HOME CAPITAL GROUP INC.

Transcription

1 HOME CAPITAL GROUP INC. Management Information Circular Notice of 2015 Annual & Special Meeting of Shareholders May 13, 2015 One King West Grand Banking Hall

2 What s Inside What s Inside... i Message to Shareholders... ii Notice of Annual and Special Meeting of Shareholders... iii Important Voting Information... iv Business of the Meeting... 1 Financial Statements... 1 Election of Directors... 1 Majority Voting Policy for Directors... 1 Appointment of Auditor... 1 Shareholder Advisory Vote on Approach to Executive Compensation 2 Shareholder Rights Plan... 2 Recommendation from Management... 2 Other Business... 2 Home Capital Group Inc. s Board of Directors... 3 Nominees for Election to the Board of Directors... 3 Director Competency Matrix Directors Meeting Attendance In Camera Sessions Director Assessment Director Orientation Director Continuing Education Director Tenure Diversity Policy Additional Disclosure Relating to Directors Interlocking Outside Boards Compensation of Directors Shareholder Rights Plan Background and Purpose of the Rights Plan Summary of the Rights Plan Approval of Resolution Committees of the Board Audit Committee Human Resources and Compensation Committee Governance, Nominating and Conduct Review Committee Risk and Capital Committee Report on Executive Compensation...27 Message to the Shareholders The Board s Role in Setting Executive Compensation Compensation Discussion and Analysis Executive Compensation Decision Making Process Components of the Executive Compensation Program Performance Review Summary of Total Direct Compensation Decisions Named Executive Officer Profiles Executive Compensation Tables Option and Share-Based Awards Performance and Restricted Share Unit Plan Employee Share Ownership Plan Retirement Savings and Benefits Termination and Change of Control Indebtedness of Officers Additional Compensation Information Performance Graph Additional Information Schedule A - Statement of Corporate Governance Practices Schedule B - Mandate of the Board Schedule C - Resolution Continuing Shareholder Rights Plan.. 56 Your Vote Counts! Registered Shareholders If your Common Shares are registered in your own name, you are a registered Shareholder. You will have received a form of proxy from Home Capital Group Inc. s transfer agent, Computershare Investor Services Inc. Complete and sign your form of proxy and mail your form of proxy in the postage-paid envelope provided. To vote in person at the meeting, see page iv of the Management Information Circular. Non-Registered Shareholders If your Common Shares are held in the name of a nominee (securities broker, trustee or other financial institution), you are a non-registered Shareholder. You will have received a request for voting instructions from your broker or other nominee. Follow the instructions on your voting instruction form to vote by telephone, Internet or complete and sign the voting instruction form and mail in the postagepaid envelope provided. To vote in person at the meeting, see page v of the Management Information Circular. Page i Home Capital Group Inc. Management Information Circular

3 Message to Shareholders Dear Fellow Shareholder, We are pleased to invite you to attend the Annual and Special Meeting of Shareholders on Wednesday, May 13, 2015 at 11:00 a.m. (Toronto time). The meeting will take place in the Grand Banking Hall of One King West, which is located at 1 King Street West in Toronto, Ontario. The Notice of Annual and Special Meeting and related materials are enclosed was a year of solid financial performance and share value appreciation for Home Capital Group Inc. Early in the year we declared a 2 for 1 stock dividend, we increased our dividend 37.5% year-over-year and we reported very solid financial performance results overall. The Board of Directors and senior management look forward to discussing these results in detail at the meeting and will be available to answer shareholder questions immediately following. The Annual and Special Meeting is also your opportunity to consider and vote on various matters, the particulars of which are set out in the enclosed Management Information Circular. You can exercise your right to vote on the business before the meeting by either attending in person or by completing and submitting your proxy. Instructions on how to vote your proxy are included in the Management Information Circular. If you are unable to attend in person, we encourage you to listen to the live webcast of the meeting. The webcast will begin promptly at 11:00 a.m. (Toronto time) on Wednesday, May 13, 2015 and may be accessed from our corporate website, The webcast will remain available for replay until the next Annual Meeting of Shareholders. We hope that you will be able to join us on Wednesday, May 13, Yours truly, Kevin P.D. Smith Chair of the Board Gerald M. Soloway Chief Executive Officer Page ii Home Capital Group Inc. Management Information Circular

4 Notice of Annual and Special Meeting of Shareholders NOTICE IS HEREBY GIVEN that the Annual and Special Meeting of Shareholders of HOME CAPITAL GROUP INC. (the Corporation ) will be held at One King West, Grand Banking Hall, Toronto, Ontario, on Wednesday, May 13, 2015, at 11:00 a.m. (Toronto time) for the following purposes: I. to receive the financial statements of the Corporation for the year ended December 31, 2014 and the auditor s report on the financial statements; II. to elect the Board of Directors; III. to appoint the auditor and authorize the directors to fix the remuneration of the auditor; IV. to approve the advisory resolution to accept the approach to executive compensation disclosed in the Management Information Circular; V. to consider and, if deemed advisable, to approve a resolution (the full text of which is reproduced on Schedule C to the accompanying Management Information Circular) to continue the Shareholder Rights Plan of the Corporation, a summary of which is included in the accompanying Management Information Circular; and VI. to consider any other business which may properly come before the Annual and Special Meeting of Shareholders. A form of proxy and a Management Information Circular accompany this notice. Shareholders who are unable to be present in person at the Annual and Special Meeting are requested to complete and sign the enclosed form of proxy and return it in the envelope provided or mail the proxy form to Computershare Investor Services Inc., Proxy Department, 100 University Avenue, 8th Floor, North Tower, Toronto, Ontario, Canada, M5J 2Y1 or send the proxy form by facsimile to within Canada and the United States or from all other countries. Proxy forms must be received not later than 5:00 p.m. (Toronto time) on Monday, May 11, DATED at Toronto, Ontario, this 19 th day of March, By order of the Board of Directors Christer V. Ahlvik Executive Vice President, Corporate Counsel & Corporate Secretary Page iii Home Capital Group Inc. Management Information Circular

5 Important Voting Information What am I voting on? Shareholders are voting on the election of directors to the Board of Home Capital Group Inc. for 2015, the appointment of an auditor for the Corporation for 2015, Say on Pay and the approval of the continuation of the Shareholder Rights Plan. Who is entitled to vote? Shareholders as at the close of business on March 19, 2015 are entitled to vote. Each Common Share is entitled to one vote on those items of business identified in the Notice of Annual and Special Meeting of Shareholders of Home Capital Group Inc. How do I vote? If you are a registered Shareholder, you may vote in person at the meeting or you may sign the enclosed form of proxy appointing the persons named in the proxy or some other person you choose, who need not be a Shareholder, to represent you as proxyholder and vote your Common Shares at the meeting. If your Common Shares are held in the name of a nominee, please see page v for voting instructions. What if I plan to attend the meeting and vote in person? If you are a registered Shareholder and plan to attend the meeting on May 13, 2015 and wish to vote your Common Shares in person at the meeting, do not complete or return the form of proxy. Your vote will be taken and counted at the meeting. Please register with the transfer agent, Computershare Investor Services Inc., upon your arrival at the meeting. If your Common Shares are held in the name of a nominee, please see page v for voting instructions. Who is soliciting my proxy? The enclosed form of proxy is being solicited by the management of Home Capital Group Inc. and the associated costs will be borne by the Corporation. The solicitation will be made primarily by mail. Proxies may also be solicited personally or by telephone by employees, officers and directors of the Corporation. What if I sign the form of proxy enclosed with this Management Information Circular? Signing the enclosed form of proxy gives authority to Kevin P. D. Smith or Gerald M. Soloway, each of whom is a director of the Corporation, or to another person you have appointed, to vote your Common Shares at the meeting. Can I appoint someone other than these directors to vote my Common Shares? Yes, you have the right to appoint as proxyholder a person or company other than the Corporation representatives named on the form of proxy. Write the name of this person, who need not be a Shareholder, in the blank space provided in the form of proxy. It is important to ensure that any other person you appoint is attending the meeting and is aware that he or she has been appointed to vote your Common Shares. Proxyholders should, upon arrival at the meeting, present themselves to a representative of Computershare Investor Services Inc. What do I do with my completed proxy? Return your completed proxy to the Corporation s transfer agent, Computershare Investor Services Inc., in the envelope provided or by fax to within Canada and the United States or from all other countries, so that it arrives no later than 5:00 p.m. (Toronto time) on Monday, May 11, This will ensure that your vote is recorded. If I change my mind, can I take back my proxy once I have given it? Yes. If you change your mind and wish to revoke your proxy, prepare a written statement to this effect. The statement must be signed by you or your attorney as authorized in writing, or if the Shareholder is a corporation, under its corporate seal or by an officer or attorney of the corporation duly authorized. This statement must be delivered to the Corporate Secretary of Home Capital Group Inc. at the following address no later than 5:00 p.m. (Toronto time) on Monday, May 11, 2015 or to the Chair on the day of the meeting, Wednesday, May 13, 2015, or at any adjournment of the meeting. Home Capital Group Inc. Corporate Secretary 145 King Street West, Suite 2300 Toronto, Ontario M5H 1J8 Fax: How will my Common Shares be voted if I give my proxy? The persons named on the form of proxy must vote for or withhold from voting your Common Shares in accordance with your directions, or you can let your proxyholder decide for you. In the absence of such directions, proxies received by management will be voted as follows: FOR the election as directors of the proposed nominees whose names are set out on the following pages; FOR the appointment of Ernst & Young LLP as the auditor; FOR the advisory resolution to accept the approach to executive compensation disclosed in the Management Information Circular; FOR the approval of the continuation of the Shareholder Rights Plan; and FOR management s proposals generally. What if amendments are made to these matters or if other matters are brought before the meeting? The persons named in the form of proxy will have discretionary authority with respect to amendments or variations to matters identified in the Notice of Annual and Special Meeting of Shareholders of Home Capital Group Page iv Home Capital Group Inc. Management Information Circular

6 Inc. and with respect to other matters which may properly come before this meeting. As at the time of printing this Management Information Circular, management of the Corporation knows of no such amendment, variation or other matter expected to come before the meeting. If any other matters properly come before the meeting, the persons named in the form of proxy will vote on them in accordance with their best judgment. How many Common Shares are entitled to vote? As of February 27, 2015, there were outstanding 70,172,080 Common Shares of Home Capital Group Inc. Each registered Shareholder has one vote for each Common Share held at the close of business on March 19, To the knowledge of the Corporation s directors and officers, as of the date of this Management Information Circular, no person or company beneficially owns, or controls or directs, directly or indirectly, common shares carrying 10% or more of the voting rights attaching to the Common Shares. How will the votes be counted? Each question brought before the meeting is determined by a majority of votes cast on the question. In the case of equal votes, the Chair of the meeting is entitled to a second or casting vote. Who counts the votes? The Corporation s transfer agent, Computershare Investor Services Inc., counts and tabulates the proxies. This is done independently of the Corporation to preserve the confidentiality of individual Shareholder votes. Proxies are referred to the Corporation only in cases where a Shareholder clearly intends to communicate with management or when it is necessary to do so to meet the requirements of applicable law. If I need to contact the transfer agent, how do I do so? For general Shareholder inquiries, you can contact the transfer agent by mail at: Computershare Investor Services Inc. 100 University Avenue, 8th Floor North Tower Toronto, Ontario M5J 2Y1 or by telephone: within Canada and the United States at and from all other countries at or by fax: within Canada and the United States at and from all other countries at or by at service@computershare.com. If my Common Shares are not registered in my name but are held in the name of a nominee (a bank, trust company, securities broker, trustee or other), how do I vote my Common Shares? There are two ways you can vote your Common Shares held by your nominee. As required by Canadian securities legislation, you will have received from your nominee either a request for voting instructions or a form of proxy for the number of Common Shares you hold. For your Common Shares to be voted for you, please follow the voting instructions provided by your nominee. Since the Corporation does not have unrestricted access to the names of its non-registered Shareholders, if you attend the meeting, the Corporation may have no record of your shareholdings or of your entitlement to vote unless your nominee has appointed you as proxyholder. Therefore, if you wish to vote in person at the meeting, insert your own name in the space provided on the request for voting instructions or form of proxy and return same by following the instructions provided. Do not otherwise complete the form as your vote will be taken at the meeting. Please register with the transfer agent, Computershare Investor Services Inc., upon your arrival at the meeting. Voting Results Following the meeting, a report on the voting results will be available on our website at and will be filed with the securities regulator at Minutes of Meeting The minutes of the meeting will be available on our website at and printed copies may be obtained free of charge by writing to: Home Capital Group Inc. Corporate Secretary 145 King Street West, Suite 2300 Toronto, Ontario M5H 1J8 Page v Home Capital Group Inc. Management Information Circular

7 Business of the Meeting Financial Statements Each year Shareholders are presented with the financial statements of the Corporation for the most recently completed financial year. The financial statements of the Corporation for the year ended 2014 are included in the 2014 Annual Report of the Corporation mailed to Shareholders with the Notice of Annual and Special Meeting of Shareholders and this Management Information Circular. The financial statements have been prepared in accordance with the Canadian generally accepted accounting principles ( GAAP ) financial reporting framework, International Financial Reporting Standards ( IFRS ). Election of Directors The ten nominees proposed for election as directors of the Corporation are listed below and beginning on page 3. All nominees have established their eligibility and willingness to serve as directors. Nominees for directors are: James C. Baillie Jacqueline E. Beaurivage Robert J. Blowes William F. Falk Diana L. Graham John M. Marsh Robert A. Mitchell Kevin P.D. Smith Gerald M. Soloway Bonita J. Then Directors will hold office until the next Annual Meeting of Shareholders of the Corporation or until their successors are elected or appointed. If, for any reason, at the time of the Annual and Special Meeting, any of the nominees for the election of directors is unable to serve, and unless otherwise specified, it is intended that the persons designated in the form of proxy will vote at their discretion for a substitute nominee or nominees. Additional information regarding each director nominee is available beginning on page 3. Management is satisfied that each of the nominees is well qualified to serve on the Corporation s Board of Directors (the Board ). Majority Voting Policy for Directors The Board has adopted a policy stipulating that any nominee for director who receives a greater number of votes withheld for his or her election than votes for his or her election must tender his or her resignation promptly after the Annual and Special Meeting for the Governance, Nominating and Conduct Review Committee s (the GNC Committee ) consideration. The GNC Committee will consider the offer of resignation and, except in special circumstances, will recommend that the Board accept the resignation offer. The Board s decision to accept or reject the resignation offer will be disclosed to the public. The nominee will not participate in any GNC Committee or Board deliberations on the resignation offer. The policy does not apply in circumstances involving contested director elections. Appointment of Auditor The directors propose that the firm of Ernst & Young LLP be appointed as auditor of the Corporation until the next Annual Meeting of Shareholders. Ernst & Young LLP has served continuously since 1988 as the Corporation s auditor. As part of the Corporation s corporate governance practices, the Board continues to ensure that a strict policy is in place limiting the auditor from providing services not related to the audit. All services provided by the auditor are pre-approved by the Audit Committee and comply with professional standards and securities regulations governing auditor independence. In the past, the directors have negotiated, at an arm s length basis, the remuneration of the auditor with the auditor of the Corporation. Such remuneration has been based on the complexity of the matters dealt with by the auditor and the time spent by the auditor in providing services to the Corporation. The directors feel that the remuneration negotiated in the past with the auditor of the Corporation has been reasonable under the circumstances and would be comparable to fees charged by another auditor providing similar services. Aggregate fees paid to the auditor during the years ended December 31, 2014 and 2013 were as follows: Page 1 Home Capital Group Inc. Management Information Circular

