SIMON FRASER UNIVERSITY THINKING OF THE WORLD

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  1. DR. PAT HIBBITTS
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MICHAEL FRANCIS ?
DR. PAT HIBBITTS ?
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SIMON FRASER UNIVERSITY

THINKING OF THE WORLD

TO:

Senate

FROM: ?

Kate Ross

Registrar and Secretary of Senate

DATE: ?

August

27, 2009

SUBJECT: SFU Financial Statements - March 31, 2009

Section 32 of the University Act states that the board must make an annual report of its

transactions to the minister, in which it must set out a balance sheet and a statement of

revenue and expenditure for the year ending on the preceding March 31, and other.

particulars the minister may require. A copy of the annual report shall be transmitted to

Senate.

The document is forwarded to Senate for information.

NOTE:

If you do not wish to keep a copy of the Financial Statement, please return it to Bobbie

Grant, Senate & Academic Services, Student Services, MBC 3102

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The Design Group, University Relations

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BOARD OF GOVERNORS

Standing (Left to Right)

Brandt C. Louie, Chancellor

Brian Taylor

Kevin Harding

Michael Francis, Board Chair

Paul Percival

Lynda Brown-Ganzert

Robert Elton

Judy Zaichkowsky

Michael Stevenson, President and Vice-Chancellor

Seated (Left to Right)

Daniel U. Pekarsky, Deputy Board Chair

Natalie Bocking

Jeanette McPhee

Peter Dhillon

Members not appearing in the photograph

Nancy McKinstry

Andrew Barton

4 ?

Message from the President

Message from the Vice President, Finance & Administration

Management Discussion & Analysis (Unaudited)

8 -

About SFU

9 ?

SFU by Numbers

10 ?

2008/09 in Review

10 ?

Our Students

12 ?

Our Faculties

13 ?

Our People

15 ?

Our Research

16 ?

Our Campuses

18 ?

Our External Environment

20 ?

Risks and Uncertainties

2 ?

Future Outlook

24 ?

Financial Highlights of Year Ended March 31, 2009

24 ?

Key Financial Highlights

25 ?

Revenues

25 ?

Expenses

26 ?

Assets

26 ?

Liabilities

27 ?

Net Assets

27 ?

Endowments

28 ?

Sponsored Research Revenues

28 ?

Ancillaries

29 ?

Significant Accounting Policies and Related Organizations

29 ?

SFU Community Trust

29 ?

Simon Fraser University Foundation

29 ?

Great Northern Way

Statement of Management Responsibility

31 ?

Report of the Auditor

32 ?

Financial Statements

34 ?

Financial Position

Operations and Changes in Operating Net Assets

Changes in Net Assets

Cash Flows

Notes to the Financial Statements

Board of Governors

_1'

SFU ANNUAL FINANCIAL REPORT 2008/09

Along with many other institutions, SFU experienced

significant market value losses in its investment

portfolios due to the economic crisis and the severe

decline in financial markets that gripped the world

in 2008. While the impact on the year's financial

statements is evident, future effects on pension funds,

endowment spending, fundraising, and government

spending are being cautiously anticipated.

Despite the financial picture, SFU has been highly

successful in delivering and advancing its academic

programs and research endeavours. SFU remains

in the top tier in natural sciences, social sciences,

and humanities and has experienced continuing

success in these areas. The pursuit of program

differentiation and strategic innovation continues to

offer students opportunities to study and research

in areas that cross disciplinary boundaries and

are innovative in thought and application.

SFU's enrolment growth is a testament to the quality

of the institution. Student demand for SFU's programs

remains strong, particularly at the Surrey campus which

is well positioned to provide post-secondary education

to the growing population seeking entry to university.

The University's presence in downtown Vancouver will

also be elevated in the coming year with the opening of

the School for the Contemporary Arts at Woodward's.

SFU's faculty, students, athletes, staff, and alumni

continue to contribute to the enrichment of the

University through nationally and internationally

recognized accomplishments. SFU retained its

position at the head of Canada's comprehensive

universities, with major achievements in research

and continued success in the recruitment of first

DR. MICHAEL STEVENSON

PRESIDENT

^^A

rate faculty and students. The new fiscal year begins

with the launch of two new faculties, the Faculty of

Environment and the Faculty of Communication, Art

and Technology, as well as the re-focusing of the

Faculty of Applied Sciences. The development and

growth of these faculties is tremendously promising

because of their compelling strategic importance to th

University, the province, and the global community.

The growth and renovation of physical infrastructure

continues at all three campuses. This fiscal year

saw the completion of Blusson Hall (right), the new

building for Health Sciences; on-going construction

at the Woodward's redevelopment in Vancouver for

the School for the Contemporary Arts; and active

planning for new science and technology facilities in

Surrey. In addition, student housing at both Burnaby

and Surrey continue to be a priority and the renovated

graduate residence, Hamilton Hall, opens in May 2009.

As governments wrestle with measures to stimulate

the economy, the importance for continuing investment

in research and education has been repeatedly voiced.

Federal and provincial budgets support the fundamental

importance of investment in universities in order to

allow the province and country to emerge from the

current recession with a revitalized economic order.

This is a cause for optimism which will sustain SFU in

its quest for innovation, engagement, and excellence.

DR. MICHAEL STEVENSON

PRESIDENT

Univentures Corporation

The University owns 100% of the shares of SF

Univentures Corporation (SFUV), which was

established to promote technology transfer to

the private sector. The assets of SFUV are not

material to these financial statements.

20. ASSET RETIREMENT OBLIGATION

In accordance with Generally Accepted Accounting

Principles, the University recognizes asset retirement

obligations where a reasonable estimate of the

fair market value of the obligation and the future

settlement date of the retirement of the asset can be

determined. The University has identified potential

asset retirement obligations relating to removal

and disposal of environmentally hazardous building

materials in some facilities that may be incurred upon

major upgrades or demolition in the future. At this

time, the University has not recognized these asset

retirement obligations as there is an indeterminate

settlement date of any potential future demolition

or renovation of the facilities and therefore the

fair value can not be reasonably estimated.

21. COMPARATIVE AMOUNTS

Certain amounts on the financial statements for the year

ended March 31, 2008 have been reclassified in order to

conform to the presentation adopted in the current year.

Net assets internally restricted for commitments- capital,

lease and other has had the balance at the beginning

of the year retroactively restated to decrease the

balance by $840,000 from $36,619,000 to $35,779,000

(note 12) and the balance deferred contributions at the

beginning of the year has been retroactively restated

by $840,000 from $58,719,000 to $59,559,000 (note

8) to correct the classification of a project balance.

23. FINANCIAL INSTRUMENT RISKS

The University through its financial assets and liabilities is

exposed to various risks. The following analysis provides

a measurement of those risks at March 31, 2009.

Credit Risk

Credit risk is the risk that the University will incur a loss

due to the failure by its debtors to meet their contractual

obligations. Financial instruments that potentially subject

the University to credit risk consist primarily of cash

and short term investments and accounts receivable.

The university has an investment policy to ensure

investments are managed appropriately to secure the

preservation of capital and the availability of liquid funds.

The University has also retained qualified investment

firms to invest surplus funds in accordance with its

investment policy. The majority of receivables are due

from students, government and government agencies.

Foreign Exchange Risk

Foreign exchange risk is the risk that the fair value

or future cash flows of financial instruments will

fluctuate because of changes in foreign exchange

rates. The University is exposed to some foreign

exchange risk as some investments, revenue and

expenses are dominated in foreign currencies.

Interest Rate Risk

Interest rate risk is the risk that the fair value or

future cash flows of a financial instrument will

fluctuate because of changes in market interest

rates. Investments bear some interest rate risk but

these risks are mitigated through the diversification

of the portfolio. Long-term debt, almost entirely, has

interest rates fixed for long periods of time with the

debt intended to be repaid over its stated term.

Market Risk

Market risk is the risk that the value of an investment will

fluctuate as a result of changes in market prices, whether

those changes are caused by factors specific to the

individual investment, or factors affecting all securities

traded in the market (see note 2: financial instruments).

Liquidity Risk

Liquidity risk is the risk that the University will not

be able to meet its obligations as they fall due. The

University maintains adequate levels of working

capital to ensure all its obligations can be met when

the fall due (see note 2: financial instruments)

24. CAPITAL DISCLOSURES

The University considers its capital to be its net assets,

operating, restricted and capital. Its restricted net

assets consist of amounts for future commitments (See

Note 10, 11, and 12) and amounts invested in property

and equipment assets. The University's objectives

when managing its capital are to safeguard its ability

to continue as a going concern so it can continue

to provide services to its students and research

funding agencies. Annual budgets are developed

and monitored to ensure the University's capital is

maintained at an appropriate level. The University

has no external restrictions imposed on its capital.

22.

PRIOR PERIOD ADJUSTMENTS

In order to more distinctly communicate the impact

of investment performance on the financial position

of the University, net assets internally restricted for

commitments- operating, was increased by $6,070,000 at

the beginning of the year from $3,160,000 to $9,230,000;

and net assets operating - operating investments

income (loss) stabilization was decreased at the

beginning of the year from nil to a deficit balance of

$6,070,000 to record the 2008 deficiency of

operating investment returns in comparison

to the budget for the year (notes 10 & 11).

SFU ANNUAL FINANCIAL REPORT 2008/09

NOTES TO THE FINANCIAL STATEMENTS

to the time of next actuarial valuation, this may

necessitate a higher contribution rate by the

University; however, management continues to

view the assumption of long-term investment rate

of return to be reasonable and appropriate.

Pension Plan for Certain Members

This plan covers two members who contributed to

the Teachers Insurance and Annuity Association

and College Retirement Equities fund in 1971, and

have chosen to remain in the defined contribution

plan. University contributions in calendar

year 2008 were $9,300 (2007: $21,600).

16. CONTINGENCIES

From time to time, the University is involved in

litigation or proceedings relating to claims arising

out of its operations in the ordinary course of

business. It is expected that the ultimate outcome

of these claims will not have a material effect on

the financial position of the University. The majority

of these claims are covered by the University's

insurance coverage. Any University payouts that

may result from these claims will be recorded in the

period when it becomes likely and determinable.

As described in the foregoing note 15, the University

has a contingent liability of $21,772,000 in relation

to the Administrative/Union Pension Plan.

17. CANADIAN UNIVERSITY RECIPROCAL

INSURANCE EXCHANGE

The University is a member in a self-insurance co-

operative in association with other Canadian universities

to provide property and general liability insurance

coverage. Under this arrangement, referred to as the

Canadian University Reciprocal Insurance Exchange

(CURIE), the University is required to share in any net

losses experienced by CURIE, beyond the reserves

that CURIE has accumulated from member premiums.

Subscribers to CURIE have exposure to premium retro-

assessments should the premiums be insufficient to

cover losses and expenses. The University is committed

to this insurance arrangement until December 31, 2012.

18. PLEDGES

Pledges made by donors to the University for

donations to be received in future years are estimated

at $32,320,000 (2008: $39,429,000). Pledges are

not recorded in the financial statements until the

related donations are received by the University.

19. RELATED ENTITIES THAT

ARE NOT CONSOLIDATED

TRI UM F

Simon Fraser University is one of six universities in a

joint operation called the Tr-Universities Meson Facility

(TRIUMF) located on the University of British Columbia

(UBC) campus. On April 1, 2009 a seventh university

became a member of the joint operation. TRIUMF is

Canada's National Laboratory for research in Particle

Physics. TRIUMF is not incorporated and each University

has an undivided fractional interest in all the assets,

liabilities and obligations of TRIUMF, except for the land

and buildings occupied by TRIUMF, which are owned

by UBC. The facility and its operations are funded by

federal government grants and the University makes

no direct financial contribution and has no expectation

of monetary gain from this research venture.

