audit & finance committee - amazon s3...committee process 1. the audit & finance committee (...

TAB 3

Report to Convocation November 2, 2017

Audit & Finance Committee

Committee Members Chris Bredt (Chair)

Suzanne Clément (Vice Chair) Teresa Donnelly (Vice-Chair)

Peter Beach Paul Cooper Janis Criger

Seymour Epstein Michelle Haigh

David Howell Vern Krishna

Jan Richardson Cathy Strosberg

Tanya Walker

Purpose of Report: Decision and Information

Prepared by the Finance Department Wendy Tysall, Chief Financial Officer, 416-947-3322 or [email protected]

Convocation - Audit and Finance Committee Report

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TABLE OF CONTENTS

For Decision ............................................................................................................... TAB 3

2018 LibraryCo Budget ................................................................................................ TAB 3.1

2018 Law Society Budget ............................................................................................ TAB 3.2

For Information: ......................................................................................................... TAB 3.3

Performance of Portfolio Manager


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COMMITTEE PROCESS

1. The Audit & Finance Committee (“the Committee”) met on October 3, 2017.

2. Committee members in attendance were Chris Bredt, (chair), Suzanne Clément, (v.chair), Teresa Donnelly, (v.chair), Peter Beach (phone), Janis Criger, Seymour Epstein, David Howell, Cathy Strosberg and Tanya Walker (phone).

3. Law Society staff in attendance: Diana Miles, Wendy Tysall, Fred Grady, Andrew Cawse and Brenda Albuquerque-Boutilier.

4. Also in attendance: Tanya Bishop of AON Hewitt.


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TAB 3.1

FOR DECISION

2018 LIBRARYCO INC. BUDGET

MOTION 5. That Convocation approve the LibraryCo Inc. budget for 2018, incorporating Law

Society funding of $7,899,937. 6. The Law Society collects funds for county and district law library purposes and transfers

these funds to LibraryCo.

7. LibraryCo, a wholly-owned, not-for-profit subsidiary of the Law Society, was established to develop policies, procedures, guidelines and standards for the delivery of county law library services and legal information across Ontario and to administer funding on behalf of the Law Society. The Law Society holds all of the 100 common shares. Of the 100 special shares, 25 are held by the Toronto Lawyers Association ("TLA") and 75 are held by the Federation of Ontario Law Associations ("FOLA"). The Law Society may appoint up to four directors, FOLA may appoint up to three directors and TLA may appoint one director.

8. Under the Unanimous Shareholders Agreement for LibraryCo: “at least ninety days prior to the commencement of each financial year of the Corporation the Board shall oversee the preparation and approve a detailed operating plan and budget for the operation of the Corporation for the coming fiscal year. The budget shall include the request from the Corporation in respect of the library levy for the next ensuing fiscal year. Once approved, the budget shall be forthwith presented to LSUC for its approval. If LSUC does not approve the budget as presented, the board and LSUC shall cooperate in good faith to resolve any disputes with a view to developing a budget that is mutually acceptable, prior to the commencement of the fiscal year. In the event a mutually acceptable budget is not developed within a reasonable period of time, nothing herein shall fetter the budgetary discretion of LSUC to determine the level of funding for the Corporation.”

9. The budget approved by the LibraryCo Board incorporates an average increase in library funding of 2% and a 1% increase in the Law Society grant or $85,000 to $7,899,937.

10. The current draft of the Law Society’s budget maintains LibraryCo funding at the 2017

county library levy of $194 per lawyer or $7,993,000 after the increase in the number of lawyers. As in previous years, any difference between the amount collected from lawyers and remitted to LibraryCo would be maintained in the County Library Fund.


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LIBRARYCO INC. DRAFT 2018 BUDGET

2018 2017Budget Budget

Expenses $ $

1 Library System (Attachment A) 6,769,219 6,612,724 2 Special Needs Grants 45,800 44,888 3 Electronic Products 342,390 339,000 4 Transition Expenses - 85,000

7,157,409 7,081,612

Delivery of Administrative and Centralized 5 Services (Attachment B) 901,100 892,200

6 Total Expenses 8,058,509 7,973,812

Revenue

7 Law Society Grant 7,899,937 7,815,240 8 Use of General Fund / Reserve Fund 158,572 158,572

9 Total Revenue 8,058,509 7,973,812

10 Surplus / (Deficit) (0) 0


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LIBRARYCO INC. DRAFT BUDGET ATTACHMENT A

GRANTS TO COUNTY LIBRARIES

ASSOCIATION 2018 LibraryCo

Grant ($) 2017 LibraryCo

Grant ($) 2018

% ChangeAlgoma 142,484 139,690 2%Brant 105,847 103,772 2%Bruce 59,035 57,877 2%Carleton 652,305 639,515 2%Cochrane 51,284 50,278 2%Dufferin 49,186 48,221 2%Durham 161,607 134,672 20%Elgin 80,648 79,067 2%Essex 296,746 290,927 2%Frontenac 140,108 137,360 2%Grey 69,904 68,533 2%Haldimand 31,560 30,941 2%Halton 147,268 144,380 2%Hamilton 474,084 464,788 2%Hastings 89,540 87,784 2%Huron 80,113 78,542 2%Kenora 92,124 90,318 2%Kent 74,386 72,928 2%Lambton 79,098 77,547 2%Lanark 41,461 40,648 2%Leeds & Grenville 75,814 74,328 2%Lennox & Addington 28,078 27,527 2%Lincoln 188,402 184,708 2%Manitoulin 2,680 2,627 2%Middlesex 382,617 375,115 2%Muskoka 68,126 66,790 2%Nipissing 91,017 89,232 2%Norfolk 74,410 72,951 2%Northumberland 87,741 86,020 2%Oxford 75,104 73,631 2%Parry Sound 46,415 45,505 2%Peel 313,885 307,730 2%Perth 57,842 56,708 2%Peterborough 140,011 137,266 2%Prescott & Russell 14,682 14,394 2%Rainy River 28,474 27,916 2%Renfrew 131,108 128,537 2%Simcoe 148,237 145,330 2%Stormont, Dundas & Glengarry 81,891 80,286 2%Sudbury 197,788 193,910 2%Temiskaming 45,620 44,725 2%Thunder Bay 179,826 176,300 2%Toronto 620,928 608,753 2%Victoria Haliburton 92,498 90,684 2%Waterloo 253,051 248,090 2%Welland 99,087 97,144 2%Wellington 79,958 78,391 2%York 245,142 240,336 2%

6,769,219 6,612,724 2%


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LIBRARYCO INC. 2018 DRAFT BUDGET DELIVERY OF ADMINISTRATIVE AND CENTRALIZED SERVICES Attachment B

2018 2017 Increase / Decrease$ $ %

Head Office 1 Insurance 5,200 5,100 2%2 Publications 4,000 4,000 0%3 Professional & Consulting Fees 30,600 30,000 2%4 Administrative Services 305,000 305,000 0%5 Web Initiatives 3,000 3,000 0%6 Board of Directors 20,000 20,000 0%7 Courier and Postage 20,700 20,300 2%8 Miscellaneous 6,100 6,000 2%

9 Total Head Office Expenses (A) 394,600 393,400 0%

Law Libraries Centralized Purchasing10 County Library Benefit Plan 265,000 260,000 2%11 COLAL Education and Meetings 37,500 36,800 2%

12 Publications County Libraries 90,000 90,000 0%13 Insurance - Counties 94,000 92,000 2%14 FOLA Meeting Expense 10,000 10,000 0%15 1-800 Phone Lines 10,000 10,000 0%

16 Total Centralized Expenses (B) 506,500 498,800 2%

17 Total Expenses (Total of A and B) 901,100 892,200 1%


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TAB 3.2

FOR DECISION

2018 LAW SOCIETY BUDGET MOTION 11. That Convocation approve the Law Society’s 2018 Budget including the following

annual fee amounts.

For lawyers:

General Fee $1,598

Compensation Fund 300

LibraryCo 194

Capital 91

Total $2,183

For paralegals:

General Fee $997

Compensation Fund 12

Capital 91

Total $1,100

12. The budget allocates $4.8 million from the Lawyer General Fund balance and $600,000 from the accumulated surplus investment income in the E&O Fund to mitigate the fee increase for lawyers. $2.1 million is allocated from the Paralegal General Fund balance to mitigate the fee increase for paralegals.

Budget Material

13. A full discussion can be found in the attached 2018 Draft Budget & Three Year Forecast

materials. 14. The Law Society's draft 2018 budget and three year projections were presented to

benchers for input at a budget information session on October 3, 2017.


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Key Issues and Considerations 15. Under S.50 of By-Law 2:

i. The annual budget shall be presented to Convocation for final approval not later than November 30 each year.

ii. The budget shall be consistent with the activities planned by Convocation for the next financial year.

iii. The budget shall include a reasonable projection of all expenses and revenues. iv. The use of reserve funds to supplement estimated revenues requires the express

approval of Convocation. v. Where Convocation has approved a budget that provides for the continuation of

a program, activity or service, any significant reduction or cancellation of that program, activity or service during the financial year requires the express approval of Convocation.

Licensees Annual Fee 16. The draft budget incorporates an annual fee increase for lawyers of $267 (14%) for an

annual fee of $2,183. The annual fee increase for paralegals is $54 (5%) for an annual fee of $1,100.

17. $213 of the increase in the lawyer annual fee is attributable to the Compensation Fund where the continued adverse claims experience has resulted in costs of $4 million and replenishment of the fund balance has resulted in costs of $5 million.

18. The balance of the increase in the lawyer annual fee is primarily attributable to: a) Staffing increases in the core areas of Professional Regulation, Professional

Development & Competence and Policy with increases of 14, 4 and 2 staff respectively. Professional Regulation processes were reviewed in late 2016 and early 2017 resulting in the reorganization of the department with increased resources being applied in 2017 and continuing in 2018.

b) Increased staffing and departmental reorganizations have resulted in additional space being rented with lease costs increasing by $900,000 in 2018.

c) $900,000, has been set aside in the 2018 budget for the Communications Plan, an increase of $600,000 over 2017.

d) Additional resources have been devoted to the Society’s Indigenous initiatives including $250,000 for the Indigenous Review and the hiring of two counsel with an Indigenous mandate.


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Activities Planned by Convocation 19. The 2018 draft budget addresses the resource requirements identified in the strategic

plan and includes estimates of costs and staffing.

20. In the fall of 2015, the Society undertook a comprehensive strategic planning exercise documenting the strategic priorities that will guide the operations of the Society through 2019. Convocation’s adopted plan will focus on five priorities and several key initiatives to support them through 2019. These priorities are:

Lead as a professional regulator

Increase organizational effectiveness

Prioritize life-long competence for lawyers and paralegals

Enhance access to justice

Engage stakeholders and the public with responsive communications.

21. In 2017, the implementation of initiatives supporting the Society’s strategic direction

continued, with the initiation of new referral and advertising rules, fine tuning the governance process, a review of the lawyer licensing process, approval of an Indigenous framework, engagement with a consultant to review and make recommendations to enhance public communications and recommendations from the Challenges Faced by Racialized Licensees Working Group. Additional resources were also allocated to support the investigative activities of the Society’s professional regulation division.

22. Examples of increased resources in 2018 which can be directly linked to specifics within

the strategic plan are:

additional regulatory resources and regulatory initiatives such as the Technology and

Evidence Control unit

the implementation of the Strategic Communications Steering Group

recommendations

development of the Coach & Advisor network

improving the policy development process

supporting the Indigenous Review.

23. Support for specific, current strategic planning initiatives such as the Mental Health

Strategy Implementation Task Force, the Legal Aid Working Group, the Challenges Faced by Racialized Licensees Working Group can all be sourced from existing resources or will have financial implications after 2018.


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Lawyer Compensation Fund

24. Provision for routine grant claims in the lawyer compensation fund increased by $4 million to $7.7 million and the replenishment of the fund balance adds an additional $5 million for a total of $12.7 million (2017: total of $3.7 million).

25. For the six months ended June 30, 2017, there was a $5.5 million deficit in the Lawyer

Compensation Fund. This follows a $2 million deficit in 2016, a $713,000 deficit in 2015 and a $10 million deficit in 2014. With this adverse claims experience the fund balance ($7.3 million at the end of June) is well below the minimum ($13 million) required by the Fund Balance Management Policy. The claims provision for 2018 of $4 million in the current version of the budget reflects this claims experience. An additional $5 million has been added to replenish the fund balance over three years in accordance with the fund balance management policy1.

26. The Society has been attempting to analyze and isolate the reason for the recent significant adverse claims experience and to identify ways of reducing the number and size of claims against the Fund. The increase in the claims limit has not been identified as a factor. There have been a number of high profile major defalcations and these do not follow a pattern. However most recently, the claims experience is more attributable to multiple claims against multiple lawyers.

27. 80% of claims against the Fund between 2007 and 2016 raised trust misappropriation or retainer issues and of these 43% related to real estate proceeds. The predominance of real estate claims and the significant rise in values in the real estate market is one factor for the adverse claims experience – the average grant per claim has been increasing since 2011.

28. The allocation of regulatory and spot audit costs to the Compensation Fund has been

discontinued for the 2018 fiscal year and the comparable 2017 Compensation Fund levies have been restated to reflect the 2018 calculation in accordance with financial reporting standards. Prior to 2018, the Compensation Fund levy was calculated to fund the direct costs of the Compensation Fund as well as an allocation of other costs which either contributed to the work of the Compensation Fund (Discipline and Investigation costs) or were used to mitigate the risk of fraud (the Spot Audit program).The Audit & Finance Committee has agreed that the Compensation Fund levy should be limited to the direct costs of the Compensation Fund with the other costs (regulatory and spot audit) currently allocated to the Compensation Fund being incorporated into the General Fund levy. This has no impact on Compensation Fund and General Fund surpluses / deficits or fund balances as the revenue raised matched projected expenses. It also has no effect on licensees as there was no impact on the total annual fee.

1 In September 2016, Convocation amended the Fund Balance Management Policy by reducing the minimum balance from three one in-one hundred year events to one one-in-two hundred year event.


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Professional Regulation Enforcement

29. The Professional Regulation department is requesting funding to address a continuing backlog of complaints, to address some specific areas of concern and to meet the National Discipline Standards obligations promulgated by the Federation.

30. The backlog was one of the reasons for the external review of the Professional

Regulation department in 2016 which initiated ongoing changes to the department.

31. The 2018 budget proposes to add 7 additional positions to the three Enforcement units

including 3 Associate Discipline Counsel and 2 contract counsel positions continuing to the end of the 2018. The function of the latter two specialized positions will be to deal with an existing inventory of complaints emerging from the Indigenous community.

Professional Regulation External Counsel 32. The draft budget includes an increase in regulatory external counsel costs from $1.5

million to $1.9 million. The increased use of external counsel augments the hiring of additional permanent staff, to address the caseload pressures noted above and reflects a growing demand for specialized expertise in dealing with complex and/or protracted discipline matters and unauthorized practice prosecutions.

Professional Regulation - Technology & Evidence Control Unit

33. The TEC Unit was created in 2017, with a single employee. Budgetary approval is now

sought to ensure that the department is appropriately staffed and resourced. Currently, investigation material received by the Society is largely paper-based. However this is gradually being replaced by electronic data, motivating a TEC Unit.

34. The Law Society Tribunal is in the process of implementing electronic workflow and Law Society regulatory materials need to be compatible with the Tribunal’s electronic systems.

35. The TEC Unit is responsible for the software applications that support electronic data management systems. It oversees the warehousing of physical and digital evidence obtained during an investigation. A fully staffed TEC Unit will provide the ability to receive, produce, manage and control electronic data in order to operate efficiently and effectively and, as part of that mandate, to develop, implement and maintain an electronic data management system. The costing of a system has not been finalized or budgeted.

36. The TEC Unit currently has total expenses of $268,000 with 1 employee and the 2018 budget envisages an additional five employees and systems costs phased in for a total increase in expenses of $500,000.


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Professional Development & Competence 37. Staffing resources in PD&C are budgeted to increase by four.

The pace of change in licensure, competence, practice supports and quality assurance for the professions continues to increase, with policy analysis and the development of strategic and operational responses also increasing. To meet this increasing workflow and responsibility, one Counsel is being added in the Executive Director’s office.

Due to the volume of calls and the increasing complexity of the issues being managed by Practice Management, one Counsel is being added.

To alleviate workload stresses, the Practice Review program will add one position in 2018.

Practice Support and Resources is adding a staff member to meet increased work volumes and to facilitate linkages between resources and supports.

Lawyer Licensing Process

38. In November 2012, Convocation approved a three-year pilot project that will allow lawyer licensing candidates to either article or complete a Law Practice Program, starting in the 2014-15 licensing year. Convocation also approved a $1 million member contribution to help defray costs of the project. In November 2016, the LPP was extended by Convocation for two additional licensing years. The current licensing fees of $4,710 per lawyer candidate has been unchanged over this time and the 2018 budget maintains the licensing fees at this level. The $1 million contribution from lawyers to the licensing process has also been retained.

Policy

39. Part of the Society’s Strategic Plan is to benchmark the policy development process. This has been accomplished leading to the reorganization of the Policy Secretariat, the addition of two counsel and the stratification between Research Counsel, Strategic Counsel and Counsel and an increase in expenses of nearly $400,000.

Communications Plan

40. As part of the Strategic Plan, Convocation set the improvement of communications with

licensees and the public as one its key priorities and a Strategic Communications Steering Group was created. A consultant was retained for expertise in building an integrated communications and outreach strategy. Subject to Convocation’s approval, the Communications Plan is focused on structuring communications to create awareness and reinforce the value of regulated legal professionals for the public in the interests of the public and ensuring the effectiveness of communications and engagement and outreach efforts with Law Society licensees and licensee stakeholder groups and organizations. $900,000 has been set aside in the 2018 budget for this plan, an increase of $600,000 over 2017.


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LibraryCo Inc.

41. Pending progress on the LibraryCo transition plan, the LibraryCo per-member levy has

been maintained at the 2017 amount of $194 for a total of $7,993,000. LibraryCo’s budget, included as part of this Committee material, projects Law Society funding of $7,899,937. Any difference between amounts actually collected and amounts remitted to LibraryCo will be maintained in the Society’s County Library Fund.

Indigenous Review 42. The budget includes a placeholder amount of $250,000 for the review panel formed in

2017 to examine the way in which the Law Society and its Tribunal address regulatory matters involving Indigenous persons, complaints, and issues. The review panel will identify issues and make recommendations on opportunities for inclusion of Indigenous perspectives.

Capital Fund 43. The Society is in the second of a three year process of replacing the existing licensee

data base with a modern, more robust database application that will serve the Society’s needs for the coming decades. The current systems built on the DB2 platform are rapidly approaching the end of their useful lives and will constrain the Society in its efforts to deal with entity regulation, as just one example.

44. The draft budget for 2018 includes a provisional estimate of $2.1 million, the same as 2017, to fund the platform acquisition, data model design, system acquisition or development. It is anticipated that over the course of a number of years, all Law Society applications, with the exception of the Law Society’s financial applications, will migrate to the Society’s new platform.

45. The planned Facilities Capital budget for 2018 is $2.7 million (2017: $2.7 million), primarily for space consolidation / relocation / workstation replacement type expenses.

46. The planned Information Technology capital budget for 2018 is $1.8 million, which is the final portion of the $8 million capital allocation to IT in 2014. Originally a three-year allocation (2014, 2015, and 2016), in 2015 the time period was extended by two years, making it a five-year allocation (including 2017 and 2018).

The Action Group on Access to Justice (TAG) 47. The Law Foundation of Ontario’s support of up to $400,000 per year for TAG has ended.

The 2018 budget envisages a reduction in operations of $100,000 previously funded by the LFO. An evaluation of TAG activities is being completed by a consultant over the last quarter of 2017 reviewing the efficacy of the access to justice clusters, assessing the effectiveness of engagements with the legal community and further reviews of activities for planning a subsequent phase.


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Use of Fund Balances 48. The draft 2018 budget allocates $4.8 million from the Lawyer General Fund balance and

$600,000 from the accumulated surplus investment income in the E&O Fund to mitigate the fee increase for lawyers. $2.1 million is allocated from the Paralegal General Fund balance to mitigate the fee increase for paralegals. Fund Balances may not be available in future years to reduce fees resulting in potentially higher annual fees. Sustaining current spending patterns will ultimately require increases in the annual fee once accumulated fund balances are exhausted and the projections show this is likely before or around 2020.

Assumptions Underlying the 2018 Budget 49. The 2018 budget is based on:

Increase in Full Fee Paying Equivalent lawyers by 1,000 to 41,200

Increase in Full Fee Paying Equivalent paralegals by 500 to 6,100

The draft 2018 budget includes a salary and benefit provision of 2% or $1.4 million

(2017: 3%) to provide for merit adjustments, increasing employee benefit costs and

to be in line with expected market rates for 2018. The Society aims to compensate

employees with salaries and benefits that are competitive and fair in exchange for

their contribution to the organization at a rate that is consistent with the 50th

percentile of the organization’s comparator group of companies and organizations

that access the same talent pool.

Allocation of $600,000 from the accumulated surplus investment income in the E&O

Fund to mitigate fee increase for lawyers (2017: $600,000)

$4.8 million of the lawyer General Fund Balance used to mitigate fee increase (2017:

$4.8 million)

$2.1 million of the paralegal General Fund Balance used to mitigate fee increase

(2017: $1 million)

Contingency maintained at $1 million

$2.1 million maintained for replacement/development of Relationship Management

System (Member Data Base)

CPD revenues reflect 2017 actuals which are projected to be close to the 2017

budget and so are unchanged

Assessments of the lawyer licensing process have not yet been completed and the

financial impact of these deliberations is expected to be limited in 2018. The current

licensing fees of $4,710 per lawyer candidate includes the costs of the Law Practice


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Program, the enhanced Articling Program and all other fees for licensure equalized

across all candidates and the 2018 budget maintains the licensing fees at this level.

