2012 – 2013leg-horizon.gnb.ca/e-repository/monographs/...5.4 4.9 4.2 Alternative Investments Absolute Return 1.2 1.1 1.9 Private Equity 1.1 0.9 0.9 2.3 2.0 2.8 Total Investments

2012 – 2013Annual Report

CONTINUING TO EXCEEDLONG-TERM INVESTMENT OBJECTIVES

BOARD OF DIRECTORS

CORPORATE OFFICERSJohn A. Sinclair Jan Imeson, CPA, CAPresident and Chief Executive Officer Chief Financial OfficerChief Investment Officer

Inge DesprésCorporate Secretary

CORPORATE LEADERSHIP TEAM John A. Sinclair James Scott, CFAPresident and Chief Executive Officer Vice-President Fixed IncomeChief Investment Officer

Dan Goguen, CA, FRM Jan Imeson, CPA, CAVice-President Private Markets Chief Financial Officer

Vice-President Finance and Administration

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

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

MEMBERS OF

CONTENTS

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

Corporate Mission ...................................................1

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

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

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

NBIMC’s Investment Beliefs ..................................6

Chairperson Letter..................................................7

CEO Letter to Stakeholders ...................................9

Pension Plan Governance .....................................13

Management’s Discussion & Analysis .................14

Compensation Discussion and Analysis...............24

Governance ............................................................34

Employee Activity in our Communities...............40

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

Public Interest Disclosure Act ..............................41

Detailed Unit Trust Performance Information ............................................................42

Financial Statements ............................................43Public Service Superannuation Fund...................46Teachers’ Pension Fund .......................................47Judges’ Superannuation Fund ..............................48Notes to the Financial Statements........................49Corporate Financial Statements ...........................81

Michael W. WaltonChair of the Board

Joel AttisVice-chair of the Board

Wiktor AskanasDirector

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

Corporate Profile

The New Brunswick Investment Management Corporation (NBIMC) is the trustee and investment manager for the pensionassets of over 51,000 members of the Public Service, Teachers’, and Judges’ defined benefit pension plans. It was formedin 1996 under the New Brunswick Investment Management Corporation Act by the Province of New Brunswick.

The primary mission of NBIMC is to increase the long-term value of the pension funds it manages and to assist the plansponsor in meeting the pension promise to its members.

To fulfill this mission NBIMC conducts the following activities:

• Acts as fund trustee. • Develops the investment policy for each fund.• Implements the investment policy for each fund.• Adds value by generating higher returns through active investment management net of organizational expenses.• Manages risks associated with the investment of the pension assets.• 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 $10.1 billion at March 31, 2013.

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.

NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATION 2012 - 2013 ANNUAL REPORT I 1

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 2012 - 2013 ANNUAL REPORT

INVESTMENTS BY PORTFOLIOAs of March 31, 2013

($ millions)

2013 2012 2011

Fixed IncomeNominal Bonds $ 945.0 $ 1,210.1 $ 1,409.5Corporate Bonds 386.2 142.1 -Short Term Assets 38.9 78.0 95.2

1,370.1 1,430.2 1,504.7

Public EquitiesCanadian 1,168.7 1,064.8 1,064.0US 808.4 679.2 546.4International 991.9 881.7 721.2

2,969.0 2,625.6 2,331.7

Inflation Linked AssetsReal Return Bonds 512.7 456.7 462.1Real Estate and Infrastructure 393.4 371.1 261.3

906.0 827.9 723.4

Alternative InvestmentsAbsolute Return 196.1 181.6 325.6Private Equity 174.9 150.7 145.0

371.0 332.2 470.7

Total Investments $ 5,616.1 $ 5,215.9 $ 5,030.4

Amounts may not add due to rounding


TOTALANNUALIZEDRETURNS(unadjusted)

One YearFour YearTen Year

9.10%10.93%7.90%

30 %

20 %

10 %

0 %

-10 %

-20 %

-30 %

Annual Nominal Returns Cumulative Annualized Returns

ANNUAL TOTAL FUND RETURNS – 2004 - 2013

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

25.51%

8.53%

16.05%

8.76%

0.76%

-18.43%

19.90%

10.42%4.83%

9.10%

PUBLIC SERVICEFiscal 2012-13Financial Highlights

ASSET MIX (As of March 31, 2013)NominalBonds 16.8%

ShortTerm 0.7%

CorporateBonds 6.9%

CanadianEquity 20.8%

U.S. Equity 14.4%

InternationalEquity 17.7%

InflationLinked 16.1%

Alternative 6.6%

12%

10%

8%

6%

4%

2%

0%

0.80%

0.70%

0.60%

0.50%

0.40%

0.30%

0.20%

0.10%

0.00%

Nominal return Real return, after inflation Value added

Ret

urns

Net

Val

ue A

dded

1 year 4 years 10 years

INVESTMENT PERFORMANCEFor the periods ended March 31, 2013


($ millions)

2013 2012 2011

Fixed IncomeNominal Bonds $ 793.0 $ 985.0 $ 1,147.7Corporate Bonds 283.5 113.2 -Short Term Assets 30.4 61.8 75.7

1,106.9 1,160.0 1,223.4

Public EquitiesCanadian 880.4 806.3 810.1US 621.1 523.1 420.0International 757.1 675.6 551.3

2,258.5 2,005.1 1,781.4


784.0 721.7 638.8


296.7 267.8 379.1

Total Investments $ 4,446.2 $ 4,154.5 $ 4,022.7




9.07%11.04%7.87%


30 %

20 %

10 %

0 %

-10 %

-20 %

-30 %



2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

24.97%

8.47%

15.67%

8.57%

0.83%

-18.24%

19.99%

10.41%5.21%

9.07%


ShortTerm 0.7%

CorporateBonds 6.4%


U.S. Equity 14.0%



Alternative 6.7%

12%

10%

8%

6%

4%

2%

0%

0.80%

0.70%

0.60%

0.50%

0.40%

0.30%

0.20%

0.10%

0.00%1 year 4 years


Ret

urns

Net

Val

ue A

dded

10 years


TEACHERS’Fiscal 2012-13Financial Highlights


($ millions)

2013 2012 2011

Fixed IncomeNominal Bonds $ 5.6 $ 7.2 $ 8.3Corporate Bonds 2.3 0.8 -Short Term Assets 0.2 0.5 0.6

8.2 8.5 8.8

Public EquitiesCanadian 7.0 6.3 6.2US 4.8 4.0 3.2International 5.9 5.2 4.2

17.6 15.6 13.6


5.4 4.9 4.2


2.3 2.0 2.8

Total Investments $ 33.4 $ 31.1 $ 29.5




9.09%10.93%8.13%


30 %

20 %

10 %

0 %

-10 %

-20 %

-30 %



2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

27.05%

8.89%

16.68%

8.76%

0.76%

-18.46%

19.89%

10.43%4.84%

9.09%


ShortTerm 0.7%

CorporateBonds 6.9%


U.S. Equity 14.3%



Alternative 6.8%

12%

10%

8%

6%

4%

2%

0%

0.80%

0.70%

0.60%

0.50%

0.40%

0.30%

0.20%

0.10%

0.00%1 year 4 years


Ret

urns

Net

Val

ue A

dded

10 years


JUDGES’Fiscal 2012-13Financial Highlights

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 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 funds under management is heavily influenced by boththe 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 present the following Fiscal 2012-13 Annual Report, which marks the conclusion of our seventeenth yearof successful operations.

The following report provides a detailed account of another solid year of long-term investment performance in a difficultinvestment environment. During the year, management was able to increase the total fund long-term annualized return toa higher rate than the year prior while also making strong inroads into the objectives outlined in our Strategic Plan. Mostimportantly long-term investment returns remain well in excess of what is required by the pension funds independentactuary.

The Board of Directors also remained very active on a number of initiatives during the year as outlined throughout thisreport. I would like to particularly point to the development of a new series of performance objectives that were createdduring the year in an effort to highlight the transparency and communication of our investment management activities.

Pension ReformIn May 2012, the Government of New Brunswick, through their Task Force on Protecting Pensions, published a backgrounddocument on pension reform. This document was followed by the introduction of a new Shared Risk Pension Model, aswell as amendments to the Pension Benefits Act legislation and regulations relating to the new model. The 2013-14Provincial Budget confirmed that the government views the shared risk pension model as the best alternative for public sectorpension plans including the Public Service Superannuation Plan.

NBIMC Directors are making every effort to ensure the Corporation is prepared to respond to any proposed changes thatmay impact the roles and responsibilities of our organization. NBIMC Directors and management look forward to sharingtheir investment experience to the process where warranted.

Throughout this reform process it is important to note that the Board will continue to work in the best interests of each ofthe pension funds under our management as per our responsibilities as their Trustee.

Appreciation of Dedicated ServiceI would like to recognize our Board for their efforts and support to the Corporation during the year, and provide a note ofappreciation to a number of our Directors whose terms expired during the fiscal year.

The terms of Ms. Elaine Albert and Mr. Gaston LeBlanc expired in June of 2012, while the terms of Mr. Earl Brewer andMr. Marc-Antoine Chiasson expired at fiscal year end. Each of these Directors did not wish to reoffer their services andhave therefore concluded their participation. We sincerely thank these retiring Directors for their contribution during theirterms. NBIMC benefits from the input of individuals in the business community and each of these Directors havecontributed greatly to our success.

Ms. Cathy Rignanesi and Mr. Richard Speight’s terms also expired at year end and they were subsequently re-appointed toanother three year term. We are also pleased to welcome back Mr. Wiktor Askanas to our Board, along with acknowledgingthe recent appointment of Ms. Patricia LeBlanc-Bird. Service on the Board continues to be a major responsibility and asignificant commitment which is greatly appreciated.

I would also like to provide a special note of appreciation to Gilles Lepage whose term as Chairperson also expired at fiscalyear end. Gilles was a founding NBIMC Director who joined the Board in 1996 and became Chairperson in 2006. TheCorporation’s long-term investment success can be largely attributed to the strong independent governance model that hasbeen developed and led by Directors with long serving terms of service such as Gilles.


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. We are very pleased that the management teamcontinues to provide long-term investment returns in excess of both actuarial funding requirements and policy benchmarksin an ongoing difficult economic and market environment.

Sincerely,

Michael W. WaltonChairperson

June 4, 2013Fredericton, New Brunswick


CEO Letter to Stakeholders

The Corporation’s investment program continues to perform very well having surpassed both our primary investmentobjective of exceeding the long-term actuarial returns required to fund the pension plans under our management and oursecondary investment objective of producing value added returns that exceed our investment policy benchmarks.

Our investment program produced a 9.08% overall annual return for the pension plans under our management during thefiscal year with a lower management expense ratio than the year prior. This return also exceeded our investment policybenchmarks by 0.81% before investment management costs.

NBIMC’s solid return can be directly attributed to our continued focus on our clients’ specific investment requirements andthe risk controlled long-term focus of our investment strategy. Most importantly our annualized long term nominal andreal investment returns (the return after adjustment for inflation), and after all investment management expenses,remains well above the return required as set out by the independent pension plan Actuary.

Fiscal 2012-13Our investment portfolios continue to remain well positioned to take advantage of the relatively slow economic reboundthat has occurred since the depths of the Fiscal 2008-09 financial markets crisis while at the same time providing protectionagainst interim periods of increased volatility and market declines.

Investment policies were also revisited by our Board and management during the year upon receipt of new actuarialinformation, and adjustments were instituted to ensure that we continue to generate the long-term investment returns requiredby our pension plan clients with similar risk characteristics.

The fiscal year started out in a challenging fashion that was somewhat similar to the prior two years. The first quarter ofthe fiscal year presented a challenging investment environment due to revisited sovereign debt concerns in Europe, fiscalchallenges in the U.S., and continued anxiety due to slower rates of global economic growth, particularly in China. Globalmarkets rebounded strongly in the second quarter by what looked to be the coordinated support of global central banks andthe particularly strong words of support to the Euro currency that came from the head of the European Central Bank. TheU.S. Federal Reserve Board provided additional support to risk assets in the third fiscal quarter of the year by announcingthey will continue to provide supportive monetary policy efforts until explicit inflation and employment targets are met. Theconclusion of the U.S. election process and signs of some type of fiscal compromise also supported markets into the calendaryear end. Financial markets ended our fiscal year very strong as many asset class levels approached record high returnsthanks to the continued low interest rate environment and strong corporate earnings growth.

As noted earlier, our overall gross nominal rate of return for the year ending March 31, 2013 was 9.08% while our long-term annualized return since NBIMC’s inception in 1996 is now at 6.79%. Most importantly our annualized real return (afteradjusting for inflation) since inception is now 4.75%. This real return is now 0.75% per annum above the long-term 4%real return requirement that the pension funds’ independent Actuary has continued to believe is necessary to fund the pensionplans under our management.



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

Annualized Returns (as of March 31, 2013)

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

1-Year Performance 7.83% 9.08%

4-Year Performance 9.23% 10.98%

Since Inception of NBIMC (17 years) 4.75% 6.79%

Net assets under management increased to an all time high of $10.1 billion from $9.4 billion in the prior year, as each ofour asset classes provided positive returns for the year. This increase in assets resulted from $829.9 million in net investmentearnings, $166.6 million in special funding payments from the plans’ sponsor, and net pension payouts of $306.2 million.Management also successfully added approximately $79.3 million of investment earnings through active portfoliomanagement activities versus their benchmarks, which provided the funds with approximately $66.9 million in additionalnet earnings after covering the $12.4 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. Our investment strategy has been particularly designed to protectagainst periods of weaker public equity returns and higher financial markets volatility, and has been performing accordingly.

We also continue to have ample liquidity within our investment portfolios to fund pensioner payment obligations. Fiscal2012-13 net payment obligations of $306.2 million against a total portfolio asset value of $10.1 billion illustrates our abilityto make pension payments well into the future.

Important AccomplishmentsNBIMC achieved a number of important accomplishments during the year:- As noted above, our long-term investment performance continues to exceed the actuarial real return target requirementfor the pension plans under our management.

- Management continues to add relative value added returns, after covering all expenses, for the portfolios through activeinvestment management activities.

- We concluded a full Asset Liability study for the Teacher’s Pension Act (TPA) based on actuarial review informationreceived in 2012. Related Investment Policy changes were approved by the Board to continue to provide the long-terminvestment returns required in a risk controlled fashion. Based on this work the Board of Directors also approvedsimilar pro-rata changes to the Investment Policies for the Public Service and Judges’ Funds.

- Management developed and implemented a new Canadian low volatility publicly traded equity portfolio, and furtherdeveloped the corporate credit portfolio that was deployed during the prior year.

- The Board of Directors approved a revised 2012-2017 Human Resources Strategic and Succession Plan.- We assisted the Minister of Finance by addressing recommendations arising from his department’s structural reviewof NBIMC’s investment performance and cost efficiency.

- The Board of Directors reviewed the NBIMC Enterprise Risk Management Framework, including the determinationof inherent risk in each risk category, mapping of risk mitigation activities and the development of a residual risk ratingconsensus for planning and monitoring purposes.

- Continued Board governance improvement initiatives arising from the prior year’s Board self-assessment process.- Developed and implemented a new stress testing protocol aligned with best practices adopted by the Office of theSuperintendent of Financial Institutions for federally-regulated pension plans.

- We continued to expand our direct private markets investment activity on both a local and global basis.- In coordination with the Office of the Auditor General, we provided a follow up report with respect to their 2006Governance and 2008 Investment Performance and Cost Analysis audit recommendations.

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

The NBIMC AdvantageAs noted in our Annual Report last year, both a global and more local debate continues in regards to the sustainability ofDefined Benefit Pension Plans. Actuarial life expectancy increases have resulted in Defined Benefit Plans having to revisitand protect the sustainability of each plan’s design by:• Ensuring that they include the use of realistic investment assumptions.• Having thorough risk management capabilities.• Providing an alignment of all participant interests.• Operating in a cost effective manner.

The Government of New Brunswick has continued to work with their Pension Task Force on potential changes that mayimpact the pension plans whose assets we manage. Irrespective of the outcome of this initiative we continue to feel that adedicated investment manager such as NBIMC continues to bring a number of benefits to the management of pension orother fiduciary based assets as follows:• NBIMC provides a well structured, experienced, independent and transparent fiduciary based governance process. • We create specific investment programs that are focused on providing dependable future retirement income for eachpension plan and stability in employer and employee contributions.

• Our corporate goals and objectives are directly aligned with the best interests of the pension plan stakeholders.• We provide a strong level of oversight through our Enterprise Risk Management Framework and asset safekeepingcapabilities.