8 Notes: (1) (2) (3) (4) Audit Fees Year Ended December 31, 2014 Year Ended December 31, 2013 Audit fees (1) $ 585,664 $ 805,665 Audit-related fees (2) $ 178,462 $ 17,640 Tax fees (3) $ 0 $ 0 All other fees (4) $ 0 $ 0 Total $ 764,126 $ 823,305 Audit fees are fees for professional services in connection with the audit of the Corporation s annual consolidated financial statements, review of the interim consolidated financial statements and other services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. Audit-related fees include all fees paid for certification services and other related services traditionally carried out by the external auditor. Tax fees are fees for services performed by the auditor for tax compliance, tax advice and tax planning. All other fees include fees paid for all services other than those posted in audit fees, audit-related fees and tax fees. Accordingly, on any ballot that may be called for relating to the appointment of an auditor and the authorization of the directors to fix the remuneration of the auditor, Common Shares will be voted by the persons designated in the proxies FOR such resolution, unless a Shareholder has specified by proxy that his or her Common Shares are to be withheld from voting in the appointment of the auditor and the authorization of the directors to fix the remuneration of the auditor. Shareholder Advisory Vote on Approach to Executive Compensation Shareholders have an opportunity to vote on the Corporation s approach to executive compensation. The Corporation believes it is important for Shareholders to understand what we pay our Named Executive Officers and the rationale for these decisions. In 2012, the Board adopted a policy to hold at each annual meeting a non-binding advisory vote on the approach to executive compensation as disclosed in the Management Information Circular. The compensation section of this Management Information Circular has been developed to help Shareholders understand the Corporation s compensation philosophy and practices, the objectives of our executive compensation program, and the principles and process used by the Human Resources and Compensation Committee (the HRC Committee ) in making its compensation recommendations and the decisions ultimately made by the Board. This Shareholder advisory vote forms an important part of the ongoing process of engagement between Shareholders and the Board on compensation. Please read the compensation section beginning page 27, including the discussion about compensation governance and the compensation discussion and analysis ( CD&A ) for details about executive compensation at the Corporation. The Chair of the HRC Committee, Dr. Kevin Smith, introduces the CD&A with a message to Shareholders on page 27. The Board recommends that Shareholders vote FOR the following advisory resolution: RESOLVED, on an advisory basis and not to diminish the role and responsibilities of the Board, that the Shareholders accept the approach to executive compensation disclosed in the Corporation s Management Information Circular delivered in advance of the 2015 Annual and Special Meeting of Shareholders. This is an advisory vote and your vote is non-binding on the Board, however the results will provide the Board and the HRC Committee with important feedback on executive compensation and the Corporation s executive compensation philosophy. The results of the vote will be disclosed in our 2015 report on voting results, which will be available on SEDAR ( The Board will take the results of the vote into account, as appropriate, when considering future compensation policies, procedures and decisions and the level of Shareholder engagement on compensation and related matters. Shareholder Rights Plan At the Annual and Special Meeting, Shareholders will be asked to consider and, if deemed advisable, vote FOR the Resolution to continue the Shareholder Rights Plan adopted by the Board on March 11, 2009, adopted and ratified by Shareholders on May 13, 2009 and continued by the Board on February 28, 2012 and by the Shareholders on May 16, Additional information regarding the Plan can be found on page 20. Recommendation from Management Management recommends that Shareholders vote FOR all items of business that are set out in the Management Information Circular. Other Business Management is not aware of nor does Management intend to present any other business at the Annual and Special Meeting of Shareholders. Page 2 Home Capital Group Inc. Management Information Circular

9 Home Capital Group Inc. s Board of Directors Nominees for Election to the Board of Directors The following provides background information on each of the nominees proposed for election to the Board of Directors of the Corporation. The number of directors to be elected is ten. Gerald M. Soloway, 76, is the Chief Executive Officer of Home Capital Group Inc. Mr. Soloway is also the Chief Executive Officer of Home Trust Company. Mr. Soloway has a B.A. from the University of Western Ontario and an LL.B. from Osgoode Hall. Prior to his involvement with the Corporation, Mr. Soloway practised law in Toronto, specializing in real estate, mortgage and commercial law. Mr. Soloway acted for major banks and trust companies. Mr. Soloway serves on the Board of Directors of the Corporation and of its subsidiary Home Trust Company. Board/Committee Membership Attendance Total Gerald M. Soloway Toronto, Ontario, Canada Director since 1986 Not Independent (1) Securities Held (2) Board of Directors 15 of % 2014 Annual Meeting Yes Votes in Favour: 99.98% Areas of Expertise CEO and Executive Leadership Executive Compensation and Human Resources Financial Services Legal and Regulatory Mortgage and Real Estate Risk Management Strategic Planning Other Public Board Membership During the Last Five Years Year Common Shares (3) Deferred Share Units (4) Shares and DSUs Total of Common None Compliant with Director Share Ownership Policy (5) February 27, ,527, ,527,766 Yes February 28, ,594, ,594,602 Yes (2) (6) Options Held (Director option grants discontinued in 2004) Date Granted Expiry Date Number Granted Exercise Price Total Unexercised Unexercised Value (7) December 8, 2008 December 8, ,000 $ ,000 $ 1,490,400 December 1, 2010 December 1, ,000 $ ,000 $ 1,072,000 February 15, 2013 February 15, ,000 $ ,000 $ 638,800 December 9, 2013 December 9, ,000 $ ,000 $ 115,000 December 11, 2014 December 11, ,890 $ ,890 $ 0 Notes: (1) (2) (3) (4) (5) (6) (7) Independent refers to the Board s determination of whether a director is independent under the categorical standards adopted by the Board. Mr. Soloway is not Independent as he is an officer of the Corporation. Securities Held and Options Held are reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Common Shares refers to the number of Common Shares of the Corporation directly or beneficially owned, or over which control or direction is exercised, by the nominee as of February 27, 2015 in respect of 2014 and February 28, 2014 in respect of The Board approved a Directors Deferred Share Unit Plan for all non-management directors that took effect on January 1, Compliant with Director Share Ownership Policy refers to the director s compliance with the Director Share Ownership Policy which is described on page 18. Compliant with Executive Share Ownership Policy refers to the Chief Executive Officer s compliance with the Executive Share Ownership Policy which is described on page 45. Options refers to the number of unexercised options held by the nominee under the Employee Stock Option Plan described on page 42 as of February 27, The granting of options to non-management directors under the Employee Stock Option Plan was discontinued in Mr. Soloway s options were granted to him in his capacity as Chief Executive Officer of the Corporation and not in his capacity as a director. Unexercised Value is determined by multiplying the number of unexercised options held by each nominee as of February 27, 2015 by the difference between the closing price of the Corporation s Common Shares on the TSX on February 27, 2015 ($45.40) and the exercise price of such options. Page 3 Home Capital Group Inc. Management Information Circular

10 John M. Marsh Port Colborne, Ontario, Canada Director since 1986 Independent (1) Securities Held (2) John M. Marsh, 72, is a retired Chief Executive Officer and a Corporate Director. Mr. Marsh is part owner of the Peace Bridge Duty Free. He has owned and operated companies involved with engineering and energy. Mr. Marsh has a B.Sc. in Mechanical Engineering from the University of Western Ontario and is a Registered Professional Engineer (Ontario) and a Registered Chartered Engineer (U.K.). Board/Committee Membership Attendance Attendance Total Board of Directors 13 of 15 Audit Committee 5 of 6 Human Resources and Compensation 5 of 6 Committee (Vice-Chair) 23 of 27 85% 2014 Annual Meeting Yes Votes in Favour: 99.77% Areas of Expertise Accounting, Audit and Financial Expertise CEO and Executive Leadership Executive Compensation and Human Resources Other Public Board Membership During the Last Five Years Radiant Energy Corporation (resigned May 2011) Year Common Shares (3) Deferred Share Units (4) Shares and DSUs Total of Common Compliant with Director Share Ownership Policy (5) February 27, ,729,127 8,626 1,737,753 Yes February 28, ,905,196 7,460 1,912,656 Yes (2) (6) Options Held (Director option grants discontinued in 2004) Date Granted Expiry Date Number Granted Exercise Price None Total Unexercised Unexercised Value (7) Notes: (1) (2) (3) (4) (5) (6) (7) Independent refers to the Board s determination of whether a director is independent under the categorical standards adopted by the Board. Securities Held and Options Held are reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Common Shares refers to the number of Common Shares of the Corporation directly or beneficially owned, or over which control or direction is exercised, by the nominee as of February 27, 2015 in respect of 2014 and February 28, 2014 in respect of The Board approved a Directors Deferred Share Unit Plan for all non-management directors that took effect on January 1, Compliant with Director Share Ownership Policy refers to the director s compliance with the Director Share Ownership Policy which is described on page 18. Options refers to the number of unexercised options held by the nominee under the Employee Stock Option Plan described on page 42 as of February 27, The granting of options to non-management directors under the Employee Stock Option Plan was discontinued in Unexercised Value is determined by multiplying the number of unexercised options held by each nominee as of February 27, 2015 by the difference between the closing price of the Corporation s Common Shares on the TSX on February 27, 2015 ($45.40) and the exercise price of such options. Page 4 Home Capital Group Inc. Management Information Circular

11 Robert A. Mitchell, 73, is a Chartered Accountant and a former partner of Ernst & Young LLP. At Ernst & Young, Mr. Mitchell acted as auditor and advisor to significant clients in a broad crosssection of industries. He was also Ernst & Young s Director of Services to the trust company industry. Mr. Mitchell currently serves on the board of Auravista Gold Corporation. He also served on the board of Orvana Minerals Corporation until his retirement effective February Mr. Mitchell has participated in numerous working groups in the investment management, securities dealer and trust company industries. Mr. Mitchell has a B.Comm. from the University of Toronto. Board/Committee Membership Attendance Attendance Total Robert A. Mitchell Oakville, Ontario, Canada Director since 2002 Independent (1) Board of Directors 15 of 15 Audit Committee (Chair) 6 of 6 Governance, Nominating and Conduct Review Committee 5 of 5 Risk and Capital Committee 6 of 6 32 of % Securities Held (2) 2014 Annual Meeting Yes Votes in Favour: 99.83% Areas of Expertise Accounting, Audit and Financial Expertise Financial Services Governance and Board Risk Management Other Public Board Membership During the Last Five Years Orvana Minerals Corporation (retired February 2015) Acuity Funds Ltd. Year Common Shares (3) Deferred Share Units (4) Shares and DSUs Total of Common Compliant with Director Share Ownership Policy (5) February 27, ,579 10,879 Yes February 28, ,414 10,714 Yes (2) (6) Options Held (Director option grants discontinued in 2004) Date Granted Expiry Date Number Granted Exercise Price None Total Unexercised Unexercised Value (7) Notes: (1) (2) (3) (4) (5) (6) (7) Independent refers to the Board s determination of whether a director is independent under the categorical standards adopted by the Board. Securities Held and Options Held are reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Common Shares refers to the number of Common Shares of the Corporation directly or beneficially owned, or over which control or direction is exercised, by the nominee as of February 27, 2015 in respect of 2014 and February 28, 2014 in respect of The Board approved a Directors Deferred Share Unit Plan for all non-management directors that took effect on January 1, Compliant with Director Share Ownership Policy refers to the director s compliance with the Director Share Ownership Policy which is described on page 18. Options refers to the number of unexercised options held by the nominee under the Employee Stock Option Plan described on page 42 as of February 27, The granting of options to non-management directors under the Employee Stock Option Plan was discontinued in Unexercised Value is determined by multiplying the number of unexercised options held by each nominee as of February 27, 2015 by the difference between the closing price of the Corporation s Common Shares on the TSX on February 27, 2015 ($45.40) and the exercise price of such options. Page 5 Home Capital Group Inc. Management Information Circular

12 Kevin P. D. Smith Burlington, Ontario, Canada Director since 2007 Independent (1) Kevin P. D. Smith, 52, currently serves as President and Chief Executive Officer of St. Joseph's Health System, a large multi-site Academic Health Science Network which includes services spanning community-based to tertiary acute-care. Dr. Smith is also an Associate Professor in the Department of Medicine, Faculty of Health Sciences, McMaster University and is a frequent advisor to the Ontario government. Dr. Smith also participates in a number of provincial and national government bodies including serving as Chair of the Canada Foundation for Innovation (CFI), the Association of Canadian Academic Health Care Organizations, the Council of Academic Hospitals of Ontario, and the Change Foundation. Dr. Smith is also a board member of the Healthcare of Ontario Pension Plan - one of Canada's best performing plans. Dr. Smith is a past Chair of the Ontario Hospital Association (OHA). Dr. Smith has a D.Phil. from Sussex University (U.K.), holds an ICD.D designation and has completed the Harvard Business School Corporate Board Effectiveness Program. Board/Committee Membership Attendance Attendance Total Board of Directors (Chair) 15 of 15 Governance, Nominating and Conduct Review Committee Human Resources and Compensation Committee (Chair) 5 of 5 6 of 6 26 of % Securities Held (2) 2014 Annual Meeting Yes Votes in Favour: 99.85% Areas of Expertise CEO and Executive Leadership Executive Compensation and Human Resources Governance and Board Government Relations and Public Policy Strategic Planning Other Public Board Membership During the Last Five Years Glendale International Corporation (resigned April 2009) Year Common Shares (3) Deferred Share Units (4) Shares and DSUs Total of Common Compliant with Director Share Ownership Policy (5) February 27, ,000 26,255 34,255 Yes February 28, ,000 23,334 31,334 Yes (2) (6) Options Held (Director option grants discontinued in 2004) Date Granted Expiry Date Number Granted Exercise Price None Total Unexercised Unexercised Value (7) Notes: (1) (2) (3) (4) (5) (6) (7) Independent refers to the Board s determination of whether a director is independent under the categorical standards adopted by the Board. Securities Held and Options Held are reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Common Shares refers to the number of Common Shares of the Corporation directly or beneficially owned, or over which control or direction is exercised, by the nominee as of February 27, 2015 in respect of 2014 and February 28, 2014 in respect of The Board approved a Directors Deferred Share Unit Plan for all non-management directors that took effect on January 1, Compliant with Director Share Ownership Policy refers to the director s compliance with the Director Share Ownership Policy which is described on page 18. Options refers to the number of unexercised options held by the nominee under the Employee Stock Option Plan described on page 42 as of February 27, The granting of options to non-management directors under the Employee Stock Option Plan was discontinued in Unexercised Value is determined by multiplying the number of unexercised options held by each nominee as of February 27, 2015 by the difference between the closing price of the Corporation s Common Shares on the TSX on February 27, 2015 ($45.40) and the exercise price of such options. Page 6 Home Capital Group Inc. Management Information Circular