$ in thousands ?

2009 ?

2008

FINANCIAL POSITION

Total assets ?

16.845 ?

16,607

WCUMBS

The University is one of five University members of

the Western Canadian Universities Marine Biological

Society (WCUMBS), which operates a research

station at Bamfield, British Columbia. The Society is

a not-for-profit organization incorporated under the

Society Act of British Columbia. The University made

a grant to the Society in 2009 of $308,000 (2008 -

nil). Such grants, when made, are recorded as an

expenditure by the University. There is no expectation

of monetary gain to the University from this venture

SFU Community Corporation

The University owns all of the outstanding shares

of SFU Community Corporation. SFU Community

Corporation has no business operations and

its sole purpose is to act as the trustee of SFU

Community Trust as described in Notes 2 and 9.

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Total liabilities

13,685

11,466

Fund balances

restricted

3,845

3,371

other

(685)

1,770

16,845

16,607

RESULTS OF OPERATION

Revenue

60,541

67,669

Expenses

62,522

66,361

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SFU ANNUAL FINANCIAL REPORT 2008/09

' ?

MESSAGE FROM THE PRESIDENT ?

14. INVESTMENT INCOME (LOSS)

$ in thousands

income (loss)

Realized (notes 8, 10)

. ?

Unrealized (change in market

adjustment (notes 4, 10)

Subtotal (notes 8, 10)

Decrease in endowment income

stabilization account realized & unrealized

from beginning of year (note 8)

Operating ?

2009

Fund

Other

Endowment

total

(14,081) ?

478 ?

(1,762)

(15,365)

203 ?

(36,976) ?

(36,773)

(13,878) ?

478 ?

(38,738) ?

(52.138)

- ?

15,090

15,090

note 8

Investment markets have been volatile and this is

to the Board of Governors of the University.

reflected in changing values of investments and

The University shall contribute to the fund such

investment income. This continued subsequent to the

amounts as the Board of Governors determines

fiscal year end with the TSX

Composite increasing 19.3%

are required to fund the retirement benefits. All

and the DEX Universe Bond Index decreasing 0.4%.

contributions to the plan are by the employer.

The 2008/09 fiscal year commenced with a last

minute reduction in the provincial operating

grant. The considerable $6 million cut came on

the heels of finalizing a budget which had already

incorporated a reduction in expenses of $9 million.

The cuts initiated a hiring freeze, further curtailment of

discretionary spending, and the use of cash reserves

to successfully present a balanced operating budget

to the Board of Governors. That was the beginning

of the financial challenges for the fiscal year.

The deteriorating economy and relatively sudden crash

in financial markets impacted the entire global economy

By fall 2008, world markets had lost an estimated

30 per cent of their value since the beginning of the

year, and SFU watched as the value of its investments

plummeted by 22 per cent by early 2009. However,

the overall loss of market value for the year is only 16

per cent. Moreover, equity markets are continuing to

recover and investments have continued to rebound

since the beginning of the new fiscal year. In the

meantime, the impact on diminished revenues has

been mitigated by reducing endowment spending

from 5% to 4% and long-term investment strategies

have been re-visited with a rebalancing of investment

portfolios. The outlook remains guardedly optimistic.

The University experienced a $62.2 million net

loss for the year. This was primarily the result of

investment losses as operating investment income

was $18.9 million below budget and endowment

losses of $32.9 had a total impact of $51.8 million.

in addition, increased accruals related to employee

future benefits, one-time restructuring costs, and

consolidated losses from Great Northern Way Campus

Trust also contributed to the deficit. Operating revenues

DR. PAT HIBBITTS

VICE PRESIDENT

FINANCE & ADMINISTRATION

from government remained stable and tuition fees

exceeded budget by $13 million as undergraduate

enrolment continues to exceed targets. Funding for

research remains strong and revenue from our ancillary

operations remains consistent with the prior year.

Concurrent with the economic and financial market

decline, donation revenue also diminished during

the year. While fundraising strategies have been

adjusted to accommodate smaller gifts, our largest

challenge is to raise $12 million more in pledges

for construction of the new facilities for the School

for Contemporary Arts at Woodward's (right).

While the financial challenges continue, we are

proactively addressing these risks through prudent

use of resources, efficient administration of programs,

alternative revenue generation strategies, and strategic

re-alignment of our academic, research and financial

plans. The University is further encouraged by the

federal and provincial government's support of post-

secondary education through additional funding and

commitment to infrastructure development. We will

continue to work with the provincial government and

fellow research universities to develop a sustainable

funding formula that adequately covers our costs of

compensation, deferred maintenance, and inflation

and which will let us confidently emerge with a

sustainable financial model that supports the long-term

operation of research universities in British Columbia.

DR. PAT HIBBITTS

VICE PRESIDENT, FINANCE & ADMINISTRATION

2008

total

25,022

(5,837)

19,185

The latest actuarial valuation as at December 31,

2007 reports a going concern surplus on a smoothed

value basis of $104,000 and on a market value basis

of $3,931,000. The 2007 solvency valuation reported a

solvency deficiency (i.e. if the plan were to be wound-

up on that date) of $21,772,000. Pursuant to the British

Columbia Pension Benefits Standards Act, instead of

making solvency deficiency payments of $4,856,000

for five years commencing in 2008, the University

chose the alternative of arranging a letter of credit in

the amount of $5,000,000 to satisfy the current year's

contribution requirement. in the calendar years 2009

through 2012 contributions or further letters of credit

will be required to satisfy the contribution requirement.

Any surplus in the plan is not available to the University

as the arrangement stipulates that the University will

not suspend or reduce its contribution to the pension

fund without the prior approval of the employee

organizations. Pursuant to an agreement between

the University and the employee organizations, the

portion of any surplus in excess of 15% of the defined

benefit portion of the liabilities with assets taken

at market values would be distributed to members.

The next valuation is to be completed with an

,effective date no later than December 31, 2010.

The employer contribution rate is 12.69%, as indicated by

the 2007 actuarial valuation. Employer contributions for

calendar year 2008 were $10,897,000 (2007: $10,047,000).

The valuation is based on the 1994 Uninsured

Pensioner Mortality Table projected to 2015 using

mortality projection scale AN an investment rate

of return of 6.00%; and an inflation rate of 2.25%.

Since the December 31, 2007 actuarial valuation,

investment markets have experienced extraordinary

declines and the plan's investments have been

affected by this decline. Should the decline persist

15. PENSION PLANS

The assets and liabilities of pension plans are not

reflected in the University's financial statements.

The boards of trustees of these plans represent plan

members and the employer and are responsible for

the management of the pension plans including the

investment of assets and administration of benefits.

Academic Pension Plan

•

The University Pension Plan for Academic Staff

generally provides benefits on a money purchase

basis, but includes a defined benefit option for

members who were in the plan on March 20, 1973.

All contributions to the plan are by the employer.

Contributions by the University for the calendar

year 2008 were $10,320,000 (2007: $9,630,000).

An amendment to the plan in 1981 and a letter of

agreement between the University and the Faculty

Association in 1990 addressed the funding and

the distribution of the formula retirement benefit

account. The latest actuarial valuation for this group

as at December 31, 2006 shows an actuarial liability

of $25,123,000 against the actuarial value of assets

of $29,209,000 resulting in a surplus of $4,086,000.

The valuation is based on the 1994 Uninsured

Pensioners Mortality Table, using an investment

rate of return of 6.25% and price inflation of 3%.

Administrative/Union Pension Plan

The University Pension Plan for the Administrative!

Union Staff provides benefits based on years of service

and the average of the highest sixty (60) consecutive

months' salary. Pensions are indexed to CPI up to a

maximum of 3% per annum. Under the Pension Plan:

The University's contribution is based on the amounts

estimated by the Actuary and recommended by

the Administrative/Union Pension Plan Trustees

SFU ANNUAL FINANCIAL REPORT 2008/09

NOTES TO THE FINANCIAL STATEMENTS

Endowment principal

in thousands

2009 ?

2008

Individual endowment

principal balances

181,840 ?

176,902

Income stabilization account

loss not deducted from

individual endowment

principal balances (note 8)

(32,869) ?

12. INTERNALLY RESTRICTED FOR

COMMITMENTS: CAPITAL. LEASE

OTHER

$ in thousands ?

2009 ?

2008

Ancillary enterprises

(400) ?

(1,141)

Property and equipment ?

(3.547) ?

4,507

Specific purpose (note 22)

12,560

15,796

Long term lease commitment

- 15,170

16,096

Self insurance ?

589

521

The Ancillary Enterprises represents accumulated

funds held for (deficit of) the ongoing operations of

ancillaries: Bookstore, Food Services, Microcomputer

Store, Residences, Parking and Document Solutions.

Property and equipment represents funds that

are restricted to capital projects; with a deficit

representing capital expenditures incurred in

advance of cash receipt of related funding.

Specific purpose represents funds from various sources

that are allocated internally to specific activities.

Long-term lease commitment funds provide for

obligations entered into for the occupancy of the

University's Harbour Centre facility, which include

lease payments, tenant loan payments, a contribution

towards operating costs, and to fund amortization

of the prepaid lease and is reported as an asset on

the University's statement of financial position.

In a previous year, the University prepaid a

termination payment due at the expiry of the lease

in December 2017 as the terms were favorable

to the University. The prepaid lease is being

amortized over the remainder of the lease.

Commitments in relation to the Harbour Centre

lease for the next five years are $331,000 per year.

Self-insurance funds are held to pay self-

insured property and liability losses.

13. ENDOWMENT

Endowment consists of restricted donations to the

University. The investment income generated from

endowments must be used in accordance with

the various purposes established by the donors.

Donors as well as University policy stipulate that

the economic value of the endowments must be

protected by limiting the amount of income that may

be expended, and capitalizing a portion of investment

income in order to maintain purchasing power.

$ in thousands

2009 ?

2008

Balance, beginning of year ?

176,902 ?

147,667

Donations ?

-- -

9,270 ?

14,431

Capitalized investment income ?

919 ?

5,642 ?

Equity income for the year from

SFU Community Trust (note 9)

(1,828)

(791) ?

Deferred investment income

capitalized (returned)

under Burnaby Mountain

Matching program

(5,529)

6,277

Deferred contributions

capitalized pursuant to donor

definition of endowment terms

& other endowment fundraising ?

2,106

3,676

Endowment investment

loss & endowment income

allocations charged to

endowment net assets (note 8)

(32,869) ?

Income (loss) from the University's beneficial

interest in SFU Community Trust was recognized

as a direct increase in (reduction of) net assets

held as endowment principal. Note 9 describes,

the Trust's sale of 99 year leases that result in

recognition of "deferred lease proceeds" which are

amortized to income over the remaining terms of

the leases. Funds from the Trust are invested to

generate income for the benefit of the endowment.

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SFU ANNUAL FINANCIAL REPORT 2008/09 ?

MESSAGE FROM THE VICE PRESIDENT, FINANCE AND ADMINISTRATION

I_V

MANAGEMENT DISCUSSION

SFU Community Trust: Financial Summary

ANALYSIS

UNAUDITED ?

$in thousands

2009 ?

-2008 ?

FINANCIAL POSITION

Total assets ?

29,705 ?

26,834

Total liabilities ?

17,922 ?

13,007

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RESULTS OF OPERATIONS & TRUST BALANCE

Revenue

1,032

6,674

Expenses

3,076

8,311

Net income (loss) for the year

(2,044)

(1,637)

Trust balance, beginning of year

13,827

7,338

Transfer of land rights from the University

8,126

utI

CASH FLOWS

Operating activities ?

(3,054)

7,729

Investing activities ?

(3,248)

(9,693)

Financing activities ?

6.410 ?

346

ii ? I1 ?

