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Pension Connectionyour

2 0 1 3 A n n u A l R e p o R t

Working in partnership to secure your pension income

2013 ANNUAL REPORT

ContentsProfile 1

Financial&OperationalHighlights 2

TheBoard 4

ReportoftheBoardChair 5

ReportoftheChiefExecutiveOfficer 7

ManagementDiscussion&Analysis 9

PlanLiabilitiesandFundingStatus 9

InvestmentManagement 14

InvestmentPerformance 19

InternalControlOverFinancialReporting 21

ChangeinNetAssets 22

PlanMemberServices 23

CompensationDiscussion&Analysis 28

2013ATRFFinancials 36

11-YearFinancialandStatisticalReview 56

CorporateDirectory 57

Table of

2013 ANNUAL REPORT 1pRoFIle

Profile

TheAlbertaTeachers’RetirementFundBoard(ATRF) isacorporationestablishedundertheTeachers’ PensionPlansAct.

ATRFisthetrustee,administratorandcustodianoftheassetsoftheTeachers’PensionPlanforallAlbertateachersemployedinschooljurisdictionsand charterschools.

ATRFisalsothetrustee,administratorandcustodian ofthePrivateSchoolTeachers’PensionPlanforteachersemployedbythoseprivateschoolsthat haveelectedtojointheplan.

TheplansaredefinedbenefitpensionplansregisteredundertheIncomeTaxActandaresponsoredbytheGovernmentofAlbertaandtheplanmembers,who arerepresentedbyTheAlbertaTeachers’Association.Theseplansponsorsareresponsibleforchangesto plandesign,benefitsandfunding,andshareinplangainsandlosses.

TheTeachers’PensionPlancovers:

• 38,099activeteachers;

• 24,652retiredmembers;and

• 12,149inactiveteachers.

ThevalueoffundingliabilitiesrelatingtoserviceaccruedsubsequenttoAugust31,1992bymembers oftheTeachers’PensionPlanexceedsthefundingvalueofassetsby$2.859billion.

ThePrivateSchoolTeachers’PensionPlanhas adeficiencyof$9.096millionandcovers:

• 247activeteachers;

• 185retiredmembers;and

• 215inactiveteachers.

Total Membership Profile

33% Retired Members

16% Inactive Teachers

51% Active Teachers

16%

33%

51%

2 2013 ANNUAL REPORT FINANCIAL&OPERATIONALHIGHLIGHTS

HiGHliGHtsFinancial & Operational

Atrf finAnCiAl Position At AUGUst 31

$Thousands

2013 2012

Investments

FixedIncome $ 2,635,188 $ 2,464,446

PublicEquities 4,626,692 3,821,766

PrivateCompanies 591,673 358,590

Infrastructure 278,243 186,940

RealEstate 446,019 334,913

NetInvestmentRelatedAssets 2,049 24,178

8,579,864 7,190,833

OtherAssets 1,163 3,196

NetAssetsAvailableforBenefits 8,581,027 7,194,029

ActuarialValueofAccruedPensionObligations 9,406,344 9,108,721

Deficiency $ 825,317 $ 1,914,692

ACtiVitY DUrinG YeAr enDeD AUGUst 31

$Thousands

2013 2012

BenefitandInvestmentOperations

InvestmentEarnings $ 1,024,552 $ 511,967

InvestmentOperationExpenses (33,150) (23,316)

991,402 488,651

NetContributions 684,381 632,878

BenefitsPaid (283,328) (257,478)

MemberServiceExpenses (5,457) (5,094)

395,596 370,306

IncreaseinNetAssets 1,386,998 858,957

IncreaseinAccruedPensionObligations (297,623) (814,356)

DecreaseinDeficiency $ 1,089,375 $ 44,601

2013 ANNUAL REPORT 3FINANCIAL&OPERATIONALHIGHLIGHTS

59% Return Enhancing GlobalEquity 37.5% CanadianEquity 15.0%PrivateEquity 6.5%

33.5% Fixed Income UniverseBonds 20.0% Long-TermBonds 11.5%MoneyMarket 2.0%

7.5% Inflation Sensitive RealEstate 4.5% Infrastructure 3.0%

Asset Mix - Post-1992 Period teachers’ Pension Plan atAugust31,2013

59%

33.5%

7.5%

Key Accomplishments – 2012-13

• Metorexceededallserviceturnaroundbenchmarksforourservicestoretired,activeandinactive planmembers

• Receivedveryhighapprovalratingsfrommembersontheplanmemberandretiredmembersurveys

• Completedacomprehensiveasset-liabilitymodellingstudyandrevisionstothefund’s targetpolicyassetmixandinvestmentpolicy

• Implementedthecoresoftwarecomponents ofthenewprivateinvestmentsystem

• Redesignedandimplementedanewplanmemberwebsite“MyPension”andanewcorporatewebsite

• Successfullyimplementedthenewplanmemberidentificationnumbersystem

• Continuedfurtherenhancementstosystems,processes,controlsandreportingthatwill contributetoATRF’songoingsuccess

• Recognizedashavingoneofthelowestplan memberadministrativeservicecostsinthe industryat$87permember

Fund Results

• FortheyearendedAugust31,2013,thefundreturned14.0%exceedingthefund’sbenchmark of11.5%by2.5%

• Overthepast15yearstheTeachers’PensionPlaninvestmentreturnwas6.3%,1.3%shortoftheinvestmentobjectiveof7.6%.TheannualizedrateofreturnforthePrivateSchoolTeachers’PensionPlanoverthesame15-yearperiodhasbeen6.0%

• Overthese15years,theratesofreturnoninvestmentswereimpactedbyasevereequitymarketdownturnandfinancialturmoilin2000-02andin2008-09.Theamortizationofthedeficienciesresultingfromthelowmarketreturnsandthereductioninthefundingdiscountratehave beenthelargestcontributorstotheincrease infundingcontributions

net Assets of Atrf ($Billions)

5.537

8.581

6.335

2013

2012

2011

2010

2009

7.194

4.956

teachers' Pension PlanPost-1992 Period

8.071

2.85910.930

FundingLiabilities 10.930

FundingValueofAssets 8.071

FundingDeficiency 2.859

atAugust31,2013 ($Billions)

Private school teachers' Pension Plan


FundingValueofAssets 39.486

FundingDeficiency 9.0969.09648.582

39.486

atAugust31,2013 ($Millions)

4 2013 ANNUAL REPORT THEBOARD

From left to right: GregMeeker,HarryBuddle,KarenElgert,LowellEpp,SandraJohnston,GeneWilliams.

BoArDThe

GREG MEEKER AssistantPrincipalatRossSheppardHighSchoolinEdmonton; ChairoftheBoardandViceChairoftheAuditCommittee.

HARRY BUDDLE Retired-PresidentandCEOofCapitalCitySavings-ServusCreditUnion; ViceChairoftheInvestmentCommitteeandFinanceandPlanningCommittee.

KAREN A. ELGERT Principal,EcoleQueenElizabethJr.High,WetaskiwinRegionalSchoolDivision; ViceChairoftheHumanResourcesandCompensationCommittee; memberoftheInvestmentCommittee.

LOWELL K. EPP ExecutiveDirector,CapitalMarketswithAlbertaTreasuryBoardandFinance; ViceChairoftheBoard;ChairoftheInvestmentCommitteeandAuditCommittee.

SANDRA JOHNSTON Coordinator,TeacherWelfarewithTheAlbertaTeachers’Association; ChairoftheFinanceandPlanningCommittee; memberoftheAuditCommittee.

GENE WiLLiAMS ActingAssistantDeputyMinister,Peopleand ResearchDivisionwithAlbertaEducation; ChairoftheHumanResourcesandCompensationCommittee.

2013 ANNUAL REPORT 5REPORTOFTHEBOARDCHAIR

GregMeeker

BoArD CHAirReport of the

Ensuringthelong-termfundingsustainabilityofdefinedbenefitpensionplansisamajorfocusofallpensionplanboards,thesponsorsofplansandthecontributorstothoseplans.Thiskeyissuehasbecomemorechallengingoverthepastdecadeduetothelowinterestrates,weakmarketreturnsandincreasinglongevityofplanmembers.Almostallplanshaveincreasedcontributionrates.Someplanshavedecreasedbenefits.Someplanshavechangedbenefits,sothattheywillbepaidonlyiftheplanisfullyfunded.

Focus on Meeting the Pension Promise

OurprincipalobjectiveistosecurethepensionsofAlbertateachers,whichmeansthatourmainfocus isonplanfundingandensuringthatsufficientassetsareinplacetomeetfuturepensionpayments. TheplanbenefitsthataretobeprovidedbyATRFaresetbytheplansponsors,TheAlbertaTeachers’AssociationandtheGovernmentofAlberta.TheATRFBoard’sresponsibilityistoensurethatthesebenefitsarefundedwithintheprescribedlegislativeprovisions.TheBoardhasonlyoneoptionavailablewhendeficienciesoccur,andthatistoraisecontributionrates.Thenecessarycontributionrateincreaseshavebeenimplementedtoensurethelong-termfundingsustainabilityofplanbenefitsandthefundedpositionsoftheplanshaveimprovedoverthepastyear.

UndertheTeachers’PensionPlan,contributionrateshavebeenincreasedtoensurethatthe$2.9billiondeficiencyisfullyfundedwithinthe15-yearperiodrequiredbylegislation.Thelimitingofshorter-termsalaryincreases,pursuanttotheAssurance for Students Act,producedexperiencegainsforplanliabilitiesthatoffsetotherexperiencelosses. Inaddition,ourrecentinvestmentresultshave beenstrong,withthefundreturning14.0%inthe pastfiscalyearendedAugust31,2013.Consequently,

thepreviouslyanticipatedadditionalcontribution rateincreaseofalmost1%in2015nolonger appearsnecessary.

SimilarlyforthePrivateSchoolTeachers’PensionPlan,contributionrateshavebeensettoensuretheplan’s$9.1milliondeficiencyisfundedwithin15years. Theprojectedcontributionrateincreasein2015 of2%isunlikelytoberequired.

Action to Ensure Longer-Term Funding Sustainability

Inthe2011-12fiscalyear,wecompletedacomprehensivereviewofthefundedpositionandfundingpoliciesoftheplans.Thekeyresultofthisreviewwasthedecisiontoimprovethefundingmarginforpotentialfutureadverseplanexperiencebydecreasingtheliabilitydiscountrateto6.25%peryear.

Inthepastfiscalyear,weconductedadetailedasset-liabilitymodellingstudywiththeInvestmentCommittee,management,andexternalfundingandinvestmentadvisors.Thepurposeoftheasset-liabilitymodellingstudywasto:

• seektheoptimalpolicyassetmixofthefundinvestmentsfortheplansgiventhefunding policiesandtheunderlyingliabilitystructures;

• minimizetheprobabilitythatthefundingcontributionratemayexceedamaximumthreshold;and

• maintainanacceptableaveragelong-termcontributionrate(i.e.maximizeinvestmentreturnwithintherisktoleranceoftheplansponsors).

Followingdetailedmodelling,stressanalysisandtesting,theresultsoftheasset-liabilitymodellingstudyshowedthatsomemodestchangestothetargetpolicy

6 2013 ANNUAL REPORT REPORTOFTHEBOARDCHAIR

assetmixhadthepotentialtoofferamorefavourablerisk-returnprofilefortheplansinthefuture.Thetargetpolicyassetmixwillbechangedtoaddanallocation toabsolutereturnstrategies.Thesestrategieswill betargetedtoimprovediversificationbyofferingreturnsthathavelittlecorrelationtoATRF’sothermajorassetclasses.Inaddition,ourCanadianandglobalpublicequitieswillbeconsolidatedintoa singleassetclassandexpandedwiththeaddition ofanemergingmarketcomponent.

TheBoardcontinuestomonitorthefinancialpositionoftheplansonanongoingbasis.Wecarefullyexaminethefundingstructureoftheplans,andthevariousfundingassumptionswithmanagementandATRF’sactuary.Wealsostresstestthefundingassumptionsandmakechangestotheselong-termassumptionsasrequired.Inaddition,weprovidetheplansponsorswithdetailedinformationonthecurrentfundedstatusoftheplanandonforward-lookingfundingchallengesthatmayarisefortheplans.

Acknowledgements

IcongratulateandthanktheemployeesofATRFfortheirsuccessinmeetingtheneedsoftheplanmembersandothercustomers,inthesuperiorvalue-addedinvestmentperformanceandintheircost-effectiveexecutionoftheongoingbusinessplanobjectives.Iwishtothanktheexternalmembersof theInvestmentCommitteefortheircounselonour keyinvestmentandfundingissues,andintheireffectivecontributiontoourrecentasset-liabilitymodellingstudy.IwouldalsoliketorecognizemyfellowBoardmembersfortheirongoingfocusonenhancingcorporategovernanceandeffectiveoversightofATRFoperations.

GregMeeker

BoardChair

TheBoardiscommittedtogoodgovernanceandbelievesthatongoingimprovementinthecorporategovernanceofATRFwillleadtoenhancedlong-termvalueforplanmembersandsponsors.OurStatementofCorporateGovernancePracticesisfoundonourwebsite.Gotowww.atrf.com>CorporateGroup>ATRFGovernance>CorporateGovernance.

2013 ANNUAL REPORT 7REPORTOFTHECHIEFExECUTIVEOFFICER

EmilianGroch

Report of theCHief eXeCUtiVe offiCer

ATRFachievedongoingstrongperformanceinallareasinthe2012-13fiscalyear.Investmentreturnsexceededthefund’sbenchmarkandthefundingobjectiveoftheplans;planmemberserviceturnaroundbenchmarksweresurpassed;highratingswerereceivedfromplanmembersurveys;plannedgrowthinATRFoperationswasimplemented;and,newbusinessplaninitiativesweresuccessfullycompleted.

TheATRFfundreturnedaverystrongpositivereturnof14.0%inthepastyear.Thisrateofreturnexceededthefund’s2012-13fiscalyearbenchmarkby2.5%,surpassedthefundingrate-of-returnobjectiveoftheplansandadded$172millioninadditionalfundgrowth.Overthepastfouryears,theinvestmentportfoliooftheATRFfundhasreturnedanannualaveragereturnof9.1%ascomparedtothe7.9% fundbenchmark,providinganaveragevalue- addedreturnof1.2%peryear.

However,thesepositiveratesofreturnhavenotfullymitigatedtheimpactsthattwosevereequitymarketdownturnshavehadonratesofreturnoverthepast13years.ThefundoftheTeachers’PensionPlanhasreturnedonaverage4.6%eachyearsinceSeptember2000,whichis2.9%peryearshortofthetargetedfundingrate-of-returnobjective.Thisandtheimpactsfromtheverylowinterestratesandincreasingplanmemberlongevityhaveresultedinsubstantialfundingshortfalls.TheTeachers’PensionPlanhasafundingdeficiencyof$2.9billionasatAugust31,2013,whilethePrivateSchoolTeachers’PensionPlanhasafundingdeficiencyof$9.1million.Thesedeficienciesarebeingfundedbyadditionalcontributionsfromactiveteachersandtaxpayers/employersover15years.

Service to Plan Members

Resultsfromthesurveysofactivemembers,retiredmembersandnewlyretiredmembersinthepastyearwereverypositive,withhighratingsreceivedinallareas.Wehaveserviceturnaroundbenchmarksforallserviceprocessesandexceededthesebenchmarksin allareaslastyear.Inaddition,ATRFcontinuestohave averycost-effectivestructurewithindustry-leadingplanmemberservices,andcoststhatarealmosthalfoftheaveragecostofagroupofsimilarCanadianpension planorganizations.

Weredesignedandimplementedanewplanmemberandcorporatewebsite.Onlineserviceenhancementsforplanmembersregisteredforthesecuredplanmemberwebsite,MyPension,wereputinplace. Also,anewplanmemberidentificationnumbersystemwaslaunchedsuccessfullyforallplanmembersandATRFsystems.Basedonfeedbackreceivedfromplanmembers,andourreviewofindustrybestpractices, wewillcontinuetomakefurtherenhancementsto planmemberservicesandcommunications.

Ongoing Fund Growth

Wecontinuetoimplementourplanstobuildandmaintainasuccessful,cost-effectiveinvestment programfortheassetsofthefund,includingasignificantcommitmenttoutilizingcost-effectiveinternalresources.Weweresuccessfulinaddingadditionalstaff,particularlyinbuildingthe investmentprogramsforinfrastructure,realestateandprivateequity.Wealsoimplementedtherequired

8 2013 ANNUAL REPORT REPORTOFTHECHIEFExECUTIVEOFFICER

administrative,controlandreportingfunctionstosupportbest-practiceoperationsoftheseilliquid assetclasses,includingtheimplementationofthe coresoftwarecomponentsofanewprivateinvestmentsystem.Weanticipateaddingamodestnumberofadditionalstaffinthe2013-14fiscalyear.

TheinvestedassetsoftheTeachers’PensionPlanrepresentplanliabilitiesforpensionableserviceafterAugust1992makingtheplanaveryyoungplanwithpositivecashflowforthenext15years.Assetsundermanagementareprojectedtoreach$15billioninfiveyears.Ourfocusforthenextyearwillbeininvestingthesegrowingfundassets,identifyinginvestmentopportunitiestogrowourinfrastructure,realestateandprivateequityassetclasses,andimplementing ournewallocationstoabsolutereturnstrategies, asnotedintheReportoftheBoardChair.

Acknowledgements

IwanttocongratulatethestaffofATRFforanotherstrongyearofperformanceandforsuccessfullymeetingourbusinessplans.Imustalsoacknowledgetheirsuccessful,ongoingcommitmenttoserving theneedsoftheplanmembersandourothercustomers,andinworkingtosecurethepensions ofAlbertateachers.

IwishtothanktheBoardmembersandthemembersoftheInvestmentCommitteefortheirongoing supportofourbusinessplaninitiatives,theirsoundadviceandtheirfocusonthelong-termfundingsustainabilityoftheplans.

EmilianGroch

ChiefExecutiveOfficer

2013 ANNUAL REPORT 9MANAGEMENTDISCUSSION&ANALYSIS

AnAlYsisManagement Discussion &

ThissectionoftheAnnualReportprovidesadetailedoverviewfrommanagement’sperspectiveoftheliabilities,assets,investmentsandserviceactivitiesofATRFthatwillassistreadersinreviewingATRF’sperformanceandfinancialposition.Itcontainsforward-lookingstatementsreflectingmanagement’sobjectives,outlook,andexpectationsthatinvolverisksanduncertainties.Ouractualresultswilldifferfromthoseanticipated.

PLAN LiABiLiTiES AND FUNDiNG STATUS

TheTeachers’PensionPlanandthePrivateSchoolTeachers’PensionPlanhaveuniqueliabilitystructuresandfundingarrangements.Theliabilitiesrelatetothreedistinctcomponents:

• thepre-September1992benefitperiodfor theTeachers’PensionPlan(Pre-1992Period);

• thepost-August1992benefitperiodfortheTeachers’PensionPlan(Post-1992Period);and

• thePrivateSchoolTeachers’PensionPlan.

Teachers’ Pension Plan: Pre-1992 Period

TheliabilitiesofthePre-1992PeriodconsistoftheactuarialvalueoftheaccruedPre-1992Periodpensionbenefits.Therearenofundassetsinrespectoftheseliabilities.TheGovernmentofAlbertaguaranteesthepaymentofbenefitsrelatedtothePre-1992PeriodandisprovidingATRFsufficientfundseachmonthtopaythesebenefitsastheybecomedue,andprovidedATRFatotalof$440millioninthepastfiscalyear.

