Western Retirement Plans

Western Retirement Plans 2015 Investment Performance Review Human Resources, Support Services Building, London, ON, N6A 3K7 Tel: 519.661.2194 Fax: 519.661.4104 E-mail: hrhelp@uwo.ca www.uwo.ca/hr

Planning your journey to retirement with the 2015 Investment Performance Review Planning for retirement is like planning for a journey it works best when you have a clear idea of where you want to go and set a path to get there. Western s defined contribution pension plans are designed so that you and the University make contributions to your plan. Your responsibility is to make decisions on the most appropriate investments to meet your retirement goals. The amount of retirement income you receive will depend on your level of contributions (you may make voluntary contributions), how long you contribute to the plan, and the returns that your investments provide. Western s retirement plans are a valuable benefit of working at Western. It is important that you take the time to regularly review your investment holdings, make changes as required, and track progress toward your retirement saving goals. This 2015 Investment Performance Review is an important tool to help you plan your journey. Human Resource Services is responsible for the day-to-day administration of the plans. Plan inquiries should be directed to: Human Resources Communication Centre, Support Services Building, room 5100 Western University, London, Ontario, N6A 3K7 Phone: 519-661-2194 Fax: 519-661-4104 Email: hrhelp@uwo.ca Website: www.uwo.ca/hr

Contents 1 HIGHLIGHTS Introduction and Report Purpose 2 Rates of Return by Investment Fund 4 Investment Fund Commentary 5 Investment Fund Management Summary 9 Investment and Operational Expenses 10 Compare Your Investment Performance 11 Member Education and Communication 13 DESCRIPTION OF INVESTMENT FUNDS Tier 1 Balanced Income Fund 15 Balanced Growth Fund 16 Tier 2 Diversified Bond Fund 18 Diversified Equity Fund 20 Tier 3 Money Market Fund 23 Target Date Funds 24 Canadian Bond Fund 25 Long Term Bond Fund 26 Canadian Equity Fund 27 US Equity Hedged Fund 28 US Equity Unhedged Fund 29 Non-North American Equity Fund 30 Socially Responsible Global Equity Fund 31 Liquidating Trust Fund 33 HISTORICAL RATES OF RETURN BY FUND 34 GLOSSARY 35 DEFINITIONS OF RISKS 37 MAKING CHANGES TO YOUR INVESTMENTS & ADMINISTRATIVE FORMS 39 The beliefs and opinions throughout this Report are those of the Joint Pension Board. They do not purport to be financial advice nor should they be relied upon in making your investment choices and decisions. Data on market indices provided by the Northern Trust Investment Risk and Analytical Services.

Introduction and Report Purpose 2 Introduction Western University sponsors two defined contribution pension plans for its employees the Pension Plan for Members of the Academic Staff and the Pension Plan for Members of the Administrative Staff providing retirement investment opportunities to approximately 7,000 individuals. The assets of Western s pension funds amount to approximately $1.1 billion as of December 31, 2015. Defined contribution pension plans, like the academic and administrative staff pension plans, are forms of capital accumulation plans in which contributions are made by both the employer and the member. In particular, a defined contribution pension plan means that the contribution by the University to your pension account is defined, but the amount you will receive when you retire is not certain. How much you receive when you retire depends on a number of things, such as the amount you choose to contribute to the plan and the amount of time you are in the plan. It also depends greatly on what investments you choose and the returns on those investments. Under the plans, each member has an account in their name and each member is responsible for the investment decisions for their account within the options available. Detailed information on those options is contained in this report. It is important that you take the time to learn, make a plan to invest wisely and track the progress of your investments. Western can provide excellent information, tools and education programs to help you plan your investments and your journey toward retirement. More information on those tools and programs is available on page 13 of this report. Western s pension contributions and its plans are a valuable component of the benefits we offer. How to read this report This report has been prepared to provide members of the Western Retirement Plans with clear and comprehensive information about the investments available to Plan members. You will find detailed data and an analysis of the investment performance experienced by members and information to help you better understand the attibutes of each investment. Retirement Plan is contained within the first 12 pages of this report. Points that may be of particular interest to members are highlighted in bold print throughout the report. In each of the fund descriptions (pages 15-33), more detailed facts and figures are noted in the Fund facts. Please note that the historical performance illustrated may not be indicative of future performance. The Glossary and the Definitions of Risks contain explanations of the terminology used in this report. You will also notice that some sections of the report will refer you to the Glossary. Contact Human Resources at 519-661-2194 or by email at hrhelp@uwo.ca if you have any questions about this report. We hope this document serves as a key resource for your retirement planning. We encourage you to take advantage of our Member Education and Communication services outlined on page 13 of this report and to consult your own financial advisor with any questions you may have about investment decisions. More information about the Pension Plans is available on our web site at: www.uwo.ca/hr/pension/. Please let us know if you require information in alternate formats or if any other arrangements can make our services accessible to you. Throughout the report you will note that the investment fund options have been grouped according to three tiers. Tier 1 funds refer to the most diversified fund options available to members made up of stocks (also known as equities - see Glossary) and bonds. For further information on these Tier 1 Balanced funds refer to pages 15 16 of this report. Tier 2 funds provide investors with well diversified portfolios within each asset class of equities and bonds. More details on the Tier 2 funds can be found on pages 18-21 of this report. Tier 3 funds are specific strategies for investors with very specific objectives. More details on the Tier 3 funds can be found on pages 23 33 of this report. An overall summary of the investments for the Western

