McGill University Pension PlanAnnual Meeting of Pension Plan MembersMay 1st, 2015

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Welcome

Pension Administration Committee (Plan Trustees)

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Mrs. Lynne B. Gervais, Chair (Principal – appointed) Ms. Cristiane Tinmouth (Principal - appointed) Ms. Kim Holden, Vice-Chair (Board of Governors - appointed) Mr. Michael Keenan (Board of Governors – appointed) Prof. Julia Scott (Academic – elected) Prof. Christopher Ragan (Academic - elected) Mr. Jim McVety (Admin & Support Staff - elected) Mr. Simon Fulleringer (Admin. & Support Staff - elected) Mr. Pierre Lavigne (Independent Member – appointed)

Pension Investment Committee

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Mr. Mark Smith, acting - Chair Mr. Michael Keenan (PAC) Mr. Stephen Cotsman Ms. Lynne B. Gervais (Chair of PAC) Mr. Russell Hiscock Ms. Kim Holden (PAC) Mr. Francois Lemarchand Mr. Scott Taylor Mr. Gilles Horrobin

Comments from the Chair

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Ms. Lynne B. Gervais

Procedures for the Meeting

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Pension Plan Structure

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Pension Administration Committee (PAC) Plan Trustees – acts in a fiduciary capacity Plan Administrators

Pension Investment Committee (PIC) Develops detailed investment policies, recommends

strategyUniversity Plan sponsor Funds ongoing contributions Puts forward plan amendments for Board approval.

Pension Plan Structure (continued)

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Pension Administration:

Delegated responsibility for administrative functions

Deliver plan communications and educational services

Pension Plan Structure (continued)

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Office of Investments:

Accountable to the PIC and the PAC Delegated responsibility for investment and

financial functions Implements and monitors investment strategies Monitors investment managers Monitors fund performance Prepares annual financial statements

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Voting Procedures/Election Results

Voting Procedures Results: FOR/AGAINST Continuance 9596 total eligible voting population

Voting Results

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FOR/AGAINST Continuance

RESULTS

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Academic Staff Representative

Register of Conflicts of Interest

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Plan Amendments Effective January 1, 2014 Cost sharing of funding requirements Part A members only 2.2% increase in contributions for all age groups

2014 Performance Review

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Ms. Sophie LeblancChief Investment Officer

Office of Investments

Senior ManagementOffice of Investments

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Sophie Leblanc, M.Sc., CFA Chief Investment Officer

Guillaume Gosselin, M.Sc., CFA, FRM Senior Manager, Investments

Line Beauregard, CFA, CPA, CA Senior Manager, Finance & Governance

2014 Market Overview

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World growth positive but slowing;

The US remains the main engine of global growth with stable upward macroeconomic momentum;

The oil price collapse will be a net positive, acting like a tax cut on consumers;

Large-scale ECB Quantitative Easing likely to prove a sentiment booster;

G4 central banks’ combined balance sheets to grow at the same pace as the past five years, supporting all asset classes.

Change in Net AssetsAccumulation Fund

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Change in Net Assets (2014 - Accumulation Fund)

$1,207$1,136

$85 $112-$118

-$7

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

Beginning Value(Dec 2013)

Contributions &Tranfers In

Benefit Payments Total Expenses Returns(Net of Fees)

Ending Value(December 2014)

Evolution of AssetsAccumulation Fund

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-

200

400

600

800

1,000

1,200

1,400

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

AF Market Value (in millions $) - Years ending Dec 31

Asset AllocationAccumulation Fund – as at Dec 31, 2014

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Summary of Accumulat ion Fund Assets

Market Value

($M)

Public Equity 609.8

Alternative Assets 195.8

Fixed Income 355.5

Money Market Pool 18.8

SRI Pool 22.9

TOTAL ACCUMULATION FUND 1,202.8 100.0

1.6

(%)

