885,185

Investment related assets

Accruedincome 8,408 8,408 6,867 6,867

Duefrombrokers 63,485 62,693 25,400 25,400

Unrealizedgainsandamounts receivableonderivativecontracts 6,340 146 34,525 122

78,233 71,247 66,792 32,389

INVESTMENT ASSETS 12,277,583 10,221,646 10,758,207 9,115,664

Investment related liabilities

Duetobrokers 34,038 34,038 25,612 25,612

Unrealizedlossesandamounts payableonderivativecontracts 162,812 114 10,737 1,147

196,850 34,152 36,349 26,759

NET INVESTMENTS $ 12,080,733 $ 10,187,494 $ 10,721,858 $ 9,088,905



ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d

a) Fair value hierarchy

FinancialinstrumentsarecategorizedwithinthefairvaluehierarchyasdescribedinNote2asfollows:

2015($Thousands)

Level 1 Level 2 Level 3 Total

Fixedincome $ 165,310 $ 2,953,221 $ 130,698 $ 3,249,229

Equity 4,872,734 — 1,145,886 6,018,620

Infrastructure — — 543,483 543,483

Realestate — — 1,090,145 1,090,145

Absolutereturn — — 1,297,873 1,297,873

Netinvestment-relatedpayables — (118,617) — (118,617)

Netinvestments $ 5,038,044 $ 2,834,604 $ 4,208,085 $ 12,080,733

42% 23% 35% 100%

2014($Thousands)

Level 1 Level 2 Level 3 Total

Fixedincome $ 125,906 $ 2,760,214 $ 94,434 $ 2,980,554

Equity 4,860,166 — 855,390 5,715,556

Infrastructure — — 404,558 404,558

Realestate — — 725,933 725,933

Absolutereturn — — 864,814 864,814

Netinvestment-relatedreceivables — 30,443 — 30,443

Netinvestments $ 4,986,072 $ 2,790,657 $ 2,945,129 $ 10,721,858

47% 26% 27% 100%

ThefollowingtablerepresentsareconciliationoffinancialinstrumentsincludedinLevel3ofthefairvaluehierarchy:

2015($Thousands) Fixed

Income Equity Infrastructure Real EstateAbsolute

Return Total

Balance,beginningofyear $ 94,434 $ 855,390 $ 404,558 $ 725,933 $ 864,814 $2,945,129

Purchases 39,050 316,543 102,777 247,914 165,240 871,524

Sales (5,746) (326,895) (19,295) (65,551) (4,044) (421,531)

Realizedgain — 131,885 652 7,333 — 139,870

Unrealizedgain 2,960 168,963 54,791 174,516 271,863 673,093

Balance,endofyear $ 130,698 $1,145,886 $ 543,483 $ 1,090,145 $ 1,297,873 $4,208,085

2014($Thousands) Fixed

Income Equity Infrastructure Real EstateAbsolute

Return Total

Balance,beginningofyear $ 69,004 $ 591,673 $ 278,243 $ 446,019 $ — $1,384,939

Purchases 29,166 317,096 111,552 305,497 867,420 1,630,731

Sales (6,061) (217,980) (2,634) (51,965) (1,288) (279,928)

Realizedgain — 51,766 74 2,517 — 54,357

Unrealizedgain/(loss) 2,325 112,835 17,323 23,865 (1,318) 155,030

Balance,endofyear $ 94,434 $ 855,390 $ 404,558 $ 725,933 $ 864,814 $2,945,129



ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

NOTE 4 ACCOUNTS PAYABLE

($Thousands)

2015 2014

Tradepayables $ 11,068 $ 9,370

Taxwithholdings 9,908 9,337Long-TermIncentivePlan 6,027 5,733

SupplementaryEmployeePensionPlan 2,380 2,048

ContributionsduetotheProvince 1,179 —

Other 1,782 1,676

$ 32,344 $ 28,164

NOTE 5 ACCRUED PENSION OBLIGATIONS

a) Best-estimate valuations and assumptions

AnactuarialvaluationoftheTeachers’PensionPlanforthePost-1992periodandthePrivateSchool Teachers’PensionPlanwasperformedasatAugust31,2015.ValuationsforthePlanswerealsoprepared asatAugust31,2014.Thepresentvalueofaccruedbenefitswasdeterminedusingtheprojectedbenefitmethodproratedonservice.Theassumptionsusedinthevaluationsarebasedonmanagement’sbest estimateoffutureevents.