13 Bonita J. Then Toronto, Ontario, Canada Director since 2008 Independent (1) Bonita J. Then, 68, is the former President and Chief Executive Officer of Speciality Foods Limited, a U.S. based food company. Prior to joining Speciality Foods Limited, Ms. Then was Chair of the board and interim Chief Executive Officer for Humpty Dumpty Snack Foods Inc. Prior to 2006, Ms. Then held several senior finance roles with companies such as Altamira Investment Services Inc., National Trustco Inc., Scott's Hospitality Inc., Central Guaranty Trustco Inc. and Shell Canada Limited. Ms. Then holds a bachelor's degree in economics and an MBA in Finance from the University of Toronto and holds an ICD.D designation. From 1991 until 2014, Ms. Then served on the Investment Advisory Committee for Nunavut Trust and also served on the board of the University of Toronto Asset Management Corporation from 2008 to Prior to 2005, Ms. Then served on the board of the Earlscourt Family Centre, GeniSystems.ca Services Inc., the Toronto Victoria Order of Nurses and was a member of the Ontario Premier's Technology Council. Board/Committee Membership Attendance Attendance Total Board of Directors 15 of 15 Audit Committee (Vice Chair) 6 of 6 27 of % Securities Held (2) Risk and Capital Committee (Chair) 6 of Annual Meeting Yes Votes in Favour: 99.98% Areas of Expertise Accounting, Audit and Financial Expertise CEO and Executive Leadership Financial Services Governance and Board Risk Management Other Public Board Membership During the Last Five Years Year Common Shares (3) Deferred Share Units (4) Shares and DSUs Total of Common None Compliant with Director Share Ownership Policy (5) February 27, , ,000 Yes February 28, , ,000 Yes (2) (6) Options Held (Director option grants discontinued in 2004) Date Granted Expiry Date Number Granted Exercise Price None Total Unexercised Unexercised Value (7) Notes: (1) (2) (3) (4) (5) (6) (7) Independent refers to the Board s determination of whether a director is independent under the categorical standards adopted by the Board. Securities Held and Options Held are reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Common Shares refers to the number of Common Shares of the Corporation directly or beneficially owned, or over which control or direction is exercised, by the nominee as of February 27, 2015 in respect of 2014 and February 28, 2014 in respect of The Board approved a Directors Deferred Share Unit Plan for all non-management directors that took effect on January 1, Compliant with Director Share Ownership Policy refers to the director s compliance with the Director Share Ownership Policy which is described on page 18. Options refers to the number of unexercised options held by the nominee under the Employee Stock Option Plan described on page 42 as of February 27, The granting of options to non-management directors under the Employee Stock Option Plan was discontinued in Unexercised Value is determined by multiplying the number of unexercised options held by each nominee as of February 27, 2015 by the difference between the closing price of the Corporation s Common Shares on the TSX on February 27, 2015 ($45.40) and the exercise price of such options. Page 7 Home Capital Group Inc. Management Information Circular

14 William F. Falk Grand Valley, Ontario, Canada Director since 2011 Independent (1) William F. Falk, 52, is the Managing Partner - Health Industries at PwC Canada, a leading consultancy/professional services firm. He is also the firm's North and South America Healthcare Leader. Over a 20 year career, Mr. Falk has advised chief executive officers and their executive teams on strategic information technology and management issues. Based in New York and Toronto, his practice has focused on academic medicine, policy and technology innovation. Mr. Falk has appointments as an Executive Fellow at the Mowat Centre for Policy Innovation and an Adjunct Professor at the Rotman School of Management at the University of Toronto. Mr. Falk frequently speaks and is an advisor in health policy and the use of information technology in improving health care. He has previously served on the board of directors of the Institute for Clinical and Evaluative Sciences and the board of directors, Children s Aid Foundation, Medseek, the Information Technology Association of Canada - Health and the William Osler Health System. Previous advisory panel appointments include Treasury Board Strategic Review of Health Canada (2008), Ontario Expert Panel on Adoption and Infertility ( ), and advisor to the Prime Minister and Minister of Health during the 2004 First Ministers Meeting. Mr. Falk holds a B.Sc. from the University of Toronto and a Masters of Public and Private Management from Yale University. Board/Committee Membership Attendance Attendance Total Board of Directors 14 of 15 Risk and Capital Committee (Vice Chair) Human Resources and Compensation Committee Governance, Nominating and Conduct Review Committee 6 of 6 3 of 3 5 of 5 28 of 29 97% Securities Held (2) 2014 Annual Meeting Yes Votes in Favour: 99.99% Areas of Expertise Accounting, Audit and Financial Expertise CEO and Executive Leadership Governance and Board Government Relations and Public Policy Information Technology Strategic Planning Other Public Board Membership During the Last Five Years Year Common Shares (3) Deferred Share Units (4) Shares and DSUs Total of Common None Compliant with Director Share Ownership Policy (5) February 27, ,030 7,387 13,417 Yes February 28, ,030 5,208 14,238 Yes (2) (6) Options Held (Director option grants discontinued in 2004) Date Granted Expiry Date Number Granted Exercise Price None Total Unexercised Unexercised Value (7) Notes: (1) (2) (3) (4) (5) (6) (7) Independent refers to the Board s determination of whether a director is independent under the categorical standards adopted by the Board. Securities Held and Options Held are reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Common Shares refers to the number of Common Shares of the Corporation directly or beneficially owned, or over which control or direction is exercised, by the nominee as of February 27, 2015 in respect of 2014 and February 28, 2014 in respect of The Board approved a Directors Deferred Share Unit Plan for all non-management directors that took effect on January 1, Compliant with Director Share Ownership Policy refers to the director s compliance with the Director Share Ownership Policy which is described on page 18. Options refers to the number of unexercised options held by the nominee under the Employee Stock Option Plan described on page 42 as of February 27, The granting of options to non-management directors under the Employee Stock Option Plan was discontinued in Unexercised Value is determined by multiplying the number of unexercised options held by each nominee as of February 27, 2015 by the difference between the closing price of the Corporation s Common Shares on the TSX on February 27, 2015 ($45.40) and the exercise price of such options. Page 8 Home Capital Group Inc. Management Information Circular

15 James C. Baillie, 76, is Senior Counsel at Torys LLP in Toronto and is recognized as one of Canada s leading corporate legal practitioners. He has had an active interest and involvement in financial institution regulation as well as advising financial institutions and other clients on complex transactions and policy issues. Mr. Baillie received his LLB from the University of Toronto and his LLM from Harvard. He is a former member of the Public Accountants Council for the Province of Ontario, past-chairman of the Ontario Securities Commission and Initial Chair of Audit and Assurance Standards Oversight Council of the Canadian Institute of Chartered Accountants. Board/Committee Membership Attendance Attendance Total James C. Baillie Toronto, Ontario, Canada Director since 2012 Independent (1) Board of Directors 14 of 15 Risk and Capital Committee 6 of 6 Governance, Nominating and Conduct Review Committee (Vice Chair) 5 of 5 25 of 26 96% 2014 Annual Meeting Yes Votes in Favour: 99.97% Securities Held (2) Areas of Expertise Financial Services Governance and Board Government Relations and Public Policy Legal and Regulatory Other Public Board Membership During the Last Five Years Sun Life Assurance Company of Canada Decision Dynamic Technology Limited Royal Utilities Income Fund Year Common Shares (3) Deferred Share Units (4) Shares and DSUs Total of Common Compliant with Director Share Ownership Policy (5) February 27, , ,642 Yes February 28, , ,524 Yes (2) (6) Options Held (Director option grants discontinued in 2004) Date Granted Expiry Date Number Granted Exercise Price None Total Unexercised Unexercised Value (7) Notes: (1) (2) (3) (4) (5) (6) (7) Independent refers to the Board s determination of whether a director is independent under the categorical standards adopted by the Board. Securities Held and Options Held are reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Common Shares refers to the number of Common Shares of the Corporation directly or beneficially owned, or over which control or direction is exercised, by the nominee as of February 27, 2015 in respect of 2014 and February 28, 2014 in respect of The Board approved a Directors Deferred Share Unit Plan for all non-management directors that took effect on January 1, Compliant with Director Share Ownership Policy refers to the director s compliance with the Director Share Ownership Policy which is described on page 18. Options refers to the number of unexercised options held by the nominee under the Employee Stock Option Plan described on page 42 as of February 27, The granting of options to non-management directors under the Employee Stock Option Plan was discontinued in Unexercised Value is determined by multiplying the number of unexercised options held by each nominee as of February 27, 2015 by the difference between the closing price of the Corporation s Common Shares on the TSX on February 27, 2015 ($45.40) and the exercise price of such options. Page 9 Home Capital Group Inc. Management Information Circular

16 Diana L. Graham Toronto, Ontario, Canada Director since 2013 Independent (1) Diana L. Graham, 68, is a retired senior risk executive from Ally Financial, Solomon Edwards Group on behalf of the FDIC, JPMorgan Chase/Washington Mutual and Canadian Imperial Bank of Commerce. During the height of the financial crisis, she worked on behalf of the US FDIC in the closure of US banks. She has also served on the Advisory Board of the Canadian Superintendent of Bankruptcy. She currently serves on the board of Canada2100 Corporation. Her presentations include The North American Financial Crisis and What it Means for Business to the Bank of China in Beijing, Assessing Risk Management Culture to Better Understand the Characteristics of Enterprise Risk Management Programs, and An Overview and Discussion of the Canadian Banking Industry and its Five Largest Banks to the Industrial and Commerce Bank of China. Ms. Graham s risk management expertise includes governance, credit, operational, market and enterprise risk management. She has the practical experience of building a risk framework, risk appetite, material risk registry and implementing appropriate governance and controls. Ms. Graham provides advice on corporate governance and the implementation of appropriate risk frameworks within both regulated and unregulated companies. Ms. Graham received her MBA from Stern School of Business, New York University. Board/Committee Membership Attendance Attendance Total Board of Directors 15 of 15 Audit Committee 6 of 6 27 of % Securities Held (2) Risk and Capital Committee 6 of Annual Meeting Yes Votes in Favour: 99.96% Areas of Expertise Accounting, Audit and Financial Expertise CEO and Executive Leadership Financial Services Governance and Board Mortgage and Real Estate Risk Management Other Public Board Membership During the Last Five Years Canada2100 Corporation (appointed February 27, 2015) Year Common Shares (3) Deferred Share Units (4) Shares and DSUs Total of Common Compliant with Director Share Ownership Policy (5) February 27, ,205 3,205 Yes February 28, ,090 1,090 Yes (2) (6) Options Held (Director option grants discontinued in 2004) Date Granted Expiry Date Number Granted Exercise Price None Total Unexercised Unexercised Value (7) Notes: (1) (2) (3) (4) (5) (6) (7) Independent refers to the Board s determination of whether a director is independent under the categorical standards adopted by the Board. Securities Held and Options Held are reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Common Shares refers to the number of Common Shares of the Corporation directly or beneficially owned, or over which control or direction is exercised, by the nominee as of February 27, 2015 in respect of 2014 and February 28, 2014 in respect of The Board approved a Directors Deferred Share Unit Plan for all non-management directors that took effect on January 1, Compliant with Director Share Ownership Policy refers to the director s compliance with the Director Share Ownership Policy which is described on page 18. Options refers to the number of unexercised options held by the nominee under the Employee Stock Option Plan described on page 42 as of February 27, The granting of options to non-management directors under the Employee Stock Option Plan was discontinued in Unexercised Value is determined by multiplying the number of unexercised options held by each nominee as of February 27, 2015 by the difference between the closing price of the Corporation s Common Shares on the TSX on February 27, 2015 ($45.40) and the exercise price of such options. Page 10 Home Capital Group Inc. Management Information Circular

17 Jacqueline E. Beaurivage Toronto, Ontario, Canada Director since 2014 Independent (1) Jacqueline E. Beaurivage, 62, currently serves as Vice President, epmo & Strategy of Ontario Teachers Pension Plan (OTTP), a large, public sector pension plan managed on behalf of Ontario s teachers. Prior to joining OTTP, Ms. Beaurivage held senior operational and strategy roles with CIBC, First Caribbean International Bank and Royal Bank of Canada. Ms. Beaurivage holds a BA from the University of Regina and an MBA from McGill University. She spent several years teaching at McGill University (Faculty of Management) and the McGill Management Institute. Ms. Beaurivage has held numerous directorships including ones with First Caribbean International Bank, CIBC Securities Inc. (as director and board chair), CIBC Suisse, CIBC Mortgage Corporation, CIBC Trust, St. Michael s Hospital Foundation and Mood Disorders Association of Ontario (as director and board chair). Board/Committee Membership Attendance Attendance Total Board of Directors 9 of 9 Risk and Capital Committee 3 of 3 15 of % Securities Held (2) Audit Committee 3 of Annual Meeting Yes Votes in Favour: 99.98% Areas of Expertise Other Public Board Membership During the Last Five Years Accounting, Audit and Financial Expertise CEO and Executive Leadership Financial Services Governance and Board Marketing and Branding Strategic Planning Year Common Shares (3) Deferred Share Units (4) Shares and DSUs Total of Common None Compliant with Director Share Ownership Policy (5) February 27, ,000 1,555 3,155 Yes February 28, N/A (2) (6) Options Held (Director option grants discontinued in 2004) Date Granted Expiry Date Number Granted Exercise Price None Total Unexercised Unexercised Value (7) Notes: (1) (2) (3) (4) (5) (6) (7) Independent refers to the Board s determination of whether a director is independent under the categorical standards adopted by the Board. Securities Held and Options Held are reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Common Shares refers to the number of Common Shares of the Corporation directly or beneficially owned, or over which control or direction is exercised, by the nominee as of February 27, 2015 in respect of 2014 and February 28, 2014 in respect of The Board approved a Directors Deferred Share Unit Plan for all non-management directors that took effect on January 1, Compliant with Director Share Ownership Policy refers to the director s compliance with the Director Share Ownership Policy which is described on page 18. Options refers to the number of unexercised options held by the nominee under the Employee Stock Option Plan described on page 42 as of February 27, The granting of options to non-management directors under the Employee Stock Option Plan was discontinued in Unexercised Value is determined by multiplying the number of unexercised options held by each nominee as of February 27, 2015 by the difference between the closing price of the Corporation s Common Shares on the TSX on February 27, 2015 ($45.40) and the exercise price of such options. Page 11 Home Capital Group Inc. Management Information Circular