• The Funds receive cost effective access to professional fund management services gained through the economies ofscale realized by pooling member plan assets. The majority of our lower investment management fees are also deployedat home in New Brunswick versus other international jurisdictions.

We expect that these advantages will continue to help keep the pension plans under our management on track in fulfillingtheir goals into the future.

Outlook For the fourth straight year, since the Fiscal 2008-09 financial markets crisis, we can reiterate that we continue to witnessa general improvement in financial market conditions. The consequences of this improvement however is that both equityand debt markets are at very high levels which makes investment allocation decisions challenging. The low level of interestrates provide a particular concern and challenge for the future, however markets also generally reflect a belief that anyeventual interest rate increases should occur in a measured fashion over a long time period. A particularly noticeable factorthat has been observed over the year has been the general reduction in both the actual and implied market volatility to pre-crisis levels.

The economy continues to slowly recover in most regions and corporate earnings remain strong. Particularly encouraginghas been the reports of growth in the U.S. economy including their housing market and related businesses, and theirdeveloping energy independence. Low rates of inflation have also continued to provide a supportive backdrop to investmentactivity.


While these market conditions are encouraging, we do not discount the fact that market gains continue to be primarily dueto the continued action of the world’s governments and central banks to provide very cheap liquidity and to a lesser extentmore limited economic stimulus. High unemployment levels and limited corporate revenue growth continues to negativelyaffect market sentiment at times, while political challenges also remain in many jurisdictions as incumbent leaders have feltthe negative effects of their electorates displeasure with austerity programs.

Once again this year we expect to conduct a full Investment Policy review for the two larger plans under our managementupon receipt of 2012 actuarial reports. The Plan Sponsor may also provide direction with respect to more significant changesbrought about through the Government’s pension reform initiative. In either case our review will be conducted to ensurethat we can prudently continue, in a risk controlled fashion, to meet each plan’s long-term actuarial return goals, given themarket challenges noted above.

Finally and consistent with our past annual letters, we remain confident that we have the strategy, people and processes inplace that can continue to meet the long-term goals of our stakeholders.

Sincerely,

John A. SinclairPresident and Chief Executive OfficerChief Investment Officer

June 4, 2013Fredericton, New Brunswick


Pension Plan Governance

The Province of New Brunswick is the Plan Sponsor for three legislated pension plans:• New Brunswick Public Service Superannuation Act; • New Brunswick Teachers’ Pension Act; and • Provincial Court Judges’ Pension Act.

The Plan Sponsor is responsible for pension plan design, which includes setting the levels of contribution 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 and is appointed as Trustee forthe pension fund assets of these three public sector pension plans.

As Trustee of the funds under management, NBIMC is responsible for development of an Investment Policy that meets theIndependent Actuary’s required long-term rate of return and implementing the Investment Policy within a risk-controlledframework.

NBIMC uses the specific pension plan cash flow data provided by the Independent Actuary as well as long-term marketexpectation assumptions to model the risks and returns of potential investment strategies. Assumptions as to economicfactors, geo-political risks and demographic trends are also considered. From this work, NBIMC develops recommendationsfor an asset mix which are reviewed with the Board of Directors. The Board decides on the appropriate asset mix anddelegates to management its implementation.

NBIMC also receives the employers’ and employees’ pension contributions collected by OHR and deploys them accordingto the Investment Policy established by the Board. NBIMC also transfers sufficient funds to OHR to fund the pensionbenefit payment requirements.


Management’s Discussion & Analysis

Management’s Discussion & Analysis (“MD&A”) is provided to enable the reader to interpret the material trends, theresults and 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.

Asset MixThe development of the asset mix for each fund is highly dependent on the actuarial liability profile of each underlyingpension plan. The respective asset mix is designed to provide annualized long-term returns that will exceed the actuarialreturn requirement for each plan, with the least amount of risk.

During the year, NBIMC had received an actuarial valuation for the Teachers’ Pension Plan (“TPA”) and the Public ServiceSuperannuation Plan (“PSSA”) as at April 1, 2011. NBIMC also subsequently received supplemental preliminary 2012actuarial estimates, which indicated a significant negative change to their liability characteristics and funding positions. Afterreviewing these valuations, the Board confirmed its belief that it would not be prudent to assume any additional risk todeliver a return other than the required actuarial investment return of 6.6% before inflation (4% real return after inflation)in an effort to try to address the increased liabilities in the short term.

During the review process, NBIMC also received a presentation from the Independent Actuary concerning the CanadianInstitute of Actuaries’ proposed adoption of revised mortality assumptions that reflect the longer life expectancy ofCanadians. The use of these mortality assumptions led to the significant change in the funding status of the PSSA and, toa somewhat lesser extent, the TPA as outlined in the supplemental estimates.

Although the detailed actuarial valuations with these revised mortality assumptions had not yet been obtained, the Boardconcluded that the asset mix and Investment Policy for each Fund warranted some interim adjustment, particularly wherebysuch adjustments could enhance return expectations with the same expected risk of the current policy. It is expected thatfurther adjustments may be required once an actuarial valuation that incorporates these new assumptions is finalized.

The resulting asset mix changes made can be summarized as follows:- A 3% reduction in the nominal government bond weight in favour of a 3% increase to corporate bonds. This shift wasconducted to increase long-term expected returns while also lowering the overall fixed income asset class duration inan attempt to provide protection against possible future interest rate increases.

- A further 2% reduction in the nominal government bond weight in favour of a 2% weighting in a new portfolio, theNBIMC Low Volatility Canadian Equity Fund.

- A transfer of 1% of the equity weightings from each of the U.S. and International Equity passive market capitalizedindex strategies to the respective low volatility equity strategies to take advantage of the expected lower annual returnvolatility.

The Board of Directors approved these recommendations and detailed copies of the related Investment Policy Statementsare available from the governance section of our website (www.nbimc.com).


Investment PerformanceThe two main objectives, in terms of investment performance that NBIMC focuses on are the actuarial return requirementsof 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 has been determined necessary to appropriately fund each pension plan. Our overall nominal return of 9.08% and realreturn of 7.83% for the fiscal year was well above our nominal and real return actuarial hurdles for the year of 6.60% and4.00% respectively, but more importantly, remained above their respective actuarial targets over the long term.

In a somewhat unusual fashion, each of our main investment asset classes provided a positive return during the year asillustrated in the Table below. The majority of our investment performance during the year came about from the strongperformance in our public equity portfolios. The U.S. and International EAFE portfolio produced particularly strong doubledigit returns due primarily to the continued strong levels of corporate earnings, supportive actions from each of the region’sCentral Banks, and the benefit of a slightly weaker Canadian dollar. Particularly encouraging was the results of the lowvolatility portfolios that we added to our investment strategies last year. These strategies are typically expected to outperformstandard market capitalized indices in weaker periods, however during the year our U.S. and EAFE low volatility strategiesactually outperformed the general market during a relatively strong period for equity returns.

Fiscal 2012-13 Rates of Return, calculated in Canadian Dollars

Portfolio BenchmarkAggregated Asset Class Return Return

Fixed IncomeNominal Bonds 4.13 % 3.86 %Corporate Bonds 6.29 6.32Short Term Assets 1.47 1.02

Public EquityCanadian 6.67 6.11United States 15.84 15.84International 13.66 13.12Low Volatility United States 22.67 15.84Low Volatility International 18.59 13.12

Inflation Linked AssetsReal Return Bonds 2.35 2.09Real Estate / Infrastructure 13.22 13.19

Alternative AssetsAbsolute Return 3.18 1.02Private Equity 10.10 14.14

Total Investment Portfolio 9.08 % 8.27 %

*Note:Detailed unit trust fund performance information is provided in a section at the end of this Annual Report (page 42).


Canadian equity market returns while positive, underperformed international equity markets due to the impact of lowerenergy and material prices on the large proportion of related companies in the Canadian market index. Our private equityportfolios produced solid returns as well during the year, as managers reported brisk company realization and refinancingactivity. We expect this performance trend to continue into the next fiscal year as the private markets’ somewhat slowervaluation process catches up to the more recent gains observed in the public equity markets.

Real estate and infrastructure returns were also strong during the year as they remained an attractive investment alternativeto many investors in the current low interest rate environment. We were also pleased to add a number of new real estateand infrastructure assets to our direct investment program during the year, which we expect to provide the portfolio withsolid long-term returns well into the future.

NBIMC’s fixed income investments all produced positive returns in a very low interest rate environment. The performanceof our new corporate bond portfolio was particularly encouraging as it outperformed each of the other fixed income assetclasses during the year. While we expect fixed income returns to remain challenging in the year ahead we continue torecognize the risk mitigation and liability matching characteristics these investments provide as part of our overall strategicinvestment policy design.

The primary performance objective, as outlined by the plan actuary, is to achieve a long term real return (i.e. return afterinflation) objective of at least 4%. This is the most significant hurdle that we measure our performance against and is theprimary 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 since NBIMC’sinception is now 4.75% which 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 management costs,and subsequently targets an additional 42 basis points (0.42%) per annum to each fund. A basis point is 1/100ths of a percentage.

Our active management activities added 81.3 basis points of gross value and 68.6 basis points of net value, or approximately$66.9 million, after covering all investment management.

Our longer-term four year average annual value added return, net of costs, was approximately 31.3 basis points per annumor approximately $105.3 million in additional value over the four year period. The four-year term remains the mostsignificant term used to measure our active management performance and is selected to represent a more consistent longerterm measure.


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 = 4.75% / 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 2012-132011-12

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

Overall Total Funds

We are very pleased that we were able to achieve additional investment value added in excess of both investment policybenchmarks and our long-term target during the fiscal year. As discussed in prior Annual Reports, NBIMC’s main activeinvestment activity is to differentiate between the securities in specific companies that we find attractive, versus those thatwe do not. This differentiation activity became very challenging during the financial markets crisis, as many investorsheaded to the perceived safety and liquidity of government securities and unfortunately did not necessarily care what othersecurities they were selling in the process. During this period of uncertainty we purposely reduced our active investmentrisk which was reflected in our active performance. Our gross value added during that period remained positive althoughlower than our targeted levels.

Since the financial markets crisis we have found that markets have continued to slowly normalize, although with shortinterim periods of volatility. These conditions have allowed us to increase our active investment risk, which has alsosubsequently led to improved performance in more recent years.

Our expectation continues 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.

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, operating costs and excess (or net)value added performance.

NBIMC also prepares and presents Schedules of Composite Performance Results for each of the pension funds undermanagement. These audited schedules are prepared in compliance with the Global Investment Performance Standards(GIPS®) and are available on our website, www.nbimc.com, when completed.


90

80

70

60

50

40

30

20

10

0

-10

-20

Bas

is P

oint

s (1 /

100th

%)

Gross Value Added Costs Net Value Added

Adding Value after Covering Operating Costs

F 2003-04 F 2004-05 F 2005-06 F 2006-07 F 2007-08 F 2009-10 F 2010-11 F 2011-12 F 2012-13F 2008-09

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 2012-13 fiscal year in order to provide a summaryof 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, as outlined above by the plan actuary, is to achieve a long term realreturn of at least 4% per annum.Our second investment performance objective is to add value, above the various asset class benchmarks in eachfunds respective investment policy, through active management strategies. This added value is expected to first coverall of NBIMC’s operating costs and subsequently targets an additional 42 basis points (0.42%) per annum to each fundover the long term. It is important to note that this target has been selected to represent a first quartile type achievementamongst similar investment managers.

The Corporation has also developed a series of other key performance indicators, as continuous performance objectives,that correspond to our 2011-2016 Strategic Plan. These indicators have been developed based on discussions andconsultations with stakeholders such as the Governor of the pension plans trusteed by NBIMC, the Province’s Board ofManagement, staff of Management Board and the Office of Human Resources, various plan member advisory groups, anddirect plan member feedback.

These indicators are being monitored on a quarterly basis by the NBIMC Board and are reported below for the current2012-13 fiscal period.

Primary Investment Performance Objectives

Objective Long-Term F2012-13 4 Year AnnualizedTargets Actual Annualized Since Inception

Real Return (after inflation) >= 4.00% per annum 7.83% 9.23% 4.75%

Nominal Return >= 6.60% per annum 9.08% 10.98% 6.79%

Secondary Investment Performance Objective

Objective Long-Term F2012-13 4 Year AnnualizedTargets Actual Annualized Since Inception

Net Relative Return (after all investment management expenses) >= 42 bps per annum 68.6 bps 31.3 bps (3.7) bps


Continuous Performance Efficiency Objectives

Objective Targets F2012-13 4 YearActual Annualized

Trade-Matching Efficiency:Securities Custodian Industry avg + 2.5% 93.5% 90.9%Prime Broker #1 Industry avg + 2.5% 95.2% 89.0%Prime Broker #2 Industry avg + 2.5% 94.9% 88.3%

Industry Average 88.8% 87.1%

Budget Efficiency(excluding performance incentives) 100% 86.9% 90.1%

Absenteeism (%) <= 2% 1.3% 1.5%

Employee Turnover (#) <= 3/yr 2 2.25/year

IT System Availability 99% 99.9% 99.9%

Risk ManagementNBIMC and the Pension Funds face a number of risks in attempting to fulfill their mandates. Our disciplined risk managementfocus is a critical part of NBIMC’s investment management activities. Risk management is a key element in helping the PlanSponsor provide stability in both pension plan contributions and benefits, and making sure that our investment managementactivities do not bring undue risk to the Plans’ assets. All investment decisions are made in a risk context that not only focuseson the expected returns of our activities but also on the potential gains or losses that could be realized by those activities.

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. In this context, the Board has communicated guidelines to management’s investment discretion in the Statements ofInvestment Policy for each Pension Fund. These Statements of Investment Policy are available on the NBIMC website.

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 & 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 the following areas:• Private Markets;• Pension Contributions, Benefits and Expenses; • Information Technology Penetration Testing; and• Portfolio Management System Review.

These reviews did not uncover any significant weaknesses; however, they have been helpful in fine-tuning our processesto increase efficiency and effectiveness.


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 and CEO of areas of emerging risk.

In fulfilling this mandate, the ERMC reviews:• the 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; and• 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; and• 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; and• monitors adherence to IT policies and processes.

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”)


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; and• 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 pay the pension promise.Lower costs result in higher comparative net returns and help to maximize the assets that are available to pay pensionbenefits.

Investment management costs are influenced by many factors. Generally, industry cost comparisons prove that it is moreefficient 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 Pension Funds’ investment management costs, in millions of dollars, for the year ended March 31, 2013 consist of thefollowing:

2013 2012

NBIMC Operational Expenses $ 8.9 $ 8.3

Third Party Service ProvidersInvestment counsel fees 2.8 3.3Securities custody - internally managed 0.6 0.6

- externally managed 0.1 0.1

$ 12.4 $ 12.3

Total Assets Under Management $ 10,095.7 $ 9,414.8

NBIMC manages approximately 87% of the assets of the Pension Funds internally, using our investment managementprofessionals and technology systems that permit global trading activity from our location in Fredericton, New Brunswick.The costs incurred to manage investment strategies internally, measured over average assets, were 0.114% or 11.4 basispoints (bps) for the year ended March 31, 2013 (2012 - 11.6 bps). NBIMC has outsourced approximately 13% of the assetsunder management where access to the desired investment opportunities or specific strategy expertise is not availableinternally. The cost of managing investments through our external investment managers, also measured on average assets,was 20.6 bps for the year ended March 31, 2013 (2012 - 22.8 bps). In total, investment management costs wereapproximately 12.7 basis points of average assets under management during the year, versus 13.3 last year.

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. CEM’s calendar 2011 surveycompared our costs against the average investment management costs for 89 participants in the Canadian universe of definedbenefit peer pension funds, responsible for an aggregate of $947 billion assets under management. Through thisbenchmarking survey, we believe that our costs are approximately 14 basis points lower than our peers. This cost differentialmeans that in the year ended March 31, 2013 the Pension Funds were able to retain over $13.7 million due to our low costadvantage. This cost advantage has been a cornerstone of our service delivery since our inception seventeen years ago. Wewill be participating in the 2012 CEM survey when available.

In addition to investment management costs, the Pension Funds incur administrative expenses paid to the Plan Sponsor forcosts associated with the Independent Actuary’s periodic actuarial valuations, and the costs to administer plan memberentitlements and payments of benefits to plan beneficiaries. These costs are reported on the Statement of Changes in NetAssets Held in Trust in the accompanying audited financial statements for each Pension Fund.