Themajorlong-termeconomicassumptionsusedinthebest-estimatevaluationsare:

2015 2014

Rateofreturnoninvestedassets 7.00% 7.25%

RateofAlbertainflation 2.50% 2.75%Realwageincreases 1.00% 1.00%

b) Sensitivity of changes in major assumptions on best-estimate valuations

Thetablebelowshowstheimpactofchangesinmajorassumptions,holdingallotherassumptionsconstant:

Teachers’ Pension Plan Private School Teachers’ Pension Plan

0.50%decreasein

rateofreturnon

investedassets

0.50%increasein

rateofinflation

0.50%decreasein

rateofreturnon

investedassets

0.50%increasein

rateofinflation

Increaseincurrentservicecosts

(%oftotalteachersalaries)1.44% 1.17% 1.72% 1.42%

Increaseinaccruedpensionbenefits $908million $662million $4million $3million

Thecurrentservicecost(excluding0.2%foradministrativeexpenses)asapercentoftotalteachersalaries fortheTeachers’PensionPlanwas13.75%andforthePrivateSchoolTeachers’PensionPlanwas14.35%.



ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d

c) Results based on valuations

ThevaluationforthePost-1992periodoftheTeachers’PensionPlanasatAugust31,2015determinedasurplusof$779.72million.ThevaluationforthePrivateSchoolTeachers’PensionPlantoAugust31,2015determinedasurplusof$8.57million.


Teachers’ Pension Plan

Private Teachers' Total

Teachers’ Pension Plan

Private Teachers' Total

Netassetsat beginningofyear

$ 10,665,258 $ 51,536 $10,716,794 $ 8,539,519 $ 41,508 $ 8,581,027

Contributions 837,338 5,303 842,641 819,543 4,222 823,765

Benefits (375,825) (2,396) (378,221) (334,866) (2,170) (337,036)

Investmentearnings 964,962 4,663 969,625 1,708,883 8,306 1,717,189

Investmentandmemberservicesexpenses

(81,021) (392) (81,413) (67,821) (330) (68,151)

Netassetsat endofyear

12,010,712 58,714 12,069,426 10,665,258 51,536 10,716,794

Actuarialvalueof accruedpension obligations

(11,230,996) (50,141) (11,281,137) (10,145,785) (44,808) (10,190,593)

Surplus $ 779,716 $ 8,573 $ 788,289 $ 519,473 $ 6,728 $ 526,201

NOTE 6 INVESTMENT EARNINGS

Thefollowingisasummaryofinvestmentearningsbyassetclass:

1 Changeinfairvalueincludesarealizednetgainof$378,740andanunrealizednetgainof$260,284.2 Changeinfairvalueincludesarealizednetgainof$826,259andanunrealizednetgainof$609,812.


Investment Income

Change in Fair Value1 Total

Investment Income

Change in Fair Value2 Total

Fixedincome

Cashandmoney- marketsecurities

$ 5,167 $ — $ 5,167 $ 4,707 $ 5,037 $ 9,744

Bondsanddebentures 79,568 65,969 145,537 83,370 132,136 215,506

Equity

Public 138,646 112,672 251,318 124,935 1,070,686 1,195,621

Private 28,271 300,848 329,119 11,642 164,601 176,243

Infrastructure 30,672 55,443 86,115 26,516 17,397 43,913

Realestate 48,277 181,849 230,126 29,948 26,382 56,330

Absolutereturn — 271,863 271,863 — (1,318) (1,318)