Introduction and Report Purpose 3 Tier 1 Western Investment Funds Tier 1 and Tier 2 Composition Balanced Income Balanced Growth 70 % Diversified Bond 30 % Diversified Equity 30 % Diversified Bond 70 % Diversified Equity Tier 2 Diversified Bond Diversified Equity 26.5% Canadian Bond 63.5% Global Bond (50% Cdn, 50% Foreign) (active) 10% Commercial Mortgages 30% Canadian Equity 10% US Large Cap Equity - Hedged 10% US Large Cap Equity (Low Vol) 16% International Equity 24% Global Equity 5% Global Small Cap 5% Emerging Markets Equity Tier 3 Money Market Target Date Fund Canadian Bonds Long Term Bonds Canadian Equity US Equity Hedged US Equity Unhedged Non-North American Socially Responsible Global Equity Liquidating Trust *The illustration reflects the target asset allocation effective March 2, 2015. How investment funds work As a member of the Western Retirement Plans, you have been asked to direct the investment of every dollar allocated to your account. The allocation specified as a percentage of your total account can be from 0% to 100% towards any one or combination of the investment funds for the plans (restrictions apply for Special Members). The amounts allocated to each fund are used to buy units of the investments. By way of example there are in excess of 1.8 million units owned by members investing in the Diversified Equity Fund. The total number of units in any fund will change by members making additional allocations or by directing an inter-fund transfer into or out of the funds. As the securities in each fund increase or decrease in market value and as interest and dividends are earned, the value of each unit changes. Your entitlement in that fund is equal to the number of units you own multiplied by the most recent unit value for that fund. For example, suppose the amount of November 2015 contributions were as follows: Your contributions $ 50.00 University contributions on your behalf $150.00 Total: $200.00 Further, assume the member directed 50% ($100) of these contributions to the Diversified Bond Fund and 50% ($100) to the Diversified Equity Fund. In the case outlined above, at November 30, 2015 the unit value of the Diversified Bond Fund was 223.411 and the unit value of the Diversified Equity Fund was 322.474. With $100 allocated to each fund at November 30, 2015, the member would have purchased: 0.4476 units ($100/223.411) of the Diversified Bond Fund and 0.3101 units ($100/322.474) of the Diversified Equity Fund By December 31, 2015 the unit values of these funds were 224.759 and 323.262 respectively. The new value of the contributions is $200.84 as illustrated below: Diversified Bond Fund: 0.4476 x 224.759 = $100.60 Diversified Equity Fund: 0.3101 x 323.262 = $100.24 Total: $200.84 The relative change in the unit values represents the rate of return on the fund for the month of December. That is, the rate of the return for the month can be found using the following formula: Unit value at end of period - 1 = % return of the fund for the period Unit value at beg of period For example: 224.759-1 = 0.0060 = 0.60% = return on Diversified 223.411 Bond Fund for December 323.262-1 = 0.0024 = 0.24% = return on Diversified 322.474 Equity Fund for December

Rates of Return by Investment Fund 4 Fund rates of return as at December 31, 2015 (annualized rates) INVESTMENT FUNDS 1-year 3-years 5-years 10-years Since Inception date inception Tier 1 Balanced Income Fund 4.79% 7.61% 6.94% 5.81% 6.11% Oct. 1, 2001 Benchmark: blended (details on page 15) 4.43% 7.22% 6.52% 5.38% Balanced Growth Fund 6.89% 12.31% 8.83% 5.96% 6.52% Oct. 1, 2001 Benchmark: blended (details on page 16) 6.01% 11.53% 8.49% 5.73% Tier 2 Diversified Bond Fund 3.17% 4.12% 5.39% 5.37% 8.57% March 1, 1978 Benchmark: blended (details on page 18) 3.25% 3.99% 5.04% 5.13% Diversified Equity Fund 8.41% 15.87% 10.10% 5.50% 9.62% March 1, 1978 Benchmark: blended (details on page 20) 7.19% 14.76% 9.97% 5.98% Tier 3 Money Market Fund 0.69% 0.95% 1.01% 1.86% 4.38% Jan. 1, 1988 Benchmark: FTSE 91-day T-Bill Index 0.63% 0.85% 0.91% 1.73% Target Date Fund June/2016 1.20% 1.87% 3.24% 3.80% June 1, 2010 Target Date Fund June/2018 2.83% 3.05% 3.03% June 1, 2012 Target Date Fund June/2020 4.19% 5.09% June 1, 2014 Canadian Bond Fund 3.26% 3.47% 4.68% 4.96% 5.94% April 1, 2000 Benchmark: FTSE Universe Bond Index 3.52% 3.63% 4.80% 5.03% Long Term Bond Fund 3.41% 4.38% 7.09% 6.31% 7.07% July 1, 1998 Benchmark: FTSE Long Bond Index 3.80% 4.59% 7.30% 6.43% Socially Responsible Global Equity Fund 2.74% 10.68% 7.60% 3.87% March 1, 2008 Benchmark: MSCI World Index 19.55% 23.17% 15.69% 7.41% Canadian Equity Fund -5.41% 8.62% 4.80% 4.87% 7.33% May 1, 1997 Benchmark: S&P/TSX Composite Index -8.32% 4.62% 2.30% 4.38% US Equity Hedged Fund 0.74% 15.08% 12.21% 5.87% 5.95% May 1, 1997 Benchmark: S&P 500 Index Hedged 0.91% 15.43% 12.69% 6.39% US Equity Unhedged Fund 21.33% 28.55% 20.18% 8.82% 6.47% May 1, 1997 Benchmark: S&P 500 Index Unhedged 21.59% 28.64% 20.37% 9.18% Non-North American Equity Fund 21.53% 17.41% 9.66% 3.71% 4.24% May 1, 1997 Benchmark: MSCI EAFE Index 19.46% 17.84% 11.28% 5.31% Liquidating Trust Fund 2.16% 5.82% 7.79% 0.15% Nov. 1, 2007 Investment returns provided here are net of management fees, custodian fees and underlying fund operating expenses. To see a detailed explanation of the fees incurred refer to page 10 of this report. It is difficult to judge the performance of the investments without understanding the nature of the market environment during the same time period. We know that a one year return of 15% looks good, but how does it compare to the performance of other similar assets during the same time period? To assist in addressing this question we have provided market benchmark performance data for relevant funds in the chart above. The abbreviations in italics following certain funds in Tier 3 provide appropriate market benchmark data for the fund preceding it in the list. The Target Date funds are specialized funds. No market benchmark exists for these funds. Expected future returns for these funds are illustrated on page 24 of this report. Use the Glossary in this report to determine the exact description of each market benchmark noted on the left.

