Investor presentation March 2016 Business. Needs. People. Health - - PowerPoint PPT Presentation

Confidential – Not for Distribution

Investor presentation

March 2016

• 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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Confidential – Not for Distribution

Our Purpose

To be recognized as essential to the financial security, health and productivity of our clients and their people.

Our Values

• We value long-term

relationships.

• We treat others the way we

want to be treated.

• We are innovative and

entrepreneurial.

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Confidential – Not for Distribution

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Morneau Shepell is a leading provider of HR services and technology

50 years

• f experience

4,000

employees

$567M

annual revenue

Fastest growing

DC/CAP provider

87%

revenue in Canada

TSX: MSI $106M

annual EBITDA

~4x

revenue since 2007

20+ years

average client tenure

Confidential – Not for Distribution

63.1% 246.6% 102.3%

(50%) 0% 50% 100% 150% 200% 250% 300%

S&P/TSX Index 63.1% Morneau Shepell 246.6% S&P 500 Index 102.3%

Total Return – From IPO to March 10, 2016

Our shareholders continue to be rewarded at a pace that exceeds the broader market

Confidential – Not for Distribution

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Our history includes several successful acquisitions

1962

Sobeco was founded and helped launch the Québec Pension Plan

1966

W.F. Morneau & Associates was established

1992

Morneau acquires Coopers & Lybrand’s 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 (MSIF)

2006

MSIF acquires Heath Benefits Consulting

2008

MSIF acquires the defined benefit pension business of Cowan Benefits Consulting; and acquires the actuarial firm Leong & Associates

2008

MSIF becomes a leader in workplace health and productivity solutions with its acquisition of Shepell·fgi

2010

Conversion to Morneau Shepell Inc. (MSI)

2011

MSI acquires Jacques Lamarre & Associates to expand Employee Assistance presence in Quebec

2012

MSI acquires SBC Systems to enhance benefits administration platform; and acquires Mercer Canada’s pension and benefits outsourcing, business

2013

MSI acquires Dion Durrell’s workers’ compensation business to strengthen Absence Management Solutions practice

2014

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

2015

MSI acquires Ceridian’s US Health and Welfare Administration business and Bennsinger, Dupont & Associates to enhance US EAP capability

Confidential – Not for Distribution

7 100 200 300 400 500 600 2007 2008 2009 2010 2011 2012 2013 2014 2015

Acquisition Growth Organic Growth Recurring Revenue

We have a long successful history of growth

(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%

$536

98%

$567

97%

Confidential – Not for Distribution

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We offer a balanced mix of services

Sources of revenue (2015)

31%

Employee Assistance Programs

11%

Absence Management Solutions

38%

Administrative Solutions

20%

Retirement and Benefit Consulting

Confidential – Not for Distribution

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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Confidential – Not for Distribution

2015 results deliver revenue growth of 6% (6% organic) and

EBITDA growth of 7%

10 535.9 567.3 100 200 300 400 500 600 2014 2015

Revenue

Payout ratio 74.1% 60.8% 98.9 105.8 20 40 60 80 100 120 2014 2015

Adjusted EBITDA

EBITDA margin 18.5% 18.7%

+6% +7%

($million) ($million)

Confidential – Not for Distribution

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48.3 million common shares

45% institutional, 5% management, 50% retail

~$780 million Convertible debenture

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

$75 million Bank debt

Additional details on next page

$242 million

Capital structure

Confidential – Not for Distribution

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Debt available Q4 2015 Balance ($m)

Revolving debt facility

$300 million $242 million

Bank debt financing has flexibility

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

Currently 2.4: 1

EBITDA to interest expense ≥ 3.0:1

Currently 6.8: 1

Financial covenants

Confidential – Not for Distribution

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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:

Alan Torrie atorrie@morneaushepell.com Scott Milligan smilligan@morneaushepell.com

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