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Pension Fund Investment Pension Fund Investment ReportReport

Accountable To Accountable To YouYou

4th Annual General 4th Annual General MeetingMeeting

October 15, 2005October 15, 2005

22

OverviewOverview

Structure of investmentsStructure of investments

Examples of investmentsExamples of investments

Performance results and current Performance results and current outlookoutlook

Corporate governanceCorporate governance

SummarySummary

33

STRUCTURE OF INVESTMENTSSTRUCTURE OF INVESTMENTS

44

Governance of the PlanGovernance of the Plan

Trustees determine plan’s investment Trustees determine plan’s investment policies and strategic directionpolicies and strategic direction

Day-to-day management is Day-to-day management is responsibility of investment responsibility of investment professionals at bcIMCprofessionals at bcIMC

Fund is managed for long-term, with Fund is managed for long-term, with the goal of securing pension benefits the goal of securing pension benefits for current and future beneficiariesfor current and future beneficiaries

55

Structure of InvestmentsStructure of Investments

At $18.2 billion, Municipal Pension Plan At $18.2 billion, Municipal Pension Plan is one of the largest pension plans in is one of the largest pension plans in CanadaCanada

Highly diversified investment portfolio—Highly diversified investment portfolio—follows the old adage of “not putting all follows the old adage of “not putting all your eggs in one basket”your eggs in one basket”

The plan has investments in 36 The plan has investments in 36 countries, in thousands of securities and countries, in thousands of securities and other income producing assets (e.g., other income producing assets (e.g., real estate)real estate)

66

Growth of the Municipal Pension Growth of the Municipal Pension PlanPlanBasic and Inflation Adjustment AccountsBasic and Inflation Adjustment Accounts

Municipal Pension Plan Municipal Pension Plan 1990 to 20051990 to 2005

00

22

44

66

88

1010

1212

1414

1616

1818

2020

19901990 19931993 19971997 20002000 20042004

Billion

sB

illion

s

Basic AccountBasic Account Basic + InflationBasic + Inflation

77

Market Value of Basic, IAA & Market Value of Basic, IAA & RAARAAas at December 2004 as at December 2004 ($ Billions)($ Billions)Total Portfolio = $18.2 Total Portfolio = $18.2

billionbillionReal Estate,Real Estate,

Mortgages andMortgages and

Foreign Foreign CurrencyCurrency

$2.5 (14%)$2.5 (14%)

PrivatePrivate

PlacementsPlacements

$0.5 (3%)$0.5 (3%)

US EquitiesUS Equities

$2.9 (16%)$2.9 (16%)CDN EquitiesCDN Equities

$3.7 (20%)$3.7 (20%)

BondsBonds

$5.4 (30%)$5.4 (30%)International International

Equities Equities

$3.0 (16%)$3.0 (16%)

Short-termShort-term

$0.2 (1%)$0.2 (1%)

88

EXAMPLES OF INVESTMENTSEXAMPLES OF INVESTMENTS

99

Real Estate InvestmentsReal Estate Investments

Yaletown 939Yaletown 939VancouverVancouver

Western Canadian Western Canadian PlacePlace

CalgaryCalgary

1010

Real Estate InvestmentsReal Estate Investments

Marché CentralMarché Central

MontrealMontreal

1111

Real Estate InvestmentsReal Estate Investments

Menkes Office & Menkes Office & IndustrialIndustrialTorontoToronto

Livingston PlaceLivingston Place Calgary Calgary

1212

Private Placements Private Placements InvestmentsInvestments

Owns and operates six Owns and operates six state-of-the-art waste-state-of-the-art waste-to-energy facilities to-energy facilities located major located major northeastern U.S. cities northeastern U.S. cities

Household garbage is Household garbage is used to generate used to generate electricityelectricity

American Ref-Fuel Company

1313

Private Placements Private Placements InvestmentsInvestments

Is one of North Is one of North America’s largest America’s largest makers of wire makers of wire products products

With production With production facilities located in facilities located in Canada and U.S., Canada and U.S., company company headquarters are in headquarters are in Richmond Richmond

Tree Island Industries

1414

Public Equity InvestmentsPublic Equity Investments

Developing an Developing an integrated oil sands integrated oil sands project in Long Lake, project in Long Lake, ABAB

Using its OrCrudeUsing its OrCrudetm tm

process, OPTI is able process, OPTI is able to extract crude oil to extract crude oil using steam injection using steam injection

OPTI Canada Inc.

1515

Public Equity InvestmentsPublic Equity Investments

13 billion barrels of 13 billion barrels of crude oil reservescrude oil reserves

Strategically located Strategically located in Fort McMurray, ABin Fort McMurray, AB

Suncor Energy Inc.