Investment Fund Commentary Market summary Financial markets experienced an increase in volatility in 2015. A number of economic developments had a significant impact on the markets. A decline in commodity prices, wild currency fluctuations and slower economic growth, especially coming from China, were the main culprits. Oil prices dropped by more than 30% in 2015, mainly caused by a change to OPEC oil production strategy, while the price of gold dropped by about 12%. Given the importance of the Energy and Materials sectors to the Canadian stock market, these two developments had a marked negative impact. The Canadian Materials and Energy sectors respectively returned -21.07% and -22.89%, significantly contributing to the -8.32% return experienced by the Canadian stock market (S&P/TSX). Fortunately for members of the Western Retirement Plans, the external investment managers hired to manage Canadian equities were able to limit losses and the Canadian Equity Fund actually outperformed the S&P/TSX by 2.91%, after fees. Outside Canada, the Materials and Energy sectors were also weak, but the greater diversification that these markets offer softened the blow. Although Energy was the worst performing sector in the U.S., the U.S. stock market, as measured by the S&P 500 return, in U.S. dollars, managed a positive return of 1.38%. However, because of a significant appreciation of the U.S. dollar versus the Canadian currency, the S&P 500 return in Canadian dollars was 21.59% in 2015. The weak Canadian dollar also impacted the return of Non-North American equities, as the MSCI EAFE Index, the main measure for Non-North American stock markets, posted a 19.46% return last year. Emerging Markets performed poorly in 2015, but Canadian investors experienced a low but positive return of 2.42% in 2015, again due to currency gains. Other significant currency events of 2015 include the devaluation of the Chinese Yuan and the de-pegging of the Swiss Franc from the Euro. Poor economic indicators, such as slower Chinese economic growth, a stalled Japanese economy and poor corporate profits in the U.S. also reduced investors confidence towards the end of the year and contributed to market volatility. Fixed income markets managed to post positive returns in 2015. The long-awaited tightening by the U.S. Federal Reserve finally took place in December 2015. The divergence in monetary policy between the U.S. and the rest of the world impacted markets in 2015. However the doom and gloom scenario for fixed income markets did not materialize as most fixed income benchmarks posted positive returns last year, with the FTSE TMX Overall Bond Index returning 3.52% and the FTSE TMX Long Term Bond Index posting a 3.80% return. Money market returns were impacted by the Bank of Canada s decision to lower its key interest rate from 1.00% to 0.50%. The FTSE 91-Day T-Bills Index posted a 0.63% return for the year, lower than the 0.91% return achieved last year. External investment managers in the Western Retirement Plans did better in 2015 than in 2014 in terms of outperforming their benchmark, especially equity managers, which is a positive development, given market volatility. Overall, six of the eight investment options on the Western Retirement Plans that are actively managed achieved better than benchmark returns, even after management fees are taken into account. A summary of market performance by asset class follows: 5 Annualized returns Market Index 1 year return 3 year return 5 year return Cash/money market funds FTSE 91-Day T-Bill 0.63% 0.85% 0.91% Bonds FTSE Universe Bond 3.52% 3.63% 4.80% FTSE Long Term Bond 3.80% 4.59% 7.30% FTSE Short Term Bond 2.61% 2.47% 2.81% BC Global Aggregate Bonds - Hedged 1.61% 3.55% 4.70% Equities S&P/TSX Composite -8.32% 4.62% 2.30% S&P 500 - Unhedged 21.59% 28.64% 20.37% S&P 500 - Hedged 0.91% 15.43% 12.69% MSCI ACWI SMID 18.81% 22.02% 14.08% MSCI EAFE 19.46% 17.84% 11.28% MSCI World 19.55% 23.17% 15.69% Canadian versus U.S. Dollar -16.18% -10.42% -6.39%

Investment Fund Commentary 6 What s new 2015 was a quiet year in terms of investment changes. Following the completion of the re-optimization of the Diversified Equity Fund in 2014, no investment manager or asset mix changes were made in 2015. The Joint Pension Board focused on successfully completing two administrative projects during the year. The first of these projects was providing remedial payments to members of the Western Retirement Plans who were impacted by the pension unitization error, back in 2009. Following a positive ruling from the Canada Revenue Agency (CRA) which confirmed that payments to members would not impact their registered retirement savings room, staff proceeded with the implementation of the remedial payments. All accounts that were negatively impacted by the error were adjusted and were also credited for the return realized by the Diversified Equity Fund since 2010. Members who benefited from the error were not asked for reimbursement. The second project was the outsourcing of the Western Retirement Income Fund (RIF) to Sun Life Financial. Although the Western RIF administered by the University was instrumental in providing retirement income to a generation of Western retirees since it was implemented in 2000, the evolution of the financial services industry justified this decision. A number of financial institutions have developed a suite of products, tools and education programs that were determined to be superior to what Western could offer directly and at a lower cost. The successful transition to Sun Life Financial was completed at the end of 2015. More than 80% of Western RIF members elected to move their assets to the new provider, transferring $215 million of pension assets in the process. In a survey distributed to 357 members (some who moved to Sun Life and some who did not) 77% of those responding said they would definitely or probably recommend Sun Life to others. Western Tier 1 Fund Performance Balanced Income Fund The Balanced Income Fund invests 70% in the Diversified Bond Fund and 30% in the Diversified Equity Fund. The benchmark for this fund is 70% of the Diversified Bond Fund benchmark and 30% of the Diversified Equity Fund benchmark. The Fund posted a return of 4.79%, outperforming the benchmark return of 4.43%, due to the outperformance of the Diversified Equity Fund. Balanced Growth Fund The Balanced Growth Fund invests 70% in the Diversified Equity Fund and 30% in the Diversified Bond Fund. The benchmark for this fund is 70% of the Diversified Equity Fund benchmark and 30% of the Diversified Bond Fund benchmark. The Fund posted a return of 6.89%, outperforming the benchmark return of 6.01%, due to the outperformance of the Diversified Equity Fund. Western Tier 2 Fund Performance Diversified Bond Fund The Diversified Bond Fund invests in Canadian and non-canadian bonds and debt securities of various durations, including commercial mortgages. The normal stance of the Fund is to invest 58% of its assets in Canadian bonds, 32% in non-canadian bonds and 10% in commercial mortgages. Less than 20% of the fund s assets may be exposed to currency fluctuations. Approximately 10% of the Fund is invested in a commercial mortgage mandate managed by Romspen Investment Corporation, 26.5% of the portfolio is passively managed by SSgA in the same manner as the Canadian Bond Fund while the remainder of the portfolio (63.5%) is actively managed by AllianceBernstein with a strategy that invests in Canadian and non-canadian bonds. The benchmark for this Fund is a combination of various FTSE TMX bond indexes (Canadian bond indexes) and the Barclays Capital Global Aggregate Index Hedged (a global bond index). The fund had a return of 3.17% after fees in 2015, slightly underperforming the benchmark return of 3.25%. AllianceBernstein slightly outperformed its benchmark before fees in 2015 through good security and currency selection, but came up short after fees. SSgA performed in line with expectations as a passive manager and they closely replicated the benchmark return before fees. Romspen posted a strong absolute return of 8.78% before fees and outperformed its benchmark.