Teachers’ Pension Plan: Post-1992 Period

ThecostofbenefitsbeingearnedforserviceafterAugust1992,includingthe60%cost-of-livingpensionadjustmentprovision,issharedequallybetween activemembersandtheGovernmentofAlberta. Activemembersareresponsiblefortheadditional 10%cost-of-livingpensionadjustmentprovision.Fundingdeficienciesundertheplanareamortized byadditionalcontributionsfromactivemembers andtheGovernmentofAlbertaovera15-yearperiod. SincePost-1992Periodbenefitsarenotguaranteediftheplanisterminated,theprimaryobjectiveistoensuretherearesufficientassetstopayallPost-1992Periodbenefits.

Funding Policy

Thefundingpolicysetsouttheprinciplesandguidelinesgoverningthefundingrequirements ofthebenefitsinrespectofserviceunderthe planinaccordancewiththeplan’slegislationandtheobjectivesoftheBoard.TheoverallobjectiveistoensurethefundingsustainabilityofthePost-1992Periodplanoverthelongtermandtoensuretheprovisionofbenefitstoplanmembersand theirbeneficiaries.

TheBoardandmanagementreviewthefundingpolicyforthePost-1992PeriodTeachers’PensionPlanannually.EffectiveSeptember1,2012,weincreasedthemarginforadverseplanexperience,bydecreasingtheplan’sliabilitydiscountrateto6.25%peryear,tomoreeffectivelymanageyear-to-yearvolatilityandtoenhanceintergenerationalfundingequity.TheresultingincreaseinplanfundingcontributionratescameintoeffectSeptember1,2013.

10 2013 ANNUAL REPORT MANAGEMENTDISCUSSION&ANALYSIS

Thekeyelementsofthecurrentfunding policyareasfollows:

• Theprimaryobjectiveisbenefitsecurityfocusedonmaximizingthelikelihoodofattainingandmaintainingaplanfundedratioofatleast100%.Thisisacriticalcomponentinthefundingsustainabilityoftheplan,andisenhancedbythegovernancestructureofATRFandtheextremelylowlikelihoodoftheplanwindingup.

• Contributionratestabilityisakeysecondaryobjective.Thecostoftheplanshouldbesustainableovertimeandreflectalong-term viewoftheplan’sassetsandliabilities.Theplanshouldbefundedtoensurethatthelevelofrequiredcontributionsremainsrelativelystablewithoutunduefluctuations,anddonotincrease tounaffordablelevels.

• Basedontheplan’scost-sharingarrangement,itisexpectedthat,totheextentpossible,eachgenerationofactivemembersandtaxpayerswillfundthebenefitsaccruingforthatgenerationofactivemembers.

• Theactuarialliabilityoftheplanisdeterminedunderbothabest-estimate-assumptionbasis, usingmanagement’sbest-estimateoffutureevents,andafunding-assumptionbasis.Underthefunding-assumptionbasis,management’sbest-estimateassumptionforthelong-terminvestmentrateofreturnmaybeadjustedforaprovisionforpotentialadverseplanexperience.

• Thefunding-assumptionbasisisdeterminedbytheplan’sactuary,inconsultationwithATRF,toachievethefundingobjectives.Thefunding-assumptionbasisissetsuchthattheliabilitiesfallwithinarangeof100%and125%oftheliabilitiesbasedonthebest-estimate-assumptionbasis,withatargetrangeof110%to115%ofthebest-estimateliabilities.

• Toachievestabilityincontributionrates, thefunding-assumptionbasiscanbeadjustedtoachieveliabilitiesnotlessthan100%ofbest-estimateliabilitiesinordertoreducedeficitswheretheplanandfundareundermoreextremefinancialpressures,ortoachieveliabilitiesofupto125%ofbest-estimateliabilities,therebyprovidingareserveforfutureadverseplanfundingexperience.

Funding Study Results

AnactuarialfundingstudyofthePost-1992PeriodTeachers’PensionPlanwascompletedasatAugust31,2013.Thestudy’sassumptionswerethesameasthoseusedinthefundingvaluationasatAugust31,2012 withthefollowingexceptions:

• minoradjustmentsweremadetomortality,retirementandterminationrateassumptionstoreflecttheresultsofa2013studyoftheactualexperienceofthoseeventsundertheplan;

• shorter-termsalaryincreaseexpectationswererevisedtoalignwiththelimitingofsalarygrowthofplanmemberspursuanttotheAssurance for Students Act;and

• thepaceofimprovementsinfuturemortality rateswasacceleratedtoalignwithrecent industryresearch.

ThefollowingtableoutlinestheresultsofthefundingstudyasatAugust31,2013.

1Theplanusesanactuariallyacceptedpracticeofsmoothingmarketreturns overafive-yearperiodtomoderateshort-termadjustmentstocontributionrates. Thispracticeisintendedtoevenouttheimpactfromthevolatilityofmarketreturnsontheplan’sfundedstatus.AsatAugust31,2013,theplan’sfundingvalueofnetassetsavailablewas$469millionlowerthanthefairvalueofnetassetsavailable(2012:$261millionhigher).

teachers’ Pension Plan Post-1992 PeriodatAugust31,2013 ($Billions)


FundingValueofAssets1 8.071

Funding Deficiency 2.859

Thefundingstudyshowedthecontribution ratesthatwereimplementedSeptember1,2013 remainadequate.

1YMPEistheYear’sMaximumPensionableEarningsusedbytheCanadaPensionPlan($52,500in2014).

teachers’ Pension PlanContribution rates September2013 (%ofSalary)

Teachers

TotalTeacherContribution 13.46

SalaryuptoYMPE1 11.44

SalaryaboveYMPE 16.34

Government 12.65


Thecurrenttotalplancontributionrateis26.11%oftotalteachersalaries,consistingofacurrentservicecostof16.2%ofsalariesandtotaldeficiencycontributionsof9.91%ofsalaries.Thetotalplandeficiencycontributionswilldecreaseoverthenext 14yearsastherespectivedeficienciesareamortizedovertheirrespective15-yearfundingperiodsas showninthechartbelow.

9.9%

8.2%

7.1%

6.9%

6.0%

3.8%

2.7%

0.0%

Estimated Total Deficiency Contribution Rates2013to2027

2013-16

2017-18

2019-20

2024-25

2021-22

2026

2023

2027

Plan Funding Challenges

Akeyassumptioninthefundingoftheplanisthatthefundwillearnanaverageinvestmentreturneachyearequaltothediscountrateusedforfundingpurposesnetofinvestmentcosts.Actualinvestmentreturnsyeartoyearcanbequitevolatileandabsentanyadjustmentwouldleadtofrequentcontributionrateadjustments.Todampentheimpactofvolatilemarketreturnsontheplan’sfundedstatus,theplanusesanactuariallyacceptedpracticeofsmoothingmarketreturnsoverafive-yearperiod.Thispracticeproducesafundingvalueofplanassetsthatinanygivenyearcanbehigherorlowerthanmarketvalue.Overanyfive-yearperiod,however,thetwovaluesareexpectedtoconvergetothesameamount.

AsatAugust31,2012,thefundingvalueofassets was$261millionhigherthanmarketvalue.This meantthatmarketreturnswouldhavehadtoexceedtheassumedfundingdiscountrateby$261million

overthecourseofthefollowingfiveyearsinorder toavoidacontributionrateincreaseofabout1% ofsalary.However,duetotherecentstrongpositive fundreturns,theplanhadfundingvalueofassetsof $469millionlessthanmarketvalueasatAugust31,2013.Thisnowplacestheplaninapositionthatmarketreturnsmaybe$469millionlessthanassumedfortheplan’sfundingneedswithnoresultingimpact oncontributionrates.

Wealsocarriedoutvariousstresstestsonourlong-termfundingassumptions.Forexample,ifthefuturelong-termrateofreturnoninvestmentsisonly5.75%,totalplancostwouldincreasebyafurther3.78%ofteachersalariesto29.89%fromthe26.11%totalplanfundingcostasofSeptember2013.

Best-Estimate Valuation Results

Weconductabest-estimateactuarialvaluationforthepurposesofthefinancialstatements.Thisbest-estimatevaluationusesamark-to-marketapproachthatvaluesplanliabilitiesandassetsbasedoncurrentmarketvalues.Ittherefore,doesnotusethe6.25%discountrateappliedinthefundingvaluation,asthefundingvaluationincludeda1.00%provisionforpotentialadverseplanexperienceinitsdiscountrate.Asaresult,thebest-estimatevaluationwasconductedusinga7.25%best-estimatediscountrate.

Theactuariallyacceptedpracticeofsmoothingmarketreturnsoverafive-yearperiodusedinthefundingvaluation,cannotbeutilizedforthebest-estimateactuarialvaluationasthefairvalueofnetassetsmustbeused.Accordingly,theassetandliabilityamountsofthebest-estimateactuarialvaluationdifferfromthoseinthefundingvaluation.

Thetablebelowoutlinestheresultsofthe best-estimatevaluationasatAugust31,2013.

teachers’ Pension Plan Post-1992 PeriodatAugust31,2013 ($Billions)

Best-EstimateLiabilities 9.365

FairValueofAssets 8.540

Deficiency 0.825


Private School Teachers’ Pension Plan (PSTPP)

Thecostofbenefitsbeingearned,includingthe60%cost-of-livingpensionadjustmentprovision,issharedequallybetweenactivemembersandprivateschoolemployers.Activemembersareresponsiblefortheadditional10%cost-of-livingpensionadjustmentprovision.Fundingdeficienciesundertheplanareamortizedbyadditionalcontributionsfromactivemembersandtheprivateschoolemployersovera 15-yearperiod.Sincebenefitsarenotguaranteed iftheplanisterminated,theprimaryobjectiveistoensuretherearesufficientassetstopayallbenefits.

PSTPP Funding Policy

TheBoardhasalsoadoptedafundingpolicyforthePSTPPthatsetsouttheprinciplesandguidelinesgoverningthefundingrequirementsofthebenefitsinrespectofserviceundertheplaninaccordancewiththeplan’slegislationandtheobjectivesoftheBoard.Theoverallobjectiveistoensurethesustainabilityoftheplanoverthelongtermandtoensuretheprovisionofbenefitstoplanmembersandtheirbeneficiaries.EffectiveSeptember1,2012,weincreasedthemarginforadverseplanexperience,bydecreasingtheplan’sliabilitydiscountrateto6.25%peryear,tomoreeffectivelymanageyear-to-yearvolatilityandtoenhanceintergenerationalfundingequity.TheresultingincreaseinplanfundingcontributionratescameintoeffectSeptember1,2013.

PSTPP Funding Study Results

AnactuarialfundingstudyofthePSTPPwascompletedasatAugust31,2013.ApartfromtheexceptionsoutlinedearlierforthePost-1992PeriodTeachers’PensionPlan,thestudy’sassumptionswerethe sameasthoseusedinthefundingvaluationasatAugust31,2012.

Thefollowingtableoutlinestheresultsof thefundingstudyasatAugust31,2013.

Private school teachers’ Pension PlanatAugust31,2013 ($Millions)


FundingValueofAssets1 39.486

Funding Deficiency 9.096

1 Theplanusesanactuariallyacceptedpracticeofsmoothingmarketreturnsover afive-yearperiodtomoderateshort-termadjustmentstocontributionrates. Thispracticeisintendedtoevenouttheimpactfromthevolatilityofmarketreturnsontheplan’sfundedstatus.AsatAugust31,2013,theplan’sfundingvalueofnetassetsavailablewas$2.021millionlowerthanthefairvalueofnetassetsavailable(2012:$2.287millionhigher).

Thefundingstudyshowedthecontribution ratesthatwereimplementedSeptember1,2013remainadequate. 1YMPEistheYear’sMaximumPensionableEarningsusedbytheCanadaPensionPlan($52,500in2014).

Private school teachers’ Pension PlanContribution rates September2013 (%ofSalary)

Teachers

TotalTeacherContribution 11.77

SalaryuptoYMPE1 10.22

SalaryaboveYMPE 14.60

Employers 10.99

Thecurrenttotalplancontributionrateis22.76%oftotalteachersalaries,consistingofacurrentservicecostof18.09%ofsalariesandtotaldeficiencycontributionsof4.67%ofsalaries.Thetotalplandeficiencycontributionswilldecreaseoverthenext 14yearsastherespectivedeficienciesareamortizedovertheirrespective15-yearfundingperiodsasshowninthechartbelow.

4.7%

1.5%

0.7%

0.0%

Estimated PSTPP Total Deficiency Contribution Rates2013to2027

2013-24

2025

2026

2027


PSTPP Plan Funding Challenges

Akeyassumptioninthefundingoftheplanisthatthefundwillearnanaverageinvestmentreturneachyearequaltothediscountrateusedforfundingpurposesnetofinvestmentcosts.Actualinvestmentreturnsyeartoyearcanbequitevolatileandabsentanyadjustmentwouldleadtofrequentcontributionrateadjustments.Todampentheimpactofvolatilemarketreturnsontheplan’sfundedstatus,theplanusesanactuariallyacceptedpracticeofsmoothingmarketreturnsover afive-yearperiod.Thispracticeproducesafundingvalueofplanassetsthatinanygivenyearcanbehigherorlowerthanmarketvalue.Overanyfive-yearperiod,however,thetwovaluesareexpected toconvergetothesameamount.

AsatAugust31,2012,thefundingvalueofassets was$2.287millionhigherthanmarketvalue. Thismeantthatmarketreturnswouldhavehadtoexceedtheassumedfundingdiscountrateby$2.287millionoverthecourseofthefollowingfiveyearsinordertoavoidacontributionrateincreaseofabout2%ofsalary.However,duetotherecentstrongpositivefundreturns,theplanhadfundingvalueofassetsof$2.022millionlessthanmarketvalueasatAugust31,2013.Thisnowplacestheplaninapositionthatmarketreturnsmaybe$2.022millionlessthanassumedfortheplan’sfundingneedswithno resultingimpactoncontributionrates.

Wealsocarriedoutvariousstresstestsonourlong-termfundingassumptions.Forexample,ifthefuturelong-termrateofreturnoninvestmentsisonly5.75%,totalplancostwouldincreasebyafurther3.95%ofteachersalariesto26.71%fromthe22.76%planfundingcostasatSeptember2013.

PSTPP Best-Estimate Valuation Results

Weconductabest-estimateactuarialvaluationforthepurposesofthefinancialstatements.Thisbest-estimatevaluationusesamark-to-marketapproachthatvaluesplanliabilitiesandassetsbasedoncurrentmarketvalues.Ittherefore,doesnotusethe6.25%discountrateappliedinthefundingvaluation,asthefundingvaluationincludeda1.00%provisionforpotentialadverseplanexperienceinitsdiscountrate.Asaresult,thebest-estimatevaluationwasconductedusinga7.25%best-estimatediscountrate.

Theactuariallyacceptedpracticeofsmoothingmarketreturnsoverafive-yearperiodusedinthefundingvaluation,cannotbeutilizedforthebest-estimateactuarialvaluationasthefairvalueofnetassetsmustbeused.Accordingly,theassetandliabilityamounts ofthebest-estimateactuarialvaluationdifferfromthoseinthefundingvaluation.

Thefollowingtableoutlinestheresultsofthe best-estimatevaluationasatAugust31,2013.

Private school teachers’ Pension Plan atAugust31,2013 ($Millions)

Best-EstimateLiabilities 41.235

FairValueofAssets 41.508

Surplus 0.273

Funding Risks Looking Forward

Thefundingstudiesandvaluationsarebasedonassumptionsthatwilldifferfromactualplanexperience.Anydifferencebetweentheassumptionsandplanexperiencewillemergeasgainsorlossesinfuturefundingstudiesandvaluations.Keyamongthoseassumptionsistheexpectedrateofreturnof thefundandtherecanbesignificantdeviationfromthisestimateovershorterperiodsoftime.

Theapproachtosmoothinginvestmentgainsandlossesadoptedbytheplanscanservetodampendramaticchangestocontributionratesduetoshort-termmarketvolatility.Thisapproachdealteffectivelywithinvestmentlossesstemmingfromthe2007-2009financialcrisisasitprovidedtimeformarketstorecovertherebyavoidingunnecessarycontributionrateincreases.Similarly,thestronginvestmentperformanceinthe2012-13fiscalyearhasprovidedbothplanssomeabilitytomitigateanypotentialmarketlossesoverthenextfiveyears.

Whilethesmoothingmethodologyisaneffectivewaytostabilizecontributionratesduringshort-termmarketvolatility,failuretoachievetheassumedfundingdiscountrateonaverageoverthelongtermwillrequirecontributionrateincreases.


INVESTMENT MANAGEMENT

Forfirsttimeinseveralyears,financialmarketsbegantoreflectamoreoptimisticviewofthefutureinfiscal2012-13.Earlysignsofeconomicstabilizationin Europeandanew,moreproactivegovernmentinJapangaveinvestorsconfidencethatthecomingyearwillbebetterthanthepast.Whiledevelopingeconomiessawslowgrowth,NorthAmericaneconomiescontinuedonapathofmodest,butpositivegrowth.Thiscombinationprovidedasolidbackdropforglobalequitymarketstorecordverystronggains.Conversely,fixed-incomemarketswereweakforthefirsttimeinseveralyears,astheU.S.begantopubliclycontemplateslowingdownthehighdegreeofmonetarystimulusithadbeenmaintainingsince2008.

InthefiscalyearendedAugust31,2013,ATRF’sinvestmentportfoliorecordeditsfourthconsecutiveyearofpositivereturns,andthestrongestsingle- yearreturninoveradecade.Thefundgenerated areturnof14.0%.

ATRF’sinvestmentoperationscontinuetodevelopinsupportoftheoverallgrowthinassets,whichincreasedfrom$7.2billionto$8.6billionduringtheyear.Inparticular,wecontinuetomakegoodprogresstowardreachingourlong-termtargetallocationstonon-publiclytradedassetsincludingrealestate,infrastructureandprivateequity.Weexpectthatitwilltakeseveralmoreyearstoreachtheseallocationtargetsaswebuildadiversifiedportfoliooflong-termassetsthatmeetourreturngoalsinarisk-controlledandcost-effectivemanner.Duringtheyearwelaunchedasignificantsoftwareimplementation projectthatwillenhanceourmanagementandcontroloftheseprivate-marketassets.Acomprehensive asset-liabilitymanagementstudywascompletedduringtheyearwhichwillresultinadditional changestoourtargetpolicyassetmixnextyear.

Target Policy Asset Mix

ThefollowingtargetpolicyassetmixwasadoptedbytheBoardin2009andimplementationbeganin2010.Asnotedabove,progresscontinuestowardreachingourlong-termgoalsfortheilliquidassetclassesofprivateequity,infrastructureandrealestate.

50% Return Enhancing GlobalEquity 30.0% CanadianEquity 10.0%PrivateEquity 10.0%

25% Fixed Income UniverseBonds 11.5% Long-TermBonds 11.5%MoneyMarket 2.0%

25% Inflation Sensitive RealEstate 15.0% Infrastructure 10.0%

Long-Term Target Policy Asset Mix atAugust31,2013

50%

25%

25%

Asplanned,ATRFundertookacomprehensiveasset-liabilitymodelingstudyin2013.Thisstudywasspecificallyfocusedonunderstanding,managingandreducingtheriskofsignificantfuturecontributionrateincreaseswithinthecontextofthefundingpolicy.FinalresultsofthestudywerereceivedinJulyandnewchangestothetargetpolicyassetmixwillreflectthisgoal.ArevisedtargetpolicyassetmixisexpectedtobeapprovedbytheBoardinearly2014andimplementationwillfollowlaterinthefiscalyear.