ABOUT SFU

Simon Fraser University is a public university serving

students from British Columbia, Canada, and the world

The University is a research intensive, comprehensive

post-secondary learning institution with approximately

33,000 credit students and more than 940 instructional

and research faculty members. The University's

three distinct campuses offer a broad range of

degrees from eight faculties as well as many varied

continuing education and mature learner courses.

Dedicated to our mandate of instruction, research and

community engagement, the University is recognized

internationally for the quality of its faculty, students,

academic programs, and research. SFU consistently

ranks among the nation's top comprehensive

universities, both for academic offerings and research.

In 2008, according to

The Times of London

2008 survey

of the world's best schools, SFU ranked among the

top 200 universities in the world: placing 109th in

overall academic ranking; 64th in social sciences; and

116th in engineering and information technology. In

research, Re$earch lnfosource Inc. ranked SFU 4th

among Canada's comprehensive universities, and

20th among Canada's top 50 research universities.

SFU's strengths lie in its ability to offer students a

broad range of choice in interdisciplinary programming.

The University offers innovative and diversified core

programs in the natural sciences, social sciences,

and humanities, and the current focus is to continue

to build expertise in the health services.

10. OPERATING (DEFICIT) : OPERATING

11. INTERNALLY RESTRICTED FOR

SFU's work integrated programs, well regarded

INVESTMENT INCOME (LOSS) STABILIZATION

COMMITMENTS: OPERATING

international field schools, and dual degree

Since all of the operating surplus is internally restricted

programs are also a competitive strength.

except for the differential between the operating

$ in thousands

2009

2008

The three distinct campuses in Burnaby, downtown

investment income budget and actual results, this

Balance, beginning ofyear

3,160

13,881

Vancouver, and Surrey, offer the finest facilities for

scholarly ?

pursuits. ?

The main Burnaby campus provides

•

investment income (loss) stabilization account. This

separately report operating

academic and research space for all Faculties as well

is intended to assist readers with understanding

investments income (loss)

students;

as residences

the Surrey

for 1,800

campus

graduate

offers

and

a more

undergraduateintimate

the

performance

cumulative

and

impact

is determined

of changes

follows:

investment

stabilization (note 22)

6,070

learning environment with courses from all Faculties

9,230

13,881

and progressive programs in science, technology,

2009

2008

Increase (decrease) in the year

(3,690)

(4,651)

communication, and engineering; and the Vancouver

campus provides a centre for SFU Business as well as

Fund

Operating

credit and non-credit continuing education courses.

investment income (loss)

in the year (note 14)

The balance at the end of the year of

internally

In addition to academic and research pursuits, SFU's

Realized ? .

(14,081) ?

5:267

restricted for commitments: operating general

Clan athletics is viewed as one of the top athletic

Unrealized ?

203 ?

(5,837)

consists of the following elements:

departments in Canada and SFU has 15 varsity sports

(13,878) ?

(570),

teams involving more than 300 student/athletes.

Budget for the year ?

5,100

5,500

Operating budget carryovers

11,591

14,138

Actual to budget

Auxiliaries & special projects

2,715

3,048

The University has annual revenues of over $483 million.

variance for the year ?

(18,978) ?

(6,070)

Research & other grants

11,765

12,458

Public funds account for 48 per cent while another

-- ?

26,071

29,644

28 per cent is raised through tuition and course fees.

Balance, start of year (note 22)

(6,070) ?

The endowment fund is valued at $149 million and

Less: accrued but not funded

generates resources to support student aid, academic

employee future benefits

programs, athletics, library materials, and research.

Funded liability

25,723

22,135

The University provides essential services to students,

Accrued liability

(40,244)

(36,729)

faculty and staff on campus through several ancillary

Unfunded portion

(14,521)

(14,594)

operations which are run as self-sustaining businesses.

Vacation pay

(6,010)

(5,820)

These include the SFU bookstores, residences

and housing, parking services, microcomputer

Subtotal: accrued but not funded

(20,531)

(20,414)

store, document solutions, and dining services.

I ?

SFU ANNUAL FINANCIAL REPORT 2008/09 ?

. ?

NOTES TO THE FINANCIAL STATEMENTS ?

Net income from Trust

$ in thousands ?

2009

2008

Net income (loss) as reported by the Trust ?

(2,044)

(1,637)

Adjustment of land value on transfer to Trust realized through sales of leases

0 ?

227

Elimination of rent expense in the Trust paid to SFU

0 ?

401

Portion of income of prior year recognized this year

(2,044) ?

(1,099)

216 ?

--S

216

2009 ?

2008 ?

2007 ?

2006 ?

2005

27,479

26,332

25,009

24,368

23,480

5,461

5,241

5,044

4,637

4,363

2,991

2,802

2,524

2,384

2,094

81.1

82.1

83.7

83.8

5,743

5,859

5,582

5,609

5,136

483

519

502

479

425

271

274

267

259

225

155

142

134

130

119

545

512

478

455

400

Change in deferred lease proceeds/equity in Trust

Net income (loss) to University Trust, per above

Base rent elimination

Change in the year

Balance, beginning of year

(1,828)

(793)

401

(401)

(1,427)

(1,194)

(17,904)

(16,710)

9. DEFERRED LEASE PROCEEDS

RELATED ENTITY ACCOUNTED FOR

BY THE EQUITY METHOD

SFU Community Trust is developing land on Burnaby

Mountain known as "UniverCity". The land was

settled on the Trust by the University. The Trust

is a taxable business trust and must pay income

taxes on any taxable income that is not allocated

to beneficiaries. The majority of the development is

being accomplished by the sale of 99 year leases to

developers who will develop residential housing.

SFU Community Trust has two beneficiaries, the

University and Simon Fraser University Foundation-

whose beneficiary is also the University. The

Trust is not consolidated but is accounted for by

the equity method with the income amortized

over the 99 year terms of the related leases.

Since its inception, the Trust has distributed $19,800,000

(2008: $19,800,000) to the University and $2,060,000

(2008: $2,060,000) to the Foundation. Cumulatively,

the University has, on an equity accounting basis,

recognized $1,649,000 (2008: $3,477,000) as

income capitalized to the endowment. However,

the entire actual funds received, $19,800,000, is

invested for the benefit of the endowment.

SFU Community Corporation, a company wholly-

owned by the University, has the sole purpose of being

Trustee of the Trust and has no business operations.

Equity in SFU Community Trust

The University records its equity accounted interest

in the income (loss) of the Trust as a direct increase

(decrease) in net assets held as endowment

principal as described in note 13. This amounted

to a loss of $1,828,000 (2008: loss of $793,000):

SFU BY NUMBERS

STUDENTS

Undergraduate

Graduate

International (Fall)

•Average Entry Grade (BC Grade 12, per cent)

Credentials Awarded (Jan-Dec)

REVENUES & EXPENSES (millions)

Total Revenues

Government Funding

Student Tuition & Fees

Sponsored

Specific

Property &

2009

2008

$ in thousands

Research

Purpose

Subtotal Equipment

total

total

Balance, beginning of year

33,104

25,615

58,719

363,776

422,495

407,454

Reclassification to net assets

internally restricted for commitments:

capital, lease and other (note 22)

840

840

840

33,104

26,455

59,559

363,776

423,335

408,294

Contributions in the year

64,976

31,957

96,933

15,328

112,261

136,289

Transferred to revenue ?

(60,995)

(24,767)

(85,762)

(13,962)

(99,724)

(102,403)

Decrease to endowment income

stabilization account in the year

(47,959)

(47,959)

(18,845)

37,085

(14,314)

22,771

365,142

387,913

423,335

JAPAN

TAIWAN

'HONG KONG

-, -

INDONESIA

OCEANIA

---

SIA

Investment loss and endowment

income allocations charged to

endowmen

net assets:

Endowment investment loss (note 14)

Allocation to individual endowment

spending accounts ?

Allocation to individual endowments

to preserve purchasing power ? -

23,648 ?

9,143 ?

9,143

78 ?

23,648

9,143

Subtotal (note 13)

32,869 ?

32,869

Ialance, end of year ?

30I35

18,555 ?

55,640

365,142 420,782

423,335

Under the deferral method of accounting for

Endowment income stabilization account

contributions, restricted contributions related to

thousands

2009

2008

expenses of future periods are deferred and recognized

Endowment .nvestm..t

as revenue in the period in which the related expenses

income (loss) for the year

are incurred. The $365,142,000 of deferred contributions

. ? .

for property and equipment represents the unamortized

. ?

Realized (note

14)

(1,762)

16,298

portion of restricted capital advances relating to assets

Unrealized (notes 4, 14)

(36,976)

(21,364)

which were purchased with restricted contributions

(38,738)

(5,066)

Endowment income allocated to

Deferred contributions for specific purposes

Individual endowment

$ in thousands

2009

2008

- ?

spending accounts

(9,143)

(10,450)

External non-research contracts ?

10,004 ?

8,320

Endowment principal to

Endowment & other externally

preserve purchasing power

(78)

(3,329)

restricted sp,nding ?

accos

unt

---..

8,551

3,045

Decrease in endowment

Endowment income stabilization

income stabilization

account (2009 deficit, note 13)

- ?

15,090

accont during the year

(47,959)

(18,845)

Balance,year ?

18,555 ?

26,455

Balance, start of year (note 14)

15,090

33,935

(32,86)

15,090

The endowment income stabilization account

Loss on endowment

represents the cumulative difference between

investments allocated to

applied

endowment

to: (a)

investment

individual

income

endowment

and

spending

the fundingaccounts

endowment principal (note 13)

32,869

and (b) the amount added to endowment principal

-Balance, end of year

15,090

to preserve the spending power of the capital.

OUR STUDENTS

SFU continues to attract top quality students

with average entry grades of over 81 per cent for

BC Grade 12 students. Total headcount for the

year was 33,000 students which translate to over

23,000 full-time equivalent (FTE) students.

The 2008 Fall semester enrolment of 20,805

undergraduate domestic students was a 3.4 per

cent increase over the previous year. The new

domestic student intake was 4,796 students at

the end of September which was substantially

more than the University's goal of 4,386.

In 2008/09, BC College transfer students comprised

26 per cent of new students while domestic BC

Grade 12 entry students were 49 per cent of the

total. The Faculty of Arts accepted 79 per cent of

all domestic BC College students followed by the

Faculties of Science (8 per cent), Applied Sciences (8

per cent), and Business Administration (3 per cent).

SFU continues to place strategic focus on building

graduate programs and providing research opportunities

to attract graduate students. The annualized graduate

student headcount was up by 2 per cent over the

previous year to 4,043 students; SFU's largest ever

increase in new graduate students. SFU's focus for future

graduate student expansion continues to be in areas of

government priority. It is expected that as the academic

curriculum is re-shaped and program development within

the new Faculties are finalized, there will be significant

growth in the demand for graduate study in these areas.

With a global focus, SFU continues to build its

international profile and aims to create a richer

contact between domestic and international

students through enrolment more international

students. The number of international students

continues to grow and this year SFU not only met the

international enrolment target of 932 but exceeded

it, enrolling 1,085 new international students.

OUTSTANDING ACHIEVEMENTS

I Grad student

Nic Rivers,

in the School of Resource and

Environmental Management, won a $150,000 Trudeau

scholarship, Canada's richest social sciences and humanities

doctoral prize, for his work in assessing the effectiveness

of alternative strategies to counter climate change.

I Business student

Milun Tesovic's

lyric-sharing website,

MetroLyrics, won a 2008 Red Herring Top

50 award as one

of Canada's most innovative and promising companies. He

also won an SFU Student Entrepreneur of the Year award.

I MBA students

Kylie McMullen, Pinder Rehal, Katy Read,

Judy Luo

and

Ashley

Wu received international recognition

for applying what they learned in the classroom to real

world situations. Their case analysis "Selling the Canadian

Armed Forces Brand to Canada's Youth" received the

Pearson Education Prize for the Best Case Study on the

case track of the 2008 Academy of Marketing Conference,

the UK's largest academic marketing conference.

