Rationale for Assumptions

A rationale for each of the assumptions used in the current valuation is provided below.

Discount Rate

We have discounted the expected benefit payment cash flows using the expected investment return on the market value of the fund net of fees and less a margin for adverse deviations. The discount rate is comprised of the following:

• An assumed investment return based on estimated return for each major asset class that are consistent with market conditions on the valuation date modified to include a provision for increases in market interest rates to a level higher than current historically low levels, on the expected time horizon over which benefits are expected to be paid, and on the target asset mix specified in the Plan’s investment policy, subject to the 6.00% limit established in OSFI guidance. Consistent with market observable and available data, the assumed investment return is a gross return for all asset.
  
  
• An active investment management expense provision of 28 bps. We have assumed that these fees would be offset by an equivalent additional return resulting from active management .
  
  
• An assumed passive investment management expense provision which represents the hypothetical fees for passive investment management of assets based on estimated fees charged by index managers for balanced mandates.
  
  
• A margin for adverse deviations of 0.90% as per the terms of engagement The discount rate was developed as follows:
  
  Assumed investment return                                                     6.00%
   
  Additional returns for active investment management                0.28%
  
  Active investment management expense provision                    (0.28%) 
  
  Assumed passive investment management expense provision    (0.17%)
  
  Margin for adverse deviations                                                  (0.90%)
  
  Adjustment for rounding                                                          (0.03%)  
  
  Net discount rate                                                                     4.90%