Derivatives — (349,620) (349,620) — 21,1450 21,150

InvestmentEarnings $ 330,601 $ 639,024 $ 969,625 $ 281,118 $ 1,436,071 $ 1,717,189



ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

NOTE 7 OPERATING EXPENSES

2015($Thousands)

Investment Member Service Total

Externalinvestmentmanagementexpenses $ 59,827 $ — $ 59,827

Salariesandbenefits 10,765 3,846 14,611

Custodialandbanking 1,841 39 1,880

Professionalandconsultingservices 1,518 583 2,101

Communicationandtravel 750 448 1,198

Premisesandequipment 749 562 1,311

Boardandcommittee 143 98 241

Actuarialfees 14 136 150

Other 43 51 94

$ 75,650 $ 5,763 $ 81,413

2014($Thousands)

Investment Member Service Total

Externalinvestmentmanagementexpenses $ 47,853 $ — $ 47,853

Salariesandbenefits 10,250 3,449 13,699

Custodialandbanking 1,403 39 1,442

Professionalandconsultingservices 1,296 819 2,115

Communicationandtravel 724 373 1,097

Premisesandequipment 523 490 1,013

Boardandcommittee 313 307 620

Actuarialfees 12 107 119

Other 127 66 193

$ 62,501 $ 5,650 $ 68,151



ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d

NOTE 8 CONTRIBUTIONS

($Thousands)

2015 2014

Teachers

Currentservice $ 248,376 $ 242,498Currentserviceadditional10%COLA 15,833 15,455

Pastservice 4,413 6,291

Deficiency 160,917 157,245

429,539 421,489

TheProvince

Currentservice 246,698 239,657

Pastservice 1,982 2,477

Deficiency 150,847 146,543

399,527 388,677

Employers

Currentservice 2,050 1,650

Deficiency 542 448

2,592 2,098

Transfersfromotherplans 10,983 11,501

$ 842,641 $ 823,765

NOTE 9 BENEFITS PAID

($Thousands)

2015 2014

Pensionbenefits $ 320,469 $ 283,518

Terminationbenefits 51,278 42,823Transferstootherplans 6,474 10,695

$ 378,221 $ 337,036

Duringtheyear$461million(2014:$450million)wasreceivedfromtheProvinceandwasdistributedasbenefitspaidrelatingtothePre-1992period.



ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

NOTE 10 RISK MANAGEMENT

ThePlansareexposedtocertainfinancialrisksasaresultofinvestmentactivities.Theserisksincludemarketrisk,creditriskandliquidityrisk.ATRFmanagesfinancialriskthroughtheInvestmentPolicywhichisapprovedbytheBoardandreviewedatleastonceeveryfiscalyear.Thispolicycontainsrisklimitsandriskmanagementprovisions thatgoverninvestmentdecisionsandhasbeendesignedtoachievethemandateofATRFwhichistoinvestassets toachievemaximum,risk-controlled,cost-effective,long-terminvestmentreturns.

a) Market risk

Marketriskistheriskthatthefairvalueorfuturecashflowsofaninvestmentassetorinvestmentliabilitywillfluctuatebecauseofchangesinpricesandrates.ATRFmitigatesmarketriskthroughdiversificationofinvestmentsacrossassettypes,geographyandtimehorizons.Marketriskiscomprisedofthefollowing:

Currency risk

CurrencyriskistheriskthatthevalueofforeigninvestmentswillbeaffectedbychangesinforeigncurrencyexchangeratesforCanadiandollars.ThePlansareexposedtocurrencyriskthroughinvestmentassetsorliabilitieswhichareheldinforeigncurrencies.TherelativeCanadianvalueorfuturecashflowsofinvestmentsdenominatedinforeigncurrencieswillchangewithachangeinthepriceofCanadiandollaragainstothercurrencies.

Foreigninvestmentsinabsolutereturn,realestateandinfrastructurearehedgedwiththeaimofminimizingforeigncurrencyexposure.ATRFpermitsportfoliomanagerstohedgeforeigncurrencyholdingstolimitthePlans’foreigncurrencyexposure.