SFU long-jumper

Ruky Abdulai

broke her own personal

best and a 12-year old Canadian record to compete in

the 2008 Olympic Games, where she finished 25th.

SFu ANNUAL FINANCIAL REPORT 2008/09 ?

NOTES

TO THE FINANCIAL STATEMENTS

76 ?

100

110

133

aim

3BD

7. EMPLOYEE FUTURE BENEFITS

Long term

Early

Non-Pension

2009

2008

$ in thousands

Disability

Retirement

Benefits

total

total

Balance, beginning of year

6,128

4,546

26,055

36,729

34,869

Current service cost

1,212

1,299

1,099

Interest on benefit obligation

404

330

1,303

2,037

763

Amortization of actuarial deficiency

380

1,043

1,423

1,043

6,999

4,876

29,613

41,488

37,774

Disbursements

(371)

(873)

(1,244)

(1,045)

Long Term Disability

The long-term disability amount represents the

liability to employees who are being paid or have

made claims pursuant to the University's self-

insured long term disability plans. An insurance

company administers the plans and is reimbursed

for disability claims payments plus service fees;

which are recorded as employee benefits expense

as incurred in the statement of operations. Thus

no disbursements are deducted from the plan.

An actuarial valuation as at March 31, 2009 reports

an actuarial liability for individuals on long-term

disability of $10,799,000. This compares to the liability

accrued for the obligation at that time of $6,999,000;

resulting in an actuarial deficiency of $3,800,000.

The actuarial deficiency is being amortized over

10 years which represents the average number of

years until the last long-term disability payment to

claimants at the time of the actuarial valuation.

The valuation is based on the 1987 Commission's Group

Disability Valuation Table. The accrued benefit liability

is discounted at the interest rate for long term good

quality corporate investments at the time of the actuarial

valuation, which is assumed to be 6.6%. There are no

contributions by employees to fund this benefit. The

next valuation will be as at March 31, 2010 in order to

determine current service costs on an annual basis.

Early Retirement

The early retirement amount represents current and

future pension payments to employees that took early

retirement in the mid 1980's and other employees that

receive supplementary pensions. This liability is fully

accrued as reported in the actuarial valuation as at

December 31, 2006 and no current service costs liability

is being added to this plan. The actuarial valuation was

based on the 1994 Uninsured Pensioners Mortality

table, a discount rate of 5% and an inflation rate of

2.25% per annum. The expected return on plan assets

is 7.25% and the actual return was 7.25% (2008: 5.5%).

Non-Pension Benefits

The non-pension benefits amount represents the

liability for portions of premiums payable to eligible

current employees and retirees for Medical Services

Plan, Extended Health Benefits and Dental Benefits.

Only employees hired before dates between July

2001 and May 1, 2003, depending on employee

group, are eligible for this benefit. The liability

recognized in the financial statements for non-pension

benefits is $28,740,000 (2008: $26,055,000).

An actuarial valuation as at March 31, 2006 reported

a benefit obligation of $32,246,000 in comparison

to an accrued liability in the financial statements

of $22,855,000 resulting in an unaccrued liability of

$9,391,000. This is being amortized over the average

remaining service period of active employees

covered by the non-pension benefits at the time of

the actuarial valuation; which was 9 years; providing

an annual amortization of $1,043,000. As at March

31, 2009, the balance of the unaccrued liability

identified in the actuarial report that remains to

be accrued as expense and liability is $6,258,000

(2008: $7,301,000) over the next 6 (2008:7) years.

The valuation is based on the RP-2000 Mortality

table, a discount rate of 5%, price inflation at 2.5%

per annum, an extended Health benefit trend rate of

inflation plus 6.0% trending down by 0.5% per annum

to 3.5%, a Dental trend rate of inflation plus 2% and an

MSP Premium trend rate of 2.5%. The accrued benefit

liability is discounted at the interest rate for long term

good quality corporate investments at the time of

the actuarial valuation, which is assumed to be 5%.

There are no contributions by the employees to fund

this benefit. The next valuation will be as at March 31,

2009 with results available in the 2010 fiscal year.

Measuring Student Enrolment

Enrolment is perhaps the most significant indicator

of growth and provides a direct link to revenues and

international student enrolment and enrolment in

premium programs provide an important source of

unrestricted funds. Graduate student enrolment directly

impacts the research mission of the University and

the President's long-term goal is to increase graduate

enrolment to 25 per cent of total enrolment.

While government funded enrolment has increased

by 15.5% since 2003/04, SFU's actual total

enrolment has increased by 17% (figure 2).

2 / PROGRAM FTES

0 UNDERGRADUATES 0 GRADUATES 0 GOVERNMENT FUNDED

16850 ?

17,489 ?

906 ?

18,343

03/04

04/05

05/06

06/07

07/08

08/09

Recruitment and retention of students is a core

strategic goal. Student Services has undertaken

several initiatives to enrich the student's experience

throughout their university career. These initiatives

will continue through 2009/10 with the intent to

•

ot only provide students with greater academic

uccess but a quality of life that makes the university

- journey at SFU a memorable and enjoyable one.

Measuring Student Success

One of the University's mandates is to educate

students and provide them with the knowledge and

skills to enter the workforce. Quantifying this goal

may be partially achieved through measuring the

credentials annually awarded by the University. Total

credential awarded to students has grown by 7 per

cent from 2003 to 2008, with Bachelors increasing

by 29%, Masters increasing by 22%, and Doctorate

degrees increasing by 68%. This is offset by Other

Graduate Credentials decreasing by 56% (figure 3).

3 / CREDENTIALS AWARDED

0 BACHELORS 0 OTHER GRAD CREDENTIALS 0 MASTERS 0 DOCTORATES

SFU is fully committed to supporting the provincial

government's priority to provide post-secondary access

to First Nations students. In March 2007, a First Nations

University-Wide Strategic Plan was approved by the

Senate and Board of Governors. Since that time the

Office of First Nations has been developed to coordinate

First Nations activities across the University. SFU aims

to establish itself as one of the leading universities in

First Nations research, teaching and engagement with

First Nations peoples and communities. In 2007/08

510 First Nations students took courses at SFU.

I ?

SFU ANNUAL FINANCIAL REPORT 2008/09

MANAGEMENT DISCUSSION & ANALYSIS

5. PROPERTY AND EQUIPMENT

Accumulated ?

2009

2008

$ in thousands

Cost

Amortization ?

net

net

Buildings

concrete

713,873 ?

153,942 ?

559,931

545,712

wood

26,858

11,557

15,301

11,753

Site services

35,999 ?

11,176 ?

24,823

24,535

Leasehold improvements

12,189

7,367 ?

4,822

5,014

Computing equipment

29,953

11,820 ?

18,133

24,560

Equipment and furnishings

117,637

45,364

72,273

73,236

Library books

80,246 ?

33,553 ?

46,693 ?

45,205

Special Collections

7,346 ?

- ?

7,346

7,151

Land and property rights

30,141 ?

- ?

30,141

30,101

Total capital assets

!1WZP

274,779 ?

779,463

767,267

Space in the Central City complex for the Surrey campus

agreement and first charge over certain properties.

is included in buildings. The 429 acres of land in Burnaby

The term loan, collateralized by a bankers

is recorded in the financial statements at its 1965

acceptance agreement, bears interest at

assessed value of $572,000. A portion of this land is set

1.26% and is due August 25, 2009.

aside for development by the SFU Community Trust.

As at March 31, 2009, the University had committed

to contracts for the construction and acquisition

of buildings that involve future expenditures of

approximately $29,140,000. The capital financing

plan in relation to construction of the School for the

Contemporary Arts at the Woodward's redevelopment

includes fundraising of which a further $12,318,000

•

of pledges need to be obtained. Alternatively, the

University will need to seek other sources of financing

or to absorb a portion in internal operations.

Buildings, concrete includes $85,000,000 of construction

in progress.

6. LONG TERM DEBT

Undergraduates learn outside the classroom; the Faculty of Environment

OUR FACULTIES

2008 was a pivotal year for the Faculty structure

at SFU. A comprehensive and consultative review

concluded with the recommendation to reorganize

the Faculty of Applied Science and create two new

faculties: the Faculty of Environment and Faculty of

Communication, Art and Technology, both of which

officially begin operations on April 1, 2009. In addition

to the two new Faculties, SFU has six original Faculties:

Applied Sciences, Arts & Social Sciences, Business

Administration, Education, Health Sciences, and

Sciences. As of April 1, 2009, the Faculty of Applied

Sciences has been re-focused to include Computing

and Engineering and Kinesiology will be moved to the

Faculty of Science. SFU has areas of strength in each

of the Faculties and the Faculty re-organization and

corresponding changes to the curriculum are expected

to position SFU to provide new and enhanced programs

The 3-year Academic Plan which provides the strategic

direction for the University's academic mandate is

currently under revision. The consultative process

will raise ideas with respect to academic curricula,

teaching methods, academic quality improvements,

and student services as well as provide the

foundation for faculty and financial planning. The

new plan will be submitted to the Senate in 2009.

Katie Brushett, Masters student in Global Health. Faculty of Health Sciences

Focus on Health

Offering a comprehensive program on public and

population health, the Faculty of Health Sciences

provides an interdisciplinary approach to learning and

research in the health field. The Faculty's mission is

to integrate social and natural science research in

order to discover vital information about population

health on a global scale-and then apply this

knowledge to develop better public health policies.

The Faculty is committed to giving students

practical opportunities to apply their knowledge

to health problems in B.C. and beyond.

The growth and expansion of the Faculty of Health

Sciences is a key strategic priority and enrolment

within the Faculty has increased five times since

Fall 2006. The Faculty enrolled 72 per cent more

undergraduate students in Fall 2008 and 35 per cent

more graduate students than they did the previous year.

SFU continues to plan new clinical programs in the

health fields and medicine that do not duplicate

established programs of existing medical schools.

Mortgages collateralized by student residence

buildings bear interest at rates between 5.375%

to 6.875% and mature between January 1, 2017

and July 1,

2019 with annual payments of $248,000

including principal and interest until maturity.

Mortgage collateralized by the Verdant rental units bears

interest at 5.20% to June 3, 2017, is amortized to June 3,

2037 and is payable in quarterly payments of $84,000.

Debentures-Senior Unsecured issued by the University

for $150,000,000 at 5.613% have semi-annual interest

payments, mature June 10, 2043 and are recorded

on the effective interest rate method. Net

proceeds

of the issue were used to finance capital projects.

The debentures are neither obligations of, nor

guaranteed by, the Province of British Columbia.

$ in thousands ?

2009 ?

2008

--•--••••-•---- -----------------------------------------

Debentures issued to the Province of British

Demand loan ?

3,750 ?

5,875

•

Columbia, unsecured, pursuant to the Financial

Term loan

4,378

4,907

Administrative Act, bear interest rates from 8.75%

Mortgages

to 9.5%, and mature between 2012 and 2022.

student residence ?

1,791

1,915

Annual payments of principal, sinking fund installments

Verdant ?

4,969

5,045

and interest due within the next five years are as follows:

Debentures

•

senior

•

unsecured ?

• ?

140,380 ?

140,090

$ in thousands ?

Principal ?

Sinking fund

Interest

Province of BC ?

11,000 ?

11,000

2010

8,342 ?

175 ?

9,831

166,268 ?

168,832

2011

226 ?

175 ?

9,785

Current portion

(8,517) ?

(11,158)

2012 ?

239 ?

175 ?

9,771

1IFng term debt

157,751

tKI

2013 ?

254

217 ?

9,330

Demand loan is the University's ¼ share of the

2014 ?