18 Robert J. Blowes Waterloo, Ontario, Canada Not Independent (1) Robert J. Blowes, 62, was most recently Executive Vice President and Chief Financial Officer of Home Capital Group Inc. and its subsidiary Home Trust Company. Mr. Blowes served in this capacity from 2011 until his retirement from the Corporation on December 31, Prior to joining the Corporation, Mr. Blowes was with Ernst & Young LLP, Chartered Accountants. He was a Partner in that Firm for 25 years and was part of the Financial Services Industry Group for over 10 years. Mr. Blowes client base included banking and trust companies, life, property and casualty insurance carriers, brokerages and other financial services. Mr. Blowes also served leading technology companies and has had extensive experience with reporting issuers. Mr. Blowes received his Chartered Accountant designation in 1977 and Certified Public Accountant (Illinois) designation in In 2013 he was elected a Fellow of the Ontario Institute of Chartered Accountants and CPA Ontario. Board/Committee Membership Mr. Blowes is not currently a director. Attendance Total Securities Held (2) Areas of Expertise Accounting, Audit and Financial Expertise CEO and Executive Leadership Financial Services Mortgage and Real Estate Risk Management Strategic Planning Other Public Board Membership During the Last Five Years Year Common Shares (3) Deferred Share Units (4) Shares and DSUs Total of Common None Compliant with Director Share Ownership Policy (5) February 27, , ,317 Yes February 28, , ,548 Not Applicable (2) (6) Options Held (Director option grants discontinued in 2004) Date Granted Expiry Date Number Granted Exercise Price Total Unexercised Unexercised Value (7) December 1, 2010 December 1, ,000 $ ,000 $ 107,200 August 1, 2012 August 1, ,000 $ 23,20 15,000 $ 333,075 February 15, 2013 February 15, ,000 $ ,000 $ 159,700 December 9, 2013 December 9, ,000 $ ,000 $ 57,500 December 11, 2014 December 11, ,060 $ ,060 $ 0 Notes: (1) (2) (3) (4) (5) (6) (7) Independent refers to the Board s determination of whether a director is independent under the categorical standards adopted by the Board. Mr. Blowes is not Independent as he was an officer of the Corporation until December 31, Former employees of the Corporation may not be considered Independent until a period of not less than 3 years has passed since the date they ceased to be in the employ of the Corporation. Securities Held and Options Held is reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Common Shares refers to the number of Common Shares of the Corporation directly or beneficially owned, or over which control or direction is exercised, by the nominee as of February 27, 2015 in respect of 2014 and February 28, 2014 in respect of The Board approved a Directors Deferred Share Unit Plan for all non-management directors that took effect on January 1, Compliant with Director Share Ownership Policy refers to the director s compliance with the Director Share Ownership Policy which is described on page 18. Options refers to the number of unexercised options held by the nominee under the Employee Stock Option Plan described on page 42 as of February 27, The granting of options to non-management directors under the Employee Stock Option Plan was discontinued in Mr. Blowes options were granted to him in his capacity as Chief Financial Officer of the Corporation. Unexercised Value is determined by multiplying the number of unexercised options held by each nominee as of February 27, 2015 by the difference between the closing price of the Corporation s Common Shares on the TSX on February 27, 2015 ($45.40) and the exercise price of such options. Page 12 Home Capital Group Inc. Management Information Circular

19 Director Competency Matrix The GNC Committee mandate provides for the establishment and update of the industry specific experience, business expertise and individual qualifications of directors in relation to the Board s specific competency requirements so as to identify any eventual competency gaps on the Board ( Competency Matrix ). The Competency Matrix is reviewed and updated periodically and at least annually. Directors use the Competency Matrix to review and self-assess their competencies each year. The results are used to enhance the development of the Board, assist in the director recruitment process and identify potential areas for training or education. The Competency Matrix below shows, for each director nominee, the principal areas of experience and expertise that the nominees have indicated they bring to our Board. Directors Competency Matrix Accounting, Audit & Financial Literacy Baillie Beaurivage Blowes Falk Graham Marsh Mitchell Smith Soloway Then CEO/Executive Leadership Executive Compensation & Human Resources Financial Services Governance/Board Government Relations & Public Policy Information Technology Legal & Regulatory Marketing & Branding Mortgages/Real Estate Risk Management Strategic Planning Directors Meeting Attendance Board and Board Committee meetings are set two years in advance and are reviewed periodically to optimize director attendance. The Corporation expects all directors to attend all meetings. Non attendance at Board and Board Committee meetings is rare and usually when an unprecedented commitment arises which cannot be rearranged. Page 13 Home Capital Group Inc. Management Information Circular

20 The following is a record of directors attendance at meetings of the Board and its Committees during the twelve months ended December 31, Directors Meeting Attendance for 2014 Director Board Attendance Committee Attendance James C. Baillie 14 of 15 93% 6 of 6 Risk and Capital Committee 100% 5 of 5 Governance, Nominating and Conduct Review Committee 100% Jacqueline E. Beaurivage (1) 9 of 9 100% 3 of 3 Audit Committee 100% 3 of 3 Risk and Capital Committee 100% Total Meetings 25 of of 15 Robert J. Blowes (2) N/A N/A The Hon. William G. Davis 14 of 15 93% 6 of 6 Human Resources and Compensation Committee 100% 4 of 5 Governance, Nominating and Conduct Review Committee 80% 24 of 26 William F. Falk (3) 14 of 15 93% 3 of 3 Human Resources and Compensation Committee 100% 6 of 6 Risk and Capital Committee 100% 28 of 29 5 of 5 Governance, Nominating and Conduct Review Committee 100% Diana L. Graham 15 of % 6 of 6 Audit Committee 100% 6 of 6 Risk and Capital Committee 100% John M. Marsh 13 of 15 87% 5 of 6 Audit Committee 83% 5 of 6 Human Resources and Compensation Committee 83% 27 of of 27 Robert A. Mitchell 15 of % 6 of 6 Audit Committee 100% 6 of 6 Risk and Capital Committee 100% 32 of 32 5 of 5 Governance, Nominating and Conduct Review Committee 100% Kevin P.D. Smith 15 of % 6 of 6 Human Resources and Compensation Committee 100% 5 of 5 Governance, Nominating and Conduct Review Committee 100% 26 of 26 Gerald M. Soloway (4) 15 of % 100% 15 of 15 Bonita J. Then 15 of % 6 of 6 Audit Committee 100% 6 of 6 Risk and Capital Committee 100% 27 of 27 Notes: (1) (2) (3) (4) Ms. Jacqueline E. Beaurivage was elected to the Board of the Corporation and its subsidiary Home Trust Company on May 14, Effective May 14, 2014, Ms. Beaurivage was appointed as a member of the Risk and Capital and Audit Committees of the Corporation and its subsidiary Home Trust Company. Mr. Robert J. Blowes is standing for election on May 13, Mr. William F. Falk was appointed to the HRC Committee on May 14, As Chief Executive Officer of the Corporation, Mr. Soloway is not a member of any Committee but attends meetings at the invitation of the Committees. In Camera Sessions The Board held in camera sessions of the independent directors at every meeting of the Corporation during Director Assessment The Board has a formal process of performance evaluation of the Board, its Committees, individual directors and the Chair of the Board. The Board believes there is value in conducting the process internally without using external resources. This allows the Board to develop an appropriately tailored approach and benefit from the direct input of each of its individual directors. The members of the Board review the effectiveness of the Board and its Committees, preparation for and performance at meetings and overall corporate governance matters. Directors participate in a written peer review to assess individual directors on the attributes that contribute to an effective Board including among other things, contributions as a director, ongoing effort, business of the Corporation and responsibilities as a director. As well, the Chair receives peer feedback from the directors as part of the formal review conducted by the Chair. Both reviews are based on a formal written questionnaire completed by each director. Following this assessment process, the directors have concluded that the Board and Board Committees function effectively and the Board and Board Committees were led by experienced directors who dedicate the time required to properly fulfill their roles and responsibilities. The Board and Board Committees performance coincided with a strong overall performance of the Corporation. Page 14 Home Capital Group Inc. Management Information Circular

21 Director Orientation To enhance the Board s effectiveness, the Board ensures that prospective candidates for Board membership understand the roles of the Board and Board Committees and the contribution that individual directors are expected to make. Upon becoming a member of the Board, a new director is provided with a substantial package of documents relating to the Corporation s corporate governance system and its business and meets with a number of senior management to better familiarize himself/herself with the Corporation. The director orientation process assists new directors in fully understanding the nature and operations of the Corporation s businesses, the role of the Board and its Committees and the contribution that directors are expected to make. Director Continuing Education The Board approved a Director Orientation, Education and Development Policy on December 4, Directors are expected to maintain a level of expertise needed to execute their roles and responsibilities. Directors are expected to stay abreast of developments in the industry in which the Corporation participates, developments in corporate governance and best practices relevant to their contribution to the Board generally as well as to their responsibilities in their specific Committee assignments and other roles. Directors are encouraged to attend specialty conferences to improve skills, professional qualifications and experiences. Directors may also attend appropriate accredited educational programs at the cost of the Corporation. The cumulative costs of any such educational programs shall not exceed $5, per director in any calendar year without prior approval of the Chair of the Board. Regular presentations on the Corporation s business are provided by members of senior management and advisors. During 2014, management made a number of special presentations to directors including the following: The Corporation s activities regarding Corporate Compliance; The Corporation s relationship with its regulators; The Corporation s activities regarding Internal Audit; The Corporation s strategy and financial plan; The Corporation s activities regarding risk management including credit loss forecasting methodologies; The Corporation s activities regarding Information Technology and Information Security; New developments impacting the Corporation s Accelerator and Classic Mortgage products; Review of upcoming plans and priorities for the Corporation s regulators and potential impact on the Corporation; Review of the commercial mortgage lending landscape and the Corporation s business strategy for growth in that area; Review of trends impacting the Corporation s Retail lending business; Review of the credit card issuing landscape and the Corporation s business strategy for growth in that area; Review of Internal Capital Adequacy Assessment Process and Risks; Review of the new Liquidity Adequacy Guidelines as issued by the Office of the Superintendent of Financial Institutions; and Review of the Corporation s executive compensation program. Director Tenure The Board and the Corporation recognize that sound corporate governance policies are important to maintain the confidence of the Corporation s stakeholders. The Board has adopted the Director Tenure Policy that sets out the term limits for directors of the Board. Directors are expected to serve up to a maximum of ten years assuming directors received solid annual performance assessments and are annually re-elected by the Shareholders. On a case-by-case basis, and on the recommendation of the GNC Committee, the Board may extend a director s initial ten year term limit by up to an additional five years, for a maximum term limit of fifteen years. The ten year initial term limit for directors commenced on May 16, The Corporation s average tenure of independent directors is 8.30 years. Diversity Policy The Corporation recognizes the importance of diversity on the Board and at all levels of the workplace, and is committed to fostering a culture of acceptance and inclusiveness. This includes building a Board and senior management team that are comprised of highly talented and experienced individuals whose diverse backgrounds reflect the Corporation s stakeholders, including its customers and employees and the communities and markets in which the Corporation operates. Diversity at the Page 15 Home Capital Group Inc. Management Information Circular

22 Corporation means respecting and appreciating the characteristics that make individuals and groups different from one another. The benefits of striving for a diverse Board and senior management team include accessing a broader pool of highquality talent, gaining exposure to a greater variety of perspectives and ideas, and maximizing opportunities for innovation in conducting the Corporation s business. As stated in the Corporation s Statement of Corporate Governance Practices and written diversity policies, the GNC Committee considers diversity (including gender, race, religion, ethnicity, language, sexual orientation, physical ability, geographic representation, age and other personal characteristics) when reviewing qualified candidates for recommendation for appointment or election to the Board. The Corporation has adopted a Board of Directors Diversity Policy that ensures the benefits of diversity, together with skills, background, experience and knowledge, are taken into account when considering candidates for the Board, and which promotes the development of strategies for identifying and attracting women board candidates. Under this Policy, the GNC Committee will take into account the Corporation s overall objectives of increasing diversity, maintaining flexibility to effectively address succession planning, and ensuring that the Corporation continues to attract and retain highly qualified individuals to serve on the Board. The Corporation continues to add women to the evergreen list of candidates for the Board. Adherence to the Policy will also be taken into account as part of the annual performance and effectiveness evaluations of the Board and the Committee. The Committee will report and make recommendations to the Board regarding any changes to the Board composition or Board recruitment process to achieve the goals outlined in the Policy. In conjunction with the Policy, the Board has adopted the objective that at least one-third of its independent directors are women which the Corporation will strive to achieve annually. The Corporation has currently achieved this objective with 33% (3 of 9) independent directors being women. As the Policy is new there has not been sufficient opportunity to measure the effectiveness or progress of the Policy. The Corporation takes a similar approach when considering candidates for Executive Officer positions, and has adopted an Executive Officers Diversity Policy that believes in the benefits of diversity as part of succession planning and talent management responsibilities. This Policy provides that the HRC Committee and the Chief Executive Officer will take into account criteria that promote diversity, together with qualifications, talent, experience, functional expertise, skills and character, and will develop strategies for identifying and attracting women senior management candidates. The HRC Committee and the Chief Executive Officer is prepared to adopt a quantitative range for women in Executive Officer positions at the Corporation and has set a minimum objective for women in Executive Officer positions of 25% over the next three to five years. This medium-term objective aligns with the Corporation s approach to its financial targets. Currently, the Corporation has met this objective as 29% (4 of 14) of the Executive Officers of the Corporation, as defined by National Instrument , Continuous Disclosure Obligations, are women. The Corporation has a small senior executive team with 14 individuals identified as Executive Officers. With careful external hiring and internal succession planning promotion, there is very limited turnover at this level. The senior executive team is comprised of the best available talent, with qualified leaders who have diverse backgrounds and experience. When identifying candidates for Executive Officer positions, the Corporation will continue to consider both ability and personal qualities, including diversity, in building a strong senior management team. The Board approved a Board of Directors Diversity Policy on February 11, 2015 with the objective that at least one third of its independent directors are women. As of March 19, 2015, the Board has achieved this objective with 33% of the independent directors being women. Additional Disclosure Relating to Directors To the knowledge of the Corporation, no director of the Corporation is, or has been in the last ten years, a director or executive officer of an issuer that, while that person was acting in that capacity, (a) was the subject of a cease trade or similar order or an order that denied the issuer access to any exemptions under Canadian securities legislation, for a period of more than 30 consecutive days, (b) was subject to an event that resulted, after that person ceased to be a director or executive officer, in the issuer being the subject of a cease trade or similar order or an order that denied the issuer access to any exemption under Canadian securities legislation, for a period of more than 30 consecutive days, or (c) within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, except for the following: Dr. Kevin P.D. Smith, a director of the Corporation, was a director of Glendale International Limited until April 6, 2009 when he resigned from their board of directors. On January 19, 2010, Glendale filed a voluntary assignment in bankruptcy under the Bankruptcy and Insolvency Act (Canada). Interlocking Outside Boards As of the date of this Management Information Circular, none of the Corporation s directors served together on any other board of directors. Page 16 Home Capital Group Inc. Management Information Circular

23 Compensation of Directors Directors are compensated for their services as directors through Board and Chair retainers. Directors who are also officers of the Corporation or its subsidiaries receive no remuneration as directors. The HRC Committee is responsible for reviewing director compensation and updating director compensation as appropriate, to recognize the workload and responsibility of Board and Committee members and to remain competitive with director compensation trends in Canada. The HRC Committee formally reviews director compensation on a biennial schedule with advice from its independent consultant, Meridian Compensation Partners. Director compensation was reviewed in December 2011 (to take effect on January 1, 2012) and again in December 2013 (to take effect on January 1, 2014). At each review, Meridian advised that directors pay was between the median and 75 th percentile of the comparator group used to benchmark Named Executive Officer compensation. Board Retainer Effective January 1, 2014, each non-management director is entitled to be paid $100,000 per annum for his or her services as a director of the Corporation and its subsidiaries. Directors are not paid individual meeting, standing committee or travel fees. Directors are paid ad hoc committee fees on a case by case basis. Directors are reimbursed for their reasonable travel expenses in connection with meeting attendance. The retainer reflects that a director s duty extends beyond attendance at meetings. Directors are expected to provide advice and be available for consultation or assistance throughout the year. The Corporation believes that it is important that a director s compensation address all elements of their responsibility to support the best interests of Home Capital Group Inc. The aggregate compensation, paid as either cash or as Deferred Share Units ( DSUs ) by the Corporation and its subsidiaries during the year ended December 31, 2014 to the directors of the Corporation and its subsidiaries in their capacity as directors, was $1,176,750 (the total Board and Chair retainers plus other allowances). The directors remuneration is paid quarterly in arrears. Each of the directors of the Corporation and its subsidiaries is entitled to be reimbursed for all reasonable out-ofpocket expenses incurred in connection with their attendance at meetings of the Board or any Committees of the Board. Chair Retainers Effective January 1, 2014, the following non-management directors were entitled to be paid chair retainers: The Hon. William G. Davis received $45,000 for his services as Vice-Chair of the boards of the Corporation and of Home Trust Company and $5,000 for his services as Chair of the GNC Committees of the Corporation and of Home Trust Company. Mr. Robert A. Mitchell received $30,000 for his services as Chair of the Audit Committees of the Corporation and of Home Trust Company. Dr. Kevin P.D. Smith received $125,000 for his services as Chair of the boards of the Corporation and of Home Trust Company and $7,500 for his services as Chair of the HRC Committees of the Corporation and Home Trust Company. Ms. Bonita J. Then received $5,000 for her services as Vice Chair of the Audit Committees of the Corporation and of Home Trust Company and $30,000 for her services as Chair of the Risk and Capital Committees of the Corporation and of Home Trust Company. Page 17 Home Capital Group Inc. Management Information Circular