Return Enhancing Assets

Returnenhancingassetsarethoseassetswhoseprimarypurposeistoincreasetheoverallreturnofthefundoverthelongterm.Includedinthiscategoryofassetsarepublicandprivateequities,aswellasotherstrategiesprincipallydesignedtogeneratereturn.

1 Includescash,accruedincomeandderivativeswithineachassetclass.

return enhancing AssetsatAugust31,2013 ($Millions) (%)

GlobalEquity 3,507 40.8

CanadianEquity 1,315 15.3

PrivateEquity 592 6.9

Total1 5,414 63.0

Public Equity Markets

The2012-13fiscalyearwasgenerallystrongforequitymarkets,asthelackofincrementalnegativenewsrestoredadegreeofconfidenceandallowedinvestorstocapitalizeonreasonablevaluations.Despitethestrongreturns,therewasvolatilitythroughoutthe yearandthedisparityinreturnsfromdifferent regionswaslarge.


NorthAmericahasbeenthebackboneoftheglobaleconomyforthelastfewyears,generatingmodest, butpositiveGDPgrowthandprovidingafoundation forotherregionstorecoverfollowingtheburstingofthecreditbubblein2008.TheUnitedStateswasthemostproactivenationindealingwiththebaddebtsonthebalancesheetsoffinancialinstitutionsandrecoveredmorequicklythanmanyotherpartsofthedevelopedworld.Asaresult,U.S.equitymarketsagaindeliveredstrongreturnsthispastyear.

Europewasandcontinuestobeinthemidstofasevererecession,butatthemarginthereappeartobeatleastsomesignsofstability.Althoughunemploymentisaseriousissueandeconomiccontractionhasbecomethenorm,therateatwhichthesehavedeterioratedhasdiminished.EconomicgrowthhasnowinchedintopositiveterritoryfortheoverallEuropeanUnionandeventhemostdeeplytroublednationsarecontractingatslowerrates. Theproblemsthesenationsfacearenowherenearbeingresolvedbutinvestorshavestartedtolookbeyondthecurrentsituation.Whencomparingstockmarketreturnsforvariouscountriesaroundtheworld,mostofthehighestreturningmarketswereinEurope.

Emergingmarketswereadisappointmentforinvestorsasnegativereturnswererecordedinnumerousmarkets.Formany,theemergingmarketsaresynonymouswithChinaanditsgrowthprospects.InvestorshavebeenconcernedwiththeslowinggrowthrateinChina,howeveritisstillstronger thanmostpartsoftheworld.Goingforward,theinvestmentworldmustbecomeaccustomedtoalowerlong-termgrowthrateinChinaasthiseconomyhasnowbecomethethirdlargestbehindtheUnitedStatesandtheentireEuropeanUnion.NoonecandenythatthegrowthandindustrializationofChinaandsimilarmarketswilllikelycontinueformanyyearstocome,howevereventhisgrowthwillgothroughcyclesasthecountryexperiencesconstraintswithrawmaterials,labour,andavailablecapital.ThesequestionsregardingtherateofgrowthcausedChinaandotheremergingmarketstobesomeofthepoorerperformingstockmarketsthispastyear.ChinamanagedasmallpositivereturnwhileIndia,Russia,andBrazilexperiencednegativereturnsduringtheperiod.Eachofthesenationshadavarietyofreasonsfortheirnegativeperformancehoweverattherootofitallwerequestionsregardingeconomicgrowth.

Arguably,oneofthemorenoteworthyeventsofthepastyearwastheappointmentofShinzoAbeasPrimeMinisterofJapan.FollowingmorethantwodecadesofpooreconomicgrowthinJapan,Abehasinitiatedaggressivemeasurestorestoreabove-trendgrowthinJapan.TheoptimismthisstrategyhasfosteredisevidentintheperformanceofJapan’sequitymarket. Inlocalcurrencyitwasthebestperformingstockmarketinthedevelopedworld,returningover50%inthe2012-13fiscalyear.Thiswasoffsettosomeextentbytheroughly20%depreciationintheJapaneseyen,howeverthiswaspartoftheanticipatedoutcome.Thesentimentlevelsofbusinessesandconsumershavemovedhigherandthishastranslatedintogreaterspendingandevenhigherrealestatepricesinsomeareas.TimewilltellifdeflationwillfinallybedefeatedinJapan,butforthetimebeing,positiveactionshavebeenputintomotion.

TheCanadianstockmarketgeneratedasolidreturnofover9%forthe2012-13fiscalyear,butunderperformedAmericanandotherglobalmarkets.ThepastyearwasoneoftwostoriesfortheCanadianmarketasthepoorperformanceoftheresourcesectorwasinstarkcontrasttothebalanceofthemarket,whichgeneratedsubstantiallypositivereturns.

Theworstperformingsectorwasmaterials,whichwasburdenedbyweakcommoditydemandfromemergingmarkets,aswellasthepoorperformanceofgoldstocks.Contrastingtheweaknessofthematerialssectorwasthestrongperformanceinthefinancial,consumer,industrial,andtechnologysectors.Thebroadstrengthacrossthesesectorsisindicativeof theunderlyinghealthoftheCanadianeconomy.

Private Equity Markets

Theimpactofcontinuedstrongpublicequitymarketvaluationswasfeltacrosstheprivateequitymarketsinthefirsthalfof2013,translatingtoincreasedconfidencebyinvestorsandhencestrongerfundraisingtotals.Currentvaluationlevelshavealsodictated acautiousinvestmentpaceforrecentprivateequityfundsandanattractiveseller’smarketformore matureportfolios.

Liquidityforprivateequity-backedcompaniesimprovedin2013largelyduetoabettercreditenvironmentandastrongermarketforpublicstockofferings.Creditmarketconditionsexceeded


expectationsinthefirsthalfof2013,withyear-to-datedebtissuanceeclipsingthestronglevelsof2012.Eachofthesefactorscontributedtoastrongyearforprivateequityinvestors.

Performance of Return Enhancing Assets

ATRF’sreturnenhancingassetsareheldinavariety ofdifferentportfoliosinbothpublicandprivatemarkets.Theseportfoliosarewelldiversifiedbyinvestmentstyle,marketcapitalization,geography andvintageyear(forprivateequityfunds)inorder toprudentlymanagerisk.Fiscal2012-13wasaverystrongyearforbothpublicandprivateequitymarkets,andATRF’sactivemanagementaddedadditionalvalue.Fortheyear,returnenhancingassetsgeneratedatotalreturnof23.4%,whichexceededthebenchmark1 returnof21.2%.

return enhancing vs. Benchmark Performance toAugust31,2013

23.4%

21.2%

4.4%

6.3%

6.1%

4.0%

1-YearReturn

1-YearBenchmark

5-YearReturn

5-YearBenchmark

10-YearReturn

10-YearBenchmark

ATRF’sglobalequityassetclassiscomprisedofadiversifiedcombinationofportfolios,allofwhich areexternallymanaged.Takentogethertheseportfoliosreturned27.1%forthefiscalyear, exceedingthe25.7%returnofthebenchmark MSCIWorldIndexby1.4%.

Asnotedabove,theCanadianequitymarketlaggedmostothermajormarketsin2012-13,butthebenchmarkS&P/TSxIndexstillpostedasolidreturnof9.3%.ATRFactivelymanagesitsCanadianequitiesthroughacombinationofinternallyandexternallymanagedportfolios.Alloftheseportfoliosperformedwellinthepastyear,deliveringacombinedreturn of16.4%,whichrepresentedadded-valueof7.1%overthebenchmark.

Privateequityassetsconsistofanumberoflimitedpartnershipsanddirectinvestmentsthatarevaluedbyourgeneralpartnersonafairvaluebasiseveryquarter.Asvaluationsforprivateequityinvestmentsaretypicallyreportedonthebasisofcalendarquartersratherthanourfiscalquarters,ourreportedreturns fortheseassetsaretime-laggedbytwomonths. Asaresult,thesereturnsrepresentthe12-monthperiodendedJune30,2013.Overthistime,our privateequityassetsdeliveredastrongreturnof17.9%,butfellshortofthebenchmarkreturnof 23.7%.ATRF’sbenchmarkforprivateequityisthe MSCIWorldIndexplusanilliquiditypremiumof2.0%.

Ouractivecurrencyinvestmentstrategymaintainsderivativeexposuretoglobalcurrencymarketswithinapre-defined,controlledandmonitoredlevelofrisk.Thegoalofthestrategyistoaddabsolutevaluetothefundoverthelongterm.Afterthreeconsecutiveyearsofpositivereturns,thestrategygeneratedalossof$3.1millioninthe2012-13fiscalyear.Thisrepresentedasmallnegativeimpactonthetotalfundreturnofapproximately0.04%.

1 Thebenchmarkreturnisastandardagainstwhichactualinvestmentperformancecanbeevaluated.ATRFbenchmarkreturnsvaryby assetclassandreflectthereturnonrecognizedmarketindicesforsomeassetclasses,andlong-termreturntargetsforotherassetclasses.

Rates of RetuRn - RetuRn enHanCInGrates of return - return enhancing AssetstoAugust31,2013

1 Year (%) 5 Years (%) 10 Years (%)

Asset Class ATRF Benchmark ATRF Benchmark ATRF Benchmark

CanadianEquity 16.4 9.3 4.3 1.3 9.3 8.1

GlobalEquity 27.1 25.7 4.2 4.0 n/a n/a

PrivateEquity 17.9 23.7 3.6 4.6 n/a n/a

TotalReturnEnhancing 23.4 21.2 4.4 4.0 6.3 6.1


Fixed-Income Assets

Fixed-incomeassetsarethoseassetswhoseprimarypurposeistooffersafetyandliquidity,aswellaslimittheoverallvolatilityofreturns.

1 Includes$12.2millioninaccruedinterest.2Includes$8.5millioninaccruedinterest.

fixed incomeatAugust31,2013 ($Millions) (%)

UniverseBonds1 1,458 17.0

Long-TermBonds2 713 8.3

MoneyMarket 282 3.3

Total 2,453 28.6

Fixed-Income Markets

Forthemajorityofthefiscalyear,theactionsofgovernmentsandcentralbankscontinuedtobetheprimaryinfluenceoninterestrates,overshadowingeconomicfundamentals.ThefirsteightmonthsofthefiscalyearsawGovernmentofCanada10-yearyieldstradeinafairlynarrowrangeof1.7%to1.9%,largelyduetotheextremelyeasymonetarypolicyofcentralbanks.AftertheU.S.FederalReservebegandiscussingthepossiblereductionofitsquantitativeeasingprogram,ratesrosequickly,andexceeded2.7%beforetheendofthefiscalyear.InCanada,corporateandprovincialbondsoutperformedfederalbondsascontinuedspread-tighteninginthefirsteightmonthsoftheyearhelpedtooffsettheincreaseingovernmentbondyieldslaterintheyear.

Performance of Fixed-Income Assets

Fixed-incomeassetsareheldinacombinationofportfolios,inordertoensurediversifiedexposure toshort,mediumandlong-durationbonds,aswell ascreditandprivatedebt.Asubstantialmajority oftheseassetsaremanagedin-housebyATRF’sinvestmentteam.

fixed income vs. Benchmark Performance toAugust31,2013

5.6%

5.2%

5.6%

5.6%

-2.0%

-2.9%

1-YearReturn

1-YearBenchmark

5-YearReturn

5-YearBenchmark

10-YearReturn

10-YearBenchmark

Afterhoveringatornearall-timelowsearlyinthefiscalyear,bondyieldsrosemateriallyinthelastthirdofthefiscalyear.Asaresult,Canadianbondmarketsdeliverednegativereturnsforthefirsttimeinseveralyears.Onacombinedbasis,ATRF’sfixed-incomeassetsreturned-2.0%,whichexceededthebenchmarkreturnof-2.9%.

Withinthefixed-incomecategory,theuniversebondassetclassreturned-0.4%,outperformingthebenchmarkDExUniverseBondIndex,whichreturned-1.1%.Theoutperformanceoftheportfolioswaslargelyduetotheopportunisticmanagementof creditexposureoverthecourseoftheyear.

Long-termbondsweremuchmoreseverelyimpactedbythelate-yearriseininterestratesthantheshorter-termuniversebondportfolio.AsaresultthebenchmarkDExLong-TermGovernmentBondIndexposteditsworstreturninmanyyears,-6.4%inthefiscalyear.ATRF’slong-termbondportfoliogeneratedaverysimilarreturntotheindexat-6.4%,althoughweweretacticallyunderweightinthisassetclassthroughmostofthefiscalyear.

ForthesecondyearinarowtheBankofCanadaleftitsbenchmarkshort-terminterestrateunchanged.Asaresult,ATRF’smoney-marketportfoliogeneratedthesame1.1%,returnasintheprioryear,slightlyexceedingthe1.0%returnofthebenchmarkDEx 30DayT-BillIndex.


Inflation Sensitive Assets

Inflationsensitiveassetsareassetsthatareheldinparttomitigatetheriskofunexpectedinflation.Investmentsinthiscategorytypicallyexhibitreturnsthatareatleastpartiallycorrelatedtoinflationoverthelongterm.ThisisbeneficialtoATRFinthelong runaspensionbenefitsundertheplansare70%indexedtoinflation.ATRFincludesbothrealestate andinfrastructureinthisassetcategory.

Inflation Sensitive Assets atAugust31,2013 ($Millions) (%)

RealEstate 443 5.2

Infrastructure 275 3.2

Total 718 8.4

Real Estate

Globalrealestatetransactionvolumesroseinthefirsthalfof2013,andfull-yearactivityisexpectedtoexceed2012levelsbyasmuchas5%to10%.Thiswouldmarkthefourthconsecutiveyearofgrowthinrealestateactivity.Theamountofnewcapitalenteringthesectorcontinuestobesubstantialasinvestorsseekyield-basedalternativestothebondmarket.Asyieldshavebeendrivendownonprimeproperties,investorsareshowingsignsofmovingfartherouttheriskcurve.

Performanceofglobaldevelopedrealestatemarketswassomewhatmixedin2012-13.WhileNorthAmericanandsomeEuropeanmarketsrose,otherEuropeanandmanyAsianmarketsdeclinedinvalue.

Globalsupplyofnewrealestateisundercontrolwhichhashelpedoffsettheeffectsofrelativelysluggishgloballeasingdemand.Highqualitydowntownofficespaceislikelytobecomeinshortsupplyifleasingactivitybeginstoimprovein2014.InCanada,investorsentimentbegantoshiftmoderatelyinthesecondhalfofthefiscalyearasinvestorsreactedtothepotentialforhigherborrowingcosts.Thismayultimatelyhave animpactonmarketprices.

Infrastructure

Moreandmoreinstitutionalinvestorsareallocatingfundstoinfrastructureasthesetypesoflong-termcoreassetsarewell-suitedtopensionfunds.Thelowinterestrateenvironmentofthelastfewyearshasimpactedpricingasinvestorstendtopricecoreinfrastructureassetsrelativetobondyields.Thisgrowinginstitutionalinvestordemandforinfrastructureassetshasledtoarapidincreasein thenumberofinfrastructurefundslaunchedoverrecentyears.

Asthelowinterest-rateenvironmentpersistedfor mostoftheyear,pricesforinfrastructureassetscontinuedtorise.Inparticular,coreassetsinEuropewerehighlysoughtafter,andthisinterestwasreflectedinassetvalues.Aswithrealestate,sentimentmaybeshiftingsomewhat,astheincreaseininterestrates inthesecondhalfoftheyearisexpectedtohave amoderatingimpactonbothdemandandpricing.

rates of return – fixed incometoAugust31,2013 1 Year (%) 5 Years (%) 10 Years (%)

Asset Class ATRF Benchmark ATRF Benchmark ATRF Benchmark

UniverseBonds -0.4 -1.1 5.9 5.1 5.5 5.4

Long-TermBonds -6.4 -6.4 4.6 5.0 n/a n/a

MoneyMarket 1.1 1.0 1.0 0.8 2.2 2.0

TotalLiabilityMatching -2.0 -2.9 5.6 5.2 5.6 5.6


Performance of Inflation Sensitive Assets

ATRF’srealestateandinfrastructureprogramscontinuedtogrowin2012-13asweworktowardachievingourlong-termallocationof25%oftotalassets.Onacombinedbasis,inflationsensitiveassetsgeneratedastrongreturnof9.9%,whichexceededthebenchmarkreturnof5.6%.

Rates of Return - Inflation Sensitive AssetstoAugust31,2013 1 Year (%)

Asset Class ATRF Benchmark

RealEstate 11.04 6.10

Infrastructure 7.88 4.63

TotalInflationSensitive 9.86 5.57

ATRF’srealestateassetsareconcentratedincoremarketsinCanada,theU.S.andEurope.Asnotedabove,thesemarketslargelyperformedwellin 2012-13leadingtopositiveresultsfromourrealestateportfolio.Fortheyear,ATRF’srealestateinvestmentsreturned11.0%,wellinexcessofthebenchmark returnof6.1%.Thebenchmarkreturncontinuesto beaweightedcombinationoftheannualchangein theCanadianConsumerPriceIndex,plus4.25%formatureassets,andtheactualreturnoftheportfolio fornon-matureassets.

ATRF’sinfrastructureassetsareprimarilylocatedinCanadaandEurope.Theseassetsdeliveredareturnof7.9%inthe2012-13fiscalyear,whichcomparesfavourablytothebenchmarkreturnof4.6%.Similartorealestate,thebenchmarkreturnforinfrastructureisaweightedcombinationoftheannualchangeintheCanadianConsumerPriceIndexplus4.75%formatureassets,andtheactualportfolioreturnoftheportfoliofornon-matureassets.

INVESTMENT PERFORMANCE

Long-Term Investment Objective

Theprimarylong-terminvestmentobjectiveof thefundistomeetthefundingdiscountrateofthe plans,netofinvestmentcostsoverthelongterm.Thistargetisanessentiallong-termassumptionindeterminingthefundingrequirementsoftheplans toensurethatplanbenefitsarefundedinaccordancewiththeestablishedfundingstructure.Weexaminetheinvestmentperformanceofthefundovera 15-yeartimeperiodinordertocoincidewiththe 15-yearamortizationperiodofdeficienciesrequiredunderthelegislatedfundingstructure.

Infiscal2012-13theinvestmentobjectiveofthefundwas6.64%,representingafundingdiscountrateof6.25%plustotalinvestmentcostsof0.39%.Thetotalinvestmentreturnof14.0%exceededthatobjective byasignificantmargin.

Overthepast15years,boththefundingdiscountrateandinvestmentcostsoftheplanhavechanged.Thefundingdiscountratehasbeenreducedfrom8.50%to6.25%overthistimeperiod,asforecastsoflong-terminvestmentreturnshavefallenandtheBoardhasreducedtheoverallfundingriskoftheplans.Investmentscostshaveincreasedslightlyoverthis timeasATRFhasincreaseditsinvestmentinilliquidassets,whichareattractivelong-terminvestments, buthaveahighercostofmanagement.