Investment Fund Commentary 7 Diversified Equity Fund The Diversified Equity Fund invests in Canadian, U.S., international, global and emerging markets equities. The Fund had a return of 8.41% after fees in 2015, outperforming its benchmark return of 7.19% (the benchmark is a blend of the benchmark for each of the underlying equity markets). In Canadian equities, strong performance relative to the S&P/TSX by all three managers (Beutel Goodman, CC&L and Greystone) added value. It was the same scenario in Non-North American Equity, as both AllianceBernstein and MFS outperformed their benchmark, with AllianceBernstein claiming the bigger share of the outperformance. In global equities, in the large cap space, one of the two managers, T. Rowe Price, outperformed its benchmark, while the other one, Harris Associates, underperformed. In the small cap space, Franklin Templeton, a manager added to the Fund in 2014, did extremely well, posting a 29.80% return before fees, outperforming its benchmark by almost 11%. In U.S. equities, the mandate indexed to the S&P 500 and managed by SSgA performed in line with the benchmark, as expected. However, the currency hedging applied to the strategy prevented it from benefiting from the strengthening of the U.S. dollar. The low volatility U.S. equity strategy, also managed by SSgA, outperformed its benchmark during the year and, because the currency is not hedged, benefited from the U.S. dollar currency gains. Finally, the emerging markets equity mandate managed by William Blair slightly underperformed its benchmark before fees during 2015. Western Tier 3 Fund Performance Money Market Fund The Money Market Fund, which invests in very shortterm loans or debt securities, had a return of 0.69% after fees in 2015, outperforming its benchmark return of 0.63%. Returns on short-term securities remain low on a historical basis due to the low short-term interest rates that prevail in Canada. At the end of 2015 a 91- day treasury bill provided an annualized return of 0.51% and a bankers acceptance of 0.84%, following two rate cuts by the Bank of Canada in 2015. Given the relatively low probability of the Bank of Canada increasing its key interest rate in the short-term, because of the weak outlook for the Canadian economy, Money Market Fund returns should remain low for a while. Canadian Bond Fund The Canadian Bond Fund invests in a variety of bonds and debt securities, including mortgages, with maturity dates between one and 30 years. In 2015, the Fund produced an annual return of 3.26%, net of fees, slightly below the FTSE TMX Overall Bond Universe Index return of 3.52%. The Canadian Bond Fund is managed passively and is expected to closely follow the FTSE TMX Overall Bond Universe Index. If prevailing interest rates rise by even 1.00%, this fund could experience a capital loss of over 5.00% in a year, reducing the overall return. Conversely, if interest rates fall, the investment may experience a gain exceeding the expectations of investors. Long Term Bond Fund The Long Term Bond Fund invests in Canadian bonds and debt securities due to mature between 10 and 30 years from now. In 2015, the Fund produced an annual return of 3.41%, net of fees, compared to the FTSE TMX Long Term Bond Index return of 3.80%. The small overall decline in long-term bond yields slightly improved returns in 2015. The Long Term Bond Fund is managed passively and expected future returns will therefore closely follow the FTSE TMX Long Term Bond Index. The Long Term Bond Fund has returns that are more volatile than the Canadian Bond Fund since the longer term nature of the portfolio makes the securities more sensitive to interest rate changes. If long-term rates increase (decrease) by 1.00%, the Long Term Bond Fund can experience a market loss (gain) of over 10.00%. Target Date Funds The Target Date Funds are portfolios of government bonds, each with a specific date on which it will terminate - the target date. There are three Target Date Funds available to our plan members and their termination dates are June 1st of 2016, 2018 and 2020 respectively. These funds have been designed to provide capital preservation for investments over time and a predictable future return if held to maturity. At the same time, they allow members to move in or out of the funds monthly. The returns experienced are consistent with the returns on Government bonds with similar terms to maturity. No TDF matured in 2015.