24 Total Board Compensation The table below sets out compensation earned by directors in respect of the year ended December 31, The amounts are actual fees paid under the compensation arrangements described above. Directors Compensation for 2014 (1) Director Board Annual Base Retainer Board Chair Retainer Committee Chair Retainer Other Meeting Fees (2) Total Compensation Portion of Fees taken in DSUs (3) Total Value of DSUs Received in 2014 (4) Total # of all DSUs Held (5) (6) Total Value of All DSUs Held (7) James C. Baillie $ 100,000 $ 0 $ 0 $ 3,000 $ 103,000 0% $ 0 0 $ 0 Jacqueline E. $ 75,000 $ 0 $ 0 $ 0 $ 75, % $ 75,000 1,555 $ 74,624 Beaurivage (8) William G. Davis $ 100,000 $ 45,000 (9) $ 5,000 (10) $ 2,083 $ 152,083 0% $ 0 0 $ 0 William F. Falk $ 100,000 $ 0 $ 0 $ 0 $ 100, % $ 100,000 7,387 $ 354,502 Diana L. Graham $ 100,000 $ 0 $ 0 $ 0 $ 100, % $ 100,000 3,205 $ 153,760 John M. Marsh $ 100,000 $ 0 $ 0 $ 0 $ 100,000 50% $ 55,000 8,626 $ Robert A. Mitchell $ 100,000 $ 0 $ 30,000 (11) $ 3,000 $ 133,000 0% $ 0 10,579 $ 507,686 Kevin P.D. Smith $ 100,000 $ 125,000 (12) $ 7,500 (13) $ 2,250 $ 234,750 50% $ 140,179 26,255 $ 1,259,977 Bonita J. Then $ 100,000 $ 0 $ 35,000 (14) $ 2,250 $ 137,250 0% $ 0 0 $ 0 F. Leslie $ 41,667 (16) Thompson (15) $ 0 $ 0 $ 0 $ 41,667 25% $ 10,417 1,591 $ 76,352 Notes: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) Board members do not currently receive option based awards or non-equity incentive plan compensation and have no pension or other compensation entitlements. Other Meeting Fees reflects fees received for participation in meetings of ad hoc committees of the Board. These fees are paid as cash compensation only. DSUs are Deferred Share Units under the Home Capital Group Inc. Directors Deferred Share Unit Plan. Base, Board Chair and Committee Chair retainers are the only fees eligible to be compensated in DSUs. Total cash value of DSUs received during 2014 is the value of compensation paid in respect of fiscal 2014 in the form of DSUs but does not include dividends paid in 2014 in the form of DSUs on each director s total DSU holdings. Total number of all DSUs held is as of December 31, This includes DSUs earned in 2014 but not yet paid as director fees are paid in arrears. Total number of DSUs is reflective of a 2-for-1 stock dividend paid by the Corporation on March 10, Total value of all DSUs held is calculated using the number of DSUs held by the director as of February 27, 2015 (inclusive of reinvested dividends) multiplied by the closing price of the Corporation s Common Shares on December 31, 2014 ($47.99). Ms. Jacqueline E. Beaurivage was elected to the Board on May 14, 2014 and received $75,000 for her services as a director. This amount has been pro-rated from the date of her election to December 31, The Hon. William G. Davis received $45,000 for his services as Vice-Chair of the Boards of the Corporation and of Home Trust Company. The Hon. William G. Davis received $5,000 for his services as Chair of the GNC Committees of the Corporation and of its subsidiary Home Trust Company. Mr. Robert A. Mitchell received $30,000 for his services as Chair of the Audit Committees of the Corporation and its subsidiary Home Trust Company. Dr. Kevin P.D. Smith received $125,000 for his services as Chair of the Boards of the Corporation and of Home Trust Company. Dr. Kevin P.D. Smith received $7,500 for his services as Chair of the HRC Committees of the Corporation and its subsidiary Home Trust Company. Ms. Bonita J. Then received $5,000 for her services as Vice Chair of the Audit Committees of the Corporation and its subsidiary Home Trust Company. Ms. Bonita J. Then also received $30,000 for her services as of Chair of the Risk and Capital Committees of the Corporation and its subsidiary Home Trust Company. Ms. F. Leslie Thompson retired from the Board of Directors of the Corporation and its subsidiary Home Trust Company on May 14, Ms. F. Leslie Thompson received $41,667 for her services as a director of the Corporation and its subsidiary Home Trust Company. The amount has been pro-rated from January 1, 2014 to the date of her retirement on May 14, Director Share Ownership Effective January 1, 2014 independent directors are required to hold 3 times their annual base retainer in Common Shares and/or in DSUs. Directors who have not met this requirement must elect to take at least 25% of their retainer in DSUs under the Corporation s Directors Deferred Share Unit Plan. Directors have 5 years to achieve the required ownership level (or any increase in their ownership requirement). Common Shares are valued using the higher of cost and market value and DSUs are valued using market value at the higher of award date and current date. Deferred Share Units Under the Corporation s Directors Deferred Share Unit Plan, directors may elect to receive all or a portion of their directors remuneration in DSUs instead of cash. A DSU is a right to receive a cash payment equal to the value of a Common Share. The number of DSUs granted to a director is determined by dividing the dollar amount of directors compensation to be received as DSUs by the market price of a Common Share generally on the third business day following the end of the Corporation s blackout period for each fiscal quarter in respect of which the DSU is granted. Additional DSUs are credited to the director in respect of dividends paid on Common Shares. DSUs cannot be redeemed until the director ceases to hold all positions with the Corporation and must be redeemed by December 15 of the year following the year the director ceases to hold all positions. Page 18 Home Capital Group Inc. Management Information Circular

25 On redemption of a DSU, the director is entitled to a cash payment equal to the number of DSUs redeemed multiplied by the market price of a Common Share determined as at the redemption date. Retirement Allowance Independent directors elected or appointed before October 20, 2004 are entitled to receive, upon retirement and after five years of service, a one-time retirement allowance of $15,000. As of February 27, 2015, John M. Marsh and Robert A. Mitchell are the only directors entitled to receive this allowance. Indebtedness of Directors As of March 19, 2015, no director of the Corporation or proposed nominee for election as a director of the Corporation is indebted to the Corporation. Directors and Officers Insurance Directors and officers liability insurance has been purchased by the Corporation for the benefit of the directors and officers of the Corporation and its subsidiaries. The policy was renewed in Q with an annual premium of $280,584 for a total coverage/policy limit of $50,000,000. Page 19 Home Capital Group Inc. Management Information Circular

26 Shareholder Rights Plan The Corporation is a party to the Shareholder Rights Plan with Computershare Investor Services Inc., as Rights Agent, dated as of March 11, 2009 (the Rights Plan ). The Rights Plan was adopted and ratified by Shareholders on May 15, 2009 and continued by the Board on February 28, 2012 and by the Shareholders on May 16, The Rights Plan will expire unless Shareholders vote at the Annual and Special Meeting to continue its operation. At the Annual and Special Meeting, Shareholders will be asked to consider, and, if deemed advisable, to approve the Resolution respecting the continuance of the Rights Plan. The Resolution approving continuance of the Rights Plan is reproduced as Schedule C to this Management Information Circular. The Rights Plan will continue in effect only if it is approved by a majority of the votes cast by Shareholders at the Annual and Special Meeting. The Board of Directors believes that the Rights Plan preserves the fair treatment of Shareholders, is consistent with current best Canadian corporate practice and addresses institutional investor guidelines. The Rights Plan is not intended to prevent a take-over of the Corporation. Background and Purpose of the Rights Plan The Rights Plan is designed to provide the Corporation s Shareholders and the Board additional time to assess an unsolicited take-over bid for the Corporation and, where appropriate, to give the Board additional time to pursue alternatives for maximizing Shareholder value. The Rights Plan also encourages fair treatment of all Shareholders by providing Shareholders with an equal opportunity to participate in a take-over bid. The Rights Plan encourages a potential acquirer to proceed by way of a Permitted Bid (as defined below), which requires the take-over bid to satisfy certain minimum standards designed to promote fairness, or with the concurrence of the Board. The Rights Plan was not adopted in response to any specific proposal to acquire control of the Corporation, nor is the Board currently aware of any pending or threatened take-over bid for the Corporation. If the Shareholders approve the resolution respecting the Rights Plan, the Rights Plan will be in effect for an additional three years. The existing legislative framework for take-over bids in Canada continues to raise the following concerns for the Corporation s Shareholders: Time Current legislation permits a take-over bid to expire 35 days after it is initiated. The Board does not believe this is sufficient time to permit Shareholders to consider a take-over bid and make a reasoned and unhurried decision or for other more favourable alternatives to be explored and developed. Pressure to Tender A Shareholder may feel compelled to tender his or her Common Shares to a take-over bid which the Shareholder considers to be inadequate out of a concern that in failing to do so, the Shareholder may be left with illiquid or minority discounted shares. Unequal Treatment While existing securities legislation has addressed many concerns related to unequal treatment of Shareholders, there remains the possibility that control of a company may be acquired pursuant to private agreements in which a small group of Shareholders disposes of shares at a premium to market price, which premium is not shared by the other Shareholders. Summary of the Rights Plan The material terms of the Rights Plan are summarized below. This summary is qualified in its entirety by reference to the actual provisions of the Rights Plan, a copy of which is posted on the Corporation s web-site, and will also be available at the Annual and Special Meeting. General The Rights Plan is effective as of March 11, One Right attaches to each Common Share. The Rights will separate from the Common Shares and will be exercisable eight trading days after a person has acquired, or commences a take-over bid to acquire, 20% or more of the Common Shares, other than by an acquisition pursuant to a takeover bid permitted by the Rights Plan (a Permitted Bid ). The acquisition by any person (an Acquiring Person ) of 20% or more of the Common Shares, other than by way of a Permitted Bid, is referred to as a Flip-in Event. Any Rights held by an Acquiring Person will become void upon the occurrence of a Flip-in Event. Eight trading days after the occurrence of the Flip-in Event, each Right (other than those held by the Acquiring Person) will permit the purchase of $400 worth of Common Shares for $200. Permitted Bid Requirements If a take-over bid is structured as a Permitted Bid, a Flip-in Event will not occur and the Rights will not become exercisable. Permitted Bids must be made by means of a take-over bid circular and comply with the following: 1. the take-over bid must be made to all Shareholders other than the bidder; Page 20 Home Capital Group Inc. Management Information Circular

27 2. the take-over bid must not permit the bidder to take up any Common Shares that have been tendered until 60 days after the take-over bid is made, and then only if at such time more than 50% of the Common Shares held by the Independent Shareholders (which term generally includes Shareholders other than the bidder and persons acting jointly or in concert with the bidder), have been tendered pursuant to the take-over bid and not withdrawn; 3. the take-over bid must contain an irrevocable and unqualified provision that, unless it is withdrawn, Common Shares may be tendered at any time during the 60 day period, and that any Common Shares deposited pursuant to the take-over bid may be withdrawn until they have been taken up and paid for; and 4. the take-over bid must contain an irrevocable and unqualified provision that, if more than 50% of the Common Shares held by Independent Shareholders are tendered pursuant to the take-over bid within the 60 day period, then the bidder must make a public announcement of that fact and the take-over bid must then remain open for an additional 10 business days from the date of the public announcement. The Rights Plan also allows a Competing Permitted Bid to be made while a Permitted Bid is in existence. A Competing Permitted Bid must satisfy all of the requirements for a Permitted Bid, except that it may expire on the same date as the Permitted Bid, subject to the requirement that it be open for at least 35 days. Redemption Until the occurrence of a Flip-in Event as to which the Board of Directors has not issued a waiver, the Board of Directors may elect to redeem all but not less than all of the then outstanding Rights at a redemption price of $ (subject to adjustment) per Right. Fiduciary Duty of Board of Directors The Rights Plan will not detract from or lessen the duty of the Board of Directors to act honestly and in good faith with a view to the best interests of the Corporation and its Shareholders. The Board of Directors will continue to have the duty and power to take such actions and make such recommendations to the Corporation s Shareholders as are considered appropriate. Amendment to the Rights Agreement The Board of Directors may amend the Rights Plan with the approval of a majority of the votes cast by Shareholders voting in person and by proxy. Without such approval, the Board may amend to correct any clerical or typographical error or to make such changes as are required to maintain the validity and effectiveness of the Rights Plan as a result of any change in any applicable laws, rules or regulatory requirements. Term If the continuance of the Rights Plan is approved pursuant to the Rights Plan Resolution, the Rights Plan will expire at the close of business on the date of the Corporation s 2018 Annual Meeting unless the continuation of the Rights Plan for additional three-year periods is approved by the Independent Shareholders of the Corporation. Approval of Resolution The Resolution in respect of the continuance of the Rights Plan, the text of which is reproduced at Schedule C to this Management Information Circular, must be approved by at least a majority of the votes cast at the Annual and Special Meeting by all Shareholders of the Corporation present or represented by proxy in order for the Rights Plan to continue its operation. The Corporation s Board of Directors believes that the Rights Plan is in the best interests of the Corporation and its Shareholders and unanimously recommends that Shareholders vote FOR the approval of the Resolution. Unless instructed otherwise, the persons designated in the enclosed form of proxy or voting instruction form intend to vote FOR the approval of this Resolution. Page 21 Home Capital Group Inc. Management Information Circular

28 Committees of the Board The Board fulfills its role directly and through committees to which it delegates certain responsibilities. The Board and its Committees are focused on the continued enhancement of our governance processes and on further strengthening the risk and control infrastructure of the Corporation as a key enabler of future growth and meeting strategic objectives. During 2014 the Board provided oversight to related initiatives, including the strategic planning process and results. Board of Directors Home Capital Group Inc James. C. Baillie Jacqueline E. The Hon. William G. Beaurivage Davis William F. Falk Diana L. Graham John M. Marsh Robert A. Mitchell Kevin P.D. Smith Gerald M. Soloway Bonita J. Then Audit Committee Human Resources and Compensation Committee Governance, Nominating and Conduct Review Committee Risk and Capital Committee Chair Robert A. Mitchell Chair Kevin P.D. Smith Chair The Hon. William G. Davis Chair Bonita J. Then Vice Chair Bonita J. Then Vice Chair John M. Marsh Vice Chair James C. Baillie Vice Chair William F. Falk Members Jacqueline E. Beaurivage Diana L. Graham John M. Marsh Members The Hon. William G. Davis William F Falk Members William F. Falk Robert A. Mitchell Kevin P.D. Smith Members James C. Baillie Jacqueline E. Beaurivage Diana L. Graham Robert A. Mitchell Page 22 Home Capital Group Inc. Management Information Circular