Overthepast15yearstheTeachers’PensionPlaninvestmentreturnwas6.3%,whichwas1.3%shortoftheinvestmentobjectiveof7.6%overthesametimeperiod.ThereturnforthePrivateSchoolTeachers’PensionPlanisslightlydifferentinthatitdidnotincludetheloantotheGovernmentofAlbertathat waspartoftheassetsoftheTeachers’PensionPlanuntiltheendof2009.Theannualizedrateofreturn forthePrivateSchoolTeachers’PensionPlanover thesame15-yeartimeperiodhasbeen6.0%.


Overthistimetheratesofreturnoninvestmentswereimpactedbyasevereequitymarketdownturnandfinancialturmoilin2000-02,andagainin2008-09. Theamortizationofthedeficienciesresultingfromthelowmarketreturnsandthereductioninthefundingdiscountratehavebeenthelargestcontributorstotheincreaseinfundingcontributions.

Long-TermInvestmentObjective

6.3%

6.0%

7.6%

15-Year return vs. long-term investment objectivetoAugust31,2013

Teachers’PensionPlanReturn

PrivateSchoolTeachers’PensionPlanReturn

Benchmark Performance

Asameasureoftheoveralleffectivenessofouractiveinvestmentstrategies,wecomparetheactualperformanceoftheinvestmentportfoliotothereturnonthefund’sbenchmarkoverbothshortandlong-termperiods.ThebenchmarksforeachassetclassareselectedbytheBoardandInvestmentCommittee. Thetotal-fundbenchmarkiscalculatedbyaggregatingthereturnsoneachasset-classbenchmark,andweightingthemtoreflectthefund’spolicyassetmix.

Asthe2012-13fiscalyearprogressed,amorestableenvironmentinEuropeandpositivepolicymeasuresinJapanprovidedamorefavourablebackdropforequitymarkets.Inthisenvironmentwemaintainedanassetmixthatwasoverweightequities,andunderweightfixed-incomeassets,whichaddedvalueoverthebenchmark.Additionally,mostofATRF’sinternalandexternalportfoliosdeliveredstrongreturnsrelativetotheirrespectivebenchmarks.Thesetwoinfluencescombinedtoresultinatotalfundreturnthatsignificantlyexceededthebenchmark.

AsillustratedinthetablebelowtheTeachers’PensionPlanfundandthePrivateSchoolTeachers’PensionPlanfundreturned14.0%inthemostrecentyear,whichexceededthebenchmarkreturnby2.5%.Althoughthereturnofthetwofundsisthesameoverthepastyear,itdiffersoverlongertimeperiodsduetotheinfluenceoftheloantotheGovernmentofAlberta,whichwasrepaidinearly2010.

OverthefiveyearsendedAugust31,2013, theTeachers’PensionPlanfundreturnexceeded itsbenchmarkby0.5%annually,whileover10yearsthefundreturnexceededitsbenchmarkby0.2%annually.ThePrivateSchoolTeachers’PensionPlanfundreturnis0.4%aheadofitsbenchmarkover fiveyears,whileitis0.2%aheadofthebenchmarkover10years.

teachers’ Pension Plan return vs. Benchmark Performance toAugust31,2013

1-YearReturn

1-YearBenchmark

5-YearReturn

5-YearBenchmark

10-YearReturn

10-YearBenchmark

14.0%

11.5%

5.1%

6.4%

4.6%

6.2%

Private school teachers’ Pension Plan return vs. Benchmark Performance toAugust31,2013

1-YearReturn

1-YearBenchmark

5-YearReturn

5-YearBenchmark

10-YearReturn

10-YearBenchmark

14.0%

11.5%

4.3%

5.9%

3.9%

5.7%


Socially Responsible Investing

Animportantpartofourlong-terminvestment strategyinvolvesencouragingcompaniestobothrecognizeandadoptbestpracticesinallaspects ofcorporategovernance,includingissuesrelated tosocialresponsibility.Weaccomplishthisinthreedifferentways.

First,ourinternalandexternalinvestmentmanagers,communicateregularlywiththemanagementandboardsofcompaniesinwhichweinvest.Issuesrelatedtocorporategovernanceandsocialresponsibilityareincludedinthesediscussions.

Also,wecommunicatewithotherinstitutionalshareholders,andcontributeregularlytojointinitiativeswhicharefocusedonimprovingcorporategovernanceamongcorporations.ATRFisafoundingmemberoftheCanadianCoalitionforGoodGovernance(CCGG),whichincludesmanyof Canada’slargestinstitutionalinvestorsinitsmembership.TheCCGG’sprimarymandateis topromotebettergovernancepracticesamongCanadiancorporations.

Finally,weencouragecompaniestostriveforbettercorporategovernanceandadvocateforimprovedshareholderrightsthroughourproxyvotingpractices.Ourproxyvotingguidelinesarereviewedeveryyearandarecontinuallyupdatedtoreflectdevelopingbestpracticesincorporategovernance.TheguidelinesalsoexpresssupportfortheOECDGuidelinesforMultinationalEnterprises,whichisacomprehensivesetofprinciplesandstandardsforresponsiblebusinessconductinareassuchastheenvironment,employmentandindustrialrelations,sustainabledevelopment,consumerinterestsandtaxation.TheseguidelineshavebeenendorsedbythemembercountriesoftheOrganizationforEconomicCooperationandDevelopmentasaunique,government-backedinternationalcorporateaccountabilitymechanismaimedatencouragingresponsiblebusinessbehaviouraroundtheworld.

INTERNAL CONTROL OVER FINANCIAL REPORTING

ATRFbusinessplansincludeactionplanstoenhancegovernanceandmanagementofinternalcontrolprocessesandsystemstoprovideanappropriatelevelofduediligenceandsecurityinATRF’sinternalcontrols,financialoperations,andreportingandinformationsystems.

Managementbasesitsevaluationoftheeffectivenessofinternalcontroloverfinancialreportinguponthe“InternalControl–IntegratedFramework”,publishedin1992bytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(COSO).

ATRFisnotrequiredbylaworregulationtoperformthisannualevaluation.Wehavechosentoperformthisevaluationandmeetthesestandardsasapartofourcommitmenttostronggovernanceandaccountability.

TheChiefExecutiveOfficerandtheDirector,FinancialServicesareresponsibleforthedesignandmaintenanceofinternalcontroloverfinancialreporting,toprovidereasonableassurancethatitisreliableandthatthepreparationofthefinancialstatementsconformswithCanadianaccountingstandardsforpensionplans.Theyarealsoresponsibleforthedesignandmaintenanceofdisclosurecontrolsandprocedurestoprovidereasonableassurancethatallmaterialinformationisgatheredandreportedtomanagementonatimelybasis.

Wehavecompletedthe2012-13fiscalyearevaluationoftheeffectivenessofourinternalcontroloverfinancialreportinganddisclosurecontrolsandprocedures.Basedupontheresultsoftheevaluation,theChiefExecutiveOfficerandDirector,FinancialServiceshaveconcludedthatinternalcontroloverfinancialreportinganddisclosurecontrolsandproceduresareproperlydesignedandoperatedeffectivelythroughouttheyear.NochangesweremadeininternalcontrolsoverfinancialreportingduringtheyearendedAugust31,2013,thatmateriallyaffected,orarereasonablylikelytomateriallyaffect,internalcontroloverfinancialreporting.


CHANGE IN NET ASSETS

The2012-13fiscalyearreturnedafourthconsecutiveyearofgrowthinnetassetswithayear-over-yearincreaseinfundassetsof$1.387billion(anincrease of19.3%)leavingthefiscalyear-endvalueat $8.581billion.Investmentearningsof$1.025billionand$362millionofpositivenetcashflowsfromcontributionsabovebenefitpaymentsand expenses,accountedforthischange.

2013

2009 4.956

2010 5.537

2011 6.335

2012 7.194

8.581

net Assets ($Billions)

Costs of Providing Services

Theincreaseininvestmentcosts,from$23.316millioninthepreviousyearto$33.150millionforthe2012-13fiscalyear,accountedforthe96.4%overallincreaseinthe$38.606milliontotaloperatingcosts.Theincreaseininvestmentcostswasrelatedtotheadditionalstaffandadvisoryservicesrequiredtobuildtheinvestmentprogramsforinfrastructure,realestateandprivateequityassetclasses,andtoexternalinvestmentmanagementfeesthatincreasedinconjunctionwiththegrowthininvestedassets.Investmentcostswereabout39centsforeach$100ofassets,ascomparedto32centsinthepreviousyear.Thesecostsexcludemanagementfeesforprivateequity,infrastructureandrealestatefunds,andcommissionspaidwhentradingsecurities.However,allsuchcostsaredeductedindeterminingnetinvestmentreturns.

investment Costs($Thousands) 2013 2012

Externalinvestmentmanagementfees $19,782 $14,651

Salariesandbenefits 10,010 5,321

Custodialandbanking 1,105 1,110

Professionalandconsultingservices 1,042 995

Communicationandtravel 541 503

Premisesandequipment 479 276

Boardandcommittee 103 305

ActuarialFees 14 10

Other 74 145

Total $ 33,150 $ 23,316

Cost ($ dollars) per $100 of assets $ 0.39 $ 0.32

Planmemberservicecostsincreasedto$5.457million,from$5.094millioninthepreviousyear.Thecostofprovidingservicestoplanmembersinthe2012-13fiscalyearwas$87permember,significantlylessthantheaveragecostof$148permemberforagroupofmajorCanadianpublicsectorpensionorganizationsthatbenchmarkcostandservicelevels.

Plan Member service Costs($Thousands) 2013 2012

Salariesandbenefits $3,559 $3,344

Professionalandconsultingservices 658 543

Premisesandequipment 457 475

Communicationandtravel 439 328

Actuarialfees 131 91

Boardandcommittee 127 135

Custodialandbanking 36 31

Other 50 147

Total $ 5,457 $ 5,094

Cost ($ dollars) per plan member $ 87 $ 82 Operatingcostswillincreaseasthevalueofinvestmentsadministeredgrowsandthenumber ofplanmemberscontinuestorise.Weremaincommittedto:

• implementingprudent,cost-effective investmentandadministrationstructures,

• carefullymanagingbothinvestmentandadministrativecosts,and

• providingplanmemberswithhigh-qualityserviceandinvestmentreturnsthatmeetthelong-termfundingrequirementsoftheplans.


PLAN MEMBER SERVICES

Plan Members

Planmembersinclude:

• 38,346activememberswhoaccruedpensionableserviceduringthe2012-13fiscalyear;

• 24,667retiredmembers;and

• 12,364inactivemembers.

Theactivecategoryincludes1,262disabledteacherswhoearnedpensionableserviceinthe2012-13fiscalyear.Thenumberofdisabledteachersaccruingpensionableserviceasapercentageofthetotalnumberofactiveteachershasremainedstableoverthelastfiveyears.

number of number of Percentage Year ended Disabled Active of Disabled August 31 teachers teachers teachers

2013 1,262 38,346 3.3%

2012 1,388 38,336 3.6%

2011 1,349 38,242 3.5%

2010 1,328 38,578 3.4%

2009 1,247 38,442 3.2%

493

Age and Gender Distribution of Active and Disabled Members

MaleFemale

< 30

35-39

40-44

45-49

50-54

55-59

60+

30-34

1,5434,105

3,885

1,5803,546

1,375

1,0142,651

1,129

3,559

1,654

4,4991,071

1,5364,706

Thenumberofnewretiredmemberswhocommenced theirpensioninthe2012-13fiscalyearwas1,131, aslightdecreasefrom1,234inthepreviousyear. Itisexpectedthattheaveragenumberofnewretiredmembersaddedeachyearwillbeapproximately1,000forthenextdecade.

1,060

1,056

986

1,234

number of new Pensions GrantedasofAugust31,2013

2013

2009

2010

2011

2012

1,131

Plan Member statistics 2013 2012 2010 2005 2000

Activemember averageage 42.1 42.1 41.7 42.4 42.7

Activemember averageyearsof 10.1 11.5 11.1 12.2 12.0 pensionableservice

Retiredmember averageage 69.0 69.0 68.0 68.0 68.0

Newretiredmember averageage 59.7 59.0 59.0 58.0 57.8

Average pensionable serviceofnew

26.0

25.9 26.2 26.4 26.6

retiredmember


Timely Service to Plan Members

ATRFhasadedicatedandknowledgeableteamofemployeesprovidingservicesinacost-effectivemanner toactiveteachers,retiredmembers,inactiveteachers,beneficiaries,andtheirrepresentatives.

Wehaveestablishedbenchmarksforthedeliveryofservicesandmeasureourbenefitdeliveryagainstthosebenchmarks.Forthe2012-13fiscalyear,weshortenedourbenchmarksforthreeservices–purchaseestimatesandterminationbenefitpaymentsdecreasedfrom10daysto7days,andurgentwritteninquiriesfrom7daysto5days.Belowareourresultsforthe2012-13fiscalyear,withcomparisonsforthe2011-12fiscalyear.Weexceededthebenchmarkinallprocesses.

Our Focus on Customer Service

In2012-13,wecontinuedtoconductbestpracticereviewsforourcustomerserviceprocesses,andindoingsoidentifiedandimplementedseveralenhancements.OneenhancementwastoprovideeachplanmemberwithanATRFIDNumber,whichcanbeusedasauniqueidentifierandtoregisterforthesecuredonlinememberwebportalMyPension.Also,planmemberswhoareregisteredforMyPension nowreceive,intheirSecureMessageCentre,anestimateofthecosttopurchasepensionableservicewhentheyreturntoteachingfromanemployer-approvedleave.

2013 Plan Member Survey

Thesurveywasdistributedelectronicallyto12,573activeplanmemberswhowereregisteredforonlineservices.ATRFreceivedhighratingsfromjustover2,700planmemberswhoresponded,representing anexcellentresponserateof21.5%.Theobjectives ofthesurveyweretoassesshowwellATRFis meetingplanmemberinformationandservice needs,andtoevaluatetheeffectivenessofATRFprogramsandinformationsources.

ATRFachievedtopmarksagain,with96%ofrespondentsratingouroverallserviceasgood toexcellent.

Respondentsalsogavehighratingstoourcommunicationmaterial:

• 95%indicatedthattheannualplanmemberstatementhelpedthemunderstandtheirpensionbenefits,itwasinformative,anditwaseasytoread.

• 95%foundthe“PensionPoints”newslettertobeeasytoread,informativeandtimely.

• Ofthe39%whoreadtheAnnualReportHighlights,95%indicateditwasinformativeand92%saiditassistedtheminunderstandingthefinancialstatusofthepensionplan.

• 97%ofrespondentswhovisitedthewebsitefoundittobeveryinformative,and93%saiditwaseasytofindinformationonthewebsite.

• 91%ofrespondentswhousedonlineservicesindicatedthepensionestimatorwasavaluabletool,and94%foundthepurchasecalculatorvaluable.

service Benchmarks for Average elapsed Average elapsed Provided 2012-13 time in 2012-13 time in 2011-12

Ongoingpensionpayments Onthethirdlast Allpayments Allpayments businessdayofthemonth madeontime madeontime

Pensionoptionspackagefornewpensions Within10daysofapplication 3days 2days

Paymentfornewpensions Within7days 4days 3days

Pensionestimate Within7days 1day 1day

Purchaseestimate Within7days 2days 2days

Terminationbenefit Within7days 1day 1day

ReciprocalTransferestimates Within14days 9days(TransferIn) 6days(TransferIn) 6days(TransferOut) 3days(TransferOut)

Urgentwritteninquiriesincludingemailinquiries Within5days 1day 1day

Non-urgentwritteninquiriesincludingemailinquiries Within10days 1day 1day

Telephoneinquiries Within1day Lessthan1day Lessthan1day


• Ofthe2,022respondentswhoviewedthe videosonourwebsite,90%ratedthemas goodtoexcellent.

Wereceivedover300comments,mostofthempositiveandsomewithconcernsandsuggestionsforpossibleimprovement.SomeplanmembershadconcernsabouttheeaseofaccessingonlineservicesandwerebasedonthefunctionalitythatwasinplacepriortoMay2013.ChangesimplementedwiththenewATRFwebsiteandMyPensionhaveaddressedthoseconcerns.Wewillusethefeedbackreceivedtoimplementadditionalinitiativestoimprovecommunicationmaterialandaccesstopersonalinterviewsin2013-14.

New Pensioner Questionnaire

Eachofthe1,131planmembers,whoretiredduringthe2012-13fiscalyear,receivedaNewPensionerQuestionnaire.ThesenewlyretiredplanmembersareaskedquestionsaboutthequalityofservicetheyreceivedfromATRFstaff,thecommunicationmaterialtheyaccessedduringthepensionapplicationprocess,and,iftheyutilizedthem,theirassessmentofourwebsiteandonlineservices.

Ofthe10.7%whoresponded:

• 98%ratedATRFserviceandcommunication asgoodtoexcellent,

• 71%indicatedtheywereregisteredfor onlineservices,

• 87%saidtheyhadvisitedthewebsite,and

• 50%hadusedthewebcalculatortodo pensionestimates.

Respondentswereinvitedtoprovide writtencomments.Whilethemajorityofthe 155commentswerepositiveandfocusedon excellentcustomerserviceandknowledgeof ATRFstaff,wewillusethecommentsand suggestionstocontinuetoimprovethelevel ofcustomerserviceprovidedtoourretiring planmembers.

2013 Retired Member Survey

ProvidingaccurateandtimelypensionpaymentsandinformationtoretiredmembersareprimarygoalsofATRF.Duringtheyear,wesurveyedretiredmemberstoobtainfeedbackontheeffectivenessofourserviceandcommunicationactivities.Wesentbothanelectronicsurveyandthetraditionalpapersurveyto10,843, or44%,ofretiredmembers.Atotalof3,558surveyswerereturned,aresponserateof33%.Overall, thesurveyresultsindicatethatretiredmemberscontinuetoholdATRFinhighregardandthatATRF issuccessfullymeetingretiredmembers’service andinformationneeds.

• 97%ofrespondentsagreedthatknowledge-base,responsivenessandcompletenessofserviceprovidedbyourstaffwereeithergoodorexcellent.

• 99%agreedorstronglyagreedthatthePensionUpdatenewsletterwaseasytoread,timelyandinformative.

• 99%foundthewebsitetobeinformative andeasytouseandread.

• Over95%ofrespondentsindicatedtheywereeithercomfortableorcompletelycomfortableinusingthesecuredonlineMyPensionfunctionstoupdatecontactinformation,incometaxinformationandbankinginformation.

WhilesurveysofATRFservicescontinuetoindicateahighlevelofsatisfactionwithservicelevels,wewilluseideaswritteninthe‘comments’sectionofthesurveystocontinuetomaintainastrongfocusondevelopingandimplementingsystemenhancementsandcommunicationtoolstohelpusmeetincreasingservicerequirements.WewillcontinuetofocusonelectronictoolsthroughMyPension,theJoinOur EmailListfeatureandotherweb-basedfeatures.


Communication Activities

OurteamoffourPensionCounsellorsprovidesindividualcounsellingsessionsinourofficeinEdmonton,aswellasatmanylocationsthroughoutAlberta.Duringthe2012-13schoolyear,936planmembersvisitedourofficeforapersonalinterview.Inaddition,weconducted658interviewswithplanmembersat10differentlocationsacrosstheprovinceandwithanadditional625teachersat10Teachers’Conventions.Planmembersregisterfortheseindividualinterviewsusingouronlineregistrationfunctionandcanrequestpensionestimatesfortwoprojectedretirementdates.Inaddition,theycanaskustopreparemoredetailedinformationforthem,forexample,anestimateofthecosttopurchasepensionableserviceandtheimpactthatwould haveontheirpensionamount.

