McMaster's Pension Plan
A Performance Review


FINANCIAL POSITION

The results of the valuation as at July 1, 1997 in comparison with those of the previous valuation as at July 1, 1996, are summarized as follows:

Going-Concern Basis ($000's)

JULY 1, 1997JULY 1, 1996
Actuarial Value of Assets
(adjusted for in-transit amounts)$732,280$678,594
Actuarial Liability
present value of accrued benefits for:
Active Members$307,506$296,302
Pensioners & Survivors$234,265$210,519
Deferred Pensioners$1,264$856
Additional Voluntary Contributions$100$357
Inactive - Status Undecided$8,540$9,957
Total Liability$551,675$517,991
FUNDING EXCESS$180,605$160,603



CURRENT SERVICE COST The estimated value of the benefits that will accrue on behalf of the active members during 1997/98, in comparison with the corresponding value determined in the previous valuation as at July 1, 1996, is summarized below:

Employer's Current Service Cost ($000's)

JULY 1, 1997JULY 1, 1996
Total Current Service Cost$20,647$20,452
Estimated members' required contributions$5,605 $ 5,880
Estimated employer's current service cost$15,042$14,572
Employer's current service cost expressed as a % of members' contributions 268% 248%

Members will contribute 50% of this amount during the 1997/1998 Plan year. The remainder will be funded through surplus assets in the Plan.


MEMBERSHIP DATA
Plan membership data is summarized below.

Plan Membership

JULY 1, 1997JULY 1, 1996
Active Members2,7312,819
Pensioners and Beneficiaries970900
Deferred Pensioners5449
Inactive-Status Undecided251254
TOTAL MEMBERSHIP4,0064,022




Measurement of Investment Management Performance for the Quarter ending June 30, 1997

Time Weighted Rates of Return

UNIVERSITYQUARTERS ENDINGANNUAL RATESLONGER PERIODS

Sep 1996Dec 1996Mar1997 June 1997Year Ending June 97Jun93- Jun94 Jun94 -Jun95Jun95-Jun96 Jun95- Jun97 Jun94-Jun97Jun93-Jun97
2 yrs3 yrs4yrs
Queen's3.98.10.6 8.122.15.112.813.7 17.816.113.3
York3.27.30.57.119.2 4.213.213.316.2 15.212.3
McMASTER3.77.6 0.19.021.72.916.2 14.217.917.313.5
Carleton4.08.3-1.18.5 20.93.614.313.2 17.016.112.8
Brock3.67.0-0.27.2 18.62.612.512.2 15.414.411.3
Waterloo4.18.20.77.8 22.32.212.614.5 18.316.412.7
Windsor4.17.60.46.6 19.92.813.313.2 16.515.412.1
TSE5.412.6-0.810.630.2 4.015.314.021.819.6 15.5
S&P5003.09.13.717.1 36.59.424.125.1 30.728.423.4
Long TermBonds6.37.7-0.76.4 21.0-3.421.311.1 15.917.712.0
Mid TermBonds5.35.3-0.54.0 14.8-1.517.910.7 12.714.410.2

Returns include interest income, dividends, currency gains/losses, capital gains and are net of investment expenses.

Prepared by William M. Mercer Limited.





Combined Managers: Asset Commitment Comparables

MARKETVALUE POLICYASSET MIX
Jun96Sept96Dec96 Mar97Jun97MinBench Max
%%%% %%%%
EQUITIES
Canadian (JF/Linc)17.017.317.7 17.817.3
Canadian (Index)11.111.412.0 12.012.3
TOTAL Canadian28.128.7 29.729.829.625 3560
U.S. (JF/Linc)10.710.59.9 10.210.610
U.S. (Derivative)***5.85.8 5.85.96.4
Non-N.A.9.69.49.39.5 9.910
TOTAL Foreign26.125.725.0 25.626.9102025**
TOTAL Equities54.254.4 54.755.456.535 5575
FIXED INCOME
Bonds (JF/Linc)27.026.926.2 26.324.6
Bonds (Index)14.514.914.7 14.714.2
TOTAL Bonds41.541.840.9 41.038.8*2542 50
Cash4.33.84.43.6 4.70315
TOTAL Fixed Income45.845.6 45.344.643.525 4565
TOTAL FUND100.0100.0 100.0100.0100.0
* change in weighting of +/- 2% since previous quarter
** Maximum of 20% by book value
*** deemed to be Canadian content


COMMENTS

As shown above, on June 30, 1997, the Fund was underweighted in Canadian equities, and overweighted in U.S. stocks, compared to the benchmark portfolio weights. Conversely, fixed income securities were underweighted. This asset allocation added value ov er the last four quarters because equities -- and U.S. equities in particular -- outperformed fixed income securities. Please note that foreign equities represented 26.9% of the Fund on June 30, 1997 which was 1.9% above the Policy maximum of 25.0%, caus ed primarily by the strong performance of U.S. equities.

Prepared by James P. Marshall, Inc.