Investment Fund Commentary 8 Canadian Equity Fund The Canadian Equity Fund had a difficult year in 2015 with a return of -5.41% after fees, although it significantly outperformed the S&P/TSX return of -8.32%. All three managers on the Fund, Beutel Goodman, Greystone and CC&L outperformed the benchmark during the year, mostly through good sector allocation but also, to a lesser extent, strong stock selection. All three managers benefited from underweighting the poor performing Energy sector. U.S. Equity Funds The U.S. Equity funds, which track the largest 500 U.S. companies (a passive strategy), experienced returns comparable to the overall U.S. experience as represented by the corresponding index. The return for the U.S. Equity Unhedged Fund (+21.33%) was above that of the U.S. Equity Hedged Fund (+0.74%) as a result of the weakening of the Canadian dollar versus the U.S. dollar over the past year. A depreciation of the Canadian dollar relative to the U.S. dollar generally results in a higher return for the U.S. Equity Unhedged Fund as compared to the U.S. Equity Hedged Fund. 19.55%. The Fund s exposure to emerging markets, overweight to the Energy sector, socially responsible screens and overall poor stock selection caused the underperformance. Liquidating Trust The Liquidating Trust holds the restructured notes that were exchanged for the non-bank asset-backed commercial paper (ABCP) held in five Western Funds (Balanced Income, Balanced Growth, Diversified Equity, U.S. Equity Hedged and U.S. Equity Unhedged). The Fund does not accept any new contributions but members have had the ability to make redemptions since May 2010. The Fund posted a return of 2.16% in 2015. As the underlying assets are getting less risky, the likelihood of losses between now and maturity in January 2017 is significantly reduced. Western periodically sells a portion of the securities in the Liquidating Trust to fund members redemptions. As of the end of 2015, the Fund s unit value was $101.197, above its initial level of $100 when non-bank ABCP stopped trading. Non-North American Equity Fund The Non-North American Equity Fund invests in securities issued by companies based outside of North America, mostly from developed countries. The fund is also allowed to have a small component invested in developing countries, such as Brazil, Russia, India and China. The Fund posted a return of 21.53% in 2015, outperforming the MSCI EAFE Index return of 19.46%. The Fund s return was boosted by the depreciation of the Canadian dollar. Both managers, AllianceBernstein and MFS, outperformed the benchmark. Socially Responsible Global Equity Fund The Socially Responsible Global Equity Fund invests in stock markets from all over the world, including developed markets located in Canada, the United States, Europe and the Far East, but also in emerging markets such as Brazil, Russia, India and China. The Fund is managed by Aberdeen Asset Management. After an initial stock selection is made, some screens are applied to the portfolio by Aberdeen to meet their socially responsible thresholds. All of the portfolio s non- Canadian investments are exposed to fluctuations in foreign currencies relative to the Canadian dollar. The Fund posted a return of 2.74% in 2015, significantly underperforming the MSCI World Index return of

Investment Fund Management Summary as at December 31, 2015 Investment fund Funds managed ($millions) % of fund % of total assets Asset class Manager style MONEY MARKET FUND State Street Global Advisors $49.5 100.0% 4.5% cash active TARGET DATE FUNDS State Street Global Advisors $24.0 100.0% 2.2% domestic bonds active-duration constrained DIVERSIFIED BOND FUND Romspen Investment Corporation $31.9 11.0% 2.9% commercial mortgages active State Street Global Advisors-Canadian Fund 75.5 26.0% 6.8% domestic bonds passive Alliance Bernstein-Global Fund 182.6 63.0% 16.5% foreign bonds active $290.1 100.0% 26.2% CANADIAN BOND FUND State Street Global Advisors $13.2 100.0% 1.2% domestic bonds passive LONG TERM BOND FUND State Street Global Advisors $13.9 100.0% 1.3% domestic bonds passive SOCIALLY RESPONSIBLE EQUITY FUND Aberdeen Asset Management $7.3 100.0% 0.7% global equity active-value DIVERSIFIED EQUITY FUND Greystone Managed Investments $52.6 9.6% 4.7% domestic equity active-growth Connor Clark & Lunn Financial Group 53.2 9.7% 4.8% domestic equity active-core Beutel, Goodman & Company 53.1 9.7% 4.8% domestic equity active-value State Street Global Advisors 53.9 9.8% 4.9% US large-cap equity (hedged) passive State Street Global Advisors 55.9 10.2% 5.0% US low volatility passive - managed volatility Franklin Templeton Investments 28.6 5.2% 2.6% global small-cap equity active-value T.Rowe Price 67.7 12.3% 6.1% global equity active-growth Harris Associates 68.0 12.4% 6.1% global equity active-value MFS Investment Management 44.0 8.0% 4.0% international equity active-growth AllianceBernstein 45.6 8.3% 4.1% international equity active-value William Blair & Company 26.8 4.9% 2.4% emerging markets equity active-growth $549.3 100.0% 49.6% CANADIAN EQUITY FUND Connor Clark & Lunn Financial Group $18.7 33.7% 1.7% domestic equity active-core Beutel, Goodman & Company 18.4 33.0% 1.7% domestic equity active-value Greystone Managed Investments 18.6 33.3% 1.7% domestic equity active-growth $55.7 100.0% 5.0% US EQUITY - HEDGED FUND State Street Global Advisors $22.1 100.0% 2.0% US equity (hedged) passive US EQUITY - UNHEDGED FUND State Street Global Advisors $38.2 100.0% 3.4% US equity passive NON-NORTH AMERICAN FUND MFS Investment Management $11.4 50.7% 1.0% international equity active-growth AllianceBernstein 11.0 49.3% 1.0% international equity active-value $22.4 100.0% 2.0% 9 ADMINISTRATIVE IMMUNIZED BOND FUND $0.2 100.0% 0.0% ACADEMIC IMMUNIZED BOND FUND 0.8 100.0% 0.1% LIQUIDATING TRUST 9.4 100.0% 0.9% OVERAL PLAN ASSET MIX CASH IN PLAN ACCOUNTS 11.3 100.0% 1.0% Cash 6.5% TOTAL PENSION $1,107.3 100.0% 100.0% Bonds 30.7% Equities 62.8% BALANCE INCOME & GROWTH FUNDS** $239.5 **These assets are included in the Diversified Bond Fund and the Diversified Equity Fund totals.