Wewereinvitedtopresentourseminar,YourPensionMatters,toover900planmembersat18locationsaswellastoabout600teachersat10Teachers’Conventions.ManyoftheseminarpresentationstakeplaceatworkshopsorganizedbytheRetirementConsultantsofTheAlbertaTeachers’Association.

Inadditiontointerviewsandseminars,weprovideinformationdirectlytoplanmembersthroughannualplanmemberstatements,newslettersandannualreporthighlights.Over4,400activeandinactiveplanmembers,and2,700retiredmembers,havechosentoreceivethesemailingsinelectronicformatbyregisteringforJoinOurEmailList.

ATRFcouldnotprovidecurrentinformationdirectlytoplanmemberswithoutplanmemberdata,includingaddresses,whichwereceiveelectronicallyonamonthlybasisfromemployers.Thetimelinessofthedatasubmissionscontinuetoimproveeveryyear.WethankandcongratulatethepayrollstaffofemployersfortheirsuccessandcommitmenttoprovidingdatatoATRF.About70%ofplanmembersreceivedtheirannualstatementsbyDecember7,2012,andallplanmembershadreceivedthembyFebruary27,2013.

Website and Online Services (MyPension)

During2012-13weredesignedandimplementedanewwebsite.WealsorevampedthesecuredplanmemberwebsitecalledMyPension.Wereorganizedwebcontentandupdatednavigationtoolstomakeiteasierforplanmemberstofindtheinformationtheyneed.Inconjunctionwiththewebsitelaunch,wemailedallplanmembersanATRFIdentificationNumber.PlanmemberscanusethisnumbertoidentifythemselveswhentheycallusandtoaccesstheirconfidentialinformationthroughMyPension.

Almost17,500activeandinactiveplanmembers and10,400retiredmembersarenowregistered totakeadvantageofthefunctionsavailablethroughMyPension.Allregisteredplanmemberscanview andupdatetheirpersonalinformationonline. Over27,900pensionestimatesweredoneonlinein2012-13.Eachmonth,anaverageof2,000planmembersaccessedtheirplanmemberstatementonline.Ofthe1,131pensionapplicationsprocessedduringtheyear,207weresubmittedelectronicallythroughMyPension.Overthepastyear,2,100 retiredmembersaccessedtheirT4Ainformation,and1,700viewedtheirpensionpaymentinformationelectronicallythroughMyPension.

WhileourwebsiteandMyPensionservicesarekeyelementsinourcustomerserviceandcommunicationinitiatives,planmembersalwayshavethechoiceofaccessingservicesandinformationinthemannertheyprefer–inperson,inwriting,bytelephone,oronline.


Plan Member Benefits

Thegrowthinthenumberofretiredmembersandtheimpactofcost-of-livingadjustments(COLA)haveresultedinanincreaseintotalannualpensionpaymentsof6.6%to$712millionasatAugust31,2013.Undertheexistingfundingstructure,despitetherecentvolatilityoffinancialmarketsandtheimpactofinvestmentreturnsonassetvalues,thefundiswellpositionedtomeetongoingcash-flowrequirements.Theaveragenewmonthlypensionpaidin2012-13 was$3,129comparedto$2,999inthepreviousyear.

AprovisionoftheTeachers’ Pension Plans Actthataffectsourretiredmembersisthere-employmentrule.Theprovisionlimitstheamountofworkundercontractinapositionthatrequiresateachingcertificatewhileinreceiptofapension.Ifaretiredmemberworks morethan0.6ofayearwithinaschoolyear,thepensionisreduceddollarfordollarbytheamount ofsalaryrelatingtotheserviceaccruedoncethe limitisreached.

EffectiveSeptember1,2011,substituteservicewasremovedfromtheplanrulesrelatingtore-employmentofretiredmembers.Basedontherevisedlegislation,

607retiredmembersreturnedtoteachingundercontractwhilereceivingapensionfromATRF.Thiswasaveryslightdecreasefromthe643in2011-12.Oftheretiredmemberswhoreturnedtoworkundercontract,38earnedgreaterthan0.6ofayearofservice,whichresultedinareductionoftheirpensionpaymentfortheamountofsalaryearnedoncetheretiredmemberhadexceeded0.6ofayearofservice.

Cost-of-Living Adjustments

Forpensionableservicebefore1993,retiredmembersreceiveacost-of-livingadjustment(COLA)of60%ofthechangeintheAlbertaConsumerPriceIndex(ACPI).COLAforpensionableserviceafter1992is70%oftheACPIchange.

InJanuary2013,COLAadjustmentswerebasedonanACPIincreaseof1.60%,comparedto2.00%inJanuary2012.Pensionsthathadbeenpaidfortheentire2012calendaryearreceiveda0.96%increaseforpre-1993serviceanda1.12%increaseforpost-1992service.Pensionspaidforlessthanafullyearreceiveda pro-ratedportionoftheCOLA.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

10.0%

5.0%

0.0%

Change in the Alberta Consumer Price index 2003-2013

1.3%1.7%

5.7%

3.6%

4.9%

3.6%

2.0%

0.1%1.0%

2.0%

1.6%

28 2013 ANNUAL REPORT

AnAlYsisCompensation Discussion &

COMPENSATIONDISCUSSION&ANALYSIS

ThefollowingisthereportoftheHumanResourcesandCompensationCommittee(HRCC)oncompensationoftheChiefExecutiveOfficerandChiefInvestmentOfficer(“executives”).ATRF’sexecutivecompensationprogramobjectivesareto:

• Rewardexecutivesinamannerconsistentwithcompetitivemarketpracticeandtherebyimprovetheorganization’sabilitytoattractandretainhighqualityprofessionals.

• Focustheexecutiveteamoncriticalbusinessandinvestmentissuesidentifiedinthestrategicplan.

• Aligninterestsoftheexecutiveteamwithpensionplanmemberinterestsbyencouragingandrewardinglong-termperformance.Thisissupportedbypromotingapay-for-performanceculture.

• Rewardtheexecutiveteamforsuperior performanceonresults.

• EnsuretotalpayreflectsthesharedeffortsoftheexecutiveteambyrewardingacollegialcultureandteamworkthatisassessedthroughindividualperformanceassessmentsconductedbytheHRCCandBoardonanannualbasis.

Human Resources and Compensation Committee Mandate

TheHRCCassiststheBoardinfulfillingitsoversightresponsibilitiesinrelationtothecorporation’shumanresourcesandcompensationmatters.

ItiscomposedofallsixmembersoftheBoard, eachofwhomisindependentofmanagement. TheHRCCretainsexternaladvisorstoprovide executivecompensationandanyotherexpertise theCommitteedeemsnecessary.

TheHRCCmetthreetimesduring2012-13fiscalyear. Itconductedincamerasessionsatthebeginningandendofeachmeeting,withoutmanagementpresent.

TheHRCC’skeyresponsibilitiesinclude:

• theappointment,performanceevaluation,compensationstructureandsuccessionplanning fortheChiefExecutiveOfficer;

• approvingthecompensationofexecutives;

• approvingthecompensationphilosophyrecommendedbytheChiefExecutiveOfficer fornon-executivestaffofATRF;

• ensuringappropriatesuccessionplanningbytheChiefExecutiveOfficerforkeystaffpositions;

• reviewinghumanresourceandcompensationaspectsofthecorporation’sbusinessplan;

• ensuringthattheriskmanagementframeworkappropriatelyconsidershumanresourceandcompensationrisks;and

• approvingincentiveandsupplementary pensionplans.

2013 ANNUAL REPORT 29COMPENSATIONDISCUSSION&ANALYSIS

Compensation Philosophy

ATRF’sexecutivecompensationphilosophy establishesthefoundationforitscompensationprogram.Itsaimisto:

• supporttheorganization’sbusinessstrategies anddesiredculture;

• stateitsdesiredcompetitivepositionandmix ofcompensationelements;and

• beresponsivetotheorganization’sobjectivesandemployee’swantsandneeds.

ATRF’scompensationprogramisdesignedtopaycompetitivelywhilesupportingATRF’sobjectivesofsecuringthepensionsofplanmembersthroughthecost-effectiveandefficientuseofresources.Ofcriticalimportanceistheoverarchingstrategytoachievethemaximum,risk-controlled,cost-effective,long-terminvestmentreturnsrequiredtomeetthefundingrequirementsoftheplans.

Ameaningfulportionofvariablecompensationisbasedontheoverallsuccessoftheorganization.Thecompensationprogramprovidesincentiverewardsforvalue-addedandabsoluteinvestmentreturns,aswellasotherimportantbusinessobjectivessuchasmaintainingqualitycustomerservice,andthecost-effectiveandefficientuseofresources.

ATRFbelievesinapay-for-performanceculture.Accordingly,alargeportionofvariableexecutivecompensationislinkedtoachieving“abovemedianperformance”againstperformancehurdles.“Abovemedianperformance”andperformancehurdlesaredeterminedusingaholisticapproachthatconsidersrelevantexternaldatasources,historicalperformanceandriskofATRF’sfund,andthecurrentinvestmentstrategyandportfolioassetmix.Asignificantportion ofexecutivecompensationislinkedtolonger-term,value-addedandabsoluteinvestmentperformance.

Managing Risk

ATRFconsideredtheimplicationsoftherisksassociatedwithitscompensationpoliciesandpractices, toensureitscompensationprogramdoesnotincentmanagementbehavioursoutsidetheorganization’s riskappetite.Compensationriskismanagedby:

• theHRCC’sindependencefrommanagement,andretentionofitsownexternalcompensationadvisor;

• workingwithinanenterprise-wideriskmanagementframeworkandinvestingwithin theInvestmentPolicy;

• establishingappropriateperformancemeasuresthataligntothebusinessstrategy;

• settingindividualandteamaccountabilities forachievingobjectives;

• settingthresholdlevelsofperformancefor allincentiveplansandnotpayingincentives unlessthresholdperformanceisachieved;

• usingappropriatepayoutcurvesandcappingincentivepayoutopportunities;

• includinglong-termperformancemeasures (i.e.four-yearratesofreturn)intheshort-termincentiveplanaswellasthelong-termincentive plantoaligncompensationpayoutswiththetimehorizonofthefund;and

• includingnon-investmentmeasuresinthe annualincentiveplan.

Comparator Groups Used to Set Competitive Pay

ATRF’soverallobjectiveistoprovidecompetitivecompensationcomparedtothoseorganizationsagainstwhichitcompetesfortheskillsandexpertiseofinvestment-relatedandmanagementprofessionals.CompensationisbenchmarkedagainstotherCanadianin-housepensionfundsandinstitutionalinvestmentorganizationsofsimilarsizeandcomplexitytoATRF.Withinthesecomparatorgroups,ATRFreviewscompensationlevelsofcomparablejobs,assessesperformanceagainstbenchmarks,aswellastherelativesizeandinvestment-structurecomplexity ofitspeers.

30 2013 ANNUAL REPORT COMPENSATIONDISCUSSION&ANALYSIS

Compensation Process and Compensation Consultants

ATRF’scompensationstrategyandstructureareregularlyreviewed.Eachyear,theHRCCreviewsandapproves thecomparatorgroups,overallbasesalary,andtheannualperformancemeasures,targetsandweightingsfor theincentiveplans,basedonmarketconditions.MarketdataisprovidedtotheHRCCbyexternalsources. TheHRCCusesthefollowingdecisionmakingprocesswhensettingexecutivecompensation:

Compensation Plan Structure

Thecompensationstructureforexecutivesbalancesfixedandvariablepaylinkedtolonger-termperformance.Theelementsoftheexecutivecompensationplanincludeabasesalary,benefits,pensionandperformance-basedshortandlong-termincentiveplanstoalignexecutiveswithpensionplanmemberinterests.ATRFbelievesthatlonger-terminvestmentsuccessthroughprudentrisktakingismoreimportantthanvolatileshort-termgains,andthisphilosophyisreflectedinitsshortandlong-termincentiveplandesigns.

Base Salary

Basesalariesareintendedtobecompetitivewiththemarketandarereviewedannuallyattheendofeachfiscalyear.SalariesaresetbasedonindividualperformanceandsalaryrangeadjustmentswithinATRFmarketcomparators.BasesalariesforexecutivesarereviewedandapprovedbytheHRCCannually.

TheHRCCissupportedbyindependent,externalhumanresourcesandcompensationconsultantsthatareretainedby,andreportdirectlyto,theHRCC. Inthe2012-13fiscalyear,theHRCC’sindependentadvisorforgovernance,humanresourceandcompensationpurposeswasGlobalGovernanceAdvisors(GGA).Duringthe2012-13fiscalyear, GGAassistedtheHRCCin:

• undertakingareviewofATRF’sCEO successionplanning;

• reviewingexecutivecompensationlevelsagainstthecompensationphilosophyandexternalmarket;

• analyzingthecorrelationofexecutivepayforperformancewithinthecompensationprogram;

• developingtheCEObalancedscorecard;and

• draftingtheCompensationDiscussionandAnalysis.

GGAdidnotprovideanyotherservicestoATRFortomanagement.TheHRCCreviewsallfeesandthetermsofconsultingservicesprovidedbyitscompensationconsultant,andisresponsibleforitsowndecisions,whichmaytakeintoconsiderationmorethantheinformationandrecommendationsprovidedbyitscompensationconsultantormanagement.

1. EstablishCompensation

Philosophy,PrinciplesandObjectives

2. Designcompensationtoalignwithcompensation

philosophyandcompetitivemarket

3. Establishandcalibrateperformanceobjectives

4. Assessimpactofcompensationthroughscenarioanalysisand

forwardandbacktesting

5. Determine performance-basedincentiveawards


Long-Term Incentive Plan (LTIP)

TheLTIPisdesignedtoencourageandrewardlong-termperformance,criticaltoATRF’ssuccess;attract,retainandmotivateparticipantsbyprovidingadditionalcompensationifinvestmentperformancegoalsareachieved;and,toalignparticipantinterestswithpensionplaninterests.TheLTIPhasafour-yearvestingperiodbeforeafirstpaymentisawardedtoaplanparticipantbasedonrelativevalue-addedperformanceabovethebenchmarkportfolio,netofinvestmentoperatingcostsandisfurthermodifiedbyabsolutefundperformance.Thethreshold,targetandmaximumvalue-addhurdlesarecalibratedtoaccountforATRF’sinvestmentstrategyandportfoliomix,whichinherentlyaccountsforATRF’sriskprofile.

ParticipationintheLTIPislimitedtoexecutives,managementandseniorinvestmentprofessionals.Participantsreceiveanotionalgrant(reflectedasapercentageofsalary),atthebeginningofafour-yearperformanceperiod.Thegrantisequaltothetargetawardopportunity,andcouldincreaseordecreasebasedonfinalinvestmentperformanceresultsrelativetothebenchmarkportfolio,netofinvestmentoperatingcosts.Attheendoftheperformanceperiod,thefour-yearrollingaverageperformanceofthetotalfundiscalculated.Amultiplierisappliedtothetargetplanaward,basedontheinvestmentperformanceofthetotalfundaftertakingintoaccountfeespaidtoexternalmanagersanddirectinvestmentcostsascomparedtospecificbenchmarksapprovedbytheHRCC.Themultiplieriscappedatthreetimesthevalueofthetargetaward.Exceptforcertainsituations, aneligibleemployeemustbeactivelyemployed asofthepaymentdateinordertoreceiveapayout.

Annual Incentive Plan

Theannualincentiveplanisdesignedtoattract,retainandmotivatehigh-qualitypeople,andtoprovidecompetitive,performance-basedopportunitiesbasedonmarketpracticesandATRF’sbusinessstrategy.Performancemeasures,targetsandweightingsareapprovedannuallybytheHRCC.Corporate,fundandportfoliobenchmarksaswellasindividualobjectivesareestablishedatthebeginningoftheyear,andactualperformanceisevaluatedattheendoftheyear.Eachparticipant’stargetcorporateincentivepaymentiscalculatedbasedonapercentageofsalary.Basedonactualperformanceagainstpre-approvedobjectives,payoutscanrangefromzerototwotimesthetargetcorporateincentiveamount.

Investmentincentivepaymentsarebasedontheachievementoftotalfundand/orportfolioperformanceaboveestablishedbenchmarks.ConsistentwithATRF’scompensationobjectives,paymentsarecalculatedbasedona75%weighttowardslong-termperformanceresultsoverafour-yearrollingaverageperiodand25%towardstheperformanceinthepastyear.Targetinvestmentincentiveopportunitiesaresetasapercentageofsalaryandrewardfordeliveringtargetbenchmarkperformanceorbetter.Basedontotalfundand/orportfolioperformance,actualpaymentscanrangefromzerototwotimesthetargetincentiveamount.Theannualincentiveplanhasathresholdlevelofperformance.Ifthethresholdisnotmet,incentivepaymentsarenotmade.Thethreshold,targetandmaximumvalue-addhurdlesarecalibratedtoaccountforATRF’sinvestmentstrategyandportfoliomix, whichinherentlyaccountsforATRF’sriskprofile.

2010 2011 2012 2013 2014 2015 2016 2017

Grant

Grant

Grant

Grant

Payout

Payout

Payout

Payout

Payout Timeline


Pension and Benefits

ATRFprovidesacompetitivebenefitsprogram thatincludespensionbenefits,healthanddental- carebenefits,lifeinsurance,illnessandlong-termdisabilitycoverage,professionalmembershipsand carallowances.

AllATRFstaffparticipateintheLocalAuthoritiesPensionPlan(LAPP).Thisisadefinedbenefitpensionplan,andprovidesforapensionof1.4%foreachyearofpensionableservicebasedontheaveragesalaryofthehighestfiveconsecutiveyearsuptotheYear’sMaximumPensionableEarningsundertheCanadaPensionPlanand2.0%ontheexcess.BenefitsunderthisplanarecappedbypensionablesalaryreachedatthemaximumpensionbenefitlimitallowedunderthefederalIncome Tax Act.

Whereearningsareinexcessofthiscappedpensionablesalary,anon-registered,unfundedSupplementaryEmployeePensionPlan(SEPP)providesforapension,inrespectofserviceafterAugust1999equaltothepensionformulaundertheLAPP,withnocapappliedtopensionablesalary,lesstheinitialpensionprovidedundertheLAPP.ParticipationintheSEPPislimitedtoexecutives,management,AssetClassHeadsandSeniorPortfolioManagers.ForpensionableservicebeforeSeptember1,2012,pensionablesalaryundertheSEPPincludes50%oftheactualannualincentivetarget-levelamountpaidundertheannualincentiveplan.ForpensionableserviceafterAugust31,2012,pensionablesalaryislimitedtobasesalarypaid.

Summary Performance

Forthe2012-13fiscalyear,incentiveplancompensationwaspaidinrelationtomeetingandexceedingpre-setcorporateobjectives,individualportfoliobenchmarksandtoproportionatelyrecognizetheabove-benchmarkperformanceoftheoverallfundinthepastfiscalyear.

Investment Performance

Inthe2012-13fiscalyear,thefundearnedarateofreturnof14.0%,exceedingthefund’s11.5%benchmarkby2.5%.Thisoutperformanceresultedin$172millionofvalue-addedinvestmentperformancebyATRF,whichwillbereinvestedintothefund.

Overthefour-yearperiodendedAugust31,2013,theinvestmentfundearnedarateofreturnof9.1%.Thiscomparestothefund’s7.9%benchmarkreturnresultingina1.2%or$280millionofvalueaddtotheassetsofthefund.

