2003 MEPP Actuarial Valuation Report by rjt20314

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									Actuarial Valuation Report on the Management
        Employees Pension Plan as at
              December 31, 2003




                                  Aon Consulting




       Management Employees Pension Plan


                                    July 28, 2004




      Canada Building · 105 – 21 Street East · 8th Floor · Saskatoon, Saskatchewan S7K 0B3
                      Telephone: (306) 934-8680 · Fax: (306) 244-7597
                                           Table of Contents


                                                                                                                        Page

Section 1: Executive Summary............................................................................................... 2

Section 2: Summary of Financial Position ............................................................................. 6

Section 3: Normal Actuarial Cost and Contribution Implications.......................................... 9

Section 4: Actuarial Opinion and Certification .................................................................... 10

Appendix A: Summary of Plan Provisions........................................................................... 12

Appendix B: Membership..................................................................................................... 18

Appendix C: Summary of Assets.......................................................................................... 22

Appendix D: Actuarial Assumptions and Cost Methods...................................................... 27

Appendix E: Analysis of Change in Surplus ........................................................................ 37


G:\Clients\MEPP-AB\Pension\Reports\2004\IntAVR03R.doc




                                                                                                                                 I
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                        Section 1: Executive Summary


Introduction

We have been engaged by the Management Employees Pension Plan Board (the “Board”) to
perform an actuarial valuation on the Management Employees Pension Plan (the “Plan”) as at
December 31, 2003. The results of our valuation are contained in this report.


Purpose

The purpose of this valuation is to:

·   determine the financial position of the Plan on a going-concern basis as at
    December 31, 2003;
·   determine the solvency position of the Plan as at December 31, 2003 as if the Plan were
    terminated and wound-up on this date;
·   determine the normal actuarial cost for 2004;
·   determine the rule to be used to determine the normal actuarial cost for Plan years after 2004
    and prior to the certification of the next actuarial valuation; and
·   determine the contribution requirements for the Plan that would result if this valuation was
    to be adopted for funding purposes in accordance with the Public Sector Pension Plans Act.

The last actuarial valuation report and corresponding funding recommendation that was filed
under the Income Tax Act was prepared as at December 31, 2001. An interim valuation was
prepared as of December 31, 2002. The results in this report have been reconciled with those
contained in the December 31, 2002 report. It is important to note that this valuation has
been prepared to provide the Board with updated information on the Plan’s financial position
from the most recent funding recommendation that has been filed with the authorities. This
valuation is not intended to update or revise the most recent funding recommendation and,
consequently, has not been prepared for the purpose of filing with the regulatory authorities.

As mentioned in our report as of December 31, 2002, the latest date for the next actuarial
valuation upon which an updated funding recommendation should be based is as of
December 31, 2004, unless this valuation report is adopted and filed.




                                                                                                     2
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                        Section 1: Executive Summary


Summary of Valuation Results

Membership
Number of active members at December 31, 2003                                          3,684
Number of pensioners and beneficiaries at December 31, 2003                            1,844
Number of deferred and hold-on deposit members at December 31, 2003                      895

Going-Concern Financial Position as at December 31, 2003

Actuarial value of assets                                                   $    1,653,532,000
Actuarial liability                                                              1,876,306,000
Surplus/(unfunded liability)                                                $     (222,774,000)

Going-Concern Normal Actuarial Cost


                                                                                   ($000,000’s)
 Annual dollar cost of benefits to be earned for service in the next 12 months      $ 61.0
 Non-investment expenses                                                                1.1
 Total normal actuarial cost of benefits for 2004                                   $ 62.1
 Expected pensionable payroll in 2004                                               $ 286.6
 Normal actuarial cost as a percentage of 2004 expected pensionable payroll            21.7%


The normal actuarial cost of benefits accruing in the Plan year following the valuation date is
estimated to be $62.1 million or 21.7% of the expected pensionable payroll for 2004. Employer
and employee contributions expected in 2004 pursuant to the PSPP Act are 22.6% of
pensionable payroll (9.5% from plan participants and 13.1% from employers).

Amortization of Unfunded Liabilities

The valuation as of December 31, 2001 disclosed an unfunded liability of $49.2 million. This
unfunded liability is being amortized with contributions of 2.1% of pensionable earnings from
April 1, 2003 to December 31, 2016. As of December 31, 2003, this unfunded liability has
grown to $61.8 million.




                                                                                                  3
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                        Section 1: Executive Summary


The total unfunded liability disclosed in this valuation is $222.8 million. Special payments of
2.1% of pensionable earnings commencing on April 1, 2003 and continuing to
December 31, 2016 will amortize the portion of this unfunded liability due to the 2001 unfunded
liability ($61.8 million). The balance of the total unfunded liability ($161.0 million) can be
amortized with special payments of 4.7% of pensionable earnings commencing January 1, 2005
and continuing to December 31, 2018. These amortization schedules assume that the
contributions for current service increase to 21.7% effective January 1, 2005.

Contribution Rates

If this valuation was to be adopted for funding purposes, the resulting total contribution rates
would be as follows:

January 1, 2004 to December 31, 2004                                          22.6%
January 1, 2005 to December 31, 2016                                          28.5%
January 1, 2017 to December 31, 2018                                          26.4%
January 1, 2019 and thereafter                                                21.7%

The above contribution rates are based on the assumption that the plan participant contribution
rate remains at 9.5%. If this rate is increased effective January 1, 2005, then the total
contribution rates shown above will also increase by 0.1% to 0.2%.


Subsequent Events

As of the date of this report, we have not been made aware of any subsequent events which
would have an effect on the results of this valuation. However, the following points should be
noted in this regard:

    · Actual experience deviating from expected since December 31, 2003 to the date of this
      report, will result in gains or losses.




                                                                                                   4
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                        Section 1: Executive Summary


    · To the best of our knowledge, the results contained in this report are based on the
      regulatory and legal environment in effect at the date of this report and do not take into
      consideration any potential changes that are currently the subject of debate, review and / or
      court appeal. To the extent that actual changes in the regulatory and legal environment
      transpire, any financial impact on the Plan as a result of such changes will be reflected in
      future valuations.