259

9,183

Great Northern Way Campus Trust (GNWCT) demand

loan and revolving loan. The loan bears interest a

bank prime plus 0.65%; has interest only payments;

and the principal is due on demand. The debt is

secured by a promissory note, general security

SFU ANNUAL FINANCIAL REPORT 2008/09 ?

NOTES TO THE FINANCIAL STATEMENTS

03/04

04/05

05/06

06/07

07/08 08/09

Disclosure of Related Party Transactions

Foreign equity investments are invested

by Not-for-Profit Organizations

approximately 38% in United States markets and

Section 4460 of the CICA Handbook has been

62% outside of Canada and the United States

amended to be consistent with the related party

accounting rules for private and public enterprises.

Sinking funds investments are held and invested

This standard is effective for the University's

by the Province of British Columbia. These funds

reporting period beginning April

2009. The

totaled $6,249,000 (2008: $5,776,000) and will

impact

University

its financial

does not

reporting

expect that

significantly.this

standard will

provide

the Province

for the retirement

at maturity.

Annual

debentures

sinking

issuedfund

•

Focus on Environmental Studies

payments due within the next five years are included

With continuing global concern over environmental

Disclosure

Not-for-Profit

of Allocated

OrganizationsExpenses

in the debt repayment schedule in note 6.

SFU

sustainability

will provide

and

opportunities

the increase

students

green technologies,

in a number

Section 4470 of the CICA Handbook establishes

Investments with a market value of $8,000,000 are

. ?

of environmentally related areas. Establishing a

disclosure standards for not-for-profit organizations

included above and are held on behalf of a sponsored

core vision for the new Faculty of Environment and

that choose to classify their expenses by function

research organization and for which an offsetting liability

developing new undergraduate programs to support

and allocate expenses from one function to another.

is recorded in accounts payable and accrued liabilities.

its mission is a key activity for the new fiscal year.

Particular emphasis is made to allocation of

Positioning SFU as a leader in environmental economics

fundraising and general administration expenses.

The University holds no asset backed commercial paper.

and policy research as well as continuing research

on alternative energy research is a key priority.

This standard is effective for the University's

Market Adjustment Analysis

reporting period beginning April

2009. The

Focus on Art, Technology and Design

impact

University

its financial

does not

reporting

expect that

significantly.this

standard will

Market

in thousands

adjustment

................ ?

market

rn..

market

SFU has been extremely successful with the School of

rn ....

Interactive Arts and Technology at SFU Surrey and is

CASH AND SHORT-TERM INVESTMENTS

operating investments

committed to continuing the development of programs

Cash and short-term investments includes demand ?

Balance, beginning of year ?

(1,933)

3,904

i n contemporary arts, new media, technology, and

design fields. The new Faculty of Communication, Art

deposits in Canadian financial institutions and

Change in the year ?

203

(5,837)

and Technology, which unites these programs with the

investments maturing in less than one year. Short-

Balance, end of year ?

(1,730) (1,933)

School for the Contemporary Arts and the School of

term investments are recorded at market value.

Endowment investments

Communication under one umbrella, will facilitate the

Balance,

beginning of year ?

15,249

36,613

multidisciplinary collaboration in this important field.

$ in thousands ? 20092008

------------------------.-----

Change in the year ?

(36,976)

(21,364)

Short

Cash

term notes ?

10,017

(8,308)

20,9912,699

Balance, end of year ?

(21,727)

15,249

has

PEOPLE

over 940 faculty members with an additional

Bonds maturing under one year ?

4,816 ?

5,736

Total, end of year ?

(23,457)

13,316

2,300 sessional lecturers, teaching and research

•i

Total

Investments, cost, year end ?

329,995

339,415

assistants. SFU's faculty are accomplished educators

Investments, at market, year end ? 

306,538 

352,731

and researchers and have won national and

international recognition for their achievements.

Cash and short-term investments is presented net

of outstanding items including cheques written

I ?

Kinesiologist

Max Donelan

and his research

but not cleared by the bank as at the date of the

Bonds and Debentures Analysis

team created the Bionic Energy Harvester, a

statement of financial position. Cash and short

2009

2008

wearable technology that generates electricity

term investments is primarily in Canadian currency

$ in thousands

market

market

from the natural motion of walking.

with a minor amount expressed in USA dollars.

Government bonds

Senior mathematics lecturer

Malgorzata Dubiel

Federal ?

22,403

21,127

makes learning math so much fun that 3M named

INVESTMENTS

Provincial and municipal ?

28,104

26,783

her to its 2008 3M National Teaching Fellowship, a

50,507

47,910

select group of Canada's finest university teachers.

$ in thousands ?

20092008

Bonds and debentures ?

151,552

145,465

Corporate debentures ?

33,130

32,742

Market competition for outstanding faculty continues

Canadian equities

72,997

112,026

Indexed bond fund ?

67,915

64,813

to be a challenge for the University. The Faculty

Total

Plan for 2009/10 continues to cite the high

Foreign equities

29,292

42,991

cost of living in the Lower Mainland, the shortage

Long term annuity ?

12,075

12,135

of suitable candidates, and the high salaries paid by

Private equities ?

10,707

8,076

US and other Canadian universities as challenges

Great Northern Way portfolio ?

8,413

9,022

for faculty hiring. Nevertheless, SFUmanaged to fill

Long term promissory note ?

7,236 ?

8,121

95.4 per cent of budgeted positions in 2008/09.

Sinking fund

6,249

5,776

FU's 1,600 non-academic staff provides the supporting

Vancouver Foundation ?

5,925 ?

7,022

•dministrative structure for the academic and research

Donated hedge fund ?

2,092 ?

2,097

activities of the University. In 2008, Mediacorp Canada

Total ?

306.538 ?

352.731

named SFU as one of Canada's Top 100 employers.

PERSONALIZED TEACHING

One of SFU's core values is to provide personalized

teaching which includes fostering meaningful

connections between faculty and students. While class

sizes may vary significantly from faculty to faculty, and

from course to course, the average undergraduate

class size in the Fall semester has remained stable

at around 56 students and the average Graduate

class size has decreased from 16 to 14 students. The

student to faculty ratio has improved since 2003/04

from 26.0:1 to 24.6:1 but has decreased slightly

in the last year due to budget constraints and the

impact this has had on faculty hiring (figure 4).

4 / STUDENT TO FACULTY RATIO

NUMBER

OF STUDENTS PER INSTRUCTOR

SFU ANNUAL FINANCIAL REPORT 2008/09 ?

MANAGEMENT DISCUSSION & ANALYSIS ?

Loans and receivables and other financial liabilities

The University has classified accounts receivable as

loans and receivables, and accounts payable and

accrued liabilities and long-term debt as other financial

liabilities for financial reporting purposes. These

instruments are initially recognized at their fair value

and are subsequently measured at their amortized

cost, using the effective interest method. Gains and

losses arising from changes in fair value are recognized

in net income upon derecognition or impairment.

Given the short-term nature of accounts receivable,

accounts payable and accrued liabilities these items

their carrying value equates to their fair value.

Inventories

Inventories of merchandise held for resale in the

Bookstore and the Microcomputer Store are recorded at

the lower of acquisition cost and net realizable value.

Property and Equipment

Property and equipment acquisitions are recorded

on the statement of financial position at cost.

Donated assets are recorded at fair market

value at the date of acquisition. Amortization of

property and equipment is recorded on a straight

line basis over the estimated life of the asset.

Estimated useful life

(time in years)

No amortization is taken on land, property rights, works

of art and collections, which include that portion of

library assets considered to have permanent value, as

they are considered to have an unlimited useful life.

Impairment of Long-Lived Assets

Long-lived assets are tested for impairment whenever

circumstances indicate that the service potential

has declined. When events or circumstance indicate

that the service potential has declined, the long-lived

assets are written down based upon the relative loss

of service potential and a related expense recognized

in the statement of operations and changes in net

operating assets. A long-lived asset taken completely

out of use is written down to its residual value. There

was no write down of long-lived assets in 2009 or 2008

Prepaid Lease

Prepaid lease expense is capitalized and

amortized over the term of the related lease.

Site services

Buildings

concrete

wood frame

Library books

Equipment and furnishings

Computing equipment

Leasehold improvements

Term of Lease

Use of Estimates

The preparation of financial statements in accordance

with Canadian generally accepted accounting

principles requires management to make estimates and

assumptions that affect the reported amounts of assets

and liabilities at the date of the financial statements,

and revenue and expenses during the reporting period.

Significant areas requiring the use of management

estimates include the impairment of assets, provision

for doubtful accounts, amortization period for property

and equipment, and actuarial assumptions for employee

future benefits and pension plans. Actual results

could differ from management's best estimates as

additional information becomes available in the future.

New Accounting Pronouncements

Recent accounting pronouncements that have been

issued but are not yet effective and have a potential

implication for the University, are as follows:

CICA Handbook Section 1000,

Financial Statement Concepts

Section 1000 has been amended to focus on the

capitalization of costs that truly meet the definition of

an asset and de-emphasizes the matching principle.

Cash Flow Statements

Section 1540 was amended to include not-for-profit

organizations within its scope. This standard is effective

for the University's reporting period beginning April 1,

2009. The University does not expect that this standard

will impact its financial reporting significantly.

Financial Statement Presentation by

Not-for-Profit Organizations

Section 4400 of the CICA Handbook

has been amended to:

eliminate the requirement to treat net

assets invested in capital assets as a

separate component of net assets; and

require that revenues and expenses must

be recognized and presented on a gross

basis when a not-for profit organization is

acting as a principal in transactions.

This standard is effective for the University's

reporting period beginning April 1, 2009. The

University does not expect that this standard will

impact its financial reporting significantly.

The revised requirements are effective for the

University's reporting period beginning April 1,

2009. The University is currently evaluating the

impact of the adoption of this change on the

disclosure within its financial statements.

SFU ANNUAL FINANCIAL REPORT 2008/09

NOTES TO THE FINANCIAL STATEMENTS

SFU's research profile continues to grow, as evident

from the increase in sponsored research revenues and

various well-publicized research achievements. SFU was

singled out in the annual rankings of Canada's innovation

leaders for the largest income growth among the

research-intensive universities. Between 2002 and 2007,

external research funding increased by 126 per cent and

continues to remain strong. In 2007/08, the University

received funding of $12.2 million for the ATLAS project.

Approximately half of SFU's research funding

comes from the three federal granting councils

NSERC, SSHRC, and CIHR, where faculty members

have been extraordinarily successful. Researchers

have consistently exceeded the national success

rates in SSHRC and NSERC competitions.

Past and future success in competing for research

awards depends upon many different factors: faculty

members and their stature and track records in their

respective fields; recruitment and retention of superior

graduate students to work with these professors,

the effectiveness of collaborative partnerships,

0th within SFU and with other institutions; and a

distinctive, competitive edge in innovative programs.

SFU researchers received many notable awards

and recognition for outstanding achievements.

I SFU resource economist Mark Jaccard's tireless

work in persuading governments to enact

effective climate-change policies earned him

the 2008 Academic of the Year award from the

Confederation of University Faculty Associations.

Health Sciences professors

Tim Takaro and

Ryan Allen

became involved in a $12 million Canadian Healthy

Infant Longitudinal Development (CHILD) Study. They

hope to determine the factors that are increasing

the incidence of childhood asthma and allergies:

Entomologist

Bernie Roitberg

extensive research

has generated significant advances in understanding

the behaviour and evolutionary ecology of insects

and their natural enemies. In October 2008, the

Entomological Society of Canada recognized his

research with a 2008 gold medal and a ranking

as "one of Canada's international science stars."

I SFU chemist

David Vocadlo

led an international

team whose enzyme inhibitor seems to prevent

the tangling of a brain protein linked with the

Onset of disorders such as Alzheimer's disease.