ThePlans’foreigncurrencyexposureisasfollows:


Currency

Foreign Currency Exposure

Currency Derivatives

Net Foreign Currency Exposure

Net Foreign Currency Exposure

UnitedStatesDollar $ 2,864,127 $ (2,019,427) $ 844,700 $ 635,661

Euro 564,073 (224,443) 339,630 238,243

BritishPoundSterling 320,421 (104,672) 215,749 259,826

HongKongDollar 230,130 — 230,130 180,750

JapaneseYen 175,939 — 175,939 144,731

SwissFranc 143,328 — 143,328 76,815

Other 664,029 (36,522) 627,507 642,620

$ 4,962,047 $ (2,385,064) $ 2,576,983 $ 2,178,646

Afterconsideringtheeffectofcurrencyhedgesa1%increase/decreaseinthevalueoftheCanadiandollaragainstallcurrencies,withallothervariablesheldconstant,wouldresultinanapproximatedecrease/increase inthevalueofnetforeigninvestmentsof$27millionasatAugust31,2015(2014:$22million).



ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d

Interest rate risk

Interestrateriskistheriskthatthefairvalueorfuturecashflowsofaninvestmentwillfluctuateasaresultofchangesinmarketinterestrates.ThePlansareexposedtointerestrateriskthroughfixed-rateandfloating-ratesecurities.Therearealsocertainalternativeinvestmentswhichmayhaveinterestratecomponentsexposingthemtointerestraterisk.Changesininterestratesaffectfairvaluesoffixed-ratesecuritiesandthecashflowsoffloating-ratesecurities.Increasesininterestrateswillgenerallydecreasethefairvalueoffixed-ratesecuritiesandincreasecashflowfromfloating-ratenotes.

ATRFmanagesinterestrateriskforinvestmentsbyestablishingatargetassetmixthatprovidesanappropriatemixbetweeninterestsensitiveinvestmentsandthosesubjecttootherrisks.Aportionoftheinterestsensitiveportfolioisactivelymanaged,allowingmanagerstoanticipateinterestratemovementstomitigateortakeadvantageofinterestratechanges.

Thetermtomaturityclassificationsofinterest-bearinginvestments,baseduponthecontractualmaturity ofthesecuritiesareasfollows:


Term to Maturity

Within 1 Year

1 to 5 Years

Over 5 Years Total

Average Effective

Yield Total

Average Effective

Yield

Money-marketsecurities $413,545 $ — $ — $ 413,545 0.95% $ 345,117 1.17%

Bondsanddebentures $ 43,414 $ 610,228 $2,016,732 $2,670,374 2.79% $ 2,509,531 3.17%

A1%increase/decreaseinnominalinterestrates,withallothervariablesheldconstant,wouldresultinanapproximatedecrease/increaseinthevalueofinterestbearinginvestmentsof$261million(2014:$214million).

Equity price risk

Equitypriceriskistheriskthatthefairvalueofaninvestmentwillfluctuateasaresultofchangesinmarketprices(otherthanthosearisingfrominterestrateriskorcurrencyrisk),whetherthosechangesarecaused byfactorsspecifictotheindividualinvestmentorfactorsaffectingallsecuritiestradedinthemarket.ThePlans aresubjecttopriceriskthroughtheirpublicequityinvestments.

ThePlansusegeographic,sectorandentityspecificanalyses,andstrategiessuchasdiversificationandderivativeinstrumentstomitigatetheoverallimpactofpricerisk.

A10%increase/decreaseinthevalueofallpublicequity,withallothervariablesheldconstant,wouldresultinanapproximateincrease/decreaseinthevalueofpublic-marketexposureof$482million(2014:$472million).



ot

he

r in

fo

rm

atio

n – a

lbe

rta

te

ac

he

rs

’ re

tir

em

en

t f

un

d b

oa

rd

b) Credit risk

Creditriskisthepotentialoflossshouldacounterpartyfailtomeetitscontractualobligations,orareduction inthevalueofassetsduetodiminishedcreditqualityofthecounterparty,guarantororthecollateralsupportingthecreditexposure.ThePlansareexposedtocreditriskthroughinvestmentinsecurities,securitieslending,balancesreceivablefromsponsorsandcounterpartiestoderivativetransactions.