Future Accounting Policy ChangesInternational Financial Reporting Standards

The Accounting Standards Board of the Canadian Institute of Chartered Accountants deferred the mandatory InternationalFinancial Reporting Standards (“IFRS”) conversion date for Investment Entities to years beginning on or after January 1,2014. The Pension Funds meet the definition for Investment Entities. This deferral accommodated the timing of changesto IFRS that permit an exemption for investment funds from following consolidation accounting in favour of fair valueaccounting for investees. Accordingly the Pension Funds expect to adopt IFRS for their fiscal year ending March 31, 2015.Except for the current requirement under IFRS to follow consolidation accounting, management has not identified anyother impacts to the financial reporting of the Pension Funds upon conversion to IFRS.

Public 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 examiningrevenue recognition standards and accounting for related party transactions, among others. Management continues tomonitor 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 investment management 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 ServiceSuperannuation Plan and retirementallowance*

Range:Threshold

TargetMaximum

Full-time staff. Full-time staff.Full-time staff with a minimum of fiveyears employment.

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

*Retirement allowance only for employees hired prior to September 2011

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 uponthe recommendations made by the Human Resources & 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 five directors, four of whom are independent and one of whom is an ex officio director. TheCommittee meets at a minimum quarterly. External human resources consultants may be used to assist the Committee withfulfilling 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 and recommendation to the Board for approval of the year-end incentive compensation pool for eligibleemployees.

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 pension plan stakeholders.

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 financial market crisis to encourage globalfinancial institutions 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 withthe FSB 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 to pension

stakeholders' 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 pension plan stakeholders’ interests. Asignificant portion of the performance 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.


Establish targetcompensation levels

Set target compensationmix and pay at-risk

Establish performanceobjectives

Evaluate performanceagainst objectives

Determine performance-based compensation awards

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) and 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, as well as the weighting to be applied to each factor.

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 23. 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 pension fund 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.

For employees hired prior to September 1, 2011, NBIMC provides a retirement allowance with a minimum vestingrequirement of five years of service that pays five working days of salary for each full year of continuous employment upto a maximum of one hundred and twenty five working days, calculated on the level of salary at time of retirement ortermination without cause. The Board of Directors has decided to discontinue this benefit effective April 30, 2013. Paymentof accrued benefits is expected to be made in the current fiscal year in an amount of approximately $842,000 (dollars).

In addition, all full-time employees participate in a defined benefit pension plan pursuant to the Public ServiceSuperannuation Act (“PSSA”). The PSSA provides for a pension upon retirement equal to 2% of the average annual salaryfor the five consecutive years of highest salary, multiplied by the number of years of pensionable service. The plan isintegrated with the Canada Pension Plan at age 65 and is indexed for inflation to a maximum of 5%. The plan requires afive year vesting period.

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 the prior year, 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 in order to provide better alignmentwith recent valuation changes in accounting standards and to reflect the more mature nature of NBIMC’s private equityportfolio. The one year investment results have a relatively lower weighting relative to four year results to reinforce theimportance 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 2012-13NBIMC’s investment program had a very successful year in Fiscal 2012-13 as measured by a number of annual and longerterm four year investment performance metrics:• NBIMC’s total fund real return (after adjusting for inflation) was 7.83% during Fiscal 2012-13. This return, alongwith the annualized 9.23% four-year, and 4.75% since NBIMC inception real returns continue to remain well in excessof the long-term 4% per annum real return requirement that has been set out by the pension funds’ independent Actuary.

• The total fund nominal return in Fiscal 2012-13 was 9.08% which represented $843.2 million in gross earnings fromthe overall investment program during the year. The longer term four year annualized return to the end of the periodwas 10.98%, which represented a cumulative $3.5 billion of investment earnings.

• Relative returns (net of all expenses) were 0.68% higher than the overall Investment Policy benchmarks during theyear. These excess investment returns resulted in an additional $66.9 million of active investment earnings during theyear, and have resulted in a total of $105.3 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) F2013 F2012

Salaries and benefits $ 4,574.4 $ 4,767.0

Performance incentives:

AIP – net investment relative performance $ 564.8 $ 246.8

AIP – individual performance 345.3 298.8

Total AIP 910.1 545.6

LTIP 818.7 360.4

Total performance incentives $ 1,728.8 $ 906.0

Base Salaries and Benefits

For the year ended March 31, 2013, and after consideration of the continuing low inflation environment, the Board approveda 2% overall base salary increase. The Board also approved the addition of two new full-time positions during the year: aManager of Operations to assist in the oversight of fiduciary and investment accounting processes and a ProgrammerAnalyst to assist in the development and maintenance of critical business systems. Despite these additions, NBIMC losttwo investment professionals during the year to other investment management organizations which more than offset theeffects of the new positions and the base salary increase during the year.

Compensation of key management personnel is discussed in note 8 to the Pension Fund financial statements (see page 80).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 pensionplan stakeholders, including an appropriate balance between maximizing long-term returns and minimizing risks. Ourinvestment performance with respect to incentive compensation can be generally summarized in two categories: (i) long-term net relative investment returns versus benchmarks, and (ii) long-term nominal total fund portfolio returns and otherbusiness 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 (dollars). 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:

(ii) Long-Term Nominal Total Fund Returns:

Annual Incentive Plan Overview

The AIP component of $910.1 consists of both an investment performance component and a business plan achievementcomponent.

The AIP related to the investment performance component was $564.8. One quarter of this component is based on theone year net value added result and the remaind er is based on the four year annualized net value added. The one year netvalue added result was 68.6 bps, and the four year annualized net value added result was 31.3 bps. A basis point is 1/100thof one percent.


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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 2012-2013F 2011-2012F 2010-2011

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

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

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 Year

Net Value Added Percentage of Target(bps) (%)

2009-10 5.2 12.5

2010-11 21.7 51.7

2011-12 16.8 39.9

2012-13 68.6 163.2

Annualized Four Year 31.3 67.7

The AIP related to business plan achievements is $345.3 for the year ended March 31, 2013. This component is basedon an achievement factor of 1.45 times overall target approved by the Board of Directors, compared to an achievement factorof 1.25 for the year ended March 31, 2012.

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 1). 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.

Achievement of the 4% long-term real return (after adjusting for inflation) required by the Independent Actuary of thepension plans in a risk-controlled fashion is NBIMC’s primary investment performance objective and accounts for thelargest weighting proportion. As noted above, the overall total fund real return was 7.83% in Fiscal 2012-13, an annualized9.23% on a four-year basis, and most importantly 4.75% per annum since NBIMC’s inception in 1996.

Key Goals F2013 Weighting Achievement

To advance governance, management and organizational effectiveness. 20% Above expectations

To exceed client long-term investment objectives through prudent asset allocation and risk management strategies. 50% 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. 5% Above expectations

To support effective and efficient information technology solutions. 15% Above expectations


In establishing the achievement factor, the Board considered the achievement of key performance indicators associatedwith each of the five key goals (see pages 32-33) as well as the following accomplishments:

Key Goals Fiscal 2012-13 Accomplishments


To advance governance, management and organizational effectiveness.• Assisted the Minister of Finance by addressing recommendations arising from his structural review ofNBIMC’s investment performance and cost efficiency. This included:o Publicly posted upcoming director vacancies, coordinated an ad-hoc NBIMC Director NominatingCommittee, evaluated expressions of interest received against a Board skills matrix andrecommended appropriate candidates to the Minister;

o Coordinated a competitive Compensation Review for all positions with recommendations approvedin February 2013 that balance competitiveness and cost efficiency;

o Developed our new client capabilities to provide a platform for other public sector pools of capitalto access our cost effective investment management services;

• Hosted an internally developed Board education and development program including a one day sessionas well as a series of one hour seminars throughout the year covering risk management strategies,operational structure, investment performance reporting and incentive plan design topics;

• Assisted the Board with a focused review of the Enterprise Risk Management Framework, includingdetermination of inherent risk in each risk category, mapping of risk mitigation activities anddevelopment of residual risk rating consensus;

• Enabled further Board governance improvement initiatives arising from prior year’s Board self-assessment process;

• Implemented annual internal control reporting to Audit Committee;• Continued focus on evolving accounting standards in preparation for conversion to InternationalFinancial Reporting Standards, including participation with peer group’s efforts to influence standard-setting decisions;

• Completed triennial review of all Board policies.

To exceed client long-term investment objectives through prudent asset allocation and risk management strategies.• Successfully generated long-term investment returns in excess of those required by the IndependentActuary of the pension plans in a risk-controlled fashion;

• Completed two new asset liability studies upon receipt of the April 1, 2011 actuarial valuations,resulting in recommendations for asset mix changes to the applicable Investment Policies;

• Implemented a new Canadian low volatility equity strategy designed to respond to the current lowinvestment return environment, as well as adjusted asset class weights resulting from the asset mixdecisions noted above;

• Continued to produce strong nominal investment returns in a volatile market environment:o Long-term since inception annualized real returns continue to exceed actuarial target;o Long-term risk adjusted returns continue to exceed median peer pooled fund survey data;

• Developed and implemented a new stress testing protocol aligned with best practices adopted by theOffice of the Superintendent of Financial Institutions for federally-regulated pension plans;

• Continued to monitor opportunities for applying Liability Driven Investment principles while expandingprivate equity, direct private real estate and infrastructure opportunities.

To maintain, develop, and attract a highly-skilled and experienced team of investment management professionals.• Completed an update of the Human Resources Strategic Plan, including organization structure changesand an updated Succession Plan;

• Supported ongoing employee professional development initiatives.


To strengthen and expand stakeholder communications and relationships.

To support effective and efficient information technology solutions.

• Continued to develop opportunities for increased stakeholder and shareholder interactions in accordancewith Strategic Communications Plan;

• Active speaker and participant in a number of local and national investment industry conferences;• Active member and Board participant in a number of local and national investment industryorganizations.

• Executed on five year Information Technology Strategic Plan including:o Assessment of portfolio management system requirements and alternatives; o Implementation of full Windows Server 2008 environment;o Upgrade of all network firewall equipment, including post-implementation security penetrationtesting;

o Upgrade of internet website infrastructure.

Long-Term Incentive Plan Overview

The LTIP component is $818.7 for the year ended March 31, 2013. One quarter of this component is based on the one yearnet value added result and the remainder is based on the four year annualized net value added. The one year net valueadded result was 68.6 basis points (bps), and the four year annualized net value added result was 37.8 bps

Four year LTIP results differ from the four year AIP results primarily due to the LTIP’s inclusion of the sale of one NewBrunswick-based investment to a strategic global purchaser during Fiscal 2011-12 which resulted in a significant realizedgain in that year as well as the ensuing three years.

A summary table of the one year value added results used to determine the four year cumulative net value added LTIP resultis as follows:

One Year

Net Value Added Percentage of Target(bps) (%)

2009-10 6.2 14.8

2010-11 32.5 77.4

2011-12 41.2 98.0

2012-13 68.6 163.2

Annualized Four Year 37.8 90.0

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 a car 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, 2013 was $132.9 (2012 - $124.9) plus travel and accommodation reimbursements of $13.8 (2012 - $14.6).

Key Goals Fiscal 2012-13 Accomplishments

Governance

Corporate GovernanceAs a Crown corporation, NBIMC is accountable to the Crown Corporations Committee of the Legislative Assembly.NBIMC most recently appeared before the Crown Corporations Committee in January 2012 to present and discuss itsobjectives and performance results for the fiscal year 2010-2011.

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 Trustee for the funds undermanagement. Board members do not represent any specific stakeholder interest. The Board ensures that all of NBIMC’stransactions are conducted on a purely commercial basis, and that decisions and actions are based on sound businesspractices.

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 &Compensation 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 2012-13:

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

Gilles Lepage 7/8 4/4 4/4 2/3Elaine Albert² 4/4 1/1 n.a. n.a.Wiktor Askanas³ 4/4 2/2 n.a. 1/1Joel Attis 7/8 n.a. 4/4 3/3Earl Brewer² 5/8 n.a. n.a. 3/3Marc-Antoine Chiasson² 6/8 3/4 n.a. n.a.Gaston LeBlanc² 3/4 1/1 n.a. n.a.Ronald Maloney 8/8 n.a. n.a. 3/3Cathy Rignanesi 8/8 4/4 4/4 n.a.Richard Speight 8/8 n.a. 4/4 n.a.Reno Thériault 8/8 n.a. n.a. 3/3Michael Walton 6/8 n.a. 2/4 2/3

¹ The Board of Directors also includes three ex-officio members: the President and CEO of NBIMC, the Deputy Minister of Finance (non-voting), andthe Vice-President of Finance of the New Brunswick Power Holding Corporation.² term expired in the fiscal year³ appointed September 5, 2012

Gilles Lepage retired from the Board after serving as a director since the inception of the Corporation and as Board Chairsince 2006. He was replaced as Chairperson by the appointment of Michael Walton, a Director who has served the Boardsince 2006.

In addition, Elaine Albert and Gaston LeBlanc’s terms as director expired on June 30, 2012, while Earl Brewer, and Marc-Antoine Chiasson’s terms as Director ended at fiscal year end.

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. Mr. Wiktor Askanas returned to our Board as a Director through an appointmentin Fiscal 2012-13, and effective May 1, 2013 Patricia LeBlanc-Bird was appointed as a new Director.

On-going director education includes exposure to relevant news and articles of interest as well as a program of educationalsessions. Structured education sessions included: an overview of NBIMC’s investment management capabilities, acomprehensive review of inherent risks facing the Corporation, a presentation on NBIMC’s investment portfolio structure,and a presentation on the CFA Institute’s Global Investment Performance Standards. In addition, the Board received twospecial presentations from the Independent Actuary. The first presentation related to the process followed for the ActuarialValuation Report on the Teachers’ Pension Plan as at April 1, 2011 and the second related to the new proposed shared riskpension plan model that is being promoted by the Province’s Pension Task Force.


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:• Review of the asset liability analyses for each of the Public Service Superannuation Plan and the Teachers’ Pension Planas at April 1, 2011;

• Approval of the decision to reduce the portfolio weight for government bonds in favour of corporate bonds and to adda low volatility Canadian equity investment strategy to the current asset mix for each of the Pension Funds undermanagement, together with consequent changes to the Investment Policy Statements for each of the Pension Funds andthe Pooled Funds;

• Approval of the Fiscal 2012-13 Annual Business Plan;• Approval of the Fiscal 2013-14 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 2012-13 Highlights In accordance with its Terms of Reference, the Committee accomplished, among otherthings, the following in or relating to Fiscal 2012-13:• Reviewed the annual audited financial statements for the Pension Funds, the NBIMCNorth American Market Neutral Fund, the NBIMC Quantitative Strategies Fund andNBIMC for the year ended March 31, 2013 and recommended their approval by theBoard;

• Reviewed the unaudited financial statements for the Unit Trust Funds for the year endedMarch 31, 2013 and recommended their approval by the Board;

• Reviewed the Schedules of Composite Performance in accordance with GlobalInvestment Performance Standards for the year ended March 31, 2013 andrecommended their approval by the Board;

• Received the draft Annual Report material for the year ended March 31, 2013 andapproved the financial content and earnings press release;

• Reviewed the quarterly financial statements for the Pension Funds, Unit Trust Fundsand NBIMC together with management’s certifications regarding changes in accountingpolicies, significant accounting estimates, errors, material weaknesses in internalcontrols over financial reporting, fraud or illegal acts and 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, 2012 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;


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).

• Approved the External Auditor’s engagement, audit plan, timing, staffing and fees forthe year ended March 31, 2013 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;

• Reviewed the External Auditor’s Audit Findings Report for the year ended March 31,2013 and obtained confirmation of the External Auditor’s independence;

• Reviewed the Audit Committee Pre-Approval Policy for Audit and Non-Audit Services;• Approved the Internal Auditor’s annual plan and budget for the upcoming year endingMarch 31, 2014;

• Received the Internal Audit recommendations and management’s responses for fourinternal audits: Private Markets Review, Pension Contributions, Benefits and ExpensesReview, network Penetration Testing, and Portfolio Management System Review;

• Reviewed a Follow-Up Report from the Internal Auditor concerning management’sresponses to previous 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;• Reviewed a report from management related to entity-level key controls;• Received the Five Year IT Strategic Plan and status;• Completed a review of the Valuation Policies for investment securities;• Received quarterly status reports of an internal review of the portfolio managementsystem;

• Reviewed and recommended approval by the Board of changes to the InvestmentAuthority limits;

• 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;• As part of a continuous development initiative, read and discussed audit committeeeffectiveness material covering oversight of management and internal audit, committeecomposition, meetings and supporting committee effectiveness;

• Completed an annual review of the Committee’s terms of reference, accomplishmentsfor the year ended March 31, 2013 and set objectives for the upcoming fiscal year.

