Board of Governors, June 24, 1999 - APPENDIX II, Annex 5

Report of the Investment Committee

This report outlines the recent activities of the Investment Committee.


The portfolio returns for various periods were as follows:

Investment Returns (%)
		      3 months   Annual   Annual  Annual       
		      to Mar 31, Mar 31,  Mar 31  Mar 31, 
Asset Class           1999       1999     1998    1997
Bonds                 0.4%       7.0%     13.5%   12.5%  
Canadian equities     0.1        (11.8)   27.3    21.0  
U.S. equities         3.4        25.9     52.3    21.5   
Non North American 
    equities          1.4        (1.0)    25.3    4.7 
Total return          1.0%       4.4%     26.3%  16.2%

Return of Median 
    fund              0.9%       0.7%     23.2%  16.3%

As indicated above, except for 1997, the performance of the University's portfolio exceeded the performance of the median fund in the Frank Russell universe of approximately 68 Canadian portfolios. Over the 5 year period ending March 31, 1999, the annualized performance of the portfolio was 13.5%, in comparison to the median return of 12.0% in the Frank Russell universe. This represents first quartile performance for our portfolio.

For additional information, please refer to the attached pages which show amounts held by each Investment manager at March 31, 1999, the annual and annualized returns by manager over the 5 years ending March 31, 1999 and the returns in relation to other Canadian balanced portfolios in the Frank Russell Canada universe.

Returns in relation to the objective of a 5% real rate of return

One of the Investment Committee's objectives is to earn a 5% real rate of return over the long term. (i.e. to earn 5% over the rate of inflation, as measured by the Consumer Price Index). Inflation has averaged 1.5% per year for the past 5 years.

For the 5 years ending March 31, 1999, the annualized real rate of return for the portfolio was 12.0%, which consisted of a nominal (actual) annualized return of 13.5% less 1.5% for inflation. For the four years ending March 31, 1999, the annualized real rate of return was 14.2%, consisting of a nominal return of 15.5% less inflation of 1.3%. These returns exceed the Investment Committee's performance objective of a real rate of return of 5%.

Book and Market Value of the Portfolio

As at March 31, 1999, the operating and endowment portfolio had a book value of $142,397,000 and a market value of $167,260,000, as follows:

                   Book Value Market Value  Actual     Target
                   ($000's)   ($000's)      Asset Mix  Asset Mix

Bonds              $66,219    $67,283       40.2%      40.0%
Canadian equities   43,076     48,383       28.9       28.0
U.S. equities       19,602     34,264       20.5       21.0
Non North American 
   equities         13,500     17,330       10.4       11.0
Total              142,397   $167,260      100.0%     100.0%

Investment returns for the month of April, 1999 were 2.7% and as a result the market value of the operating and endowment portfolio grew to $171,762,000 at April 30, 1999.

At April 30, 1999, the portfolio consisted of the following components:

Portion related to Endowed funds: $ 88,862,000

Portion related to Operating and non-endowed funds 82,900,000

Total market value of portfolio $171,762,000

Manager Review

At the meeting of May 25, 1999, the Investment Committee interviewed Templeton Investment Management. (Non-North American equity manager). Although the recent performance of this manager has been disappointing, the Committee remains confident that Templeton will add value over its benchmark index (the E.A.F.E. index) over the longer term.

Reappointment of Investment Consultant

The Investment Committee reappointed Frank Russell Canada as Investment Consultant for a three year period, subject to review each year. Frank Russell Canada also consults to the Joint Pension Board.