First Quarter Report - Power Financial · to common shareholders in the irst quarter of were $ m illion. IGM’s contribution to Power Financial’s operating earnings was $ million

First Quarter ReportF O R T H E P E R I O D E N D E D

M A R C H 3 1 , 2 0 1 21

This document is also available on www.sedar.com or

on the Corporation’s website, www.powerfinancial.com

Additional printed copies of this document are available

from the Secretary, Power Financial Corporation

751 Victoria Square, Montréal, Québec, Canada H2Y 2J3

or

Suite 2600, Richardson Building, 1 Lombard Place, Winnipeg, Manitoba, Canada R3B 0X5

Ce document est aussi disponible sur le site www.sedar.com ou

sur le site Web de la Société, www.powerfinancial.com

Si vous préférez recevoir ce document en français,

veuillez vous adresser au secrétaire, Corporation Financière Power

751, square Victoria, Montréal (Québec) Canada H2Y 2J3

ou

Bureau 2600, Richardson Building, 1 Lombard Place, Winnipeg (Manitoba) Canada R3B 0X5

T O T H E S H A R E H O L D E R S

Power Financial Corporation’s operating earnings attributable to common shareholders for the three-month period ended March , were $ million or $ . per share, the same as in the corresponding period in .Other items represented a contribution of $ million, compared with a charge of $ million in the irst quarter of . Other items in the irst quarter of were mainly composed of the Corporation’s share of the gains realized by Groupe Bruxelles Lambert (GBL) on the partial disposal of Pernod Ricard (a producer of wines and spirits) shares ($ million) and the disposal of Arkema (a French chemicals producer) shares ($ million).As a result, net earnings attributable to common shareholders for the three-month period ended March , were $ million or $ . per share, compared with $ million or $ . per share in the corresponding period in .RESULTS OF SUBSIDIARIES AND PARJOINTCO

GREAT WEST LIFECO For the three-month period ended March , , Great-West Lifeco Inc. (Lifeco) reported operating earnings and net earnings attributable to common shareholders of $ million or $ . per share, compared with $ million or $ . per share in the corresponding period in . This represents an increase of . % on a per share basis.Included in operating earnings for the irst quarter of was the establishment of catastrophe provisions relating to earthquake events in Japan and New Zealand with an after-tax impact of $ million. Power Financial’s share of these provisions was $ million.Lifeco’s contribution to Power Financial’s operating earnings was $ million for the three-month period ended March , , compared with $ million for the corresponding period in .IGM FINANCIALFor the three-month period ended March , , IGM Financial Inc. (IGM) reported operating earnings and net earnings available to common shareholders of $ million or $ . per share, compared with operating earnings available to common shareholders of $ million or $ . per share in the same period in , a decrease of . % on a per share basis. Net earnings available to common shareholders in the irst quarter of were $ million.IGM’s contribution to Power Financial’s operating earnings was $ million for the three-month period ended March , , compared with $ million for the corresponding period in .

P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 1

PFC_QUAT1_Eng01_letter_PFC_2012-05-13_v2.indd 1PFC_QUAT1_Eng01_letter_PFC_2012-05-13_v2.indd 1 12-05-14 11:02 AM12-05-14 11:02 AM

PARJOINTCOPower Financial held a % interest in Parjointco N.V., which in turn held a . % equity interest in Pargesa SA (Pargesa) at March , . For the three-month period ended March , , Pargesa reported an operating loss of SF million, compared with operating earnings of SF million in the corresponding period in . These results re lect that, although the results of Imerys were . % higher than in the corresponding period in , the contribution from Imerys to Pargesa’s earnings decreased by . % in the irst quarter of , due to a smaller percentage of ownership as Pargesa’s direct interest in Imerys was sold to GBL in April , as previously disclosed.Including the gains realized by GBL as referred to above, Pargesa’s net earnings for the three-month period ended March , were SF million, compared with SF million in the corresponding period in .Expressed in Canadian dollars, Pargesa’s contribution to Power Financial’s operating earnings was a charge of $ million for the three-month period ended March , , compared with earnings of $ million in the corresponding period in . On behalf of the Board of Directors,

Signed Signed SignedPaul Desmarais, Jr., . ., . . André Desmarais, . ., . . R. Jeffrey OrrCo-Chairman of the Board Co-Chairman of the Board President and Chief Executive Of icerMay ,

2 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2

GR

EA

T-WEST LIFEC

O IN

C.

