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Message from the TTC Pension Fund Society CEO

TTC PFS 2016 Annual Report cover 6/15/17 9:43 AM

The TTC Pension Fund Society has been delivering our pension promise for over 75 years and we are committed to continue to deliver on that promise well into the future.

When we manage our Plans assets, we need to keep in mind that the contributions that we receive from a TTC Operator today while they are in their 20s or 30s will be used to deliver pension payments to that person as a pensioner while they are in their 80s and 90s. Employing a long-term approach to pension plan management enables us to keep our sights on the horizon to deliver our pension promise long into the future. Of course, we fully expect, and anticipate that certain periods in the future will be characterized by challenging short-term performance due to slow economic growth, market volatility and heightened geopolitical risks. Despite some of these varied challenges in 2016, the Fund has been able to generate another year with positive results. The Fund earned 6.3% after fees for the year ending December 31 with Plan assets increasing by approximately $300 million to $6.1 billion at year end. We ended the year with a funded status of 97% on a going concern basis, equal to the funded status from the year prior. Consistent with our long-term track-record, the Plan has earned an annualized return of 10.0% after fees over the last five years, which has exceeded our Plan benchmark return by 1.4% annually.

2016 TTC PFS Annual Report

2016 TTC PFS-SBA AGM Information Package

This strong financial position has allowed the TTC Pension Fund Society Board the ability to approve valuable increases to member benefits. The Board approved a Base year update effective January 1, 2017, and an ad-hoc pensioner increase of up to 1.35%. The pensioner increase is the maximum permitted by Canadian tax law and is equal to the change in the Consumer Price Index (CPI) published by Statistics Canada.

In keeping with our long-term approach to managing the Fund well into the future, pension staff are working with our plan actuary to conduct a study to update our long-term funded status projections. This study may result in moderate changes to our investment strategy moving forward, which will be designed to outperform the liabilities of the pension plan over the long term.

At the TTC Pension Fund Society, we take Member communication very seriously, which is why we have our Members come into our offices to understand the value of their pension, the provisions in their pension plan, and to go over various pension benefit options and other plan provisions available to them. In 2016, we processed a record number of retirements; over 500 employees came through our offices to sign pension documents, a year-over-year increase of roughly 30% from 2015.

Market Overview

2016 was a challenging year, characterized by continued modest economic growth in the global economy including concerns regarding stagnating European economic conditions, slowdown of growth in China and modest growth figures in the U.S. and Canada. The year was also characterized by significant political outcomes, with Britain voting to exit from the European Union and the unanticipated election of Donald Trump as President of the United States.

The environment for interest rates saw some major moves over the year, which was characterized by falling bond yields in both Canada and the U.S. in the first three quarters of 2016, which was followed by a sharp increase in bond yields in the last quarter.

Equity market returns were quite robust. Within the domestic market, Canada’s S&P/TSX Composite Index was one of the best performing markets in the world with a return of 21%, which was led by a strong recovery of global energy prices. Equity indices in the U.S. and emerging markets also experienced relatively strong performance, returning 8.7% and 8.0% in Canadian dollar terms respectively.

Sean Hewitt
Chief Executive Officer
TTC Pension Fund Society

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