NOTES TO THE FINANCIAL STATEMENTS

SIMON FRASER UNIVERSITY 2008/09

OUR RESEARCH

AUTHORITY AND PURPOSE

Simon Fraser University is an agent of the Crown and

operates under the authority of the University Act, R.S.

Chapter 468. The purpose of the University is to conduct

research and deliver a full range of undergraduate,

graduate and continuing studies programs. Simon Fraser

University is a not-for-profit entity governed by a Board

of Governors, the majority of which are appointed by the

provincial government of British Columbia. The academic

governance of the University is vested in the Senate. The

University is a registered charity and is therefore exempt

from income taxes under section 149 of the Income

Tax Act. The University receives a significant portion of

its revenues from the Province of British Columbia.

SIGNIFICANT ACCOUNTING POLICIES

AND REPORTING PRACTICES

Accounting Method

The financial statements are prepared in accordance

with Canadian generally accepted accounting principles

for not-for-profit organizations. These principles

are consistent with those used in prior years.

The deferral method of accounting for contributions

is used. Net assets are reported in relation to general

operating, internally restricted, invested in property

& equipment and endowments. Revenues and

expenses are recorded on a gross and accrual basis.

Related Entities

The University's 25% interest in the Great Northern

Way Campus Trust is recorded on a proportionate

consolidation basis. Simon Fraser University

Foundation is consolidated in the accounts of the

University. The SFU Community Trust is recorded

based on the equity method as described in Note 9

Details of other corporations and consortiums,

in which the University may have a significant

interest, are contained in Note 19. These entities

are not consolidated in these financial statements

as the net assets are not contemplated to be, and

are not, readily realizable by the University.

Revenue Recognition

Operating government grants not restricted in use

are recognized when received or receivable. Such

grants, if contributed for a future period, are deferred

and reported as deferred contributions until that

future period. Other unrestricted revenue, including

student fees and sales of goods and services, are

reported as revenue at the time the services or

products are provided. Unrestricted contributions and

pledges are recognized as revenue when received.

Externally restricted contributions (grants and donations)

are reported as revenue depending on the nature of

restrictions on the use of the funds by the contributors.

Contributions for specific purposes other than

endowment or the acquisition of property

and equipment are recorded as deferred

contributions and recognized as revenue in

the year related expenses are incurred.

Contributions restricted for capital purposes

are recorded as deferred contributions until the

amount is invested in property and equipment.

If the property and equipment acquired is land,

property rights or a special collection item, the

amount is recorded as a direct increase to net

assets invested in property and equipment.

If the property and equipment has a limited life,

the amount invested is recorded as a deferred

capital contribution and amortized over the

useful life of the asset to net assets invested

in property and equipment. Amortization of

deferred capital contributions for property and

equipment is recorded on a straight-line basis

over the estimated life of the related assets.

Endowment contributions, matching contributions

and investment income allocated for endowment

capital preservation are recognized as direct

increases in net assets held for endowments in

the period in which they are received or earned.

Gifts-in-kind are recorded at fair market value on the

date of their donation or at nominal value when the

fair market value can not be reasonably determined.

Financial Instruments

The University's financial instruments consist

of cash and short-term investments, accounts

receivable, long-term investments, accounts payable

and accrued liabilities and long-term debt. These

financial instruments are accounted for as follows:

Held-for-trading

The University has designated cash and short-term

investments and long-term investments as held-for-

trading. These instruments are recognized at their

fair value, determined by published price quotations

in an active market. Transaction costs to buy or

sell these items are recognized in income on the

settlement date. Net gains and losses arising from

changes in fair value are recognized immediately

in income unless funds are externally restricted.

Measuring Research Success

In comparison with other Canadian universities,

SFU continues to achieve excellent results

in annual competitions for research awards

from the three federal granting agencies:

SUCCESS OBTAINING RESEARCH FUNDING

• SFU • NATIONAL AVERAGE

The success of our researchers in obtaining funding

means that SFU received $6.3 million from the Federal

Indirect Cost of Research program which is used to

invest in research facilities and resources. With respect

to research intensity (tn-council funding per faculty

member), SFU surpasses several medical/doctoral

universities and all but one comprehensive university, a

fact that attests to the high quality and competitiveness

of the outstanding research programs (figure 6).

TRICOUNCIL RESEARCH INTENSITY

• NSERC U SSHRC U CIHR

Waterloo

140.4 ?

Regina ?

17.9

2.1

fl.

:U SFU ANNUAL FINANCIAL REPORT 2008/09 ?

MANAGEMENT DISCUSSION & ANALYSIS

UniverCity, SFU's sustainable community on Burnaby Mountain

Technology and Sciences Complex on Burnaby campus

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED MARCH 31, 2009

$ in thousands

2009

2008

. ?

OPERATING ACTIVITIES

Net Revenue(loss) for - the year ?

(62,211)

6,716

Items not involving cash

Unrealized portion of investment losses

36,773

5,837

Amortization of deferred contributions, property & equipment

(13,962)

(10,822)

Amortization of property and equipment ?

49,508

41,858

Employee future benefits

3,515

1,860

13,623

45,449

Changes in non-cash operating balances

Accounts receivable ? -

3,846

(2,133)

Inventories

(883)

487

Prepaid expenses ?

306

1,190

Prepaid lease

315

(3,066)

Accounts Payable and accrued liabilities

(3,034)

5,049

Deferred contributions, net of unrealized endowment income

(3,919)

(2,697)

OUR CAMPUSES

SFU Burnaby

Atop Burnaby Mountain, SFU's main campus offers

a breathtaking landscape for students, staff and

faculty to work and live. The 290,000 square metres

of space provides facilities for SFU's 22,500 students

who attend courses at Burnaby every year.

The opening of Blusson Hall for Health Sciences in

September 2008 marked the completion of a $56.9

million project. Named after Stewart and Marilyn

Blusson who contributed $12 million to the project,

the three-storey complex provides classroom

and lecture halls, office space, and research

laboratories for the Faculty of Health Sciences.

SFU has embarked upon a program of environmental

sustainability and in 2008 became North America's

first post-secondary institution to achieve Go Green

certification from the International Building and Owner

Managers Association (BOMA). The new Blusson

Health Sciences building is the greenest building on the

Burnaby Campus. In this same vein, a new sustainability

policy was established to ensure SFU will continue its

leadership in sustainable operations, research, teaching,

performance evaluation and community outreach.

SFU Surrey

With the continual growth of the South Fraser region,

programming at SFU Surrey continues to mature

and expand. Over 20 undergraduate and graduate

programs are being offered at this campus from 5

of SFU's Faculties. Focus is now on implementing

the second phase of enrolment growth as outlined

in the 2003 Memorandum of Understanding

between SFU and the Ministry of Advanced

Education and Labour Market Development.

To accommodate this growth and related research

expansion, new facilities, particularly for science

and technology, as well as student housing is

required. SFU has signed an agreement with

Surrey Campus Residences Corporation (SCRC)

to build a 240-bed student residence.

The proposed new programs and facilities will provide

SFU Surrey with the enabling capability to meet student

demand "close to home" in the critical need area of

Science and Health Sciences. University science options

in the South Fraser region are particularly limited and

currently Science students at SFU Surrey must travel

to the Burnaby campus for their laboratory courses.

INVESTING ACTIVITIES

Net decrease (increase) in long term investments, net of market adjustment

9,420

(38,780)

Property and equipment acquisitions

(61,704) ?

(99,292)

Endowment contributions ?

6,365 ?

30,429

Cash used in investing activities ?

(45,919) ?

(107,643)

FINANCING ACTIVITIES

Deferred contributions for property and equipment

15,328 ?

49,922

Long term debt proceeds ?

- ?

9,118

Debt principal repaid

(2,564) ?

(190)

Net decrease in cash and short term investments ?

(22,901)

(4,514)

Cash and short term investments, beginning of year ?

29,426 ?

33,940

Cash and short term investments,

end of year

6,525

29,426

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

The SFU 10-Year Capital Plan identifies a number of

infrastructure renewal projects at the Burnaby campus.

Renovation of graduate residences is completed and

with additional infrastructure funding of $49.4 million,

the existing new Chemistry facilities will be renewed.

SFU ANNUAL FINANCIAL REPORT 2008/09

AUDITED STATEMENTS •F

SFU Vancouver

SFU's Vancouver campus has four sites including

SFU Harbour Centre, the Morris J. Wosk Centre for

Dialogue, the Segal Graduate School of Business,

and the SFU Contemporary Arts' Alexander Street

Udio space. SFU will extend its Vancouver presence

ith the transition of the School for Contemporary

Arts to the Woodward's redevelopment which

is expected to be complete in 2009/10.

SFU Vancouver offers a variety of undergraduate

programs, including the Undergraduate Semester

in Dialogue, and professional graduate degrees

including master's programs in business, gerontology,

international studies, liberal studies, public policy,

publishing and urban studies. Currently the campus

welcomes more than 70,000 people annually; 10,000

are students enrolled in credit and non-credit courses

and thousands of others attend SFU public programs

or are involved in events organized externally.

OUTSTANDING ACHIEVEMENTS

The

UniverCity

residential community won several

2008 environmental honours, including a LivCom award

backed by the United Nations Environment Programme,

a Best Practices award from Canada Mortgage and

Housing Corp. and a National Planning Excellence

award from the American Planning Association.

SFU became North America's first post-secondary

institution to achieve

Go Green

certification from the

International Building and Owner Managers Association

(BOMA). SFU also launched its own Green Pages website.

The recently completed

Arts & Social Sciences

and Blusson Hall

complex received the 2009

Lieutenant-Governor of British Columbia

Gold Medal Award in Architecture.

STATEMENT OF CHANGES IN NET ASSETS

SIMON FRASER UNIVERSITY MARCH 31, 2009

INTERNALLY RESTRICTED COMMITMENTS

EXTERNALLY

OPERATING: ?

CAPITAL, ?

INVESTED IN ?

RESTRICTED FOR

INVESTMENT ?

LEASE &

PROPERTY & ?

ENDOWMENT

$ in thousands

STABILIZATION ?

OPERATING ?

OTHER ?

EQUIPMENT ?

PRINCIPAL

NET ASSETS, beginning of year

As previously stated

- ?

3,160 ?

36,619 ?

261,727 ?

176,902

Reclassification of internally restricted to

operating: investment stabilization (note 22)

(6,070)

6,070

Reclassification to deferred contributions (note 22)

(840)

As restated ?

(6,070)

9,230 ?

35,779 ?

261,727

176,902

CHANGES FOR THE YEAR

Net revenue (loss) for the year

(62,211)

Transfers

Change in restricted for

specific commitments ?

15,097

(3,690)

(11,407) ?

Increase in investment in

property & equipment

(4,733)

4,733

Endowment Transactions ?

Contributions and other transfers

11,376

Capitalized investment income

(4,610)

SFU Community Trust equity income (loss) (note 9)

(1,828)

Loss on endowment investments allocated

to endowment principal (notes 8 & 13)

32,869

(32,869)

note 10

note 11 ?

note 12 ?

see below ?

note 13

Invested in Property & Equipment is represented by

Property and Equipment ?

779,463

Sinking Fund Investment

6,249

Long-term debt, before Current portion

(166,268)

Deferred Contributions for property and equipment

(365,142)

Net current assets and current liabilities invested in Capital Fund

4,922

Long-term donation receivable

7,236

Invested in Property & Equipment

266,460

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

The $71.5 million redevelopment of the historic

Woodward's site is expected to be completed within

the next fiscal year. The School for Contemporary

Arts will be relocated to these new facilities which

will include 125,000 square feet of space comprising

a cinema, various theatres, an art studio and gallery,

various teaching studios, a multimedia centre, and

a sound stage. The facility is expected to serve

over 1,000 students, faculty and staff each day

d attract thousands of arts enthusiasts to enjoy

usic, film, theatre, dance and visual arts events.

