Global expansion

Check against delivery.

Today, I would like to discuss two strong convictions.

Two convictions that go hand in hand.

First: to serve Québec and our clients, La Caisse de dépôt must become a truly global organization.

Second: to energize its economy, Québec must adopt a global perspective in pursuit of opportunities for growth.

Two separate goals, one challenge.

A difficult challenge and a demanding one, but one that is crucial: that of taking on the world.

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Some may think that with all the changes La Caisse has made over the past five years, everything is fine, that we don't need to give ourselves this challenge.

Well, I beg to differ!

Yes, we have built a solid foundation.

Yes, we have made more investments in all regions of Québec than ever before.

Yes, we have a more agile organization, with exceptional skills and expertise.

The results of the last few years speak for themselves.

We can and should be proud.

But we must not stop there.

We must use this foundation to do even better, to go even further, to reach another level, by becoming a truly global organization.

And the same applies to Québec's economy, which must resolutely pursue the opportunities for growth provided by the global economy.

It is our responsibility to become a global organization positioned to go out and find returns where they are and to serve as a bridge to the world for Québec's economy.

This will be one of the cornerstones of everything we do over the next five years.

WHY A GLOBAL ORGANIZATION?

It is our responsibility to become a global organization positioned to go out and find returns where they are and to serve as a bridge to the world for Québec's economy.

Why should La Caisse adopt a global view?

Because the world presents us with exceptional opportunities and we must be able to seize them.

Examples:

In India:

• There is a desperate need for infrastructure. This country needs 184 new airports. It needs roads and power grids. In all, investments of $2 trillion should be made over the next 7-8 years.
• Also, India has many quality companies, local champions which are beginning to conquer the world.

In Mexico, the government has launched a series of reforms in transport, energy, telecommunications – many investment opportunities to be explored.

A huge potential therefore, but these countries, and emerging markets in general, will have to make major structural changes. And that will be difficult.

Certain countries will be able to rise to the challenge, others won’t.

We need to be highly selective and build an organization capable of making good choices in a fast-changing environment.

Of course, the world is not limited to emerging market economies.

We sit next to the largest economy in the world, one of the most innovative and productive.

I am speaking about the United States, a country full of potential:

• the vitality of Silicon Valley
• electricity prices that are now very low
• signs of a recovery in manufacturing
• massive investments required to modernize its infrastructure

And then there's Australia, a gateway to Asia.

Among the developed countries, Australia is one of the countries that has experienced the strongest population growth, and the strongest growth in terms of private investments.

Here too are opportunities to be seized, in businesses, railways and ports.

So why go global? To seize opportunities.

But going global doesn't mean being everywhere in the world, in all countries.

Make no mistake: it's not the overall level of global growth that will enable us to achieve the returns we desire.

We need to find the most appropriate locations and projects, the ones that are the most attractive for La Caisse and best aligned with our objectives.

And to get our hands on these opportunities, the competition can only be summarized in one word: fierce.

In the global arena, there are a lot of investors.

And these are competent people, who have means commensurate with their ambitions.

Citing just a few examples:

• in Norway, Norges Bank has $930 billion in assets
• in the Netherlands, ABP manages $450 billion
• sovereign wealth funds like that of Abu Dhabi: $840 billion
• and in the case of Singapore: $350 billion.

And that is not counting all the private funds seeking to invest trillions of dollars.

In the past, the major investors would write a big cheque and invest for the long term, and that would be enough to give them a comparative advantage.

Clearly, this strategy doesn’t cut it anymore.

We need to shift from "big money to smart money," from power to intelligence, to in-depth knowledge.

As an organization, we also need to be agile, because no one can foresee, with certainty, what will happen 5, 10, or 20 years down the road.

To raise our game globally, we have a four-part plan: 1) strengthen our expertise, our teams; 2) intensify our presence on the ground in selected markets; 3) identify the right partners; 4) invest strategically.

It would be arrogant and, as Yogi Berra said: "It's tough to make predictions, especially about the future."

We must be able to adapt: be agile, flexible and smart.

We must have a deep understanding of the global economy and its major trends, along with a deep knowledge of regional realities.

In this environment, global knowledge is key.

HOW DO WE DO THIS?

What does it mean to build a world-class organization?