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

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


In accordance with its Terms of Reference, the Committee accomplished, among otherthings, the following in Fiscal 2012-13:• Established Board Goals for Fiscal 2012-13; • Recommended the appointment of a new director to the Audit Committee and theHuman Resources & Compensation Committee;

• Reviewed the Director Orientation and Education program and Fiscal 2012-13 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 the annual review of upcoming director term expirations and Skills GapAssessment for new candidate consideration. Communicated these findings to theMinister of Finance;

• Created an ad hoc committee to conduct a director appointment process including publicposting of director vacancies, evaluation of expressions of interest received and makingrecommendations for consideration by the Minister;

• Reviewed recommendations from an external review of NBIMC’s performance asreported to the Minister of Finance in connection with government’s structural reviewprocess, approved an action plan to address these items and received quarterly statusreports of progress made;

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

• Completed the annual review of all governing documents and Committee Terms ofReference and established the meeting schedules for 2013;

• Reviewed the status of the Strategic Communications Plan;• Monitored publicly available information concerning efforts by the Public SectorPension Task Force to introduce a shared risk pension model in New Brunswick;

• Reviewed the annual confirmation of the Code of Ethics and Business Conduct atMarch 31, 2013 for employees and directors;

• Reviewed Director compensation and a summary of expense claims for each Directorand the President and CEO for the year ended March 31, 2013; and

• Reviewed the draft Plan and Corporate Governance disclosure for the Fiscal 2012-13Annual Report and recommended its approval by the Board.

Fiscal 2012-13 Highlights

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.



Report of the Human Resources & Compensation Committee

The Human Resources & 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.


Fiscal 2012-13 Highlights In accordance with its Terms of Reference, the Committee accomplished, among otherthings, the following in Fiscal 2012-13:• Reviewed the Committee’s Terms of Reference Business;• Set the Committee’s objectives for Fiscal 2012-13 and reviewed subsequentachievements;

• Reviewed recommendations from an external review of NBIMC’s performance asreported to the Minister of Finance in connection with government’s structural reviewprocess and approved an action plan to address the compensation-related items;

• Recommended to the Board a full Corporate Compensation Review Project andappointed an ad hoc committee to conduct this review;

• Reviewed the individual business plan weightings of the NBIMC Fiscal 2012-13Annual Business Plan and recommended their approval by the Board;

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

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

• 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;• Reviewed the ad hoc committee’s Analysis & Recommendations for the Fiscal 2012-13 Corporate Compensation Review Project and recommended to the Board forapproval a Summary of Resolutions relating to salary band scales and performanceincentive components;

• Received quarterly certification from management as to regulatory compliance withvarious legislative requirements;

• Recommended approval by the Board of the compensation range for a new InvestmentAnalyst position;

• Reviewed Fiscal 2012-13 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 2012-13; and• Reviewed the Compensation Discussion and Analysis section of the Fiscal 2012-13Annual Report and recommended its approval by the Board.

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

R. Thériault (Chair), W. Askanas, J. Attis, 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 50 hours per volunteer to 35 non-profit organizations. Three additionalcharitable causes were also supported through other internal corporate fund-raising initiatives.

Of particular note, NBIMC recognized five individuals: Ms. H. Giles, Ms. A. MacDonald, Ms. E. Quigley, Mr. D. Goguenand Mr. M. Holleran as our “Volunteer of the Year” for the significant contributions that they have made to our community.We were also pleased to recognize our corporate team this year: “Bowl for Kids Sake” team (Big Brothers and Big Sisters).

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• Canadian Coalition of Good Governance• 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.

NBIMC also reports to a number of stakeholder groups at least annually through the following means:• PSSA Consultation Committee or delegates• NBTA / AEFNB Pension Committee• NB Teachers Federation• PSSA and 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 2012-13:• 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.


Detailed Unit Trust Fund Performance InformationThe specific performance of each NBIMC unit trust fund, its respective benchmark and value added for the year endedMarch 31, 2013 is outlined in the table below.

Unit Trust Fund Nominal Rate Benchmark Gross Value of Return % Return % Added %

Fixed income:NBIMC Nominal Bond Fund 4.12 3.86 0.26 NBIMC Corporate Bond Fund 6.29 6.32 (0.03)NBIMC New Brunswick Fixed Income Opportunity Fund 4.89 3.86 1.03 NBIMC Money Market Fund 1.47 1.02 0.45 NBIMC Student Investment Fund 5.23 5.37 (0.14)

Total Fixed Income 4.11 4.14 (0.03)

Equities:NBIMC Canadian Equity Index Fund 7.19 6.11 1.08 NBIMC External Canadian Equity Fund 6.69 6.11 0.58 NBIMC Low Volatility Canadian Equity Fund 2.94 (0.05) 2.99 NBIMC S&P/TSX Completion Index Fund 3.93 4.39 (0.46)NBIMC Canadian Equity Active Long Strategy Fund 6.20 6.11 0.09 NBIMC External International Equity Fund 15.08 13.12 1.96 NBIMC EAFE Equity Index Fund 13.34 13.12 0.22 NBIMC Low Volatility International Equity Fund 18.60 13.12 5.48 NBIMC U.S. Equity Index Fund 15.79 15.84 (0.05)NBIMC Low Volatility U.S. Equity Fund 22.67 15.84 6.83

Total Equities 12.10 11.01 1.09

Inflation Linked Assets:NBIMC Inflation Linked Securities Fund 2.35 2.09 0.26 NBIMC Canadian Real Estate Fund 12.07 10.00 2.07 NBIMC International Real Estate Fund 16.11 19.04 (2.93)NBIMC Infrastructure Fund 7.06 6.13 0.93

Total Inflation Linked Assets 7.19 7.03 0.16

Alternative Investments:NBIMC North American Market Neutral Fund 0.59 1.02 (0.43)NBIMC Quantitative Strategies Fund 4.97 1.02 3.95 NBIMC New Brunswick and Atlantic Canada Equity Opportunity Fund 38.09 6.13 31.96 NBIMC Private Equity Fund 10.11 14.14 (4.03)

Total Alternative Investments 7.35 6.97 0.38

Total Fund Return 9.08 8.27 0.81


FINANCIAL STATEMENTSYEAR ENDED MARCH 31, 2013

TABLE OF CONTENTSMANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

PENSION FUNDS’ FINANCIAL STATEMENTS:

Public Service Superannuation Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Teachers’ Pension Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Judges’ Superannuation Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

CORPORATE FINANCIAL STATEMENTS:

New Brunswick Investment Management Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81


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. The Province of NewBrunswick is the Pension Plan Sponsor and Administrator for each of these pension plans.

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

Management prepared the Pension Funds’ financial statements to comply with section 27(1) of the NBIMC Act. ThePension Fund financial statements are special purpose financial statements and reflect the net assets held in trust and changesin net assets held in trust in accordance with the basis of accounting as disclosed in note 1(a) to the financial statements.

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 Public Service Superannuation Fund, the Teachers’ PensionFund and the Judges’ Superannuation Fund held in trust by the New Brunswick Investment Management Corporation,which comprise the statements of net assets held in trust as at March 31, 2013, the statements of changes in net assets heldin trust for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatoryinformation. The financial statements have been prepared by management to comply with Section 27(1) of the NewBrunswick 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 with Section27(1) of the New Brunswick Investment Management Corporation Act; this includes determining that the basis of accountingis an acceptable basis for the preparation of these financial statements in the circumstances; and for such internal controlas management determines is necessary to enable the preparation of financial statements that are free from materialmisstatement, 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 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 net assets held in trust by the NewBrunswick Investment Management Corporation for the Public Service Superannuation Fund, the Teachers’ Pension Fundand the Judges’ Superannuation Fund as at March 31, 2013 and the changes in net assets held in trust for the year thenended in accordance with Section 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 Section 27(1) of the NewBrunswick Investment Management Corporation Act. As a result, the financial statements may not be suitable for anotherpurpose. Our report is intended solely for the Directors and the Minister of Finance and should not be used by parties otherthan the specified users.

CHARTERED ACCOUNTANTS

JUNE 4, 2013FREDERICTON, CANADA


PUBLIC SERVICE SUPERANNUATION FUNDStatement of Net Assets Held in Trust(In thousands of Canadian dollars)

AS AT MARCH 31

2013 2012

ASSETSInvestments (note 3) $ 5,616,096 $ 5,215,946 Contributions receivable (note 8) 10,199 12,684 Other receivable 203 —

5,626,498 5,228,630 LIABILITIESAccounts payable and accrued liabilities (note 8) 3,287 2,399 NET ASSETS HELD IN TRUST $ 5,623,211 $ 5,226,231 See accompanying notes to financial statements.

PUBLIC SERVICE SUPERANNUATION FUNDStatement of Changes in Net Assets Held in Trust(In thousands of Canadian dollars)

YEAR ENDED MARCH 31

2013 2012

INCREASE IN NET ASSETSNet investment income (note 6) $ 468,943 $ 239,179 Employee pension contributions 70,910 71,463 Employer pension contributions 92,128 89,385 Employer special contributions 67,852 64,931

699,833 464,958 DECREASE IN NET ASSETSPayments to sponsor for benefits 292,833 269,772 Payments to sponsor for expenses 2,708 2,712 Fees paid to third party suppliers 1,841 2,099 Fees paid to NBIMC 5,231 4,911 Harmonized sales tax, net of rebates 240 446

302,853 279,940

NET INCREASE FOR THE YEAR 396,980 185,018

NET ASSETS HELD IN TRUST, BEGINNING OF YEAR 5,226,231 5,041,213 NET ASSETS HELD IN TRUST, END OF YEAR $ 5,623,211 $ 5,226,231 See accompanying notes to financial statements.Commitments (note 9)

Approved on behalf of the Board:

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


TEACHERS’ PENSION FUNDStatement of Net Assets Held in Trust(In thousands of Canadian dollars)

AS AT MARCH 31

2013 2012

ASSETSInvestments (note 3) $ 4,446,152 $ 4,154,531 Contributions receivable (note 8) 4,890 5,037 Other receivable 171 —

4,451,213 4,159,568 LIABILITIESAccounts payable and accrued liabilities (note 8) 2,694 2,060 NET ASSETS HELD IN TRUST $ 4,448,519 $ 4,157,508 See accompanying notes to financial statements.

TEACHERS’ PENSION FUNDStatement of Changes in Net Assets Held in Trust(In thousands of Canadian dollars)

YEAR ENDED MARCH 31

2013 2012

INCREASE IN NET ASSETSNet investment income (note 6) $ 371,486 $ 206,093 Employee pension contributions 47,877 47,847 Employer pension contributions 46,139 46,367 Employer special contributions 98,627 94,380

564,129 394,687 DECREASE IN NET ASSETSPayments to sponsor for benefits 265,565 255,075 Payments to sponsor for expenses 1,561 1,550 Fees paid to third party suppliers 1,627 1,837 Fees paid to NBIMC 4,164 3,929 Harmonized sales tax, net of rebates 201 365

273,118 262,756


NET ASSETS HELD IN TRUST, BEGINNING OF YEAR 4,157,508 4,025,577 NET ASSETS HELD IN TRUST, END OF YEAR $ 4,448,519 $ 4,157,508 See accompanying notes to financial statements.Commitments (note 9)




JUDGES’ SUPERANNUATION FUNDStatement of Net Assets Held in Trust(In thousands of Canadian dollars)

AS AT MARCH 31

2013 2012

ASSETSInvestments (note 3) $ 33,415 $ 31,076 Contributions receivable (note 8) 25 36 Other receivable 1 —

33,441 31,112 LIABILITIESAccounts payable and accrued liabilities (note 8) 26 12 NET ASSETS HELD IN TRUST $ 33,415 $ 31,100 See accompanying notes to financial statements.

JUDGES’ SUPERANNUATION FUNDStatement of Changes in Net Assets Held in Trust(In thousands of Canadian dollars)

YEAR ENDED MARCH 31

2013 2012

INCREASE IN NET ASSETSNet investment income (note 6) $ 2,785 $ 1,427 Employee pension contributions 398 471 Employer pension contributions 326 696 Employer special contributions 153 305

3,662 2,899 DECREASE IN NET ASSETSPayments to sponsor for benefits 1,278 1,167 Payments to sponsor for expenses 27 32 Fees paid to third party suppliers 11 12 Fees paid to NBIMC 30 29 Harmonized sales tax, net of rebates 1 2

1,347 1,242


NET ASSETS HELD IN TRUST, BEGINNING OF YEAR 31,100 29,443 NET ASSETS HELD IN TRUST, END OF YEAR $ 33,415 $ 31,100 See accompanying notes to financial statements.Commitments (note 9)





NET ASSETS HELD IN TRUSTNotes to Financial Statements(In thousands of Canadian dollars)

YEAR ENDED MARCH 31, 2013

The assets of the Public Service Superannuation Fund (“Public Service”), Teachers’ Pension Fund (“Teachers”) and Judges’Superannuation Fund (“Judges”), (collectively “the Funds”) are held in trust by the New Brunswick Investment ManagementCorporation (“NBIMC”). NBIMC was appointed as trustee on March 11, 1996, pursuant to the New Brunswick InvestmentManagement Corporation Act of the New Brunswick Legislature (the “NBIMC Act”) and assumed responsibility for themanagement of the Funds’ assets effective April 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 23 active unit trust funds inplace at year-end, each pool with a specific investment mandate. Each of the Funds holds units of the unit trust funds inaccordance with the investment policy of the Fund.

1. Significant Accounting Policies

(a) Accounting entity and basis of presentation

These special purpose financial statements provide information on the net assets of the Funds managed by NBIMC. Theydo not include the pension liabilities of the Public Service Superannuation Act, the Teachers’ Pension Act or the ProvincialCourt Judges’ Pension Act (collectively “the Plans”). Consequently, these financial statements do not purport to show theadequacy of the Funds’ assets to meet the Plans’ pension obligations.

These financial statements have not been prepared in accordance with Canadian Generally Accepted Accounting Principles(“GAAP”) because they exclude the actuarial liabilities of the Plans. They are prepared solely for the information and useof the Directors of NBIMC and the Minister of Finance for the Province of New Brunswick for complying with section 27(1)of the NBIMC Act.

Certain comparative figures have been reclassified to conform to the financial statement presentation adopted in the currentyear.

(b) Valuation of investments

All investments of the Funds are represented by holdings of units of each of the unit trust funds and are designated as heldfor trading upon initial recognition. The value of each investment in unit trust funds is based on the calculated net assetvalue per unit multiplied by the number of units held. Investments held in the unit trusts are valued at their fair value as ofthe date of the financial statements. Fair value is the amount for which an asset could be exchanged, or a liability settled,between knowledgeable, willing parties in an arm’s length transaction.

NOTES TO FINANCIAL STATEMENT OF NET ASSETS HELD IN TRUST


1. Significant Accounting Policies (cont’d)

Fair value is determined as follows:

(i) For publicly-traded fixed income securities such as bonds and floating rate notes, fair value is the most recentquote available from the bond quotation service, DEX.

(ii) For publicly-traded equities, fair value is the latest quoted bid price for long positions and the latest quoted ask pricefor short positions.

(iii) For externally-managed fund investments, fair value is based on the net asset value as reported by the externalmanagers of the funds. External managers use public market prices in calculating the applicable net asset values.

(iv) For unlisted securities or securities traded in “over-the-counter”, fair value is based on a quotation service from arecognized dealer. Residual bonds are valued using a quoted market price for a similarly-termed government bondand adjusted for changes in credit risk spreads based on dealer feedback.

(v) For private investments, such as non-traded pooled or closed funds, limited partnership interests, private placementbonds or equity investments, fair value is a subjective process. Private investment fund valuations are initiallyprovided by the external fund managers. Fair values for private investments are estimated using one or moremethodologies, including discounted cash flows, multiples of earning measures, third party valuation andcomparable recent transactions. An internal Valuation Committee, consisting of NBIMC’s Chief ExecutiveOfficer/Chief Investment Officer, the Chief Financial Officer and the Vice President, Private Markets, review theexternal valuations quarterly. The Valuation Committee also meets annually to consider the need to adjust thevaluation estimates.

(vi) Investments in money market instruments are reported at cost which, together with accrued interest, approximatesfair value.

(vii)Derivatives are measured at their fair value with changes in fair value recognized in changes in net assets for theyear. Total return equity swaps are valued based on quoted market index rates. Forward foreign exchange contractsare valued based on quoted exchange rates. Interest rate and cross currency swaps are valued using quoted marketinformation from Bloomberg.

