Transcript Municipal Pension Plan

Pension Fund Investment Report
Accountable To You
4th Annual General Meeting
October 15, 2005
Vancouver
Webcast
Overview
 Structure of investments
 Examples of investments
 Performance results and current outlook
 Corporate governance
 Summary
2
STRUCTURE OF INVESTMENTS
3
Governance of the Plan
 Trustees determine plan’s investment
policies and strategic direction
 Day-to-day management is responsibility of
investment professionals at bcIMC
 Fund is managed for long-term, with the
goal of securing pension benefits for
current and future beneficiaries
4
Structure of Investments
 At $18.2 billion, Municipal Pension Plan is
one of the largest pension plans in Canada
 Highly diversified investment portfolio—
follows the old adage of “not putting all your
eggs in one basket”
 The plan has investments in 36 countries, in
thousands of securities and other income
producing assets (e.g., real estate)
5
Growth of the Municipal Pension Plan
Basic and Inflation Adjustment Accounts
Municipal Pension Plan
1990 to 2005
20
18
16
Billions
14
12
10
8
6
4
2
0
1990
1993
1997
Basic Account
2000
Basic + Inflation
2004
6
Market Value of Basic, IAA & RAA
as at December 2004 ($ Billions)
Total Portfolio = $18.2 billion
Real Estate,
Mortgages and
Foreign Currency
$2.5 (14%)
Private
Placements
$0.5 (3%)
International
Equities
$3.0 (16%)
US Equities
$2.9 (16%)
Bonds
$5.4 (30%)
Short-term
$0.2 (1%)
CDN Equities
$3.7 (20%)
7
EXAMPLES OF INVESTMENTS
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Real Estate Investments
Yaletown 939
Vancouver
Western Canadian Place
Calgary
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Real Estate Investments
Marché Central
Montreal
10
Real Estate Investments
Livingston Place
Calgary
Menkes Office & Industrial
Toronto
11
Private Placements Investments
American Ref-Fuel Company
 Owns and operates six
state-of-the-art waste-toenergy facilities located
major northeastern U.S.
cities
 Household garbage is used
to generate electricity
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Private Placements Investments
Tree Island Industries
 Is one of North America’s
largest makers of wire
products
 With production facilities
located in Canada and
U.S., company
headquarters are in
Richmond
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Public Equity Investments
OPTI Canada Inc.
 Developing an integrated
oil sands project in Long
Lake, AB
 Using its OrCrudetm
process, OPTI is able to
extract crude oil using
steam injection
14
Public Equity Investments
Suncor Energy Inc.
 13 billion barrels of crude
oil reserves
 Strategically located in
Fort McMurray, AB
15
PERFORMANCE
RESULTS & OUTLOOK
16
Investment Performance
Basic Account as at December 31, 2004
12%
 Reason for strong
returns in 2004:
10.0% 10.1%
10%
8%
6%
4.6%
4.2%
4%
2%
0%
1 Year
Fund Return
 High oil prices and
strong demand for
commodities led to good
year from Canadian
stocks
 Hedging has mitigated
the impact of falling US$
 Lower interest rates
provided good returns on
bonds
5 Year
Total Fund Benchmark
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Value Added
 Investment performance is assessed relative
to market conditions
 Investment managers can add value through
managing the asset mix, security selection,
and risks (e.g., hedging against currency
fluctuations)
 Over past five years, bcIMC and its
managers have added $235 million in
additional return relative to market
benchmark (after fees)
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Investment Costs
 Industry surveys find that bcIMC is a lowcost service provider
 Investment costs in 2004 were about 15
cents for every $100 invested. Retail
mutual funds often charge between $2 to
$3 for every $100 invested
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Review of 2005 To Date
 Canadian equity markets continue to be
one of the best performers as global
demand for commodities persists
 Economic impact of Hurricane Katrina will
be devastating for the region but minimal
relative to US economy
 Bank of Canada recently raised interest
rates for the first time since October 2004
 Expectation is for modest returns in 2005
and on a go-forward basis
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Investment Risks
 US Current Account deficit
 Use of leverage in financial markets
 Higher interest rates and debt levels
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CORPORATE GOVERNANCE
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Corporate Governance & Proxy Voting
 Exercising shareholder rights (e.g., voting proxies)
is an important duty as a fiduciary and
responsible investor
 Trustees delegate voting rights to bcIMC and have
instructed bcIMC to act in the best financial
interests of the Plan
 bcIMC votes in accordance with our Corporate
Governance and Proxy Voting Guidelines. These
guidelines were developed based on input from
MPP and other clients
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Corporate Governance & Proxy Voting
 The goal of the proxy voting process is to influence
corporate behaviour and to encourage changes in
practices that do not meet expected standards
 bcIMC reports quarterly to the Trustees on corporate
governance and proxy voting issues. In addition, a
summary of our voting record is prepared annually.
 bcIMC voted more than 4,200 issues in 2004
 bcIMC’s proxy voting results are posted on the
website at www.bcimc.com
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Advocacy for Social Responsibility
 In addition to voting proxies, bcIMC may approach
corporate management directly on matters of social
responsibility
 bcIMC expects companies to approach social and
environmental issues in a manner that is responsible
to the communities and that serves to maximize
shareholder value
Example 1
 bcIMC supports all shareholder proposals asking
companies to adopt International Labour
Organization (“ILO”) standards
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Advocacy for Social Responsibility
Example 2
 Until the mid-1980’s, James Hardie Industries was
Australia’s largest manufacturer and supplier of
asbestos-containing building products
 bcIMC contacted company management advocating
that employees who are victims of asbestos
poisoning be treated appropriately and that they be
fairly compensated for their work related illnesses
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Corporate Governance & Proxy Voting
 Member of:
 Canadian Coalition of Good Governance
(CCGG)
 bcIMC is on CCGG’s Board
 International Corporate Governance Network
 Asian Corporate Governance Association
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Summary
 Expectation is for more modest returns on
a go forward basis
 The focus of Trustees and bcIMC is to grow
the asset base to secure pension benefits
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