2007 was a year of steady and meaningful progress.

In summary, it was a year in which we continued to reduce our funding shortfall, outperformed our investment benchmarks, and saw assets climb above the $30-billion mark, a new record. It was also a year in which our long-standing commitment to the use of effective technologies began to yield improved service levels, enhanced investment results and reduced investment risk.

Successes aside, 2007 was not without its challenges. While we faced a difficult investment market and continuing change in the healthcare sector, we did so with our members’ interests squarely in mind – and with positive results.

Managing the risk
In terms of the investment environment, 2007 was a difficult year. A soaring Canadian dollar, volatile equity and credit markets and low interest rates combined to create an extremely challenging investment climate.

Nevertheless, HOOPP continued to generate value-added returns – outperforming its investment benchmark for the 10th straight year. Overall, the Fund’s total return was 6.23 per cent. Although this figure is down from the double-digit returns of 2006 and 2005, it would have been significantly lower if not for prudent investment strategies that allowed us to:

• avoid turmoil related to the sub-prime mortgage market
• bypass non-bank asset-backed commercial paper in favour of less risky investments, and
• minimize currency exchange losses through the use of effective hedging strategies

To strike an appropriate balance between risk and return – one that protects the Plan’s assets and reflects future liabilities – HOOPP is moving forward with a liability-driven approach to investing. The move to liability-driven investing is not a destination, it’s a journey – one that requires the best people, policies, and systems. During 2007, HOOPP made considerable progress on that journey. Specifically, we:

• adjusted our asset mix policy, reducing our exposure to equity markets and increasing our exposure to the historically less volatile bond and real estate markets
• reduced our reliance on external investment managers, bringing the management of more funds in-house – a move that will help us reduce investment costs and risk
• continued to develop investment technology that will support and strengthen our liability-driven approach to investment

Elevating service
On the client service side, we moved significantly closer to full implementation of our new pension administration system. In fact, during 2007, we achieved functionality for all core pension transactions, which allowed us to:

• generate new, easy-to-read annual statements for members
• improve client service by speeding transaction turnaround times

The new system, which has been rolled out in phases, automates 80 per cent of HOOPP pension transactions. When fully implemented, the system will give our clients direct access to a wide range of web-based services. These online services will mark a major move toward a new service delivery model – a model that will significantly reduce the administrative work employers currently handle on behalf of HOOPP. We expect to start rolling these services out in late 2008. But as always, will ensure any new technology is rigorously tested before it is rolled out.

Embracing change
While we have continued to address funding, investment and client service issues, we have also kept one eye focused on the changes affecting the healthcare sector. During 2007, we took a series of proactive steps to protect member access to HOOPP and ensure we remain the pension plan of choice for the healthcare sector. For example, we:

• monitored the healthcare environment for trends that could impact HOOPP stakeholders
• interacted with stakeholders – via meetings, focus groups and research – to ensure that we understand their needs and the impact of any change
• worked with stakeholders to ensure pension issues are addressed (and fully understood) during any restructuring, and
• worked closely with the signatories of the HOOPP Trust Agreement to ensure that we are all moving toward a common goal – securing the pension promise

Change in the healthcare sector is not new. What is new is the extent of the change and the impact it will have on our stakeholders. At HOOPP, we’re working hard on behalf of members and participating employers to do what we can to smooth the way.

“Caring for the financial future of those who care for us” truly reflects the dedication and caring spirit of our employees. We saw that spirit several times in 2007 – through the development of a Vision Map that showed HOOPP’s long history of rising to challenges, a video for our Board that showed our team’s commitment to service, and through the incredible success of our annual United Way campaign.

Moving forward
To ensure we continue to employ the committed and caring employees we need to meet the challenges that lie ahead, HOOPP introduced both a talent management framework and a succession planning strategy during 2007.

Securing the pension promise in an ever-changing environment is no easy task. And, no doubt, the road ahead will have some bumps and interesting twists and turns. But with a dedicated team in place, a strong financial base to work from, and a carefully crafted strategy to reach our destination, we are ready – together – to climb the ladder to the next level.

John Crocker
President & CEO