APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2022

11. Financial instruments (continued):

(b) Associated risks:

(i) Market risk:

Market risk is the risk of adverse financial impact as a consequence of market movements such as currency exchange rates, interest rates and other price changes. Market risk arises due to fluctuations in both the value of the assets held and the value of liabilities. As all of the Plan’s financial instruments are carried at fair value with fair value changes recognized in the statement of changes in net assets available for benefits, all changes in market conditions will directly affect the change in net assets available for benefits. Market risk is managed through construction of a diversified portfolio of instruments traded on various markets and across various industries.

The Plan’s investments in equity funds are sensitive to market fluctuations. A $1 change in the unit price of the equity funds would change the fair value by $3,308,530 (December 31, 2021 - $3,284,734).

(ii) Liquidity risk:

Liquidity risk is the risk that the Plan cannot meet its obligations as they become due. The Plan maintains a SIP&G, which contains asset mix guidelines which help to ensure the Plan is able to liquidate investments to meet its pension benefit or other obligations. The investments are held in pooled funds and the underlying debt and equity instruments are in liquid securities traded in public markets. Although market events could lead to some investments becoming illiquid and affecting the unit values of the funds, the diversity of the Plan’s portfolios should ensure that liquidity is available for benefit payments. The Plan also maintains cash for liquidity purposes and to pay accounts payable and accrued liabilities.

There has been no change to liquidity risk from the prior year.

(iii) Credit risk:

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss. The underlying equity investments of the various equity funds are exchange traded, which reduces credit risk as counterparties are backed by an exchange clearing house. The underlying fixed income investments of the Plan’s long-term bond fund are primarily Canadian-issued instruments and are diversified among government 34% (2021 - 73%) and corporate 66% (2021 - 27%). The underlying properties of the Plan’s real estate fund are diversified by location and tenant-type; as well, investment in a single property is limited to 10% of overall holdings. In order to minimize the exposure to credit risk, a comprehensive investment strategy has been developed and described in SIP&G. There were no significant concentrations of credit risk in the portfolios in either 2022 or 2021

The maximum credit risk exposure as at December 31, 2022 is $835,282 (December 31, 2021 - $783,871) and is comprised of contributions receivable and accounts receivable. There has been no change to credit risk from the prior year.