IGM

FINA

NC

IAL IN

C.

PAR

GESA

HO

LDIN

G SA

PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

Power Financial Corporation

TA B L E O F CO N T EN T S

Power Financial Corporation PA R T A

Great-West Lifeco Inc. PA R T B

IGM Financial Inc. PA R T C

Pargesa Holding SA PA R T D

This document contains management’s discussion and analysis of the unaudited interim consolidated fi nancial condition and fi nancial performance of Power Financial Corporation for the three months ended March 31, 2012 and the unaudited interim condensed consolidated fi nancial statements of the Corporation as at and for the three months ended March 31, 2012. This document has been fi led with the securities regulatory authorities in each of the provinces and territories of Canada and mailed to shareholders of the Corporation in accordance with applicable securities laws.

P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 3

PFC_QUAT1_Eng01_PFC_2012-05-12_v1.indd 3PFC_QUAT1_Eng01_PFC_2012-05-12_v1.indd 3 12/05/12 3:27 PM12/05/12 3:27 PM

The trademarks contained in this report are owned by Power Financial Corporation or by a member of the Power Corporation group of companiesTM. Trademarks that are not owned by Power Financial are used with permission.

4 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2

PFC_QUAT1_Eng01_PFC_2012-05-12_v1.indd 4PFC_QUAT1_Eng01_PFC_2012-05-12_v1.indd 4 12/05/12 3:27 PM12/05/12 3:27 PM

PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

MANAGEMENT’S DISCUSSION AND ANALYSIS

PA G E A 2

FINANCIAL STATEMENTS AND NOTES

PA G E A 1 9

F O R T H E P E R I O D E N D E D M A R C H 3 1, 2 0 1 2

Power Financial Corporation

PA RT A

P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 A 1

PFC_QUAT1_Eng01_PFC_2012-05-12_v1.indd B1PFC_QUAT1_Eng01_PFC_2012-05-12_v1.indd B1 12/05/12 3:27 PM12/05/12 3:27 PM

PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

P O W E R F I N A N C I A L C O R P O R A T I O N M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S MAY14,2012ALLTABULARAMOUNTSAREINMILLIONSOFCANADIANDOLLARS,UNLESSOTHERWISENOTED.The followingsets forthmanagement’sdiscussionandanalysis (MD&A)of theunaudited interimconsolidatedfinancial condition and financial performance of Power Financial Corporation (Power Financial or theCorporation)forthethree‐monthperiodendedMarch31,2012(theinterimMD&A).ThisdocumentshouldbereadinconjunctionwiththeunauditedinterimcondensedconsolidatedfinancialstatementsofPowerFinancialand notes thereto for the three‐month period ended March 31, 2012 (the Interim Consolidated FinancialStatements),theMD&AfortheyearendedDecember31,2011(the2011MD&A),andtheauditedconsolidatedfinancialstatementsandnotestheretofortheyearendedDecember31,2011(the2011ConsolidatedFinancialStatements).AdditionalinformationrelatingtoPowerFinancial,includingitsAnnualInformationForm,maybefoundonSEDARatwww.sedar.com.