(c) Contributions

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

(d) 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. Interest income is recognizedon an accrual basis. Dividend income is recognized on the ex-dividend date. Transaction costs are expensed as incurred.

(e) 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 held in trust. Investment income and expenses are translated at the exchange ratesprevailing on the transaction date. Realized and unrealized exchange gains and losses are included in investment income.

(f) Measurement uncertainty

The preparation of financial statements in conformity with the disclosed basis of accounting requires management to makeestimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significantestimates and judgments are required in determining the reported estimated fair value of private investments since thesedeterminations may include estimates of expected future cash flows, rates of return and the impact of future events. Actualresults could differ from those estimates.



(g) Taxes

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

2. Future Accounting Standards

International Financial Reporting Standards

On January 1, 2011 International Financial Reporting Standards (“IFRS”) replaced Canadian GAAP for publicly accountableentities. The International Accounting Standards Board (“IASB”) has recently completed a project on consolidations thatexempts reporting entities that meet the definition of “investment company” from the requirement to consolidate controllinginterests in other entities. Such controlled entities would instead be accounted for at fair value. Recognizing the importanceof this change in IFRS to Canadian reporting entities, the Canadian Accounting Standards Board deferred the IFRSconversion date for investment companies to annual periods beginning on or after January 1, 2014. The Funds meet thedefinition of an investment company and therefore qualify for this deferral.

NBIMC has developed an IFRS conversion plan. Major differences between Canadian GAAP and IFRS consist of additionalfinancial disclosures but no significant financial impact to net assets held in trust has been identified to date. We willcontinue to monitor developments and changes to IFRS that may impact the planned IFRS conversion on April 1, 2014.

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 existence during the year ended March 31, 2013:

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 DEX All Government Bond Index, over a four-year moving average.

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 DEX CorporateBond 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 DEX All Government Bond Index, over a four-year moving 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 DEX 91-Day Treasury Bill Indexand 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% DEX All Government Bond Index, 4.65% DEX 91-Day Treasury Bill Index and 0.35% Call LoanRate. NBIMC staff closely monitor the activities of this fund, including executing and processing all transactions on behalfof the students.




3. Investments (cont’d)

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

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 DEX Real Return Bond Index, over a four-year moving average.

NBIMC Canadian Real Estate Fund

This fund invests in public and private Canadian real estate investments through Real Estate Investment Trusts (“REITs”),limited partnerships or similar investment vehicles. The benchmark is a blend of the S&P/TSX Capped REIT Index andinflation, as measured by the percentage change in the twelve-month CPI-Canada All Items Index, plus 4%.

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 DEX 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 DEX 91-Day Treasury Bill Index and 7% of the CallLoan 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 Value Fair Value Fair Value

Public Service Units (rounded March 31, March 31,($ thousands) (# rounded) in dollars) 2013 2012

Fixed Income:NBIMC Nominal Bond 402,302 $ 2,322 $ 934,258 $ 1,196,711 NBIMC Corporate Bond 355,271 1,087 386,202 142,103 NBIMC New Brunswick Fixed Income Opportunity 3,399 2,760 9,384 12,124 NBIMC Money Market 25,234 1,541 38,873 78,014 NBIMC Student Investment 485 2,767 1,342 1,276

1,370,059 1,430,228 Equities:NBIMC Canadian Equity Index 252,347 2,484 626,706 608,317 NBIMC Low Volatility Canadian Equity 109,092 1,028 112,095 — NBIMC External Canadian Equity 72,583 2,883 209,275 196,139 NBIMC S&P/TSX Completion Index 38,349 2,692 103,251 99,253 NBIMC Canadian Equity Active Long Strategy 111,476 1,053 117,364 161,068 NBIMC External International Equity 89,219 1,282 114,340 99,312 NBIMC EAFE Equity Index 722,907 967 699,332 675,781 NBIMC Low Volatility International Equity 143,757 1,240 178,262 106,565 NBIMC U.S. Equity Index 484,418 1,302 630,875 573,885 NBIMC Low Volatility U.S. Equity 139,309 1,274 177,492 105,321

2,968,992 2,625,641 Inflation Linked Assets:NBIMC Inflation Linked Securities 151,027 3,395 512,665 456,735 NBIMC Canadian Real Estate 71,693 3,184 228,303 177,299 NBIMC International Real Estate 30,095 4,120 123,981 165,689 NBIMC Infrastructure 33,859 1,213 41,083 28,144

906,032 827,867 Alternative Investments:NBIMC North American Market Neutral 65,964 1,225 80,784 83,046 NBIMC Quantitative Strategies 100,265 1,150 115,294 98,506 NBIMC New Brunswick and Atlantic Canada Equity Opportunity 3,547 4,308 15,278 9,649

NBIMC Private Equity 104,647 1,526 159,657 141,009 371,013 332,210

$ 5,616,096 $ 5,215,946




Teachers’ Units (rounded March 31, March 31,($ thousands) (# rounded) in dollars) 2013 2012

Fixed Income:NBIMC Nominal Bond 337,685 $ 2,322 $ 784,200 $ 973,963 NBIMC Corporate Bond 260,795 1,087 283,500 113,185 NBIMC New Brunswick Fixed Income Opportunity 2,663 2,760 7,351 9,656 NBIMC Money Market 19,718 1,541 30,376 61,765 NBIMC Student Investment 528 2,767 1,462 1,389

1,106,889 1,159,958 Equities:NBIMC Canadian Equity Index 181,604 2,484 451,016 442,764 NBIMC Low Volatility Canadian Equity 86,365 1,028 88,742 — NBIMC External Canadian Equity 57,755 2,883 166,522 156,225 NBIMC S&P/TSX Completion Index 30,516 2,692 82,162 79,055 NBIMC Canadian Equity Active Long Strategy 87,377 1,053 91,993 128,290 NBIMC External International Equity 70,993 1,282 90,983 79,102 NBIMC EAFE Equity Index 542,638 967 524,942 511,607 NBIMC Low Volatility International Equity 113,809 1,240 141,125 84,879 NBIMC U.S. Equity Index 368,983 1,302 480,540 439,258 NBIMC Low Volatility U.S. Equity 110,287 1,274 140,516 83,888

2,258,541 2,005,068 Inflation Linked Assets:NBIMC Inflation Linked Securities 126,117 3,395 428,109 384,574 NBIMC Canadian Real Estate 56,754 3,184 180,731 141,219 NBIMC International Real Estate 34,381 4,120 141,635 172,590 NBIMC Infrastructure 27,623 1,213 33,516 23,344

783,991 721,727 Alternative Investments:NBIMC North American Market Neutral 52,222 1,225 63,954 66,146 NBIMC Quantitative Strategies 79,377 1,150 91,275 78,460 NBIMC New Brunswick and Atlantic Canada Equity Opportunity 2,879 4,308 12,404 7,893

NBIMC Private Equity 84,617 1,526 129,098 115,279 296,731 267,778

$ 4,446,152 $ 4,154,531






Judges’ Units (rounded March 31, March 31,($ thousands) (# rounded) in dollars) 2013 2012

Fixed Income:NBIMC Nominal Bond 2,394 $ 2,322 $ 5,559 $ 7,129NBIMC Corporate Bond 2,114 1,087 2,298 847NBIMC New Brunswick Fixed Income Opportunity 20 2,760 56 72NBIMC Money Market 149 1,541 229 463NBIMC Student Investment 4 2,767 10 10

8,152 8,521Equities:NBIMC Canadian Equity Index 1,495 2,484 3,711 3,623NBIMC Low Volatility Canadian Equity 649 1,028 667 —NBIMC External Canadian Equity 434 2,883 1,250 1,169NBIMC S&P/TSX Completion Index 229 2,692 617 591NBIMC Canadian Equity Active Long Strategy 670 1,053 706 960NBIMC External International Equity 533 1,282 683 592NBIMC EAFE Equity Index 4,264 967 4,125 3,999NBIMC Low Volatility International Equity 855 1,240 1,061 635NBIMC U.S. Equity Index 2,864 1,302 3,730 3,400NBIMC Low Volatility U.S. Equity 829 1,274 1,056 627

17,606 15,596Inflation Linked Assets:NBIMC Inflation Linked Securities 899 3,395 3,049 2,721NBIMC Canadian Real Estate 427 3,184 1,359 1,056NBIMC International Real Estate 179 4,120 736 986NBIMC Infrastructure 203 1,213 246 169

5,390 4,932Alternative Investments:NBIMC North American Market Neutral 392 1,225 481 495NBIMC Quantitative Strategies 597 1,150 686 587NBIMC New Brunswick and Atlantic Canada Equity Opportunity 22 4,308 93 59

NBIMC Private Equity 660 1,526 1,007 8862,267 2,027

$ 33,415 $ 31,076



Fair Value Hierarchy

The Funds have designated all of their investments to be held for trading. Accordingly, investments are valued at fair valuewith 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 1 include publicly traded fixed income securities, publicly traded equity securities,real estate investment trusts (REITs) and exchange-traded funds and futures. Cash is a Level 1 investment.

Investments that are classified as Level 2 include short-term securities, non-publicly traded fixed income and equitysecurities as well as derivatives traded over-the-counter. These investments are valued based on a quotation from arecognized dealer, or by applying a spread to a similarly termed instrument.

Investments that are classified as Level 3 include private equity, real estate and infrastructure investments, as well as somefixed income instruments. These investments are typically private market investments and fair value is derived by usingvaluation techniques. The significant inputs and assumptions used in these valuation models are not observable and mayinvolve significant subjectivity.

The Funds typically hold their investments indirectly through units of the unit trust funds. For purposes of determining theclassification of the inputs used in measuring fair value, the classification of each underlying investment of each unit trustfund is determined.

Certain unit trust funds hold units of the NBIMC Money Market Fund as a proxy for cash. The underlying investments ofthe NBIMC Money Market Fund include investments that have been measured using Level 1 and Level 2 inputs.Accordingly, the classification of units in the NBIMC Money Market Fund has been determined based on the lowest levelinput that is significant to the entire assessment, which is Level 2.





The levels of input for valuation of the Funds’ investments are shown in the following tables:

PUBLIC SERVICEFair Value

($ thousands) March 31, 2013 Level 1 Level 2 Level 3

Fixed Income:NBIMC Nominal Bond $ 934,258 $ 776,508 $ 157,750 $ —NBIMC Corporate Bond 386,202 374,377 11,825 —NBIMC New Brunswick Fixed Income Opportunity 9,384 — — 9,384

NBIMC Money Market 38,873 2,870 36,003 —NBIMC Student Investment 1,342 1,255 87 —

1,370,059 1,155,010 205,665 9,384Equities:NBIMC Canadian Equity Index 626,706 15,076 611,630 —NBIMC Low Volatility Canadian Equity 112,095 111,900 195 —NBIMC External Canadian Equity 209,275 97,191 112,084 —NBIMC S&P/TSX Completion Index 103,251 102,095 1,156 —NBIMC Canadian Equity Active Long Strategy 117,364 110,055 7,309 —NBIMC External International Equity 114,340 — 114,340 —NBIMC EAFE Equity Index 699,332 686,176 13,156 —NBIMC Low Volatility International Equity 178,262 178,262 — —NBIMC U.S. Equity Index 630,875 572,378 58,497 —NBIMC Low Volatility U.S. Equity 177,492 176,904 588 —

2,968,992 2,050,037 918,955 —Inflation Linked Assets:NBIMC Inflation Linked Securities 512,665 — 512,665 —NBIMC Canadian Real Estate 228,303 118,306 — 109,997NBIMC International Real Estate 123,981 123,478 503 —NBIMC Infrastructure 41,083 467 187 40,429

906,032 242,251 513,355 150,426Alternative Investments:NBIMC North American Market Neutral 80,784 (232) 81,016 —NBIMC Quantitative Strategies 115,294 27,230 88,064 —NBIMC New Brunswick and Atlantic Canada Equity Opportunity 15,278 — — 15,278

NBIMC Private Equity 159,657 — — 159,657371,013 26,998 169,080 174,935

Total $ 5,616,096 $ 3,474,296 $ 1,807,055 $ 334,745



TEACHERS’Fair Value


Fixed Income:NBIMC Nominal Bond $ 784,200 $ 651,788 $ 132,412 $ —NBIMC Corporate Bond 283,500 274,820 8,680 —NBIMC New Brunswick Fixed Income Opportunity 7,351 — — 7,351


1,106,889 930,215 169,323 7,351Equities:NBIMC Canadian Equity Index 451,016 10,850 440,166 —NBIMC Low Volatility Canadian Equity 88,742 88,588 154 —NBIMC External Canadian Equity 166,522 77,335 89,187 —NBIMC S&P/TSX Completion Index 82,162 81,242 920 —NBIMC Canadian Equity Active Long Strategy 91,993 86,264 5,729 —NBIMC External International Equity 90,983 — 90,983 —NBIMC EAFE Equity Index 524,942 515,067 9,875 —NBIMC Low Volatility International Equity 141,125 141,125 — —NBIMC U.S. Equity Index 480,540 435,983 44,557 —NBIMC Low Volatility U.S. Equity 140,516 140,050 466 —

2,258,541 1,576,504 682,037 —Inflation Linked Assets:NBIMC Inflation Linked Securities 428,109 — 428,109 —NBIMC Canadian Real Estate 180,731 93,654 — 87,077NBIMC International Real Estate 141,635 141,060 575 —NBIMC Infrastructure 33,516 380 153 32,983

783,991 235,094 428,837 120,060Alternative Investments:NBIMC North American Market Neutral 63,954 (184) 64,138 —NBIMC Quantitative Strategies 91,275 21,557 69,718 —NBIMC New Brunswick and Atlantic Canada Equity Opportunity 12,404 — — 12,404


Total $ 4,446,152 $ 2,763,186 $ 1,414,053 $ 268,913





JUDGES’Fair Value


Fixed Income:NBIMC Nominal Bond $ 5,559 $ 4,620 $ 939 $ —NBIMC Corporate Bond 2,298 2,228 70 —NBIMC New Brunswick Fixed Income Opportunity 56 — — 56

NBIMC Money Market 229 18 211 —NBIMC Student Investment 10 9 1 —

8,152 6,875 1,221 56Equities:NBIMC Canadian Equity Index 3,711 87 3,624 —NBIMC Low Volatility Canadian Equity 667 666 1 —NBIMC External Canadian Equity 1,250 580 670 —NBIMC S&P/TSX Completion Index 617 610 7 —NBIMC Canadian Equity Active Long Strategy 706 662 44 —NBIMC External International Equity 683 — 683 —NBIMC EAFE Equity Index 4,125 4,047 78 —NBIMC Low Volatility International Equity 1,061 1,061 — —NBIMC U.S. Equity Index 3,730 3,384 346 —NBIMC Low Volatility U.S. Equity 1,056 1,053 3 —

17,606 12,150 5,456 —Inflation Linked Assets:NBIMC Inflation Linked Securities 3,049 — 3,049 —NBIMC Canadian Real Estate 1,359 704 — 655NBIMC International Real Estate 736 733 3 — NBIMC Infrastructure 246 3 1 242

5,390 1,440 3,053 897Alternative Investments:NBIMC North American Market Neutral 481 — 481 —NBIMC Quantitative Strategies 686 162 524 —NBIMC New Brunswick and Atlantic Canada Equity Opportunity 93 — — 93

NBIMC Private Equity 1,007 — — 1,0072,267 162 1,005 1,100

Total $ 33,415 $ 20,627 $ 10,735 $ 2,053



PUBLIC SERVICEFair Value


Fixed Income:NBIMC Nominal Bond $ 1,196,712 $ 1,046,162 $ 150,550 $ —NBIMC Corporate Bond 142,103 130,744 11,359 —NBIMC New Brunswick Fixed Income Opportunity 12,123 28 — 12,095


1,430,228 1,180,886 237,247 12,095Equities:NBIMC Canadian Equity Index 608,317 72,490 535,827 —NBIMC External Canadian Equity 196,139 90,501 105,638 —NBIMC S&P/TSX Completion Index 99,253 98,688 565 —NBIMC Canadian Equity Active Long Strategy 161,068 159,849 1,219 —NBIMC External International Equity 99,312 — 99,312 —NBIMC EAFE Equity Index 675,781 675,876 (95) —NBIMC Low Volatility International Equity 106,565 106,565 — —NBIMC U.S. Equity Index 573,885 573,605 280 —NBIMC Low Volatility U.S. Equity 105,321 105,255 66 —

2,625,641 1,882,829 742,812 —Inflation Linked Assets:NBIMC Inflation Linked Securities 456,735 — 456,735 —NBIMC Canadian Real Estate 177,299 104,482 — 72,817NBIMC International Real Estate 165,689 164,778 911 —NBIMC Infrastructure 28,144 — (116) 28,260