Respectfully submitted,

Original signed by                                               Original signed by

Wayne R. Berney, FSA, FCIA                                       Robert J. Thiessen, FSA, FCIA
Senior Vice President                                            Vice President

July 28, 2004




                                                                                                      5
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
              Section 2: Summary of Financial Position


Going-Concern Actuarial Position at December 31, 2003

The financial position of the Plan on a going-concern basis is measured by comparing the
actuarial value of assets to the actuarial value of liabilities assuming the Plan is continuing for
the long term. Any difference, if positive, is a funding excess and can be retained in the Plan, or
used to reduce the current service contributions and/or increase benefits under the Plan. Any
difference, if negative, is an unfunded liability and must be amortized over specified periods
under the PSPP Act.

The going-concern actuarial position of the Plan as at December 31, 2003 is summarized in the
following table. For comparison purposes, the results as at December 31, 2002 are also shown.
Further information concerning the Plan provisions that have been valued, membership data,
asset data and assumptions and methods used to determine the going-concern actuarial position
is contained in Appendices A, B, C and D respectively.


                                                          December 31, 2003   December 31, 2002
                                                             ($000,000’s)        ($000,000’s)
Assets
   Market value                                                  $ 1,571.9         $ 1,390.6
   Asset smoothing adjustment                                         78.6             108.3
   Payments due                                                        3.0               1.3
Total actuarial value of assets                                  $ 1,653.5         $ 1,500.2
Actuarial Liabilities
  Active members                                                 $   814.7         $   758.0
  Pensions in payment                                                847.6             773.3
  Deferred vested/Hold-on deposit                                    214.0             222.4
Total liabilities                                                $ 1,876.3         $ 1,753.7
Surplus/(Unfunded Liability)                                     $ (222.8)         $ (253.5)

This valuation has revealed that the Plan has an unfunded liability of $222.8 million as at
December 31, 2003. The previous valuation revealed an unfunded liability of $253.5 million
as at December 31, 2002.

An analysis of the sources of change in financial position is provided in Appendix E.




                                                                                                      6
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
              Section 2: Summary of Financial Position


Amortization of Unfunded Liability

The valuation as of December 31, 2001 disclosed an unfunded liability of $49.2 million. This
unfunded liability is being amortized with contributions of 2.1% of pensionable earnings from
April 1, 2003 to December 31, 2016. As of December 31, 2003, this unfunded liability has
grown to $61.8 million.

The total unfunded liability disclosed in this valuation is $222.8 million. Special payments of
2.1% of pensionable earnings commencing on April 1, 2003 and continuing to
December 31, 2016 will amortize the portion of this unfunded liability due to the 2001 unfunded
liability ($61.8 million). The balance of the total unfunded liability ($161.0 million) can be
amortized with special payments of 4.7% of pensionable earnings commencing January 1, 2005
and continuing to December 31, 2018. These amortization schedules assume that the
contributions for current service increase to 21.7% effective January 1, 2005.




                                                                                                  7
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
              Section 2: Summary of Financial Position


Solvency Position as at December 31, 2003

In accordance with the PSPP Act, we have determined the solvency position of the Plan as at
December 31, 2003 on the assumption that the Plan was terminated on that date and all
liabilities were settled. For this purpose, we have used market value as the value for the
assets. To determine the liabilities, the benefits valued are those that would be paid on plan
termination, without continued accrual of service and with all members fully vested in their
accrued benefits.

The solvency position of the Plan is as follows:


                                                                  December 31, 2003
                                                                      ($000,000’s)
Assets
    Market value                                                     $     1,571.9
Liabilities
    Active members                                                   $       920.6
    Pensions in payment                                                      933.7
    Deferred vested/Hold-on deposit                                          230.2
Total liabilities                                                    $     2,084.5
Solvency excess/(Deficiency)                                         $      (512.6)


A reserve for windup expenses has specifically not been included. Accepted actuarial
practice would normally require such a reserve. However, since this valuation is for the
specific purposes of the PSPP Act, and windup of the entire Plan is assumed to have a zero
probability of occurring, it is our opinion that no such reserve is appropriate and further that
such exclusion would be consistent with accepted actuarial practice. Further information
concerning the Plan provisions that have been valued, membership data, asset data and
assumptions and methods used to determine the solvency position is contained in
Appendices A, B, C, and D respectively.




                                                                                                   8
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
     Section 3: Normal Actuarial Cost and Contribution
                       Implications

Normal Actuarial Cost

                                                                                    ($000,000’s)
Annual dollar cost of benefits to be earned for service in the next 12 months        $ 61.0
Non-investment expenses                                                                  1.1
Total normal actuarial cost of benefits for 2004                                     $ 62.1
Expected pensionable payroll in 2004                                                 $ 286.6
Normal actuarial cost as a percentage of 2004 expected pensionable payroll              21.7%

The 2002 valuation calculated the normal cost percentage as 21.9% of payroll. The normal
actuarial cost percentage for 2004 is 21.7%. This calculation was made by dividing the present
value of benefits to be earned for service in 2004 plus expense allowance by the expected
pensionable payroll for 2004. The change in normal cost percentage from 21.9% to 21.7% is
due to changes in the average earnings of members offset somewhat by modest aging of the
active members. The normal actuarial cost also assumes that the plan participant contribution
rate remains at 9.5%. If the plan participant contribution rate is increased, then the normal
actuarial cost will increase by 0.1% to 0.2%.


Contribution Implications

If this valuation was to be adopted for funding purposes, the resulting total contribution rates
would be as follows:

January 1, 2004 to December 31, 2004                                            22.6%
January 1, 2005 to December 31, 2016                                            28.5%
January 1, 2017 to December 31, 2018                                            26.4%
January 1, 2019 and thereafter                                                  21.7%

The above schedule of contribution rates will meet the Plan’s normal cost requirements and
eliminate the unfunded liability by December 31, 2018, assuming the plan participant
contribution rate remains at 9.5%. If it is increased, then the total contribution rates on and
after January 1, 2005 will increase by 0.1% to 0.2%.




                                                                                                   9
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
          Section 4: Actuarial Opinion and Certification


            Actuarial Opinion and Certification for the
     Management Employees Pension Plan at December 31, 2003

Opinion

This opinion forms an integral part of the report.