29 Audit Committee The Audit Committee is responsible for the oversight of: The quality and integrity of the Corporation s financial reporting to Shareholders. The effectiveness of the Corporation s internal controls including the effectiveness and independence of the Corporation s Finance, Internal Audit and Corporate Compliance functions. The External Auditor s performance, qualifications and independence. The Corporation s compliance with legislative and regulatory requirements. Each member of the Audit Committee is financially literate as defined under Canadian Securities Administrators rules as determined by the Board and each member satisfies the independence standards established by the Board. Each member of the Audit Committee is an independent director and has never been a member of management of the Corporation. The Audit Committee met six times during 2014 and at each meeting it met in camera with the external auditor, Senior Vice President, Internal Audit, Chief Financial Officer and the Chief Compliance Officer & Chief Anti-Money Laundering Officer ( CAMLO ). The Audit Committee also met in camera at the conclusion of each meeting with no members of management present. The Audit Committee s Charter containing the Committee s responsibilities, powers and operations is available on the Corporation s website at and is attached to the Corporation s Annual Information Form dated March 19, 2015 which has been filed on SEDAR at Changes to the Committee in 2014 On May 14, 2014, Ms. Jacqueline E. Beaurivage was appointed to the Committee. Committee Accomplishments During 2014 Reviewed and discussed with management and the external auditor the quarterly financial statements and the annual audited financial statements prior to the publication of earnings, including judgements and estimates. Reviewed and discussed with management and the external auditor the annual and quarterly disclosures made in management s discussion and analyses and approved any reports included in the Annual Report. Reviewed and discussed with management and the external auditor any significant changes to the accounting principles and practices suggested by the external auditor or management. Reviewed and discussed with the Chief Executive Officer and the Chief Financial Officer procedures undertaken regarding certification of annual and interim filings. Reviewed and discussed the granting of Shareholder dividends and the granting of dividends to the Corporation from its subsidiary, Home Trust Company. Reviewed and monitored the Corporation s financial plan. Appointed, set the compensation of and supervised the work of the external auditor, and reviewed and monitored audit service and quality. In 2014, the Committee reviewed external developments related to external audit quality, and has formalized its documentation related to the annual review of audit service and quality. Provided oversight of the adequacy and effectiveness of internal controls through the review and monitoring of key internal control issues and the status of corrective actions with the internal and external auditors, the Chief Financial Officer and the Chief Compliance Officer & CAMLO. In addition, in 2014 the Audit Committee reviewed an internal control assessment prepared by management s Governance, Risk and Compliance Committee. Provided oversight of the Corporation s finance, internal audit and compliance (including both General & AML/ATF) functions by reviewing annual work plans, mandates, independence, organizational structure, periodic reports and assessing the effectiveness of the functions and the individual performance of the Chief Financial Officer, Senior Vice President Internal Audit, and the Chief Compliance Officer & CAMLO. Reviewed and approved enhancements to the Regulatory Compliance Management framework and various compliance policies to strengthen the Corporation s compliance programs. Received updates on regulatory developments, and management actions in response to such developments. Reviewed and approved the internal and external audit plans. Page 23 Home Capital Group Inc. Management Information Circular

30 Human Resources and Compensation Committee The HRC Committee assists the Board in its oversight role by: Overseeing the Corporation s human resources strategy, policies and programs. Monitoring all matters relating to proper utilization of human resources within the Corporation, with special focus on management succession and development. Overseeing compensation programs and managing compensation related risks. Each member of the HRC Committee is an independent director and has never been a member of management of the Corporation. The HRC Committee met six times during 2014 and at each meeting it met in camera with no members of management present. The Committee also met in camera with the Senior Vice-President, Human Resources at each meeting. The HRC Committee s Charter containing its responsibilities, powers and operations is available on the Corporation s website at Changes to the Committee in 2014 On May 14, 2014, Ms. F. Leslie Thompson retired from the HRC Committee. On May 14, 2014, Mr. William F. Falk was appointed to the HRC Committee. Committee Accomplishments During 2014 Reviewed and provided oversight of the Executive Compensation Plan. Reviewed and recommended to the Board, revisions to the Corporation s Employee Stock Option and Performance & Restricted Share Unit Plans. Reviewed and discussed the enterprise wide Compensation Policy. Reviewed succession and leadership plans for the appointment and succession of senior management. Conducted a formal review of compensation related risks, alignment with regulatory requirements and linkage between performance and compensation. Recommended to the Board performance goals for the Chief Executive Officer and other Named Executive Officers. Conducted compensation benchmarking for Named Executive Officers. Reviewed and approved the Corporation s Code of Business Conduct and Ethics and other Human Resources policies. Reviewed and recommended to the Board amendments to the Employee Stock Option Plan and Performance and Restricted Share Unit Plan. Reviewed and approved awards pursuant to the Employee Stock Option Plan and Performance and Restricted Share Unit Plan. Reviewed the Compensation Discussion and Analysis section of the Management Information Circular. Reviewed and revised the Corporation s Peer Group for compensation purposes. Reviewed key human resources metrics and employee engagement results. Supported management in the implementation of new leadership development programs, including launching of a Senior Women Networking Committee. Supported management in the implementation of a new Human Resources Information System to ensure employee metrics and corporate dashboard information is secure and timely. Page 24 Home Capital Group Inc. Management Information Circular

31 Governance, Nominating and Conduct Review Committee The GNC Committee assists the Board of Directors in its oversight role by: Identifying individuals qualified and suitable to become directors and recommending to the Board the nominees for each annual meeting of Shareholders. Developing the Corporation s governance policies, practices and processes. Monitoring the effectiveness of the Board, its Committees and the chairs of those Committees. Assessing the contributions of individual directors. Monitoring conflicts of interest, confidential corporate information, transactions involving related parties of the Corporation and disclosure of information. Developing and maintaining Direction Orientation, Education and Development Policy and Programs. Each member of the GNC Committee is an independent director and has never been a member of management of the Corporation. The GNC Committee met five times during 2014 and at each meeting it met in camera with no members of management present. The GNC Committee s Charter containing the GNC Committee s responsibilities, powers and operations is available on the Corporation s website at Changes to the Committee in 2014 There were no changes to the GNC Committee during Committee Accomplishments During 2014 Reviewed corporate governance practices and recommended policies, practices and procedures to the Board. Reviewed the adequacy and effectiveness of the Board governance policies and made appropriate recommendations for their improvement. Reviewed and reported on emerging legislative and industry developments and trends in corporate governance. Reviewed the competencies, areas of expertise, backgrounds, independence and qualifications of members of the Board. Reviewed and assessed the effectiveness and performance of the Board, directors, Board Committees and the Chair of the Board. Reviewed and considered the qualifications of prospective director candidates. Reviewed the performance of the Chair of the Board of the Corporation and recommended the election of the Chair. Recommended to the Board the appointment of directors to Board Committees. Reviewed the Charter of the Board and the Charters of Board Committees. Reviewed and approved the payment of management fees pursuant to related party rules. Reviewed and approved policies including the Director Orientation, Education and Development Policy, the Director Tenure Policy, the Majority Election of Directors Policy and the Policy for Escalation of Issues to the Board. Page 25 Home Capital Group Inc. Management Information Circular

32 Risk and Capital Committee The Risk and Capital Committee is responsible for assisting the Board of Directors by: Identifying, assessing and managing the Corporation s risk profile. Reviewing and recommending Board approval of the Corporation s overall risk appetite framework including risk limits. Reviewing and approving the Corporation s risk and capital policies and limits. Reviewing the effectiveness of the Corporation s risk and capital practices. Reviewing the Corporation s adherence to internal risk and capital policies and procedures through timely management reporting. Each member of the Risk and Capital Committee is an independent director and has never been a member of management of the Corporation. The Risk and Capital Committee met six times during 2014 and at each meeting it met in camera with no members of management present. The Risk and Capital Committee also met in camera with the Chief Risk Officer at the conclusion of all regularly scheduled Board meetings. The Risk and Capital Committee s Charter containing the Risk and Capital Committee s responsibilities, powers and operations is available on the Corporation s website at Changes to the Committee in 2014 On May 14, 2014, Ms. F. Leslie Thompson retired from the Risk and Capital Committee. On May 14, 2014, Mr. William F. Falk was appointed to the Risk and Capital Committee. On May 14, 2014, Ms. Jacqueline E. Beaurivage was appointed to the Risk and Capital Committee. Committee Accomplishments During 2014 Reviewed and approved the risk appetite framework and the statement of risk appetite, including establishment with senior management the Corporation s risk capacity and risk taking philosophy. Reviewed and approved the enterprise risk framework and policy. Monitored the risk profile of the Corporation by reviewing in depth reports on the quality and performance of the Corporation s lending portfolios and on the assessment, monitoring and mitigation of other principal risks. Reviewed, discussed and approved significant changes to the Corporation s underwriting policies. Reviewed and approved overall capital management strategies and policies and reviewed with senior management reports demonstrating compliance with capital management policies. Reviewed, approved and challenged the capital plan and quarterly assessments of capital adequacy. Reviewed and discussed a range of stress scenarios and the impact to the Corporation s risk profile. Reviewed and approved overall credit risk management strategies and policies and reviewed reports demonstrating compliance with credit risk policies. Reviewed and approved overall market risk management strategies and policies and monitored investment practices of the Corporation to ensure that the Corporation is adhering to the policies approved by the Board. Reviewed and approved overall liquidity risk management policies and strategies and reviewed with senior management reports demonstrating compliance with liquidity risk policies. Reviewed and recommended to the Board a liquidity contingency plan and procedures for implementation. Reviewed and approved interest rate risk management strategies and policies and reviewed with senior management reports demonstrating compliance with interest rate risk policies. Reviewed and approved overall operational risk management strategies and policies and reviewed with senior management reports demonstrating compliance with operational risk policies. Initiated board education sessions to provide greater insight on risk topics in advance of required approvals for areas such as capital management, liquidity and funding and stress testing. Received reports on technology risks and projects including cyber-security risk. Provided oversight of the enterprise risk management and credit functions by reviewing mandates, independence, organizational structure, work plans and periodic reports. Page 26 Home Capital Group Inc. Management Information Circular

33 2014 Report on Executive Compensation Message to the Shareholders From the Chair of the Human Resources and Compensation Committee Dear Fellow Shareholder, I am pleased to advise that in 2014, we continued our vision of creating Total Reward and Recognition Programs for the executives and employees of Home Trust that would inspire, reward, and ultimately retain our high performing workforce. Every year we need to review how we can improve our programs in order to maintain a lead position in a highly competitive market. More than ever we need to link our compensation philosophy and programs to the achievement of both our short and long term growth objectives while continuing to ensure we promote sound risk management behaviours and principles. In 2014, the Board and management conducted an in-depth review of our Executive Compensation Programs to ensure they were competitive and aligned with our business strategy. During this review, we also assessed our deferred incentive programs and made an adjustment to our Employee Stock Option Plan to better align our vesting term with the short, medium and long term financial growth objectives of the Corporation and employee engagement. As previously mentioned, we are in a highly competitive market and the fight for top talent continues. In addition to direct compensation, we need to be highly aware and responsive to all our benefits offerings and to that end, we are working closely with senior executives, Human Resources and independent advisors to explore new employee value solutions. As previously advised, in 2013 we introduced an advisory vote on executive compensation which received a 91% favourable vote. I am very pleased to report that for 2014, we continued with our strong ratings in this area and 96% of our shareholders voted in favour of our compensation programs. Clearly our Shareholders support the direction we are taking and we are committed to listening carefully to your feedback on executive compensation. It is no secret that 2014 was a challenging economic year for Canada and the housing market in particular softened in the second half of the calendar year. Based on this and in order to better align compensation with the long-term performance of the Corporation, you will see in the following pages that in 2014, the executives of Home Trust agreed, at the request of the Board, to take 75% of their variable compensation in deferred compensation as demonstration of their commitment to the Corporation. Notwithstanding the challenging economic environment in 2014, I am pleased to advise that the Corporation met many of its performance objectives. Specifically: An adjusted return on shareholder s equity of 22.0%, exceeding our target of 20%; growth in adjusted net income of 11.9%, below our target of 13% to 18%; an increase in adjusted diluted earnings per Common Share of 11.1%, below our target of 13% to 18%; an increase in total loans under administration of 13.1%, below our target of 15% to 20%; an adjusted efficiency ratio of 28.5%, meeting the target of 28% to 32%; provisions as a percentage of gross uninsured loans of 0.10%, exceeding our target of 0.15% to 0.25% We remain committed to disclosure that will support effective market disciplines which in turn will continue to allow market participants to assess the quality of compensation practices and the quality of support for the Corporation s strategy and risk framework. Additionally, the HRC Committee commits to our shareholders that we will continue to review our executive compensation plans and practices to ensure they are safeguarding the long term sustainability of the organization. Kevin P. D. Smith Chair, Human Resources Compensation Committee Page 27 Home Capital Group Inc. Management Information Circular

34 The Board s Role in Setting Executive Compensation The Board determines executive compensation based on the recommendations from the HRC Committee. The HRC Committee is comprised entirely of independent directors. No member of the HRC Committee has ever been a member of management of the Corporation. The HRC Committee has in camera sessions with no management present at each HRC Committee meeting. Compensation Governance The Corporation s compensation governance structure is composed of the Board, the HRC Committee, management s Executive Committee, Enterprise Risk Management, Internal Audit and the HRC Committee s independent consultant. Home Capital Group Inc. Board of Directors The Board has oversight of all compensation related policies, programs and recommendations. The Board approves major plans, practices and payouts based on the recommendations of the HRC Committee. John M. Marsh is a member of both committees William Falk is a member of both committees Audit Committee Internal Audit Internal Audit supports the HRC Committee by conducting an independent review of executive compensation programs and practices. Independent Compensation Advisor Meridian Compensation Partners provides advice regarding compensation policies and compensation program design as required. Meridian may also provide total compensation recommendations for the Chief Executive Officer, Named Executive Officers and other members of senior management as requested by the HRC Committee if necessary. Human Resources and Compensation Committee The HRC Committee supports the Board in carrying out compensation matters by: Reviewing major programs and policies against the Corporation s business objectives. Reviewing and considering compensation related risks and assessing alignment with FSB Principles including stress tests and back tests. Recommending awards made under the Corporation s compensation program. Reviewing succession planning and other talent management related matters. Executive Committee (management committee) Management s Executive Committee supports the HRC Committee by: Recommending the design of compensation programs and awards. Aligning compensation plans and practices with FSB Principles and risk appetite. Ensuring compensation is adjusted for risk and performance. Identifying key individuals as part of the Corporation s succession planning. Risk and Capital Committee ( RCC ) Enterprise Risk Management Enterprise Risk Management supports the HRC Committee through ongoing evaluation of principal risks with regular reporting to the RCC. The Chief Risk Officer presents a comprehensive risk assessment in a joint HRC/RCC meeting prior to the annual compensation decision cycle. HRC Committee s Role in Setting Executive Compensation The HRC Committee reviews the Corporation s remuneration structure at least annually and administers the Corporation s executive compensation program. As part of its mandate, the HRC Committee has primary responsibility for making recommendations to the Board with respect to the appointment and remuneration of executive officers of the Corporation. The HRC Committee also evaluates the performance of the Corporation s executive officers and reviews the design and competitiveness of the Corporation s compensation plan. The HRC Committee met six times during the year ended December 31, Page 28 Home Capital Group Inc. Management Information Circular