The $1 million contribution from lawyers to the licensing process has also been

retained. The paralegal licensing examination fees are budgeted to remain at $1,400.

Bencher remuneration rates have not been increased in this budget. However, if the

working group assessing the current remuneration scheme recommend an

inflationary increase in the per diem the budget has made sufficient provision to

absorb such a recommendation.


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THE LAW SOCIETY OF UPPER CANADA 2018 DRAFT BUDGET AND THREE YEAR FORECAST

1


November 2, 2017


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Introduction .............................................................................................................................................................. 3

Budget Summary ..................................................................................................................................................... 4

Major Budgetary Assumptions ................................................................................................................................. 7

Annual Fees............................................................................................................................................................. 8

Use of Fund Balances ............................................................................................................................................. 9

2018-2020 Forecast ............................................................................................................................................... 10

Expenditures by Operational Area ......................................................................................................................... 15

Non-Annual Fee Revenues ................................................................................................................................... 18

Strategic Priorities .................................................................................................................................................. 19

Professional Regulation ......................................................................................................................................... 20

Law Society Tribunal ............................................................................................................................................. 36

Professional Development and Competence ........................................................................................................ 37

Policy ..................................................................................................................................................................... 53

Legal ...................................................................................................................................................................... 55

External Relations and Communications ............................................................................................................... 56

Corporate Services ................................................................................................................................................ 60

Chief Executive Officer .......................................................................................................................................... 74

Finance .................................................................................................................................................................. 78

Bencher/Treasurer ................................................................................................................................................. 80

Corporate Expenses .............................................................................................................................................. 81

Support of External Organizations ......................................................................................................................... 82

Assistance Plans ................................................................................................................................................... 83

10 Year History ...................................................................................................................................................... 84


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The 2018 budget and 2019-2020 financial projections are intended to ensure operational sustainability and ongoing support of the Law Society’s core functions and the priorities of Convocation. While demonstrating fiscal restraint, the budget focuses on the organization’s core responsibilities of professional regulation, professional development & competence, policy development and facilitating access to justice, while addressing the established priorities for the 2015-2019 bencher term. Law Society By-Law 2:

i. The annual budget shall be presented to Convocation for final approval not later than November 30 each year. ii. The budget shall be consistent with the activities planned by Convocation for the next financial year. iii. The budget shall include a reasonable projection of all expenses and revenues. iv. The use of reserve funds to supplement estimated revenues requires the express approval of Convocation.

Total Budgeted Expenditures

2018 2017

Salaries & Benefits 66,951,300 62,312,700

Operating Expenses 4,449,500 4,290,200

Program Expenses 65,242,800 54,795,900

Total 136,643,600 121,398,800

606.1579.8

2018 2017

FTE


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Approved Projected Change2017 2018 2017 vsBudget Budget 2018

1 Annual fee revenue 82,883,000 96,652,200 13,769,200 2 Licensing process 13,198,300 13,268,300 70,000 3 CPD 8,686,000 8,686,000 ‐ 4 Other revenue 10,149,200 10,495,700 346,500 5 Total Funding 114,916,500 129,102,200 14,185,700

6 Salaries and benefits 62,674,700 66,951,300 4,276,600 7 Operating 4,194,800 4,449,500 254,700 8 Program 37,926,100 39,910,500 1,984,400 9 General fund 104,795,600 111,311,300 6,515,700 10 Capital fund 4,777,000 4,304,300 472,700‐ 11 LibraryCo 7,815,300 7,993,000 177,700 12 Compensation Fund 4,010,900 13,035,000 9,024,100 13 Total Expenditures 121,398,800 136,643,600 15,244,800

14 Deficit 6,482,300‐ 7,541,400‐ 1,059,100‐

15 E&O surplus investment income 600,000 600,000 ‐ 16 Fund Balances 5,882,300 6,941,400 1,059,100 17 Total Use of Fund Balances 6,482,300 7,541,400 1,059,100

Law Society of Upper Canada2018 Budget

Lawyers and Paralegals


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1 Annual fee revenue 77,027,300 89,944,000 12,916,700 2 Licensing process 11,016,700 11,016,700 ‐ 3 CPD 7,817,400 7,648,000 169,400‐ 4 Other revenue 9,153,100 9,266,200 113,100 5 Total Funding 105,014,500 117,874,900 12,860,400

6 Salaries and benefits 56,257,100 58,923,800 2,666,700 7 Operating 3,778,100 3,924,200 146,100 8 Program 34,537,600 35,835,400 1,297,800 9 General fund 94,572,800 98,683,400 4,110,600 10 Capital fund 4,194,600 3,749,200 445,400‐ 11 LibraryCo 7,815,300 7,993,000 177,700 12 Compensation Fund 3,870,000 12,887,500 9,017,500 13 Total Expenditures 110,452,700 123,313,100 12,860,400

14 Deficit 5,438,200‐ 5,438,200‐ ‐

15 E&O surplus investment income 600,000 600,000 ‐ 16 Fund Balances 4,838,200 4,838,200 ‐ 17 Total Use of Fund Balances 5,438,200 5,438,200 ‐

Law Society of Upper Canada2018 BudgetLawyers


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1 Annual fee revenue 5,855,700 6,708,200 852,500 2 Licensing process 2,181,600 2,251,600 70,000 3 CPD 868,600 1,038,000 169,400 4 Other revenue 996,100 1,229,500 233,400 5 Total Funding 9,902,000 11,227,300 1,325,300

6 Salaries and benefits 6,417,600 8,027,500 1,609,900 7 Operating 416,700 525,300 108,600 8 Program 3,388,500 4,075,100 686,600 9 General fund 10,222,800 12,627,900 2,405,100 10 Capital fund 582,400 555,100 27,300‐ 11 Compensation Fund 140,900 147,500 6,600 12 Total Expenditures 10,946,100 13,330,500 2,384,400

13 Deficit 1,044,100‐ 2,103,200‐ 1,059,100‐

14 Fund Balances 1,044,100 2,103,200 1,059,100 15 Total Use of Fund Balances 1,044,100 2,103,200 1,059,100

Law Society of Upper Canada2018 BudgetParalegals


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Major Budgetary Assumptions

Increase in Full Fee Paying Equivalent lawyers by 1,000 to 41,200

Increase in Full Fee Paying Equivalent paralegals by 500 to 6,100

The draft 2018 budget includes a salary and benefit provision of 2% or $1.4 million (2017: 3%) to

provide for merit adjustments, increasing employee benefit costs and to be in line with expected market

rates for 2018. The Society aims to compensate employees with salaries and benefits that are

competitive and consistent with the 50th percentile of the organization’s comparator group of companies

and organizations that access the same talent pool

Non-salary expenses projected to increase at 0.6% (2017: 2%)

Allocation of $600,000 from the accumulated surplus investment income in the E&O Fund to mitigate

fee increase for lawyers (2017: $600,000)

$4.8 million of the lawyer General Fund Balance used to mitigate fee increase (2017: $4.8 million)

$2.1 million of the paralegal General Fund Balance used to mitigate fee increase (2017: $1 million)

Contingency maintained at $1 million

$2.1 million maintained for replacement/development of Relationship Management System

CPD revenues reflect 2017 experience

Assessments of the lawyer licensing process have not yet been completed and the financial impact of

these deliberations is expected to be limited in 2018. The current licensing fees of $4,710 per lawyer

candidate includes the costs of the Law Practice Program, the enhanced Articling Program and all other

fees for licensure equalized across all candidates and the 2018 budget maintains the licensing fees at

this level. The $1 million contribution from lawyers to the licensing process has also been retained

The paralegal licensing examination fees are budgeted to remain at $1,400


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Licensees Annual Fee The draft budget incorporates an annual fee increase for lawyers of $267 and paralegals of $54 for an annual fee of $2,183 and $1,100 respectively. The Society has a three tier annual fee structure. Licensees engaged in the practice of law or the provision of legal services pay 100% of the annual fee. Licensees otherwise employed pay 50% of the annual fee and those on parental leave or unemployed pay 25%. For the purpose of determining the annual fee the total number of licensees is prorated based on the tiers to determine the Full Equivalent total of licensees. The draft budget projects an increase in the number of lawyers of 1,000 to a Full Fee Paying Equivalent total of 41,200. It also projects an increase in the number of paralegals of 500 to a Full Fee Paying Equivalent total of 6,100. Relevant revenues and expenditures not directly attributable to lawyers or paralegals are allocated proportionately based on the FFE count.

Lawyers 2017 2018 Change

General Fund 1,531 1,598 67 Compensation Fund 87 300 213 Capital Fund 104 91 13‐ LibraryCo 194 194 ‐

Total 1,916 2,183 267

Full Fee Paying Equivalent Lawyers 40,200 41,200 1,000

Paralegals 2017 2018 Change

General Fund 925 997 72 Compensation Fund 17 12 5‐ Capital Fund 104 91 13‐

Total 1,046 1,100 54

Full Fee Paying Equivalent Paralegals 5,600 6,100 500


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Use of Fund Balances to Mitigate The Annual Fee The budget allocates $4.8 million from the Lawyer General Fund balance and $600,000 from the accumulated surplus investment income in the E&O Fund to mitigate the fee increase for lawyers. $2 million is allocated from the Paralegal General Fund balance to mitigate the fee increase for paralegals. This use of fund balances conforms to the Society’s fund balance management policy.

A B C D E

No Use of Fund Balances

Draft 2018 Budget Lawyers

General Fund

Estimated Policy

Maximum Requirement

Estimated Policy Mid‐

point Requirement

Estimated Policy

Minimum Requirement

1 Projected Balance December 31, 2017 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000

2 Available to mitigate annual fee 4,838,000 ‐ 4,200,000 8,400,000

3 Projected balance after fee mitigation 25,000,000 20,162,000 25,000,000 20,800,000 16,600,000

4 Annual Fee 2,353$ 2,183$ 2,300$ 2,199$ 2,096$

No Use of Fund Balances

Draft 2018 Budget

Paralegals General Fund

Estimated Policy

Maximum Requirement

Estimated Policy Mid‐

point Requirement

Estimated Policy

Minimum Requirement

5 Projected Balance December 31, 2017 5,200,000 5,200,000 5,200,000 5,200,000 5,200,000

6 Available to mitigate annual fee 2,103,000 2,000,000 2,550,000 3,100,000 .

7 Projected balance after fee mitigation 5,200,000 3,097,000 3,200,000 2,650,000 2,100,000

8 Annual Fee 1,489$ 1,100$ 1,117$ 1,027$ 937$


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Draft Projected Projected2018 2019 2020Budget Budget Budget

1 Annual fee revenue 96,652,200 106,288,700 112,247,000 2 Licensing process 13,268,300 13,401,000 13,535,000 3 CPD 8,686,000 8,772,900 8,860,600 4 Other revenue 10,495,700 10,600,700 10,706,700 5 Total Funding 129,102,200 139,063,300 145,349,300

6 Salaries and benefits 66,951,300 68,790,400 70,716,200 7 Operating 4,449,500 5,038,500 5,639,300 8 Program 39,910,500 41,208,700 42,532,800 9 General fund 111,311,300 115,037,600 118,888,300 10 Capital fund 4,304,300 4,777,000 5,583,300 11 LibraryCo 7,993,000 8,152,900 8,316,000 12 Compensation Fund 13,035,000 13,295,800 13,561,700 13 Total Expenditures 136,643,600 141,263,300 146,349,300

14 Deficit 7,541,400‐ 2,200,000‐ 1,000,000‐

15 E&O surplus investment income 600,000 1,200,000 1,000,000 16 Fund Balances 6,941,400 1,000,000 ‐ 17 Total Use of Fund Balances 7,541,400 2,200,000 1,000,000

Law Society of Upper Canada2018 ‐ 2020 Forecast Summary

Lawyers and Paralegals


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6 Salaries and benefits 58,923,800 60,552,300 62,263,300 7 Operating 3,924,200 4,502,700 5,092,800 8 Program 35,835,400 37,052,100 38,293,100 9 General fund 98,683,400 102,107,100 105,649,200 10 Capital fund 3,749,200 4,135,600 4,795,200 11 LibraryCo 7,993,000 8,152,900 8,316,000 12 Compensation Fund 12,887,500 13,145,300 13,408,200 13 Total Expenditures 123,313,100 127,540,900 132,168,600

14 Deficit 5,438,200‐ 1,200,000‐ 1,000,000‐

15 E&O surplus investment income 600,000 1,200,000 1,000,000 16 Fund Balances 4,838,200 ‐ ‐ 17 Total Use of Fund Balances 5,438,200 1,200,000 1,000,000


Lawyers


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6 Salaries and benefits 8,027,500 8,238,100 8,452,900 7 Operating 525,300 535,800 546,500 8 Program 4,075,100 4,156,600 4,239,700 9 General fund 12,627,900 12,930,500 13,239,100 10 Capital fund 555,100 641,400 788,100 11 Compensation Fund 147,500 150,500 153,500 12 Total Expenditures 13,330,500 13,722,400 14,180,700

13 Deficit 2,103,200‐ 1,000,000‐ ‐

14 Fund Balances 2,103,200 1,000,000 ‐ 15 Total Use of Fund Balances 2,103,200 1,000,000 ‐


Paralegals


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Annual Fee Forecast

Lawyers 2018 2019 2020

General Fund 1,598 1,734 1,773 Compensation Fund 300 300 300 Capital Fund 91 98 111 LibraryCo 194 193 193

Total 2,183 2,325 2,377

Full Fee Paying Equivalent Lawyers 41,200 42,200 43,200

Paralegals 2018 2019 2020

General Fund 997 1,158 1,254 Compensation Fund 12 14 16 Capital Fund 91 98 111

Total 1,100 1,271 1,381

Full Fee Paying Equivalent Paralegals 6,100 6,600 7,100


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A B C

2018 Draft Budget Lawyers

General Fund

Projected 2019 Budget Lawyers

General Fund

Projected 2020 Budget Lawyers General Fund

1 Projected Balance January 1 25,000,000 20,162,000 16,662,000

2 Available to mitigate annual fee 4,838,000 3,500,000 ‐

3 Projected balance after fee mitigation 20,162,000 16,662,000 16,662,000

4 Annual Fee 2,183$ 2,325$ 2,377$

2018 Draft Budget Paralegal

General Fund

Projected 2019 Budget Paralegal

General Fund

Projected 2020 Budget Paralegal General Fund

5 Projected Balance January 1 5,200,000 3,097,000 2,097,000

6 Available to mitigate annual fee 2,103,000 1,000,000 .

7 Projected balance after fee mitigation 3,097,000 2,097,000 2,097,000

8 Annual Fee 1,100$ 1,271$ 1,381$

Use of General Fund Balances to Mitigate Annual Fee


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Expenditures by Operational Area

Salary Administration The Society aims to compensate employees with salaries and benefits that are competitive and fair in exchange for their contribution to the organization at a rate that is consistent with the 50th percentile of the organization’s comparator group of companies and organizations that access the same talent pool.

The Society salary administration budget contains a provision of 2% for market and merit adjustments as well as all other compensation, such as promotions and job reclassifications.

Space Requirements Operationally, the expansion of existing activities and the introduction of new activities in 2017, 2018 and forecast for 2019 make it necessary for the Society to seek additional space for the staff being added. The Society has obtained additional rental space in 2017 with payments commencing 2018. The costs of relocating staff and operations from Osgoode Hall to this new space and reconfiguring the existing space they occupy in Osgoode Hall was provided for in 2017 with additional reconfiguration costs included in the facilities capital budget for 2018.

2018 2017

Professional Regulation incl. Comp Fund 41,181,500 29,624,600

Professional Development & Competence 29,805,200 29,012,500

Policy and Legal 3,355,200 3,178,400

External Relations and Communications 4,234,200 3,622,100

Tribunal 2,184,100 2,078,500

Client Service Centre 7,353,300 6,900,400

Convocation, Equity and Agencies 15,335,800 15,221,300

Corporate and Administration 28,890,000 26,984,000

Capital Allocation Fund 4,304,300 4,777,000

Total 136,643,600 121,398,800


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Support of Other Organizations The draft budget includes support for a number of other organizations as summarized below:

2018 ($) 2017 ($) LibraryCo 7,993,000 7,815,000CanLII 1,520,000 1,540,000Federation of Law Societies 1,100,000 1,120,000Federation of Ontario Law Associations 261,700 260,000Law Commission of Ontario 145,900 145,000Lawyers Feed the Hungry 100,000 100,000Ontario Justice Education Network 40,000 50,000Pro Bono Ontario 50,000 50,000

LibraryCo funding has been increased 2% from the 2017 amount of $7.8 million while LibraryCo’s transition planning progresses. Parental Leave Assistance Plan Funding of the Parental Leave Assistance Plan remains at zero in the draft budget. Use of the Parental Leave Assistance Plan continues to be low with expenses of $91,000 in the first half of 2017 compared to $61,000 in 2016. At the end of July 2017, the PLAP Fund balance was $361,000. Licensee Database Development The Society’s capital budgets for facilities and information systems are discussed in the detailed section below. However, the main issue faced by the Society is the storage and access of the Society’s core business data - its licensee data base. The Society is currently relying on an IBM platform released in 1988 for this purpose. The platform has served the Society’s needs for over 25 years. However, the underlying data base application is no longer suited to best support the ever changing needs of the Society.

The Society began the process of replacing the existing licensee data base with a modern, more robust database application that will serve the Society’s needs for the coming decades.

The draft budget for 2018 includes a provision of $2.1 million to fund the development and implementation phase of the system. This phase is expected to be completed in 2019 with additional funding of approximately $3 million required.


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Compensation Fund The provision for grant claims in the Lawyer Compensation Fund has been set at $7.7 million, increased by $4,000,000 from 2017. The provision has increased from 2017 based on recent claims incurred data. In addition a provision of $5,000,000 to restore the fund balance to its policy approved level within three years has been included. The lawyer’s fund has experienced two consecutive years of unusually high claims experience. This has depleted the fund balance and current projections are for the fund to be very low by the end of 2017. The $5 million provision will be sufficient to restore the fund balance to its policy approved minimum (approximately $15 million) within three years. The increase in the general provision to $7 million reflects the recent experience of the fund. If this experience is in fact an anomaly, the resulting surplus will hasten the restoration of the fund balance. If this experience is not anomaly future analysis will be required to determine the appropriate fund balance sufficient to withstand a 1 in 200 year event. The provision for grant claims in the Paralegal Compensation Fund has been set at $122,000, the same as 2017. The fund balance for lawyers is projected to end 2017 with an estimated balance of zero and the paralegal fund balance is estimated to be $500,000.


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Non- Annual Fee Revenue Annual fees continue to provide the bulk of the Society’s revenue. For 2018, annual fees totaling $96.7 million will represent approximately 75% of total revenues. Licensing process fees total $13.3 million followed by Continuing Professional Development revenues totaling $8.7 million.

2018 2017

Licensing Process 13,268,300 13,198,300

CPD 8,686,000 8,686,000

Investment Income 1,750,000 1,750,000

Catering 1,735,000 1,735,000

Lexis Nexis 1,500,000 1,500,000

Regulatory Recoveries 950,600 950,600

Late Fees 1,300,000 800,000

Professional Corporations 500,000 500,000

PAP Admin Fees 422,000 406,000

LFO Access to Justice ‐ 400,000

LSRS 325,000 325,000

LibraryCo 305,000 305,000

Certified Specialists 270,000 270,000

Other 1,438,100 1,207,600

Total 32,450,000 32,033,500


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Strategic Plan In the fall of 2015, the Society undertook a comprehensive strategic planning exercise documenting the strategic priorities that will guide the operations of the Society through 2019. Convocation’s adopted plan will focus on five priorities and several key initiatives to support them through 2019. These priorities are:

In 2017, the implementation of initiatives supporting the Society’s strategic direction continued, with undertakings to enhance the paralegal licensing process, increased practice supports for practitioners, coaches and advisors, recommendations from the Mental Health Task Force, engagement of a consultant to review

and make recommendations to enhance public communications and awareness, including public awareness on legal service issues and improved communications with practitioners by revising the Society’s website to be more focused and responsive to practitioner needs and preferences. Additional resources were also allocated to support the investigative activities of the Society’s professional regulation division.


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PROFESSIONAL REGULATION

As part of its mandate to protect the public interest, the Society addresses issues of capacity, conduct and competence of lawyers and licensed paralegals. For the Division this includes responding to complaints, investigations, discipline prosecutions, trusteeships, management of the Compensation Fund and related activities. The mandate of the Division is to identify and manage risk, to respond to complaints based on good standards, to ensure a fair, accessible, transparent and effective investigation and prosecutorial process, to identify and bring forward issues concerning regulation, and to manage relationships with the communities and individuals related to the regulatory work of the Society. The number of new cases referred to the Division through the Intake & Resolution department has remained relatively constant over the past few years at approximately 4,800 per year. From a high of 5,040 complaints received in 2013, the number of new complaints declined in 2014 (by 5%) and 2015 (by a further 2.8%). In 2016, the number of new complaints received in the Division increased to 4,833. With the number of new complaints received to date, it is anticipated that the input in 2017 will be slightly higher than 2016’s input and that the input for 2018 will be slightly higher than 2017’s input. It is also anticipated that the increase in input will mostly be due to complaints involving lawyers.