In our opinion, for the purposes of this actuarial valuation:

     ·   the data on which this valuation is based are sufficient and reliable;
     ·   the assumptions used are, in aggregate, appropriate; and
     ·   the actuarial cost methods and the asset valuation methods employed in this report are
         appropriate.

Nonetheless, emerging experience differing from the assumptions will result in gains or
losses that will be revealed in subsequent valuations.


We Hereby Certify That:

1.       With respect to the funding of the Plan:

         (a)      The purposes of this report include determining the Plan’s financial position on
                  a going-concern basis as at December 31, 2003, determining the adequacy of the
                  contribution rate schedule for 2004 and future years, determining the normal
                  actuarial cost for 2004 and the rule to be used to determine the normal actuarial
                  cost for the Plan years 2005 to 2007 (or the time of the next actuarial
                  certification under the PSPP Act and the Income Tax Act, if earlier).

         (b)      The Plan has an unfunded liability of $222.8 million on a going-concern basis as
                  at December 31, 2003 based on assets of $1,653.5 million and liabilities of
                  $1,876.3 million.

         (c)      The Plan’s normal actuarial cost for 2004 is estimated to be $62.1 million
                  (21.7% of pensionable earnings).




                                                                                                      10
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
          Section 4: Actuarial Opinion and Certification


         (d)      For the Plan years 2005 to 2007, the Plan’s normal actuarial cost is determined
                  as 21.7% of pensionable earnings.

         (e)      The combined plan participant and employer fixed contribution rates, as
                  provided in the funding recommendation as at December 31, 2001 (9.5% and
                  13.1%, respectively) and as required by the Plan terms, are not sufficient to meet
                  the funding requirements of the Plan.

2.       With respect to the solvency of the Plan:

         (a)      A further purpose of the report is to determine the solvency position of the Plan
                  as at December 31, 2003.

         (b)      There is a solvency deficiency of $512.6 million as at December 31, 2003 based
                  on assets of $1,571.9 million and liabilities of $2,084.5 million.

         (c)      The liabilities of the Plan would exceed the assets by $512.6 million if the Plan
                  was terminated and wound-up as at December 31, 2003.

3.       Contribution implications:

         (a)      If this valuation report is adopted and filed with the regulatory authorities,
                  current contribution rates of plan participants and employers should be increased
                  effective January 1, 2005 to 28.5% to meet the funding requirements of the Plan.
                  Such a change will meet the Plan’s normal actuarial cost of 21.7%. The
                  balance, 6.8%, will amortize the Plan’s unfunded liability of $222.8 million over
                  the period commencing January 1, 2005 and ending December 31, 2018. This
                  balance decreases by 2.1% effective January 1, 2017, and by a further 4.7%
                  effective January 1, 2019.

         (b)      The employer contributions in 1(e) and 3(a) above are eligible contributions
                  under Section 147.2(2) of the Income Tax Act.

Original signed by                                   Original signed by

Wayne R. Berney                                       Robert J. Thiessen
Fellow, Canadian Institute of Actuaries               Fellow, Canadian Institute of Actuaries


                                                                                                       11
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
              Appendix A: Summary of Plan Provisions


Prior to 1993, the Management Employees Pension Plan Act provided for the payment of
pension and related ancillary benefits to eligible participants. In 1993, the Public Sector Pension
Plans Act was passed, thereby covering six public sector pension plans: the Local Authorities
Pension Plan, the Public Service Pension Plan, the Universities Academic Pension Plan, the
Special Forces Pension Plan, the Management Employees Pension Plan, and the Public Service
Management (Closed Membership) Pension Plan.

This appendix outlines the major provisions of the Management Employees Pension Plan,
which have a material impact on the cost of benefits payable under the Plan. This summary
is not intended to be a detailed description of all Plan provisions.


Eligibility

Eligible participants include full-time and part-time employees who meet criteria specified in
the Plan.


Pensionable Service and Pensionable Salary

Combined pensionable service, as defined under the provisions of the Plan, shall not exceed 35
years. Combined pensionable service (service in the Management Plan plus pensionable service
in the Public Service Pension Plan) is used to determine eligibility for benefits, vesting and
determination of highest average salary. Pensionable salary is defined as the participant’s actual
salary limited to the amount in any year after 1992 which results in the maximum defined
benefit for that year under the Income Tax Act Regulations.


Credited Interest

Prior to 1994, participants’ contributions were accumulated at the rate of 4% per annum,
compounded semi-annually. Effective January 1, 1994, the rate of interest credited to
participants’ contributions was changed to the average yield of five-year personal fixed term
chartered bank deposits (CANSIM series B14045) over the most recent 12-month period,
calculated as of the first day of the calendar year.




                                                                                                      12
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
              Appendix A: Summary of Plan Provisions


Retirement Age

Participants are eligible to retire under the Plan if they have attained age 55 and have at least five
years pensionable service.


Retirement Benefit

The annual pension payable at retirement is determined as follows:

·   2.0% of highest average pensionable salary, multiplied by years of pensionable service.

Highest average pensionable salary is the participant’s average annual salary in the five
consecutive years of pensionable service in which such average is the highest. Pensionable
salary for service after December 31, 1991, will be limited to $86,111. This limit will
increase in accordance with the provisions of the Income Tax Act. For 2004, it will increase
to $91,667. For 2005, it will increase to $100,000. Each year thereafter, it will increase in
accordance with the Average Industrial Wage increase as detailed in the Income Tax Act.


Early Retirement

For service prior to January 1, 1992, if a participant has attained the age of 55 and accrued five
years of service, there is no reduction in the participant pension upon retirement.

For service after December 31, 1991, if the participant has accrued 80 points (that is, age plus
pensionable service is greater than or equal to 80) or has attained age 60, no reduction is applied.
Otherwise, the retirement pension is reduced by 3% for each year that the participant’s early
retirement age precedes the earlier of age 60 and the age at which 80 points would be reached
(based on pensionable service to the date of termination).


Benefits on Disability

If the participant is not receiving benefits from an LTD plan and the participant is permanently
and totally disabled, the participant is entitled to an immediate unreduced pension based on
pensionable service and salary to the date of disability. If the participant is partially disabled, the
pension is reduced in accordance with the Plan rules.