35 HRC Committee Expertise in Executive Compensation The Chair of the HRC Committee, Dr. Kevin P.D. Smith, is the President and Chief Executive Officer of St. Joseph s Health System and has completed the Institute of Corporate Directors (ICD.D) program for directors and the Harvard Business School Corporate Board Effectiveness Program. Dr. Smith has attended sessions by Deloitte on enterprise wide risk management. As such, Dr. Smith has experience and expertise in executive compensation and enterprise risk. The Vice Chair of the HRC Committee, Mr. John M. Marsh, is also a member of the Audit Committee. Mr. Marsh was a chief executive officer of a number of companies for over 25 years and as such was responsible for setting senior management compensation. Mr. Marsh was on the board of directors of Radiant Energy Corporation until 2009 and was the Chair of Radiant s compensation committee. Mr. Marsh is currently a member of the board of directors of Peace Bridge Duty Free and is the Chair of its compensation committee. Mr. Marsh has been a member of the Corporation s HRC Committee for more than 10 years. As such, Mr. Marsh has significant experience and expertise in executive compensation. Mr. William F. Falk was appointed to the HRC Committee on May 14, Mr. Falk is also a member of the Governance, Nominating and Conduct Review Committee and the Risk and Capital Committee. Mr. Falk is a Managing Partner & National Leader of the Healthcare Services Group at PricewaterhouseCoopers LLP. He has over 20 years of experience advising chief executive officers and their executive teams on strategic information technology and management issues. He has been an active member of the Board in all executive compensation discussions and has extensive business experience in providing insights on the effectiveness of executive compensation plans and frameworks. The Hon. William G. Davis is an experienced director and has been the Chair of a number of public company human resources and compensation committees over the years. He has experience with executive compensation arrangements from a board member s perspective. As such, Mr. Davis has expertise in executive compensation. HRC Committee s Annual Decision Making Process The HRC Committee makes compensation related recommendations to the Board each year with input from executive management including the Chief Executive Officer (the CEO ) and the Chief Risk Officer of the Corporation to the HRC Committee. Once business results have been calculated and the variable incentive pool determined, executive management assesses the performance of senior executives including the CEO and prepares compensation recommendations for the HRC Committee to consider. The HRC Committee recommends compensation decisions to the Board including discretion to increase or decrease any element of compensation based on any considerations deemed relevant. Managing Compensation Related Risk The HRC Committee is actively involved in the risk oversight of the compensation programs and practices. The Corporation s Executive Compensation Plan is designed to discourage excessive risk taking, align executive interests with those of Shareholders over the long term and further strengthen the Corporation s alignment with Financial Stability Board s Principles for Sound Compensation Practices ( FSB Principles ). Enterprise Risk Management s Role in Compensation The Corporation s strategies and management of risk are supported by an overall Enterprise Risk Management ( ERM ) framework including policies, guidelines, and procedures for each major category of risk to which it is exposed. The Corporation defines ERM as an ongoing process involving the Board, management and other personnel in the identification, measurement, assessment and management of risks that may positively or negatively impact the organization as a whole. ERM is applied in strategic setting across the enterprise and is designed to provide reasonable assurance that the Corporation s objectives can be realized given its stated risk appetite. The goal of ERM is to help maximize, within the Corporation s risk appetite, the benefit to the enterprise, shareholders and other stakeholders from a portfolio of risks that the Corporation is willing to accept. Supporting the Corporation s ERM structure is a risk culture and a governance framework, including Board and senior management oversight and an increasingly robust set of risk policies and guidelines reflective of the Corporation s risk appetite, that set boundaries for acceptable business strategies, exposures and activities. The Corporation s governance structure is supported by the industry standard three lines of defence model. Authority is delegated by the Board through the Chief Executive Officer to business units that are responsible for managing the risks they take in the pursuit of their business objectives. The ERM group, along with the Credit, Finance and Corporate Compliance groups, represents the second line of defence, and provides policy guidance to business units and helps ensure that all risks are identified, monitored, measured, assessed and reported to senior management and the Board. These risk management responsibilities are primarily carried out through the Risk and Capital Committee of the Board. In this role the Risk and Capital Committee provides oversight to ensure all significant risks to the Corporation, regardless of source, are proactively identified and managed. This is accomplished by reviewing and approving, on at least an annual basis, all key risk policies; monitoring, on at least a quarterly basis, the Corporation s actual exposures versus Board-approved risk appetite and limits; and providing direction to management where deemed necessary. With the HRC Committee, the Risk and Capital Committee provides oversight to ensure that compensation does not encourage excessive risk taking that the ERM function is adequately independent from the business activities ERM oversees. Internal Audit, the third line of defence, provides objective and independent reviews of the risk management process, its controls, and the effectiveness of governance, risk management and controls. Page 29 Home Capital Group Inc. Management Information Circular

36 Compensation Related Risk Review The HRC Committee considered the implications of the risks associated with its compensation policies and practices and retained Meridian Compensation Partners, an independent consulting firm, to review its assessment of compensation related risks and alignment of compensation practices with FSB Principles for The following table summarizes the alignment of the Corporation s current compensation approach with relevant FSB Principles. Financial Stability Board Principles for Sound Compensation Practices Principle 1 The firm s board of directors must actively oversee the compensation system s design and operation. Principle 2 The firm s board of directors must monitor and review the compensation system to ensure the system operates as intended. Principle 3 Staff engaged in financial and risk control must be independent, have appropriate authority, and be compensated in a manner that is independent of the business areas they oversee and commensurate with their key role in the firm. Principle 4 Compensation must be adjusted for all types of risk. Principle 5 Compensation outcomes must be symmetric with risk outcomes. Principle 6 Compensation payout schedules must be sensitive to the time horizon of risks. Principle 7 The mix of cash, equity and other forms of compensation must be consistent with risk alignment. Principle 8 Supervisory reviews of compensation practices must be rigorous and sustained, and deficiencies must be addressed promptly with supervisory action. Principle 9 Firms must disclose clear, comprehensive and timely information about their compensation practices to facilitate constructive engagement by all stakeholders. Assessment The HRC Committee reviews the Corporation s remuneration structure at least annually and administers the executive compensation program. As part of its mandate, the HRC Committee has primary responsibility for making recommendations to the Board with respect to the remuneration of senior executives of the Corporation. The HRC Committee members are all independent directors with executive compensation experience. The HRC Committee reviews and approves key compensation programs and awards for alignment with shareholder interests, the Corporation s risk appetite and regulatory requirements. The Quarterly HR Reports and Year-end Compensation Discussion and Analysis ensures the HRC Committee s effectiveness in overseeing compensation programs. Each key control function department head reports directly to the Chair of their respective Committee. In addition, the variable compensation pool for control function employees is not funded based on financial performance. Control function employees are paid on the basis of a competitive salary with an annual bonus based on the achievement of departmental and individual objectives. The Chief Risk Officer (the CRO ) presents a comprehensive risk assessment in a joint HRC Committee and Risk and Capital Committee meeting prior to annual compensation decisions. In addition, the Executive Compensation Plan ensures the Risk and Capital/HRC Committee has the ability to reduce variable compensation if it concludes that an individual s performance has been achieved by exposing the Corporation to excessive or inappropriate risks. With the exception of Control Functions (ERM, Finance, Compliance, Credit and Internal Audit), the variable compensation pool is generated based on a percentage of Net Income (before taxes). Should the pool be affected by external environmental factors beyond management s control, the HRC Committee has the authority to apply discretionary adjustments to ensure that the pool continues to align with business performance. The HRC Committee may set the variable compensation pool to zero in extreme circumstances where the outcome is inconsistent with the intent of the plan design. If individual or cumulative loss events occur that are related to investment or lending decisions made in a prior reporting period, the HRC Committee has discretionary authority to require forfeiture of all or a portion of the deferred incentive compensation. Compensation components such as Restricted Share Units, Performance Share Units and Stock Options are all designed to align executive compensation with the risk time horizon. The Executive Compensation Plan ensures variable compensation decisions, including cash award, share units and stock options are determined coherently to align with Corporation s short, medium and long term risks. Senior executives have the majority of their variable compensation delivered as deferred equity. The deferred equity portion of their variable compensation increases with their role s accountabilities and long term impact. This requirement is only applicable to regulators. The Corporation makes annual disclosures in accordance with the rules of the Ontario Securities Commission and Pillar III Disclosure Requirements for Remuneration. The Committee s role, expertise respecting compensation and related risk, executive benchmarking, performance targets and disclosure of hedging practices are all disclosed in the Management Information Circular. Page 30 Home Capital Group Inc. Management Information Circular

37 Compensation Consultants The HRC Committee retained Meridian Compensation Partners ( Meridian ) as its independent compensation consultant. In 2014, Meridian reviewed the assessment of the Corporation s alignment with FSB Principles for Sound Compensation Practices. The HRC Committee initially retained the services of Meridian in Meridian does not provide any services to the Corporation other than those provided directly to the HRC Committee. Any use of Meridian by management would require the HRC Committee s prior approval. Executive Compensation-Related Fees The Corporation paid Meridian $19,341 for services provided to the HRC Committee during 2014 and $163,136 for services provided to the HRC Committee in The HRC Committee reviews all fees and the terms of consulting services provided by its compensation consultant. The HRC Committee is ultimately responsible for its own decisions, which may take into consideration more than the information and recommendations provided by its compensation consultant or management. Succession Planning for Senior Executives Succession Planning and leadership development is an integral practice for the Corporation. It is viewed as a systematic effort to identify, assess and develop talent to ensure leadership continuity in key positions as well as ensure stability within the executive talent pipeline. The succession planning framework is based on the following principles: Aligns talent requirements to short and long-term business strategy; Employs proactive and systematic strategies to develop talent and measure progress and growth of individuals for key roles as well as overall employee talent pools; Ensures credible and valid employee data for assessing future talent capability; and Is an ongoing, integral business process. For each senior executive position within the Corporation, an annual review is conducted to assess the strength of succession planning readiness based on the following planning requirements: Emergency replacement: the successor is ready to step in and fill the role for a short period of time. Ready now: the successor is ready to assume the role permanently if the opportunity presented itself. Ready in months: the successor is showing good development in their current role and ideally requires some additional experience and exposure before taking on the new role. Ready in months: the successor is an emerging talent and is showing early signs of capability and potential beyond their current position. The HRC Committee reviews the Framework, guiding principles and Succession Mapping of the Corporation at least once annually. Compensation Philosophy and Strategy All of the Corporation s compensation programs are designed to meet pay-for-performance and competitiveness objectives. In addition, the disclosure of the Corporation s compensation program is designed to support effective market discipline and allow market participants to further assess the quality of compensation practices and the quality of support for the Corporation s strategy and risk framework. Actual variable compensation rewards are directly linked to the results of the Corporation. Measures set each year represent an improvement in the Corporation s operations. The program also supports the Corporation s strategy to attract, retain, and motivate high performing executives in the creation of sustainable long term value for shareholders. To achieve these objectives, the executive compensation program is based on the following three principles: 1. Alignment with the Corporation s short term and long term business strategy The Corporation s compensation programs link executive compensation with the achievement of specific strategic business objectives and the Corporation s performance. 2. Effective Risk Management The compensation programs are designed specifically to ensure that they do not create an incentive for risk taking outside the Corporation s stated risk appetite. The HRC Committee reviews each plan regularly to ensure it is operating as intended. 3. Pay for Performance The Corporation s compensation programs demonstrate clear relationships between pay and performance. Specific policies and guidelines supporting this objective include: Aligning the financial and risk management interests and motivations of the Corporation s management team and employees with the annual financial performance of the Corporation; and Motivating management to work towards the Corporation s annual performance objectives. Page 31 Home Capital Group Inc. Management Information Circular

38 4. Competitive Compensation The Corporation s compensation programs set target compensation to ensure competitiveness in the market where the Corporation competes for talent. Compensation Discussion and Analysis This section discusses the compensation structure, decision making process, programs and awards for the Named Executive Officers (the NEOs ) of the Corporation. For 2014, the NEOs were: Gerald M. Soloway, Chief Executive Officer Martin K. Reid, President Brian R. Mosko, Chief Operating Officer and Executive Vice President Pino G. Decina, Executive Vice President, Residential Mortgage Lending Robert J. Blowes (1), Chief Financial Officer and Executive Vice President Robert L. Morton (2), Chief Financial Officer and Executive Vice President Notes: (1) (2) Mr. Blowes retired from the Corporation on December 31, Mr. Morton joined the Corporation in September 2014 as Chief Financial Officer of Home Trust Company. He assumed Mr. Blowes responsibilities as Chief Financial Officer of the Corporation on January 1, Executive Compensation Decision Making Process The process for determining executive compensation includes the following steps: Step 1 Step 2 Step 3 Step 4 Setting Compensation Targets Establishing Performance Objectives Evaluating Performance Determining Pay Awards Step 1: Setting Compensation Targets The HRC Committee uses discretion and judgment when determining compensation levels based on the Corporation s Compensation Philosophy. Individual compensation targets are based on an individual s experience and long-term performance or other criteria deemed important by the HRC Committee. Compensation for the NEOs and control function executives is generally between the median and the 75 th percentile of the comparator group (the Chief Executive Officer s compensation is at the 75 th percentile of the comparator group). This market position is aligned with the Corporation s long term performance which is above the 75 th percentile of the comparator group. Benchmarking and Compensation Surveys - Compensation Peer Group A benchmarking analysis was conducted in 2014 based on a group of comparators comprised of publicly traded companies in the financial services and other relevant industries. The target revenue scope of the comparator group is one-third to three times that of the Corporation with the median revenue approximately the same as that of the Corporation. The HRC Committee reviews the comparator group with management annually to ensure that companies in the comparator group are the Corporation s primary competitors for top talent. Accordingly, the current comparator group was refined in 2014 to the following: Canadian Western Bank Davis & Henderson Corporation E-L Financial Corp Ltd Equitable Group Inc Fairfax Financial Holding First National Financial Corp Components of the Executive Compensation Program Genworth MI Canada Inc IGM Financial Inc Industrial Alliance Insurance & Financial Services Intact Financial Corp Laurentian Bank of Canada The Corporation s Executive compensation program includes three components: annual salary, annual cash incentive and long-term incentives. Page 32 Home Capital Group Inc. Management Information Circular

39 Compensation Mix Variable Compensation Total Direct Compensation = Base Salary + Annual Cash Bonus + Equity Incentives A significant portion of each executive s total compensation is variable or at-risk. This at-risk portion of total compensation includes an annual cash bonus, Restricted Share Units, Performance Share Units and Stock Options. These are linked to performance during the year. If the executive s and/or the Corporation s performance is poor, the value of at-risk compensation will decrease and if the executive s and/or the Corporation s performance is strong, the value of at-risk compensation will increase. The following charts set out the relative weight of 2014 compensation attributable to base salary, short-term incentive awards and long-term incentive awards for (1) the Corporation s Chief Executive Officer and the Chief Executive Officers of the comparator group companies, and (2) Named Executive Officers of the Corporation and the Named Executive Officers of the comparator group companies, other than the Chief Executive Officers. Market compensation is based on information disclosed in each comparator company s most recent management information circular. (1) Compensation for Robert L. Morton has been excluded from the charts. Page 33 Home Capital Group Inc. Management Information Circular