50.7

16.3

29.5

1.9

Actual Weight

Asset AllocationPensioner Fund – as at December 31, 2014

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Summary of Pensioner Fund Assets

Market Value Policy Target 2013 Weight

($M) (%) (%)

Equity 60.1 35 31.0

Real Estate 22.0 0 15.6

Fixed Income 109.9 65 52.0

Cash & Equivalents 6.4 0 1.3

TOTAL PENSIONER FUND 198.4 100 100

11.1 0-20

Actual Weight Policy Range

(%) (%)

30.3 20-45

55.4 50-75

3.2 up to 10%

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PerformanceAccumulation Fund

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In 2014, all asset classes performed well on an absolute return basis;

USD hedging strategy detracted approx. 1% from Balanced Account performance;

Bonds continued to perform well as interest rates continued to fall over the year.

ACCUMULATION FUND PERFORMANCE - 2014Gross Portfolio

ReturnBenchmark

ReturnGross Value-

Added(%) (%) (%)

10.3 11.9 -1.6Public Equity 11.4 12.8 -1.4

Canadian Equity 11.6 10.6 1.0Global Equity 11.2 13.8 -2.6

Alternative Assets 10.6 10.0 0.6Real Estate 8.0 5.5 2.5Infrastructure 3.7 5.5 -1.8Private Equity 17.8 18.3 -0.5Absolute Return Strategies 9.5 7.7 1.8

9.3 8.8 0.5

1.0 0.9 0.1

11.4 10.7 0.7

10.1 10.8 -0.7* Returns for the Equity Pool include Forward FX contracts for all of 2014.

Equity Pool*

Fixed Income Pool

SRI Pool

Money Market Pool

BALANCED ACCOUNT

PerformanceAccumulation Fund

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The Balanced Account exceeded its 10-year objective; All investment pools also exceeded their respective 10-year objectives; Real Estate and Private Equity were the strongest performing asset class for the 5-year

period (in CAD terms); Canadian equities outperformed during the10-year period.

ACCUMULATION FUND PERFORMANCE - LONG TERM ANNUALIZED PERFORMANCE

Gross Portfolio 5-Y Return

Gross Portfolio 10-Y Return

10-Y Long Term Objective

(%) (%) (%)

11.7 8.0 6.7Public Equity 11.6 8.0

Canadian Equity 10.4 9.2Global Equity 12.2 6.3

Alternative Assets 13.7 6.9 6.2Real Estate 14.9 7.4Infrastructure -- --Private Equity 15.3 6.5Absolute Return Strategies -- --

6.0 5.4 3.2

0.9 1.9 1.8

7.9 -- 5.3

10.1 7.6 5.4BALANCED ACCOUNT

Fixed Income Pool

Money Market Pool

Equity Pool

SRI Pool

PerformancePensioner Fund

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In 2014, equities outperformed all other asset classes, both in absolute and relative terms.

The outperformance of fixed income is mainly attributable to the strong performance of corporate bonds manager, Canso.

The negative value-added for the Total Pensioner Fund is due to the overweight in real estate versus the target allocation.

PENSIONER FUND PERFORMANCE - 2014Gross Portfolio

ReturnBenchmark

ReturnGross Value-

Added(%) (%) (%)

13.4 12.6 0.8

5.7 5.5 0.2

9.6 8.8 0.8

0.9 0.9 0.0

10.0 10.2 -0.2

Equity

Fixed Income

Real Estate

Money Market

TOTAL PENSIONER

PerformancePensioner Fund

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Real estate has been the strongest asset class within the Pensioner Fund over the last 10-year period.

The Pensioner exceeded the long term objective over the last 10 years.