Corporate Performance

ATRF’sHRCCestablishedthefollowingcorporateobjectivesforthe2012-13fiscalyear,whichalignwithATRF’sstrategic,enterprise-wideriskmanagementandbusinessplans.Executives’performance-basedincentivesweremeasuredbasedontheirachievementagainsteachoftheseobjectives.

Objective Measure Achieved

PolicyAssetMix Completerisk-focusedassetliabilitystudy,andreviewandupdatethe AboveTarget investmentpolicyandassetmix

Implementrelatedgrowthinstaff,midandback-officeinvestmentfunctions, BelowTarget controlsandreporting

Implementplannedgrowthinilliquidassetprogram Target

EnterpriseRisk Provideplansponsorswithproactivesupportandinformationonplan Maximum ManagementPlan sustainability,fundingcontributionraterequirementsandbenefitissues

Supporttheboarddevelopmentinitiatives Maximum

PlanSponsorResults Provideinformation,supportandassessplansponsors’issuesand AboveTarget maintainATRF’sreputation

InvestmentResults TotalFundValueAddReturn Maximum


Summary Compensation Table

Thetablebelowprovidescompletedisclosureofsalary,annualincentivepayments,valueofSEPPbenefitsand allothercompensationearnedforyearsendedAugust31,2013,2012and2011bytheChiefExecutiveOfficer, ChiefInvestmentOfficerandthethreeothermosthighlycompensatedseniorstaff.

PensionsundertheSEPPwillbepaidwhentheycomedue.Accordingly,nopre-fundingoccurs.SEPPfinancingcostsareincludedinpensionexpense.

3 AllOtherCompensationincludesvacationpayoutsandtheemployer’sshareofallemployeebenefitsandcontributionsorpaymentsmadeonbehalfofemployees,includingpension(excludingSEPP),healthanddentalcare,lifeinsurance,long-termdisabilityplan,professionalmemberships,andcarallowances.

($Dollars) ChangeinPresentValueofAccruedBenefitdueto:

PresentValueofAccrued BenefitAccrualand InterestCostand PresentValueofAccruedNameandPosition BenefitsAugust31,2012 ChangeinPlan ChangeinAssumptions BenefitsAugust31,2013

Emilian Groch ChiefExecutiveOfficer 614,500 56,800 41,500 712,800

Derek Brodersen ChiefInvestmentOfficer 330,300 40,400 14,000 384,700

Charlie Kim SeniorPortfolioManager,Equities 40,200 10,300 1,300 51,800

Andy Elson SeniorPortfolioManager,FixedIncome 54,600 10,300 3,000 67,900

Rakesh Saraf Head,PrivateInvestments 35,500 17,000 1,900 54,500

Annual Long-Term Incentive Incentive All Other Total Name and Position Year Salary Plan Plan1 SEPP2 Compensation3 Compensation

Emilian Groch 2013 375,000 474,900 522,200 56,800 45,600 1,474,500ChiefExecutive 2012 375,000 237,100 10,000 (89,100) 40,300 573,300Officer 2011 320,000 86,000 – 294,400 40,000 740,400

Derek Brodersen 2013 300,000 306,100 320,400 40,400 44,500 1,011,400ChiefInvestment 2012 300,000 128,300 6,100 (189,600) 40,000 284,800Officer 2011 255,000 48,300 – 204,000 38,300 545,600

Charlie Kim 2013 223,600 169,200 209,500 10,300 33,600 646,200SeniorPortfolio 2012 216,000 124,600 3,900 (6,400) 30,500 368,600Manager,Equities 2011 204,300 54,000 – 13,100 27,100 298,500

Andy Elson 2013 211,100 85,600 170,900 10,300 33,000 510,900SeniorPortfolio 2012 200,400 65,000 2,900 20,300 30,600 319,200Manager,FixedIncome 2011 190,000 59,400 – 16,300 28,800 294,500

Rakesh Saraf 2013 250,000 190,200 – 17,000 34,000 491,200Head, 2012 210,000 123,800 – 12,200 31,000 377,000PrivateInvestments 2011 191,700 72,800 – 13,300 28,800 306,600

Summary Compensation Table ($Dollars–Audited)

1 AstheLTIPwaseffectiveSeptember1,2008,thefirstactualpayoutforeligibleparticipantswasdeterminedasatthecompletionofthe2011-12fiscalyear.2 ThepresentvalueoftheaccruedbenefitsoftheSEPPisestimatedbasedontheprojectedbenefitmethodproratedonservice,incorporatingthesameassumptionsused forthePlans(seeNote5(a)tothefinancialstatements),andrepresententitlementsthatmaychangeovertime.Inparticular,thepresentvalueforthenamedemployees isbasedonbenefitamountsthathavebeenprojectedforsalaryincreasestoretirementandasofAugust31,2013theamount,recordedinaccountspayable,is$1,271,600(2012-$1,075,100).Thepresentvalueofaccruedbenefits,basedontheaccruedpensionablesalaryearnedtoAugust31,2013,thatwouldbepaidifallnamedemployeesleftemploymentis$1,020,400(2012-$795,900).


Long-term Incentive Awards, Accumulated Value

LTIPawardsaregrantedatthestartofafiscalyearandpaidoutattheendofthefour-yearvestingperiod. ThefollowingtableshowstheLTIPandestimatedfuturepayoutsforthefivemosthighlycompensatedsenior staff.ThefuturevalueoftheawardsgrantedbutnotyetvestedareestimatedasatAugust31,2013,basedon:

• actualperformancemultipliersforfiscalyears2010-11,2011-12and2012-13,andpro-formamultipliers ofone(1.0x)forfutureyears;and

• actualfundratesofreturnforfiscalyears2010-11,2011-12and2012-13,andnoassumedgrowth infutureyears.

Succession Planning

ATRFhasshort-termcontingencyplansandlonger-termsuccessionplansinplacefortheChiefExecutiveOfficerandseniormanagement.Inidentifyingpotentialsuccessors,theBoardandChiefExecutiveOfficerconsiderATRF’sfuturebusinessstrategy,thecoreskillsandexperiencesrequiredtocarryoutthisstrategyandtheleadershipabilitiesofindividuals.Wheretherearegapsinexperienceorskillsofpotentialsuccessors,theChiefExecutiveOfficerdiscussesdevelopmentalopportunitieswiththeindividualandwiththeBoard.TheBoardalsoensures thattheBoardmembersgettoknowthepotentialsuccessorsidentified,throughBoardpresentationsandevents.

TheHRCCreviewsthesuccessionplanfortheentireleadershipteamonanannualbasis.Thesuccessionplan fortheChiefExecutiveOfficerwasupdatedin2012-13.

Long-Term Incentive Plan Awards and Estimated Future Payouts

1Representsthetargetvalueatthetimeofgrant;noawardispayableifperformanceisbelowathresholdvalue-addhurdle.2Representsthemaximumvaluepayableattheendofthefour-yearvestingperiod.SeetheLTIPsectionfordetails.

Year of Award Maximum Name and Position Grant (Target Value)1 Value2 2014 2015 2016

Emilian Groch 2012-13 281,300 843,900 – – 766,200ChiefExecutive 2011-12 281,300 843,900 – 843,900 –Officer 2010-11 240,000 720,000 720,000 – –

Derek Brodersen 2012-13 180,000 540,000 – – 490,300ChiefInvestment 2011-12 180,000 540,000 – 540,000 –Officer 2010-11 127,500 382,500 382,500 – –

Charlie Kim 2012-13 89,400 268,200 – – 243,600SeniorPortfolioManager, 2011-12 84,000 252,000 – 252,000 –Equities 2010-11 81,600 244,800 244,800 – –

Andy Elson 2012-13 84,400 253,200 – – 230,000SeniorPortfolioManager, 2011-12 80,200 240,600 – 240,600 –FixedIncome 2010-11 76,000 228,000 228,000 – – Rakesh Saraf 2012-13 100,000 300,000 – – 272,400Head, 2011-12 84,000 252,000 – 252,000 –PrivateInvestments 2010-11 76,700 230,100 230,100 – –

Estimated Future Payouts at fiscal year ending August 31:

($Dollars–Audited)


Board Remuneration

TheTeachers’ Pension Plans ActprovidesthatnoremunerationcanbepaidtoanyBoardmemberwhois employedbyanemployercoveredbytheplans,theGovernmentofAlbertaorTheAlbertaTeachers’Association.TheBoardannuallyreviewsandsetstheremunerationforBoardmemberswhoareeligibletoreceiveremuneration.ThereviewisbasedonasurveyoftheremunerationratesbeingpaidbyothersimilarCanadianpublic-sectorpensioninvestmentandadministrationorganizations.OnlyoneBoardmemberwaseligibleto receiveremunerationinthe2012-13fiscalyear.

Inthepastyear,Boardremunerationwaspaidaccordingtothefollowingschedule:anannualBoardmemberretainerof$15,000;anannualcommitteechairretainerof$4,000;aBoardmeetingfeeof$1,200,andcommitteemeetingfeesof$800,formeetingsuptofourhoursinanyoneday,and$1,200formeetingsinexcessoffourhoursinanyoneday.SeparatefeesarenotpaidforcommitteemeetingsheldthesamedayasaBoardmeeting.

Boardmembersarereimbursedforreasonableexpensesfortravel,mealsandaccommodation,asrequired.

Duringthe2012-13fiscalyear,BoardmembersattendedallBoardmeetingsandeachapplicablecommitteemeeting,exceptthatoneBoardmemberwasunabletoattendoneBoardmeetingandanotherBoardmember wasunabletoattendtwomeetingsoftheInvestmentCommittee.

1 AppointedtotheBoardDecember19,2012.2 RetiredfromtheBoardSeptember23,2012.

Board remuneration ($Dollars–Audited)

Board Board Committee Meeting Total 2012-13 Total 2011-12Member Retainer Meetings Meetings Fees Remuneration Remuneration

HarryBuddle 15,000 7/7 11/11 16,800 31,800 30,200KarenElgert n/a 7/7 8/10 n/a n/a n/aLowellEpp n/a 6/7 13/13 n/a n/a n/aSandraJohnston1 n/a 4/4 11/11 n/a n/a n/aGregMeeker n/a 7/7 6/6 n/a n/a n/aGeneWilliams n/a 7/7 9/9 n/a n/a n/aSharonVogrinetz2 n/a 0/0 0/0 n/a n/a n/a

36 2013 ANNUAL REPORT ALbERTA TEAchERs’ RETiREmENT FUNdFINANCIALS

finAnCiAls2013 ATRF

Management’sResponsibilityforFinancialReporting 37

IndependentAuditor’sReport 38

Actuary’sOpinion 39

FinancialStatements 40

NotestotheFinancialStatements 42

2013 ANNUAL REPORT 37ALBERTA TEACHERS’ RETIREMENT FUND MANAGEMENT’SRESPONSIBILITYFORFINANCIALREPORTING

Management’s Responsibility for

ThefinancialstatementsoftheAlbertaTeachers’RetirementFundBoardandallinformationintheAnnualReport aretheresponsibilityofmanagementandhavebeenapprovedbytheBoard.ThefinancialstatementshavebeenpreparedinaccordancewithCanadianaccountingstandardsforpensionplans.Wherenecessary,management hasmadeinformedjudgmentsandestimatesoftheoutcomeofeventsandtransactionswithdueconsideration tomateriality.

FinancialandoperatingdataelsewhereintheAnnualReportisconsistentwiththeinformationcontained inthefinancialstatements.

FortheintegrityoffinancialinformationincludedinthisAnnualReport,managementreliesontheorganization’ssystemofinternalcontrolsandsupportingprocedures.Thissystemhasbeenestablishedtoensurewithinreasonablelimitsthatassetsaresafeguarded,thattransactionsareproperlyexecutedinaccordancewithmanagement’sauthorization,andthattheaccountingrecordsprovideasolidfoundationfromwhichtopreparethefinancialstatements.Controlsincludehighqualitystandardsforhiringandtrainingemployees,anorganizationalstructurethatprovidesawell-defineddivisionofresponsibilitiesandaccountabilityforperformance,andthecommunicationofpoliciesandguidelinesthroughouttheorganization.

UltimateresponsibilityforthefinancialstatementsrestswiththeBoard,whichisassistedinitsresponsibilitiesbythestaffandtheAuditCommittee.TheAlbertaTeachers’RetirementFundBoard’sexternalauditor,theAuditorGeneral,hasconductedanindependentexaminationofthefinancialstatementsinaccordancewithCanadiangenerallyacceptedauditingstandards,performingsuchtestsandotherproceduresasheconsidersnecessarytoexpresstheopinioninhisreport.TheAuditCommitteeoftheBoardreviewstheAuditor’sReportandthefinancialstatementsandrecommendsthemforapprovalbytheBoard.TheAuditorGeneralhasfullandunrestrictedaccesstodiscusstheauditandrelatedfindingsregardingtheintegrityoffinancialreportingandtheadequacyofinternalcontrolsystems.

MylesNorton,CMA,CFA Director,FinancialServices

EmilianV.Groch ChiefExecutiveOfficer

SignaturesPending SignaturesPending

finAnCiAl rePortinG

38 2013 ANNUAL REPORT ALbERTA TEAchERs’ RETiREmENT FUNdINDEPENDENTAUDITOR’SREPORT

Independent Auditor’srePortTotheAlbertaTeachers’RetirementFundBoard

Report on the Financial StatementsIhaveauditedtheaccompanyingfinancialstatementsoftheAlbertaTeachers’RetirementFundBoard,whichcomprisethestatementoffinancialpositionasatAugust31,2013,andthestatementsofchangesinnetassetsavailableforbenefitsandchangesinpensionobligationsfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation.

Management’s Responsibility for the Financial StatementsManagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithCanadianaccountingstandardsforpensionplans,andforsuchinternalcontrolasmanagementdetermines isnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement, whetherduetofraudorerror.

Auditor’s ResponsibilityMyresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonmyaudit.IconductedmyauditinaccordancewithCanadiangenerallyacceptedauditingstandards.ThosestandardsrequirethatIcomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentof therisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthose riskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

IbelievethattheauditevidenceIhaveobtainedissufficientandappropriatetoprovideabasisfor myauditopinion.

OpinionInmyopinion,thefinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionofthe AlbertaTeachers’RetirementFundBoardasatAugust31,2013,andthechangesinitsnetassetsavailable forbenefitsandchangesinitspensionobligationsfortheyearthenendedinaccordancewithCanadian accountingstandardsforpensionplans.

[OriginalSignedbyMerwanN.Saher,FCA] AuditorGeneral December17,2013 Edmonton,Alberta

2013 ANNUAL REPORT 39ALBERTA TEACHERS’ RETIREMENT FUND ACTUARY’SOPINION

Actuary’soPinionAonHewitthasbeenengagedbytheAlbertaTeachers’RetirementFundBoard(“ATRF”)toprepareactuarialvaluationsfortheTeachers’ Pension PlanandthePrivate School Teachers’ Pension Plan (the“Plans”)asat August31,2013.Thepurposeofthesevaluationsistodeterminethenecessaryactuarialinformationfor financialstatementreportingforthePlansinaccordancewithSection4600oftheCanadianInstituteof CharteredAccountants’Handbook(“CICA4600”).

Ourvaluationshavebeenpreparedbasedon:

• membershipandassetdataprovidedbyATRFasatAugust31,2013andadjustedtoreflect anticipatednewhiresasatSeptember1,2013;

• assumptionsthatweunderstandhavebeenadoptedasATRFmanagement’sbestestimates;and• actuarialcostmethodsandassetvaluationmethodsthatareinaccordanceCICA4600.

Basedontheworkwehaveperformed,includingconductingreasonabilitytestsonthemembershipandassetdata,wehaveconcludedthat,inouropinion:

• thedataissufficientandreliable;• theassumptionsadoptedasbestestimatebyATRF’smanagementare,inaggregate,appropriate

whenconsideringthecircumstancesofthePlansandthepurposeofthevaluations;• theactuarialcostmethodsandtheassetvaluationmethodsemployedareappropriateforthe

purposeofthevaluations;and• thevaluationsconformwiththerequirementsofSection4600ofthehandbookofthe

CanadianInstituteofCharteredAccountants.

WhiletheactuarialassumptionsusedtoestimatethePlans’liabilitiesrepresentATRFmanagement’sbestestimateoffutureeventsandmarketconditionsatAugust31,2013,thePlans’futureexperiencewilldifferfromtheactuarialassumptions.Emergingexperiencedifferingfromtheassumptionswillresultingainsorlossesthatwillberevealedinfuturevaluations,andwillaffectthefinancialpositionofthePlans.

Ouropinionshavebeengiven,andourvaluationshavebeenperformed,inaccordancewithacceptedactuarialpracticeinCanada.

RobertJ.Thiessen DonaldL.IrelandFellow,CanadianInstituteofActuaries Fellow,CanadianInstituteofActuariesFellow,SocietyofActuaries Fellow,SocietyofActuaries

November12,2013


40 2013 ANNUAL REPORT ALbERTA TEAchERs’ RETiREmENT FUNdFINANCIALSTATEMENTS

stAteMentsFinancial

Theaccompanyingnotesarepartofthesefinancialstatements.

ApprovedbytheBoard

GregMeeker LowellEpp Chair ViceChair

2013 2012

Assets

Investments(Note3) $ 8,579,864 $ 7,190,833

Contributionsreceivable 19,405 17,234

Otherassets 1,620 1,020

8,600,889 7,209,087

Liabilities

Accountspayable(Note4) 19,862 15,058

Net assets available for benefits 8,581,027 7,194,029

Accrued pension obligations (Note5) 9,406,344 9,108,721

Deficiency $ 825,317 $ 1,914,692

statement of financial Position AsatAugust31($Thousands)


2013 ANNUAL REPORT 41ALBERTA TEACHERS’ RETIREMENT FUND FINANCIALSTATEMENTS

statement of Changes in Pension obligations FortheyearendedAugust31($Thousands) 2013 2012

Accrued pension obligations, beginning of year $ 9,108,721 $ 8,294,365

Increase (decrease) in accrued pension obligations

Interestonaccruedbenefits 665,750 586,557

Benefitsaccrued 434,207 427,515

Changesinactuarialassumptions (583,737) –

Experiencelosses 64,731 57,762

Benefitspaid (283,328) (257,478)

297,623 814,356

Accrued pension obligations, end of year (Note 5) $ 9,406,344 $ 9,108,721

Statement of Changes in Net Assets Available for Benefits FortheyearendedAugust31($Thousands) 2013 2012

Net assets available for benefits, beginning of year $ 7,194,029 $ 6,335,072

Investment operations

Investmentincome(Note6) 217,346 187,125

Changeinfairvalueofinvestments(Note6) 807,206 324,842

Administrativeexpenses(Note7) (33,150) (23,316)

Netinvestmentoperations 991,402 488,651

Member service operations

Contributions(Note8)

Teachers 352,549 327,369

TheProvince 324,613 301,832

Employers 1,756 1,458

Nettransfersfromotherplans 5,463 2,219

Benefitspaid(Note9) (283,328) (257,478)

Administrativeexpenses(Note7) (5,457) (5,094)

Net member service operations 395,596 370,306

Increase in net assets available for benefits 1,386,998 858,957

Net assets available for benefits, end of year $ 8,581,027 $ 7,194,029

Theaccompanyingnotesarepartofthesefinancialstatements.