40 The following target mixes are designed to align executive compensation with their impact and risk horizon and are applicable to executives including the NEOs and control function executives. Base Salary (as a % of Total Compensation) Variable Compensation (as a % of Total Compensation) Cash Equity Chief Executive Officer 30% 28% 42% President 40% 27% 33% Executive Vice President 40% - 50% 25% - 30% 25% - 30% Senior Vice President 50% - 65% 21% - 30% 14% - 20% Variable Compensation The Corporation s variable compensation program includes four components: Annual Cash Bonus, Restricted Share Units ( RSUs ), Performance Share Units ( PSUs ) and Stock Options. The Corporation believes that these elements of compensation provide incentives for short-term, mid-term and long-term performance and align the executives interests with the interests of Shareholders. Stock Options and PSUs were awarded to the Named Executive Officers in December 2014 based on 2014 performance. The HRC Committee uses discretion when determining the mix within the equity incentive component based on the Compensation Philosophy and Strategy as outlined on page 31. Performance and Vesting Period of Variable Compensation Elements Annual Cash Bonus Restricted Share Unit Plan Performance Share Unit Plan Employee Stock Option Plan Purpose Align compensation with annual performance objectives Align compensation with medium term corporate performance and risk horizon Align compensation with medium term corporate performance, risk horizon and relative performance versus Peer Group Align compensation with long term share performance and risk horizon Performance Period 12 Months 3 Years 3 Years Stock options granted from December 2014 onward have a five year term; Options granted prior to December 2014 have a seven year term Vesting Schedule Paid out at the end of performance period 1/3 vests each year over three years Vests and paid out at the end of a three year term, subject to performance during the period Typically 25% of options vest on each of the first through fourth anniversaries of the grant date subject to the achievement of performance hurdles as described on page 43 Additional valuation factors Not Applicable Fair Market Value on vesting date (1) Fair Market Value and relative performance on vesting date (1) Relative TSR Performance Adjustment Factor against peer group TSR: Share price on exercise date Relative TSR Performance Adjustment Factor 75th %tile & Above 150% 50th %tile 100% 30th %tile 50% Below 30th %tile 0% Dividends Not Applicable Eligible and reinvested as additional units Eligible and reinvested as additional units Not eligible Note: (1) Fair Market Value is defined as the volume weighted average trading price of the Common Shares of the Corporation for the five trading days immediately preceding the vesting date. Page 34 Home Capital Group Inc. Management Information Circular

41 Step 2: Establishing Performance Objectives The HRC Committee establishes corporate performance objectives annually based on a combination of risk management, strategic, operational and financial targets as appropriate. Corporate performance objectives are set within the Corporation s risk appetite framework. At the individual level, performance objectives are set with consideration of risk management, compliance and control accountabilities. Step 3: Evaluating Performance The HRC Committee evaluates performance based on the factors below. The same performance evaluation approach is applied at Corporate and individual levels: Financial Targets Financial targets apply to non-control function employees only. Considerations include net income, loan growth, efficiency ratio, return on equity, capital ratios and provision for loan losses. Risk Management The Chief Risk Officer presents a comprehensive risk management assessment based on quantitative and qualitative measures such as alignment with the Corporation s risk appetite. The HRC Committee has the right to reduce variable compensation if performance was achieved by exposing the Corporation to excessive or inappropriate risks. Strategic and Operational Performance The HRC Committee has discretion to adjust both the overall variable compensation pool and individual awards in order to recognize key strategic and operational achievements. Performance is evaluated at the individual level. Step 4: Determining Variable Pay Awards The overall variable compensation pool is based on the Corporation s Net Income (before tax). The HRC Committee finalizes the pool based on performance evaluations as described in Step 3 and has discretion to adjust the pool as it deems appropriate. The variable compensation pool for control function employees is based on measures independent of financial results to mitigate the potential for conflict of interest. The HRC Committee recommends variable compensation awards for Named Executive Officers, including the CEO, to the Board at the end of each year. In addition to the performance criteria listed in Steps 2-3, the HRC Committee also considers the following factors: External compensation market benchmarking; Internal compensation history, historical performance level, potential and internal equity; and Risk and control accountabilities - Individual performance is also measured against the Corporation s risk appetite and the time horizon of potential risks. The HRC Committee further defined the executive equity pay mixes to provide a more consistent approach on RSU, PSU and Stock Option allocation Performance Review Assessment of 2014 Financial Performance with Respect to Variable Compensation In 2014, the HRC Committee considered performance against Net Income, Earnings Per Share (diluted), Growth in Combined Total Assets and Securitized Mortgages, Return on Equity and Capital Ratio targets in assessing the annual incentive awards for Named Executive Officers. The table below sets out the Corporation s performance objectives for 2014 with respect to these key elements as well as the actual results and performance relative to target: 2014 Performance Objective (1) (1) Performance Relative to 2014 Actual Results Target 20% Adjusted Return on Shareholder s Equity Adjusted Return on Shareholder s Equity was 22.0% for 2014 compared to 24.0% for Better than Target 13-18% growth in Adjusted Net Income Adjusted Net Income for 2014 reached $288.4 million, up 11.9% over % Adjusted Efficiency Ratio Adjusted Efficiency Ratio (TEB) was 28.5% compared to 28.2% in Below Target On Target 13-18% increase in Adjusted Diluted Earnings Per Share Diluted Earnings Per Share in 2014 were $4.09, up 11.1% above Below Target Page 35 Home Capital Group Inc. Management Information Circular

42 2014 Performance Objective (1) (1) Performance Relative to 2014 Actual Results Target 0.15% % provision as a percentage of gross uninsured loans Provision as a percentage of gross uninsured loans was 0.10% Better than Target 15%-20% growth in total loans under administration Total loans under administration, grew to $22.56 billion in 2014, an increase of 13.1% from $19.94 billion in Below Target Note: (1) See definition of Adjusted Net Income, Adjusted Diluted Earnings per Share, Adjusted Return on Shareholders Equity and Adjusted Efficiency Ratio under Non-GAAP measures of the 2014 Annual Report. Risk Management The Chief Risk Officer concluded that the Corporation continued to operate within its Board approved risk appetite and risk tolerances throughout Aggregate risk levels are monitored through ongoing evaluation of principal risks, with regular reporting to senior management and the Board. Operational and Strategic Goals Continued to offer one-stop convenience to borrowers and brokers, offering both traditional alternative residential lending and prime lending increasing total originations by 28% over Enhanced Oaken Financial presence through the introduction of Oaken Online Banking Maintained a flexible supply of funding through the deposit broker network and Oaken Financial by utilized funding through securitization markets and high interest accounts. The Corporation has also raised $500 million through the institutional deposit note program. On March 10, 2014 the Corporation paid a stock dividend of one common share per each issued and outstanding common share to shareholders. Overall Evaluation In 2014, the HRC Committee decided to adjust variable compensation mix by reducing cash incentives and increasing share based awards to better align executive compensation with shareholder s interests and to reflect less than optimal market conditions. The following table shows the total direct compensation that was awarded to the NEOs in respect of fiscal 2014 performance. Summary of Total Direct Compensation Decisions 2014 Direct Compensation for NEOs Named Executive Officer Base Salary Annual Cash Incentive Variable Compensation (VC) Share-Based Awards (PSUs) Option-Based Awards Total Direct Compensation (TDC) Variable Compensation as % of TDC Deferred Compensation as % of VC Gerald M. Soloway $ 725,000 $ 426,000 $ 855,590 $ 421,410 $ 2,428,000 70% 75% Martin K. Reid $ 675,000 $ 333,600 $ 670,402 $ 330,198 $ 2,009,200 66% 75% Brian R. Mosko $ 500,000 $ 156,500 $ 314,163 $ 154,737 $ 1,125,400 56% 75% Pino G. Decina $ 425,000 $ 140,000 $ 281,400 $ 138,600 $ 985,000 57% 75% Robert J. Blowes (1) $ 360,000 $ 287,500 $ 192,625 $ 94,875 $ 935,000 61% 50% Robert L. Morton (2) $ 86,538 $ 75,000 $ 0 $ 83,600 $ 245,138 65% 53% Note: (1) (2) Mr. Robert J. Blowes retired from the Corporation on December 31, In accordance with the Plans, the total balance of Mr. Blowes outstanding equities had an accounting value of approximately $525,000. Outstanding equity was comprised of: 15,000 vested stock options, 40,060 unvested stock options, 1,299 unvested Restricted Share Units and 5,243 unvested Performance Share Units Mr. Robert L. Morton joined the Corporation and its subsidiary Home Trust Company on September 8, 2014 as Chief Financial Officer of Home Trust Company. A $75,000 cash bonus was paid and 10,000 stock options were granted to Mr. Morton in accordance with his employment offer and do not reflect Mr. Morton s 2014 performance. Employment Contract for Robert L. Morton Mr. Robert L. Morton joined the Corporation and its subsidiary Home Trust Company on September 8, 2014 as Chief Financial Officer of Home Trust Company. On January 1, 2015, Mr. Morton was appointed Chief Financial Officer of the Corporation in addition to his role with the subsidiary. The following arrangements were negotiated as per Mr. Morton s Employment Contract: A guaranteed cash bonus of not less than $67,000 but not greater than $83,000 for 2014 only A one-time grant of 10,000 stock options granted on November 13, 2014 Guaranteed severance and notice: Page 36 Home Capital Group Inc. Management Information Circular

43 Months of Employment Severance and Notice First six months $150,000 Month Seven $125,000 Month Eight $100,000 Between nine and twelve months $75,000 After first twelve months Three months salary Named Executive Officer Profiles Gerald M. Soloway, Chief Executive Officer Gerald M. Soloway became Chief Executive Officer of the Corporation on January 1, 1987 and continues to serve in that capacity. He also serves as the Chief Executive Officer of the Corporation s subsidiary Home Trust Company. Prior to his involvement with the Corporation, Mr. Soloway practised law in Toronto, specializing in real estate, mortgage and commercial law. Mr. Soloway acted for major banks and trust companies. Mr. Soloway has a B.A. from the University of Western Ontario, an LL.B. from Osgoode Hall and is an Accredited Mortgage Professional (AMP) Mr. Soloway has been with the Corporation since 1986 and has been involved in the industry since Martin K. Reid, President Martin K. Reid is President of the Corporation and its subsidiary Home Trust Company. Mr. Reid was appointed to this position on January 1, Mr. Reid joined the Corporation in September 2007 as Treasurer. He has more than 20 years of financial services industry experience in numerous senior management positions in treasury and capital markets. Prior to joining the Corporation, Mr. Reid worked for Deutsche Bank Canada in various capacities, Deutsche Bank New York as Director of Market Risk for the Americas and most recently Dundee Bank of Canada where he was Managing Director of Rates and Liquidity. Mr. Reid is also a director on the First Canadian Title Advisory Board and the Board of Healthcare of Ontario Pension Plan. Mr. Reid graduated from York University with a B.A. in Economics, is an Accredited Mortgage Professional (AMP) and holds an ICD.D from the Institute of Corporate Directors at the Rotman School of Management. Brian R. Mosko, Chief Operating Officer and Executive Vice President Brian R. Mosko is Chief Operating Officer and Executive Vice President of the Corporation and its subsidiary Home Trust Company. He was appointed to this position on January 1, Mr. Mosko joined the Corporation in March 1989 as a Senior Mortgage Underwriter. He assumed increasing responsibilities over time and was appointed Chief Operating Officer and Senior Vice President on January 1, On January 1, 2010, he was appointed Chief Operating Officer and Executive Vice President. Mr. Mosko is responsible for the overall operation and administration of the Corporation. Prior to joining the Corporation, Mr. Mosko held positions with the Bank of Montreal, Revenue Canada and Price Waterhouse. He holds a Bachelor of Commerce (Hons) degree from the University of Windsor, is a Fellow of the Institute of Canadian Bankers (FICB) as well as an Accredited Mortgage Professional (AMP) and an ICD.D from the Institute of Corporate Directors at the Rotman School of Management. Page 37 Home Capital Group Inc. Management Information Circular

44 Pino G. Decina, Executive Vice President, Residential Mortgage Lending Pino Decina currently serves as Executive Vice President, Residential Mortgage Lending of the Corporation and of its subsidiary Home Trust Company. He was appointed to this position on October 1, Mr. Decina joined the Corporation in 2003 as Senior Manager, Mortgage Underwriting. In 2006 he was appointed Vice-President, Mortgage Lending and in 2009, he was appointed Senior Vice President, Residential Mortgage Lending. Mr. Decina is responsible for overseeing all marketing and business development activities across Canada. Prior to joining the Corporation, Mr. Decina was with Citifinancial where he held a variety of senior positions. Mr. Decina graduated from York University with a B.A. in Economics. Mr. Decina is also an Accredited Mortgage Professional (AMP) and is frequently invited to speak at a variety of mortgage industry events. Robert J. Blowes, Chief Financial Officer and Executive Vice President Robert J. Blowes was Executive Vice President and Chief Financial Officer of the Corporation and of its subsidiary Home Trust Company until December 31, Mr. Blowes joined the Corporation in 2010 as Senior Vice President, Finance and was appointed to the role of Executive Vice President and Chief Financial Officer on October 1, 2012, a position he held until his retirement on December 31, Prior to joining the Corporation, Mr. Blowes was with Ernst & Young LLP, Chartered Accountants. He was a Partner in that firm for 25 years and was part of the Financial Services Industry Group for over 10 years. Mr. Blowes client base included banking and trust companies, life, property and casualty insurance carriers, brokerages and other financial services. Mr. Blowes also served leading technology companies. Mr. Blowes received his Chartered Accountant designation in 1977 and Certified Public Accountant (Illinois) designation in Robert L. Morton, Chief Financial Officer and Executive Vice President Robert L. Morton is Executive Vice President and Chief Financial Officer of the Corporation and its subsidiary of Home Trust Company. Mr. Morton joined the Corporation in September of 2014 as Chief Financial Officer of Home Trust Company. He was appointed to his present position of Executive Vice President and Chief Financial Officer of the Corporation on January 1, 2015 following Mr. Blowes retirement. Prior to joining the Corporation, Mr. Morton was with State Street Bank where he was most recently Group Chief Financial Officer of the Canadian legal entities, responsible for all financial functions in Canada as well as Principal Officer of State Street Bank and Trust Company Canada Branch. Mr. Morton is a CPA, CMA, and also holds the Chartered Director (C.Dir.) designation from the DeGroote School of Business at McMaster University. Executive Compensation Tables Summary Compensation of Named Executive Officers Three Year Look Back The following table sets forth all compensation for services in all capacities to the Corporation and its subsidiaries for the financial years ended December 31, 2014, 2013 and 2012 paid to the Chief Executive Officer and the Chief Financial Officer and to the next three most highly compensated executive officers whose total compensation received during the year ended December 31, 2014 was greater than $150,000 (the Named Executive Officers ). Page 38 Home Capital Group Inc. Management Information Circular