2018 2017




Total 41,181,500 29,624,600

185.1172.6

2018 2017

FTE


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Re-organization of the Division This budget submission continues the response to the review of Professional Regulation initiated by the CEO (the “CEO Report”). In February 2017, a new organizational structure was implemented in the Division. The key changes can be summarized as:

more robust, early triage and resolution carried out by a larger Intake & Resolution department.

creation of new multi-functional Enforcement teams with different types of Investigators and Discipline Counsel/Paralegals working together in teams.

creation of a Technology & Evidence Control Unit to enhance the Division’s ability to receive, produce, manage and control electronic data.

The Division has also set a goal of meeting the National Discipline Standards obligations promulgated by the Federation of Law Societies for all files commenced as of November 2017. Executive Director’s Office

The responsibility of the Executive Director is to oversee all departments within the Division including budget, staffing, technology, issue management and case process including an effective and timely complaints process, and appropriate risk

management. This includes coordination and liaison with other divisions of the Society and external parties, communications both within and outside the division, development of policy and rule amendment proposals, oversight of case process including the management of significant investigations and prosecutions, and resource management.

2018 2017


Operating Expenses 259,000 220,300


Total 4,376,700 3,727,000

10.011.0

2018 2017

FTE


85

P

22


The Executive Director supports the Professional Regulation Committee and supports Bencher work on strategic initiatives in licensee regulation. Significant changes in resources in the Executive Director’s office included in the draft 2018 budget are:

a) Manager for a new Intelligence Unit The creation of this unit was a recommendation in the CEO Report. The function of this unit will be to gather information related to the Society’s regulatory function, using a variety of investigation techniques, in circumstances where traditional investigative methods would not be as effective. The Division has already commenced using sensitive investigation techniques in some of its investigations. It is conceivable that the unit would be utilized for addressing unauthorized practice and the unit would also build on recent experience dealing with complaints about advertising and fees. Filling the Manager position in 2018 would be the precursor to the likely expansion of the unit in future years.

b) Increase in the Outside Counsel budget This will assist with timely investigations and to address the prosecution backlog. Outside counsel continue to support the work of Professional Regulation while new Discipline Counsel are recruited and trained, and to deal with licensees facing mental health issues as well as an increased need for interlocutory suspensions. The 2017 Outside Counsel budget was $1.5 million, and it is certain to be fully expended. This is partly because of delays in filling vacant positions, but also reflects a growing demand for specialized expertise in dealing with complex discipline matters. The 2018 Outside Counsel has been set at $1.9 million.

PR Executive Director’s Office 2018 Budget The Executive Director’s Office has total expenses of $4.4 million with significant changes discussed above.


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Intake & Resolution As the division's regulatory gatekeeper, the Intake & Resolution department provides early complaint assessment through triaging, identifying regulatory and risk issues, resolving complaints where possible, reviewing and substantiating complaints and identifying and obtaining required instructions for complaints requiring investigation. It is expected that the department will receive a slightly higher number of complaints in 2017 and 2018 than in 2016. A major component of the Division’s re-structure is more robust, early triage and resolution carried out by a larger Intake & Resolution

department. In the latter part of 2016, the former Intake department began working towards this goal, reducing the number of complaints transferred for investigation by 24% from the number transferred in 2015 and increasing the number of complaints that were closed in 2016 (by 11%) than were closed in 2015.The Intake & Resolution department continues to focus on reducing the number of complaints transferred for investigation to those that raise serious regulatory and public risk issues and increasing the number of complaints that can be resolved or effectively addressed by a lesser regulatory response, such as best practices advice or a staff caution1.

1 In the first half of 2017, the number of cases closed by Intake & Resolution (1521) increased by 48% from the number closed in the same period in 2016 (1028) and by 52% from the

number closed in the same period in 2015 (1002). The number of cases transferred for investigation in the first half of 2017 (603) decreased by 56% from the number transferred in the same period in 2016 (1360) and by 58% from the number transferred in the same period in 2015 (1436).

2018 2017



Program Expenses 50,000 49,700

Total 2,614,000 2,737,300

21.823.0

2018 2017

FTE


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Intake & Resolution will also continue to work on balancing its inventory in the next 2-3 years. It is anticipated that the increase in inventory noted in 2016 will continue in 2017 and level out in 2018. It is anticipated that the inventory will then start to decrease with staff working towards an optimal caseload of 1,000 to 1,200 cases. Intake & Resolution 2018 Budget Intake & Resolution has total expenses of $2.6 million only changed by inflationary-type increases.


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Enforcement Units 1. Enforcement - Investigations Based on the experience in the first half of 2017, the input of cases instructed for investigation and transferred from the Intake & Resolution department to the Enforcement Department - Investigations in 2017 is expected to be approximately 1,220. This is a significant decrease from the total number of complaints instructed and transferred for investigation in previous years2. The number for 2018 is projected to be similar. There have been a number of staff vacancies due to the departmental reorganization. As a result, caseloads are high but the number of cases under investigation have decreased by 19% since the restructure. It is not anticipated that this rate of completions will continue. However, with a full complement of investigative staff it is anticipated that the caseload will continue to decrease. 2. Enforcement - Discipline Discipline Counsel/Paralegals represent the Society before the Law Society Tribunals and in the courts. In addition to prosecuting a variety of matters including those concerning licensee conduct, capacity and competency as well as applications for reinstatement and licensing, Discipline Counsel/Paralegals are becoming involved at an early stage in investigations that are slated to proceed for prosecution. The trend in the number of authorizations by the Proceedings Authorization Committee (PAC) for matters to proceed to a hearing is set out below.

2 Prior to 2017, investigations were conducted in 2 departments, the former CR and the former Investigations departments. In the re-structured Division, many of the complaints that

would have gone to the CR department are now addressed in Intake and Resolution.

2018 2017




Total 16,267,200 14,955,400

115.0107.2

2018 2017

FTE


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P

26


With respect to the number of Notices issued in 2017, it is anticipated that, with a full complement of Discipline Counsel/Paralegals, the total number will be comparable to the total number issued in 2016. However, there have been 17 Notices of Motion for interlocutory suspension/restrictions brought in the first half of 2017 compared to 11 in the first half of 2016. While essential to ensure the protection of the public, these motions are extremely labour intensive, requiring Discipline Counsel/Paralegals as well as the investigator to devote significant time in a short period to the preparation of the materials for the PAC and for the hearing. This does impact the Discipline Counsel/Paralegals ability to address other matters at the time they are addressing the interlocutory motion. A key feature of the creation of the newly created Enforcement Units is an emphasis on earlier involvement of Discipline Counsel/Paralegals in investigations. The total effect of this involvement is not yet fully determined, however, currently Discipline Counsel/ Paralegals are assigned to assist in the investigations of over 300 cases involving over 160 licensees/applicants.

To date, the re-structured department has shown success in reducing the inventory of complaints under investigation and in implementing efficiencies to assist staff in their investigative work. In the new model, embedded Discipline Counsel now work alongside investigators to help ensure that an appropriate and defensible evidentiary record is developed prior to the stage where PAC authorization is sought.

The budget envisages one Investigations Counsel and one Discipline Counsel would be filled on a contract basis, starting in 2017 and continuing to the end of the 2018. Enforcement Units 2018 Budget The combined Enforcement units budgets have total expenses of $16.3 million. In response to the factors noted above, the 2018 budget proposes to add 7 additional positions to the three Enforcement units and reduce one forensic auditor position. The additions are:

3 Associate Discipline Counsel 1 contract Investigation Counsel and 1 contract Discipline Counsel. The function of these two specialized positions

will be to deal with an existing inventory of complaints emerging from the Indigenous community, including those related to the handling of settlements to victims of the Indian Residential Schools. Those recruited to fill these positions will be familiar with the specific cultural requirements and sensitivities of this historically disadvantaged


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population. 2 additional articling/summer students


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Regulatory Compliance The Regulatory Compliance department (formerly the Monitoring & Enforcement department) monitors Law Society Tribunal orders against licensees and undertakings given by licensees, as well as bankruptcies. Additional functions include judicial appointment clearances, reporting Tribunal decisions to the police, reporting on Regulatory Meetings and Invitations to Attend and responding to regulatory inquiries from the public.3 The number of undertakings increased significantly in 2016 and it is anticipated that a similar number will be obtained in 2017 and 2018. Also,

given the increased number of Orders made by the Law Society Tribunal Hearing and Appeal Tribunals in the first half of the year, it is anticipated that a significantly higher number of Orders to be monitored will be received in the department in 2017 and 2018 than in 2016. It is anticipated that the inventory will continue to increase, adding to already high caseloads. The draft 2018 budget includes an additional law clerk position to support the work of Regulatory Compliance and the Compensation Fund. Both departments are dealing with large file loads. To illustrate, the number of orders requiring enforcement has increased sharply in 2017 over 2016 (predicting 180 as opposed to 157 the year before). Moreover, Compensation Fund claims in the first half of 2017 are up 32% over the same period in 2016.

3 With the re-structure of the Division, all alleged breaches of Orders and Undertakings that were formerly investigated by Monitoring & Enforcement under its "Enforcement” branch,

are now referred to and addressed by an investigations team in one of the Enforcement Departments.

2018 2017

Salaries & Benefits 594,200 541,100



Total 659,500 606,000

5.0

4.4

2018 2017

FTE


92

P

29


Regulatory Compliance 2018 Budget Regulatory Compliance has revenues of $400,000 and total expenses of $660,000. As noted above, the only significant change is the proposal to add a shared clerical position.


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Trustee Services Trustee Services responds in situations where a licensee has abandoned his/her practice or is unable to practise due to serious health problems, or where there are regulatory issues such as a suspension or revocation of licence. Trustee Services may provide informal support, or may apply for a formal trusteeship of the practice under the Law Society Act. The department also: Provides information and assistance to licensees and their personal

representatives who are closing their practices Is responsible for the administration of the Unclaimed Trust Fund

Program Indexes all client files, wills and other property from licensee practices

recovered by the department The current staff complement has been constant for several years. Trustee Services has seen growth in the various activities involved in formal trusteeships and the informal support provided by the department. As well, the department has noted an increase in the complexity of the work performed. At least some of this is attributable to an aging profession, in which some licensees have not made adequate provision for succession planning.

The major change in the draft 2018 budget is an additional clerical position to support the work of the Trustee Services department, especially with respect to indexing of client files recovered from licensee practices as a result of formal trusteeships and recovery agreements with licensees and/or their successors. Trustee Services 2018 Budget Trustee Services is requesting total expenses of $1.7 million. As noted above, the only significant change is the proposal to add a clerical position.

2018 2017




Total 1,653,400 1,365,700


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Technology & Evidence Control Unit (TEC)

The draft 2018 budget includes 5.0 new FTEs and other resources for an expanded TEC Unit. Some portion of the practices of the vast majority of licensees is now electronic. Establishing a modern TEC Unit will promote efficiencies, ensure more effective and defensible evidence control, respond to the increased reliance on electronic recordkeeping and reduce the use of paper in our regulatory work. The TEC Unit was created in 2017, with the hiring of a Manager. Budgetary approval is now sought to ensure that the department is appropriately staffed and resourced. Currently, documents received by staff at the intake stage are largely paper-based but all parties involved in regulatory processes will increasingly use electronic data. The Law Society Tribunal is already in the process of implementing electronic workflow, with the goal of having paperless and fully electronic hearings within the next few years. The Division is following this development, to ensure full compatibility with the Tribunal’s electronic systems.

The TEC Unit is responsible for the software applications that support electronic data management systems. It oversees the warehousing of physical and digital evidence obtained during an investigation. A fully staffed TEC Unit will give the Division the ability to receive, produce, manage and control electronic data and develop, implement and maintain an electronic data management system. To become fully operational, the draft 2018 budget proposes to add the following staff to the TEC Unit:

One Senior Digital Forensics Examiner, responsible for the software applications that support electronic data management systems and digital forensics investigations.

2018 2017




Total 764,700 263,100


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One Digital Forensics Examiner responsible for the digital forensics and eDiscovery investigations. In conjunction with the Senior Digital Forensics Examiner, this role is also essential for supporting the implementation of the electronic systems and electronic workflow.

One Administrative Assistant Two Evidence Specialists providing custodial control and maintenance of security for digital and physical evidence

and other properties. Responsibilities will include the receipt, storage, control, and custody of all evidence and other property.

The TEC Unit will require a variety of hardware tools (such as computer equipment, high speed scanners and specialized forensic equipment) and forensic and e-Discovery software. The anticipated cost of these items, and miscellaneous allocations for items such as purpose-built lab furniture in 2018 is approximately $260,000. A further business case is being developed for the implementation of an Electronic Data Management System (EDMS) which will impact the capital and IT budgets. The EDMS is key to the implementation of an electronic workflow system that is also responsive to the needs of the Tribunal. The implementation of the TEC and EDMS Units should result in savings. As processes become increasingly electronic, there will be less photocopying and binding and electronic access to evidence is expected to improve staff efficiency and reduce the need for storage. Technology & Evidence Control Unit 2018 Budget The TEC unit has total expenses of $765,000 with the significant changes discussed above.


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Case Management This unit oversees the Integrated Regulatory Information System (“IRIS”). Case Management was created to ensure in house control of the quality and integrity of data maintained in IRIS and to allow for ongoing improvements to IRIS. The unit is responsible for: the development of qualitative analysis and recommendations regarding file handling, issue management, work process and procedural improvements; the development of reporting structures and the examination and evaluation of reporting requirements for Professional Regulation; and ongoing monitoring of case files to ensure that the Professional Regulation product continues to support the Society’s mandate.

Case Management 2018 Budget

Case Management has total expenses of $659,000 only changed by inflationary-type increases.

2018 2017




Total 659,300 638,900


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Compensation Fund 2018 The Compensation Fund receives and processes claims from clients who have lost money because of a lawyer’s or paralegal’s dishonesty. The Fund depends entirely on the lawyer and paralegal fee levies. Staff receive claims and assess their merits based on a set of Guidelines approved by Convocation. Last year, the maximum compensation payable under the Guidelines for claims involving lawyers was raised to $500,000 to any one claimant. The maximum compensation payable for claims involving paralegals remains at $10,000 to any one claimant. The current inventory of active claims in the Compensation Fund (399 claims) is approximately 10% higher than the inventory at the end of 2016 (364 claims), mainly due to the following: There has been an increase in the number of claims received. In the

first half of 2017, 133 claims have been received, a 32% increase over the 101 claims received in the same period in 2016.

Both Counsel positions have been vacant for a significant part of the first six months. Currently, only one Counsel position is filled. If both Counsel positions were filled, each would have in excess of 200 files, a caseload that is higher than at any time in the previous few years.

It is anticipated that both of these factors will continue to influence the Compensation Fund's inventory which will continue to grow in the second half of 2017 and into 2018.

Compensation Fund 2018 Operating Budget The lawyer and paralegal Compensation Funds have recoveries and investment income of $1.3 million and total program and operating expenses of $600,000 excluding the provision for unpaid grants which is addressed separately in the budget material.

2018 2017




Total 13,422,000 4,594,100


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Complaints Resolution Commissioner 2018 Budget

Where a complaint is closed by Society staff, the complainant may have the right to a review of that decision by the Complaints Resolution Commissioner (CRC). The role of the Commissioner and the complaints review process is established by the Law Society Act and Law Society By-Law 11. The Commissioner receives all cases where a complainant wishes to bring a complaint and holds meetings with the complainants. At the end of the process, the Commissioner may confirm the Society decision, or recommend further investigation. The Commissioner may also make informal recommendations for improved process. Complaints Resolution Commissioner 2018 Budget The CRC has expenses of $765,000 primarily changed by inflationary-type increases.

2018 2017




Total 764,700 737,100


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THE TRIBUNAL

The Law Society Tribunal is an independent adjudicative tribunal within the Society, processing regulatory cases about Ontario lawyers and paralegals. The Tribunal is made up of staff and adjudicators, who include benchers and other lawyer, paralegal and lay appointees. An independent, non-bencher Chair sets strategic direction and leads the work and enhancement of the Tribunal.

Tribunal 2018 Budget The Tribunal has a budget totaling $2.2 million. The only significant change is the addition of a Communications Officer. This position would take over the developing communication needs of the Tribunal including weekly emails and media relations about tribunal proceedings, preparing and formatting communications such as the annual report, maintaining the Tribunal website and preparing plain language guides to Tribunal processes.

2018 2017




Total 2,184,100 2,078,500


100

P

37


PROFESSIONAL DEVELOPMENT AND COMPETENCE

The Professional Development and Competence (PD&C) Division is responsible for all activities relating to licensing, continuing professional development, practice management support and quality assurance for lawyers and paralegals. The operating functions related to lawyers include:

a) Licensing Licensing Examinations Professional Conduct and Practice in Ontario Course Articling and Placement Services Testing Accommodations Financial assistance and tutoring Licensing of Applicants - Calls to the Bar Ceremonies and Administrative Calls Pathways to the Profession Pilot Project

b) Competence

Practice Management Resources and Helpline Coach and Advisor Network Certified Specialist Program Continuing Professional Development (CPD) Program Production CPD Program Accreditation Legal Information and Library Services LibraryCo Board and Administrative Services Agreement support Corporate Records and Archives

c) Quality Assurance

Spot Audit Practice Review – Lawyers (Focused Reviews, Practice Management Reviews, Re-entry Reviews)


101

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CPD Completion Audit The operating functions related to paralegals include:

a) Licensing Licensing Examinations Testing Accommodations Tutoring Paralegal College Program Accreditation Paralegal College Program Audits Licensing of P1 applicants – Administrative Process and Paralegal Receptions

b) Competence

Practice Management Resources and Helpline Coach and Advisor Network CPD Program Production and Accreditation Legal Information and Library Services

c) Quality Assurance

Practice Audit CPD Completion Audit


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Budget Summary

The 2017 and 2018 budgets before transfers for the PD&C Division are summarized below. Lawyers Paralegals Total 2017 2018 2017 2018 2017 2018 Departmental Revenues

19,292,100 19,122,700 3,050,200 3,289,600 22,342,300 22,412,300

Departmental Expenditures

26,047,500 26,518,400 2,965,000 3,286,800 29,012,500 29,805,200

Net Expenditure

(6,755,400) (7,395,700) 85,200 2,800 (6,670,200) (7,392,900)

Staff complement in the PD&C Division is proposed at 154 full-time equivalent employees in the 2018 budget. This includes an increase of four full-time equivalent staff to support increasing workflows in the division in its core areas of regulatory activity including competence policy development, licensure, quality assurance audits, and member practice supports.

2018 2017




Total 29,805,200 29,012,500

154.1 149.2

2018 2017

FTE


103

P

40


1. Office of the Executive Director The pace of change in licensure, competence, practice supports and quality assurance for the professions continues to increase, with policy analysis and the development of strategic and operational responses also increasing. These functions are overseen in the Office of the Executive Director. In order to support this increasing workflow and responsibility, an additional Counsel, not included in the budget, was added in 2017. PD&C Executive Director 2018 Budget The Executive Directors office has expenses of $1.2 million with significant changes noted above.

2018 2017

Salaries & Benefits 1,120,200 866,100



Total 1,211,900 954,500

5.0

4.0

2018 2017

FTE


104

P

41


2. Licensing Process There are nearly 2,400 newly registered lawyer candidates in the licensing process annually. Candidates have three years within which to complete all components of licensing. This results in approximately 4,500 lawyer candidates moving through the process each year. There are nearly 1,400 newly registered paralegal candidates in the licensing process annually. Candidates have three years within which to complete all components of licensing, resulting in approximately 2,500 paralegal candidates moving through the process each year. The current fee for the lawyer licensing process of $4,710 per candidate includes the costs of the Law Practice Program, the enhanced Articling Program and all other administrative fees for licensure. The fee supports the continuation of the Law Practice Program as an additional path of transitional training, and the costs of that program are equalized across all candidates in the process. Licensing fees will remain at this level pending outcomes from the PD&C Committee deliberations on potential changes to the lawyer licensing process expected in 2018. The total expenditures for the lawyer licensing process, a cost recovery process supported by the payment of fees by licensing candidates, continue to be mitigated by a contribution by the profession approved by Convocation in the amount of $1 million. The paralegal licensing fees are $1,400 per candidate and include the costs of applications, licensing examination and licensing fee. The fees will remain the same for 2018.


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Licensing Process 2018 Budget The lawyer and paralegal Licensing Processes have revenues of $13.3 million and direct expenses of $12 million with significant changes noted above.

2018 2017




Total 12,022,300 11,797,600

35.0 35.0

2018 2017

FTE


106

P

43


3. Competence a) Practice Supports and Resources The demand for support from the Practice Management Helpline (PMH) continues to increase with Representatives and Counsel responding to approximately 8,000 calls from lawyer and paralegal practitioners annually. The PMH team is currently comprised of one counsel lead, two permanent counsel, and three representatives. The Practice Management team provides subject matter expertise across the organization on issues relating to the Rules, By-Laws, practice management concerns and related ethical inquiries. In addition to providing support across the organization, the team enhances and creates resources and other content to support lawyers and paralegals in their efforts at compliance. Having not had a staffing increase for many years, in 2017, one PMH Representative and one PMH counsel were added to the team. Due to the volume of calls and the increasing complexity of the issues being managed by the PMH, program development funds were also transferred to create a 6-month contract position for an additional PMH counsel. While this assisted with the team’s capacity for helpline coverage and contingency planning within the PMH team, one additional permanent PMH Counsel is required in 2018 to address the continued increase in call volumes and complexity, respond to the evolving resource needs of the professions and meet the expectations set out by Convocation under Strategic Priority 4.2 to enhance practice supports and resources.


