1 Canadian – Head Office in Vancouver and globally focused on: Exploration Mining Refining Teck Cominco Limited Gerry Wahl, Assistant Treasurer Teck Cominco Limited CADC2005

2 9 DB plans 12 DC plans 12 Group RRSP’s 20 Supplemental plans (some funded ) Joint Ventures and partnerships Canada & the US C$1.6 billion in assets Teck Cominco Pension EnvironmentCADC2005

Why small plans don’t invest in “alternate assets” Subject of my presentation today …CADC2005

4 Kepner-Tregoe First step in solving a problem: identify it as completely as possible Break a situation down into its smallest and simplest pieces “Understand the Problem” …CADC2005

5 “ The essence of investment management is the management of risk, not the management of returns” Benjamin Graham A key underlying conceptCADC2005

6 Administrators and committees of smaller plans are not familiar or comfortable with the concept of risk : It’s not a simple concept – takes time & effort to understand Definition(s) of risk - focus is usually on “loss” vs. “volatility” Statistical nature of the risk measures is intimidating Linkage between returns and volatility is not clear Linkage between risk and plan objective is not clear Jargon is confusing Committees and administrators are more comfortable with the concept of annual returns The underlying “problem” …CADC2005

7 The “primary objective” of a plan may be overlooked Dependence on style “boxes” and asset liability studies Input to asset liability studies is minimal Asset liability studies are expected to address all situations Asset Liability studies are a source of frustration As a result …CADC2005

8 Overcoming the resistance or lack of comfort in dealing with risk. An approach?..keep it simple…make it comfortable …at least initially A critical problem ….. from both a governance and financial service providers perspective a critical problem is ….. CADC2005

9 Solvency deficits must be eliminated within 5 years of filing a valuation This is a critical requirement …….from a financial perspective Key issue for a corporate planCADC2005

How about simple model - focused on Short term (5 year) funding and volatility CADC2005 Underlying Objective  increase the awareness and comfort level with “RISK” increase the awareness and comfort level with “RISK”

11 Mitigate fluctuations in: A.cash contributions B.funded ratios Which however are the result of : »Asset liability mismatches »Short term volatility of certain asset classes »Correlations »Legislation Reasonable objective for smaller plansCADC2005

12 Focus on Basics – On understanding the nature/duration of the pension liability the financial risk related to contributions the role and implications of asset mix the limitations of asset liability studies the importance of benchmarks the major source of “contribution” risk CADC2005

13 Marketing approaches Assess client “readiness” levels and focus efforts accordinglyAssess client “readiness” levels and focus efforts accordingly Sponsor or provide risk conferences, seminars or training sessions Sponsor or provide risk conferences, seminars or training sessions Understand each client plan’s primary objective and benchmark(s) Understand each client plan’s primary objective and benchmark(s) Understand the client’s current portfolio asset mix Understand the client’s current portfolio asset mix Deal in “knowns” such as annualized 4-5 year returns which reflect volatility Deal in “knowns” such as annualized 4-5 year returns which reflect volatility Frame the product in terms of a risk management approach rather than as a source of alpha Frame the product in terms of a risk management approach rather than as a source of alpha Demonstrate how the product would (have) impact on the current portfolio’s longer term i.e. 4-5 year return performance Demonstrate how the product would (have) impact on the current portfolio’s longer term i.e. 4-5 year return performance CADC2005

14 What’s a good result ? Once comfortable with the concepts and problems relating to risk, there will likely be more willingness to entertain “alternate” solutions A small plan doesn’t have to target the optimal level of active risk to gain benefits from a better awareness and management of risk CADC2005