Investment and Operational Expenses 10 Investment and operational expenses The University is the plan sponsor for the pension plans. The Joint Pension Board is the official plan administrator for the pension plans and Human Resources provides day-to-day operational support for all programs. The plans operate with the assistance of many professionals, including investment managers, investment consultants, actuarial consultants, legal advisors, financial statement auditors, custodians, pension administrators, retirement counselors, and educators. The total management expense includes fees for external investment management, custodian fees, underlying fund operating expenses and other professional fees and pension staff expenses. The total management expense cost is about 51 basis points (0.51%) of assets per year for pension plan members. The Joint Pension Board believes the operations are at an expense level far below that of comparable retail retirement savings products which tend to charge fees that average about 200 basis points (2.0%) per year of invested assets. fees for external investment management, custodian fees and underlying fund operating expenses. Returns for each fund are determined after deducting these fees, which amount to an average of about 40 basis points (0.40%) per year of the value of the fund. These fees, which are shown in the table on this page, vary depending on the type of investment and the value of assets in each portfolio. Other professional fees and pension staff expenses are funded by the University for actively contributing University employees. A fee is charged to accounts of members from some participating employers (e.g. Brescia University College and Huron University College) and to former employees who have chosen to leave their funds invested in the plans. This fee is waived for former employees who have retired from the University. The Joint Pension Board, as part of its overall governance of the plans, reviews the fees charged to former employees on an ongoing basis and will communicate any anticipated changes. Further, active Western employees only fund a portion of these expenses with their investments, including Investment and operational expenses Western Fund Investment management fee Custodian fee Underlying fund operating expense Expected average fee* Balanced Income 0.32% 0.05% 0.03% 0.40% Balanced Growth 0.40% 0.03% 0.05% 0.48% Diversified Bond 0.27% 0.06% 0.01% 0.35% Diversified Equity 0.45% 0.02% 0.07% 0.54% Money Market 0.06% 0.02% 0.00% 0.07% Target Date Fund 2016 0.08% 0.02% 0.00% 0.11% Target Date Fund 2018 0.08% 0.03% 0.00% 0.11% Target Date Fund 2020 0.08% 0.09% 0.00% 0.17% Canadian Bond 0.10% 0.04% 0.00% 0.14% Canadian Long Term Bond 0.06% 0.07% 0.00% 0.13% Socially Responsible Global Equity 0.80% 0.10% 0.00% 0.90% Canadian Equity 0.26% 0.03% 0.01% 0.30% US Equity Hedged 0.06% 0.02% 0.04% 0.13% US Equity Unhedged 0.06% 0.02% 0.03% 0.12% Non-North American Equity 0.48% 0.06% 0.12% 0.66% Liquidating Trust 0.10% 0.07% 0.00% 0.17%

Compare Your Investment Performance with Other Strategies 11 The Joint Pension Board recognizes that the investment allocation decision is difficult even when a great deal of information is available to you. The purpose of this section of the annual report is to help you assess the investment options available under the Western Retirement Plans by comparing the relative returns under each asset class and illustrating the returns and risks associated with each asset class or a combination of asset classes. Although there is significant choice of investment funds under the plans, your investment decision may be a consideration of three broad asset classes: cash, bonds and equities. In the case of the Balanced Growth and Balanced Income Funds, this mix of asset classes has been set for you. Cash attributes have been illustrated here using the historical performance of the Western Money Market Fund. Bond attributes have been illustrated here using the historical performance of the Western Diversified Bond Fund. Equities attributes have been illustrated here using the historical performance of the Western Diversified Equity Fund. Balanced Income attributes have been illustrated using 30% Western Diversified Equity Fund and 70% Western Diversified Bond Fund. Balanced Growth attributes have been illustrated using 70% Western Diversified Equity Fund and 30% Western Diversified Bond Fund. When considering the risks and returns of an investment, good investment advisors commonly apply Modern Portfolio Theory. The Theory holds that the risks and returns of the entire portfolio should be considered rather than evaluating risks and returns on an investment-by-investment basis. For example, an equity investment statistically has a greater risk than a bond investment. However, there could be a combination (or investment mix) that includes equities which has generated a greater average rate of return than a pure bond investment but has the same or lower level of risk of a pure bond investment. Using the Western Retirement Plans fund data for 2015 the chart below illustrates how each of the cash, bonds, equities and three Portfolios with other investment mixes performed in terms of rate of return. The rate of change in the consumer price index (CPI) is also provided here. The real returns can be approximated by subtracting CPI (the change in purchasing power for the year) from the nominal returns. You can use your individual rate of return indicated on your personal statement to compare your investment performance for the year with other strategies illustrated below. A complete history of calendar year returns for all funds is provided on page 34 of this report. Portfolio A: 10% cash 40% bonds 50% equities 15% Cash Bonds Equities Western Portfolio Returns for 2015 Balanced Growth Balanced Income Portfolio A Portfolio B Portfolio C CPI Portfolio B: 40% bonds 60% equities Portfolio C: 20% bonds 80% equities Return in 2015 10% 5% 0% 0.69% 3.17% 8.41% 6.84% 4.74% 5.54% 6.31% 7.36% 1.61% -5%

