Investing for Contributors & Bene ciaries - cppib.com

1 2018 ANNUAL REPORTI nvesting for Contributors & BeneficiariesTable of Contents2 Our People3 Performance4 Chairperson s Report 7 President s Message 11 Senior Management Team 12 Purpose 14 Advantages 16 Global Investments 18 Operational Highlights 19 Our Mission and investment Strategy 45 Management s Discussion & Analysis76 Compensation Discussion & Analysis 92 Governance Practices of the board of Directors 10 4 Consolidated Financial Statements and NotesCPP investment board is an investment organization established to help ensure the canada pension plan (CPP) will be there for generations to compete around the world to secure and manage public and private assets to maximize returns and deliver sustainable value.

2 We have global teams who bring deep expertise and local ensure the Fund has both asset and geographic diversification to make the Fund more resilient to single-market volatility and to safeguard the best interests of current and future beneficiaries against other factors affecting the funding of the success depends on the strength of our governance framework, which safeguards our sole investment focus while upholding our accountability to the 20 million CPP Contributors and We Are12018 Annual Report CPP investment BoardReNew Power Ventures Pvt. invested a combined US$391 million in ReNew Power Ventures, one of India s leading clean energy companies.

3 These investments by our Relationship Investments team align well with CPPIB s overall power and renewables strategy, providing greater diversification for the CPP Fund. India s overall power industry continues to grow and we see solar and wind as attractive renewable energy sources to meet the country s growing demand for electricity. (l r) Christian Hensley, Wendy Franks, Mike Burnett, Aman Bhathal, Ruoyi LiuNord Anglia EducationThe Private Equity Asia team completed CPPIB s first direct investment into private education with the acquisition of Hong Kong-based Nord Anglia Education for US$ billion, alongside Baring Private Equity Asia.

4 The premium K-12 private school operator is well positioned to benefit from the rising demand for high-quality education globally and provides a platform for future growth for CPPIB in this sector. (l r) Deborah Orida, Kheed Ng, Frank Su, Leo Chiu, Selina Wang, Jason HuBGL GroupWe acquired a 30% stake in BGL Group, the leading digital distributor of insurance and household financial services, for approximately 525 million. Through this Direct Private Equity investment , CPPIB will form a partnership with BHL to support the future growth of this financial technology business, with iconic brands like , which provides greater price transparency and choice to consumers.

5 (l r) Jean-Philippe Garant, Katherine Chung, Jonah Enbar, Inaki Echave, Guillaume Pfistner, Jessica MorrisParkway, Real Estate Americas team completed its first take-private transaction with the acquisition of the outstanding common shares of Parkway, Inc., a Houston-based real estate investment trust, Investing US$928 million. Parkway fits well with CPPIB s real estate strategy to invest in high-quality assets in large markets.(l r) Lora Gotcheva, Tianhao Fan, Jay Fischer, Hilary Spann, Howard ChangOur People2 CPP investment board 2 018 Annual ReportPerformance 18171615141312111009 -20-15-10-505101520 Rate of Return (net nominal)For the years ended March 31 (%)Cumulative Net Income Since Inception of Active ManagementFiscal years 2007 2018 ($ billions)$ BillionCPP Fund Value at March 31, 2018 11.

6 6 %Fiscal 2018 rate of return (net nominal)$ BillionFiscal 2018 net income after all CPPIB costs$ BillionCumulative net income for 10-year period after all CPPIB 10-year annualized rate of return (net nominal) IncomeInvestment Management FeesTransaction CostsOperating ExpensesNet investments real assets bonds, Cash and Absolute return strategies1 equities estate equities Net of external debt MixAs at March 31, 201832018 Annual Report CPP investment BoardAs Chairperson of the CPPIB board , I am pleased to report to you on CPPIB s significant work and development on your behalf over this past year.

7 While CPPIB s focus is firmly set on the long term, we are neither immune from nor indifferent to short-term events impacting global markets and investors. From natural disasters to geopolitical risks, to new federal pension developments with the creation of the additional stream of CPP, fiscal 2018 brought to both board and Management a number of significant developmental considerations and related activities along with a sustained focus on long-term investment performance. As our CEO, Mark Machin, completes his second year at the helm of CPPIB, he continues to demonstrate that CPPIB is in strong, capable leads the enterprise with resolute focus on CPPIB s mandate and special public purpose, its long-term investment strategy, organizational culture and talent development.

8 With his leadership and an outstanding community of CPPIB colleagues, the organization continues to move forward on a firm course through an important period of development against a global backdrop of some uncertainty. This coming year marks a happy milestone the 20th anniversary of CPPIB first receiving funds to invest on behalf of the CPP. Even as we celebrate the growth and accomplishment of the past 20 years, our eyes are firmly set on charting for success over the next 20 years and our two decades, CPPIB has been fortunate in its ability to recruit and retain leaders whose skills and experience have been ideally suited to the challenges at hand.

9 A key responsibility of CPPIB s board is to ensure the composition of the organization s leadership team evolves effectively over time, while maintaining the right balance between renewal and continuity. We do this by bringing in new members with fresh perspectives and new skills to address the challenges of an ever-changing business environment. This year, our board played a significant role in the renewal of our Senior Management Team (SMT), endorsing the appointment of four new SMT CPPIB s business evolves, so too must the skills of those who manage it. Our strong, principled culture, public purpose and best-in-class governance framework provide a constant enabling us to recruit the most talented and dedicated professionals from around the world.

10 Their daily work on behalf of the CPP s 20 million Contributors and beneficiaries helps ensure the Fund remains sustainable over the long term. I am pleased to report CPPIB s results for the past fiscal year continue to demonstrate this, the Fund ending the year with $ billion in net assets, reflecting the second largest annual increase in the Fund s history. Stewardship of CPPIB s long-term investment strategySince inception, CPPIB has steadily evolved its investment strategy, moving from passive to active management in 2006 and extending our global reach and expertise, the results of which we are celebrating this year with the 10th anniversary of the Hong Kong and London offices.