107

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b) Coach and Advisor Network The new Coach and Advisor Network (CAN) has been a significant focus of attention in the PD&C Practice Supports and Resources department since it was launched in November 2016. CAN is currently comprised of one counsel lead, one counsel and one administrator. In the first six months’ of operations CAN recruited more than 150 volunteers and responded to more than 400 requests from lawyers and paralegals seeking a Coach or Advisor. By year end, CAN will have hosted 10 training events in four cities across Ontario and will have presented its outreach presentation to at least 10 local law associations. CAN continues to actively cultivate relationships with the leadership of Canadian Association of Black Lawyers, Federation of Asian Canadian Lawyers, Southeast Asian Bar Association, Criminal Lawyers’ Association, Black Female Lawyers’ Network, The Advocates’ Society, Legal Aid Ontario and other legal organizations and associations. In 2018, CAN will maintain an ongoing focus on recruitment, retention, training, technology and outreach. Practice Supports 2018 Budget The Practice Support and Practice Management departments, have total expenses of $1.7 million with significant changes noted above.

2018 2017




Total 1,732,400 1,406,900

13.0

11.0

2018 2017

FTE


108

P

45


c) Certified Specialist Program The Certified Specialist Program for lawyers continues to maintain itself as a cost-recovery initiative at this time. The staff allocated to the program will continue at one full-time equivalent for 2018. The development work on the specialty in Indigenous Legal Issues concluded in 2017 and the recently launched application process has resulted in three certified specialists, and one pending application, in this area thus far. The program continues to achieve cost recovery and no increases in budget are required for 2018. Certified Specialist Budget The Certified Specialist program has revenues of $270,000 and direct expenses of $130,000.

2018 2017




Total 130,000 128,200


109

P

46


d) Continuing Professional Development Program Production Registration results for 2017, to date, are tracking similarly to results from the previous year, and CPD anticipates meeting the budget projection for revenues for the year. For the 2018 budget, projections will also be set to reflect the current status quo of registrations in the range of 50,000 attendees, so there is no change in total revenue. CPD’s Production Services team continues to increase its service provision as an internal resource for events - assisting with CPD programs, webcasts and offsite events, and Equity, TAG, Professional Regulation, and most recently Practice Supports and Resources, the Dialogue on Licensing, and Convocation sessions. Demand is forecast to increase in 2018. In addition to the assistance that will be provided for live events from a Production Assistant, it will allow us to capture more requests for video editing, filming vignettes and event production, with potential costs savings from internal departments that will be able to in-source post-production work. In the 2015-16 season, 55 Production Services managed events were held, compared to 71 internal and external events for the 2016-17 season. As a full schedule of Convocation in the Lamont has now also been added for fall 2017 and is expected to continue. Competencies for four major areas of practice – Civil Litigation, Real Estate, Estates and Trusts, and Family Law – are being reviewed and validated by Competency Advisory Groups of experienced legal practitioners in 2017 under the direction of CPD’s planning Counsel. This effort is pursuant to Convocation’s strategic initiative to create a competencies-based curriculum for our CPD programming. Additional competencies review and validation sessions for other major practice areas will continue throughout 2018. The results from these sessions will be consolidated into a formalized curriculum for the Society’s Professional Development offerings.


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CPD 2018 Budget CPD is projecting total revenues of $8.7 million, unchanged from 2017 and total expenses of $4 million, only changed by inflationary-type increases.

2018 2017




Total 3,893,400 4,079,700

27.8 27.7

2018 2017

FTE


111

P

48


e) Legal Information and Library Services The Great Library continues to provide access to a print and electronic collection that acts as a core practice resource for lawyers and paralegals across the province. The library was unable to acquire a Library Maintenance Agreement with Thomson Reuters for 2017 due to copyright and document delivery restrictions embedded in the contract. This eliminates an opportunity to reduce the growing cost of print materials by means other than simply cancelling them. The library continues to see collection pricing increases from 5-10% a year. The team continue to balance the need for print access, increasing digital collections that are accessible province wide, and space usage in Osgoode Hall. Multiple collection shifts currently underway will take advantage of new compact shelving and enable additional research space on the Great Library’s main floor in 2018 for use by patrons. Legal Information and Library Services 2018 Budget Legal Information and Library Services has total expenses of $3.5 million only changed by inflationary-type increases.

2018 2017




Total 3,526,700 3,494,100


112

P

49


f) Corporate Records and Archives The Corporate Records and Archives teams continue to collaborate with the Information Technology team (IT) and other internal teams on the SharePoint content management system. At the same time, they have completed a revision of the corporate records retention schedule. The team has identified records management tools for SharePoint and will acquire a software application, to be implemented by IT, in 2018. Corporate Records and Archives 2018 Budget Corporate Records and Archives has total expenses of $364,000 only changed by inflationary-type increases.

2018 2017




Total 364,400 278,000

3.5 3.5

2018 2017

FTE


113

P

50


4. Quality Assurance a) Spot Audit One of this department’s goals is to complete 1,400 law firm audits per year which ensures that all Ontario law firms within the approved risk criteria for selection receive a visit within the specific 5-7-10 year rotation periods, depending on firm size and practice focus. Re-audits of firms (revisits due to serious books and records deficiencies) continue to be required for 8% or more of lawyer law firm audits. The Spot Audit department is on track to achieve its audit targets, and there will be no change to the staff complement or general expenses for the Spot Audit team for 2018. Spot Audit Budget The Spot Audit department has total expenses of $4.1 million only changed by inflationary-type increases. b) Practice Review The Practice Review program conducts approximately 560 reviews per year, comprised of random reviews (lawyers who were called within the past 8 years), focused reviews (lawyers selected for a review due to cause) and re-entry reviews (lawyers re-entering private practice after 5 years).

2018 2017




Total 4,137,500 4,088,200


114

P

51


The addition of two full-time equivalent Reviewers in 2017, one for Practice Review and one for Practice Audits, has resulted in a necessary increase in the number of reports and working papers to be reviewed by the Counsel and Assistant Managers in order to meet annual targets for completion. To alleviate this workload, the Practice Review program will add one part-time permanent Quality Reviewer position in 2018. Practice Review 2018 Budget The Practice Audit department has total expenses of $2.2 million with the staffing changes noted above and the elimination of the external reviewer budget of $72,000 in 2018.

2018 2017




Total 2,214,000 2,194,100


115

P

52


c) Practice Audits Practice Audits are combined financial audit and practice management reviews conducted on paralegal practices. The Paralegal Audit program conducts approximately 175 audits per year. Since the program’s inception the revisit rate continues to be high with no anticipated reduction. Between 50-55% of practice audits of paralegal practices result in a revisit due to serious practice management deficiencies. The addition of one full-time equivalent reviewer in 2017 assisted in ensuring that the staffing complement is sufficient to achieve the program’s target of 125 originating audits per year. Practice Audit 2018 Budget The Practice Audit department has total expenses of $573,000 which has only changed by inflationary-type increases.

2018 2017




Total 572,600 591,200


116

P

53


Policy The Policy department is responsible for providing support for the policy development function of the Society. Over the past few years, a trend has emerged that has the Society looking at more complex policy issues in less time. In the short term, particularly with the evolution in the practice of law that is occurring, this trend will continue. Part of the Society’s Strategic Plan is to benchmark the policy development process. To address these factors, in 2018, the Policy department will be staffed with two groups of counsel: 4 Strategic Policy Counsel and 2 Policy Counsel and also a Director and Administrator. The Policy Counsel will provide support to the benchers in their ongoing policy work, particularly within the standing committee framework. Policy Counsel will be assigned to the standing committees and will be responsible for the ongoing work of the committees. For example, a Policy Counsel will be assigned to the Professional Regulation Committee and will be responsible for: all policy work that is involved in amendments to the rules of conduct (including drafting); all policy work that is involved in amendments to relevant provisions of the Law Society Act, the regulations and the by-laws; ensuring that the Committee is provided with all the updates that it currently receives with respect to the work of the Professional Regulation Division; with keeping track of the Committee’s agenda of work; and, overall, acting as secretary to the Committee. There are at least four standing committees with extensive agendas and the fulfilment of their mandates to a high standard requires dedicated staff to

each committee: Professional Regulation, Paralegal Standing, Professional Development & Competence and Tribunal. In addition to these standing committees, each Policy Counsel would be assigned to the remaining standing committees and be responsible for their ongoing work.


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The Strategic Policy Counsel will provide support to the benchers in dealing with discrete policy issues that require strategic and innovative thinking. Strategic Policy Counsel will be assigned to work on emerging issues that require innovative policy development. Where an emerging issue is to be dealt with by a standing committee, the Strategic Policy Counsel will collaborate with Policy Counsel on bringing the work to the committee. The Strategic Policy Counsel will be responsible for all the substantive work on the emerging issue. Where an emerging issue is to be dealt with by a working group or task force, the Strategic Policy Counsel will not only do all the substantive work on the issue, but also act as secretary to the working group or task force. Due to the nature of the issues that Strategic Policy Counsel will be working on, Strategic Policy Counsel will be involved in any relevant stakeholder consultations, including preparing documents for the consultations, attending meetings with stakeholders and reviewing/analyzing submissions. As a group, Strategic Policy Counsel would, for example, be responsible for the work of the Access to Justice Committee with respect to the the report of the Family Legal Services Review prepared by Justice Bonkalo, the work of the Professional Development & Competence Committee with respect to licensing, the work of the Advertising and Fee Issues Working Group, the work of the ABS Working Group, the work of the Governance Task Force, the work of the Legal Aid Working Issues Group, the work of the Compliance-Based Entity Regulation Task Force and the work of the Real Estate Issues Working Group. The Research Counsel will support both the Strategic Policy Counsel and the Policy Counsel and conduct the legal and policy research necessary to give context and background to policy development. The Research Counsel will provide research support for the policy work of the Society. This will be, not only policy research (for example, environmental scans), but also legal research. Research Counsel will also be responsible for monitoring the introduction and progress of legislation at both the provincial and federal levels. Under the previous policy staffing model, much of this work was done by staff within the Society other than policy staff. This is no longer sustainable for a variety of reasons, including increasing demands for the other staff to re-devote their time to their primary responsibilities and ensuring that certain research work is consistently performed (e.g., legislative monitoring).


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Legal The office provides in-house counsel services to the Society: reviewing and / or drafting legal agreements to be entered into by the

Society provides legal advice and opinions to other departments of the Society,

committees of Benchers and Convocation conducts the bulk of the Society's employment and labour law matters

and all non-regulatory, non-insured litigation monitors the progress of litigation involving the Society that is

instructed by the Lawyers’ Professional Indemnity Company provides legislative drafting services to committees of Benchers and

Convocation (i.e., drafts by-laws and regulations) and responds to general requests from licensees for access to information

about them in the possession of the Society as the Society’s designated privacy officer

Two new Research Counsel will be responsible for monitoring the introduction and progress of legislation at provincial and federal levels as well as providing research support for policy work. Outside Counsel Fees The budget for outside counsel fees for 2018 has been reduced by $225,000 from the 2017 level. While the one case (TWU) which was

taking the bulk of the outside counsel fees budget in the past few years will be completed by the end of 2017, a new demand for the budget has arisen. Due to initiatives undertaken by the Society to improve its relationship with the police, there has been an increase in the number of production orders being served on the Society. Responding to production orders is resource intensive particularly in assessing the solicitor-client privilege implications. A future decision on whether to hire additional staff to take on the work of responding to production orders will await assessment of whether the increase in production orders is an anomaly or the beginning of a long-term trend.


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EXTERNAL RELATIONS AND COMMUNICATIONS

1. OFFICE OF THE EXECUTIVE DIRECTOR The External Relations and Communications (ERC) division was created in March 2017 effectively merging all of the Society’s relationship and communications functions together. It amalgamated the following four departments: Public Affairs (which was comprised of Government and Stakeholder Relations), Communications and Marketing, The Action Group on Access to Justice (TAG) and Media Relations & Issues Management. ERC is organized into the following departments:

1. The Office of the Executive Director 2. External Engagement Department 3. Media Relations and Communications Department

The Executive Director (ERC) provides strategic leadership advice on key stakeholder and related engagement initiatives to Convocation, SME and the External Relations and Communications team. ERC is responsible for developing and implementing a strategic communications plan to ensure effective engagement with all of the Society’s internal and external audiences. The Executive Director is responsible for strengthening the Society’s reputation with these audiences through a variety of relationship enhancing activities with the goal of strengthening the Society’s reputation. Modernizing the Society’s communications, supporting the Treasurer and Convocation are key areas of focus. These priorities are approached with an emphasis on transparency and outreach to multiple stakeholders, particularly working in partnership with indigenous and francophone communities.

2018 2017




Total 1,092,600 1,094,700


120

P

57


Executive Director 2018 Budget The Office of the Executive Director has a budget totaling $1.1 million, a combination of budgets that were previously attributed to four separate departments. 2. EXTERNAL ENGAGEMENT The External Engagement department is responsible for the Society’s public affairs, government relations, The Action Group on Access to Justice (TAG) and related outreach activities. The Society is able to respond to and manage critical and emerging issues effectively and appropriately as a result of the leadership provided by the External Engagement department. Working closely with ERC’s Office of the Executive Director and Media Relations and Communications departments along with the Office of the Treasurer, the CEO, other Society departments, the External Engagement department coordinates the delivery of strategic advice and support. This department ensures that the Society presents clear and consistent positions that align with the organization’s mandate and strategic plan. The Action Group on Access to Justice TAG was established by the Society in 2015 to facilitate better coordination and collaboration across the justice sector. TAG provides a platform for justice sector organizations to collaborate on innovative, public-centered and data-informed access to justice solutions. Pilot project funding was provided from 2015 to 2017 by the Law Foundation to launch the initiative. In 2018, the Society will continue to provide backbone support to TAG. The following activities are planned for 2018: an expansion of the Steps to Justice website and a related public awareness campaign, a third annual Access to Justice Week, a symposium, a second season of TAG’s podcast and various public engagement initiatives. TAG underwent evaluation in 2016 and 2017; results from these evaluations will inform a strategic plan for TAG that will be finalized in 2018. Events 2018 will see a consolidation of Society events within the External Engagement department by bringing together events that were previously organized by TAG, Public Affairs and the Equity department and the coordination of outreach programs.


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External Engagement Budget The External Engagement department 2018 budget totals $1.1 million which consolidates what was previously presented as budgets from Public Affairs and TAG. The Law Foundation of Ontario funded TAG’s start-up costs from 2015 to 2017, budgeted at $400,000 which concludes in December 2017.

MEDIA RELATIONS AND COMMUNICATIONS The Media Relations and Communications department is responsible for managing the Society’s communications channels in a manner that engages key stakeholders and enhances the organization’s reputation. Communications This department is responsible for modernizing the Society’s communications in service of the strategic plan. A key priority in 2018 is launching and maintaining a new website and related digital communications activities that will enhance engagement with members, the public and staff. Communications tasks can include developing key messages on corporate issues and initiatives and other content for Society websites and social media channels. Media Relations This department manages media inquiries and provides timely, thoughtful responses that enhance the Society’s reputation. In addition to responding to inquiries, Media Relations and Communications also pursues positive earned media coverage of Society initiatives. In support of this, media training is provided for key subject matter experts and regular reports on media coverage are provided to the Executive Director of ERC.

2018 2017




Total 1,060,800 1,145,400


122

P

59


Strategic Plan 2015-2019 As part of its Strategic Plan for 2015-2019, Convocation set the improvement of communications with licensees and the public as one of its key priorities and created the Strategic Communications Steering Group, which is working with staff to provide guidance, input and direction on a comprehensive communications, engagement and outreach strategy for the Society. Benchers were briefed on the results of the work to date in June 2017. The work is focused on structuring communications to create awareness and reinforce the value of regulated legal professionals for the public in the interests of the public and ensuring the effectiveness of communications and engagement and outreach efforts with Society licensees and stakeholder groups and organizations. The campaign is budgeted to cost an additional $650,000 in 2018 with a total budgeted cost in 2018 of just over $1 million. An additional $1 million in related expenses is anticipated in each of 2019 and 2020 to complete the campaign. Media Relations and Communications Budget The Media Relations and Communications department 2018 budget totals $2.1 million which consolidates what was previously presented as Communications & Marketing and Media Relations & Issues Management.

2018 2017



Program Expenses 1,398,600 744,100

Total 2,080,800 1,382,000


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CORPORATE SERVICES

1. Corporate Services Executive Directors Office The Corporate Services Division is a collection of business units that offer a diverse range of services to both internal and external stakeholders, including: staff, licensees, members of the public and visitors to the building. However, what they all have in common is the provision of shared services that contribute to the effective operations of the Society. Corporate Services Executive Director 2018 Budget The Office of the Executive Director has a budget of $646,000 only changed by inflationary-type increases.

2018 2017




Total 646,000 659,300


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P

61


2. Human Resources The HR Department meets the needs of employees by providing support and services in the following areas:

Recruitment and staffing Performance management Compensation: salary and benefits HR related policies and procedures Coaching, training and development for staff Ensuring compliance with legislative requirements

A request has been made for an additional Recruiting Specialist, a 1-year full time contract, with an assessment to be made of the future needs of the recruitment function. This will meet the increasing demand for hiring. The positions being recruited have also increased in complexity over the years. This is due to increasing turnover at the management level, as well as organizational change resulting in net-new positions aligned with the strategic priorities of the Society.

HR 2018 Budget Human Resources has a total budget of $2.9 million in 2018. The significant changes are the new recruiter and:

Training expenses will increase from $312,000 to $412,000 for a succession planning program Performance Management expenses will increase from $57,000 to $200,000 for an Employee Engagement Survey

and Diversity Census and Inclusion Survey

2018 2017




Total 2,892,800 2,499,000


125

P

62


3. Information Technology Information Technology (“IT”) is responsible for designing, implementing, and maintaining the organization’s technology systems, business applications, and data management systems, according to professional standards and best practices, while ensuring their confidentiality, integrity, and availability. There are five core areas of responsibility within the IT department:

Business Integration Helpdesk and User Support Application Development and Data Management Infrastructure and Security Project Management Office

IT 2018 Operating Budget IT has a total operating budget of $6.4 million in 2018. The only significant changes are re-allocations with Software Licenses increasing from $900,000 to $1 million to incorporate the start of a three-year subscription-based Microsoft Enterprise Agreement as well as other software increases. Consulting fees will be reduced from $290,000 to $167,000 as these funds are no longer needed to support contract helpdesk staff, and consulting fees are often built into capital projects, which are funded separately.

2018 2017




Total 6,381,200 6,397,300


126

P

63


IT 2018 Capital Budget The capital budget envelope for 2018 is $1.6 million, which is a portion of the $8 million capital allocation to IT in 2014. Originally a three-year allocation, in 2015 the time period was extended by two years, making it a five-year allocation (including 2017 and 2018). Starting in 2017 for three years, the Relationship Management System project (RMS), is being managed as a standalone capital project - separate from the five-year capital IT allocation. The required capital funding for the RMS for 2018 is $2.1 million.


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4. Facilities The Facilities Services operational budget is developed to allow for an optimal environment for the Society’s primary functions. The proposed resources take into account historical data of common expenditures and anticipated costs resulting from new factors such as: increased number of users in the facility, an aging heritage building that requires specialty products and services, best practices related to furniture and ergonomics in the working environment, changing codes related to health and safety, as well as market conditions impacting general costs for materials and labour.

Facilities 2018 Operating Budget Facilities Services has 29 staff and a total operating budget of $6.9 million in 2018. The significant changes are: Facilities is requesting an additional Senior Building Projects Lead. The

Senior Building Projects Lead function at the Society provides full service for all projects occurring at Osgoode Hall. There is a growing demand for projects, as the building age increases and a Senior Building Projects lead will assist in ensuring projects are completed efficiently

Based on the recommendations from the Risk Assessment Report, Security Services is requesting an additional FTE Security Guard, primarily to ensure coverage of the new locations at 393 University Ave. is appropriate

Additional accommodation space is required because of the increase in Society staff in recent years, a move away from the working-from-home model in certain departments and changes in accommodation arrangements at 130 Queen Street. The Society has taken over the 11th and 12th floors of 393 University Ave and given up the lease of the 5th floor, with the exception of the CRC space on this floor. Lease payments will commence in March 2018 and this has increased leasing expenses by $900,000 to $1.9 million in 2018.

Cleaning Service Contracts will increase from $580,000 to $655,000 in order to reflect the increase in the second year of the contract, projected salary increase due to minimum wage going up to $14 in 2017, extra cleaning fees to cover two new floors at 393 University Ave, and general increase in events volume.

2018 2017




Total 6,920,700 5,748,900


128

P

65


Facilities 2018 Capital Budget The planned Facilities Capital budget for 2018 is $2,665,000.

2018 New Facilities Capital Projects Budget ($)

Space consolidation / relocation 350,000Workstation replacement of obsolete systems furniture 325,000Carpet replacement- north wing 250,000Carpet replacement- south wing 300,000New boardrooms, furniture & equipment 50,000Exterior windows restoration and replacement 100,000Washroom upgrades 100,000Exterior heritage door replacement 30,000Benchers and East Entrance steps and walkways 180,000Asbestos abatement 200,000New cafeteria tables and seating 180,000Fire alarm system replacement 350,000Building additional offices for Professional Regulation, 393 University 250,000TOTAL 2,665,000


129

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66


5. Corporate Resource and Training Centre (“CRTC”) The Corporate Resource and Training Centre develops and delivers baseline corporate training such as new employee introductions, mandatory training modules, including AODA and Violence in the Workplace, as well as other types of training solutions in a variety of formats. CRTC 2018 Budget The CRTC has total expenses of $759,000 in 2018 with the only change being inflation type increases.