                                                                                                          13
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                 Appendix A: Summary of Plan Provisions


If the participant is receiving benefits from an LTD plan, participation in this Plan depends on
whether or not the LTD plan is an approved plan. If the LTD plan is an approved plan,
participation in this Plan continues, but no pension is payable concurrently with the LTD benefit.
For the purpose of determining contributions and benefits, pensionable salary will be the
pensionable salary immediately preceding disability, increased by subsequent general wage
increases applicable for that participant’s employment class.

If the LTD plan is not an approved plan, the participant is considered to be on a disability leave.
The participant is eligible to “buy back” this period of leave, as outlined in the Plan, upon return
to active employment.


Post-Retirement Death Benefits

a)         Service Pre-1992

           Normal Form

           The normal form of pension is payable for life. If the participant dies and has no
           Pension Partner at death, pension payments cease. If, at the death of the participant,
           the participant has a Pension Partner1, the Pension Partner will continue to receive a
           pension equalling 75% of the participant’s pension.

           Optional Forms

           Optional forms of pension are available on an actuarially equivalent basis from the
           life only pension.

b)         Service Post-1991

           Normal Form

           The normal form of pension for a participant who does not have a Pension Partner at
           retirement is a lifetime pension guaranteed for 120 months. If the participant dies


1
    If the member terminated prior to January 1, 1994, the Pension Partner is entitled to the benefit if the Pension Partner
    had been the member’s Pension Partner for five years immediately preceding the member’s death. If the member
    terminated after December 31, 1993, the benefit is payable if the member is survived by the person who was the
    Pension Partner at pension commencement.


                                                                                                                               14
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
              Appendix A: Summary of Plan Provisions


         before 120 monthly payments are made, the balance of the 120 payments are payable
         to the participant’s beneficiary or estate. The normal form of pension for a
         participant who has a Pension Partner at retirement is a pension payable for the
         lifetime of the participant. Upon the participant’s death, a survivor pension equal to
         2/3 of the participant’s pension is payable to the pension partner for the remaining
         lifetime of the pension partner.

         Optional Forms

         Optional forms of pension are available on an actuarially equivalent basis.


Pre-Retirement Death Benefits

         Pre-1992 Service                                            Benefit
No Pension Partner or dependent               ·   Refund of 1 x participant contributions with
children                                          interest.
Dependent children but no Pension
Partner
    If > 5 years of pensionable service       ·   Refund of 2 x participant contributions with
    or death in service                           interest.
    Otherwise                                 ·   Refund of 1 x participant contributions with
                                                  interest.
Pension Partner
   If death in service                        ·   Refund of 2 x participant contributions with
                                                  interest.
    Otherwise                                 ·   Refund of 1 x participant contributions with
                                                   interest.
                                              ·   If the participant has at least five years of
                                                   pensionable service, the Pension Partner is
                                                   eligible for an unreduced immediate pension
                                                   determined as though the participant had retired
                                                   on the day before death and elected a J&S 100%
                                                   optional form pension.




                                                                                                      15
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
              Appendix A: Summary of Plan Provisions


        Post-1991 Service                                             Benefit
No Pension Partner
   < 5 years of pensionable service           ·    Refund of 1 x participant contributions with
                                                   interest.
     > 5 years of pensionable service         ·    100% of commuted value plus excess
                                                   contributions.
Pension Partner
   < 5 years of pensionable service           ·    Refund of 1 x participant contributions with
                                                   interest.
    > 5 years of pensionable service          ·    Either 100% of commuted value or an immediate
                                                   unreduced pension for life determined as though
                                                   the participant had retired on the day before death
                                                   and elected a J&S 100% optional form pension,
                                                   plus excess contributions.


Termination Benefits

                                                                      Benefit
< 5 years of pensionable service               ·   Refund of participant contributions with interest.
> 5 years of pensionable service               ·   Either a refund of participant contributions with
                                                   interest or a deferred pension.
                                               ·   For post-1991 service, excess contributions, if
                                                   any, will be paid.
                                               ·   For post-1991 service, in lieu of the deferred
                                                   pension, the participant may elect to transfer out
                                                   100% of the commuted value plus excess
                                                   contributions. In that event, the participant must
                                                   also take a refund of the participant’s pre-1992
                                                   contributions in lieu of the deferred pension
                                                   earned for pre-1992 service.




                                                                                                         16
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
               Appendix A: Summary of Plan Provisions


Cost-of-Living-Increases

Cost-of-living increases based on 60% of the Alberta CPI apply to both deferred pensions
and pensions-in-payment.


Financing of the Plan and Contributions

In accordance with the Plan, contribution rates for service after December 31, 1991, will be
set at a level appropriate for the funding and solvency of the Plan, as recommended by the
Plan’s actuary. Based on the December 31, 1999 valuation, contribution rates, as a percent of
pensionable salary, were at the following levels:


                                                                 Contribution Rates
Participants                                                            7.75%
Employers                                                              10.75%
Total                                                                  18.50%


Based on the December 31, 2001 valuation, contribution rates, as a percent of pensionable salary
were increased, effective April 1, 2003 as follows:


                                                                 Contribution Rates
Participants                                                            9.5%
Employers                                                              13.1%
Total                                                                  22.6%




                                                                                                   17
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                             Appendix B: Membership


Source of Data

Data for active participants, pensioners, deferreds and hold-on-deposits as at
December 31, 2003, were supplied by Alberta Pensions Administration Corporation (APAC).
This data included dates of birth, gender, full/part-time status, service ratio, pensionable
current service, prior bought service, prior service being bought and reciprocal service.
Service fields were split for pre-1992 and post-1991 service. Pensionable salary (non-
annualized) and in-year service were also provided for 2003. Contribution information was
also provided, split by employee/employer and pre-1992 and post-1991 service.

Numerous tests were performed on the data, reconciling 2003 data to 2002 data and testing
the validity of the 2003 data. Any outstanding questions were sent to APAC and adjustments
made according to the responses received. In particular, for 83 pensioners, the pension split
between pre-92 and post-91 service was adjusted while the total pensions for these
pensioners remained unchanged.

Despite these numerous tests, where data was still unreliable or unavailable, assumptions
were required to complete the data. These assumptions are summarized below.