827,867 269,260 457,530 101,077Alternative Investments:NBIMC North American Market Neutral 83,046 1,101 81,945 —NBIMC Quantitative Strategies 98,506 22,731 75,775 —NBIMC New Brunswick and Atlantic Canada Equity Opportunity 9,649 — — 9,649


Total $ 5,215,946 $ 3,356,807 $ 1,595,309 $ 263,830





TEACHERS’Fair Value


Fixed Income:NBIMC Nominal Bond $ 973,963 $ 851,431 $ 122,532 $ —NBIMC Corporate Bond 113,185 104,138 9,047 —NBIMC New Brunswick Fixed Income Opportunity 9,656 22 — 9,634


1,159,958 959,073 191,251 9,634Equities:NBIMC Canadian Equity Index 442,764 52,763 390,001 —NBIMC External Canadian Equity 156,225 72,084 84,141 —NBIMC S&P/TSX Completion Index 79,055 78,605 450 —NBIMC Canadian Equity Active Long Strategy 128,290 127,320 970 —NBIMC External International Equity 79,102 (1) 79,103 —NBIMC EAFE Equity Index 511,607 511,679 (72) —NBIMC Low Volatility International Equity 84,879 84,879 — —NBIMC U.S. Equity Index 439,258 439,044 214 —NBIMC Low Volatility U.S. Equity 83,888 83,836 52 —

2,005,068 1,450,209 554,859 —Inflation Linked Assets:NBIMC Inflation Linked Securities 384,573 — 384,573 —NBIMC Canadian Real Estate 141,220 83,221 — 57,999NBIMC International Real Estate 172,590 171,641 949 — NBIMC Infrastructure 23,344 — (97) 23,441

721,727 254,862 385,425 81,440Alternative Investments:NBIMC North American Market Neutral 66,146 878 65,268 —NBIMC Quantitative Strategies 78,460 18,104 60,356 —NBIMC New Brunswick and Atlantic Canada Equity Opportunity 7,893 — — 7,893


Total $ 4,154,531 $ 2,683,126 $ 1,257,159 $ 214,246



JUDGES’Fair Value


Fixed Income:NBIMC Nominal Bond $ 7,129 $ 6,232 $ 897 $ —NBIMC Corporate Bond 847 779 68 —NBIMC New Brunswick Fixed Income Opportunity 72 — — 72

NBIMC Money Market 463 17 446 —NBIMC Student Investment 10 9 1 —

8,521 7,037 1,412 72Equities:NBIMC Canadian Equity Index 3,623 431 3,192 —NBIMC External Canadian Equity 1,169 540 629 —NBIMC S&P/TSX Completion Index 591 588 3 —NBIMC Canadian Equity Active Long Strategy 960 953 7 —NBIMC External International Equity 592 — 592 —NBIMC EAFE Equity Index 3,999 4,000 (1) —NBIMC Low Volatility International Equity 635 635 — —NBIMC U.S. Equity Index 3,400 3,398 2 —NBIMC Low Volatility U.S. Equity 627 627 — —

15,596 11,172 4,424 —Inflation Linked Assets:NBIMC Inflation Linked Securities 2,722 — 2,722 —NBIMC Canadian Real Estate 1,055 622 — 433NBIMC International Real Estate 986 981 5 —NBIMC Infrastructure 169 — (1) 170

4,932 1,603 2,726 603Alternative Investments:NBIMC North American Market Neutral 495 7 488 —NBIMC Quantitative Strategies 587 135 452 —NBIMC New Brunswick and Atlantic Canada Equity Opportunity 59 — — 59

NBIMC Private Equity 886 — — 8862,027 142 940 945

Total $ 31,076 $ 19,954 $ 9,502 $ 1,620





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

PUBLIC SERVICEGains (losses)

Fair Value in net Transfers Fair Value April 1, investment out of March 31,

($ thousands) 2012 income Purchases Settlements Level 3 2013

NBIMC New Brunswick Fixed Income Opportunity $ 12,095 $ 20 $ — $ 2,731 $ — $ 9,384

NBIMC Canadian Real Estate 72,817 5,816 62,966 31,602 — 109,997NBIMC Infrastructure 28,260 506 11,820 157 — 40,429NBIMC New Brunswick and Atlantic Canada Equity Opportunity 9,649 2,889 2,740 — — 15,278

NBIMC Private Equity 141,009 14,278 36,317 31,947 — 159,657

TEACHERS’Gains (losses)



NBIMC New Brunswick Fixed Income Opportunity $ 9,634 $ (143) $ — $ 2,140 $ — $ 7,351

NBIMC Canadian Real Estate 57,999 4,250 49,845 25,017 — 87,077NBIMC Infrastructure 23,441 27 9,643 128 — 32,983NBIMC New Brunswick and Atlantic Canada Equity Opportunity 7,893 2,287 2,224 — — 12,404


JUDGES’Gains (losses)



NBIMC New Brunswick Fixed Income Opportunity $ 72 $ — $ — $ 16 $ — $ 56

NBIMC Canadian Real Estate 433 34 376 188 — 655NBIMC Infrastructure 170 2 71 1 — 242NBIMC New Brunswick and Atlantic Canada Equity Opportunity 59 17 17 — — 93

NBIMC Private Equity 886 93 229 201 — 1,007



PUBLIC SERVICEGains (losses)



NBIMC New Brunswick Fixed Income Opportunity $ 12,059 $ 405 — 369 $ — $ 12,095

NBIMC Canadian Real Estate 57,141 5,982 14,357 4,663 — 72,817NBIMC Infrastructure 45,237 1,781 137 18,895 — 28,260NBIMC New Brunswick and Atlantic Canada Equity Opportunity 21,607 11,993 549 24,500 — 9,649


TEACHERS’Gains (losses)



NBIMC New Brunswick Fixed Income Opportunity $ 9,643 $ 285 — 294 $ — $ 9,634

NBIMC Canadian Real Estate 41,645 8,631 11,437 3,714 — 57,999NBIMC Infrastructure 36,477 2,523 114 15,673 — 23,441NBIMC New Brunswick and Atlantic Canada Equity Opportunity 17,825 9,658 450 20,040 — 7,893NBIMC Private Equity 100,334 13,689 20,977 19,721 — 115,279

JUDGES’Gains (losses)



NBIMC New Brunswick Fixed Income Opportunity $ 71 $ 3 — 2 $ — $ 72

NBIMC Canadian Real Estate 332 44 85 28 — 433NBIMC Infrastructure 264 18 1 113 — 170NBIMC New Brunswick and Atlantic Canada Equity Opportunity 129 78 3 151 — 59

NBIMC Private Equity 749 126 162 151 — 886





Collateral

NBIMC conducts certain of its investment activities on behalf of the Funds by trading through broker channels on regulatedexchanges and in the over-the-counter market.

Brokers typically require that collateral be pledged against potential market fluctuations when trading in derivative financialinstruments or when shorting security positions. As at March 31, 2013 the fair value of securities that have been depositedor pledged with various financial institutions as collateral or margin are as follows:

2013 2012

Public Service $ 130,676 $ 152,038Teachers’ 103,458 120,873Judges’ 778 906

4. 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 Board of Directors has overall responsibility for understanding the principal risks facing the Funds and the systems thatmanagement has put in place to mitigate and manage those risks. Accordingly, the Board of Directors is responsible forthe establishment of a Statement of Investment Policy for each of the Funds. Day-to-day investment activities andmonitoring of risk controls are delegated to management, which acts in accordance with the Statements of InvestmentPolicy. Management produces quarterly reporting of investment performance, policy compliance, and trends and changesin 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.

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 Statement of Investment Policy, NBIMC also uses astatistical modeling technique known as Value at Risk (VaR) to estimate the probability of loss on investment portfolios.Using return, volatility, and correlation figures, VaR models attempt to aggregate the risks involved in separate investmentsinto one cohesive measure. This aggregation involves certain simplifying assumptions, most notably with respect to theshape of the return distribution for the assets being modeled, which can limit the ability of a VaR system to forecast risk inall market environments. Despite these modeling challenges, well constructed VaR systems provide a valuable way toaggregate separate investment risks into one cohesive measure, and therefore monitor and analyze these risks over time.


4. Financial Instrument Risk Management (cont’d)

(a) Market Risk:

Market risk is the risk that the value of an investment will fluctuate as a result of changes in market prices whether thosechanges are caused by factors specific to the individual investment or factors affecting all securities traded in the market.In addition to exposure to foreign currency risk, interest rate risk, credit risk and pricing risk as discussed below, the Fundsare exposed to other market risks. Investment strategies 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. The Statement of Investment Policy for each Fund precludes the use of leverage in the investment portfolio.Accordingly, to the extent that there is market exposure from derivative investments, the Funds will hold cash underlay equalto the amount of market exposure. Market neutral strategies mitigate market risk through adherence to maximum investmentlimits and stop loss constraints, and are also supported by cash underlay.

(b) Foreign Currency Risk:

Foreign currency risk arises from a unit trust fund holding investments denominated in currencies other than the Canadiandollar. Fluctuations in the relative value of the Canadian dollar against these foreign currencies can result in a positive ora negative effect on the fair value of investments. Management considers exposure to foreign currencies to providediversification benefit. The Statement of Investment Policy for each Fund specifies the policy decision to not hedge foreigncurrency exposure.

Foreign currency hedging remains permitted within the investment policies of the underlying unit trust funds. NBIMCmay mitigate this risk through the use of foreign exchange forward contracts (see also note 5).

The net underlying unhedged currency exposures, expressed in Canadian dollar equivalents, as at March 31, 2013 are asfollows:

Public Service 2013 Fair Value by Currency($ thousands) Total Exposure Hedged Net Exposure Total

Canadian Dollar $ 3,602,025 $ (39,426) $ 3,562,599 63.44%United States Dollar 1,056,733 48,775 1,105,508 19.69Euro 301,153 — 301,153 5.36Japanese Yen 185,766 — 185,766 3.31British Pound Sterling 213,439 (9,349) 204,090 3.63Swiss Frank 76,015 — 76,015 1.35Danish Kroner 9,657 — 9,657 0.17Norwegian Kroner 7,159 — 7,159 0.13Swedish Kroner 26,855 — 26,855 0.48Other 137,294 — 137,294 2.44Investments $ 5,616,096 $ — $ 5,616,096 100.00 %





Teachers’ 2013 Fair Value by Currency($ thousands) Total Exposure Hedged Net Exposure Total

Canadian Dollar $ 2,850,271 $ (29,683) $ 2,820,588 63.44%United States Dollar 864,425 37,310 901,735 20.28Euro 231,939 — 231,939 5.22Japanese Yen 141,075 — 141,075 3.17British Pound Sterling 163,120 (7,627) 155,493 3.50Swiss Frank 57,590 — 57,590 1.30Danish Kroner 7,322 — 7,322 0.16Norwegian Kroner 5,422 — 5,422 0.12Swedish Kroner 20,341 — 20,341 0.46Other 104,647 — 104,647 2.35Investments $ 4,446,152 $ — $ 4,446,152 100.00 %

Judges’ 2013 Fair Value by Currency($ thousands) Total Exposure Hedged Net Exposure Total

Canadian Dollar $ 21,433 $ (233) $ 21,200 63.44%United States Dollar 6,292 289 6,581 19.69Euro 1,807 — 1,807 5.41Japanese Yen 1,098 — 1,098 3.29British Pound Sterling 1,266 (56) 1,210 3.62Swiss Frank 449 — 449 1.34Danish Kroner 57 — 57 0.17Norwegian Kroner 42 — 42 0.13Swedish Kroner 159 — 159 0.48Other 812 — 812 2.43Investments $ 33,415 $ — $ 33,415 100.00 %

The net underlying unhedged currency exposures, expressed in Canadian dollar equivalents, as at March 31, 2012 are asfollows:

Public Service 2012 Fair Value by Currency($ thousands) Total Exposure Hedged Net Exposure Total

Canadian Dollar $ 3,335,020 $ 11,409 $ 3,346,429 64.16%United States Dollar 1,016,973 (4,151) 1,012,822 19.42Euro 277,140 74 277,214 5.31Japanese Yen 169,339 — 169,339 3.25British Pound Sterling 194,282 (7,332) 186,950 3.58Swiss Frank 66,128 — 66,128 1.27Danish Kroner 8,931 — 8,931 0.17Norwegian Kroner 7,564 — 7,564 0.15Swedish Kroner 24,521 — 24,521 0.47Other 116,047 — 116,047 2.22Investments $ 5,215,945 $ — $ 5,215,945 100.00 %



Teachers’ 2012 Fair Value by Currency($ thousands) Total Exposure Hedged Net Exposure Total

Canadian Dollar $ 2,657,067 $ 9,451 $ 2,666,518 64.18%United States Dollar 834,081 (3,430) 830,651 20.00Euro 214,566 60 214,626 5.17Japanese Yen 129,098 — 129,098 3.11British Pound Sterling 149,141 (6,081) 143,060 3.44Swiss Frank 50,397 — 50,397 1.21Danish Kroner 6,815 — 6,815 0.16Norwegian Kroner 5,769 — 5,769 0.14Swedish Kroner 18,680 — 18,680 0.45Other 88,917 — 88,917 2.14Investments $ 4,154,531 $ — $ 4,154,531 100.00 %

Judges’ 2012 Fair Value by Currency($ thousands) Total Exposure Hedged Net Exposure Total

Canadian Dollar $ 19,872 $ 68 $ 19,940 64.16%United States Dollar 6,061 (24) 6,037 19.43Euro 1,663 — 1,663 5.35Japanese Yen 1,003 — 1,003 3.23British Pound Sterling 1,154 (44) 1,110 3.57Swiss Frank 392 — 392 1.26Danish Kroner 53 — 53 0.17Norwegian Kroner 45 — 45 0.14Swedish Kroner 145 — 145 0.47Other 688 — 688 2.22Investments $ 31,076 $ — $ 31,076 100.00 %

A 1% increase or decrease in the value of the Canadian dollar against all currencies would result in an approximate increaseor decrease in the value of the Funds’ net investment assets of: Public Service - $20,535 (2012 - $18,695), Teachers’ -$16,256 (2012 - $14,880) and Judges’ - $122 (2012 - $111).

(c) Interest Rate Risk:

Interest rate risk refers to the effect on the market value of investments due to fluctuation of interest rates. Managementadheres to guidelines on duration and yield curve, which are designed to mitigate the risk of interest rate volatility. Durationis the present value, expressed in years, of the yield, coupon, final maturity and call features of interest-bearing financialinstruments.