2018 2017




Total 758,600 727,900


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67


6. Catering The Society’s Catering Department provides food services for internal and external meetings and events. The department caters a variety of internal functions such as Continuing Professional Development programs, stakeholder education and outreach events as well as bencher functions and staff meetings, averaging 1,500 catered events per year. In addition, Catering contributes to the operations of Toronto Lawyers Feed the Hungry program. Responsibilities of the Catering Department also extend to the management of Osgoode Hall Restaurant. Catering 2018 Budget Catering has revenues of $1.7 million and expenses of $2.2 million in 2018, all unchanged apart from inflationary-type increases.

2018 2017




Total 2,185,700 2,102,200


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7. Client Service Centre (“CSC”) Administration The CSC consolidates the various intake channels of the Society, handling most of the incoming calls and emails from licensees and from the general public. It is typically a person’s first point of contact with the Society. The CSC consists of six business units, and is the largest area within Corporate Services. The CSC Administration supports and coordinates activities amongst the various business units; supporting the business units from a technology perspective; and processing licensee data and statistical requests. CSC Administration 2018 Budget CSC Administration has expenses of $491,000 in 2018. The only significant change from 2017 is the addition of a Document/Accessibility Specialist. The position would be a resource for Corporate Services and other divisions on the issue of accessible documents and applications. The objective is to hire someone who can prepare accessible versions of documents and applications, and who can work with IT to transition many of our paper based applications to on-line versions.

2018 2017



Program Expenses ‐ ‐

Total 490,800 403,300


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69


8. Call Centre The Call Centre is the primary intake area for inbound phone calls to the Society. There are three main call streams, depending on the nature of the call: Reception; Complaints Reception and the Resource Centre. Call Centre 2018 Budget The Call Centre has expenses of $855,000 in 2018, unchanged from 2017 apart from inflation-type increases.

2018 2017




Total 854,500 844,800


133

P

70


9. Law Society Referral Service (“LSRS”) The Law Society Referral Service connects people looking for legal assistance with a lawyer or paralegal who will provide a free consultation of up to 30 minutes to help determine rights and options. LSRS is typically an online service unless a member of the public is in crisis, for example if in custody. LSRS 2018 Budget LSRS has revenues of $325,000 and expenses of $721,000 in 2018, all unchanged apart from inflationary-type increases.

2018 2017




Total 721,000 678,000


134

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71


10. Membership Services Membership Services is responsible for processing a significant volume of transactional work originating in the LSUC Portal, the Call Centre, and elsewhere. These transactions included requests related to database changes, adjusted billings and refunds, in-person transactions at the membership window, and other miscellaneous requests. In addition to being responsible for the maintenance of most of the database changes (name, address, mailing information, status changes, etc.) for lawyers and paralegals, they create and mail adjusted billings. Staff also assist licensees by phone, relating to various issues, including reporting CPD Hours. Their responsibilities extend to the ongoing maintenance of a member file room for storage of hardcopy & scanned electronic licensee records, a service desk for payments and general inquiries, and a front desk providing reception services. Membership Services 2018 Budget Membership Services has revenues of $103,000 and expenses of $1.5 million in 2018, all unchanged apart from inflationary-type increases.

2018 2017




Total 1,499,000 1,389,600


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11. Complaints & Compliance Complaints & Compliance opens mail, acknowledges receipt, and assesses whether a written complaint is outside the jurisdiction of the Society. If it is, the department will respond directly and explain the reasons for closing the file. Allegations within our jurisdiction, are streamed to the Intake area of Professional Regulation. Complaints Services deals with a variety of general inquiries to the Society. Complaints & Compliance 2018 Budget Complaints & Compliance has revenues of $180,000 and expenses of $1.9 million in 2018, all unchanged apart from inflationary-type increases.

2018 2017




Total 1,895,500 1,884,600


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12. By-Law Administration Services (“BAS”) BAS is responsible for all aspects of the Lawyer and Paralegal Annual Report, the administrative suspension process, and the fulfilment of some types of licensee-driven requests, such as clearance checks, Status Letters, Certificates of Standing, name changes and Diploma/Certificate replacements. It also manages the paralegal insurance process. By-Law Administration Services 2018 Budget BAS has revenues of $500,000 and expenses of $1.4 million in 2018, all unchanged apart from inflationary-type increases.

2018 2017




Total 1,372,500 1,300,100


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CHIEF EXECUTIVE OFFICER

The main activities that come under the Chief Executive Officer (“CEO”) are the operation of the office of the CEO, governance support activities and Equity Initiatives. The CEO’s office oversees the implementation of policy decisions made by Convocation and is responsible to Convocation for the implementation of its strategic plan. The CEO leads the operations of the Society, which includes managing the day-to-day activities of the Society and its various operational divisions. The CEO manages the operational divisions’ Senior Management Executives as direct reports to the CEO. The CEO is accountable to Convocation for fulfilling Convocation’s policy objectives and its priorities, and also fulfills an advisory role to the Treasurer and Convocation. The CEO provides reports at regular intervals to Convocation on the status of Society operations, including challenges and opportunities that arise, progress in achieving the Society’s strategic priorities and the manner in which the Society’s operations support its mandate to regulate in the public interest. The CEO participates as the Society’s most senior executive in the work of the Federation of Law Societies of Canada. The CEO also represents the Society, when called upon, as its senior executive in various provincial, national and international fora centered on the legal profession and its regulation, and ensures the appropriate management of various stakeholder relationships. The CEO is also a member of the Board of Directors of LAWPRO. The responsibilities of the Director, Office of the CEO and Corporate Secretary include managing governance functions such as the conduct of Bencher and Treasurer elections, the conduct of the Annual General Meeting, Convocation and other general Corporate Secretary functions. The Director also oversees the management of the Equity Initiatives department. The CEO’s office also provides project and event planning, protocol, and logistic support to the Treasurer and the Treasurer’s office.


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CEO 2018 Budget The Office of the CEO has total expenses of $1.9 million in 2018. Convocation expenses are increasing by $70,000 primarily associated with holding Convocation in the Lamont Centre on a more consistent basis and Convocation education sessions. The Consulting Fee budget has increased by $25,000 to $450,000 and is intended to primarily fund Governance Task Force work, the Program Review project and $250,000 for the work of the Treasurer’s Review Panel on Indigenous Issues.

2018 2017




Total 1,857,900 1,694,900


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Equity Initiatives 2018 Budget The Equity Initiatives Department undertakes activities to enhance

the accessibility of the Society’s services, programs and decision-making to diverse communities equality and diversity within the legal professions in Ontario and at the governance level access to justice for the public

The Department’s focus on equity, diversity and inclusion includes legal education and outreach, research and support for policy development, and design of initiatives to implement positive measures. The functions include: Public Education and Outreach - the Department coordinates legal

education events Research in Demographic Analysis - demographic analysis is

undertaken each year to provide insights into the demographic profile of the profession

Professional Development Initiatives - aimed at imparting knowledge related to equality and diversity

Equity and Diversity at the Society - professional development activities are also delivered within the Society

Women in Private Practice - the Department continues to monitor the ongoing implementation of the Justicia Project, manages the Contract Lawyers’ Registry and conducts a change of status survey

Challenges Faced by Racialized Licensees Working Group – the Department is responsible for overseeing the implementation of the recommendations of the Challenges Faced by Racialized Licensees Working Group report

Indigenous Initiatives – the Department supports the Indigenous Framework approved by Convocation and works closely with the Indigenous Advisory Group

Discrimination and Harassment Counsel (DHC) – the Department supports the Office of the DHC Francophone Initiatives – the department supports the ongoing implementation of the Society’s French language

services policy and the relationship with the Ontario French Language Services Commissioner

2018 2017




Total 1,620,800 1,193,100

7.0

4.0

2018 2017

FTE


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Equity Initiatives has total expenses of $1.6 million. The primary increase is the addition of two new Counsel positions. The first is a Counsel to the Equity Advisor who will support the overall mandate and activities of Equity Initiatives. The second is a Senior Indigenous Counsel who will provide support for indigenous issues and the implementation of the Indigenous Framework adopted by Convocation in June 2017.


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FINANCE The Finance department provides services for the Society in the areas of financial reporting, general accounting, purchasing, cash and investment management, payroll, financial policy development, insurance, government filings/returns, central purchasing and the billing of all member and student related fees. The department is responsible for ensuring the adequacy of internal financial controls intended to safeguard the financial assets of the Society and for ensuring the Society's books and records are in compliance with generally accepted accounting principles. The administration of the printing and mail services contract is carried out by the Finance department. Staff manage the Society's annual process for the lawyer, paralegal and capital budgets, develop budget policy options, track expenditures to budget throughout the year and provide assistance to departments in managing their individual budgets. The department supports the Audit and Finance Committee. Under a Management Services Agreement signed between the Law Society of Upper Canada and LAWPRO, LAWPRO provides services with respect to the management of the Law Society’s Errors and Omissions Insurance Fund which accounts for insurance-related transactions between LAWPRO, the Society and insured lawyers. The Finance department works closely with LAWPRO’S management team on financial reporting and audit matters. Under the Administrative Services Agreement (ASA) between the Law Society and LibraryCo Inc., the Finance department provides administrative services to LibraryCo. The Finance department also provides administrative, accounting and other support services to the Law Society Foundation. Other Finance department responsibilities include:

Bencher expense reimbursement and Bencher remuneration administration Secretariat support to the Society’s Audit and Finance Committee, LibraryCo’s Audit and Finance Committee and

the Foundation’s Board of Trustees Administration of the Parental Leave Assistance Program Coordinating the annual external audit and preparing annual audited financial statements for the Law Society, the

Law Society Pension Fund, LibraryCo and the Foundation.


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Finance 2018 Budget The Finance department has revenues of $422,000 and expenses of $3.4 million in 2018, all unchanged apart from inflationary-type increases. 2018 2017




Total 3,438,100 3,345,500


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BENCHER AND TREASURER EXPENSES

The budget for Bencher and Treasurer expenses includes reimbursement of expenses, bencher functions, bencher remuneration and the Treasurer’s honorarium. The total budget for these expenses is decreasing by $460,000 to $2.6 million, reflecting the experience in recent years of functions and remuneration. Bencher per diems are unchanged for the second year at $585 per day / $355 per half day.


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CORPORATE REVENUES AND EXPENSES

Corporate revenues total $4.6 million and Corporate expenses total $3.8 million with significant balances and changes summarized below:

Revenues 2017 Budget ($)

2018 Draft Budget ($)

Investment income 775,000 775,000 Ontario Reports revenues 1,500,000 1,490,000 LibraryCo admin fee 305,000 305,000Late fees 800,000 1,300,000Miscellaneous revenue 325,000 505,000Expenses Contingency 1,000,000 1,000,000Severance 500,000 500,000Credit Card Discounts, increasing based on experience

929,000 1,329,000

Pre-Authorized Annual Payment Plan Discounts, decreasing based on experience

500,000 100,000

Other (including licenses and insurance)

870,000 880,000


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SUPPORT OF EXTERNAL ORGANIZATIONS

The draft budget includes support for a number of other organizations as summarized below: 2017 Budget ($) 2018 Draft Budget ($) LibraryCo Manages the Ontario county courthouse library system

7,815,000 7,993,000

CanLII A virtual library of Canadian legal information

1,540,000 1,520,000

Federation of Law Societies The national coordinating body of Canada’s law societies

1,120,000 1,100,000

Federation of Ontario Law Associations An association of county & district law presidents', FOLA advocates on behalf of its members and the legal industry

260,000 261,700

Law Commission of Ontario Recommends law reform measures to make the law accessible in Ontario

145,000 145,900

Lawyers Feed the Hungry Charity providing food for Ontarians in need

100,000 100,000

Ontario Justice Education Network Develops educational tools to build the legal capability of youth

50,000 40,000

Pro Bono Ontario Bridging the gap between lawyers who want to donate their services, and low-income Ontarians

50,000 50,000


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ASSISTANCE PLANS

Parental Leave Assistance Plan Funding of the Parental Leave Assistance Plan has been maintained at zero in the draft budget. Use of the Parental Leave Assistance Plan continues at low levels with expenses of $97,000 in the first half of 2017. At the end of June 2017, the PLAP Fund balance was $360,500. Member Assistance Plan This confidential assistance program funded by the Society and LAWPRO, provides support to lawyers and paralegals in Ontario who are experiencing a professional or personal crisis. The program provides peer-to-peer counseling and other support services. In 2018, our proposed operational budget for the program is $520,000, increased by $120,000 from 2017 to reflect increased use of the program. LAWPRO funds approximately 46% of this amount.


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THE LAW SOCIETY OF UPPER CANADABudget History2009-2018

2018 2017 2016 2015 2014 2013 2012 2011 2010 2009Projected Budgeted Budgeted Budgeted Budgeted Budgeted Budgeted Budgeted Budgeted Budgeted

Expenditures Expenditures Expenditures Expenditures Expenditures Expenditures Expenditures Expenditures Expenditures Expenditures

1 Total Expenditures ( 000's) 136,643$ 121,399$ 110,690$ 109,014$ 106,273$ 103,444$ 99,482$ 92,514$ 86,615$ 81,918$

2 Full Time Equivalent Employees (FTE) 606.1 579.8 554.9 545.9 552.2 558.6 552.2 523.7 493.1 466.0 3 FTE Annual Change 26.3 24.9 9.0 (6.3) (6.4) 6.4 28.5 30.6 27.1 31.7 4 FTE Accumulated Change 171.8 145.5 120.6 111.6 117.9 124.3 117.9 89.4 58.8 31.7

5 Full Fee Equivalent (FFE) Lawyers 41,200 40,200 39,500 38,100 37,200 36,600 36,000 35,000 34,000 33,600 6 FFE Paralegals 6,100 5,600 5,050 4,700 4,350 4,050 3,400 3,200 2,800 2,400

7 Total FFE Licencees 47,300 45,800 44,550 42,800 41,550 40,650 39,400 38,200 36,800 36,000

8 Total Lawyer Fee 2,183$ 1,916$ 1,866$ 1,866$ 1,866$ 1,851$ 1,826$ 1,785$ 1,736$ 1,703$

9 Total Paralegal Fee 1,100$ 1,046$ 996$ 996$ 996$ 996$ 982$ 957$ 933$ 900$


148

TAB 3.3

FOR INFORMATION

PERFORMANCE OF PORTFOLIO MANAGER

50. The Committee recommends that Convocation receive a report on the

performance of the Law Society’s Portfolio Manager for the six months to June 30, 2017 for information.

Rationale 51. Under the Law Society’s Investment Policy, the Audit & Finance Committee shall

periodically report to Convocation on the performance of the Portfolio Manager based on returns of the portfolio investments. The Law Society's long-term investments, totaling $65 million at the end of June, are divided into three portfolios for the General Fund (June 30, 2017: $15.4 million), the Compensation Fund (June 30, 2017: $30 million), and the Errors & Omissions Insurance Fund (June 30, 2016: $19.6 million). All the investments are managed by Foyston Gordon & Payne under the same investment policy.

52. Approximately 30% of the portfolio administered is held in equity investments with the balance in fixed income securities.

53. We receive biannual reports on investment performance from AON Hewitt, our investment consultants. The Investment Monitoring Report as at June 30, 2017 is provided.

Key Issues and Considerations 54. According to the Investment Policy, the Portfolio Manager’s benchmarks are:

a) By asset class: to outperform the appropriate market index return

b) By benchmark portfolio: to outperform a static benchmark portfolio consisting of the benchmark of the asset mix ranges (i.e., a portfolio consisting of 70% of the FTSE TMX Short-Term Bond Index total return, and 30% of the total return of the S&P/TSX Composite Index, over a four year moving average or complete market cycle).

55. According to the AON report, the Portfolio Manager’s overall gross return over the 4-year

period ending 30 June, 2017 was 3.3%, outperforming the benchmark by 0.2%. Over the most recent 6-month period, the Fund underperformed its benchmark by 0.75% with a negative return of 0.4% and this will be monitored.


149

Law Society of Upper Canada:Errors & Omissions Insurance Fund, Compensation Fund and General Fund

Semi-Annual Period Ending 30 June 2017

Streamlined Performance Review andInvestment Manager Evaluation

© 2017 Aon Hewitt Inc. All rights reserved.

Aon HewittInvestment Consulting


150

1 Executive Summary Page 1

2 Capital Market Performance Page 11

3 E&O Insurance Fund Analysis Page 14

4 Compensation Fund Analysis Page 19

5 General Fund Analysis Page 24

6 Asset Class Analysis Page 29

7 Appendix A - Plan Information Page 36

8 Appendix B - Manager Updates Page 40

9 Appendix C - Capital Markets Environment Page 42

10 Appendix D - Description of Market Indices and Statistics Page 52

11 Appendix E - Fee Analysis Page 57

12 Appendix F - Aon Hewitt Flash Reports Page 59

13 Appendix G - Compliance Page 62

14 Appendix H - Disclosure Page 64

Table Of Contents


151

Executive Summary

Page 1


152

Commentary and RecommendationsExecutive Summary

As of 30 June 2017

Comments Recommendations

E&O Insurance Fund Performance

The overall gross return over the 4-year period ending 30 June 2017 was 3.34%, outperforming the benchmark by 0.20%.

Over the most recent 6-month period, the Fund underperformed its benchmark by 0.75%, with a return of -0.39%.

Weak stock selection in the energy sector detracted from performance as oil prices declined. Stock selection in the financials sector contributed to performance as banks continue to exceed expectations.

The portfolio’s overweight position in corporate bonds continued to be a strong contributor to performance. Canadian financial bonds, specifically bank non-viable contingent capital (NVCC) securities, performed well over the first two quarters. The exposure to longer-dated hybrid federal bonds detracted from performance, but there is little concern from a longer term perspective due to their high credit quality and liquidity.

No action is required.

Compensation Fund Performance


Over the most recent 6-month period, the Fund underperformed its benchmark by 0.74% with a return of -0.38%.

Performance attribution comments for this Fund are the same as the E&O Insurance Fund comments above.


General Fund Performance


Over the most recent 6-month period, the Fund underperformed its benchmark by 0.74% with a return of -0.38%.

Performance attribution comments for this Fund are the same as the E&O Insurance Fund comments above.


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Commentary and RecommendationsExecutive Summary

As of 30 June 2017

Portfolio Rebalancing As at 30 June 2017, all asset classes were within their allowable ranges. Continue to monitor.

Statement of Investment Policies and Procedures (SIPP)

The SIPP was last updated in February 2017. The Asset Mix was revised, accordingly.

The SIPP should be reviewed and updated annually and any changes to the Plan’s investment policies should be reflected accordingly.

Foyston, Gordon & Payne (FGP)

Mark Thompson, who joined FGP in 2000 and was most recently Chief Operating Officer and Chief Compliance Officer, retired on 30 June 2017, one year after announcing his departure. Gavin Deokiesingh is now COO and CCO having joined FGP in February 2017 as part of the transition plan. On 27 February 2017, FGP announced that Bryan Pilsworth has been promoted to co-PM along with John Berry for the Canadian Equity strategy. In addition, Tom Duncanson has been promoted to Portfolio Manager for the Canadian Small Cap Equity strategy. For more details, please see the FGP Flash Report in Appendix D.

Continue to monitor.

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154

Latest Thinking

Executive Summary

During the last quarter, we have produced papers on the following topics. Although these topics may not be directly applicable to your plan, they may be of general

interest and provide some insight into Aon Hewitt’s global research. For more details, please contact your Aon Hewitt Investment Consultant.

Topic Summary

Canadian Real Estate

Benchmarking

The REALpac/IPD Canada Quarterly Property Index (IPD) is currently the most readily available and generally accepted index ofdirect real estate performance in Canada. Over the last several years an effort has been underway to produce the REALpac /IPD Canada Quarterly Property Fund Index (PFI).

This paper looks at some of the key differences between the IPD and the PFI.

http://www.aon.com/canada/attachments/thought-leadership/report-ic-Canadian-Real-Estate-Benchmarking.pdf

Making Portfolios More

Fee Efficient

Investment management fees are highly relevant to portfolio performance. Making portfolios more fee-efficient is not necessarily about reducing fees; rather it is about paying for things that add value.

This paper, written in the U.S., describes a toolkit of approaches for making portfolios more fee-efficient.

www.aon.com/canada/attachments/thought-leadership/report-IC-Making-Portfolios-More-Fee-Efficient.pdf

Managed Futures Investors looking to improve the quality of returns in their portfolio often look to make allocations to strategies that have low correlations to their other holdings. One such strategy to consider is a managed futures strategy. Managed Futures offer potential risk, historical performance and diversification opportunities, as a standalone investment or within a wider mandate.

This paper, written in the United Kingdom, was inspired by a more in-depth paper produced last quarter, and provides an introduction to managed futures.

http://www.aon.com/canada/attachments/thought-leadership/report_IC_Managed_Futures_July_2017.pdf

T + 2 Settlement The North American securities markets will be moving to a maximum security settlement cycle of T+2 (trade date plus two days) from the current T+3 settlement cycle on September 5, 2017.

