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Memorial University Pension Fund Investment Policy


1. Purpose

The purpose of this policy is to define the investment objectives of the Memorial University Pension Plan, the constraints of the Plan and the roles and responsibilities of each of the Committees, Advisors and Managers. The investment objectives and constraints are designed to guide the investment of the Plan's assets to ensure that funds are available to meet the liabilities of the Plan as they come due by establishing acceptable levels of risk, return and liquidity.

2. Sponsor

The Government of Newfoundland and Labrador is the Plan Sponsor with Memorial University of Newfoundland and its Board of Regents, as Trustee, having the power and responsibility as provided under The Memorial University Pensions Act. The Memorial University Act,Section 34(1)(n), provides the Board with the power "... to pay money, directly or indirectly, as contributions towards pensions, annuities, retiring allowances and gratuities for employees of the University upon such terms as the Board may from time to time prescribe." Section 6 of The Memorial University Pensions Actstates that "All pensions, payments, and refunds and all expenses of the administration of this Act are a charge upon and payable out of this fund and if at any time there is not sufficient money to the credit of the fund for those purposes as they fall due for payment the Minister of Finance shall pay into the fund an amount to cover the deficiency."

3. Profile

The Memorial University Pension Plan is a defined-benefit plan. Pensions are based on the average of the best five years of pensionable salary times two percent per year of pensionable service (subject to integration with the Canada Pension Plan) to a maximum of 35 years. Each employee shall contribute six percent (subject to integration with the Canada Pension Plan) of pensionable salary to the fund. The rate of contribution by the employer is not specified; historically, however, the employer has matched employee contributions, in accordance with Section 34(1)(n) of The Memorial University Act as noted above.

[The above section 3 requires some revision to take into account the changes due to the promulgation of the Pension Benefits Act of 1997 and the amendments to the Memorial University of Newfoundland Pensions Act in December of 1997. - Ed, May 1998.]



4. Roles and Responsibilities

The composition, roles and responsibilities of the University Pensions Committee shall be as stated in the University Pensions Committee Terms of Reference (see Appendix A).

The roles of the Performance Review Subcommittee and Amendments Subcommittee are as follows:

  • Performance Review Subcommittee: To assist the University Pensions Committee in evaluating the performance of the Pension Fund.
  • Amendments Subcommittee: To assist the University Pensions Committee in proposing amendments to The Memorial University Pensions Act.



5. Asset Classes Eligible for Investment The Memorial University Pensions Act provides that the fund may be invested in:

  1. bonds or debentures of a municipality in Canada or a public school corporation or other corporation, which are guaranteed by the Government of Canada or a province;
  2. investments in which life insurance companies are authorized by the Parliament of Canada to invest funds, subject to the limitation on investments in stocks, bonds, debentures, and real estate mortgages set out in the Insurance Companies Act; and
  3. other securities and upon such terms and conditions that are approved for the purpose by the Lieutenant-Governor in Council; or
  4. any of the securities or investments referred to in paragraphs (a) to (c).



6. Assets

(a) Asset Mix

Balanced Managers shall have the discretion to change the asset mix within the ranges outlined below (based on market value):

Minimum (%) Maximum(%)
Equities * 35 65
Fixed Income 35 65
Short Term 0 30



* Maximum for foreign content is to be the maximum limit as permitted under the Income Tax Act (based on book value).


Specialty Managers will operate in accordance with the mandate as provided to them by the Committee. The Committee shall award speciality mandates in such a manner that the asset mix provided for Balanced Managers is maintained for the fund overall.

(b) Constraints by Asset Class

For the following four classes, percentages refer to the proportion of funds invested in the specific asset classes at book value.

Canadian Equities

Maximum in a single industry group: the lesser of 30% or 8% + TSE 300 industry weight

Maximum in a single company: the higher of 7.5% or 1.5 TSE company weight

Maximum in companies with a market capitalization less than $250 million: 15%

All equities shall be listed on the Toronto Stock Exchange or the Montreal Stock Exchange except convertible and exchangeable securities and new issues providing these securities comply with policy upon conversion or immediately after the new issue.

Foreign Equities

Maximum in a single company: 7.5%

Maximum market capitalization of a single company for direct investment: $200 million

All equity investments shall be traded on a recognized market.