First of all, we must always apply the principles guiding our investment strategy:

• Focus on high-quality assets, staying far away from stock market indexes
• Select assets that are firmly rooted in the real economy, rather than those derived from financial engineering
• Target stable returns over the long term.

And above all, always have an in-depth understanding before investing.

These principles will continue to guide us.

To raise our game globally, we have a four-part plan:

1. Strengthen our expertise, our teams
2. Intensify our presence on the ground in selected markets
3. Identify the right partners
4. Invest strategically

1. Strengthen our expertise

Over the past five years, we have invested here in Montréal by strengthening our operational, economic and analytical expertise.

And now we are going to strengthen the capacities of our teams to better understand the world, countries, companies, various sectors and good partners.

By having the right people in the right places, with the right areas of expertise.

We have already begun, by recruiting Andreas Beroutsos and Rashad Kaldany, who joined La Caisse very recently.

Andreas leads our Private Equity and Infrastructure team for investment activities outside Québec.

He has spent the past 25 years managing global private equity operations, enabling him to develop a worldwide network of contacts – at the most senior levels and of the highest quality.

Rashad, who oversees the Growth Markets team, also managed global private equity operations, both in the public and private sectors, during his 20-year career in investing at the World Bank.

In addition to their exceptional expertise and their broad knowledge of global markets, La Caisse now benefits from their networks.

And it's not just them, but also the teams they are now building.

2. Intensify our presence in selected markets

Second point: intensify our presence on the ground.

If there is a lesson we have learned from investing in Québec, it's that in-depth knowledge of a given environment constitutes a definite advantage when it comes time to invest.

We are establishing our global presence based on this principle, which is critical to:

• obtain direct information
• acquire a clear awareness of the local reality in the markets in which we intend to invest
• understand the business culture
• get directly involved in the deal flow and business discussions.

Also, a fundamental point: when organizations are seeking a business partner, we want them to think of La Caisse.

We want to be among the first to be called when someone has a good business proposition.

If there is a lesson we have learned from investing in Québec, it's that in-depth knowledge of a given environment constitutes a definite advantage when it comes time to invest.

For that to happen, we must be on the ground, where the action is.

We will not be everywhere, but we will be at the centre of the major crossroads of the global economy.

For example, south of the border.

We already have an office in New York, and we are making it even stronger by recruiting people who will broaden our expertise in finance, infrastructure and private equity.

We are opening a satellite office in Washington in order to be connected to a critical mass of expertise and relationships centered around the World Bank, the IMF and the Inter-American Development Bank.

Washington is a crossroads of the the global economy as well as Latin-American business networks.

Still within the NAFTA zone and to serve as a bridgehead to Latin America, we will open an office in Mexico City.

In Asia, we already have an office in Beijing.

To serve as its hub in Asia, La Caisse will open a regional office in Singapore.

Later we plan to open branches in Mumbai, India and Sydney, Australia.

There are many good reasons why we need a foothold on the ground. There is one reason that is particularly important to me – that our people assigned to these positions can become immersed in the business culture of these regions and develop networks of contacts.

3. Establish a network of partners

Through our people in Montréal, our presence on the ground, our expertise and networks, we will be positioned to identify the right partners.

For us, a good partner is an investor or a company whose goal is to build long-term value.

Through a good partner we gain geographic, sectoral or operational complementarity.

This is the case, for example, with the stake we acquired in the Port of Brisbane, in Australia.

We are partners with Australian institutional investors, who know their own environment best.

When a potential partner eventually needs an investor, we want them to immediately think of La Caisse as a partner of choice.

Our goal is to know this partner.

We want to know the environment, and if we decide that we can build value, we will seize the opportunity.

We will have this capacity.

4. Invest strategically

The first three parts of our plan give us the global view and a platform on which to operate in the world.

But how will we use this platform?

We need to be able to distinguish between fads and the major trends shaping the global economy.

Distinguish between investments that are opportunistic and those that are strategic.

Examples:

• Each year, millions of people in the world join the middle class and expect better-quality food. As a result, we are looking at the agri-food sector.
• Another example: in North America and in many other countries, the production and distribution of energy are undergoing major changes.
• Second, economic and population growth creates a need for shopping centres, office buildings, housing – the expertise of our subsidiary, Ivanhoé Cambridge.
• And as I mentioned earlier, there are huge needs to renovate, build and finance infrastructure.