                Description                                              Assumption
Annualization of Pensionable Earnings              Since the data provided by APAC did not include
                                                   annualized salary, earnings were annualized
                                                   using actual earnings and in-year service where
                                                   required.
Missing Earnings Information                       If earnings were available for 2001 or 2002, the
                                                   most recent data was utilized and increased by
                                                   5.25%. Otherwise, the overall average of the
                                                   group was utilized.
Missing Service Information                        Service was assumed to start from date of
                                                   commencement of contributions into the Plan.
Missing Detail in Financial Information            Due to the nature of the financial information, it
                                                   was not possible to trace the refunds individually
                                                   for every terminating member. The potential
                                                   impact of this data omission was immaterial to
                                                   the overall results of the valuation; however, it
                                                   could impact on the gain/loss analysis.



                                                                                                        18
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                             Appendix B: Membership


                 Description                                            Assumption
Pension Data for Pensioners                        In some cases, the data fields used to calculate
                                                   pre, post and bridge pensions were zero. In these
                                                   cases, other fields were used which had the total
                                                   pre and post pension. No bridge amounts were
                                                   assumed.
Contribution Data for Hold-On Deposit              Participant contributions were updated with
Participants                                       interest from the date of calculation to
                                                   December 31, 2003.


Membership Reconciliation

                                                                             Pensioners/
                                   Actives         Deferreds      HODs        Survivors      Total
Number as at
December 31, 2002                    3,476             891          59          1,697        6,123
New entrants/survivors                342                0           0            1          343
Rehires                               13               (13)          0            0            0
Terminations – Paid Out              (23)               (9)         (5)           0          (37)
Terminations – to HOD                (20)                0          20            0            0
Terminations – to Deferred            (7)                7           0            0            0
Retirements                          (95)              (53)          0           148           0
Deaths                                (2)               (1)         (1)          (2)          (6)
Number as at
December 31, 2003                    3,684             822          73          1,844        6,423




                                                                                                       19
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                             Appendix B: Membership


Summary of Membership Data

                                                        Previous Valuation   Current Valuation
Actives
   Number of Participants                                         3,476            3,684
   Average Age                                                     48.5             48.9
   Average Service                                                 11.8             11.5
   Average Current Salary                                        $79,667          $83,144
   Percent Female                                                 36%              37%
Deferreds
    Number of Participants                                         891              822
    Average Age                                                    50.7             51.5
    Average Annual Deferred Pensions                             $16,488          $18,342
Hold-on-Deposits
   Number of Members                                                59               73
   Average Age                                                     44.2             43.6
   Average Contributions with Interest                           $12,054          $11,521
Pensioners & Beneficiaries
   Number of Participants/Beneficiaries                           1,697            1,844
   Average Age                                                     62.4             64.1
   Average Annual Pension                                        $34,355          35,061




                                                                                                 20
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                             Appendix B: Membership


Active Membership Distribution

                                                    Years of Credited Service
                       Under                                                                 35 or
Age                      5   5-9.99 10-14.99 15-19.99 20-24.99 25-29.99 30-34.99             More        Total
20-24   Number              1        0         0          0          0        0         0            0           1
        Avg Salary $    58,502       0         0          0          0        0         0            0    58,502

25-29   Number             35        6         0          0          0        0         0            0       41
        Avg Salary $    59,419   65,259        0          0          0        0         0            0    60,273

30-34   Number             89       41         2          0          0        0         0            0      132
        Avg Salary $    68,701   70,174    66,798         0          0        0         0            0    69,130

35-39   Number            145       93        49         16          0        0         0            0      303
        Avg Salary $    78,440   78,927    73,894     75,867         0        0         0            0    77,718

40-44   Number            178       84        91         89         75        6         0            0      523
        Avg Salary $    80,499   81,075    77,758     77,120     74,288   68,097        0            0    78,507

45-49   Number            169       62        87        141        227       89         3            0      778
        Avg Salary $    81,040   86,319    80,671     83,970     81,849   80,067    59,351           0    81,991

50-54   Number            152       50        65        131        232      256        88            3      977
        Avg Salary $    83,381   87,875    83,781     85,843     87,258   86,680    87,784    61,938      86,083

55-59   Number             96       38        51         69        148      167       124        22         715
        Avg Salary $    84,594   88,311    83,770     84,123     87,435   92,203    89,807    84,891      87,966

60-64   Number             20        6        11         23         49       45        28        14         196
        Avg Salary $    88,793   92,454    76,195     81,560     92,114   86,788    97,595   100,137      89,787

Over 64 Number              3        2         2          1          6        2         2            0       18
        Avg Salary $    85,657   89,960    79,532    112,302     95,619   75,292   109,724           0    91,778

Total   Number            888      382       358        470        737      565       245        39        3,684
        Avg Salary $    79,368   81,820    79,788     82,884     84,698   87,042    89,760    88,599      83,144



Average salary in the above table has not been limited to pensionable salary. The overall
average salary limited to pensionable salary and excluding those members with 35 or more
years of service is $78,620.




                                                                                                                     21
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                      Appendix C: Summary of Assets


The asset data has been extracted from the Plan’s annual financial statements for 2003. A
breakdown of the market value of the invested assets is shown below:

                                                                              ($000’s)
Market Value of Assets
Deposits in the Consolidated Cash Investment
    Trust Fund                                                                   $17,784
Fixed Income Securities
    Canadian Dollar Public Debt Pool                                             416,281
    Private Mortgage Pool                                                         76,810
    Real Rate of Return Bonds                                                     74,164

Total Deposits and Fixed Income Securities                                      $585,039

Canadian Equities
   Canadian Pooled Equity Fund                                                    71,618
   Domestic Passive Equity Pooled Fund                                           123,569
   External Managers Funds (Canadian)                                            223,420
   Private Equity Pool                                                             1,928
                                                                                 420,535
Foreign Equities
    External Managers Funds (Global)                                             223,707
    External Managers Funds (US)                                                 129,132
    EAFE Structured Equity Pooled Fund                                            31,544
    US Passive Equity Pooled Fund                                                 47,599
    US S&P 500 Pooled Index Fund                                                  53,493
                                                                                 485,475
Real Estate                                                                       72,912
Private Equity and Income Pools                                                    2,978
Total Equities                                                                 $981,900
Total Market Value of Assets at December 31, 2003                             $1,566,939
    Net Invested Assets Available for Benefits
    Investments (market value)                                                 1,566,939
    Accrued investment income and accounts receivable                                451
    Contributions receivable                                                       4,764
    Accounts payable                                                                (240)

Net invested assets available for benefits                                    $1,571,914




                                                                                            22
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                      Appendix C: Summary of Assets


Reconciliation of Net Invested Assets Available for Benefits

A reconciliation of the change in market value, as reported in the Plan’s financial statements,
for the period December 31, 2002, to December 31, 2003, is provided below.