42 2013 ANNUAL REPORT ALbERTA TEAchERs’ RETiREmENT FUNdNOTESTOTHEFINANCIALSTATEMENTS

stAteMentsNotes to the Financial

NOTE 1DESCRIPTION OF PLANS

ThefollowingdescriptionoftheTeachers’Pension PlanandthePrivateSchoolTeachers’PensionPlan (the“Plans”)isasummaryonly.

a) General

TheAlbertaTeachers’RetirementFundBoard(“ATRF”),acorporationoftheProvinceofAlberta(the“Province”)operatingundertheauthorityof theTeachers’PensionPlansAct,ChapterT-1,RSA2000,isthetrusteeandadministratorofthePlans.ThePlansarecontributorydefined-benefitpensionplansfortheteachersofAlberta.

ThePlansareregisteredpensionplansasdefinedintheIncome Tax Act(registrationnumber0359125)andarenotsubjecttoincometaxesinCanada.ThePlansmaybesubjecttotaxesinotherjurisdictionswherefulltaxexemptionsarenotavailable.

b) Obligations relating to the period before September 1992

TheTeachers’PensionPlan’sassetsandobligationsrelatedtopensionableserviceafterAugust31,1992(the“Post-1992period”)havebeenaccountedforseparatelyfromtheassetsandobligationsrelated topensionableservicepriortoSeptember1,1992(the“Pre-1992period”)and,accordingly,thesefinancialstatementsandnotesincludeonlyPost-1992periodtransactionsoftheTeachers’PensionPlanandtransactionsofthePrivateSchoolTeachers’PensionPlan.

EffectiveSeptember1,2009,theProvince assumedfullresponsibilityforobligationsrelated toPre-1992periodpensionableserviceandprovidestherequiredamountstoATRFtopaytheobligationsonamonthlybasis.

c) Funding

ThedeterminationofthevalueofthebenefitsandtherequiredcontributionsforthePlansismadeonthebasisofperiodicactuarialvaluations.

AllteachersundercontractwithschooljurisdictionsandcharterschoolsinAlbertaarerequiredtocontributetotheTeachers’PensionPlan.CurrentservicecostsandrelateddeficienciesarefundedbyequalcontributionsfromtheProvinceandtheteachers.Anadditional10percentcostoflivingadjustmentforserviceearnedafter1992isfundedentirelybytheteachers.

CertainotherdesignatedorganisationsinAlbertaalsoparticipateintheTeachers’PensionPlanunderthesamefundingarrangements,excepttheseorganisationsmaketheemployercontributionsratherthantheProvince.

CertainprivateschoolsparticipateinthePrivateSchoolTeachers’PensionPlan.Plancostsare fundedbycontributionsfromtheemployers andtheteachers.

2013 ANNUAL REPORT 43ALBERTA TEACHERS’ RETIREMENT FUND NOTESTOTHEFINANCIALSTATEMENTS

d) Retirement pensions

Retirementpensionsarebasedonthenumberofyearsofpensionableserviceandthehighestconsecutivefive-yearaveragesalary.Pensionsarepayabletoteacherswhoretireaftercompletionofatleastfiveyearsofpensionableservice,withcertainrestrictions,andwhohaveattainedage65.Unreducedpensionsarealsopayabletoteacherswhohavereachedatleastage55andthesumoftheirageandserviceequals85.Withcertainrestrictions,reducedearlyretirementpensionsarepayabletoteacherswhoretireonorafterage55withaminimumoffiveyearsofpensionableservice.

e) Disability benefits

TeacherswhoaredisabledafterAugust31,1992 arecreditedwithpensionableservicewhile disabled.Teachersdonotcontributetothe Planswhiledisabled.

f) Termination benefits

Refundsorcommutedvaluetransfersareavailablewhenateacherceasesemployment.

g) Death benefits

Deathbenefitsareavailableuponthedeathofateacherandmaybeavailableuponthedeathof aretiredmember.Thebenefitmaytaketheform ofalumpsumpaymentorasurvivorpension.

h) Other provisions

PurchaseofpastserviceandreinstatementofrefundedserviceisallowedonabasisthatiscostneutraltothePlans.

i) Cost-of-living adjustments

Pensionspayableareincreasedeachyearbyanamountequalto60percentoftheincreaseintheAlbertaConsumerPriceIndex.Theportionof pensionearnedafter1992isincreasedbyanadditional10percentoftheincreaseinthe AlbertaConsumerPriceIndex.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of presentation

ThestatementspresenttheaggregatefinancialpositionofthePlans.Thesefinancialstatements arepreparedinaccordancewithCanadianaccountingstandardsforpensionplans.Section4600–PensionPlans,oftheCanadianInstituteofCharteredAccountants(“CICA”)Handbook,prescribes accountingpoliciesspecifictoinvestmentsandpensionobligations.Foraccountingpolicieswhichdonotrelatetoeitherinvestmentsorpensionobligations,InternationalFinancialReportingStandards(“IFRS”)areapplied.TotheextentthatIFRSisinconsistent withSection4600,Section4600takesprecedence.


b) Investments

Investments,investmentreceivablesandinvestmentliabilitiesarerecognizedonatradedatebasis andarestatedatfairvalue.

i)VALUATIONOFINVESTMENTS

Fairvalueisthepriceatwhichaninvestmentassetwouldbesoldorinvestmentliabilitytransferredthrough anorderlytransactionbetweenmarketparticipantsatthemeasurementdateundercurrentmarketconditions.

Fairvaluesaredeterminedasfollows:

CATEGORY BASIS OF VALUATION

Money-market securities Costplusaccruedinterestapproximatesfairvalueduetotheshort-term natureofthesesecurities.

Bonds and debentures Closingquotedmarketprice.Wherequotedpricesarenotavailable, estimatedvaluesarecalculatedusingdiscountedcashflowsbasedon currentmarketyieldsforcomparablesecurities.

Public equity Closingquotedmarketprice.Whereamarketpriceisnotavailable, marketvalueisdeterminedusingappropriatevaluationmethods.

Real estate Realestateassetsandliabilitiesarehelddirectlyandthroughlimitedpartnerships. Fairvaluefordirectinvestmentsinrealestatearebasedonestimatedfairvalues usingappropriatevaluationtechniquessuchasdiscountedcashflowsandcomparablepurchasesandsalestransactions.Investmentsheldthroughlimitedpartnershipsare valuedusingcarryingvaluesreportedbythegeneralpartnerusingsimilaracceptedindustryvaluationmethods.

Infrastructure Infrastructureinvestmentsaremadethroughjointventuresofvaryinglegalforms. Fairvalueinformationisprovidedbyinvestmentmanagersusingappropriate valuationtechniques.

Private companies Investmentsinprivatecompaniesareheldthroughlimitedpartnershipsandinvestmentfunds.Fairvalueisdeterminedbasedoncarryingvaluesandotherrelevantinformationreportedbytheinvestmentmanagerusingacceptedvaluationmethods.Inthefirstyear ofownership,costisgenerallyconsideredtobeanappropriateestimateoffairvalue.

Derivatives Marketpricesareusedforexchange-tradedderivativessuchasfutures. Wherequotedmarketpricesarenotavailable,appropriatevaluationtechniques areusedtodeterminefairvalue.

DerivativecontractsenteredintobyATRFeitherdirectlywithcounterpartiesinthe over-the-countermarketoronregulatedexchangesincludeforeignexchangeforwards.Aforeignexchangeforwardcontractisacontractualagreementbetweentwopartiestoexchangeanotionalamountofonecurrencyforanotherataspecifiedpriceforsettlementonapredetermineddateinthefuture.ATRFusesforeign-exchangeforwardcontractstomodifycurrencyexposureforbothhedgingandactivecurrencymanagement.


ii)INCOMERECOGNITION

Investmentincomeincludesinterestanddividends,netincomefromrealestateandprivatecompanyinvestments,andunrealizedgainsandlossesresultingfromchangesinthefairvalueofinvestmentsandundistributedincome.

Incomeisrecognizedasfollows:

c) Fair value disclosures

Allfinancialinstrumentsmeasuredatfairvalue arecategorizedintooneofthefollowingthreehierarchylevels.Eachlevelreflectstheavailability ofobservableinputswhichareusedtodeterminefairvalues:

Level1–inputsareunadjustedquotedprices ofidenticalassetsorliabilitiesinactivemarkets.

Level2–inputsareotherthanquotedpricesincludedinLevel1thatareobservableforthe assetorliability,eitherdirectlyorindirectly.

Level3–oneormoresignificantinputsusedinavaluationtechniqueareunobservableindeterminingfairvaluesoftheassetsorliabilities.

Determinationoffairvalueandtheresultinghierarchyrequirestheuseofobservablemarketdatawheneveravailable.Theclassificationofafinancialinstrumentinthehierarchyisbaseduponthelowestlevelofinputthatissignificanttothemeasurementoffairvalue.

iii)TRANSACTIONCOSTS

Transactioncostsareincrementalcostsattributabletotheacquisition,issueordisposalofinvestmentassets orliabilities.Transactioncostsareexpensedasincurred,oninitialrecognitionofinvestmentsacquired.

d) Foreign currency translation

AssetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedintoCanadiandollars attheexchangeratesprevailingontheyear-enddate.IncomeandexpensesaretranslatedintoCanadiandollarsattheexchangeratesprevailing onthedatesofthetransactions.Therealized gainsandlossesarisingfromthesetranslations areincludedwithinchangeinfairvalueofinvestmentsininvestmentearnings.

e) Contributions

Contributionsfromthemembers,theProvince andtheemployersarerecordedonanaccrualbasis.Cashreceivedfrommembersforcreditedserviceandcashtransfersfromotherpensionplansarerecordedwhenreceived.

CATEGORY BASIS OF RECOGNITION

Interest income Accrualbasis.

Dividend income Accrualbasisontheex-dividenddate.

Net operating income from real estate and private companies

Mostcurrentavailableoperatingincomereportedbytheinvestment manager(whereapplicable,incomeisreportednetofmanagementfees chargedbygeneralpartners).

Realized gains and losses on investments

Differencebetweenproceedsondisposalandtheaveragecost.

Unrealized gains and losses on investments

Changeinthedifferencebetweenestimatedfairvalueandcost.


f) Benefits

Pensionbenefits,terminationbenefitsandtransferstootherplansarerecordedintheperiodinwhichtheyarepaid.Anybenefitpaymentaccrualsnot paidarereflectedinaccruedpensionbenefits.

g) Accrued pension benefits

Thevalueofaccruedpensionbenefitsandchangesthereinduringtheyeararebasedonanactuarialvaluationpreparedbyanindependentfirmofactuaries.Thevaluationismadeannuallyasat August31.Itusestheprojectedbenefitmethod pro-ratedonserviceandmanagement’sbestestimate,asatthevaluationdate,ofvarious futureevents.

h) Capital assets

Capitalassetsarerecordedatcostandamortized onastraight-linebasisovertheirestimatedusefullives.Costsnetofaccumulatedamortizationareincludedwith‘otherassets’ontheStatements ofFinancialPosition.

i) Use of estimates

Thepreparationoffinancialstatements, inconformitywithCanadianaccountingstandardsforpensionplans,requiresmanagementtomakeestimatesandassumptionsthataffecttheamountsreportedinthefinancialstatements.Actualresultscoulddifferfromthoseestimates.

MeasurementuncertaintyexistsinthecalculationofthePlans’actuarialvalueofaccruedbenefits.UncertaintyarisesbecausethePlans’actualexperiencemaydiffersignificantlyfromassumptionsusedinthecalculationofthePlans’accruedbenefits.

Measurementuncertaintyexistsinthevaluation ofthePlans’privateinvestmentsasvaluesmay differsignificantlyfromthevaluesthatwould havebeenusedhadareadymarketexistedfor theseinvestments.

j) Salaries, incentives and benefits

DetailsofseniorstaffcompensationandBoardmemberremunerationincludedin“salariesandbenefits”(Note7)arepresentedintheCompensationandDiscussionAnalysissectionoftheAnnualReport.

TheBoardparticipatesintheLocalAuthoritiesPensionPlan,adefinedbenefitpublicsectorpensionplan,whichmeetstheaccountingrequirements fortreatmentasadefinedcontributionplan. Theemployercontributionsarerecordedas anexpenseundersalariesandbenefits(Note7).

TheBoardprovidesaSupplementaryEmployeePensionPlan(SEPP)toexecutivesandmanagerswhoseearningsexceedthepensionbenefitlimitundertheIncome Tax Actregulations.Thepensionbenefitisrecordedasanexpenseundersalaries,incentivesandbenefits(Note7)andasaliability(Note4).


NOTE 3INVESTMENTS

ThefollowingschedulesummarizesthecostandfairvalueofthePlans’investmentsbeforeallocatingthemarketexposurerelatedtoderivativefinancialinstruments.

($Thousands) 2013 2012

Fair Value Cost Fair Value Cost

Fixed income

Cash $ 179,724 $ 179,724 $ 100,351 $ 100,351

Money-marketsecurities 293,911 293,911 135,475 135,475

Bondsanddebentures 2,161,553 2,147,640 2,228,620 2,042,681

2,635,188 2,621,275 2,464,446 2,278,507

Public equities

Canadian 1,384,905 1,105,100 1,239,230 1,079,703

Foreign 3,241,787 2,699,951 2,582,536 2,441,481

4,626,692 3,805,051 3,821,766 3,521,184

Private companies 591,673 498,975 358,590 337,806

Infrastructure 278,243 239,964 186,940 177,962

Real estate 446,019 383,843 334,913 319,991

Investment related assets

Accruedincome 11,173 11,173 29,128 29,128

Unrealizedgainsandamounts

receivableonderivativecontracts 1,030,851 238,078 762,757 58,342

2,357,959 1,372,033 1,672,328 923,229

INVESTMENT ASSETS 9,619,839 7,798,359 7,958,540 6,722,920

Investment related liabilities

Unrealizedlossesandamounts

payableonderivativecontracts 1,032,567 238,297 763,294 60,649

Other 7,408 7,408 4,413 4,413

1,039,975 245,705 767,707 65,062

NET INVESTMENTS $ 8,579,864 $ 7,552,654 $ 7,190,833 $ 6,657,858


a) Fair value hierarchy

FinancialinstrumentsarecategorizedwithinthefairvaluehierarchyasdescribedinNote2(c)asfollows:

ThefollowingtablerepresentsareconciliationoffinancialinstrumentsincludedinLevel3ofthefairvaluehierarchy:

2013 ($Thousands) Level1 Level2 Level3 Total

Fixedincome $ 179,724 $ 2,455,464 $ – $ 2,635,188 Equity 4,626,692 – 591,673 5,218,365

Realestate&infrastructure – – 724,262 724,262

Netinvestment-relatedreceivables – 2,049 – 2,049

Netinvestments $ 4,806,416 $ 2,457,513 $1,315,935 $ 8,579,864

56% 29% 15% 100%

2012 ($Thousands) Level1 Level2 Level3 Total

Fixedincome $ 100,351 $ 2,364,095 $ – $ 2,464,446

Equity 3,821,766 – 358,590 4,180,356

Realestate&infrastructure – – 521,853 521,853

Netinvestment-relatedreceivables – 24,178 – 24,178

Netinvestments $ 3,922,117 $ 2,388,273 $ 880,443 $ 7,190,833

55% 33% 12% 100%

2013 ($Thousands) RealEstate&Infrastructure Equity Total

Balance,beginningofyear $ 521,853 $ 358,590 $ 880,443

Unrealizedgains 69,905 70,998 140,903

Purchases 132,504 162,085 294,589

Balance,endofyear $ 724,262 $ 591,673 $ 1,315,935

2012 ($Thousands) RealEstate&Infrastructure Equity Total

Balance,beginningofyear $ 184,453 $ 277,503 $ 461,956

Unrealizedgains 19,446 11,739 31,185

Purchases 317,954 69,348 387,302

Balance,endofyear $ 521,853 $ 358,590 $ 880,443


2013 2012

Rateofreturnoninvestedassets 7.25% 7.00%

RateofAlbertainflation 2.75% 2.75%

Realwageincreases 1.00% 1.00%

NOTE 5ACCRUED PENSION OBLIGATIONS

a) Valuations and assumptions

AnactuarialvaluationoftheTeachers’PensionPlanforthePost-1992periodandthePrivateSchool Teachers’PensionPlanwasperformedasatAugust31,2013.ValuationsforthePlanswerealsoprepared asatAugust31,2012.Thepresentvalueofaccruedbenefitswasdeterminedusingtheprojectedbenefit methodproratedonservice.Theassumptionsusedinthevaluationsarebasedonmanagement’sbest estimateoffutureevents.

Themajorlong-termeconomicassumptionsusedinthebest-estimatevaluationsare:

b) Sensitivity of changes in major assumptions

Thetablebelowshowstheimpactofchangestomajorassumptions,holdingallotherassumptionsconstant:

Thecurrentservicecost(excluding0.2%foradministrativeexpenses)asapercentoftotalteachersalaries fortheTeachers’PensionPlanwas12.57%andforthePrivateSchoolTeachers’PensionPlanwas12.49%.

NOTE 4ACCOUNTS PAYABLE


Taxwithholdings $ 8,558 $ 8,193

Long-TermIncentivePlan 4,620 1,443

TradePayables 4,496 2,206

SupplementaryEmployeePensionPlan 1,703 1,457

ContributionsduetotheProvince – 269

Other 485 1,490

$ 19,862 $ 15,058

Teachers’ Pension Plan Private School Teachers’ Pension Plan

0.50%decreasein 0.50%increase 0.50%decreasein 0.50%increase RateofReturnon inRateof RateofReturnon inRateof InvestedAssets Inflation InvestedAssets Inflation

1.27% 0.92% 1.59% 1.07%

$755million $504million $3million $2million

Increaseincurrentservicecosts (%oftotalteachersalaries)

Increaseinaccruedpensionobligations


c) Results Based on Valuations

ThevaluationforthePost-1992periodoftheTeachers’PensionPlanasatAugust31,2013determinedadeficiencyof$825.59million.ThevaluationforthePrivateSchoolTeachers’PensionPlantoAugust31,2013determinedasurplusof$273thousand.

NOTE 6INVESTMENT EARNINGS

Thefollowingisasummaryofinvestmentearningsbyassetclass:


Investment Changein Investment Changein Income FairValue1 Total Income FairValue2 Total

Fixedincome

Cashandmoney-marketsecurities $ 4,321 $ – $ 4,321 $ 3,233 $ – $ 3,233

Bondsanddebentures 82,128 (136,821) (54,693) 77,268 117,377 194,645

Publicequity

Canadian 36,221 152,591 188,812 36,972 (17,210) 19,762

Foreign 84,500 664,260 748,760 64,034 192,006 256,040

Privatecompanies 9,851 70,998 80,849 1,186 10,343 11,529

Infrastructure 2 24,066 24,068 3,222 9,155 12,377

Realestate 323 45,824 46,147 1,210 10,933 12,143

Derivatives – (13,712) (13,712) – 2,238 2,238

Total $ 217,346 $ 807,206 $1,024,552 $ 187,125 $ 324,842 $ 511,967


Teachers’ Private Teachers’ Private PensionPlan Teachers’ Total PensionPlan Teachers’ Total

Netassetsat $ 7,159,011 $ 35,018 $ 7,194,029 $ 6,303,028 $ 32,044 $ 6,335,072 beginningofyear

Netcontributions 680,862 3,519 684,381 629,967 2,911 632,878

Benefits (281,500) (1,828) (283,328) (255,095) (2,383) (257,478)

Investmentearnings 1,019,565 4,987 1,024,552 509,377 2,590 511,967

Administrative (38,419) (188) (38,607) (28,266) (144) (28,410)expense

Netassetsat 8,539,519 41,508 8,581,027 7,159,011 35,018 7,194,029endofyear

Actuarialvalueof (9,365,109) (41,235) (9,406,344) (9,068,324) (40,397) (9,108,721)accruedpensionobligations

(Deficiency)/Surplus $ (825,590) $ 273 $ (825,317) $ (1,909,313) $ (5,379) $ (1,914,692)

1Changeinfairvalueincludesarealizednetgainof$312,989andanunrealizednetgainof$494,217.2Changeinfairvalueincludesarealizednetgainof$33,107andanunrealizednetgainof$291,735.


