Board of Governors, May 3, 2001 - APPENDIX III, Annex 3

Report of the Investment Committee

For Information

This report outlines the performance of the investment portfolio and the recent activities of the Investment Committee.

Performance

The portfolio returns for the past four years were as follows:

Asset Class	Annual Dec. 31 2000	Annual Dec. 31 1999	Annual Dec. 31 1998	Annual Dec. 31 1997	Annualized for Four Years Ending Dec.31, 2000
Bonds	10.5%	- 1.5%	9.7%	9.7%	7.0%
Equities Canadian US Non North American	19.4 - 1.9 - 1.8	18.0 15.1 25.8	- 2.0 37.9 13.4	14.7 39.2 7.0	12.2 21.3 10.7
Total return	7.8%	10.2%	12.4%	16.7%	11.7%
Return of Median fund	9.2%	12.4%	7.9%	15.3%	10.9%

As indicated above, our annual returns were above median in 1998 and 1997 and below median in 1999 and 2000, in relation to the Frank Russell universe of approximately 50 Canadian portfolios. Over the four year period ending December 31, 2000, our annualized return of 11.7% was above the median return of 10.9% for the Frank Russell universe.

Over the five year period ending December 31, 2000, the annualized performance of the portfolio was 13.1% and this was above the Frank Russell universe median return of 12.8%.

For additional information, please refer to the attached pages which show amounts held by each investment manager at December 31, 2000, the annual and annualized returns by manager over the five years ending December 31, 2000 and the returns in relation to other Canadian balanced portfolios in the Frank Russell universe.

Returns in relation to the objective of a 5% real rate of return

One of the Investment Committee's objectives is to earn a 5% real rate of return over the long term. (i.e., to earn 5% over the rate of inflation, as measured by the Consumer Price Index). Inflation has averaged 1.9% per year for the past five years.

For the five years ending December 31, 2000 the annualized real rate of return for the portfolio was 11.2%, which consisted of a nominal (actual) annualized return of 13.1% less 1.9% for inflation. For the four years ending December 31, 2000, the annualized real rate of return was 9.8%, consisting of a nominal return of 11.7% less inflation of 1.9%. These returns exceed the Investment Committee's performance objective of a real rate of return of 5%.

Value added by Active Management

Another of the Investment Committee's objectives is to earn the return produced by the asset mix policy based on the returns of the market indices plus a premium to reflect the additional fees related to active management. In order to achieve this objective, investment managers with active investment mandates need to outperform their benchmark indices. For example, Canadian equity managers need to outperform the TSE 300 index over time and Canadian bond managers need to outperform the SCM universe index over time.

Over the five years ending December 31, 2000, the actual annualized return for the portfolio was 13.1% and the return generated by the market indices for the portfolio was also13.1% (the policy return). Over this period, the Canadian bond managers and the non-North American managers exceeded their respective benchmarks, but the Canadian equity managers did not.

For some markets, such as US equities, the Committee uses index managers. Over the past five years this has resulted in second quartile performance for the US equity portion of our portfolio, since the majority of active US managers have been unable to outperform the return of the Standard and Poor 500 stock index.

Book and Market Value of the Portfolio

As at December 31, 2000, the operating and endowment portfolio had a book value of $193,492,000 and a market value of $217,716,000, as follows:

			Policy
	Book Value ($000's)	Market Value ($000's)	Actual Asset Mix	Asset Mix
Bonds	$91,805	$92,902	42.7%	40.0%
Canadian equities	34,482	41,168	18.9	20.0
US equities	41,454	50,689	23.3	25.0
Non-North American equities	25,751	32,957	15.1	15.0
Total	$193,492	$217,716	100.0%	100.0%

At December 31, 2000 the portfolio consisted of the following components:

Portion related to Endowed funds $101,602,000 = 46.7%

Portion related to Operating and non-endowed funds116,114,000 = 53.3%

Total market value of portfolio $217,716,000 = 100.0%

Canadian Equity Review

The Investment Committee continues to review alternative structures for the Canadian equity portion of the portfolio. Investment returns for the Canadian equities exceeded the return on the TSE 300 index by 12% in 2000, representing above median performance. The Committee would like the Canadian equity portion of the portfolio to track the return of the TSE 300 index more closely from quarter to quarter and outperform the index over time. The Committee expects to complete its review of investment strategy for Canadian equities at the next meeting on June 1, 2001 and will implement any changes in structure at that time.

Foundation Western

The proposal to have two members who serve on Foundation Western's Investment Committee and on UWO's Investment Committee is under review by Foundation Western.