                                                                            $(000,000’s)
                                                                               2003
Opening Market Value at the beginning of the year                           $ 1,390.6
Contributions (participants, employers and reciprocal transfers)                  56.3
Benefit Payments (including pension payments, refunds,                           (62.6)
 reciprocal transfers and commuted value payouts)
Net Investment Income (including realized and unrealized gains                    189.0
 and losses net of investment expenses)
Administrative Expenses                                                          (1.4)
Market value at end of year                                                 $ 1,571.9


Actuarial Value of Assets
The formulation of the actuarial value of assets is shown on the next page. Please refer to
Appendix D for a complete description of the asset valuation method used for this valuation.
Historical market and actuarial rates of return are shown on the graph immediately following
the next page.




                                                                                                  23
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                       Appendix C: Summary of Assets


Market Value                                                     ($000’s)
                                          1999           2000         2001         2002         2003
Total value of assets as of
  January 1                         $1,308,708     $1,444,394    $1,555,403   $1,480,041   $1,390,581
Participant contributions               15,156         16,667        17,946       20,241       23,782
Employer contributions                  21,180         22,316        24,415       25,989       32,515
Net transfers                         (66,278)            243         (683)        (293)        (170)
Investment income                      206,210        117,078      (66,405)     (77,732)      189,309
Termination and death
  payments                             (1,554)         (1,415)      (1,247)      (1,603)      (1,603)
Pension payments                      (38,232)        (43,160)     (48,476)     (54,714)     (60,835)
Administration expenses                  (581)           (487)        (686)      (1,105)      (1,369)
Investment expenses                      (215)           (233)        (226)        (243)        (301)
Total value of assets as of
  December 31                       $1,444,394     $1,555,403    $1,480,041   $1,390,581   $1,571,909

Net Rate of Return                      16.2%           8.1%         (4.3%)       (5.3%)      13.6%
Expected Actuarial Return               6.75%          6.75%         6.75%        6.75%       6.75%
Net Investment Income                  205,995        116,845      (66,631)     (77,975)     189,008
Expected Actuarial Investment
  Income                                85,965         97,300       104,695       99,515      93,605
Excess\(Shortfall)                     120,030         19,545     (171,326)    (177,490)      95,403

5 Year Amortization                     24,006          3,909      (34,265)     (35,498)       19,081
                                         4,786         24,006         3,909     (34,265)     (35,489)
                                        12,028          4,786        24,006        3,909     (34,265)
                                        20,822         12,028         4,786       24,006        3,909
                                        16,202         20,822        12,028        4,786       24,006
Sum of 5 Year Amortization              77,844         65,551        10,464     (37,062)     (22,767)

Actuarial Value
Total value of assets as of
  January 1                         $1,195,635     $1,289,135    $1,446,150   $1,552,578   $1,603,546
Total Contributions                     36,386         38,983        42,361       46,230       56,297
Net Transfers                         (66,278)            243         (683)        (293)        (170)
Investment Income                      163,809        162,851       115,159       62,453       70,838
Adjustment for Cap                           0              0             0            0     (16,200)
Termination and death
  payments                             (1,554)         (1,415)      (1,247)      (1,603)      (1,603)
Pension payments                      (38,232)        (43,160)     (48,476)     (54,714)     (60,835)
Administration expenses                  (581)           (487)        (686)      (1,105)      (1,369)
Total value of assets as of
  December 31                       $1,289,135     $1,446,150    $1,552,578   $1,603,546   $1,650,504

Net Rate of Return based on
 actuarial value of assets              14.1%           12.6%         8.0%         4.0%         3.3%




                                                                                                        24
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                                              Appendix C: Summary of Assets




                                                  Historical Net Rates of Return
         25.00%

         20.00%


         15.00%

         10.00%

          5.00%

          0.00%
                     1992       1993       1994      1995        1996   1997       1998     1999     2000       2001   2002   2003
         -5.00%

        -10.00%



                                              Market Rate of Return            Actuarial Value Rate of Return




                                                                                                                                     25
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
                      Appendix C: Summary of Assets


Payments Due

These amounts represent contributions to be made by plan participants after the valuation
date to buy back certain periods of service. The valuation includes the effect of these
buybacks in the liabilities. The amount of payments due for buyback service as at
December 31, 2003 was $3.0 million. As at December 31, 2002, this amount was
$1.3 million.




                                                                                            26
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
 Appendix D: Actuarial Assumptions and Cost Methods


Going-Concern Actuarial Assumptions

The actuarial assumptions adopted by the Board for this valuation at December 31, 2003, are
outlined in detail below. The assumptions used for the valuation as at December 31, 2002
were reviewed and no changes were made for this valuation.


Economic Assumptions

a)       Level of Price Inflation

         The level of price inflation directly influences benefits provided by the Plan by the
         application of the cost-of-living increases. It is also useful in developing a coherent
         set of economic assumptions by relating several of the individual assumptions to an
         assumed long term level of underlying price inflation.

         The previous valuation at December 31, 2002, utilized a level inflation rate of 2.75%
         to reflect anticipated future long term inflation. For this valuation, the inflation rate
         remains at 2.75%.

b)       Nominal Discount Rate

         Since benefits promised by the Plan will be paid out over a period of time in the
         future, it is necessary to make an assumption as to the rate of investment return the
         Fund will realize over the period of its existence. Having regard to the long-term
         nature of the Plan’s liabilities, while recognizing current rates available in the
         financial markets, we have assumed a valuation interest rate of 6.75% per annum, net
         of investment expenses. This is unchanged from the previous valuation.

         If the Fund achieves higher investment returns than assumed, gains will be revealed
         at subsequent valuations. If the Fund achieves lower investment returns, losses will
         emerge.




