1. Pension Fund Investment in Canada Pension Fund Investment in Canada Trends, Regulation and Pension Governance April 2002 Rio de Janeiro, Brazil Rudy R. Dabideen, CFA

2. 2 Presentation Outline PIAC Pension Assets / Market Regulations Investment Trends Fund / Plan Governance

3. 3 PIAC 200 Plus Members Total Assets of PIAC members Approx $600 Bill Investment Focus 5 Main Committees –Investment –Communications –Member Services –Government Relations –Corporate Governance Web Site: www.piacweb.org Pension Investment Association of Canada

4. 4 Total Pension Asset Growth Total Pension Assets (US MM) Source: Intersec

5. 5 Top 10 Pension Plans in Canada Cdn $’s Bill Source: Benefits Canada - April 2001 As of Dec 2000

6. 6 Average PIAC Asset Mix - 2000 Source: PIAC

7. 7 TSE 300 Canadian Equity MSCI WorldGlobal Equity MSCI EAFEInternational Equity SC UniverseCanadian Bonds S&P500 US Equity MSCI JapanJapan Equity Typical Market Indexes

8. 8 Limit on global investments –30% outside of Canada (2001) Statement of Investment Policies & Procedures (SIP&P) Harmonization of “regulators” Pension Benefit Act –Prudent Person Rule Actuarial Valuations –Solvency valuations Regulation

9. 9 Investment Trends Increase in Foreign Investments –Derivatives to go beyond the legal limit –Canada: 2% of World market capitalization Alternative Investments –Private Equity –Hedge Funds

10. 10 Investment Trends Changes to the Canadian Bond index –Corporate bond content of index changed from 13.9% in 1996 to 25.9% at end of 2001 –Increase % of BBB 4.6% of index 17.8% of all corporate bonds –Concentrated on shorter maturities –Higher focus on credit analysis

11. 11 Risk Management –Risk Budgeting Defined Benefit to Defined Contribution Plans Social Investing / Ethical Investing Settlement Improvements T + 1 Investment Trends

12. 12 Fund Governance Pension Plan Governance Model –PIAC / ACPM / OSFI Structure of Pension Plans –Trustee’s Role –Management’s Role –Monitoring –Feedback

13. 13 Plan Governance Enron in USA Nortel & JDS in Canada Ontario Teachers’ Model (Summary from Teachers’ Website) –Fiduciaries report on how they vote shares –Corporations report the results of shareholders vote within 1 day of the annual general meeting –Independent directors on Board –Board should have meetings in absence of management –All press releases based on GAAP earnings –Auditors earn only audit fees

14. 14 END