Investor presentation Alan Torrie, President & CEO; Scott - - PowerPoint PPT Presentation

Confidential – Not for Distribution

Investor presentation

Alan Torrie, President & CEO; Scott Milligan, CFO | November 2014

• Business. Needs. People.

Health • Benefits • Employee Assistance • Retirement Health • Benefits • Employee Assistance • Retirement

Confidential – Not for Distribution

This document contains “forward‐looking statements” within the meaning of applicable securities laws, such as statements concerning anticipated future events, results, circumstances, performance ,or expectations that are not historical facts. The use of words such as “may,” “will,” “expect,” “believe,” or

• ther words of similar effect may indicate a forward‐looking statement. These statements are not

guarantees of future performance and are subject to numerous risks and uncertainties, including those described in the firm’s publicly filed documents (available on SEDAR at sedar.com) and in Morneau Shepell (the firm's) MD&A under the heading “Risks and Uncertainties.” Those risks and uncertainties include current economic conditions, income tax matters, the ability to maintain profitability and manage growth, reliance on information systems and technology, reputational risk, dependence on key clients, and reliance

• n key professionals. Many of these risks and uncertainties can affect the firm’s actual results and could

cause the firm’s actual results to differ materially from those expressed or implied in any forward‐looking statement made by the firm or on the firm’s behalf. Given these risks and uncertainties, investors should not place undue reliance on forward‐looking statements as a prediction of actual results. All forward‐ looking statements in this document are qualified by these cautionary statements. These statements are made as of the current date and, except as required by applicable law, the firm undertakes no obligation to publicly update or revise any forward‐looking statement, whether as a result of new information, future events or otherwise. Additionally, the firm undertakes no obligation to comment on analyses, expectations,

• r statements made by third parties in respect of the firm, its financial or operating results, or its securities.

Forward‐looking statements

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A long history of growth and acquisitions

1962

Sobeco was founded and helped launch the Québec Pension Plan

1966

W.F. Morneau & Associates was established

1992

Morneau forms a strategic alliance with Coopers & Lybrand and absorbs its pension consulting and actuarial business

1996

Morneau launches its administrative outsourcing practice

1997

W.F. Morneau & Associates and Sobeco merge to form Morneau Sobeco

1998

Morneau acquires the Canadian pension consulting practice of Deloitte & Touche

2005

The firm completes an IPO and becomes an income trust: Morneau Sobeco Income Fund

2006

MSIF expands its western Canada presence by acquiring Heath Benefits Consulting

2008

MSIF enhances its Ontario presence by acquiring the defined benefit pension business of Cowan Benefits Consulting; MSIF adds further depth in western Canada by acquiring the actuarial firm of Leong & Associates

2008

Morneau Sobeco Income Fund becomes a major player in workplace health and productivity solutions with its acquisition of Shepell∙fgi

2010

Conversion to Morneau Shepell Inc.

2011

MSI acquires Jacques Lamarre & Associates (JLA) to expand EAP presence in Quebec

2012

MSI acquires US‐based SBC Systems to enhance benefits administration platform; and Mercer Canada’s pension and benefits outsourcing, business, which added a number of major multi‐ national companies to our roster

2013

MSI acquires Dion Durrell’s workers’ compensation business to strengthen Organizational Health Solutions practice

2014

MSI acquires Groupe AST, the largest workers’ compensation business in Quebec

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• 1. Growth and performance

Sustain or exceed our historical organic revenue growth and profit margins, augmented by strategic acquisitions

• 2. People

Being an employer of choice and developing capacity and capability within our leadership and broader talent pool

Four‐point strategy focused on growth and consistent returns

• 3. Client and brand management

Build strong integrative relationships with our clients, and a strong brand presence with our target audience

• 4. Shareholder value

Align capital structure and ongoing investments with stakeholder expectations

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Advice to employers

How can we reduce absenteeism? How can we control benefit costs? How can we manage pension risk? How can we improve employee engagement, health and productivity? How can we improve

• ur competitive

position?

Answers to employees

Will I have enough to retire? Will my family be looked after? Will I stay engaged and productive at work? Will there be support to help me and my family?

Essential to the financial security, health, and productivity of our clients and their people

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A balanced mix of services

Sources of revenue (2013)

33%

Employee Assistance Programs

11%

Absence Management Solutions

34%

Administrative Solutions

22%

Retirement and Benefit Consulting

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Increased complexity Improving productivity and employee engagement Rising health benefit costs Pension shortfalls and reform The future of retirement Changing demographics and technology Workplace mental health needs

Market trends drive demand for our services

Enabling companies to focus on their core businesses

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Large and growing blue chip client base

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9 50 100 150 200 250 300 350 400 450 500 2007 2008 2009 2010 2011 2012 2013

Acquisition Growth Organic Growth Recurring Revenue

A long history of growing recurring revenue

(million) $419 $365 $249 $147 $335 $332 $471

Percentage indicates proportion of total revenue that is recurring from prior year

99% 99% 99% 97% 98% 98% 98%

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10 118.5 132.7 20 40 60 80 100 120 140 2013 2014 ($million)

Q3 2014 results

Revenue and EBITDA growth of 12%

Revenue

Payout ratio 73.2% 70.6% 21.9 24.4 5 10 15 20 25 30 2013 2014 ($million)

EBITDA

EBITDA margin 18.5% 18.4%

+12% +12%

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11 352.6 404.7 ‐ 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 2013 2014 ($million)

Q3 YTD results

Revenue and EBITDA growth of 15%

Payout ratio 73.2% 70.6% 66.3 76.3 10 20 30 40 50 60 70 80 90 2013 2014 ($million) EBITDA margin 18.8% 18.9%

+15% +15%

Revenue EBITDA

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47.9 million common shares

45% institutional, 10% management, 45% retail

$800 million Convertible debenture

Due March 2017, 5.75% rate, $15 conversion price

$75 million Bank debt

Additional details on next page

$230 million

Capital structure

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Debt available Q2 2014 Balance ($m)

Revolving debt facility

$250 million $230 million

Bank debt financing has flexibility

Current bank debt facility (matures Nov 29, 2017) Bank debt to EBITDA ≤ 3.0:1

Currently 2.3: 1

EBITDA to interest expense ≥ 3.0:1

Currently 6.8: 1

Financial covenants

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100 109 141 182 197 50 100 150 200 250

A consistent total return to shareholders since our IPO in 2005

Cumulative total return Value of $100 invested on January 1, 2011

9/30/2014 1/1/2014 1/1/2013 1/1/2012 1/1/2011

Cumulative CAGR

MSI

217.3% 13.7%

S&P/TSX Comp

75.5% 6.4% Total return from IPO (September 2005) to September 2014

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20% CAGR total return since the beginning of 2011

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Significant recurring revenue base with strong margins, cash flow and low capital requirements Consistent performance and returns to investors

• ver time – current yield ~5%

Investment summary

Customer base of large, blue‐chip companies Unique integrated provider of human resource services

Confidential – Not for Distribution

Investor Relations contacts:

Michele Kumara mkumara@morneaushepell.com 416.383.6463 Alan Torrie atorrie@morneaushepell.com Scott Milligan smilligan@morneaushepell.com

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