                                                                                                     27
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
 Appendix D: Actuarial Assumptions and Cost Methods


c)       Salary Escalation

         An assumption as to individual salary increases is necessary in the valuation since the
         formula for determining the pension to be received is based on participants’ average
         earnings in their highest five consecutive years of pensionable earnings. Individual
         salary increases can generally be considered to result from general economic
         conditions, plus non-economic factors such as merit and promotion.

         For this valuation, salaries are assumed to increase at 3.25% plus merit and
         promotion. It is assumed that salaries will increase at the rate of inflation plus 0.5%
         for general productivity plus merit and promotion as indicated below.

         The previous valuation assumed salaries would increase at the same rate.

d)       Escalation of Income Tax Act Maximum Pensionable Earnings

         According to the terms of the Plan, pensionable salaries for service after
         January 1, 1992, are limited to $86,111. The Income Tax Act contains provisions for
         the $86,111 limit to be increased to $91,667 in 2004 and to $100,000 in 2005, then
         increased annually by the rate of increase in the average industrial wage, beginning in
         2006.

         For this valuation, we have assumed that the maximum limit on pensionable salaries
         will increase at the rate of 3.25% per annum, with the first such increase occurring in
         2006. The previous valuation used the same assumption.




                                                                                                   28
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
 Appendix D: Actuarial Assumptions and Cost Methods


Demographic Assumptions

a)       Merit and Promotion

         The same merit and promotion scale was used for this valuation as was used
         previously. The following table shows rates at selected ages:


                  Selected Age                            Annual Rates of Salary Increase due to
                                                                 Merit and Promotion
                         20                                               2.5%
                         30                                               2.5%
                         40                                               2.0%
                         50                                               1.5%
                         60                                               1.0%


b)       Retirement Rates

         No change was made to the retirement rates for this valuation. The retirement rates
         for each age are outlined in the table below:


                       Age                                         Current Valuation
                       55                                               17.5%
                       56                                               17.5%
                       57                                               15.0%
                       58                                               12.5%
                       59                                               20.0%
                       60                                               20.0%
                       61                                               30.0%
                       62                                               20.0%
                       63                                               30.0%
                       64                                               40.0%
                   65 and over                                         100.0%


         The rates were based on the experience study conducted in 2001.




                                                                                                   29
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
 Appendix D: Actuarial Assumptions and Cost Methods


a)       Termination of Employment

         Rates of participant termination at selected ages used for this valuation and the
         previous valuation were as follows:

                  Selected Age                                   Rate of Termination
                       20                                                6.0%
                       25                                                6.0%
                       30                                                9.0%
                       35                                                7.5%
                       40                                                7.5%
                       45                                                6.0%
                       50                                                4.5%
                       55                                                0.0%


b)       Mortality

         The rates of mortality assumed in a valuation serve two purposes: firstly, to
         determine what portion of the current membership will survive to retirement age, and
         secondly, to forecast the remaining lifetime of participants once they reach
         retirement.

         As with the previous valuation, for the current valuation, we utilized the 1994
         Uninsured Pensioner mortality table, projected to 2020. The mortality rates for
         selected ages are illustrated below.




                                                                                                30
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
 Appendix D: Actuarial Assumptions and Cost Methods



                                 Annual Mortality Rates Per 1000
                                 1994 Uninsured Pensioner Table
                                        Projected to 2020
                  Age                             Male                         Female
                   25                                 0.5                      0.2
                   30                                 0.8                      0.3
                   35                                 0.8                      0.4
                   40                                 0.9                      0.5
                   45                                 1.2                      0.7
                   50                                 1.7                      1.0
                   55                                 2.9                      2.0
                   60                                 5.6                      4.2
                   65                                 10.8                     8.2
                   70                                 17.2                     13.0
                   75                                 27.7                     19.8
                   80                                 51.4                     35.3
                   85                                 87.1                     62.3
                   90                                 148.2                    115.6
                   95                                 238.4                    190.1
                  100                                 332.4                    289.6


c)       Disability Rates and Methodology

         Based on the number of employees in approved LTD plans and the very small
         number of disability claims experienced by the Plan, we believe it is appropriate to
         ignore the contingency of disability. Such action is conservative since the resulting
         liabilities are slightly higher than would be the case if an appropriate disability
         assumption was used. The difference is not believed to be material.




                                                                                                 31
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
 Appendix D: Actuarial Assumptions and Cost Methods


Other

a)       Pension Partner and Age of Partner

         It is necessary to make assumptions as to the likelihood of a participant having a
         Pension Partner because the Plan provides benefits to the Pension Partners of
         participants in certain circumstances. 90% of participants are assumed to have a
         Pension Partner of the opposite sex. The male partner is assumed to be four years
         older than the female partner. 10% of participants are assumed to have no Pension
         Partner. While the definition of Pension Partner now includes same-sex
         relationships, it is believed that this assumption adequately provides for all such
         contingencies.

b)       Expenses of the Plan

         For the current valuation, expenses have been assumed to be 0.4% of pensionable
         earnings.

c)       Percent Electing Deferred Pension

         As with the previous valuation, we assumed that 75% of vested terminated
         participants elect a deferred pension and the remaining 25% take a cash refund and/or
         transfer value.


Going-Concern Actuarial Cost Method and Asset Valuation
Method

a)       Actuarial Cost Method

         The function of an actuarial cost method is to allocate the actuarial present value (as
         determined in accordance with the actuarial assumptions) of all anticipated benefits to
         past and future time periods. The method used in this valuation is known as the
         Projected Unit Credit actuarial cost method, also known as the Projected Accrued
         Benefit actuarial cost method prorated by service.




                                                                                                   32
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
 Appendix D: Actuarial Assumptions and Cost Methods


         Under this method, the actuarial present value of benefits accrued for service prior to
         the valuation date, but based on earnings projected to retirement, is allocated to prior
         time periods and referred to as the actuarial liability. The difference between the
         actuarial value of assets and the actuarial liability represents the unfunded actuarial
         liability, or excess assets, as the case may be. The actuarial present value of benefits
         expected to be earned in respect of service in the year following the valuation date is
         the normal actuarial cost. The normal actuarial cost is typically expressed as a
         percentage of pensionable earnings.

b)       Asset Valuation Method

         In the previous valuation, the asset valuation method used a smoothed market value
         approach with realized and unrealized gains spread over a three-year period. The
         smoothing method recognized one-third of the realized and unrealized gains/losses
         from the current year, two-thirds of the realized and unrealized gains/losses from the
         preceding year and 100% of the realized and unrealized gains/losses from all years
         prior to the preceding year.