FORWARD‐LOOKINGSTATEMENTS › Certain statements in thisMD&A, other than statementsofhistorical fact, are forward‐looking statementsbasedoncertainassumptionsandreflecttheCorporation’scurrentexpectations,orwithrespecttodisclosureregardingtheCorporation’spublicsubsidiaries, reflect such subsidiaries’ disclosed current expectations. Forward‐looking statements areprovided for thepurposesof assisting thereaderinunderstandingtheCorporation’sfinancialperformance,financialpositionandcashflowsasatandfortheperiodsendedoncertaindatesand to present information about management’s current expectations and plans relating to the future and the reader is cautioned that suchstatementsmay not be appropriate for other purposes. These statementsmay include,without limitation, statements regarding the operations,business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives,strategiesandoutlookoftheCorporationanditssubsidiaries,aswellastheoutlookforNorthAmericanandinternationaleconomiesforthecurrentfiscalyearandsubsequentperiods.Forward‐lookingstatements includestatements thatarepredictive innature,dependuponorrefer to futureevents or conditions, or include words such as “expects”, “anticipates”, “plans”, “believes”, “estimates”, “seeks”, “intends”, “targets”, “projects”,“forecasts”ornegativeversions thereofandothersimilarexpressions,or futureorconditionalverbssuchas“may”, “will”, “should”, “would”and“could”.Byitsnature,thisinformationissubjecttoinherentrisksanduncertaintiesthatmaybegeneralorspecificandwhichgiverisetothepossibilitythatexpectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and thatobjectives,strategicgoalsandprioritieswillnotbeachieved.Avarietyoffactors,manyofwhicharebeyondtheCorporation’sanditssubsidiaries’control,affecttheoperations,performanceandresultsoftheCorporationanditssubsidiariesandtheirbusinesses,andcouldcauseactualresultstodiffermateriallyfromcurrentexpectationsofestimatedoranticipatedeventsorresults.Thesefactorsinclude,butarenotlimitedto:theimpactorunanticipated impactofgeneraleconomic,politicalandmarket factors inNorthAmericaand internationally, interestand foreignexchangerates,globalequityandcapitalmarkets,managementofmarket liquidityand fundingrisks, changes inaccountingpoliciesandmethodsused toreportfinancialcondition(includinguncertaintiesassociatedwithcriticalaccountingassumptionsandestimates),theeffectofapplyingfutureaccountingchanges,businesscompetition,operationalandreputationalrisks,technologicalchange,changesingovernmentregulationandlegislation,changesintaxlaws,unexpectedjudicialorregulatoryproceedings,catastrophicevents,theCorporation’sanditssubsidiaries’abilitytocompletestrategictransactions, integrateacquisitionsandimplementothergrowthstrategies,andtheCorporation’sanditssubsidiaries’success inanticipatingandmanagingtheforegoingfactors.Thereaderiscautionedtoconsidertheseandotherfactors,uncertaintiesandpotentialeventscarefullyandnottoputunduerelianceonforward‐lookingstatements.Informationcontainedinforward‐lookingstatementsisbaseduponcertainmaterialassumptionsthatwereappliedindrawingaconclusion ormaking a forecast or projection, includingmanagement’s perceptions of historical trends, current conditions and expected futuredevelopments,aswellasotherconsiderationsthatarebelievedtobeappropriateinthecircumstances,includingthattheforegoinglistoffactors,collectively,arenotexpectedtohaveamaterialimpactontheCorporationanditssubsidiaries.WhiletheCorporationconsiderstheseassumptionstobereasonablebasedoninformationcurrentlyavailabletomanagement,theymayprovetobeincorrect.OtherthanasspecificallyrequiredbyapplicableCanadianlaw,theCorporationundertakesnoobligationtoupdateanyforward‐lookingstatementtoreflecteventsorcircumstancesafterthedateonwhichsuchstatementismade,ortoreflecttheoccurrenceofunanticipatedevents,whetherasaresultofnewinformation,futureeventsorresults,orotherwise.Additional informationabouttherisksanduncertaintiesof theCorporation’sbusinessandmaterial factorsorassumptionsonwhich informationcontained in forward‐looking statements is based is provided in its disclosure materials, including this MD&A and its most recent AnnualInformationForm,filedwiththesecuritiesregulatoryauthoritiesinCanadaandavailableatwww.sedar.com.The followingabbreviationsareusedthroughout thisreport:Great‐WestLifeco Inc. (Lifeco);GroupeBruxellesLambert(GBL); IGMFinancial Inc.(IGM);ImerysS.A.(Imerys);LafargeS.A.(Lafarge);PargesaHoldingSA(Pargesa);ParjointcoN.V.(Parjointco);PowerCorporationofCanada(PowerCorporation);PutnamInvestments,LLC(Putnam);SuezEnvironnementCompany(SuezEnvironnement);TheGreat‐WestLifeAssuranceCompany(Great‐WestLife);TotalS.A.(Total).Inaddition,IFRSreferstoInternationalFinancialReportingStandards.