PENSIONER FUND PERFORMANCE - LONG TERM ANNUALIZED PERFORMANCE

Gross Portfolio 5-Y Return

Gross Portfolio 10-Y Return

10-Y Long Term Objective

(%) (%) (%)

10.8 7.2

13.6 11.5

-- --

0.8 -0.2

8.1 6.4 5.25

Equity

Real Estate

Fixed Income

Money Market

TOTAL PENSIONER

Changes to Managers - 2014

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NEW MANDATES - 2014Date Hired Manager Strategy Assets ($) Fund

January PH&N Balanced 20 M SRI PoolJanuary Wellington US Equities 105 M Equity PoolSeptember TDAM Treasury Management 11 M Money Market Pool / Fixed Income Pool / Equity PoolSeptember TDAM Short Term Investments 11 M Money Market Pool / Fixed Income Pool / Equity PoolOctober Vontobel Global Equities 59 M Pensioner FundNovember Lasalle Fund IV Canadian Real Estate 20 M (commitment) Equity PoolNovember QV Investors Canadian Equities 73 M Equity Pool

TERMINATED MANDATES - 2014Date Terminated Manager Strategy Assets ($) Fund

January GEM Balanced 20 M SRI PoolJanuary SSGA US Equities (passive) 108 M Equity PoolMarch Scout Hedge Fund 11 M Equity PoolApril TDAM Universe Bonds (passive) 42 M Pensioner FundSeptember TDAM Treasury Management Gov  21 M Money Market Pool / Fixed Income Pool / Equity PoolOctober PH&N Canadian Equities 65 M Pensioner FundNovember SSGA Canadian Equities (passive) 81 M Equity PoolDecember Coatue Hedge Fund 11 M Equity Pool

Other Changes - 2014

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Office of Investments Restructuring - 2014• New CIO role• New Finance and Governance Senior Manager

Services Changes - 2014• New mandate with Mercer for research services• Cambridge advisor fee reduction

Investment Structure Changes - 2014

• Increase of allocation to LDI component within the Pensioner Fund• Modification of the hedging policy guidelines• Modification of the equity composition of the Pensioner Fund• Decrease of private equity target allocation weight from 10% to 5%• Creation of a real assets asset class that includes real estate and 

infrastructure investments with a target allocation of 8%

Compliance

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Compliance has been confirmed with regards to:

The Statement of Investment Policy and the PIC’s Statement of Investment Beliefs

Regulatory requirements

The PAC, PIC and Office of Investments Staff ’s compliance with the Terms of Reference

Managers’ compliance with individual mandate guidelines Exception – slight guideline breach by one manager; upon review

of guideline breech, staff has allowed the manager to deviate from the mandate guideline on a short-term basis

Fees as a Percentage of Average Net Assets

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Administrat ive and Investment Management Fees

as a Percentage of Investment Pool assets2014 2013

Balanced Account 0.85% 0.73%

Equity Pool 1.03% 0.87%

Fixed Income Pool 0.43% 0.40%

Socially Responsible Investment Pool 0.48% 0.80%

Money Market Pool 0.30% 0.28%

0.41% 0.52%

Accumulation Fund

Pensioner Fund

2015 Market Outlook

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Equity: Europe (and Japan) are growing and US momentum is still strong; Many EM countries face challenges.

Fixed Income: Expensive bond valuation in the US and Canada suggest diminished

returns in 2015; Corporate credit should continue to do well overall.

Commodities: Rising real rates in the US will continue to be a drag for

commodities, particularly precious metals. Currency: Large-scale European Central Bank Quantitative Easing (QE) and

Bank of Japan QE leave the case for a dollar uptrend undiminished; CAD pressured by policy easing and the price of crude oil.