         For this valuation, a change has been made to the smoothing method. The revised
         smoothing method is being adopted retroactively commencing with the 1992 plan
         year. The actuarial value of the net investment income for each year is determined as
         the sum of the required investment income on the market value of the assets (that
         amount of investment income which generates a rate of return net of investment
         expenses on the market value of the assets equal to the valuation discount rate of
         6.75%) and an amortization adjustment. The amortization adjustment is determined
         by amortizing over a five-year period, the difference between the actual investment
         income less investment expenses in a year over the required investment income for
         that year as defined above.

         Following determination of the smoothed value of assets as described above, a further
         constraint is applied. The actuarial value of assets is restricted to be no less then 85%
         or no more than 105% of the market value of the assets.




                                                                                                     33
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
 Appendix D: Actuarial Assumptions and Cost Methods


c)       Other Methodologies

         We have prepared a list of additional assumptions and methods used in the valuation
         of the Plan. This list is intended to assist users of this report in understanding the
         specific benefits valued. Small differences in methods and assumptions in a plan of
         this size can sometimes have effects in the millions of dollars. Appendix B of the
         report deals with data omissions so they will not be repeated here.

         ·   it is assumed that indexation of deferred and immediate pensions commences one
             year after termination or retirement;

         ·   coordinated options for retired participants have the entire pension indexed if
             retired prior to January 1, 1985, and the base pension indexed for all others;

         ·   the rate of interest credited on employee contributions is equal to the nominal
             discount rate of 6.75%;

         ·   current service contributions are based on pensionable salary;

         ·   the normal actuarial cost includes refunds of additional contributions for non-
             vested participants;

         ·   the pensionable salary for calculating the normal cost percentage is nil for
             participants with more than 35 years of service;

         ·   pensioners who had not elected a form of pension as at the valuation date were
             valued as joint and survivor 662/3% (joint and survivor 75% for pre-1992 service)
             for participants with Pension Partners and single life, with a 10 year guarantee
             (life only for pre-1992 service) for participants without Pension Partners;

         ·   for deferred benefits on termination or death (post-1991 service), the pensions
             were deferred to 55 with the early reduction factor calculated from the earlier of
             age 60 and the attainment of 80 points. Deferred pensioners over 55 at the
             valuation date were assumed to retire immediately.




                                                                                                  34
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
 Appendix D: Actuarial Assumptions and Cost Methods


Solvency Assumption Basis

The PSPP Act requires that a solvency valuation be prepared to determine if the assets of the
Plan are sufficient to cover the liabilities for benefits accrued to the valuation date. In other
words, if the Plan was terminated on the valuation date, the assets should be sufficient to
provide for the accrued benefits.

Since a solvency valuation requires the Plan to be valued on a termination approach, the
ongoing valuation assumptions were modified as follows for the solvency results:



Economic Assumptions

a)       Nominal discount rate and level of price inflation

         The discount rate for active members and deferred pensioners which would apply if
         the Plan were terminated at December 31, 2003, is 4.25% for 15 years and 4.25%
         thereafter. The discount rate for pensioners is 3.75% for all years. These discount
         rates reflect the fact that the Plan is indexed to 60% of Alberta CPI, both pre and post
         retirement.

b)       Salary Escalation

         No salary scale was used.

c)       Escalation of ITA Maximum

         The defined benefit limit that would apply if the Plan were wound up at
         December 31, 2003, is $1,833.33 per year of pensionable service




                                                                                                    35
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
 Appendix D: Actuarial Assumptions and Cost Methods


Demographic Assumptions

a)       Mortality

         We used the 1983 Group Annuity Mortality Table, without projection.

b)       Termination Rates

         All members are assumed to terminate with full vesting on the valuation date.

c)       Retirement Rates

         We assumed all members would retire at age 55 or on January 1, 2004, if they were at
         least age 55 on the valuation date.

d)       Merit and Promotion

         No merit and promotion scale was used.




                                                                                                36
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
            Appendix E: Analysis of Change in Surplus


Analysis of Change in Financial Position

The following is a reconciliation of the change in actuarial position since the previous valuation
as at December 31, 2002:

                                                                                      Total
                                                                                   ($000,000’s)
Excess Assets/(Unfunded Liability) at December 31, 2002                            $ (253.5)
Interest on excess assets/(unfunded liability)                                         (17.1)
Gain from asset valuation method change                                                113.6
Gain on data corrections                                                                  9.5
Gain on retirement decrement                                                              4.9
Gain on termination decrement                                                             2.2
Loss on investment income less than expected                                           (54.9)
Loss on indexing                                                                       (18.2)
Loss on salary scale                                                                      (4.8)
Loss on mortality                                                                         (3.3)
Loss on expenses                                                                          (0.6)
Loss on contributions less than normal cost                                               (0.6)
Excess Assets/(Unfunded Liability) at December 31, 2003                            $ (222.8)


Commentary

The following commentary discusses the major components of the gain and loss.

a)       The unfunded liability at December 31, 2002 was assumed to increase with interest at
         the previous valuation interest rate of 6.75% per annum.

b)       The change in the asset valuation method resulted in a gain of $113.6 million.

c)       Certain data corrections (mostly to pensioners) resulted in gains of
         $9.5 million.




                                                                                                     37
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003
            Appendix E: Analysis of Change in Surplus



d)       Gains resulted from fewer retirements than expected and on the termination decrement
         of $4.9 million and $2.2 million, respectively.

e)       Investment income on the actuarial value of assets (using the previous method) was less
         than expected resulting in a loss of $54.9 million.

f)       Indexing on pensions in payment at January 1, 2004 was 3.4%, which exceeded the
         assumption of 1.65% producing a loss of $18.2 million.

g)       There were losses on the mortality decrement and the salary scale assumption of
         $3.3 million and $4.8 million, respectively.

h)       The contribution rates were not adjusted until April 1, 2003 resulting in a loss of
         $0.6 million.

i)       Administrative expenses exceeded the assumption by $0.6 million.




                                                                                                   38
Management Employees Pension Plan
Actuarial Valuation Report on the MEPP as at December 31, 2003

								
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