Inflation-Sensitive Investments
	Infrastructure I Real-return Bonds I Real Estate/Cadillac Fairview I Commodities
	The fund's inflation-sensitive assets provide stable returns tied to inflation and act as a hedge against the cost of paying inflation-protected pensions to teachers.
	Infrastructure Valued at $8.8 billion at Dec. 31, 2007, our global infrastructure portfolio is focused on the long-term retention of assets that have a long economic life and offer low-risk, reliable returns linked to inflation to pay inflation-indexed pensions for decades. We began investing in infrastructure assets in 2001. Our global portfolio provides stable, long-term returns to help us pay inflation-protected pensions to teachers. Generally, we are a direct investor. We are capable of financing large investment deals involving senior and subordinated debt, public and private equity. We often invest with financial partners that have significant Our infrastructure portfolio is designed to generate stable, long-term returns to help us pay inflation-protected pensions to members. (Chart as at Dec. 31, 2007) infrastructure experience. We look for businesses and opportunities in regulated industries that will provide stable returns with low risk. We find good investment opportunities in jurisdictions that have a fair and transparent regulatory framework, creating a strong environment for private investment.
	Significant investments
	Power Generation We bought a 50% interest in InterGen N.V. in 2005. InterGen owns 10 state-of-the-art power plants located around the world. This investment complements our 50% stake in Northern Star Generation, which holds interests in 13 power plants in the United States. These assets have a combined generating capacity of 7,500 megawatts.
	Water and Wastewater Utilities Attracted by the company’s regulated utility activities, we bought a 25% stake in Northumbrian Water Group in 2005 (we now own 26% of shares). Northumbrian provides the regulated supply of water and wastewater services to 4.3 million people in England. In 2007, we expanded our portfolio by acquiring significant or controlling interests in three water utilities in Chile representing approximately one-third of Chile’s regulated water and wastewater market: Empresa de Servicios Sanitarios del Bio-Bio S.A. (ESSBIO), Aguas Nuevo Sur Maule, S.A.., and Esval S.A.
	Gas Distribution We were part of a consortium that purchased Scotia Gas Networks, which operates gas distribution networks in Scotland and southern England, in 2005 and hold a 25% stake in the enterprise. These networks deliver gas to 5.7 million customers and represent two of the largest regional gas distribution networks in the U.K.
	Airports Initially, we invested indirectly in airports through Macquarie Airports Group, which has interests in airports in Birmingham and Sydney. We also have interests in Copenhagen, Bristol and Sydney airports. Building on the expertise we gained in this sector, we acquired a 48.25% stake with a partner in Birmingham International Airport in 2007.
	Toll Roads We are a large shareholder in selected publicly traded companies focusing on toll road ownership and operation around the world. As a result, we have indirect interests in some of the largest and most traveled highway privatizations in the world: 407 ETR in Canada; M6 Toll in the U.K.; and APRR motorway network in western Europe.
	Port Facilities We made our single, largest acquisition to date in 2007 with the US$2.4 billion purchase of four North American marine container terminals: Vanterm and Deltaport in the Vancouver area; New York Container Terminal on Staten Island, New York; and Global Terminal in New Jersey. Collectively, the terminals handle two million containers annually.
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	Real-return bonds Real-return bonds bear interest adjusted to inflation. For this reason, they are an excellent match for paying indexed pensions, and along with index-linked mortgages, are risk free with respect to inflation. In 1999, we structured $650 million of financing for Highway 407 in Ontario as a real-return bond. We have continued since then to be a keen buyer of these securities in Canada and the United States. Real estate Our real estate is managed by our wholly owned subsidiary, Cadillac Fairview, one of North America’s largest managers of commercial property. We acquired full ownership of this company in March 2000. The aim is to maintain a well-balanced portfolio of retail and office properties that provides dependable cash flows.
	The size and quality of our real estate portfolio provides large and predictable income. For more information, see our annual report and the Cadillac Fairview Corporation. Top 10 real estate holdings
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	Commodities Commodities also help to diversify risk. They generally have high real returns when there is unanticipated inflation and provide a hedge against short-term inflation risks in the value of the plan's liabilities. We primarily invest through enhanced index agreements linked to the S&P Goldman Sachs Commodity Index, which is heavily weighted to oil and gas.

	Posted May 2008	TOP