A 2 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2


PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

OVERVIEW Power Financial, a subsidiary of Power Corporation, is a holding company with substantial interests in thefinancialservicessectorinCanada,theUnitedStatesandEurope,throughitscontrollinginterestsinLifecoandIGM.PowerFinancialalsoholds,togetherwiththeFrèregroupofBelgium,aninterestinPargesa.For a description of the activities and results of Lifeco and IGM, readers are referred to PartsB andC of thisMD&A,whichconsistoftheirrespectiveinterimMD&Asandfinancialstatements,aspreparedanddisclosedbythese companies in accordancewith applicable securities legislation. This information is also available eitherdirectly from SEDAR (www.sedar.com), or from the websites of Lifeco (www.greatwestlifeco.com) and IGM(www.igmfinancial.com),respectively.PartDconsistsofinformationrelatingtoPargesa,whichisderivedfrompublicinformationissuedbyPargesaandavailableonitswebsite(www.pargesa.ch).AsatMarch31,2012,PowerFinancialandIGMheld68.2%and4.0%,respectively,ofLifeco’scommonshares,representing approximately 65% of the voting rights attached to all outstanding Lifeco voting shares. As atMarch31,2012,PowerFinancialandGreat‐WestLife,asubsidiaryofLifeco,held57.8%and3.6%,respectively,ofIGM’scommonshares.PowerFinancialEuropeB.V.,awhollyownedsubsidiaryofPowerFinancial,andtheFrèregroupeachholda50%interestinParjointco,which,asatMarch31,2012,helda56.5%equityinterestinPargesa,representing76.0%of the voting rights of that company. These figures do not reflect the dilution which could result from thepotential conversionofoutstandingdebentures convertible intonewbearer shares issuedbyPargesa in2006and2007,asdisclosedintheCorporation’spreviousMD&As.ThePargesa grouphasholdings inmajor companiesbased inEurope.These investments areheldbyPargesathroughitsaffiliatedBelgianholdingcompany,GroupeBruxellesLambert.AsatMarch31,2012,Pargesahelda50.0%equityinterestinGBL,representing52.0%ofthevotingrights.AsatMarch31,2012,Pargesa’sportfoliowascomposedof interests invarioussectors, includingprimarilyoiland gas throughTotal; energy and energy services throughGDF Suez;water andwastemanagement servicesthrough Suez Environnement; industrial minerals through Imerys; cement and building materials throughLafarge;andwinesandspirits throughPernodRicard.OnMarch 14,2012,GBLsold its interest inArkema forproceedsof€432millionandrealizedagainof€220million.OnMarch15,2012,GBLsold6.2millionsharesofPernod Ricard, representing approximately 2.3% of the share capital of Pernod Ricard, for proceeds of€499million and a gainof€240million. Following this transaction,GBLholds7.5%ofPernodRicard’s sharecapital.Inaddition,PargesaandGBLhavealsoinvested,orcommittedtoinvest,intheareaofprivateequity,includingintheFrenchprivateequity fundsSagard1andSagard2,whosemanagementcompany isasubsidiaryofPowerCorporation.



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

BASIS OF PRESENTATION TheInterimConsolidatedFinancialStatementshavebeenpreparedinaccordancewithIFRSandarepresentedinCanadiandollars.INCLUSION OF PARGESA’S RESULTS The investment in Pargesa, an associate of the Corporation as defined under IFRS, is accounted for by PowerFinancial under the equitymethod. As described above, the Pargesa portfolio currently consists primarily ofinvestmentsinImerys,Total,GDFSuez,SuezEnvironnement,LafargeandPernodRicard,whichareheldthroughGBL,whichisconsolidatedinPargesa.Imerys’resultsareconsolidatedinthefinancialstatementsofGBL,whilethe contribution from Total, GDF Suez, Suez Environnement and Pernod Ricard to GBL’s operating earningsconsistsofthedividendsreceivedfromthesecompanies.GBLaccountsfor its investment inLafargeundertheequitymethod, and consequently, the contribution from Lafarge to GBL’s earnings consists of GBL’s share ofLafarge’snetearnings.The contribution from Pargesa to Power Financial’s earnings is based on the economic (flow‐through)presentation of results as published by Pargesa. Pursuant to this presentation, operating earnings andnon‐operatingearningsarepresentedseparatelybyPargesa.PowerFinancial’sshareofnon‐operatingearningsof Pargesa, after adjustments or reclassifications if necessary, is included as part of other items in theCorporation’sfinancialstatements.NON‐IFRS FINANCIAL MEASURES InanalyzingthefinancialresultsoftheCorporationandconsistentwiththepresentationinpreviousyears,netearnings attributable to common shareholders are subdivided in the section “Results of Power FinancialCorporation”belowintothefollowingcomponents:

operatingearningsattributabletocommonshareholders;and other items or non‐operating earnings, which include the after‐tax impact of any item that managementconsiderstobeofanon‐recurringnatureorthatcouldmaketheperiod‐over‐periodcomparisonofresultsfromoperations lessmeaningful,andalso include theCorporation’s shareofanysuch itempresented inacomparablemannerbyitssubsidiaries.PleasealsorefertothecommentsaboverelatedtotheinclusionofPargesa’sresults.Managementhasusedthesefinancialmeasuresformanyyears in itspresentationandanalysisofthefinancialperformanceofPowerFinancial,andbelievesthattheyprovideadditionalmeaningfulinformationtoreadersintheiranalysisoftheresultsoftheCorporation.Operating earnings attributable to common shareholders and operating earnings per share are non‐IFRSfinancialmeasuresthatdonothaveastandardmeaningandmaynotbecomparabletosimilarmeasuresusedbyotherentities.Forareconciliationofthesenon‐IFRSmeasurestoresultsreportedinaccordancewithIFRS,see“Results of Power Financial Corporation – Earnings Summary – Condensed Supplementary Statements ofEarnings”sectionbelow.



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

RESULTS OF POWER FINANCIAL CORPORATION Thissection isanoverviewof theresultsofPowerFinancial. In this section, consistentwithpastpractice, thecontributionsfromLifecoandIGM,whichrepresentmostoftheearningsofPowerFinancial,areaccountedforusing theequitymethod inorder to facilitate thediscussionandanalysis. Thispresentationhasno impactonPowerFinancial’snetearningsandisintendedtoassistreadersintheiranalysisoftheresultsoftheCorporation.EARNINGS SUMMARY – CONDENSED SUPPLEMENTARY STATEMENTS OF EARNINGS Thefollowingtableshowsareconciliationofnon‐IFRSfinancialmeasuresusedhereinfortheperiodsindicated,with the reported results in accordancewith IFRS for net earnings attributable to common shareholders andearningspershare.Three months ended

March 31,2012

December 31,2011

March 31,2011 Contributiontooperatingearningsfromsubsidiariesandinvestmentinassociates Lifeco 306 342 284IGM 114 113 121Pargesa (2) 7 4 418 462 409Resultsfromcorporateactivities (17) (14) (11)Dividendsonperpetualpreferredshares (29) (26) (26)Operatingearningsattributabletocommonshareholders 372 422 372Otheritems 83 111 (2)Netearningsattributabletocommonshareholders 455 533 370Earningspershare(attributabletocommonshareholders) –operatingearnings 0.52 0.60 0.52–non‐operatingearnings 0.12 0.15 ––netearnings 0.64 0.75 0.52

OPERATING EARNINGS ATTRIBUTABLE TO COMMON SHAREHOLDERS Operatingearningsattributabletocommonshareholdersforthethree‐monthperiodendedMarch31,2012were$372 million or $0.52 per share, the same as in the corresponding period in 2011. Operating earningsattributabletocommonshareholderswere$422millionor$0.60pershareinthefourthquarterof2011.CONTRIBUTION TO OPERATING EARNINGS FROM SUBSIDIARIES AND INVESTMENT IN ASSOCIATES PowerFinancial’s share of operating earnings from its subsidiaries and investment in associates increasedby2.2% for the three‐month period ended March 31, 2012, compared with the same period in 2011, from$409millionto$418million.PowerFinancial’sshareofoperatingearningsfromitssubsidiariesandinvestmentinassociateswas$462millioninthefourthquarterof2011.