1616

PERFORMANCE PERFORMANCE RESULTS & OUTLOOKRESULTS & OUTLOOK

1717

Investment PerformanceInvestment PerformanceBasic Account as at December 31, 2004Basic Account as at December 31, 2004

Reason for strong Reason for strong returns in 2004:returns in 2004: High oil prices and High oil prices and

strong demand for strong demand for commodities led to commodities led to good year from good year from Canadian stocksCanadian stocks

Hedging has mitigated Hedging has mitigated the impact of falling the impact of falling US$ US$

Lower interest rates Lower interest rates provided good returns provided good returns on bonds on bonds

4.2%

10.0%

4.6%

10.1%

0%

2%

4%

6%

8%

10%

12%

1 Year 5 Year

Fund Return Total Fund Benchmark

1818

Value AddedValue Added

Investment performance is assessed Investment performance is assessed relative to market conditionsrelative to market conditions

Investment managers can add value Investment managers can add value through managing the asset mix, through managing the asset mix, security selection, and risks (e.g., security selection, and risks (e.g., hedging against currency fluctuations)hedging against currency fluctuations)

Over past five years, bcIMC and its Over past five years, bcIMC and its managers have added $235 million in managers have added $235 million in additional return relative to market additional return relative to market benchmark (after fees)benchmark (after fees)

1919

Investment CostsInvestment Costs

Industry surveys find that bcIMC is a Industry surveys find that bcIMC is a low-cost service providerlow-cost service provider

Investment costs in 2004 were about Investment costs in 2004 were about 15 cents for every $100 invested. 15 cents for every $100 invested. Retail mutual funds often charge Retail mutual funds often charge between $2 to $3 for every $100 between $2 to $3 for every $100 invested invested

2020

Review of 2005 To DateReview of 2005 To Date

Canadian equity markets continue to be one of Canadian equity markets continue to be one of the best performers as global demand for the best performers as global demand for commodities persistscommodities persists

Economic impact of Hurricane Katrina will be Economic impact of Hurricane Katrina will be devastating for the region but minimal relative devastating for the region but minimal relative to US economyto US economy

Bank of Canada recently raised interest rates Bank of Canada recently raised interest rates for the first time since October 2004for the first time since October 2004

Expectation is for modest returns in 2005 and Expectation is for modest returns in 2005 and on a go-forward basison a go-forward basis

2121

Investment RisksInvestment Risks

US Current Account deficitUS Current Account deficit

Use of leverage in financial marketsUse of leverage in financial markets

Higher interest rates and debt levels Higher interest rates and debt levels

2222

CORPORATE GOVERNANCECORPORATE GOVERNANCE

2323

Corporate Governance & Proxy Corporate Governance & Proxy VotingVoting

Exercising shareholder rights (e.g., voting Exercising shareholder rights (e.g., voting proxies) is an important duty as a fiduciary proxies) is an important duty as a fiduciary and responsible investorand responsible investor

Trustees delegate voting rights to bcIMC and Trustees delegate voting rights to bcIMC and have instructed bcIMC to act in the best have instructed bcIMC to act in the best financial interests of the Planfinancial interests of the Plan

bcIMC votes in accordance with our bcIMC votes in accordance with our Corporate Governance and Proxy Voting Corporate Governance and Proxy Voting Guidelines. Guidelines. These guidelines were developed These guidelines were developed based on input frombased on input from MPP and other clientsMPP and other clients

2424

Corporate Governance & Proxy Corporate Governance & Proxy VotingVoting

The goal of the proxy voting process is to influence The goal of the proxy voting process is to influence corporate behaviour and to encourage changes in corporate behaviour and to encourage changes in practices that do not meet expected standards practices that do not meet expected standards

bcIMC reports quarterly to the Trustees on bcIMC reports quarterly to the Trustees on corporate governance and proxy voting issues. In corporate governance and proxy voting issues. In addition, a summary of our voting record is addition, a summary of our voting record is prepared annually.prepared annually.

bcIMC voted more than 4,200 issues in 2004bcIMC voted more than 4,200 issues in 2004

bcIMC’s proxy voting results are posted on the bcIMC’s proxy voting results are posted on the website at website at www.bcimc.comwww.bcimc.com

2525

Advocacy for Social Advocacy for Social ResponsibilityResponsibility In addition to voting proxies, bcIMC may In addition to voting proxies, bcIMC may

approach corporate management directly on approach corporate management directly on matters of social responsibilitymatters of social responsibility

bcIMC expects companies to approach social bcIMC expects companies to approach social and environmental issues in a manner that is and environmental issues in a manner that is responsible to the communities and that responsible to the communities and that serves to maximize shareholder valueserves to maximize shareholder value

Example 1Example 1

bcIMC supports all shareholder proposals bcIMC supports all shareholder proposals asking companies to adopt International asking companies to adopt International Labour Organization (“ILO”) standardsLabour Organization (“ILO”) standards

2626

Advocacy for Social Advocacy for Social ResponsibilityResponsibility

Example 2Example 2

Until the mid-1980’s, James Hardie Industries Until the mid-1980’s, James Hardie Industries was Australia’s largest manufacturer and was Australia’s largest manufacturer and supplier of asbestos-containing building supplier of asbestos-containing building products products

bcIMC contacted company management bcIMC contacted company management advocating that employees who are victims of advocating that employees who are victims of asbestos poisoning be treated appropriately asbestos poisoning be treated appropriately and that they be fairly compensated for their and that they be fairly compensated for their work related illnesseswork related illnesses

2727

Corporate Governance & Proxy Corporate Governance & Proxy VotingVoting

Member of:Member of: Canadian Coalition of Good Governance Canadian Coalition of Good Governance

(CCGG)(CCGG) bcIMC is on CCGG’s Board bcIMC is on CCGG’s Board

International Corporate Governance International Corporate Governance NetworkNetwork

Asian Corporate Governance AssociationAsian Corporate Governance Association

2828

SummarySummary

Expectation is for more modest Expectation is for more modest returns on a go forward basisreturns on a go forward basis

The focus of Trustees and bcIMC is to The focus of Trustees and bcIMC is to grow the asset base to secure grow the asset base to secure pension benefitspension benefits