This paper briefly discusses the parties impacted by the move to T+2 settlement and how clients may be impacted.

http://www.aon.com/canada/attachments/thought-leadership/infobulletin/pub_infobulletin_T2Settlement_Newsletter.pdf

For more timely access to our latest thinking, please visit and subscribe to the Aon Hewitt Retirement & Investment Blog:

https://retirementandinvestmentblog.aon.com/

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MarketValue($000)

%

Performance (%)

6Months

1Year

2Years

3Years

4Years

5Years

SinceInception

InceptionDate

E&O Insurance Fund (Gross) 21,020 100.0 -0.39 3.01 1.91 1.69 3.34 3.66 3.83 1/04/2006

E&O Insurance Fund Benchmark 0.36 1.81 1.58 1.98 3.14 2.98 3.25

Value Added -0.75 1.20 0.33 -0.29 0.20 0.68 0.58

E&O Insurance Fund (Net) 21,020 100.0 -0.48 2.85 1.77 1.55 3.20 3.52 3.68 1/04/2006

E&O Insurance Fund Benchmark 0.36 1.81 1.58 1.98 3.14 2.98 3.25

Value Added -0.84 1.04 0.19 -0.43 0.06 0.54 0.43

E&O Canadian Equities 6,767 32.2 -2.99 (94) 13.69 (33) 6.45 (50) 2.30 (85) 8.80 (80) 11.18 (40) 6.15 (57) 1/04/2006

S&P/TSX Capped Composite 0.74 (58) 11.05 (65) 5.27 (70) 3.08 (71) 8.96 (78) 8.74 (90) 5.02 (87)

Value Added -3.73 2.64 1.18 -0.78 -0.16 2.44 1.13

Canadian Equity Median 1.08 11.99 6.44 4.22 10.28 10.72 6.35

E&O Canadian Fixed Income 13,402 63.8 0.67 (35) 1.25 (24) 1.17 (96) 1.79 (96) 2.35 (76) 2.35 (61) 3.89 (26) 1/04/2006

FTSE TMX Short Term Bond 0.25 (100) 0.20 (100) 0.88 (100) 1.72 (100) 2.09 (100) 1.94 (100) 3.50 (100)

Value Added 0.42 1.05 0.29 0.07 0.26 0.41 0.39

Canadian Short Term Bonds Median 0.63 0.85 1.36 2.10 2.48 2.37 3.78

total 21,020 100.0

E&O Short-Term 851 4.1 0.33 (91) 0.69 (90) 0.67 (93) 0.78 (94) 0.85 (94) 0.90 (87) 0.87 (93) 1/10/2009

FTSE TMX 91-Day T-Bill 0.19 (100) 0.45 (100) 0.47 (100) 0.60 (100) 0.69 (100) 0.76 (100) 0.76 (100)

Value Added 0.14 0.24 0.20 0.18 0.16 0.14 0.11

Money Market Median 0.43 0.87 0.86 0.94 1.00 1.03 1.02

Executive Summary

E&O Insurance Fund Asset Allocation and Annualized Performance

As of 30 June 2017

The total fund performance prior to 30 June 2009 includes a U.S. equities component.Parentheses contain percentile rankings.Returns for periods greater than one year are annualized.

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156

Performance (%)

2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

E&O Insurance Fund (Gross) 3.01 0.82 1.25 8.45 4.94 1.98 6.54 7.43 -0.46 1.42 11.24

E&O Insurance Fund Benchmark 1.81 1.35 2.77 6.72 2.34 1.70 5.70 5.57 -0.80 2.82 8.39

Value Added 1.20 -0.53 -1.52 1.73 2.60 0.28 0.84 1.86 0.34 -1.40 2.85

E&O Insurance Fund (Net) 2.85 0.70 1.12 8.30 4.82 1.86 6.40 7.29 -0.66 1.26 11.03

E&O Insurance Fund Benchmark 1.81 1.35 2.77 6.72 2.34 1.70 5.70 5.57 -0.80 2.82 8.39

Value Added 1.04 -0.65 -1.65 1.58 2.48 0.16 0.70 1.72 0.14 -1.56 2.64

E&O Canadian Equities 13.69 (33) -0.32 (63) -5.53 (88) 30.89 (41) 21.21 (5) -9.83 (58) 22.80 (30) 13.89 (35) -18.85 (28) -6.78 (93) 26.80 (27)

S&P/TSX Capped Composite 11.05 (65) -0.20 (63) -1.16 (65) 28.66 (65) 7.90 (93) -10.25 (64) 20.87 (57) 11.95 (54) -25.69 (67) 6.75 (32) 22.73 (63)

Value Added 2.64 -0.12 -4.37 2.23 13.31 0.42 1.93 1.94 6.84 -13.53 4.07

Canadian Equity Median 11.99 2.01 0.70 29.96 12.34 -9.11 21.29 12.08 -22.93 2.32 24.36

E&O Canadian Fixed Income 1.25 (24) 1.10 (99) 3.03 (89) 4.04 (25) 2.37 (13) 3.87 (62) 3.44 (59) 7.43 (1) 6.16 (98) 6.91 (4) 5.39 (1)

FTSE TMX Short Term Bond 0.20 (100) 1.56 (81) 3.43 (72) 3.21 (97) 1.36 (100) 3.80 (64) 3.16 (94) 4.31 (100) 8.02 (61) 6.46 (13) 4.02 (87)

Value Added 1.05 -0.46 -0.40 0.83 1.01 0.07 0.28 3.12 -1.86 0.45 1.37

Canadian Short Term Bonds Median 0.85 1.93 3.54 3.80 1.94 3.99 3.51 5.47 8.23 6.00 4.14

E&O Short-Term 0.69 (90) 0.65 (84) 0.99 (71) 1.06 (81) 1.13 (68) 0.96 (88) 0.99 (71) - - - -

FTSE TMX 91-Day T-Bill 0.45 (100) 0.49 (100) 0.87 (96) 0.97 (100) 1.00 (89) 0.96 (88) 0.89 (92) 0.33 (80) 1.98 (74) 4.13 (81) 4.27 (67)

Value Added 0.24 0.16 0.12 0.09 0.13 0.00 0.10 - - - -

Money Market Median 0.87 0.85 1.11 1.21 1.19 1.18 1.07 0.55 2.20 4.35 4.30

Executive Summary

E&O Insurance Fund Annual Performance

As of 30 June

The total fund performance prior to 30 June 2009 includes a U.S. equities component.Parentheses contain percentile rankings.

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MarketValue($000)

%

Performance (%)

6Months

1Year

2Years

3Years

4Years

5Years

SinceInception

InceptionDate

Compensation Fund (Gross) 32,649 100.0 -0.38 3.02 1.87 1.65 3.30 3.65 4.80 1/06/2003

Compensation Fund Benchmark 0.36 1.81 1.58 1.98 3.14 2.98 4.36

Value Added -0.74 1.21 0.29 -0.33 0.16 0.67 0.44

Compensation Fund (Net) 32,649 100.0 -0.47 2.86 1.73 1.52 3.17 3.51 4.69 1/06/2003

Compensation Fund Benchmark 0.36 1.81 1.58 1.98 3.14 2.98 4.36

Value Added -0.83 1.05 0.15 -0.46 0.03 0.53 0.33

Compensation Canadian Equities 10,494 32.1 -3.01 (94) 13.68 (33) 6.33 (51) 2.29 (85) 8.81 (80) 11.18 (40) 9.91 (55) 1/06/2003


Value Added -3.75 2.63 1.06 -0.79 -0.15 2.44 1.24


Compensation Canadian Fixed Income 20,829 63.8 0.68 (32) 1.26 (24) 1.18 (95) 1.81 (92) 2.36 (73) 2.37 (48) 4.38 (-) 1/06/2003

Compensation Fixed Income Benchmark 0.25 (100) 0.20 (100) 0.88 (100) 1.72 (100) 2.09 (100) 1.94 (100) 3.94 (-)

Value Added 0.43 1.06 0.30 0.09 0.27 0.43 0.44

Canadian Short Term Bonds Median 0.63 0.85 1.36 2.10 2.48 2.37 -

total 32,649 100.0

Compensation Short-Term 1,325 4.1 0.33 (92) 0.69 (94) 0.67 (93) 0.77 (94) 0.85 (92) 0.90 (87) 1.61 (100) 1/06/2003


Value Added 0.14 0.24 0.20 0.17 0.16 0.14 -0.14


Executive Summary

Compensation Fund Asset Allocation and Annualized Performance

As of 30 June 2017


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Performance (%)

2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Compensation Fund (Gross) 3.02 0.73 1.22 8.43 5.03 1.98 6.49 7.97 3.91 3.36 7.93

Compensation Fund Benchmark 1.81 1.35 2.77 6.72 2.34 1.70 5.70 6.40 2.72 4.91 6.85

Value Added 1.21 -0.62 -1.55 1.71 2.69 0.28 0.79 1.57 1.19 -1.55 1.08

Compensation Fund (Net) 2.86 0.61 1.09 8.28 4.91 1.86 6.46 7.95 3.85 3.26 7.79

Compensation Fund Benchmark 1.81 1.35 2.77 6.72 2.34 1.70 5.70 6.40 2.72 4.91 6.85

Value Added 1.05 -0.74 -1.68 1.56 2.57 0.16 0.76 1.55 1.13 -1.65 0.94

Compensation Canadian Equities 13.68 (33) -0.53 (65) -5.36 (87) 30.97 (39) 21.21 (5) -9.83 (58) 22.80 (30) 13.89 (35) -18.85 (28) -6.78 (93) 26.80 (27)


Value Added 2.63 -0.33 -4.20 2.31 13.31 0.42 1.93 1.94 6.84 -13.53 4.07


Compensation Canadian Fixed Income 1.26 (24) 1.09 (100) 3.10 (86) 4.04 (25) 2.39 (13) 3.87 (62) 3.44 (59) 7.88 (1) 6.33 (97) 6.95 (4) 5.47 (1)

Compensation Fixed Income Benchmark 0.20 (100) 1.56 (81) 3.43 (72) 3.21 (97) 1.36 (100) 3.80 (64) 3.16 (94) 5.62 (29) 7.02 (94) 6.80 (5) 4.77 (7)

Value Added 1.06 -0.47 -0.33 0.83 1.03 0.07 0.28 2.26 -0.69 0.15 0.70


total

Compensation Short-Term 0.69 (94) 0.65 (85) 0.99 (70) 1.08 (77) 1.12 (69) 0.96 (88) 0.99 (71) -3.72 (100) 5.27 (1) 3.72 (91) 3.76 (97)


Value Added 0.24 0.16 0.12 0.11 0.12 0.00 0.10 -4.05 3.29 -0.41 -0.51


Executive Summary

Compensation Fund Annual Performance

As of 30 June


Page 8


159

MarketValue($000)

%

Performance (%)

6Months

1Year

2Years

3Years

4Years

5Years

SinceInception

InceptionDate

General Fund (Gross) 16,720 100.0 -0.38 3.02 1.88 1.65 3.30 3.65 3.97 1/04/2004

General Fund Benchmark 0.36 1.81 1.58 1.98 3.14 2.98 3.71

Value Added -0.74 1.21 0.30 -0.33 0.16 0.67 0.26

General Fund (Net) 16,720 100.0 -0.47 2.86 1.74 1.52 3.17 3.51 3.87 1/04/2004

General Fund Benchmark 0.36 1.81 1.58 1.98 3.14 2.98 3.71

Value Added -0.83 1.05 0.16 -0.46 0.03 0.53 0.16

General Canadian Equities 5,375 32.1 -3.01 (94) 13.67 (33) 6.33 (51) 2.27 (85) 8.80 (80) 11.17 (40) 8.54 (55) 1/04/2004


Value Added -3.75 2.62 1.06 -0.81 -0.16 2.43 1.26


General Canadian Fixed Income 10,668 63.8 0.68 (32) 1.26 (24) 1.18 (94) 1.81 (92) 2.37 (73) 2.37 (42) 3.49 (100) 1/04/2004

FTSE TMX Short Term Bond 0.25 (100) 0.20 (100) 0.88 (100) 1.72 (100) 2.09 (100) 1.94 (100) 3.36 (100)

Value Added 0.43 1.06 0.30 0.09 0.28 0.43 0.13

Canadian Short Term Bonds Median 0.63 0.85 1.36 2.10 2.48 2.37 3.68

total 16,720 100.0

General Short-Term 677 4.1 0.33 (92) 0.69 (94) 0.67 (93) 0.78 (94) 0.85 (92) 0.89 (94) 1.96 (37) 1/04/2004


Value Added 0.14 0.24 0.20 0.18 0.16 0.13 0.28


Executive Summary

General Fund Asset Allocation and Annualized Performance

As of 30 June 2017


Page 9


160

Performance (%)

2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

General Fund (Gross) 3.02 0.75 1.22 8.41 5.03 1.98 6.52 4.68 5.33 3.16 6.82

General Fund Benchmark 1.81 1.35 2.77 6.72 2.34 1.70 5.70 5.25 3.58 4.64 6.19

Value Added 1.21 -0.60 -1.55 1.69 2.69 0.28 0.82 -0.57 1.75 -1.48 0.63

General Fund (Net) 2.86 0.63 1.09 8.27 4.91 1.86 6.48 4.67 5.26 3.06 6.70

General Fund Benchmark 1.81 1.35 2.77 6.72 2.34 1.70 5.70 5.25 3.58 4.64 6.19

Value Added 1.05 -0.72 -1.68 1.55 2.57 0.16 0.78 -0.58 1.68 -1.58 0.51

General Canadian Equities 13.67 (33) -0.53 (65) -5.39 (87) 30.97 (38) 21.21 (5) -9.83 (58) 22.80 (30) 13.89 (35) -18.85 (28) -6.78 (93) 26.80 (27)


Value Added 2.62 -0.33 -4.23 2.31 13.31 0.42 1.93 1.94 6.84 -13.53 4.07


General Canadian Fixed Income 1.26 (24) 1.10 (100) 3.10 (86) 4.04 (25) 2.41 (13) 3.87 (62) 3.44 (59) 3.75 (100) 7.90 (64) 6.79 (5) 3.69 (95)

FTSE TMX Short Term Bond 0.20 (100) 1.56 (81) 3.43 (72) 3.21 (97) 1.36 (100) 3.80 (64) 3.16 (94) 4.31 (100) 8.02 (61) 6.46 (13) 4.02 (87)

Value Added 1.06 -0.46 -0.33 0.83 1.05 0.07 0.28 -0.56 -0.12 0.33 -0.33


General Short-Term 0.69 (94) 0.65 (84) 0.99 (71) 1.08 (78) 1.04 (80) 0.93 (90) 0.90 (91) 0.05 (100) 8.48 (1) 3.76 (90) 3.05 (99)


Value Added 0.24 0.16 0.12 0.11 0.04 -0.03 0.01 -0.28 6.50 -0.37 -1.22


Executive Summary

General Fund Annual Performance

As of 30 June


Page 10


161

Capital Market Performance

Page 11


162

6 Months Year To Date 1 Year 2 Years 3 Years 4 Years 5 Years 10 Years

Canadian Equity

S&P/TSX Composite 0.7 0.7 11.0 5.3 3.1 9.0 8.7 3.9

Foreign Equity

S&P 500 (CAD) 5.9 5.9 17.9 12.9 17.1 19.2 20.3 9.3

S&P 500 (USD) 9.3 9.3 17.9 10.7 9.6 13.2 14.6 7.2

MSCI EAFE (Net) (CAD) 10.2 10.2 20.3 6.0 8.1 12.0 14.1 3.1

MSCI World (Net) (CAD) 7.2 7.2 18.2 9.3 12.4 15.5 16.9 6.1

Real Estate

REALpac / IPD Canada Property Index (IPD) 2.8 2.8 6.4 7.1 7.0 7.5 8.5 8.5

Fixed Income

FTSE TMX Universe Bond 2.4 2.4 0.0 2.6 3.8 4.2 3.3 5.1

FTSE TMX Long Term Bond 6.1 6.1 0.4 5.0 6.7 6.9 4.9 7.2

FTSE TMX 91-Day T-Bill 0.2 0.2 0.5 0.5 0.6 0.7 0.8 1.2

Consumer Price Index

Canadian CPI, unadjusted 1.6 1.6 1.0 1.3 1.2 1.5 1.4 1.5

Canadian Equities

The S&P/TSX Composite Index returned +0.7% over the last six months. Energy (-13.3%) and Materials (-0.7%), which account for a third of the Index, were

the only two sectors to post negative returns. Growth stocks outperformed value stocks (+1.0% vs. -0.2% respectively) but still trailed by a substantial margin

over the past year (+6.7% vs. +18.3% respectively).The S&P/TSX Composite Index returned +11.0% over the past twelve months. The best performing sectors

were Industrials (+30.3%) and Consumer Discretionary (+24.1%) while the worst performers were Healthcare (-20.6%) and Materials (-7.9%).

U.S. Equities

In the last six months, the S&P 500 Index returned +5.9% in Canadian dollar terms. The appreciation of the Canadian dollar versus the U.S. dollar subtracted

3.4% for unhedged Canadian investors. Information Technology (+13.5%) and Healthcare (+12.4%) were the best performing sectors and Energy (-15.4%) and

Telecommunications (-13.6%) were the worst performing sectors. The Index returned +17.9% over the last twelve months in Canadian dollar terms. The best

performing sector was Financials (+35.4%) while Telecommunications (-11.7%) was the worst performer.

Non-North American Equities

The MSCI EAFE Index returned +10.2% in the first half of 2017 in Canadian dollar terms. All sectors posted positive returns, except for Energy (-5.6%). The

best performing sectors were Information Technology (+18.4%) and Consumer Staples (+13.6%). Over the past twelve months, the Index returned +20.3% in

Canadian dollar terms. All sectors generated positive returns, led by Financials (+38.2%), Information Technology (+35.8%) and Materials (+33.1%).

Fixed Income

The Canadian bond market, as measured by the FTSE TMX Universe Bond Index, returned +2.4% over the last six months. Bond market returns were positive

across all segments. Provincial bonds returned +3.5%, outperforming both Corporate bonds (+2.9%) and Federal bonds (+0.8%). Over the last twelve months,

Index returns were flat. Long duration bonds (+0.4%) outperformed both short duration (+0.2%) and medium duration bonds (-0.9%).


Major Capital Markets' Returns

As of 30 June 2017

Page 12


163

6 Months 1 Year 4 Years

0.0 3.0 6.0 9.0 12.0 15.0 18.0 21.0 24.0 27.0 30.0Return

Canadian CPI, unadjusted

FTSE TMX 91-Day T-Bill

REALpac / IPD Canada Property Index (IPD)

FTSE TMX Long Term Bond

FTSE TMX Universe Bond

MSCI Emerging Markets (Net) (CAD)

MSCI ACWI (Net) (CAD)

MSCI World (Net) (CAD)

MSCI EAFE (Net) (CAD)

S&P 500 (CAD)

S&P/TSX Composite

1.6

0.2

2.8

6.1

2.4

14.7

8.0

7.2

10.2

5.9

0.7

1.0

0.5

6.4

0.4

0.0

23.7

18.8

18.2

20.3

17.9

11.0

1.5

0.7

7.5

6.9

4.2

9.8

14.9

15.5

12.0

19.2

9.0


Comparative Performance

As of 30 June 2017

Page 13


164

E&O Insurance Fund Analysis

Page 14


165

SegmentsMarket Value

($)Allocation

(%)

Canadian Equity 6,767,086 32.2¢£

Canadian Fixed Income 13,401,839 63.8¢£

Short-Term 851,342 4.1¢£

30 June 2017 : $21,020,267

Canadian Equity Canadian Fixed Income Short-Term

32.2%

4.1%

63.8%


($)Allocation

(%)



Short-Term 1,076,168 4.9¢£

31 December 2016 : $22,070,392


18.6%4.9%

76.5%

E&O Insurance Fund

Asset Allocation by Segment

E&O Insurance Fund

Page 15


166

Added Value History (%)

Return Summary

E&O Insurance Fund E&O Insurance Fund Benchmark

0.0

2.0

4.0

6.0

-2.0

Re

turn

(%)

6Months

1Year

2Years

3Years

4Years

5Years

0.4

1.8 1.62.0

3.1 3.0

-0.4

3.0

1.9 1.7

3.3 3.7

Performance Statistics

Quarters %

Market Capture

Up Markets 36 122.9

Down Markets 9 140.3

Batting Average

Up Markets 36 72.2

Down Markets 9 33.3

Overall 45 64.4

Added Value (up market) Added Value (down market)

Cumulative Added Value Rolling 4 Years Added Value

0.0

4.0

8.0

12.0

-4.0

-8.0

Ad

de

d V

alu

e (%

)

9/07 6/08 3/09 12/09 9/10 6/11 3/12 12/12 9/13 6/14 3/15 12/15 9/16 6/17

Six Months

Weak stock selection in the energy sector detracted fromperformance as oil prices declined. Stock selection in thefinancials sector contributed to performance as bankscontinue to exceed expectations.

The portfolio’s overweight position in corporate bondscontinued to be a strong contributor to performance.Canadian financial bonds, specifically bank non-viablecontingent capital (NVCC) securities, performed well overthe first two quarters. The exposure to longer-dated hybridfederal bonds detracted from performance, but there islittle concern from a longer term perspective due to theirhigh credit quality and liquidity.

E&O Insurance Fund Performance Summary

As of 30 June 2017

E&O Insurance Fund

Page 16


167

Change in Market Value ($000)From 1 January 2013 to 30 June 2017

Summary of Cash Flows ($000)

$0

$20,000

$40,000

$60,000

($20,000)

($40,000)

Beginning Market Value Net Additions / Withdrawals Investment Earnings Ending Market Value

$29,670

($12,826)

$4,176

$21,020

Jan-2013To

Jun-2017

E&O Insurance Fund

Beginning Market Value 29,670

+/- Net Cash Flows -12,826

+/- Income 3,622

+/- Capital Gains / Losses 554

= Ending Market Value 21,020

E&O Insurance Fund Asset SummaryAs of 30 June 2017

E&O Insurance Fund

Note: Capital Gains / Losses also includes Accretion / Amortization.