InvestmentrestrictionswithinthePlanshavebeensettolimitthecreditexposuretosecurityissuers.Short-terminvestmentsrequirearatingof“R-1”orequivalent.Bondsordebenturesrequireminimumratingsof“CCC”orequivalentintheexternallymanagedportfolioand“BBB”fortheportfoliomanagedinternally.UnratedprivatedebtinvestmentsarerequiredtomeettheratingcriteriacomparabletoaBBBrating.Creditexposuretoanysinglecounterpartyislimitedtomaximumamountsandminimumratingsasspecifiedintheinvestmentpoliciesandguidelines.Fixed-incomeinvestmentsandover-the-counterderivativesexposedtocreditrisk,bycreditrating,isasfollows:

2015 2014

Investmentgrade(AAAtoBBB-) 94% 97%Speculativegrade(BB+orlower) 1% 2%

Unrated 5% 1%

c) Liquidity risk

LiquidityriskistheriskofthePlansbeingunabletogeneratesufficientcashinatimelyandcost-effectivemannertomeetcommitmentsandexpensesastheybecomedue.LiquidityrequirementsofthePlansaremetthroughincomegeneratedfrominvestments,employeeandemployercontributions,andbyholdingpubliclytradedliquidassetstradedinactivemarketsthatareeasilysoldandconvertedtocash.Theseinvestmentsincludemoney-marketsecurities,bondsandpublicly-tradedequities.

NOTE 11 CAPITAL

CapitalisthenetassetsofthePlans.InaccordancewiththeTeachers’ Pension Plans Act,theactuarialsurplusordeficitisdeterminedbyanactuarialfundingvaluationperformed,ataminimum,everythreeyears.TheobjectiveistoensurethatthePlansarefullyfundedoverthelongtermthroughthemanagementofinvestmentsandcontributionrates.InvestmentsarebasedonanassetmixthatisdesignedtoenablethePlanstomeettheir long-termfundingrequirementwithinanacceptablelevelofrisk,consistentwiththePlans’investmentandfundingpolicies,whichareapprovedbytheBoard.

ThePlans’surplusordeficiencyisdeterminedonthefair-valuebasisforaccountingpurposes.Howeverforfundingvaluationpurposes,assetvaluesareadjustedforfluctuationsinfairvaluestomoderatetheeffectofmarketvolatilityonthePlans’fundedstatus.

InaccordancewiththeTeachers’ Pension Plans Act,theactuarialdeficienciesasdeterminedbyactuarialfundingvaluationsareexpectedtobefundedbyAugust31,2027.



ot

he

r i

nf

or

mat

ion

– a

lbe

rta

te

ac

he

rs

’ r

et

ire

me

nt

fu

nd

bo

ar

d

NOTE 12 COMMITMENTS

TheBoardhascommittedtofundcertaininvestmentsoverthenextseveralyearsinaccordancewiththe termsandconditionsagreedto;asatAugust31,2015,thesumofthesecommitmentsequalled$1,730million (2014-$1,381million).

NOTE 13 NET INVESTMENT RETURNS AND RELATED BENCHMARK RETURNS

NetinvestmentreturnsandrelatedbenchmarkreturnsforthePlansfortheyearsendedAugust31areasfollows:

2015 2014

NetInvestmentReturn 8.3% 18.9%BenchmarkReturn 6.5% 18.4%

NOTE 14 COMPARATIVE FIGURES

Comparativefigureshavebeenreclassified,wherenecessary,toconformtothe2015presentation.


or iformaio arta ars’ rirm f oar - alberta education · or iformaio arta ars’ rirm f oar...

Documents