! ?

SFU ANNUAL FINANCIAL REPORT 2008/09

MANAGEMENT DISCUSSION & ANALYSIS

2009 ?

2008

215,007

211,811

53,412

60,941

2,275

1,528

135,704

125,450

9,081

7,341

10,006

9,202

41,382

40,075

29,139

25,614

(37,048)

19,185

13,962

10,822

9,840

6,536

482,760

518,505

STATEMENT OF OPERATIONS AND CHANGES IN OPERATING NET ASSETS

FOR THE YEAR ENDED MARCH 31, 2009

$ in thousands

REVENUE

Government grants and contracts

Province of British Columbia

Government of Canada

Other governments

Tuition

Credit courses

Non-credit courses

Other

Sales of goods and services

Gifts, grants and contracts

Investment income (loss) (note 14)

Amortization of deferred contributions: property & equipment

Miscellaneous income

EXPENSE

Salaries ?

- - -

278,336

258,900

Employee benefits

53,476

49,387

331,812

308,287

Amortization of property and equipment

49,508

41,858

Scholarships bursaries & prizes

26,338

25,828

Other operational expenses ?

24,693

25,810

Travel and personnel expenses

14372

17,837

Professional fees

15,917

17,683

Materials and supplies

17,809

15,246

Cost of goods sold

12,771

12,163

Interest on long-term debt

10,381

10,614

Contract services

10,501

10,135

Renovations and alterations

10,537

8,411

Utilities

8,164

7,801

Equipment rental and maintenance ?

5,564

5,098

Grants to other agencies

3,604

5,018

544,971

511,789

OUR EXTERNAL ENVIRONMENT

The most significant external factors currently shaping

SFU's operating environment are the economic recession,

the funding capabilities and priorities of government,

and British Columbia's changing student demographic.

Global Recession

Although British Columbia has been an economic leader

in Canada for several years, the Province is not immune

to the effects of the global recession. The consequences

of the recession to the University are threefold: it has

direct financial implications to operating, endowment

and pension fund investment portfolios; it is likely to

change enrolment trends and education demands; and

it impacts governments which may have repercussions

to public funding for education and research.

The most obvious impact, and one that has already been

severely felt by SFU, is the decline in the world equity

markets and the resulting loss in value of investment

portfolios. Not only does this translate to a loss in the

financial statements but it has a significant hit to future

income and impairs the University's financial flexibility

for funding both endowed and operating activities.

As SFU's strategic plans include the growth and

development of graduate programs, this is good news,

however increasing graduate enrolment comes at a cost

that SFU cannot fund alone. While governments have

recognized the prudence of supporting education during

the recession, additional operating funds are expected

for targeted programs, and infrastructure funds are for

projects selected by government such as the $49 million

Chemistry building renovation announced in April 2009.

Government Funding

For British Columbia to effectively compete in a

knowledge-based economy, the importance of post-

secondary education has been well recognized.

Leading both the country and the world in progressive

thought and innovation means having a well supported

and funded post-secondary education system.

Recent federal and provincial budgets both stated

that post-secondary education is a clear priority

and both levels of government articulated that

education and research are crucial to economic

recovery. Infrastructure and operational support will

be made available to support these commitments.

Secondly, while the factors that influence participation

rates in post-secondary education are multifaceted,

the Educational Policy Institute in their paper

On the

Brink: How the Recession of 2009

Will

Affect Post-

Secondary Education,

written by Alex Usher and

Ryan Dunn, suggests that the current recession will

have a positive impact on enrolment in short-course

programs, including university graduate programs.

Research and innovation has consistently been identified

and supported as a priority within BC. Generous funding

through provincial research agencies has been a key

factor in the research and innovation-intensive industries

such as technology and engineering, clean energy, and

health sciences. Progressive and innovative research

and development will provide opportunities for the

province to diversify its productivity, compete in the

increasingly knowledge based global economy, and

benefit with a faster recovery from the recession.

CHANGES IN NET ASSETS

Decrease in net assets restricted for commitments ?

15,097 ?

9,973

Increase in investment in property and equipment

(4,733)

(26 663)

Loss on endowment investments allocated

to endowment principal (note 8)

32,869 ? -

Net change in operating net assets ?

(18,978)

(9,974) ?

Operating net assets, beginning of year (note 22)

(6,070)

3,904

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

SFU ANNUAL FINANCIAL REPORT 2008/09

AUDITED STATEMENTS ?

STATEMENT OF FINANCIAL POSITION

SIMON FRASER UNIVERSITY MARCH 31, 2009

in thousands

2009

2008

ASSETS

Current Assets -

Cash and short-term investments (note 3)

6,525

29,426

Accounts receivable

13,098

16,944

Inventories

2,446

1,563

Prepaid expenses

1,988

2,294

24,057

50,227

Investments (note 4)

306,538

352,731

Property and Equipment (note 5)

779,463

767,267

Prepaid Lease (note 12)

2,751

3,066

Total Assets

1,112,809

1,173,291

Investing in research was recognized in the

Campus

2020: Thinking Ahead

report commissioned by the

government. Geoff Plant stated "We must ensure

BC has institutions recognized as global leaders

in knowledge discovery, creation and application.

To do so means that BC must make a significant,

. ?

•ngoing commitment to research funding. The

rovince must spend at a sustainable and meaningful

level-significantly enough to ensure that our

research institutions are adequately supported."

Student Demographic,

According to the Educational Policy Institute, the main

driver of enrolment in undergraduate programs is

demographic rather than economic. Seventy nine per

cent of SFU's undergraduate students are within the

18-24 years age range with the mean age of full-time

undergraduate students at 21 years with a slight increase

to 23 years for part-time students. Furthermore, 58 per

cent of all students attending SFU in the fall of 2008

had previously attended secondary school while the

rest had attended another post-secondary institution.

Changes to the student demographic necessitate

changes to the future of post-secondary programming

and a shift that focuses on the education needs of

the mature learner. SFU has recently implemented

a continuing education program called SFU NOW

(Nights and Weekends) which is an initiative to help

working adults complete an undergraduate degree

through additional programming flexibility.

With an aging population, one of the biggest challenges

in BC will be replacing retiring professional workers.

One of the roles of post-secondary education is to

adapt to society's training needs and providing the

means to fill this gap. SFU has identified the need for

more professional and semi-professional programs

and will explore ways to deliver these requirements.

SFU's operating environment will continue to change

and preparing for these changes is part of the overall

planning process. The next iteration of the 3-year

Academic Plan will be completed in 2009/10 and it will

address the academic requirements of our students,

government and society. In tandem with this new plan,

the Strategic Research Plan will also be updated to

ensure that research and teaching priorities are aligned.

LIABILITIES AND NET ASSETS

Current Liabilities

Accounts payable and accrued liabilities

Current portion of long term debt (note 6)

Employee future benefits (note 7)

Long-term debt (Note 6)

Deferred contributions (note 8)

Deferred contributions for property and equipment (note 8)

Deferred lease proceeds (note 9)

45,889

48,923

Nevertheless, while this is currently the case, population

8,517

11,158

projections are indicating a different picture for future

54,406

60,081

years (fig 7 below). Provincial enrolment in Grade 12 will

decline and the BC population aged 18-24 is expected to

40,244

36,729

sink to its lowest point by 2025. The trend for the South

157,751

157,674

Fraser region is not so severe however with the creation

55,640

59,559

of additional universities in the region, competition for

365,142

363,776

these students has increased and SFU must continue

19,331

17,904

o differentiate its programs through multi-disciplinary

60cus

on academic programs and research.

692,514

695,723

Net Assets

Operating (deficit): investment income (loss) stabilization (note 10)

(25,048)

(6,070)

Internally restricted for commitments

Operating (note 11)

5,540

9,230

(19,508)

3,160

Capital, lease & other (note 12)

24,372

35,779

4,864

38,939

Invested in property and equipment

266,460

261,727

Endowment (note 13)

148,971

176,902

420,295

477,568

POPULATION PROJECTION BY COLLEGE AREA, AGES 18-24

IN THOUSANDS U CAPILANO • DOUGLAS U FRASER VALLEY U KWANTLEN U VANCOUVER (BC STATS PEOPLE 32 POP. PROJECTION 2007)

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

Approved:

MICHAEL FRANCIS

PAT HIBBITTS

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

CHAIR, BOARD OF GOVERNORS

VICE PRESIDENT, FINANCE & ADMINISTRATION

U SFU ANNUAL FINANCIAL REPORT 2008/09

1 ?

MANAGEMENT DISCUSSION & ANALYSIS

RISKS AND UNCERTAINTIES

SFU manages risk through a framework of risk

identification, measurement, and monitoring.

The following is an overview of the most

significant risks currently facing the University

Economic Environment & Investment Returns

The recession and the decline in financial markets

has already impacted SFU's investment portfolios.

Until markets start to recover, further decreases in

market value may be expected. Endowment spending

capacity has been affected and spending allocation

rates have been reduced from 5 to 4 per cent for

2009/10. Budgeted operating investment income

has been reduced from $5.1 million in 2008/09

to $4 million in 2009/10. This source of income

supplements other revenues for supporting the

University's non-endowed activities. Re-alignment

of investment policy mix and performance reviews

of investment managers has been performed.

Monitoring of investment performance is on-going.

2. Public Funding Environment

The government funding model is based on historical

per student rates that do not include adjustments for

unfunded salary increases, inflation, or infrastructure

growth. Salary increases outside the provincial

government's Negotiating Framework and deferred

maintenance on capital buildings are key components

that are not part of the funding formula. In addition,

provincial legislation caps tuition fee increases to

the rate of inflation measured by the Consumer Price

Index which is 2% for 2009/10. This funding model

requires the University to make budget adjustments

to expenses which are beginning to impact the

quality of education that SFU can provide. SFU

continues to work with The Research Universities

Presidents Council and the government to promote

a more sustainable government funding model.

3. Unsustainable Financial Model

Departments have been permitted to carry forward

unspent operating budgets at the end of each

year for expenditure in the following year. While

this was sustainable as long as the carry forward

balance were greater than the accrued liabilities,

this is no longer the case as operating reserves

have been used to supplement budget cutbacks

and been further reduced by market losses on

investments. The operating reserve is now in a

deficit position and rebuilding these cash reserves

is a priority for continued financial stability.

4. Fundraising

SFU has been highly successful in raising funds through

philanthropic donations. The impact of the recession

to our partners and donors is expected to reduce

donations by over 67 per cent for the next fiscal

year. A change to fundraising strategy is warranted

and the University Advancement office will focus

on strengthening relationships with existing donors

and alumni and raising SFU's visibility to favorably

position the University when the economy recovers.

In 2009, SFU will complete the $71.5 million Woodward's

redevelopment project and move the School for the

Contemporary Arts to its new location. Currently

$12 million in pledges remains to be raised and

with a constrained philanthropic environment, the

University may be required to fund the difference.

Course Accessibility

Ensuring that undergraduate courses are available to

students is vital to the success of the University. Course

accessibility impacts the student's ability to complete

degrees on a timely basis as well as has consequences to

student satisfaction and the University's reputation. This

risk has been addressed through new course scheduling

policy and the new Academic Plan will address the

challenge of course accessibility for students.

Enrolment

Post-secondary education opportunities for students

in British Columbia have increased with the conversion

of several community colleges to university status.

While these are not research institutions, the risk to

SFU's enrolment is that transfer students from BC

Colleges will diminish over the long run. This combined

with the changing student demographic may pose

a challenge for SFU to continue to meet and exceed

enrolment targets. Ensuring that SFU's program

are differentiated and SFU expands its research

focus are key strategies for mitigating this risk.