Page 17


168

Target Allocation Actual Allocation

0.0% 15.0% 30.0% 45.0% 60.0% 75.0% 90.0%

Short-Term$851

Canadian Fixed Income$13,402

Canadian Equity$6,767

0.0%

70.0%

30.0%

4.1%

63.8%

32.2%

MarketValue($000)

MarketValue

(%)

TargetAllocation

(%)

Differences(%)

MinimumAllocation

(%)

MaximumAllocation

(%)

Total Fund 21,020 100.0 100.0 0.0

Canadian Equity 6,767 32.2 30.0 2.2 20.0 40.0

Canadian Fixed Income 13,402 63.8 70.0 -6.2 45.0 80.0

Short-Term 851 4.1 0.0 4.1 0.0 15.0

E&O Insurance Fund

Asset Allocation Compliance

As of 30 June 2017 ($000)

Page 18


169

Compensation Fund Analysis

Page 19


170


($)Allocation

(%)



Short-Term 1,325,344 4.1¢£

30 June 2017 : $32,648,911


32.1%

4.1%

63.8%


($)Allocation

(%)



Short-Term 1,598,547 4.9¢£

31 December 2016 : $32,774,041


18.5%4.9%

76.6%

Compensation Fund


Compensation Fund

Page 20


171


Return Summary

Compensation Fund Compensation Fund Benchmark

0.0

2.0

4.0

6.0

-2.0

Re

turn

(%)

6Months

1Year

2Years

3Years

4Years

5Years

0.4

1.8 1.62.0

3.1 3.0

-0.4

3.0

1.9 1.7

3.3 3.6


Quarters %

Market Capture

Up Markets 33 113.5

Down Markets 7 101.3

Batting Average

Up Markets 33 63.6

Down Markets 7 42.9

Overall 40 60.0



0.0

3.0

6.0

9.0

12.0

-3.0

-6.0

Ad

de

d V

alu

e (%

)

9/07 6/08 3/09 12/09 9/10 6/11 3/12 12/12 9/13 6/14 3/15 12/15 9/16 6/17

Six Months


The portfolio's overweight position in corporate bondscontinued to be a strong contributor to performance.Canadian financial bonds, specifically bank non-viablecontingent capital (NVCC) securities, performed well overthe first two quarters. The exposure to longer-dated hybridfederal bonds detracted from performance, but there islittle concern from a longer term perspective due to theirhigh credit quality and liquidity.

Compensation Fund Performance Summary

As of 30 June 2017

Compensation Fund

Page 21


172



$0

$15,000

$30,000

$45,000

($15,000)


$32,752

($4,999)

$4,896

$32,649

Jan-2013To

Jun-2017

Compensation Fund


+/- Net Cash Flows -4,999

+/- Income 4,286



Compensation Fund Asset SummaryAs of 30 June 2017

Compensation Fund


Page 22


173


0.0% 15.0% 30.0% 45.0% 60.0% 75.0% 90.0%

Short-Term$1,325



0.0%

70.0%

30.0%

4.1%

63.8%

32.1%

MarketValue($000)

MarketValue

(%)

TargetAllocation

(%)

Differences(%)

MinimumAllocation

(%)

MaximumAllocation

(%)

Total Fund 32,649 100.0 100.0 0.0

Canadian Equity 10,494 32.1 30.0 2.1 20.0 40.0


Short-Term 1,325 4.1 0.0 4.1 0.0 15.0

Compensation Fund


As of 30 June 2017 ($000)

Page 23


174

General Fund Analysis

Page 24


175


($)Allocation

(%)



Short-Term 677,331 4.1¢£

30 June 2017 : $16,720,371


32.1%

4.1%

63.8%


($)Allocation

(%)



Short-Term 817,877 4.9¢£

31 December 2016 : $16,784,593


18.6%4.9%

76.6%

General Fund


General Fund

Page 25


176


Return Summary

General Fund General Fund Benchmark

0.0

2.0

4.0

6.0

-2.0

Re

turn

(%)

6Months

1Year

2Years

3Years

4Years

5Years

0.4

1.8 1.62.0

3.1 3.0

-0.4

3.0

1.9 1.7

3.3 3.6


Quarters %

Market Capture

Up Markets 44 105.3

Down Markets 9 87.3

Batting Average

Up Markets 44 59.1

Down Markets 9 55.6

Overall 53 58.5



0.0

2.0

4.0

6.0

8.0

-2.0

-4.0

Ad

de

d V

alu

e (%

)

9/07 6/08 3/09 12/09 9/10 6/11 3/12 12/12 9/13 6/14 3/15 12/15 9/16 6/17

Six Months


The portfolio’s overweight position in corporate bondscontinued to be a strong contributor to performance.Canadian financial bonds, specifically bank non-viablecontingent capital (NVCC) securities, performed well overthe first two quarters. The exposure to longer-dated hybridfederal bonds detracted from performance, but there islittle concern from a longer term perspective due to their

high credit quality and liquidity.

General Fund Performance Summary

As of 30 June 2017

General Fund

Page 26


177



$0

$6,000

$12,000

$18,000

$24,000


$14,452

$0

$2,268

$16,720

Jan-2013To

Jun-2017

General Fund


+/- Net Cash Flows -

+/- Income 1,983



General Fund Asset SummaryAs of 30 June 2017

General Fund


Page 27


178


0.0% 15.0% 30.0% 45.0% 60.0% 75.0% 90.0%

Short-Term$677



0.0%

70.0%

30.0%

4.1%

63.8%

32.1%

MarketValue($000)

MarketValue

(%)

TargetAllocation

(%)

Differences(%)

MinimumAllocation

(%)

MaximumAllocation

(%)

Total Fund 16,720 100.0 100.0 0.0

Canadian Equity 5,375 32.1 30.0 2.1 20.0 40.0


Short-Term 677 4.1 0.0 4.1 0.0 15.0

General Fund


As of 30 June 2017 ($000)

Page 28


179

Asset Class Analysis

Page 29


180

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

Re

turn

(%)

6Months

1Year

2Years

3Years

4Years

5Years

2016 2015 2014 2013

FGP Canadian Equity -3.0 (94) 13.7 (33) 6.5 (50) 2.3 (85) 8.8 (80) 11.2 (40) -0.3 (63) -5.5 (88) 30.9 (41) 21.2 (5)¢£

S&P/TSX Capped Composite 0.7 (58) 11.0 (65) 5.3 (70) 3.1 (71) 9.0 (78) 8.7 (90) -0.2 (63) -1.2 (65) 28.7 (65) 7.9 (93)��

5th Percentile 5.1 17.3 10.4 8.2 13.0 14.1 7.1 9.8 35.7 21.2

1st Quartile 2.0 14.2 7.9 5.5 11.2 11.6 3.7 4.1 32.0 16.0

Median 1.1 12.0 6.4 4.2 10.3 10.7 2.0 0.7 30.0 12.3

3rd Quartile -0.2 10.2 5.0 2.7 9.1 9.9 -1.8 -3.0 27.3 10.1

95th Percentile -3.6 6.6 2.7 -0.6 7.4 7.7 -5.2 -9.7 24.4 6.7

Population 103 103 103 103 103 103 113 117 120 126

Canadian Equity Funds

Peer Group Analysis

As of 30 June 2017

Canadian Equity

Parentheses contain percentile rankings.Returns for periods greater than one year are annualized.Source: Aon Hewitt Manager Universe.

Page 30


181

4 Years

5.6

6.4

7.2

8.0

8.8

9.6

10.4

11.2

12.0

12.8

13.6

14.4

Re

turn

(%)

4.0 6.0 8.0 10.0 12.0 14.0

Risk (Standard Deviation %)

5 Years

5.4

6.3

7.2

8.1

9.0

9.9

10.8

11.7

12.6

13.5

14.4

15.3

Re

turn

(%)

4.0 6.0 8.0 10.0 12.0 14.0


ReturnStandardDeviation

FGP Canadian Equity 8.8 10.6¢£

S&P/TSX Capped Composite 9.0 8.5��

Median 10.3 8.3¾


FGP Canadian Equity 11.2 10.0¢£

S&P/TSX Capped Composite 8.7 8.4��

Median 10.7 8.1¾

Canadian Equity Funds

Peer Group Scattergram

Periods Ending 30 June 2017

Canadian Equity

Returns for periods greater than one year are annualized.Source: Aon Hewitt Manager Universe.

Page 31


182

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Re

turn

(%)

6Months

1Year

2Years

3Years

4Years

5Years

2016 2015 2014 2013

E&O Fixed Income 0.7 (35) 1.2 (24) 1.2 (96) 1.8 (96) 2.3 (76) 2.4 (61) 1.1 (99) 3.0 (89) 4.0 (25) 2.4 (13)¢£

General Fixed Income 0.7 (32) 1.3 (24) 1.2 (94) 1.8 (92) 2.4 (73) 2.4 (42) 1.1 (100) 3.1 (86) 4.0 (25) 2.4 (13)��

FTSE TMX Short Term Bond 0.2 (100) 0.2 (100) 0.9 (100) 1.7 (100) 2.1 (100) 1.9 (100) 1.6 (81) 3.4 (72) 3.2 (97) 1.4 (100)pr

Compensation Fixed Income 0.7 (32) 1.3 (24) 1.2 (95) 1.8 (92) 2.4 (73) 2.4 (48) 1.1 (100) 3.1 (86) 4.0 (25) 2.4 (13)¿̄

Compensation Fixed Income Benchmark 0.2 (100) 0.2 (100) 0.9 (100) 1.7 (100) 2.1 (100) 1.9 (100) 1.6 (81) 3.4 (72) 3.2 (97) 1.4 (100)qs

5th Percentile 1.0 1.8 1.9 2.5 2.8 2.7 2.4 3.8 4.4 3.3

1st Quartile 0.8 1.2 1.5 2.2 2.6 2.4 2.0 3.7 4.0 2.1

Median 0.6 0.8 1.4 2.1 2.5 2.4 1.9 3.5 3.8 1.9

3rd Quartile 0.5 0.7 1.2 2.0 2.4 2.3 1.8 3.4 3.5 1.7

95th Percentile 0.4 0.4 1.2 1.8 2.2 2.1 1.1 2.8 3.3 1.6

Population 14 14 14 13 13 13 17 16 16 16

Fixed Income Funds

Peer Group Analysis

As of 30 June 2017

Canadian Short Term Bonds

Parentheses contain percentile rankings.Returns for periods greater than one year are annualized.For illustrative purposes, Aon Hewitt has used the FTSE TMX Universe Bond Index for the purpose of a peer group analysis.Note, this is not a direct comparison between FGP's Canadian fixed income mandate and the Canadian bonds universe.Source: Aon Hewitt Manager Universe.

Page 32


183

4 Years

1.8

2.0

2.2

2.4

2.6

2.8

3.0

Re

turn

(%)

0.8 0.9 1.0 1.1 1.2 1.3 1.4


5 Years

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

Re

turn

(%)

0.9 1.0 1.1 1.2 1.3 1.4 1.5



E&O Fixed Income 2.3 1.0¢£

General Fixed Income 2.4 1.0��

FTSE TMX Short Term Bond 2.1 1.1pr

Compensation Fixed Income 2.4 1.0¿̄

Compensation Fixed Income Benchmark 2.1 1.1qs

Median 2.5 1.1¾


E&O Fixed Income 2.4 1.1¢£

General Fixed Income 2.4 1.1��

FTSE TMX Short Term Bond 1.9 1.1pr

Compensation Fixed Income 2.4 1.1¿̄

Compensation Fixed Income Benchmark 1.9 1.1qs

Median 2.4 1.1¾

Fixed Income Funds



Canadian Short Term Bonds

Returns for periods greater than one year are annualized.For illustrative purposes, Aon Hewitt has used the FTSE TMX Universe Bond Index for the purpose of a peer group analysis.Note, this is not a direct comparison between FGP's Canadian fixed income mandate and the Canadian bonds universe.Source: Aon Hewitt Manager Universe.

Page 33


184

-0.1

0.2

0.5

0.8

1.1

1.4

1.7

Re

turn

(%)

6Months

1Year

2Years

3Years

4Years

5Years

2016 2015 2014 2013

E&O Short-Term 0.3 (91) 0.7 (90) 0.7 (93) 0.8 (94) 0.8 (94) 0.9 (87) 0.7 (84) 1.0 (71) 1.1 (81) 1.1 (68)¢£

Compensation Short-Term 0.3 (92) 0.7 (94) 0.7 (93) 0.8 (94) 0.9 (92) 0.9 (87) 0.6 (85) 1.0 (70) 1.1 (77) 1.1 (69)��

General Short-Term 0.3 (92) 0.7 (94) 0.7 (93) 0.8 (94) 0.9 (92) 0.9 (94) 0.7 (84) 1.0 (71) 1.1 (78) 1.0 (80)pr

FTSE TMX 91-Day T-Bill 0.2 (100) 0.5 (100) 0.5 (100) 0.6 (100) 0.7 (100) 0.8 (100) 0.5 (100) 0.9 (96) 1.0 (100) 1.0 (89)¿̄

5th Percentile 0.5 1.0 1.0 1.1 1.2 1.2 1.0 1.3 1.3 1.3

1st Quartile 0.5 0.9 0.9 1.0 1.1 1.1 0.9 1.2 1.3 1.3

Median 0.4 0.9 0.9 0.9 1.0 1.0 0.8 1.1 1.2 1.2

3rd Quartile 0.4 0.8 0.7 0.8 0.9 1.0 0.7 1.0 1.1 1.1

95th Percentile 0.3 0.7 0.6 0.8 0.8 0.9 0.6 0.9 1.0 1.0

Population 16 16 16 16 16 16 16 16 16 19

Money Market Funds

Peer Group Analysis

As of 30 June 2017

Money Market

Parentheses contain percentile rankings.Returns for periods greater than one year are annualized.Source: Aon Hewitt Manager Universe.

Page 34


185

4 Years

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Re

turn

(%)

0.0 0.1 0.2


5 Years

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

Re

turn

(%)

0.0 0.1 0.2



E&O Short-Term 0.8 0.1¢£

Compensation Short-Term 0.9 0.1��

General Short-Term 0.9 0.1pr

FTSE TMX 91-Day T-Bill 0.7 0.1¿̄

Median 1.0 0.1¾


E&O Short-Term 0.9 0.1¢£

Compensation Short-Term 0.9 0.1��

General Short-Term 0.9 0.1pr

FTSE TMX 91-Day T-Bill 0.8 0.1¿̄

Median 1.0 0.1¾

Money Market Funds



Money Market

Returns for periods greater than one year are annualized.Source: Aon Hewitt Manager Universe.

Page 35


186

Appendix A - Plan Information

Page 36


187

Plan Information

The investment policy contains specific performance objectives for the fund and for the investment manager.

Investment rates of return are reported on a calendar basis and include realized and unrealized capital gains and losses, plus income.

Returns are calculated on a time-weighted basis and are compared to the objectives described below in order to assess the performance of theinvestment manager.

The primary objective is to outperform a benchmark portfolio over moving four-year periods. The specific benchmark weights areprovided on the following page.

Management Mandates: Active management of the asset allocationActive management of the asset classes

Management Structure: One Short-Term bond mandateOne Canadian equity mandate

Management Firm: Foyston, Gordon & Payne Inc. (FGP)

Prior to From 1 July 2009 From 21 May 2010Investment Products: 30 June 2009 to 21 May 2010 23 June 2014

E&O Insurance FundShort-Term - Pooled PooledCanadian Bonds Pooled Pooled SegregatedCanadian Equities Pooled Pooled PooledPrivate U.S. Equities Pooled - -

Compensation & General FundShort-Term Pooled Pooled PooledCanadian Bonds Segregated Segregated SegregatedCanadian Equities Pooled Pooled PooledPrivate U.S. Equities Segregated - - -

Note: Segregated = Individual Securities

Pooled-

PooledPooledPooled

Summary of Investment Objectives

After23 June 2014

PooledPooled

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188

E&O Insurance Fund Benchmark Compensation Fund Benchmark

Components Weight (%)

Mar-2006

S&P/TSX Composite 15.00

S&P 500 (CAD) 15.00

FTSE TMX Short Term Bond 70.00

Jul-2009



FTSE TMX 91-Day T-Bill 0.00

Jun-2017





Jun-2003


S&P 500 (CAD) 7.50


Jan-2004


S&P 500 (CAD) 7.50

FTSE TMX Universe Bond 85.00

Jul-2009



Apr-2010




Jun-2017




Plan Information


Blended Benchmark Composition

Page 38


189

Compensation Fund Fixed Income BenchmarkGeneral Fund Benchmark


Mar-2004


S&P 500 (CAD) 7.50


Jul-2009



Apr-2010




Jun-2017





Jun-2003


Jan-2004


Apr-2010


Plan Information


Blended Benchmark Composition

Page 39


190

Appendix B - Manager Updates

Page 40


191

Foyston, Gordon & Payne ("FGP")

Q2 2017

BusinessThere were no significant events.

StaffMark Thompson, who joined FGP in 2000 and was most recently Chief Operating Officer and Chief Compliance Officer, retired on 30 June 2017, one year afterannouncing his departure. Garvin Deokiesingh is now COO and CCO, having joined FGP in February 2017 as part of the transition plan. Prior to joining the firm,Deokiesingh was the Chief Auditor and Head of Enterprise Risk at AGF Management Limited.

Prashanth Uppuluri joined FGP as Senior Research Analyst on the foreign equity team. Uppuluri brings about twenty years of international experience to thefirm, having worked in finance and investment roles in India, the United States, the United Arab Emirates, and Qatar.

Q1 2017

BusinessThere were no significant events.

StaffGarvin Deokiesingh joined FGP as Chief Operating Officer, taking over from Mark Thompson, who will be retiring at the end of June 2017. Deokiesingh wasmost recently the Chief Auditor and Head of Enterprise Risk at AGF Management Limited.

Bryan Pilsworth was appointed co-manager of FGP’s Canadian equity mandates, working with John Berry. Tom Duncanson assumed full portfolio managementresponsibility for FGP’s Canadian small cap mandates. Brandon Tu was appointed co-manager of FGP’s dividend-oriented mandates, working with John Berry.

Ryan Domsy was appointed co-manager of the FGP Corporate Bond Fund, and Cameron Greenwood was appointed co-manager of the FGP Long Term BondFund. Both Domsy and Greenwood are working with Robert Head.

Manager Updates

Manager Updates

As of 30 June 2017

Page 41


192

Appendix C - Capital Markets Environment

Page 42


193

Capital Markets Environment


As of 30 June 2017

The global equity market rally continued in the second quarter of 2017, supported by strong corporate earnings, a pro-EU result in the French election, and strong resiliency towards hawkish central bank comments made at the end of the quarter. Canadian equity underperformance continued as the S&P/TSX Composite Index posted a -1.6% return while the MSCI All Countries World Index (“ACWI”) returned +3.1% in local currency terms and +1.5% in Canadian dollar terms over the quarter. Diverging political and economic fortunes led to more varied regional and sector returns.

The U.S. Federal Reserve (“Fed”) raised the federal funds rate target for a third successive quarter to 1.00%-1.25%. The Fed re-iterated its expectations of a further rate hike later in 2017. Markets were surprised by hawkish comments emanating from both the Bank of England and the European Central Bank, which sent respective government bond yields higher over the quarter.

The Canadian economy grew at an annualized rate of +3.7% in the first quarter of 2017, led by domestic spending. Economic resiliency continued into the second quarter with GDP growth of +0.2% in April, the sixth consecutive month of expansion.

The Bank of Canada (“BoC”) kept monetary policy unchanged over the quarter. However, the BoC struck a more hawkish monetary policy stance as the economy gathered momentum, and to counteract concerns relating to excessive froth building in the housing market.

Note: The latest quarterly return for the REALpac / IPD Canada Property Index is estimated and may change in the future.

Page 43


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As of 30 June 2017

Canadian Equity Markets

The S&P/TSX Composite Index returned -1.6% during the quarter. Falling oil prices dragged down performance in the energy sector, which accounts for a

significant proportion of the Index. Financial stocks also came under pressure as Moody’s Investor Services downgraded the credit ratings of major banks in Canada. The S&P TSX Composite Index returned +0.7% on a year-to-date basis, underperforming global equity markets in Canadian dollar terms.

The best performing sectors over the quarter were Healthcare (+13.4%), Industrials (+6.1%) and Consumer Discretionary (+4.8%). Energy (-8.3%) was the worst performing sector, extending the negative returns seen over the previous quarter.

While growth stocks outperformed value stocks during the quarter, both posted negative returns (-1.5% and -1.9%, respectively).

Small cap stocks had a particularly disappointing quarter, returning -5.5%. Not only did small cap stocks significantly underperform their large cap peers, but the poor performance also caused year-to-date returns to fall into negative territory (-4.1%).

-1.6%

4.8%

-8.3%

1.7%

-0.9%

13.4%

6.1%

2.2%

-6.4%

2.5% 2.6%1.2%0.7%

12.2%

-13.3%

4.4%

2.6% 2.0%

11.7%

9.4%

-0.7%

7.6%

10.1%

6.0%

-15%

-10%

-5%

0%

5%

10%

15%

S&P/TSXComposite

5.4%Cons. Disc.

20.0% Energy

3.9%Cons.Stap.

34.5%Financials

0.7%Healthcare

9.6% Industrials

3.3%IT

11.5%Materials

4.9%Telecoms

3.3%Utilities

3.0%Real

Estate

S&P/TSX COMPOSITE GICS SECTOR RETURNS (CAD) AS OF 6/30/2017

Current Quarter

YTD

Source: S&P

-1.6%

-5.5%

-1.5%-1.9%

0.7%

-4.1%

1.0%

-0.2%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

S&P/TSX Composite S&P/TSX SmallCap MSCI Canada Growth MSCI Canada Value

CANADIAN EQUITY STYLE/SIZE RETURNS (CAD) AS OF 6/30/2017

Current Quarter

YTD

Source: S&P, MSCI

Page 44


195



As of 30 June 2017

U.S. Equity Markets

A selection of disappointing economic releases initially weighed on the U.S. equity market, as the pace of economic expansion slipped to just +0.7% for the year to March 2017 (subsequently revised to +1.4%). This figure was not only below forecasts, but also was markedly lower than previous GDP growth of over +2.0%. The keenly watched ISM Manufacturing Index (“ISM”) fell back 2.8 points to +54.8, while consumer confidence fell from a 16-year peak set in March. However, the disappointing trend was broken in June, with a rebound in the ISM to a three-year high and a stronger than expected payrolls report.