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N Lifeco’scontributiontoPowerFinancial’soperatingearningswas$306millionforthethree‐monthperiodendedMarch31, 2012, comparedwith $284million for the correspondingperiod in2011. For the fourthquarter of2011,Lifeco’scontributiontoPowerFinancial’soperatingearningswas$342 million.Detailsareasfollows: Lifecoreportedoperatingearningsattributabletocommonshareholdersof$451millionor$0.475persharefor thethree‐monthperiodendedMarch31,2012,comparedwith$415millionor$0.438pershare inthecorresponding period in 2011. This represents an increase of 8.4% on a per share basis. For the fourthquarterof2011,Lifecoreportedoperatingearningsattributabletocommonshareholdersof$500 millionor$0.528pershare. Includedinoperatingearningsforthefirstquarterof2011wastheestablishmentofcatastropheprovisionsrelatingtoearthquakeevents inJapanandNewZealandwithanegativeafter‐tax impactof$75million,or$0.08perLifecocommonshare.IGM’scontributiontoPowerFinancial’soperatingearningswas$114millionforthethree‐monthperiodendedMarch 31, 2012, comparedwith $121million for the corresponding period in 2011 and $113 million for thethree‐monthperiodendedDecember31,2011.Detailsareasfollows: IGMreportedoperatingearningsavailable tocommonshareholdersof$200millionor$0.78pershare forthethree‐monthperiodendedMarch31,2012,comparedwith$211millionor$0.81pershareinthesameperiodin2011,adecreaseof3.7%onapersharebasis,and$196millionor$0.76pershareforthethree‐monthperiodendedDecember31,2011. IGM’squarterlyearningsareprimarilydependenton the levelofassetsundermanagement.Averagedailymutual fundassets for the three‐monthperiodendedMarch31,2012were$103.6billion, comparedwith$110.0billioninthefirstquarterof2011and$99.6billioninthefourthquarterof2011.Pargesa’scontribution toPowerFinancial’soperatingearningswasachargeof$2million for the three‐monthperiodendedMarch31,2012,comparedwithacontributionof$4millioninthecorrespondingperiodin2011,andacontributionof$7millionforthethree‐monthperiodendedDecember31,2011.Detailsareasfollows: Pargesa’soperatinglossforthefirstquarterof2012wasSF6 million,comparedwithoperatingearningsofSF14million in the corresponding period in 2011, and operating earnings of SF24 million for the three‐monthperiodendedDecember31,2011. Although the results of Imerys for the first quarter of 2012 were 10% higher than in the correspondingperiod in 2011, the contribution from Imerys to Pargesa’s earnings decreased by 27% in 2012, due to asmaller percentage of ownership as Pargesa’s direct interest in Imeryswas sold to GBL in April 2011 aspreviouslydisclosed.Foramorecompletediscussionof the resultsofLifecoand IGM, readersare referred toPartsBandCof thisMD&A,whichconsistoftheirrespectiveinterimMD&Asandfinancialstatements,aspreparedanddisclosedbythesecompanies inaccordancewithapplicablesecurities legislation.PartDconsistsof informationrelating toPargesa,whichisderivedfrompublicinformationissuedbyPargesa.