At March 31, the duration for the interest-bearing securities, by unit trust fund, and the sensitivity to an increase or decreaseof 0.25% in interest rates, are as follows:

2013 2012

Fixed Sensitivity Fixed Sensitivity Income to 0.25% Income to 0.25%

Public Service Instruments Duration change Instruments Duration change($ thousands) Fair Value (years) in rates Fair Value (years) in rates

NBIMC Nominal Bond $ 898,386 7.5 $ 16,257 $ 1,172,601 7.2 $ 20,439NBIMC Corporate Bond 374,306 6.3 5,704 130,744 6.4 2,032NBIMC New Brunswick Fixed Income Opportunity 9,384 6.1 125 12,095 5.2 136

NBIMC Student Investment 565 7.2 10 532 6.9 9NBIMC Inflation Linked Securities 509,856 16.7 20,627 451,308 16.8 18,369

$ 1,792,497 $ 1,767,280

2013 2012


Teachers’ Instruments Duration change Instruments Duration change($ thousands) Fair Value (years) in rates Fair Value (years) in rates

NBIMC Nominal Bond $ 754,088 7.5 $ 13,646 $ 954,341 7.2 $ 16,634NBIMC Corporate Bond 274,767 6.3 4,187 104,138 6.4 1,618NBIMC New Brunswick FixedIncome Opportunity 7,351 6.1 98 9,634 5.2 109

NBIMC Student Investment 615 7.2 11 579 6.9 10NBIMC Inflation Linked Securities 425,763 16.7 17,225 380,004 16.8 15,467

$ 1,462,584 $ 1,448,696

2013 2012


Judges’ Instruments Duration change Instruments Duration change($ thousands) Fair Value (years) in rates Fair Value (years) in rates

NBIMC Nominal Bond $ 5,345 7.5 $ 97 $ 6,986 7.2 $ 122NBIMC Corporate Bond 2,227 6.3 34 779 6.4 12NBIMC New Brunswick Fixed Income Opportunity 56 6.1 1 72 5.2 1

NBIMC Student Investment 4 7.2 — 4 6.9 —NBIMC Inflation Linked Securities 3,034 16.7 123 2,689 16.8 109

$ 10,666 $ 10,530



The terms to maturity and average effective yields of the interest-bearing financial instruments as at March 31, are as follows:

2013 2012Term to Maturity

Average AveragePublic Service Within 1-5 6-10 Over 10 Effective Effective($ thousands) 1 Year Years Years Years Total Yield Total Yield

CanadianGovernment of Canada bonds $ 32,299 $ 120,590 $ 145,076 $ 428,755 $ 726,720 2.4% $ 852,595 2.5%

Provincial bonds 20,449 84,738 112,132 290,255 507,574 4.0% 563,858 4.1%Municipal bonds 2,842 69,151 37,099 8,553 117,645 4.3% 121,891 4.4%Corporate bonds 41,553 200,022 105,493 84,106 431,174 0.6% 219,311 1.6%Other — — — 9,384 9,384 5.6% 9,625 5.6%

$ 97,143 $ 474,501 $ 399,800 $ 821,053 $1,792,497 $ 1,767,280


Average AverageTeachers’ Within 1-5 6-10 Over 10 Effective Effective($ thousands) 1 Year Years Years Years Total Yield Total Yield

CanadianGovernment of Canada bonds $ 27,111 $ 101,249 $ 121,384 $ 357,722 $ 607,466 2.4% $ 703,783 2.5%

Provincial bonds 17,165 71,149 94,158 243,312 425,784 4.0% 461,171 4.1%Municipal bonds 2,385 58,048 31,141 7,179 98,753 4.3% 99,209 4.4%Corporate bonds 34,696 146,831 77,439 64,264 323,230 0.6% 176,866 1.6%Other — — — 7,351 7,351 5.6% 7,667 5.6%

$ 81,357 $ 377,277 $ 324,122 $ 679,828 $1,462,584 $ 1,448,696


Average AverageJudges’ Within 1-5 6-10 Over 10 Effective Effective($ thousands) 1 Year Years Years Years Total Yield Total Yield

CanadianGovernment of Canada bonds $ 192 $ 719 $ 863 $ 2,551 $ 4,325 2.4% $ 5,079 2.5%

Provincial bonds 122 504 667 1,727 3,020 4.0% 3,361 4.1%Municipal bonds 17 411 221 51 700 4.3% 726 4.4%Corporate bonds 247 1,190 628 500 2,565 0.6% 1,307 1.6%Other — — — 56 56 5.6% 57 5.6%

$ 578 $ 2,824 $ 2,379 $ 4,885 $ 10,666 $ 10,530





(d) Credit Risk:

The Funds are exposed to credit-related risk in the event that a derivative or debt security counterparty defaults or becomesinsolvent. NBIMC has established investment criteria which are designed to manage credit risk by establishing limits byissuer type and credit rating for fixed income and derivative credit exposure. Management monitors these exposuresmonthly. Such derivative and short and long-term debt securities are restricted to those having investment grade ratings,as provided by a third party rating agency. In addition, each counterparty exposure is restricted to no more than 5% of totalassets. Investment grade ratings are BBB and above for longer term debt securities and R-1 for short-term debt. Any creditdowngrade below investment grade is subject to review by NBIMC’s Board of Directors.

The maximum credit exposure for each of the Funds as of March 31 is as follows:

Public Service Teachers’ Judges’($ thousands) 2013 2012 2013 2012 2013 2012

Fixed IncomeNBIMC Nominal Bond $ 934,258 $1,196,711 $ 784,200 $ 973,965 $ 5,559 $ 7,129NBIMC Corporate Bond 386,128 142,103 283,447 113,185 2,297 847NBIMC New Brunswick Fixed Income Opportunity 9,384 12,095 7,352 9,634 55 72

NBIMC Money Market 37,096 47,472 27,046 35,701 208 278NBIMC Student Investment 638 604 695 658 6 5

1,367,504 1,398,985 1,102,740 1,133,143 8,125 8,331EquitiesNBIMC Canadian Equity Index 611,630 565,605 440,166 411,676 3,624 3,369NBIMC Low Volatility Canadian Equity 195 — 154 — 1 —NBIMC External Canadian Equity 3,775 4,347 3,004 3,462 23 26NBIMC S&P/TSX Completion Index 1,156 564 920 450 7 3NBIMC Canadian Equity Active Long Strategy 7,308 1,218 5,729 970 44 7

NBIMC EAFE Equity Index 13,156 — 9,875 — 78 —NBIMC Low Volatility International Equity — — — — — —

NBIMC U.S. Equity Index 58,506 281 44,548 214 346 2NBIMC Low Volatility U.S. Equity 587 66 466 52 4 —

696,313 572,081 504,862 416,824 4,127 3,407Inflation Linked AssetsNBIMC Inflation Linked Securities 512,666 456,735 428,107 384,573 3,052 2,721NBIMC Canadian Real Estate — 4,519 — 3,599 — 27NBIMC International Real Estate 503 911 575 949 3 5NBIMC Infrastructure 5,593 5,133 4,564 4,257 34 31

518,762 467,298 433,246 393,378 3,089 2,784Alternative InvestmentsNBIMC North American Market Neutral 81,007 81,946 64,132 65,268 481 488NBIMC Quantitative Strategies 87,976 75,598 69,650 60,213 524 450

168,983 157,544 133,782 125,481 1,005 938Contributions receivable 10,199 12,684 4,890 5,037 25 36Other receivables 203 — 171 — 1 —Total $2,761,964 $2,608,592 $2,179,691 $2,073,863 $ 16,372 $ 15,496



The quality of the maximum credit exposure as at March 31 is as follows:


AAA $ 870,037 $ 998,025 $ 726,438 $ 822,079 $ 5,177 $ 5,947AA 858,069 899,768 656,393 689,846 5,088 5,317A 627,398 459,900 489,615 367,603 3,694 2,740BBB 84,483 28,804 62,237 23,056 503 172R-1 314,224 209,857 238,887 161,358 1,857 1,247Other 7,753 12,238 6,121 9,921 53 73

$2,761,964 $2,608,592 $2,179,691 $2,073,863 $ 16,372 $ 15,496

As at March 31, 2013, the highest concentration of credit risk is with Government of Canada bonds.

(e) Other Pricing Risk:

Pricing risk is the risk that the fair value or future cash flows of an investment will fluctuate because of changes in marketprices (other than those arising from foreign currency, interest rate or credit risks). Pricing risk can affect specificinvestments or broad market indices.

Each of the Funds holds a portion of its assets in unit trust funds that invest in active and passive equity strategies.Management’s principal lever for managing equity pricing risk is to invest in widely diversified countries, sectors, andissuers.

The Funds also employ absolute return strategies. These strategies have a low correlation to broad market indices andtherefore are capable of generating positive returns regardless of market conditions.

(f) Liquidity Risk:

Liquidity risk is the risk of not having sufficient funds available to meet cash demands. Sources of liquidity include pensioncontributions collected from the plan sponsor, cash and readily marketable assets such as government bonds and publiclytraded securities. Uses of liquidity include payments to the plan sponsor for pension benefits, purchases of securities andsettlement 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 table shows the determination of net liquid assets:

March 31, 2013($ thousands) Public Service Teachers’ Judges’

Net assets $ 5,623,211 $ 4,448,519 $ 33,415Less: investment in NBIMC New Brunswick Fixed Income Opportunity (note 3) (9,384) (7,351) (56)

Less: non-publicly traded assets in NBIMC Canadian Real Estate (note 3) (109,997) (87,077) (655)

Less: investment in NBIMC Infrastructure (note 3) (41,083) (33,516) (246)Less: investment in NBIMC New Brunswick and Atlantic Canada Equity Opportunity (note 3) (15,278) (12,404) (93)

Less: investment in NBIMC Private Equity (note 3) (159,657) (129,098) (1,007)Less: collateral pledged (note 3) (130,676) (103,458) (778)Less: investment commitments (note 9) (133,973) (108,179) (841)Net liquid assets $ 5,023,163 $ 3,967,436 $ 29,739

March 31, 2012($ thousands) Public Service Teachers’ Judges’

Net assets $ 5,226,231 $ 4,157,508 $ 31,100Less: investment in NBIMC New Brunswick Fixed Income Opportunity (note 3) (12,123) (9,656) (72)

Less: investment in NBIMC Canadian Real Estate (note 3) (72,817) (57,999) (433)Less: investment in NBIMC Infrastructure (note 3) (28,144) (23,344) (170)Less: investment in NBIMC New Brunswick and Atlantic Canada Equity Opportunity (note 3) (9,649) (7,893) (59)

Less: investment in NBIMC Private Equity (note 3) (141,009) (115,279) (886)Less: collateral pledged (note 3) (152,038) (120,873) (906)Less: investment commitments (note 9) (114,191) (92,934) (712)Net liquid assets $ 4,696,260 $ 3,729,530 $ 27,862



(g) Securities Lending:

Certain of the unit trust funds in which the Funds are invested have entered into a securities lending arrangement with theirsecurities custodian with the objective of enhancing portfolio returns. Under this program, the custodian may loan securitiesowned by the unit trust funds to other approved borrowers in exchange for collateral in the form of readily marketablegovernment-backed securities equal to at least 105% of the value of securities on loan and a borrowing fee. NBIMC hasrestricted the approved borrowers under this program to minimize exposure to counterparty credit risk. Securities on loanremain recorded as investments on the Statement of Net Assets. As at March 31, 2012 the Funds had loaned securities withan estimated fair value as follows:


Fixed IncomeNBIMC Nominal Bond $ 195,313 $ 244,249 $ 163,941 $ 198,786 $ 1,163 $ 1,455NBIMC Corporate Bond 28,435 — 20,874 — 169 —NBIMC Money Market 8,127 15,922 6,350 12,606 48 94NBIMC Student Investment 250 227 274 247 2 2

232,125 260,398 191,439 211,639 1,382 1,551EquitiesNBIMC Canadian Equity Index 15,171 30,361 10,919 22,098 90 181NBIMC Low Volatility Canadian Equity Fund 12,956 — 10,257 — 77 —

NBIMC External Canadian Equity 12,075 16,973 9,608 13,519 72 101NBIMC S&P/TSX Completion Index 33,869 32,887 26,951 26,194 202 196NBIMC Canadian Equity Active Long Strategy 18,245 28,064 14,300 22,355 110 166

NBIMC EAFE Equity Index 65,429 77,470 49,113 58,650 386 458NBIMC Low Volatility International Equity 23,262 5,368 18,416 4,276 138 32

NBIMC U.S. Equity Index 42,791 41,812 32,594 32,001 253 249NBIMC Low Volatility U.S. Equity 8,713 — 6,898 — 52 —

232,511 232,935 179,056 179,093 1,380 1,383Inflation Linked AssetsNBIMC Inflation Linked Securities 126,630 93,220 105,744 78,491 754 556NBIMC International Real Estate 14 4,792 16 4,993 — 28

126,644 98,012 105,760 83,484 754 584Alternative InvestmentsNBIMC North American Market Neutral 7,331 8,564 5,803 6,821 44 50NBIMC Quantitative Strategies 8,300 7,250 6,571 5,775 49 44

15,631 15,814 12,374 12,596 93 94Total $ 606,911 $ 607,159 $ 488,629 $ 486,812 $ 3,609 $ 3,612




5. Derivatives

A derivative is a financial contract, the value of which is derived from the notional value of underlying assets, indices,interest rates or currency exchange rates. The Funds, through their investments in the unit trust funds, may be party tocertain derivatives, including futures contracts, interest rate swaps, forward foreign exchange contracts, cross currencyswaps and total return equity swaps. Futures contracts are agreements between two parties to buy or sell a security orfinancial interest at a specified date, quantity and price. Futures contracts are standardized and traded on recognizedexchanges. Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount.Forward currency contracts are agreements between two parties, traded over the counter and not on an organized exchange,to purchase or sell currency against another currency at a future date and price. Total return equity swaps, traded in the over-the-counter market, are contractual agreements between two counterparties to exchange financial returns with predeterminedconditions based on notional amounts.

Derivatives are used for various purposes, including: to invest in a particular stock market in an inexpensive and effectivefashion (e.g. futures and swaps); to enhance returns (total return equity swaps); to convert a fixed interest rate payment intoa floating interest rate payment (interest rate swaps); and to hedge against potential losses due to changes in foreign exchangerates or stock prices (forward foreign exchange contracts).

Derivative contracts create credit risk exposure should counterparties be unable to meet the terms of the contracts (see note4(d)). NBIMC mitigates this risk exposure by only entering into derivatives with investment grade counterparties andrestricting each counterparty exposure to no more than 5% of total assets. Derivatives are also subject to foreign currency,interest rate, pricing and liquidity risk (see notes 4(b), (c), (e), and (f)). Liquidity risk is the risk that the Funds would needto pay a premium to cancel or offset a derivative position prior to its maturity.

The Statements of Investment Policy do not permit leverage in the use of derivatives. Accordingly, short-term assets in anamount sufficient to cover potential derivative exposure are maintained as cash underlay.

The following tables summarize the derivative contracts of each Fund. Notional values represent the volume of outstandingpositions of the derivative contracts. The notional value is the amount to which a rate or price is applied in the calculationof cash flows for swaps, foreign exchange contracts and futures.

Public Service 2013 2012($ thousands) Notional Value Fair Value Notional Value Fair Value

Asset management:Equity futures $ 81,037 $ 1,250 $ (22,974) $ 441Equity swaps 583,817 7,984 556,275 7,603Forward exchange contracts (39,702) (278) 11,262 (147)

Net fair value of derivative contracts $ 8,956 $ 7,897

Teachers’ 2013 2012($ thousands) Notional Value Fair Value Notional Value Fair Value

Asset management:Equity futures $ 61,529 $ 974 $ (16,434) $ 344Equity swaps 420,543 5,764 404,884 5,534Forward exchange contracts (29,882) (199) 9,328 (123)

Net fair value of derivative contracts $ 6,539 $ 5,755


5. Derivatives (cont’d)

Judges’ 2013 2012($ thousands) Notional Value Fair Value Notional Value Fair Value

Asset management:Equity futures $ 478 $ 7 $ (137) $ 3Equity swaps 3,459 48 3,313 45Forward exchange contracts (234) (1) 68 —

Net fair value of derivative contracts $ 54 $ 48

The term to maturity based on the notional value for the derivatives as at March 31 is as follows:


Under 1 year $ 625,152 $ 544,563 $ 452,190 $ 397,778 $ 3,703 $ 3,244

6. Net Investment Income

(a) Net Investment Income (Loss) by type:

Net investment income for the year ended March 31 is as follows:


Interest income $ 66,696 $ 72,143 $ 54,668 $ 59,038 $ 392 $ 426Dividend income 84,529 59,266 67,009 47,178 503 352Income from Money Market Pool 3,321 3,723 2,627 3,010 20 22Income (loss) from derivatives 42,338 (45,525) 30,868 (33,411) 251 (271)Securities lending income 1,305 1,056 1,006 814 8 6Transaction costs (4,910) (5,861) (3,798) (4,577) (29) (35)Other (2,922) (3,376) (2,354) (2,737) (18) (20)

190,357 81,426 150,026 69,315 1,127 480Realized gains on investments 208,391 52,141 165,850 47,951 1,235 317Unrealized gains on investments 70,195 105,612 55,610 88,827 423 630Total gain on investments 278,586 157,753 221,460 136,778 1,658 947Net investment income $ 468,943 $ 239,179 $ 371,486 $ 206,093 $ 2,785 $ 1,427




6. Net Investment Income (cont’d)

(b) Net Investment Income (Loss) by unit trust fund:

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


Fixed IncomeNBIMC Nominal Bond $ 43,570 $ 132,948 $ 35,911 $ 108,233 $ 258 $ 782NBIMC Corporate Bond 15,682 1,406 11,767 1,123 93 8NBIMC New Brunswick Fixed Income Opportunity 477 1,114 378 891 3 7

NBIMC Money Market 585 1,242 452 985 3 7NBIMC Student Investment 67 (18) 73 (20) — —

60,381 136,692 48,581 111,212 357 804EquitiesNBIMC Canadian Equity Index 48,349 (38,987) 35,360 (27,717) 286 (226)NBIMC Low Volatility Canadian Equity Fund 2,149 — 1,707 — 13 —

NBIMC External Canadian Equity 13,030 (16,952) 10,407 (13,544) 78 (99)NBIMC S&P/TSX Completion Index 3,950 (9,447) 3,156 (7,550) 24 (55)NBIMC Canadian Equity Active Long Strategy 10,803 (19,910) 8,543 (15,911) 66 (116)

NBIMC External International Equity 14,963 (4,472) 11,948 (3,570) 89 (26)NBIMC EAFE Equity Index 92,033 (13,532) 69,538 (10,265) 541 (77)NBIMC Low Volatility International 23,195 3,506 18,443 2,802 138 21NBIMC U.S. Equity Index 90,750 61,649 69,405 47,214 536 364NBIMC Low Volatility U.S. Equity 26,938 3,549 21,421 2,836 160 21

326,160 (34,596) 249,928 (25,705) 1,931 (193)Inflation Linked AssetsNBIMC Inflation Linked Securities 11,419 69,958 9,613 59,051 68 413NBIMC Canadian Real Estate 22,277 12,062 17,737 9,250 133 71NBIMC International Real Estate 21,651 29,612 23,685 31,176 129 175NBIMC Infrastructure Fund 2,102 3,758 1,734 3,113 13 22

57,449 115,390 52,769 102,590 343 681Alternative InvestmentsNBIMC North American Market Neutral 535 (11,794) 428 (9,438) 3 (69)NBIMC Quantitative Strategies 5,332 4,586 4,242 3,669 32 27NBIMC New Brunswick and Atlantic Canada Equity Opportunity 4,395 13,178 3,577 10,866 27 81

NBIMC Private Equity 14,691 15,723 11,961 12,899 92 9624,953 21,693 20,208 17,996 154 135

Net investment income $ 468,943 $ 239,179 $ 371,486 $ 206,093 $ 2,785 $ 1,427


7. Capital and Annualized Long-Term Returns

The definition of capital, as it pertains to each of the Funds, is the net assets of each Fund. Net assets do not include thepension liabilities and consequently, these financial statements do not purport to show the adequacy of net assets to meetthe pension obligations. Each Fund’s objective is to achieve annualized long-term returns that will meet or exceed theinvestment return assumptions contained in the actuarial valuation for each of the pension plans. Note 3 - Investments, Note4 - Financial Instrument Risk Management, and Note 5 - Derivatives provide qualitative descriptions of the investmentmanagement process and quality of investments.