We are working to identify the major trends in the global economy in order to invest strategically, for the long term.

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Our objective with this plan is simple: have a global vision firmly planted in the bedrock of our expertise, our networks, our reputation and our partners. Strengthened by a deep understanding of promising areas that reflect major global trends.

With this plan, we will improve our game, step by step, for the long term.

In order to become a world-class organization, positioned to take on the world.

AND WHERE DOES QUÉBEC FIT INTO THE PLAN?

Does becoming a world-class organization mean neglecting Québec?

No! Quite the contrary!

They go hand in hand, because in our opinion, the most critical challenge is precisely to globalize Québec's economy.

We have big challenges to overcome. We are all acutely aware of that.

First of all, we should make no mistake about the size and depth of Québec’s economy; it represents 0.3% of the global economy.

Our economy is less and less export-driven.

Since 2000, our international exports have declined 1% every year. They have dropped from 42% of GDP to 27%.

Since 2007, jobs have been created in construction, health care and education.

And what about in other sectors of our economy? No net job creation.

Does becoming a world-class organization mean neglecting Québec? No! Quite the contrary! They go hand in hand...

Investments in machinery and equipment have declined an average of 1.3% per year in Québec.

In the United States, the opposite is happening: growth of close to 1% per year.

Productivity?

Productivity in the United States and Canada has grown at an annual rate of about three times that of Québec.

To top it all off, we're entering a period of demographic deficit.

There will be more people retiring than entering the workforce.

All these figures point to the same conclusion: we can and must do better.

Invest in infrastructure, focus on education, keep the doors open to immigration. All of this is necessary.

But if we want to turn our economic situation around, we must participate much more intensively in global growth.

We need to export more, export better, go out and seek wealth and growth where they are.

We must tap into the potential of companies capable of positioning themselves in world markets.

Just like La Caisse, we must raise our level of play and be ready to take on the world.

It is a difficult and demanding ambition, but it is also a golden opportunity to whip the economy into shape.

How can La Caisse contribute?

Obviously, La Caisse will continue to invest in Québec with a global perspective.

We are going to do three things:

• identify and invest in Québec companies capable of positioning themselves in world markets
• put our global network of relationships at the service of exporters
• continue to foster and strengthen a global, outward-looking entrepreneurial culture.

We partner with hundreds of Québec companies, including more than 400 SMEs.

Many are capable of exporting, exporting more and exporting better, to more promising markets.

Capable of exporting, but also capable of expanding by breaking into new markets.

We will continue to seek out companies of all sizes, promising companies, and focus on those with the potential to go after foreign markets.

We will invest in these companies and build alongside them, for the long term.

Second, we will use our networks and global expertise to the benefit of our Québec partners.

To accompany them, to establish connections with foreign companies, with our foreign partners.

And third, La Caisse will intensify its efforts to strengthen the entrepreneurial culture in Québec.

Entrepreneurs have ambition, and it takes ambition to conquer the world.

Doing business globally must become a reflex in Québec, a contagious reflex.

An entrepreneur who decides to export on the global market is taking on global competitors.

This naturally pushes an entrepreneur to innovate, to adopt best practices, to train the best workers, to equip himself with the most efficient equipment.

Whether they are small, medium or large, we are going to facilitate the expansion plans of promising Québec companies.

Doing business globally must become a reflex in Québec, a contagious reflex.

As a partner, we will accompany them wherever growth is, we will help build strong companies, capable of winning in global markets. All this, while generating solid returns for our clients.

In this way, we will enable Québec's economy to take its place in the world.

LA CAISSE GOES GLOBAL

In the 1960s, you needed a lot of ambition to imagine that La Caisse de dépôt would become what it is today.

Jean Lesage and Jacques Parizeau, the architects of La Caisse, had this great ambition to create a powerful financial institution, capable of meeting the needs of its clients and contributing to Québec's economic development.

Next year, we will be celebrating our 50th anniversary.

The best way to honour this original ambition, an exceptional ambition, is to raise our level of ambition for La Caisse and Québec today.

The time has come to realize our full potential.

To become a global investor.