2014Administrative Activities

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Mr. John D’AgataDirector – HR

Pension Administration & Benefits

Administrative Update

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Recordkeeping platform with Morneau Shepell: Account updates including defined benefit minimum Investor profile questionnaire Investment glide paths Retirement Income Calculator (RIC) Retirement Savings Plan (RSP) option or AVCs for

members age 65 - 71 Group Life Income Fund (LIF)/Retirement Income

Fund (RIF)

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Contributions

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MUPP Regular Contributions MUPP AVC Contributions

Group RSP Contributions

Start 7165

Group LIF/RIF – Investment Options

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Money Market Fund Option: TD Emerald Canadian Short-Term Investment Fund

Fixed Income Fund Option Phillips, Hager & North Fixed Income Bond Fund

Equity Fund Option 30% TD Emerald Low Volatility Canadian Equity Pooled Fund Trust 40% TD Emerald US Market Index Fund C$ 30% TD Emerald International Equity Index Fund

Risk Target Balanced OptionsConservative Moderate Aggressive

Money Market Option 20% 10% 10%

Fixed Income Option 55% 55% 40 %

Equity Option 25% 35% 50%

Group LIF/RIF – Fees

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Investment Management Fees: Range between 0.20 – 0.30% which can result in big savings over retail

Record Keeping Fee: $49.57/annum for each LIF/RIF Payment Issuance Fee: $20/lump-sum withdrawal

Management Expense Ratio (MER)

Initial Investment ($) at age 65

Estimated Management Fees (in today’s dollars - over 25

years)

0.25% $250,000 $ 6,340

1.0% $250,000 $25,395

1.5% $250,000 $38,125

2.0% $250,000 $50,875

2.5% $250,000 $63,645

Information Sessions

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Dates, times, locations & registration tool available on our web site: www.mcgill.ca/hr/bp/pensions/infosessions/

Session Dates (until the end of 2015)

General Sessions Sep 28, Oct 26 & Nov 30

Settlement Option Sessions May 11, Sep 14, Oct 13, Nov 17 & Dec 14

Retirement Sessions June 10, Sep 29, Oct 27 & Dec 1

Group LIF/RIF Sessions May 6 & May 21

2014 Settlements

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1 Includes transfers to RRSPs, RIFs and Marriage Breakdown Settlements

Number Total AmountTransfers to LIRAs/LIFs: 269 $110,828,298

Lump-Sum Payments: 157 $1,592,571

Other1: 75 $4,690,939

Annuity Purchases (external): 4 $1,592,571

Death Benefit Payments: 12 $1,196,805

Transfer to Other Pension Plans: 6 $815,126

Pensioner Fund – Compositionas at December 31, 2014

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OLD POOL(prior to Jan 1, 2000)

NEW POOL(from Jan 1, 2000)

No. of Members 745 457

Average Age 84.0 years 72.4 years

Deaths in 2014 52 3

Pensioner Fund – Annuity Dividend

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Pensioner Fund in deficit position Likelihood of future annuity dividend

increases is low

Triennial Actuarial Valuationas at December 31, 2012

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Assumes that the Plan would have been totally terminated and benefits fully settled on the valuation date, the assumptions used are largely dictated by regulators.

Triennial Valuation – Solvency Basis

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Results December 31, 2012

MarketValue of Assets $1,281,942,000

Solvency Liabilities $1,555,323,000

Solvency Surplus (Deficit) ($273,881,000)

Overall solvency ratio of the MUPP 82.4%

Degree of Solvency (per Art. 127 of SPPA) 74.8%

Degree of solvency: ratio of total solvency assets to total solvency liabilities, excludes both solvency assets and solvency liabilities for defined contribution balances for members who would not have been entitled to any benefits under the defined benefit minimum provisions of the Plan.

Funding Requirements until the Next Valuation

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Year 2013 Year 2014 Year 2015

University current service contributions in respect of the DBM $3,605,000 $3,713,040 $3,825,000University contributions to amortize going-concern deficit $1,879,000 $9,396,000 $9,396,000University Funding required to maintain 100% payout for those in DBM: $5,801,800 $17,157,221 $3,603,131 (1)

Total University Contributions: $11,285,800 $30,266,261 $16,824,131Part A Member – Cost-Sharing Contributions: N/A $6,072,511 $1,421,606 (1)

1 to March 31, 2015.

Questions/Comments

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