*FOR THE YEAR EIEI ?

©©

SFU ANNUAL FINANCIAL REPORT 2008/09

MANAGEMENT DISCUSSION & ANALYSIS

Report of the Auditor General

•

of British Columbia

To the Members of the Board

Governors

Simon Fraser University, and

To the Minister ofAdvanced Education and Labour Market Development,

Province of British Columbia:

I have audited the statement of financial position

of Simon Fraser University

as at

March 31, 2009, and the statements of operations and changes in operating net assets,

changes in net assets and cash flows for the year then ended. These financial statements

are the responsibility of the University's management. My responsibility is to express an

opinion on these financial statements based on my audit.

I conducted my audit in accordance with Canadian generally accepted auditing standards.

Those standards require that I plan and perform an audit to obtain reasonable assurance

whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the

financial statements. An audit also includes assessing the accounting principles used and

significant estimates made by management, as well as evaluating the overall financial

statement presentation..

In my opinion, these financial statements present fairly, in all material respects, the

financial position of

Simon Fraser University

as at March 31, 2009, and the results of its

operations and its cash flows for the year then ended in accordance with Canadian

enera1ly accepted accounting principles.

FUTURE OUTLOOK

Student demand for admission to the University's

As SFU contends with the current economic

programs remains exceptionally strong, and applications

uncertainties and financial market turbulence,

for fall enrolment are optimistic. Interest in the Faculty

the University's prudent use of resources, cost-

of Health Sciences and Faculty of Environment are

containment efforts, and development of other

encouraging as in these new Faculties are a strategic

sources of revenues will ensure that SFU continues

priority for the University. Surrey has been historically

to provide the quality education and research for

under-serviced in terms of university education and

which it has developed an exceptional reputation.

SFU's Surrey campus is entering its second phase of

Along with ongoing efforts toward revenue

growth and development. The demographic trend

diversification and strategic changes for operational

in the South Fraser region indicates that student

efficiencies, SFU's financial flexibility is enhanced by

enrolment will continue at targeted rates.

its AAA rating from Moody's Investors Service.

SFU will continue to work with lower mainland

A major factor contributing to the University's ability

colleges to promote post-secondary articulation and

to continue delivering outstanding academic programs

increase transfer students. Strategic partnerships

is the support from the provincial government.

with lower mainland colleges will benefit students and

There is a direct relationship between the support

the entire BC post-secondary system. Short course

from government and the University's ability to

programs such as graduate programs are expected to

enhance, let alone maintain, its core academic and

be in demand during the recession and SFU will pay

research programs. Both the provincial and federal

particular focus to increasing opportunities for these

governments have indicated their overall support for

students. Moreover, SFU recognizes the changing

post-secondary education through additional operating

student demographic and the shift of programming

and infrastructure funds in their 2009 Budgets.

focus to the adult learner and mature student.

The University continues its capital development

The three year Academic Plan will be finalized in 2009/10

plans. Not only will it expand its facilities with the

and will map the future for the University in terms of

addition of the School for the Contemporary Arts,

academic curriculum and student experience. SFU has

but graduate student residence rehabilitation is also

developed an outstanding research profile in areas

expected to be complete in 2009. With additional

identified in the Strategic Research Plan which will also

infrastructure funds and new private partnerships,

be updated to reflect academic changes and priorities.

the renovation of chemistry facilities and residence

The growing national and international reputation

maintenance will be initiated in 2009/10.

of SFU and successful competition for research

funding is expected to continue through 2009/10.

The University will continue to employ its long-term

investment strategy to maximize total returns on its

investment portfolios at an appropriate level of risk,

while utilizing a spending-rate policy that protects

the University's operations from temporary market

volatility. The Investment Advisory Committee which

provides guidance to the University with respect to its

investments and policies has agreed to a rebalancing

of the portfolio to within policy asset mix limits.

This will be initiated early in the new fiscal year.

Victoria, British Columbia

John oyle, MBA, CA

May 28, 2009

Auditor General

SFU ANNUAL FINANCIAL REPORT 2008/09

REPORT OF THE AUDITOR GENERAL

STATEMENT OF

MANAGEMENT RESPONSIBILITY

The University is responsible for the preparation of

the financial statements and has prepared them

in accordance with Canadian generally accepted

accounting principles. The financial statements

present fairly the financial position of the University

as at March 31, 2009 and the results of its operations

and its cash flows for the year then ended.

In fulfilling its responsibilities and recognizing the

limits inherent in all systems, the University has

developed and maintains a system of internal

control designed to provide reasonable assurance

that University assets are safeguarded from loss

and that the accounting records are a reliable basis

for the preparation of financial statements.

The Board of Governors carries out its responsibility

for review of the financial statements and oversight of

management's performance of its financial reporting

responsibilities principally through its Audit Committee.

Members of the Audit Committee are not officers or

employees of the University. The Committee meets

with Management, the internal auditor and the external

auditors to discuss the results of audit examinations

and financial reporting matters. The external

auditors have full access to the Audit Committee,

with and without the presence of Management.

The financial statements for the year ended

March 31, 2009 have been reported on by the

Auditor General of British Columbia. The Auditors'

Report outlines the scope of their examination

and provides their opinion on the fairness of

presentation of the information in the statements.

Who owns the past? Ownership of and

access to ancient material and data pose

increasing dilemmas for scholars, practitioners,

indigenous peoples and

policy makers.

Archaeolog.y professor George Nicholas

leads a S"2.5-million SSHRC project

designed to examine and resolve the issues,

involving an unprecendented collaboration of

archaeologi ?

fft'sm indigenous groups,

lawyers, anthropologists, museum specialists,

andpolicy makers representing eight countries.

. ?

; ?

•:

-.4

•

DR. MICHAEL STEVENSON

PRESIDENT

DR. PAT HIBBITTS

VICE PRESIDENT, FINANCE & ADMINISTRATION

MAY 13, 2009

fD I

SFU ANNUAL FINANCIAL REPORT 2008/09 ?

MANAGEMENT DISCUSSION & ANALYSIS ?

FINANCIAL HIGHLIGHTS

SIGNIFICANT ACCOUNTING POLICIES

FOR THE YEAR ENDED MARCH 31, 2009

AND RELATED ORGANIZATIONS

The endowment was also impacted by investment

losses. The endowment investment portfolio experienced

a $38.7 million loss, mitigated in part by drawing down

the $15.1 million endowment income stabilization

account; this resulted in a net $23.6 million investment

loss. After endowment donations and spending

allocations the endowment net assets were reduced

SFU's core mandate of education and research,

while recently impacted by financial challenges, is

operating in a relatively stable financial manner.

Most of the year's net loss relates to investment

market declines and one-time expenses, whereas

enrolment and tuition have both increased and

sponsored research revenue is stable, indicating

strong support for the University's key operations.

The net loss of $62.2 million is primarily the result

of investment losses: operating investment income

of $18.9 million below budget and endowment

investment losses of $32.8 million total $51.8. In

addition, accrued expenses related to the Voluntary

Exit Incentive Plan of $4.9 million, the impact of the

consolidated loss from Great Northern Way Campus

Trust, and the increase in accruals for employee future

benefits contributed to the consolidated net loss.

The economic crisis and severe decline in world-wide

financial markets impacted SFU as it has other holders

of investment portfolios. The investment loss reported

on the statement of operations is $37.0 million. The total

investment loss was $52.1 million however $15.1 million

of the loss was absorbed in the deferred contributions

endowment investment stabilization account. Compared

with last year's investment income of $19.2 million,

there is a $71.3 million change. Fortunately, investment

markets are now shifting towards a recovery mode.

Government funding remains steady at $271 million

which was a 3% increase over 2008. Moreover,

revenues from tuition and student fees increased $13

million or 9% per cent due to strong undergraduate

enrolment and a 2% increase in fees. SFU is funded

for 17,196 undergraduate and 2,268 graduate full-

time equivalent student spaces and enrolled over

22,339 domestic and international students.

Sponsored research revenues decreased slightly

from $67 in 2008 to $65 million in 2009. Grants

from the Canada Foundation for Innovation

and BC Knowledge Development Fund in 2008

of $12 million were not repeated in 2009 due

to the cyclical nature of this funding.

SFU's largest expenses is salary and benefit costs

which totaled $332 million, a 7 per cent or $24 million

increase over 2007/08. This includes the costs of

the organizational restructuring of $5 million.

Capital spending was $62 million. The University

completed the Blusson Hall building for Health

Sciences and made significant progress on the

rehabilitation of Hamilton Hall graduate residences

which will re-open in May 2009. The Woodwards'

redevelopment for the School of Contemporary

Arts is expected to complete in 2009/10.

$27.9 million (15.8%) to $149.0 million. During 2009,

there was no capitalization of interest to endowments

to protect the purchasing power of the capital as there

was no income to allocate for the purpose. For 2010,

the budgeted allocation of income to endowment

spending accounts has been reduced from 5% to 4%.

Reserves for operations declined to a deficit

of $19.5 million. This includes $26.1 million of

operating budget carryovers, less accrued but

unfunded liabilities for employee future benefits and

vacation pay of $20.5, and operating investment

loss in the stabilization account of $25 million.

SFU is innovatively adapting itself to the needs of the

communities it serves while simultaneously adapting

its operations to the availablefinancial resources.

This will continue to occur through the positive

engagement of students, faculty, staff, donors,

and funding partners as the financial challenges

are addressed and opportunities are realized.

As explained in Note 2 and Note 9, the University's

financial statements include the financial

information for the following related entities.

SFU COMMUNITY TRUST

SFU Community Trust's mandate is to oversee the

development of UniverCity, a compact, mixed-use

residential neighbourhood founded on the Four

Cornerstones of Sustainability: Equity, Economy,

Education and Environment. The Official Community

Plan allows for up to 4,536 residential units in two

distinct neighbourhoods to the south and east of

SFU's campus, each with its own elementary school-

and neighbourhood park. The OCP includes provisions

for a commercial core, community facilities, and

an extensive network of pedestrian paths and

bike trails. The Trust oversees the development of

UniverCity through the provision of zoned, serviced,

subdivided sites to private sector developers on

a prepaid, long-term (99-year) leasehold basis.

The Trust is presided over by a 17-member Board of

Directors comprising key SFU stakeholders, faculty

Oand student representatives as well as a number of

prominent real estate and development experts from

in and around Vancouver and the Lower Mainland.

The Board of Directors establishes policy for SFU

Community Trust and plays a very active role in

shaping the planning and development of UniverCity.

SIMON FRASER UNIVERSITY FOUNDATION

The purpose of the Simon Fraser University Foundation

(the "Foundation") is to encourage public awareness

of, and support for, Simon Fraser University (the

"University") and its benefits to the people of British

Columbia. The Foundation is an Agent of the Crown

and is therefore exempt from income taxes under

section 149 of the Income Tax Act. The majority of

the Foundation's revenue is rental income from the

20 rental units in the Verdant housing complex which

are owned by the Foundation for the purposes of

leasing to SFU's faculty and staff. The Foundation is

consolidated in the endowment fund of the University.

GREAT NORTHERN WAY

The Great Northern Way collaborative university

campus combines the strengths of four academic

institutions: University of British Columbia; Simon Fraser

University; Emily Carr University of Art + Design and

the British Columbia Institute of Technology. GNWC

has the mandate to intersect arts, technology and

the environment in a manner that bridges academia

with industry, artists with technology, and innovation

with development. It is an integrative environment

that builds community and celebrates innovation.

SFU has a 25% interest in GNWC and it recorded

on a proportionate consolidation basis.

KEY POINTS

0 1,

- ?

SFU ANNUAL FINANCIAL REPORT 2008/09

SIGNIFICANT ACCOUNTING POLICIES AND RELATED ORGANIZATIONS

U''