Compare Your Investment Performance with Other Strategies 12 The 2015 rates of return for individual member accounts under the Western Retirement Plans were ranked from highest to lowest. The distribution of the returns is provided below: Returns: Individual account returns Plans average 5.25% Maximum annual return 26.86% Median annual return 5.88% Minimum annual return -8.76% Risks: The top 25% of our members received returns between 6.71% and 26.86%. The middle 50% of our members received returns between 3.86% and 6.71%. The bottom 25% of our members received returns between -8.76% and 3.86% The median return, which indicates that 1/2 of the accounts had returns below that amount, was 5.88%. Investment strategies will provide different performance based on the different levels of risks associated with the strategies. Risk of an investment is commonly measured by the amount the actual investment return of a portfolio is expected to vary from the average return over time. By considering this measure the investor can decide if it is worth taking on that risk or variation in exchange for the expected return. The graph below illustrates the variation in 3-year time periods for each of cash, bonds, equities and the portfolios discussed earlier. The white and black bars indicate the relative risk that the actual returns can vary from average returns. The longer these bars in either direction, the more risk. The average 3-year return is indicated by the grey bars. Ideally, an investor wants to achieve the maximum average return for the variation they can live with. While variability in return is a common measure of risk associated with an investment, there are other types of risks associated with investment portfolios. For example, there is a risk that the total accumulated funds in the portfolio at the end of any given time period is insufficient to provide for the intended use of the funds. There is also the risk that an investment is insufficient to maintain the purchasing power of the original investment (i.e. the return has not matched the increase in the cost of living (CPI) over the period of investment). Human Resources staff can help you understand the nature of the options available to you. You may meet individually with a pension and benefits consultant in Human Resources, attend workshops or access on-line tools offered from the Human Resource Services website. You are encouraged to take advantage of these resources and/or consult your own financial advisor in setting your investment mix. Portfolio A: 10% cash 40% bonds 50% equities Portfolio B: 40% bonds 60% equities Portfolio C: 20% bonds 80% equities 30% 25% 20% 15% 10% 5% 0% 4.31% 12.05% 0.93% 1.31% Western Investment Funds Annualized Returns Over 3-Year Periods January 1988 to December 2015 16.76% 7.82% 7.45% 24.22% 16.86% 20.75% 17.62% 19.61% 7.79% 7.64% 7.37% 7.69% 7.59% 21.91% Minimum Average Maximum -5% -2.61% -10% -15% -12.95% Cash Bonds Equity Balanced Income -8.55% Balanced Growth -5.39% -7.07% -10.02% Portfolio A Portfolio B Portfolio C

Member Education & Communication 13 Both the University and the member make contributions to the member s individual account. It is the responsibility of the member to make decisions on the investments held within their account. This is the essence of a defined contribution plan. To assist members in understanding these decisions and evaluating the available options, Human Resource Services offers several education and communication programs that can help you plan your journey to retirement. Group educational sessions Group educational sessions for members of the Western Retirement Plans are held at various locations on campus throughout the year. The times and locations are announced during the year in our newsletter, in Western News, in the Western Events Calendar and on the Human Resources website. The workshops are given by internal professional staff and may also involve external professionals. The educational session topics will vary throughout the year. Financial and Pre-Retirement Planning Workshop: Offered Quarterly These comprehensive day-long workshops are aimed at members aged 45 plus and considering retirement within the next ten years. The sessions are facilitated by an external consultant who will lead an unbiased discussion of the role of the Western pension, government pensions and private savings in retirement income planning. Additional topics may include preparing for the transition into retirement, investing in retirement and tax planning. a Pension & Benefits Consultant by calling Human Resources at 519-661-2194 or on campus at x82194. Online Tools The Investment Personality Questionnaire uses a series of questions to help assess your risk tolerance and then provides corresponding samples of diversified portfolios identifying the funds available under the Western Retirement Plans. Web-based planning tools and calculators are available to help members with budgeting, savings, asset allocation, life insurance, mortgage assessment and much more. For assistance, please contact Human Resources at 519-661-2194 or on campus at x82194 or hrhelp@uwo.ca. Online Access The goal of the group education, individual counseling sessions and on-line tools is to help members better understand their investment, contribution and payment options. The knowledge gained through these resources can be used when members go online to www.uwo.ca/ hr. Within the Retirement Plans section of the Human Resources web site, a member can login to view their account(s), review performance reports, obtain forms and review terms of the pension plan(s). This password-protected pension website allows members to view account balances, request account investment changes and address changes on-line. Western employees can also use My Human Resources to access information on their pension plan contribution levels and beneficiary designations. The sessions are open to all members of the Academic and Administrative Staff pension plans. Spouses are welcome and are encouraged to attend with the plan member. For assistance determining the appropriate time to attend, speak with a Pension & Benefits Consultant in Human Resources by calling 519-661- 2194 or on campus at x82194. Individual Counseling Sessions Pension & Benefits Consultants are available to provide individual counseling on your Western Retirement Plans. A consultant can assist you with your retirement planning and help you understand the choices available to you including your investment options, contribution level and payout options. All appointments are confidential. Spouses/family members are welcome to attend. Personal appointments may be arranged with