NOTE 7ADMINISTRATIVE EXPENSES

Investment Member 2013 Operation Service ($Thousands) Expenses Expenses Total Budget

Externalinvestmentmanagementfees $ 19,782 $ – $ 19,782 $ 18,314

Salariesandbenefits 10,010 3,559 13,569 11,037

Custodialandbanking 1,105 36 1,141 1,137

Professionalandconsultingservices 1,042 658 1,700 2,245

Communicationandtravel 541 439 980 1,532

Premisesandequipment 479 457 936 1,185

Boardandcommittee 103 127 230 361

Actuaryfees 14 131 145 120

Other 74 50 124 353

Total $ 33,150 $ 5,457 $ 38,607 $ 36,284

Investment Member 2012 Operation Service ($Thousands) Expenses Expenses Total Budget

Externalinvestmentmanagementfees $ 14,651 $ – $ 14,651 $ 17,033

Salariesandbenefits 5,321 3,344 8,665 9,025

Custodialandbanking 1,110 31 1,141 1,467

Professionalandconsultingservices 995 543 1,538 1,946

Communicationandtravel 503 328 831 1,308

Boardandcommittee 305 135 440 344

Premisesandequipment 276 475 751 1,019

Audit 40 40 80 80

Actuaryfees 10 91 101 110

Other 105 107 212 314

Total $ 23,316 $ 5,094 $ 28,410 $ 32,646


NOTE 8CONTRIBUTIONS

NOTE 9BENEFiTS PAiD

Duringtheyear$440million(2012:$430million)wasreceivedfromtheProvinceandwasdistributedasbenefitpaymentsrelatingtothePre-1992period.


Teachers

Currentservice $ 219,685 $ 213,658

Currentserviceadditional10%COLA 13,529 12,615

Pastservice 5,402 6,189

Deficiency 113,933 94,907

352,549 327,369

TheProvince

Currentservice 216,662 211,269

Pastservice 2,195 2,138

Deficiency 105,756 88,425

324,613 301,832

Employers

Currentservice 1,410 1,167

Deficiency 346 291

1,756 1,458

Nettransfersfromotherplans 5,463 2,219

$ 684,381 $ 632,878


Pensionbenefits $ 249,686 $ 220,853

Terminationbenefits 33,642 36,625

$ 283,328 $ 257,478


NOTE 10RiSK MANAGEMENT

ThePlansareexposedtocertainfinancialrisksasaresultofitsinvestmentactivities.Theserisksincludemarketrisk,creditriskandliquidityrisk.ATRFmanagesfinancialriskthroughtheInvestmentPolicywhichisapprovedbytheBoardatleastonceeveryfiscalyear.ThispolicycontainsrisklimitsandriskmanagementprovisionsthatgoverninvestmentdecisionsandhasbeendesignedtoachievethemandateofATRFwhichistoinvestitsassetstoachievemaximum,risk-controlled,cost-effective,long-terminvestmentreturns.

a) Market risk

Marketriskistheriskthatthefairvalueorfuturecashflowsofaninvestmentassetorinvestmentliabilitywillfluctuatebecauseofchangesinpricesandrates.ATRFmitigatesmarketriskthroughdiversificationofinvestmentsacrossassettypes,geographyandtimehorizons.Marketriskiscomprisedofthefollowing:

Currency risk

ThePlansareexposedtocurrencyriskthroughinvestmentassetsorliabilitieswhichareheldinforeigncurrencies.ChangesintherelativevalueofforeigncurrenciesinreferencetotheCanadiandollarwill resultinachangeinthefairvalueorfuturecashflowsoftheseinvestmentassetsandliabilities. ATRFpermitsportfoliomanagerstousecurrency-forwardcontractstolimitthePlans’foreigncurrency exposure.Foreigninvestmentsinrealestateandinfrastructurearehedgedwiththeaimofremoving allforeigncurrencyexposure.ThePlans’foreigncurrencyexposureisasfollows:

A1%increase/decreaseinthevalueoftheCanadiandollaragainstallcurrencies,withallothervariablesandunderlyingvaluesheldconstant,wouldresultinanapproximatedecrease/increaseinthevalueofnetinvestmentsof$32millionasatAugust31,2013(2012:$24million)

Interest-rate risk

Interestrateriskistheriskthatthefairvalueorfuturecashflowsofaninvestmentwillchangeasaresult ofchangesinmarketinterestrates.Changesininterestratesaffectfairvaluesoffixed-ratesecuritiesand thecashflowsoffloating-ratesecurities.Increasesininterestrateswillgenerallydecreasethefairvalueoffixed-ratesecurities.

ATRFmanagesinterestrateriskforinvestmentsbyestablishingatargetassetmixthatprovidesanappropriatemixbetweeninterest-sensitiveinvestmentsandthosesubjecttootherrisks.Aportionoftheinterest-sensitiveportfolioisactivelymanaged,allowingmanagerstoanticipateinterestratemovementstomitigateortakeadvantageofinterest-ratechanges.Therearealsocertainalternativeinvestmentswhichmayhaveinterest- ratecomponentsmakingthemsubjecttointerest-rateexposure.


Foreign NetForeign NetForeign Currency Currency Currency CurrencyCurrency Exposure Derivatives Exposure Exposure

UnitedStatesdollar $ 1,801,188 $ (168,506) $ 1,632,682 $ 1,350,297

Euro 493,017 (114,024) 378,993 190,671

Britishpoundsterling 358,152 (7,783) 350,369 200,831

Japaneseyen 283,832 (2,474) 281,358 159,649

Swissfranc 173,518 (2,873) 170,645 147,955

HongKongdollar 84,199 – 84,199 62,242

Other 299,532 (16) 299,516 309,431

$ 3,493,438 (295,676) 3,197,762 $ 2,421,076


Afterconsideringtheeffectofderivativecontractsa1%increase/decreaseinnominal-interestrates, withallothervariablesheldconstant,wouldresultinanapproximatedecrease/increaseinthevalue ofnetinterestbearinginvestmentsandanunrealizedloss/gainof$202million(2012:$219million).

Equity-price risk

Equity-priceriskistheriskthatthefairvalueorfuturecashflowsofaninvestmentwillfluctuatebecause ofchangesinmarketprices(otherthanthosearisingfrominterest-rateriskorcurrencyrisk),whetherthosechangesarecausedbyfactorsspecifictotheindividualinvestmentorfactorsaffectingallsecuritiestraded inthemarket.ThePlansaresubjecttopriceriskthroughtheirpublicequityinvestmentsand,inadditiontogeographic,industrialsectorandentityspecificanalyses,usesstrategiessuchasdiversificationandtheuse ofderivativeinstrumentstomitigatetheoverallimpactofpricerisk.Aftergivingeffecttoderivativecontracts, atenpercentincrease/decreaseinthevalueofallpublicequity,withallothervariablesheldconstant,wouldresultinanapproximateincrease/decreaseinthevalueofpublic-marketexposureandanunrealizedgain/loss of$458million(2012:$378million).

b) Credit risk

Creditriskisthepotentialoflossshouldacounterpartyfailtomeetitscontractualobligations,orareduction inthevalueofassetsduetodiminishedcreditqualityofthecounterparty,guarantororthecollateral supportingthecreditexposure.ThePlansareexposedtocreditriskthroughinvestmentinsecurities, securitieslending,balancesreceivablefromsponsorsandcounterpartiestoderivativetransactions.

InvestmentrestrictionswithinthePlanshavebeensettolimitthecreditexposuretosecurityissuers. Short-terminvestmentsrequirearatingof“R-1”orequivalent.Bondsordebenturesrequireminimumratings of“CCC”orequivalentintheexternallymanagedportfolioand“BBB”fortheportfoliomanagedinternally. Creditexposuretoanysinglecounterpartyislimitedtomaximumamountsasspecifiedintheinvestment policiesandguidelines.Thecounterpartycreditriskassociatedwithforeign-currencyforwardsismanaged bylimitingthenumberofcounterpartiestoone;havingacreditratingof“AA”.Thefairvalueofthefixed-incomeinvestmentsandover-the-counterderivativesexposedtocreditrisk,bycreditrating,isasfollows:

Thetermtomaturityclassificationsofinterest-bearinginvestments,baseduponthecontractual maturityofthesecuritiesareasfollows:

2013 2012

Investmentgrade(AAAtoBBB-) 94% 95%

Speculativegrade(BB+orlower) 3% 3%

Unrated 3% 2%


TermtoMaturity

Average Average Within 1to5 Over Effective Effective 1Year Years 5Years Total Yield Total Yield

Money-marketsecurities $293,911 $ – $ – $ 293,911 1.02% $ 135,475 1.07%

Bondsanddebentures 49,797 487,280 1,624,476 2,161,553 3.64% 2,228,620 3.72%

2013 ANNUAL REPORT 55ALBERTA TEACHERS’ RETIREMENT FUND NOTESTOTHEFINANCIALSTATEMENTSc

c) Liquidity risk

LiquidityriskistheriskofthePlansbeingunabletogeneratesufficientcashinatimelyandcost- effectivemannertomeetcommitmentsandexpensesastheybecomedue.Liquidityrequirements ofthePlansaremetthroughincomegeneratedfrominvestments,employeeandemployercontributions, andbyholdingpubliclytradedliquidassetstradedinactivemarketsthatareeasilysoldandconverted tocash.Theseinvestmentsincludemoney-marketsecurities,bondsandpublicly-tradedequities.

Allderivativeandnon-derivativeinvestmentrelatedliabilitiesareduewithinoneyear.

NOTE 11CAPITAL

CapitalisthenetassetsofthePlans.InaccordancewiththeTeachers’PensionPlansAct,theactuarialsurplusordeficitisdeterminedbyanactuarialfundingvaluationperformed,ataminimum,everythreeyears.TheobjectiveistoensurethatthePlansarefullyfundedoverthelongtermthroughthemanagementofinvestmentsandcontributionrates.InvestmentsarebasedonanassetmixthatisdesignedtoenablethePlanstomeettheirlong-termfundingrequirementwithinanacceptablelevelofrisk,consistentwiththePlans’investmentandfundingpolicies,whichareapprovedbytheBoard.

ThePlans’deficiencyisdeterminedonthefair-valuebasisforaccountingpurposes.Howeverforfundingvaluationpurposes,assetvaluesareadjustedforfluctuationsinfairvaluestomoderatetheeffectofmarketvolatilityonthePlans’fundedstatus.

InaccordancewiththeTeachers’ Pension Plans Act,theactuarialdeficienciesasdeterminedbyactuarialfundingvaluationsareexpectedtobefundedbyAugust31,2027.

NOTE 12COMMITMENTS

TheBoardhascommittedtofundcertaininvestmentsoverthenextseveralyearsinaccordancewiththe termsandconditionsagreedto.AsatAugust31,2013,thesumofthesecommitmentsequalled$865million (2012-$726million).

NOTE 13INVESTMENT RETURNS AND RELATED BENCHMARK RETURNS

InvestmentreturnsandrelatedbenchmarkreturnsforthePlansfortheyearsendedAugust31areasfollows:

2013 2012

InvestmentReturn 14.0% 7.8%

BenchmarkReturn 11.5% 6.3%

56 2013 ANNUAL REPORT ALbERTA TEAchERs’ RETiREmENT FUNd11-YEARFINANCIALANDSTATISTICALREVIEW

11-YeAr finAnCiAl AnD stAtistiCAl reVieW(UNAUDITED)

Note:Since2008amountsrelatetotransactionsofthePost-August1992PeriodoftheTPP*andofthePrivateSchoolTPP*.

*Teachers'PensionPlan

FinancialPositionasatAugust31 ($Millions) 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

InvestmentsEquities Canadian 1,384.9 1,239.2 1,200.9 1,156.8 1,016.2 1,248.5 1,246.2 1,035.6 955.6 795.1 707.8 Global 3,241.8 2,582.6 2,344.4 2,142.0 1,857.5 2,031.1 2,283.1 2,051.0 1,450.3 1,219.8 1,084.3 Private 591.7 358.6 277.5 208.8 127.7 120.6 53.9 22.6 6.8 3.0 2.7Infrastructure 278.2 186.9 123.9 – – – – – – – –RealEstate 446.0 334.9 60.6 – – – – – – – –AccruedIncomeandOther 2.0 24.2 7.8 – – – – – – – –FixedIncome 2,635.2 2,464.4 2,328.2 1,995.2 756.2 777.7 714.2 624.2 913.4 839.0 663.7NetInvestments 8,579.8 7,190.8 6,343.3 5,502.8 3,757.6 4,177.9 4,297.4 3,733.4 3,326.1 2,856.9 2,458.5LoanReceivablefromtheProvince – – – – 1,184.7 944.1 – – – – –ContributionsReceivable 19.4 17.2 12.0 11.3 11.2 9.0 13.7 12.5 11.0 10.2 7.3OtherAssetsandLiabilities (18.2) (14.0) (20.2) 22.9 3.0 6.4 (3.1) 4.5 10.1 (6.4) 2.8NetAssetsAvailableforBenefits 8,581.0 7,194.0 6,335.1 5,537.0 4,956.5 5,137.4 4,308.0 3,750.4 3,347.2 2,860.7 2,468.6ActuarialValueofAccrued PensionObligations 9,406.3 9,108.7 8,294.4 7,467.7 6,861.7 6,321.9 11,316.3 10,702.210,285.5 9,681.6 8,703.2Deficiency 825.3 1,914.7 1,959.3 1,930.7 1,905.2 1,184.5 7,008.3 6,951.8 6,938.3 6,820.9 6,234.6

ActivityduringyearendedAugust31BenefitandInvestmentOperations Investmentearnings 1,024.6 512.0 440.4 274.3 (443.5) (209.4) 440.3 259.0 373.2 287.9 163.0 AmountassumedbytheProvince – – – – – 784.5 – – – – – Netcontributions 650.7 596.3 577.5 499.2 433.7 402.8 600.8 581.0 518.0 481.0 436.5 Pensionbenefits (249.7) (220.9) (194.5) (173.0) (153.0) (130.0) (465.3) (425.0) (394.5) (367.5) (342.7) Administrativeexpenses (38.6) (28.4) (25.3) (20.0) (18.2) (18.5) (18.3) (11.5) (10.2) (9.2) (8.5)IncreaseinNetAssets 1,387.0 859.0 798.1 580.5 (181.0) 829.4 557.5 403.5 486.5 392.2 248.3Increase(Decrease)inAccrued PensionObligations 297.6 814.4 826.7 606.0 539.7 (4,994.3) 614.0 417.0 603.9 978.5 514.1Increase(Decrease)inDeficiency (1,089.4) (44.6) 28.5 25.5 720.7 (5,823.7) 56.5 13.5 117.4 586.3 265.8

Post1992TPP*-yearendedAugust31 Performance 14.0% 7.8% 7.8% 5.6% -8.5% -2.8% 11.3% 7.5% 12.4% 11.4% 6.8% Benchmark 11.5% 6.3% 7.3% 5.4% -6.8% -2.7% 10.9% 8.1% 12.2% 11.2% 9.7% FundingObjective 6.7% 7.1% 7.1% 7.0% 7.6% 7.6% 7.6% 7.5% 7.5% 7.7% 7.7%

FundingShortfall Pre1992TPP* – – – – – – 6,592.0 6,367.0 6,266.1 6,030.0 5,562.1 Post1992TPP* 2,859.0 2,880.0 1,751.0 1,787.0 1,766.0 1,048.0 742.0 742.0 700.4 662.0 434.1 PrivateSchoolTPP* 9.1 8.4 5.6 6.0 5.0 (0.4) 0.1 0.1 (0.2) (0.4) (0.7) 2,868.1 2,888.4 1,756.6 1,793.0 1,771.0 1,047.6 7,334.1 7,109.1 6,966.3 6,691.6 5,995.5PlanMembers Active 38,346 38,336 38,242 38,578 38,422 37,627 37,577 36,640 36,266 34,649 35,278 Inactive 12,295 12,404 12,384 12,119 11,769 11,713 10,852 11,260 10,940 11,937 11,654 RetiredMembers 24,667 23,892 22,989 22,302 21,563 20,796 19,837 18,718 17,718 16,888 16,163

NumberofNewRetiredMembers 1,131 1,234 986 1,056 1,060 1,257 1,419 1,263 1,103 993 968

MemberServiceCosts(permember) $ 87 $ 81 $ 69 $ 69 $ 68 $ 69 $ 68 $ 72 $ 65 $ 65 $ 62Benchmark $ 148 $ 145 $ 155 $ 148 $ 138 $ 132 $ 120 $ 116 $ 117 $ 110 $ 108

InvestmentCosts(per$100ofassets) $ 0.39 $ 0.32 $ 0.33 $0.29 $0.28 $0.38 $0.30 $0.22 $0.20 $0.20 $0.17

AdministrativeExpenses Memberservices 14.1% 17.9% 16.7% 20.9% 23.4% 21.7% 21.4% 34.7% 34.3% 36.3% 37.6% Investments 85.9% 82.1% 83.3% 78.9% 76.6% 78.3% 78.6% 64.3% 65.7% 63.7% 62.4%

2013 ANNUAL REPORT 57CORPORATEDIRECTORY

DirectoryCorporate

From left to right:EmilianGroch,DerekBrodersen,AlbertCopeland,PeggyCorner,MargotHrynyk,MylesNorton.

BOARDGregMeeker,ChairLowellK.Epp,ViceChairHarryBuddleKarenA.ElgertSandraJohnstonGeneWilliams

CORPORATEEmilianV.GrochChiefExecutiveOfficer

DerekM.BrodersenChiefInvestmentOfficer

AlbertCopelandDirector,Informationand TechnologyServices

FINANCE AND PLANNiNGSandraJohnston,ChairHarryBuddle,ViceChair

HUMAN RESOURCES AND COMPENSATIONGeneWilliams,ChairKarenA.Elgert,ViceChairHarryBuddleLowellK.EppSandraJohnstonGregMeeker

PeggyCornerDirector,BenefitInformationServices

MargotM.HrynykDirector,HumanResources andCommunication

MylesNortonDirector,Financial Services

Wewelcomeanycommentsorsuggestionsforthisannualreport,oranyotheraspectsofourcommunicationsprogram.

INVESTMENTLowellK.Epp,ChairHarryBuddle,ViceChairKarenA.ElgertCatherineA.ConnollyRichardFortierRobertMaroneyJaiParihar

AUDiTLowellK.Epp,ChairGregMeeker,ViceChairSandraJohnston

BOARD & CORPORATE COMMITTEES OF THE BOARD

600 BARNETT HOUSE

11010 142 ST NW

EDMONTON, ALBERTA, T5N 2R1

Telephone:780-451-4166

TollFree:1-800-661-9582

Email:[email protected]

Web:www.atrf.com

Documents

Pension Connection - ATRF · Pension Connection your ... Greg Meeker Board Chair The Board is committed to good governance and believes that ongoing improvement in the corporate governance