Fixed Income

Credit Rating

  • Minimum average quality standard for the fund: A
  • Minimum quality standard at time of purchase for any single investment: BBB
  • Maximum exposure to securities with quality standards less than A: 20% of fixed income portfolio
  • Maximum exposure to corporate securities with quality standards less than A: 10%
  • Maximum exposure to BBB bonds of a single government or government guaranteed issuer: 20%

Sector and Security Weighting

  • Maximum in a single, non-government guaranteed issue: 5%
  • Maximum exposure to non-government guaranteed issues: 60%
  • Maximum in a single industry: 30%
  • Maximum exposure to Provincial issues and guaranteed: 60%
  • Maximum exposure to Municipal issues: 20%

Duration

  • Maximum duration (that is, time-weighted average) range compared to Universe index: + or - 2 years

Types of Issues

  • Maximum exposure to non-publicly traded securities: 10%
  • Maximum exposure to Canadian denominated in foreign currency: 25%
  • Mortgage investments shall be CMHC insured or conventional first mortgages not exceeding 75% of the market value of the property.

Cash and Equivalent

  • Minimum quality standard at time of purchase for any single investment: R-1 (or equivalent)
  • Maximum term of any single investment: 1 year
  • Maximum exposure to non-government guaranteed issues: 40%



7. Performance Objectives

The long term investment performance objectives will be an average annual rate of return, over a four-year moving period, at least equal to:

  1. The real rate of return assumed by our consulting actuaries in their calculations of actuarial values for accrued pension benefits; and
    1. The median balanced fund rate of return achieved by other professional pension fund managers, with similar investment policies, as determined by the retained performance measurement services; or
    2. In the case of Speciality Managers, the median rate of return achieved by other such Speciality Managers, with similar investment policies, as determined by the retained performance measurement services.


8. Performance Review

The Performance Review Subcommittee will review the performance of the Managers on a quarterly basis. At least once in a fiscal year (ending March 31), each Manager will be requested to present to the Subcommittee and explain the past results and present strategies for the short and long term.

9. Voting Rights

The Managers are hereby delegated the responsibility to instruct the custodian on the exercise of the voting rights of the investments, subject to any exceptions provided in writing to the Managers by the Committee, and with the understanding that these rights be exercised to enhance the value of the relevant securities. The Managers will report annually to the Committee on the exercise of this authority.

10. Conflict of Interest

A conflict will be deemed to exist when the personal or corporate interests of a Plan Advisor or Fiduciary (for example, member of the Board of Regents, Committee member, Subcommittee member, Manager, Consultant, Custodian, Actuary) may benefit or may reasonable be perceived or expected to benefit from this relationship.

Members of the Board of Regents or of the Committee shall disclose all conflicts of interest in writing to the Board of Regents as soon as they become aware (or should become aware in the judgement of a reasonable person) of the existence of the conflict. All other Plan Advisors and Fiduciaries shall disclose a conflict of interest to the Committee. The Board of Regents or the Committee, as applicable, shall determine if a conflict exists. If a conflict is deemed to exist, then the person or firm in conflict shall be absent for the relevant discussions.

Managers shall abide by the Association for Investment Management and Research (AIMR) Code and Standards.

11. Legislation

The Plan Advisors and Fiduciaries shall comply with all relevant legislation, including, but not limited to:

  1. The Newfoundland Pension Benefits Act and Regulations
  2. The Memorial University Pensions Act and Regulations.

12. Monitoring

Managers are required to submit a statement by April 30 of each year indicating compliance with this policy and their mandate for the previous period of April 1 to March 31.

13. Responsibility for Investment Policy

The Committee is responsible for recommending an investment policy to the Board of Regents and, upon approval, the policy shall govern the actions of the Committee, the Subcommittee, the Plan Advisors and the Plan Fiduciaries. Unless specific circumstances demand immediate policy review, such as a change in benefit formula or a sudden change in the financial variables of the plan, this policy will normally be reviewed by the Committee every two years.

The Subcommittee is responsible to the Pensions Committee, which is responsible to the Board of Regents, for ensuring that all relevant parties comply with this policy or, in the event of non-compliance, that the appropriate action is taken.

1995.02.02

Disclaimer

This is a transcription of a copy of the Investment Policy from our files. Although it has been carefully checked, we make no warrant that it is error-free. -- Marilyn Tuck Lewis, Secretary

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