In the equity markets, strong earnings growth, particularly in the Technology sector, supported positive returns early in the quarter. However, a rotation occurred later in the quarter as Technology stocks sold-off while Financials benefited, especially as U.S. banks passed the Fed's stress tests which will likely result in greater dividend payouts in the future.

Over the quarter, U.S. equities returned +3.1% in local currency terms. However, due to the Canadian dollar’s appreciation versus the U.S dollar, the S&P 500 Index returned just +0.4% in Canadian dollar terms. On a year-to-date basis, the Index returned +5.9% in Canadian dollar terms.

The Telecommunications and Energy sectors were the weakest performers in the second quarter, returning -9.5% and -8.8% respectively.

Growth stocks outperformed value stocks across all capitalizations during the quarter.

Page 45


196



As of 30 June 2017

Global Equity Markets

The MSCI ACWI returned +1.5% during the quarter and returned +8.0% on a year-to-date basis in Canadian dollar terms.

EAFE equities returned +2.7% in local currency terms over the quarter, led mainly by Eurozone equities. A confluence of factors including lower political uncertainty, indications of a strengthening economy and corporate earnings recovery led to European equities' strong performance over the last quarter. GDP growth picked up slightly to +1.9% over the first quarter of 2017. Japanese equities also generated positive returns as a softening of the yen over the quarter and better than expected corporate profits drove positive equity returns. UK equities held up gains despite political uncertainty alongside sterling strength weighing on the domestic market. The Canadian dollar fell against global currencies, pushing up the returns in Canadian dollars terms to +3.3%.

For the second consecutive quarter, emerging markets equities were the strongest performers in local currency terms, returning +6.6%. This result occurred despite corruption allegations and lower energy prices weighing on Brazil and Russia, respectively. China and South Korea outperformed, with the latter benefiting from the election of President Moon Jae-In and prospects of greater fiscal spending. Fears of a China hard-landing partially abated as the People's Bank of China's deleveraging efforts do not seem to be much of a hindrance on economic growth so far.

Appreciation of the Canadian dollar pushed down the returns for emerging markets to +3.5%.

All sectors within the EAFE region posted positive returns in Canadian dollar terms except for the Energy sector (-3.3%). The Information Technology sector was the strongest performer (+6.6%).

Page 46


197



As of 30 June 2017

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

0 5 10 15 20 25 30

Maturity (years)

CANADIAN FEDERAL YIELD CURVE

30/06/2017

31/03/2017

30/12/2016

30/06/2016

Source: Bloomberg

0%

1%

2%

3%

4%

5%

6%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

CANADIAN 30-YEAR FEDERAL YIELDS

Real 30-year yield

Nominal 30-year yield

Source: Bloomberg

Canada Fixed Income Markets

The Canadian yield curve flattened over the quarter. Yields rose at the short end of the curve as expectations of an interest hike by the Bank of Canada for the

first time in nearly seven years gathered momentum.

In contrast, long maturity bond yields fell while medium maturity bond yields were relatively unchanged.

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As of 30 June 2017

Canada Fixed Income Markets

Bond market returns were positive over the quarter with Provincial issues outperforming both Corporate and Federal issues.

In the investment grade corporate market, returns were positive across all grades of credit quality with the exception of the highest quality (AA+) bonds (-0.3%). 'A' grade bonds outperformed both BBB grade and AA+ grade bonds over the quarter.

Long term bonds outperformed both medium and short term bonds over the quarter due to the flattening of the government bond yield curve.

Page 48


199



As of 30 June 2017

Currency

As measured by the broad trade weighted Canadian dollar index, the Canadian dollar appreciated +2.1% during the quarter. The strength in the Canadian dollar on a trade weighted basis was driven by expectation of an interest rate hike by the Bank of Canada.

The U.S. dollar continued on a downward trend as the greenback depreciated by a further 2.9% on a trade-weighted basis over the quarter. This depreciation occurred despite the Fed hiking the target range for the federal funds rate to a range of 1.00% - 1.25%, as concerns over the implementation of pro-growth policies grew. The U.S. dollar depreciated by 2.6% against the Canadian dollar.

The euro, on a trade-weighted basis, rose by +4.1% and also appreciated by +3.8% against the Canadian dollar. Contrasting election fortunes drove the euro versus sterling appreciation, as waning populism in European politics was a big positive for the region while the Conservative Party lost its parliamentary majority in June's general election.

The yen depreciated by 3.3% on a trade-weighted basis on prospects of monetary policy divergence between the Bank of Japan and the U.S. Federal Reserve. However, it rose by +2.5% against the Canadian dollar over the quarter.

80

85

90

95

100

105

110

115

120

2009 2010 2011 2012 2013 2014 2015 2016

TRADE WEIGHTED CANADIAN DOLLAR INDEX(1997 = 100)

Source: Bank of England

70

80

90

100

110

120

130

2009 2010 2011 2012 2013 2014 2015 2016

CANADIAN DOLLAR RELATIVE TO EUR, USD AND JPYREBASED TO 100 AT 12/31/2009

EUR/CAD

USD/CAD

JPY/CAD

Source: DataStream

Stronger C$

Weaker C$

Page 49


200



As of 30 June 2017

Commodities

The Bloomberg Commodity Index returned -5.6% in the second quarter, with all sectors posting negative returns except for Grains (+1.7%) and Livestock

(+8.3%).

Softs was the worst performing commodity during the quarter with a return of -16.5%.

The Energy sector was particularly volatile over the quarter. High crude oil inventory levels in the U.S., driven up by shale producers, offset the extension of agreed OPEC crude oil production cuts, which temporarily drove the price of crude oil higher.

-5.6%

-2.9%

-12.1%

-3.8%

-5.7%

-3.0%

-16.5%

1.7%

8.3%

-8.7%

-1.1%

-22.9%

2.5%

2.4%

-6.8%

-21.3%

-0.8%

7.3%

-25% -20% -15% -10% -5% 0% 5% 10%

Bloomberg Commodity Index

Ex-Energy

Energy

Industrial Metals

Prec. Metals

Agric.

Softs

Grains

Livestock

COMMODITY RETURNS (CAD) AS OF 6/30/2017

Current Quarter YTDSource: Bloomberg

Page 50


201



As of 30 June 2017

Hedge Fund Markets Overview

Hedge fund performance was positive over the quarter across all strategies with the exception of Global Macro strategies.

The HFRI Fund-Weighted Composite Index and the HFRI Fund of Funds Composite Index produced returns of +1.1% and +0.6% respectively in Q2 2017.

Emerging Markets continued to be the best performer with a return of +3.3% while Global Macro was the worst performer at -0.6%.

1.6%

-0.6%

2.1%

3.3%

1.7%

0.9%

0.5%

1.1%

0.6%

3.4%

-0.7%

6.1%

9.9%

4.1%

3.5%

2.7%

3.6%

3.0%

-5% 0% 5% 10% 15% 20%

Fixed Income/Convertible Arb.

Global Macro

Equity Hedge

Emerging Markets

Event-Driven

Distressed-Restructuring

Relative Value

Fund-Weighted Composite Index

Fund of Funds Composite Index

HEDGE FUND PERFORMANCE (USD) AS OF 6/30/2017

Current Quarter

YTD

Note: Latest 5 months of HFR data are estimated by HFR and may change in the future.Source: HFR

Page 51


202

Appendix D - Description of Market Indices and Statistics

Page 52


203

S&P/TSX Composite

S&P/TSX Composite Index comprises approximately 71 percent of market capitalization for Canadian-based, Toronto Stock Exchange listed companies. It iscalculated on a float market capitalization and is the broadest Canadian equity index available. The index also serves as the premier benchmark for Canadianpension funds and mutual market funds.

S&P 500

Standard and Poor's 500 Composite Stock Index consists of 500 large companies in the United States chosen for market size, liquidity and industry grouprepresentation. It is a market-value weighted index, with each stock's weight in the index proportionate to its market value. For the purposes of this report, theS&P 500 Index returns are converted from U.S. dollars into Canadian dollars, and therefore reflect currency gains or losses.

FTSE TMX Universe Bond (formerly DEX Universe Bond)

The FTSE TMX Universe Bond Index covers all marketable Canadian bonds with term to maturity of more than one year. The Universe contains approximatelyone thousand marketable Canadian bonds with an average term of 10.4 years and an average duration of 7.6 years. The purpose of the index is to reflect theperformance of the broad "Canadian Bond Market" in a similar manner to the S&P/TSX Composite Index in the Canadian Equity Market.

FTSE TMX 91-Day T-Bill (formerly DEX 91-Day T-Bill)

Canada Treasury Bills represent the highest quality short-term instruments available. The index is constructed by selling and repurchasing Government ofCanada T-Bills with an average term to maturity of 91 days. The 91-Day Treasury Bill Index is calculated and marked to market daily.

Description of Market Indices and Statistics

Index Definitions

Page 53


204

Active Return

Arithmetic difference between the portfolio return and the benchmark return over a specified time period.

Active Weight

The difference between the portfolio weight and the benchmark weight, where the weight is based on the beginning of period weights for the sector/region/assetclass for a certain periodicity (monthly or quarterly, depending upon the reporting frequency), adjusted by the relative return for the sector/region/asset class.

Annualized Value Added

A portfolio's excess return over a benchmark, annualized as it is recorded.

Asset Allocation

The value added or subtracted by under or over weighting sectors/regions/asset classes versus the benchmark weights. Asset allocation measures the impacton performance attributed only to the sector/region/asset class weighting decisions by the manager. It assumes that the manager holds the same securities ineach sector/region/asset class and in the same proportion as in the benchmark. Any differences in return can be attributed to differences in sector weightsbetween the manager's fund and the benchmark.

Batting Average

The frequency, expressed in percentage terms, of the portfolio's return equaling or exceeding the benchmark's return.

Beta

A measure of the sensitivity of a portfolio to the movements in the market. It is a measure of a portfolio's non-diversifiable or systematic risk.

Correlation

Also called coefficient of correlation, it is a measure of the co-movements of two sets of returns. Indicates the degree in which two sets of returns move intandem.

Cumulative Added Value

The geometrically linked excess return of a portfolio over a benchmark.

Down Market Capture

The portfolio's average return as a percentage of the benchmark return, during periods of negative benchmark return. Lower values indicate better portfolioperformance.

Downside Risk

A measure similar to standard deviation, but focuses only on the negative movements of the return series. It is calculated by taking the standard deviation of thenegative quarterly set of returns. The higher the factor, the riskier the portfolio.


Statistic Definitions

As of 30 June 2017

Page 54


205



As of 30 June 2017

Duration

A measure of a bond portfolio's sensitivity to movements in interest rates.

EPS

Earnings Per Share

Excess Return

Arithmetic difference between the managers return and the risk-free return over a specified time period.

Excess Risk

A measure of the standard deviation of a portfolio's performance relative to the risk free return.

Information Ratio

Measured by dividing the active rate of return by the tracking error. The higher the Information Ratio, the more value-added contribution by the manager.

Return

Compounded rate of return for the period.

R-Squared

The percentage of a portfolio's performance explained by the behaviour of the appropriate benchmark. High R-Square means a higher correlation of theportfolio's performance to the appropriate benchmark.

Security Selection

The value added or subtracted by holding securities at weights which differ from those in the benchmark, including securities not in the benchmark or a zero

weight. The security selection return assumes the manager weights for each sector/region/asset class in the portfolio are in the same proportion as in the overall

benchmark, and excess returns are due to security selection. That is, differences in returns between the manager's fund and the benchmark are attributed to the

securities the manager has chosen.

Sharpe Ratio

Represents the excess rate of return over the risk free return divided by the standard deviation of the excess return. The result is the absolute rate of return perunit of risk. The higher the value, the better the portfolio’s historical risk-adjusted performance.

Simple Alpha

The difference between the portfolio's return and the benchmark's return.

Page 55


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As of 30 June 2017

Sortino Ratio

Represents the excess return over the risk-free rate divided by the downside deviation (i.e. the standard deviation of negative asset returns). Therefore, theSortino Ratio differentiates harmful volatility from general volatility. A large Sortino Ratio indicates there is a low probability of a large loss.

Standard Deviation

A statistical measure of the range of a portfolio's performance, the variability of a return around its average return over a specified time period.

Tracking Error

A measure of the standard deviation of a portfolio's performance relative to the performance of an appropriate benchmark.

Treynor Ratio

Similar to Sharpe ratio, but focuses on beta rather than excess risk (standard deviation). Represents the excess rate of return over the risk free rate divided bythe beta. The result is the absolute rate of return per unit of risk. The higher the value, the better the portfolio’s historical risk-adjusted performance.

Up Market Capture

The portfolio's average return as a percentage of the benchmark return, during periods of positive benchmark return. Higher values indicate better portfolioperformance.

Page 56


207

Appendix E - Fee Analysis

Page 57


208

Fee Analysis

Account Market ValuePercentage of

PortfolioEstimated

Annual Fee ($)Estimated

Annual Fee (%)

Total $70,389,550 100.0% $125,742 0.179%

FGP - Equities 0.450% of the first $50 Million $22,636,747 32.2% $101,865 0.450%0.300% of the next $25 Million0.200% of the balance

FGP - Fixed Income 0.050% of the balance $47,752,803 67.8% $23,876 0.050% & Short-Term

Manager Fees

Fee Schedule

Page 58


209

Appendix F - Aon Hewitt Flash Reports

Page 59


210

Aon Hewitt February 2017 Retirement and Investment

Risk. Reinsurance. Human Resources.

Flash Report

Foyston, Gordon & Payne Portfolio Managers and Chief Operating Officer Announcement

Recommendation

On February 27, 2017, Foyston, Gordon & Payne Inc. made an announcement regarding the promotions of a

number of portfolio managers and a newly hired Chief Operating Officer (COO) effective immediately. GIM team

had been aware of the upcoming portfolio manager appointments and the retirement of the current COO, Mark

Thompson. We know the new appointed portfolio managers and view the appointments positively as part of the

firm’s ongoing succession plans and as a result we maintain the current Buy ratings for the FGP Canadian Equity

and FGP Canadian Small Cap Equity strategies.

Please see below for the details of the appointments:

Bryan Pilsworth has been promoted to co-Pm along with John Berry for the FGP Canadian Equity

Strategy

Tom Duncanson has been promoted to Portfolio Manager for the FGP Canadian Small Cap Equity

Strategy

Brandon Tu has been promoted to Portfolio Manager for the FGP Canadian Dividend Equity strategy

The firm has hired Garvin Deokiesingh to take over the role of Chief Operating Officer from Mark

Thompson, who will be retiring at the end of June 2017.

Chief Operating Officer change will not affect portfolio management.

Although we don’t know Mr. Deokiesingh, in the second half of the year we will coordinate with our Operational

Due Diligence team to schedule a time to meet with him.

For further details please refer to the announcement from FGP and feel free to contact your Aon Hewitt

investment consultant or a local member of Global Investment Management should you have any questions.

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Aon Hewitt Retirement and Investment

Foyston, Gordon & Payne PM and CCO Appointment 2

Disclaimer This document has been produced by Aon Hewitt’s Global Investment Management (GIM) Research Team, a division of Aon plc and is appropriate solely for institutional investors. Nothing in this document should be treated as an authoritative statement of the law on any particular aspect or in any specific case. It should not be taken as financial advice and action should not be taken as a result of this document alone. Consultants will be pleased to answer questions on its contents but cannot give individual financial advice. Individuals are recommended to seek independent financial advice in respect of their own personal circumstances. The information contained herein is given as of the date hereof and does not purport to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information set forth herein since the date hereof or any obligation to update or provide amendments hereto. The information contained herein is derived from proprietary and non-proprietary sources deemed by Aon Hewitt to be reliable and are not necessarily all inclusive. Aon Hewitt does not guarantee the accuracy or completeness of this information and cannot be held accountable for inaccurate data provided by third parties. Reliance upon information in this material is at the sole discretion of the reader. This document does not constitute an offer of securities or solicitation of any kind and may not be treated as such, i) in any jurisdiction where such an offer or solicitation is against the law; ii) to anyone to whom it is unlawful to make such an offer or solicitation; or iii) if the person making the offer or solicitation is not qualified to do so. If you are unsure as to whether the investment products and services described within this document are suitable for you, we strongly recommend that you seek professional advice from a financial adviser registered in the jurisdiction in which you reside. We have not considered the suitability and/or appropriateness of any investment you may wish to make with us. It is your responsibility to be aware of and to observe all applicable laws and regulations of any relevant jurisdiction, including the one in which you reside. Aon Hewitt Limited is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. 4396810. When distributed in the US, Aon Hewitt Investment Consulting, Inc. (“AHIC”) is a registered investment adviser with the Securities and Exchange Commission (“SEC”). AHIC is a wholly owned, indirect subsidiary of Aon plc. In Canada, Aon Hewitt Inc. and Aon Hewitt Investment Management Inc. (“AHIM”) are indirect subsidiaries of Aon plc, a public company trading on the NYSE. Investment advice to Canadian investors is provided through AHIM, a portfolio manager, investment fund manager and exempt market dealer registered under applicable Canadian securities laws. Regional distribution and contact information is provided below. Contact your local Aon representative for contact information relevant to your local country if not included below. Aon plc/Aon Hewitt Limited Registered office The Aon Centre The Leadenhall Building 122 Leadenhall Street London EC3V 4AN

Aon Hewitt Investment Consulting, Inc. 200 E. Randolph Street Suite 1500 Chicago, IL 60601 USA

Aon Hewitt Inc./Aon Hewitt Investment Management Inc. 225 King Street West, Suite 1600 Toronto, ON M5V 3M2 Canada

Copyright © 2017 Aon plc

Page 61


212

Appendix G - Compliance

Page 62


213

ComplianceE&O Insurance Fund, Compensation Fund and General Fund

Jun-17Confirm whether the following transactions have occurred in the portfolio:Use of non-taxable accounts. noUse of derivatives. noShort selling investments. noUse of margin. noDirect investment in real estate. no

Money Market

Investments

Investments have a minimum rating of R1 or better as established by The Dominion Bond Rating Service or equivalent rating by another recognized bond rating servce, at the time of purchase. yes

Investments have a maximum maturity of 1 year (364 days). yesMoney Market/Short Term Investments are only in these type of investments: yes• Federal Government T-Bills (including Federal and Provincial agencies)• Bankers Acceptance• Commercial Paper

yes

No more than 8% of the total portfolio has been invested with any single issuer other than Government of Canada securities. yesInvestments have a minimum rating of BBB for bonds and debentures or P2 for preferred stocks by The Dominion Bond Rating Service or equivalent rating by another recognized bond rating service, at the time of purchase. yes

Investments are in Canadian Currency. yesNo more than 10% of the market value of the fixed income portfolio has been invested with any one security or issuer other than holdings with Federal and Provincial Governments and their guarantees. yes

Portfolio's weighted average duration is between 1 to 5 years and in-line with the Benchmark (FTSE TMX Short Term Bond Index). yesFixed Income Investments are only in these type of investments: yes• Bonds, Debentures, Notes, Non-Convertible Preferred Stocks, Term Deposits and GICs• Bonds of Foreign Issuers denominated in Canadian Dollars• NHA-insured Mortgage-Backed Securities or Collateralized Mortgage-Backed Securities• Marketable Private Placement of BondsConfirm whether the fixed income portion of the portfolio's asset mix has been within the ranges defined below for the previous month:Federal and Federally Guaranteed Bonds: Min 26% Max 100% yesProcincials, Provincially Guarantees and Municipals: Min 0% Max 38% yesTotal Corporate Issues: Min 0% Max 56% yesTotal BBB Issues with Corporate issues: Min 0% Max 18% yesCash or Money Market: Min 0% Max 5% yesStocks are listed on one of the major stock exchanges.No more than 10% of market value of the total portfolio is invested with a single issuer. yesConfirm whether the portfolio asset mix has been within the ranges defined below for the previous month: Money Market: Min 0%, Max 15% yes Canadian Fixed Income: Min 45%, Max 80% yes Total Fixed Income: Min 60%, Max 80% yes Canadian Equities: Min 20%, Max 40% yes

Asset Mix (based on

market value)

Equity Securities

GuidelinesCategory

General

Fixed Income Investments

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Appendix H - Disclosure

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Aon Hewitt Inc. reconciles the rates of return with each investment manager quarterly. Aon Hewitt Inc. calculates returns from the custodian/trustee statementswhile the managers use different data sources. Occasionally discrepancies occur because of differences in computational procedures, security prices, "tradedate" versus "settlement date" accounting, etc. We monitor these discrepancies closely and find that they generally do not tend to persist over time. However, if amaterial discrepancy arises or persists, we will bring the matter to your attention after discussion with your money manager.

This report may contain slight discrepancies due to rounding in some of the calculations.

© 2017 Aon Hewitt Inc. (“Aon Hewitt”)

This report does not constitute accounting, legal or tax advice and should not be relied upon for any such business decisions. This report contains information thatis proprietary to Aon Hewitt and may not be distributed, reproduced, copied, or amended without Aon Hewitt’s prior written consent.

Statement of Disclosure

Disclosure

As of 30 June 2017

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