14 Tier 1 Balanced Income Balanced Growth The most diversified investment options

Tier 1 Balanced Income Fund 15 Fund facts Total value of assets as at Dec. 31, 2015 $58.6 million Number of investors 998 Date of inception October 1, 2001 Management expense ratio 0.40% (Expected average fees) Risk attributes Standard deviation of annual returns 6.1% Historical frequency of a negative calendar year return 1/14 Managers See Diversified Bond and Diversified Equity Funds Annualized returns to December 31, 2015 1-Yr 3-Yr 5-Yr 10-Yr Western Fund 4.79% 7.61% 6.94% 5.81% Market Benchmark 4.43% 7.22% 6.52% 5.38% Median Mutual Fund 4.25% 6.82% 6.28% 5.65% Growth of $1000 Since Inception $2,400 $2,200 $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Investment objective The Fund s investment objective is to achieve high total investment return by using a balanced approach. The Fund invests in the equity and fixed income securities of issuers located anywhere in the world. The Fund will invest predominantly in fixed income securities, with a 70% target allocation. The Fund aims to outperform the following benchmark: 40.8% FTSE Universe Bond Index 22.2% Barclays Capital Global Aggregate Hedged Index 9.0% S&P/TSX Composite Index 7.2% MSCI World Index 7.0% FTSE Short Term Bond Index 4.8% MSCI EAFE Index 3.0% S&P 500 Hedged Index 3.0% Russell 3000 Index 1.5% MSCI Emerging Markets Index 1.5% MSCI ACWI SMID Index +0.3% (a flat extra stated on an annualized basis) Investment strategy The Fund s target mix is 70% Diversified Bond Fund and 30% Diversified Equity Fund. The Fund uses a strategic allocation approach, i.e. the Fund is rebalanced every month to its target asset mix, no component is overweight or underweight based on short-term market views. Permissible investments The Fund s target mix is 70% Diversified Bond Fund and 30% Diversified Equity Fund. Permissible investments for the Balanced Income Fund are the same as for the Diversified Bond and the Diversified Equity Fund. Risks of investing in the fund Because this Fund is built by combining the Diversified Bond Fund and the Diversified Equity Fund, it is exposed to the same risks, but to a smaller extent. The main risks of investing in this Fund include market risk, credit risk, credit spread risk, currency risk, derivative risk, foreign investment risk, interest rate risk, prepayment risk, reinvestment risk, active management risk and tracking error risk. For a detailed definition of each risk, see the Definitions of Risks section on page 37. Who should invest in this fund? You might want to invest in this fund if you have a medium term horizon (3 to 5 years) and you want the simplicity of a single and well-diversified portfolio exposed mostly to fixed income securities. To invest in this fund, you should be able to accept a low to moderate level of risk. Top ten holdings** U.S. Treasury Note 2.125% 30-Jun-2021 1.2% Canada Housing Trust No.1 2.900% 15-Jun-2024 1.0% Canada Housing Trust No.1 1.250% 15-Dec-2020 1.0% Australia Government Bond 4.250% 21-Apr-2026 0.8% Bundesrepublik Deutschlan 1.000% 15-Aug-2025 0.8% Government of Canada 5.750% 01-Jun-2029 0.8% U.S. Treasury Note 2.625% 15-Aug-2020 0.8% Canada Housing Trust No.1 2.550% 15-Mar-2025 0.8% Province of Quebec 2.750% 01-Sep-2025 0.7% Toronto-Dominion Bank 0.7% Asset mix** Canadian Equities 9.4% U.S. Equities 9.3% EAFE Equities 9.0% Emerging Markets Equities 2.6% Canadian Fixed Income 39.5% Foreign Fixed Income 15.5% Mortgages 10.9% Other 4.0% Cash & Equivalents 0.0% **As of December 31, 2015

Tier 1 Balanced Growth Fund 16 Fund facts Total value of assets as at Dec. 31, 2015 $180.9 million Number of investors 3032 Date of inception October 1, 2001 Management expense ratio 0.48% (Expected average fees) Risk attributes Standard deviation of annual returns 12.3% Historical frequency of a negative calendar year return 3/14 Manager See Diversified Bond and Diversfied Equity Funds Annualized returns to December 31, 2015 1-Yr 3-Yr 5-Yr 10-Yr Western Fund 6.89% 12.31% 8.83% 5.96% Market Benchmark 6.01% 11.53% 8.49% 5.73% Median Mutual Fund 3.19% 10.25% 7.67% 6.33% Growth of $1000 Since Inception $2,500 $2,250 $2,000 $1,750 $1,500 $1,250 $1,000 $750 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Investment objective The Fund s investment objective is to achieve high total investment return by using a balanced approach. The Fund invests in the equity and fixed income securities of issuers located anywhere in the world. The Fund will invest predominantly in equities, with a 70% target allocation. The Fund aims to outperform the following benchmark: 21.0% S&P/TSX Composite Index 17.5% FTSE Universe Bond Index 16.8% MSCI World Index 11.2% MSCI EAFE Index 9.5% Barclays Capital Global Aggregate Hedged Index 7.0% S&P 500 Hedged Index 7.0% Russell 3000 Index 3.5% MSCI Emerging Markets Index 3.5% MSCI ACWI SMID Index 3.0% FTSE Short Term Bond Index +0.1% (a flat extra stated on an annualized basis) Investment strategy The Fund s target mix is 30% Diversified Bond Fund and 70% Diversified Equity Fund. The Fund uses a strategic allocation approach, i.e. the Fund is rebalanced every month to its target asset mix, no component is overweight or underweight based on short-term market views. Permissible investments The Fund target mix is 30% Diversified Bond Fund and 70% Diversified Equity Fund. Permissible investments for the Balanced Income Fund are the same as for the Diversified Bond and the Diversified Equity Fund. Risks of investing in the fund Because this Fund is built by combining the Diversified Bond Fund and the Diversified Equity Fund, it is exposed to the same risks, but to a smaller extent. The main risks of investing in this Fund include market risk, credit risk, credit spread risk, currency risk, derivative risk, foreign investment risk, interest rate risk, prepayment risk, reinvestment risk, active management risk and tracking error risk. For a detailed definition of each risk, see the Definitions of Risks section on page 37. Who should invest in this fund? You might want to invest in this fund if you have a medium to long-term horizon (5 to 10 years) and you want the simplicity of a single and well-diversified portfolio exposed mostly to equities. To invest in this fund, you should be able to accept a moderate level of risk. Top ten holdings** Toronto-Dominion Bank 1.5% Royal Bank of Canada 1.2% Bank of Nova Scotia 0.9% Canadian National Railway Co. 0.9% Brookfield Asset Management Inc. 0.8% Canadian National Resources Ltd. 0.7% Manulife Financial Corp. 0.7% Magna International Inc. 0.6% Rogers Communications Inc. 0.5% U.S. Treasury Note 2.125% 30-Jun-2021 0.5% Asset mix ** Canadian Equities 21.8% U.S. Equities 21.6% EAFE Equities 20.8% Emerging Markets Equities 6.0% Canadian Fixed Income 16.9% Foreign Fixed Income 6.6% Mortgages 4.7% Other 1.7% Cash & Equivalents 0.0% **As of December 31, 2015