The most recent actuarial valuation received for each of the Public Service and Teachers’ is April 1, 2011 and for the Judges’is April 1, 2010. These valuations provide the long-term nominal and inflation adjusted return assumptions. The target long-term nominal investment return assumptions contained therein and a summary of the four year and ten year annualizedlong-term nominal returns for each Fund is as follows:

2013 2012Annualized Nominal Returns Annualized Nominal ReturnsActuarial Actuarial

Requirement 4 Year 10 Year Requirement 4 Year 10 Year

Public Service 6.60% 10.93% 7.90% 6.60% 3.15% 6.16%Teachers’ 6.60% 11.04% 7.87% 6.60% 3.32% 6.22%Judges’ 6.60% 10.93% 8.13% 6.60% 3.14% 6.19%

8. Related Party Transactions

The Province of New Brunswick is the Plan Sponsor for the Public Service Superannuation Act (“PSSA”), Teachers’ PensionAct (“TPA”) and the Provincial Court Judges’ Pension Act (“JPA”) and therefore is related to the Funds. The amounts ofcontributions to and payments from the Funds are determined by the Plan Sponsor and are shown in the Statements ofChanges in Net Assets Held in Trust. The Plan Sponsor is responsible for the administration of collections from andpayments to the pension plan members. The Plan Sponsor and NBIMC charge fees for services to the respective Funds ona cost recovery basis which are also shown in the Statements of Changes in Net Assets Held in Trust.

Included in the Statement of Net Assets Held in Trust are investments in New Brunswick provincial and municipal bondsthat are recorded at their fair values as follows:

($ thousands) 2013 2012

Public Service $ 36,282 $ 51,496Teachers’ 30,454 41,911Judges 216 307

Contributions receivable from the Plan Sponsor as at March 31, 2013 are as shown in the Statement of Net Assets Held inTrust.

Accounts payable and accrued liabilities as at March 31, 2013 as shown in the Statement of Net Assets Held in Trust includethe following amounts due to related parties:

($ thousands) 2013 2012

Public Service $ 2,313 $ 1,798Teachers’ 1,666 1,537Judges 22 9




8. Related Party Transactions (cont’d)

The Funds have undivided interests in the underlying assets of the Unit Trust Funds. The NBIMC Canadian Real EstateFund have made certain of its direct and indirect real estate investments using wholly-owned subsidiary company structures.

NBIMC’s Board of Directors and key management personnel are related parties by virtue of their collective ability tomanage the activities of the Funds.

The cost of the Board function, including per diems, director orientation and Board education, for the year ended March31, 2013 was $133 (2012 - $125) plus travel and accommodation reimbursements of $14 (2012 - $15).

Compensation earned by key management personnel is paid by NBIMC. NBIMC recovers this compensation through itsinvestment management fee charged to the Funds. Compensation earned by key management personnel during the year isas follows:

($ thousands) 2013 2012

Salary and benefits $ 1,123 $ 1,094Short-term incentive plan 322 310Long-term incentive plan 487 212Pension contribution 122 113Retirement allowance 24 26

$ 2,078 $ 1,755

9. Commitments

The NBIMC Private Equity Fund, the NBIMC Canadian Real Estate Fund and the NBIMC Infrastructure Fund havecommitted to enter into investments, which may be funded over the next several years in accordance with the terms andconditions agreed to in various partnership agreements. Unfunded commitments as at March 31 are:


NBIMC Private Equity $ 125,162 $ 94,221 $ 101,204 $ 77,028 $ 789 $ 593NBIMC Canadian Real Estate 8,811 19,970 6,975 15,906 52 119

$ 133,973 $ 114,191 $ 108,179 $ 92,934 $ 841 $ 712

NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATIONFINANCIAL STATEMENTS

March 31, 2013


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, 2013, the statement 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, 2013, and its results of operations and changes in accumulated deficit,changes in net debt and cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Chartered AccountantsJune 4, 2013Fredericton, Canada


NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATIONStatement of Financial Position(in thousands of Canadian dollars)

March 31, March 31,2013 2012

FINANCIAL ASSETSCash $ 89 $ 55Accounts receivable – Pension Funds 2,522 1,745Other receivables 5 8

Total financial assets 2,616 1,808

FINANCIAL LIABILITIESAccounts payable and accrued liabilities 2,191 1,529Supplemental pension (note 5) 374 379Employee future benefits (note 6) 730 642

Total financial liabilities 3,295 2,550NET DEBT (679) (742)

NON-FINANCIAL ASSETSTangible capital assets (note 3) 271 315Prepaid expenses 237 300

Total non-financial assets 508 615

ACCUMULATED DEFICIT $ (171) $ (127)

Contractual obligations and contingencies (note 4)Subsequent event (note 6(b))Indemnifications (note 9)See accompanying notes to financial statements




NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATIONStatement of Operations and Changes in Accumulated DeficitFor the year ended March 31, 2013(in thousands of Canadian dollars)

Budget Actual Actual2013 2013 2012

(note 8)(unaudited)

REVENUEFees:Public Service Superannuation Fund $ 5,182 $ 4,928 $ 4,653Teachers’ Pension Fund 4,128 3,922 3,721Judges’ Superannuation Fund 31 29 27

Other — 2 2Total revenue 9,341 8,881 8,403EXPENSESSalaries and benefits 6,216 6,415 5,787Information systems 1,463 1,409 1,362Office and business 594 351 426Professional services 573 301 375Office rent 317 309 294Amortization of tangible capital assets 140 140 143Total expenses 9,303 8,925 8,387ANNUAL (DEFICIT) / SURPLUS $ 38 $ (44) $ 16

ACCUMULATED DEFICIT, beginning of year $ (127) $ (127) $ (143)Annual (deficit) / surplus 38 (44) 16ACCUMULATED DEFICIT, end of year $ (89) $ (171) $ (127)See accompanying notes to financial statements


NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATIONStatement of Changes in Net DebtFor the year ended March 31, 2013(in thousands of Canadian dollars)

Budget Actual Actual2013 2013 2012

(note 8)

NET DEBT, BEGINNING OF YEAR $ (742) $ (742) $ (725)CHANGES IN YEARAnnual (deficit) / surplus 38 (44) 16Purchases of tangible capital assets (178) (96) (159)Amortization of tangible capital assets 140 140 143Net change in prepaid expenses — 63 (17)DECREASE (INCREASE) IN NET DEBT — 63 (17)NET DEBT, END OF YEAR $ (742) $ (679) $ (742)See accompanying notes to financial statements


NEW BRUNSWICK INVESTMENT MANAGEMENT CORPORATIONStatement of Cash FlowFor the year ended March 31, 2013(in thousands of Canadian dollars)

Actual Actual2013 2012

OPERATING ACTIVITIESAnnual (deficit) / surplus $ (44) $ 16Non cash items:Amortization of tangible capital assets 140 143Increase in accounts receivable – Pension Funds (777) (184)Decrease in other receivables 3 2Increase in accounts payable and accrued liabilities 662 182Increase in supplemental pension 17 17Increase in employee future benefits 88 36Decrease (increase) in prepaid expenses 63 (17)

Net cash from operating activities 152 195

CAPITAL ACTIVITIESPurchases of tangible capital assets (96) (159)Net cash used in capital activities (96) (159)

FINANCING ACTIVITIESPayment of supplemental pension (22) (22)Net cash used in financing activities (22) (22)

INCREASE IN CASH DURING YEAR 34 14Cash, beginning of year 55 41CASH, END OF YEAR $ 89 $ 55See accompanying notes to financial statements


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 Public Service Superannuation Fund, the Teachers’ Pension Fund and the Judges’ SuperannuationFund (“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;

• Have regard to investment opportunities in the Province 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, 2013, the estimated market value of assets managed by NBIMC was $10.1 billion (2012 - $9.4 billion). Theseassets are held in separate pooled fund unit trust entities, managed by NBIMC. NBIMC does not consolidate the financialresults 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.

(c) Employee future benefits

NBIMC participates in a multi-employer defined benefit pension plan that meets the accounting requirements for treatmentas a defined contribution plan. Employer contributions are expensed as incurred.

NBIMC also provides a retirement allowance benefit and a sick leave benefit for eligible employees. These benefits accrueover the estimated service life of the employees and are expensed according to actuarial estimates and assumptions.


NOTES TO FINANCIAL STATEMENTSYears ended March 31, 2013(in thousands of Canadian dollars)

NOTES TO FINANCIAL STATEMENTS



(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).

3. Tangible Capital Assets

Computer Furniture & LeaseholdMarch 31, 2013 equipment equipment Improvements 2013 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

Computer Furniture & LeaseholdMarch 31, 2012 equipment equipment Improvements 2012 Total

CostOpening balance $ 799 $ 387 $ 322 $ 1,508Purchases 55 19 85 159Disposals (3) (23) — (26)Closing balance 851 383 407 1,641

Accumulated amortizationOpening accumulated amortization 556 338 315 1,209Amortization expense 119 14 10 143Disposals (3) (23) — (26)Closing accumulated amortization 672 329 325 1,326Net book value $ 179 $ 54 $ 82 $ 315

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 $374 (2012 - $379) 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

Full-time employees of NBIMC are covered by the Public Service Superannuation Act (the “PSSA”) of the Province of NewBrunswick. The PSSA is a defined benefit multi-employer plan under which contributions are made by both NBIMC andthe employees. For the year ended March 31, 2013, NBIMC expensed contributions of $362 under the terms of the Plan(2012 - $330). NBIMC has no direct liability or entitlement to any unfunded liability or surplus in the plan related to itscurrent or former employees.

(b) Retirement allowance

Full-time employees of NBIMC hired prior to September 1, 2011 are entitled to be paid a retirement allowance upon theirretirement based upon years of service. Over the service life of its employees, NBIMC accrues the estimated future liabilitybased upon actuarial estimates and assumptions. The accrued liability is reduced by actual payments made. This is anunfunded program with no specific assets segregated to meet the obligations when they come due.

The significant assumptions are as follows:

2013 2012

Annual discount rate 3.4% 3.5%Annual salary increases 3.0% 3.0%Mortality None NoneTermination of employment NBIMC Experience PSSA ExperienceRetirement age 15% at Age 56-58 15% at Age 56-58

60% at Age 59-61 60% at Age 59-6125% at Age 62-65 25% at Age 62-65

Actuarial cost method Projected Unit Credit pro-rated on service





6. Employee Future Benefits (cont’d)

Previously NBIMC used a termination assumption developed using termination experience from 2000 -2005 for allemployees under the PSSA. For the current fiscal year, NBIMC has adopted a termination assumption developed usinghistorical termination experience for employees of NBIMC from 2000 - 2013. The changes have been applied prospectively.The impact of the assumption change results in a reduction of accrued benefit obligations and an increase in unamortizednet actuarial gains as at March 31, 2013 in the amount of $94.

Information on the retirement allowance obligation is as follows:

2013 2012

Accrued benefit plan obligationBalance, beginning of year $ 669 $ 584Current service cost 52 48Benefit payments — (45)Interest cost 24 26Actuarial (gain) loss (94) 56Balance, end of year (unfunded) 651 669

Unamortized net actuarial gain (loss) 24 (75)Accrued benefit liability $ 675 $ 594

Benefit costs recognized in the year is as follows:

2013 2012

Current service cost $ 52 $ 48Interest cost 24 26Amortization of actuarial losses 5 2Benefit expense $ 81 $ 76

Subsequent to the year end, the Board of Directors approved a discontinuance of the retirement allowance benefit for alleligible employees effective April 30, 2013. Current benefit entitlements of approximately $842 are expected to be paidno later than October 15, 2013.

6. Employee Future Benefits (cont’d)

(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 include the same discount rate, annual salary increases, mortality, and retirement age describedfor the retirement allowance. For purposes of the actuarial valuation, there has been an assumption that no terminationsoccur. The assumption for the net excess (over 15 days) utilization rate of sick leave is as follows:

2013 2012Age Number of Number of

Days per year Days per year

30 – 31 1.3 1.332 – 34 1.2 1.235 – 36 1.1 1.137 – 39 1.0 1.040 – 41 0.9 0.942 – 44 0.8 0.845 – 46 0.7 0.747 – 48 0.6 0.649 – 51 0.5 0.552 – 53 0.4 0.454 – 56 0.3 0.357 – 58 0.2 0.259 – 60 0.1 0.1

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

2013 2012

Accrued sick leave obligationBalance, beginning of year $ 65 $ 35Current service cost 10 5Benefit payments (6) —Interest cost 2 1Actuarial loss 1 24

Balance, end of year (unfunded) 72 65Unamortized net actuarial gain (17) (17)Accrued sick leave liability $ 55 $ 48





7. Related Party Transactions

NBIMC is related to all Province of New Brunswick departments, agencies and Crown corporations by virtue of commonownership. NBIMC obtains certain employee benefits and services from related parties during its normal course ofoperations which are recorded at the exchange amount agreed to by the parties.

Related party transactions are included in accounts payable and accrued liabilities in the amount of $42 (2012 - $58).NBIMC obtains certain of its telecommunications services from a department of the Province of New Brunswick. Includedin office and business expenses are fees in the amount of $640 (2012 - $688).

NBIMC is economically dependent upon the revenue received from the three public pension funds for which it serves astrustee.

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 20, 2012 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

Cash, accounts and other receivables and accounts payable and accrued liabilities are financial instruments. Financialinstruments may be exposed to risks such as credit risk, foreign currency risk and liquidity risk.

Credit risk arises from the potential that a counterparty will fail to perform its obligations. NBIMC is exposed to thecarrying value of its accounts and other receivables, all of which have been collected subsequent to the date of the financialstatements.

Foreign currency risk arises from holding assets or incurring liabilities denominated in a currency other than the Canadiandollar. NBIMC incurs certain of its expenses in U.S. dollars and incurs foreign currency risk between the date the expensewas incurred and its settlement date. NBIMC manages its foreign currency risk by settling its accounts payable promptly.The maximum exposure that NBIMC has to foreign currency risk at March 31, 2013 is $8 (2012 - $13). Realized foreignexchange losses included in office and business expenses in the Statement of Operations were $1 (2012 - ($6)).

Liquidity risk is the risk of not having sufficient funds available to meet cash demands. NBIMC manages liquidity risk offinancial liabilities by settling its accounts payable within a typical 30 day payment cycle.

Documents

2012 – 2013leg-horizon.gnb.ca/e-repository/monographs/...5.4 4.9 4.2 Alternative Investments Absolute Return 1.2 1.1 1.9 Private Equity 1.1 0.9 0.9 2.3 2.0 2.8 Total Investments