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

RESULTS FROM CORPORATE ACTIVITIES Results from corporate activities include income from investments, operating expenses, financing charges,depreciationandincometaxes.Corporateactivitieswereanetchargeof$17millioninthethree‐monthperiodendedMarch31,2012,comparedwithanet chargeof $11million in the correspondingperiod in2011, andanet chargeof $14million for thethree‐monthperiodendedDecember31,2011.Thenegativevariationincorporateactivitieswhencomparingcorporateactivitiesinthefirstquarterof2012tothoseinthefirstquarterof2011andthefourthquarterof2011ismainlyduetotherecognition,inthefirstandfourthquartersof2011,ofthetaxadvantageoflosscarryforwardstransferredtoIGMunderalossconsolidationtransaction.OTHER ITEMS For the three‐month period ended March 31, 2012, other items represented a contribution of $83million,comparedwithachargeof$2millioninthecorrespondingperiodin2011andacontributionof$111millioninthethree‐monthperiodendedDecember31,2011.Otheritemsinthefirstquarterof2012aremainlycomposedoftheCorporation’sshareofthegainsrealizedbyGBLonthepartialdisposalofitsinterestinPernodRicard($46million)andthedisposalofitsinterestinArkema($43million).Other items in the fourthquarterof2011 includeacontributionof$88millionrepresenting theCorporation’sshare of non‐operating earnings of Lifeco. In the fourth quarter of 2011, Lifeco re‐evaluated and reduced alitigation provision established in the third quarter of 2010 which positively impacted Lifeco’s commonshareholders’ net earnings by $223 million. Additionally, in the fourth quarter of 2011, Lifeco established aprovisionof$99millionaftertaxinrespectofthesettlementoflitigationrelatingtoitsownershipinaU.S.‐basedprivateequityfirm.ThenetimpacttoLifecoofthesetwounrelatedmatterswas$124million.Otheritemsinthefourthquarterof2011alsoincludetheCorporation’sshareofthegainrecordedbyIGMonthedisposalofM.R.S.TrustCompanyandM.R.S.Inc.(MRS).ThefollowingtableprovidesabreakdownofOtherItemsfortheperiodsindicated:Three months ended

March 31,2012

December 31,2011

March 31,2011 ShareofLifeco’s Litigationprovisions 88ShareofIGM’s GainondisposalofMRS 18ShareofPargesa’s GainonpartialdisposalofPernodRicard 46 GainondisposalofArkema 43 Other (6) 5 (2) 83 111 (2)

NET EARNINGS ATTRIBUTABLE TO COMMON SHAREHOLDERS Net earnings attributable to common shareholders for the three‐month period ended March 31, 2012 were$455 million or $0.64per share, comparedwith $370million or $0.52per share in the correspondingperiodin2011,and$533 millionor$0.75pershareforthethree‐monthperiodendedDecember31,2011.



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

CONDENSED SUPPLEMENTARY BALANCE SHEETS

March 31,2012

December 31,2011

March 31,2012

December 31,2011

Consolidated basis Equity basis

Assets Cashandcashequivalents[1] 2,829 3,385 936 707Investmentinassociates 2,294 2,222 13,524 13,369Investments 118,824 117,042 Fundsheldbycedinginsurers 10,127 9,923 Reinsuranceassets 1,983 2,061 Otherassets 7,786 7,654 103 104Intangibleassets 4,993 5,023 Goodwill 8,798 8,786 Segregatedfundsfortheriskofunitholders 100,474 96,582 Totalassets 258,108 252,678 14,563 14,180

Liabilities Insuranceandinvestmentcontractliabilities 115,561 115,512 Obligationstosecuritizationentities 4,018 3,827 Debenturesandotherborrowings 6,001 5,888 250 250Capitaltrustsecurities 534 533 Otherliabilities 8,071 7,521 412 409Insuranceandinvestmentcontractsonaccountofunitholders 100,474 96,582 Totalliabilities 234,659 229,863 662 659

Equity Perpetualpreferredshares 2,255 2,005 2,255 2,005Commonshareholders’equity 11,646 11,516 11,646 11,516Non‐controllinginterests 9,548 9,294 Totalequity 23,449 22,815 13,901 13,521Totalliabilitiesandequity 258,108 252,678 14,563 14,180[1] Undertheequitybasispresentation,cashequivalentsinclude$617million($430millionatDecember31,2011)offixedincomesecuritieswithmaturitiesofmorethan90days.IntheConsolidatedFinancialStatements,thisamountofcashequivalentsisclassifiedininvestments.CONSOLIDATED BASIS The consolidated balance sheets include Lifeco’s and IGM’s assets and liabilities. Parts B and C of thisMD&Arelatingtothesesubsidiariesincludeapresentationoftheirbalancesheets.Totalassetsof theCorporation increasedto$258.1billionatMarch31,2012,comparedwith$252.7billionatDecember31,2011.The investment in associates of $2.3 billion represents the Corporation’s carrying value in Parjointco. Thecomponentsoftheincreasefrom2011areshowninthe“EquityBasis”sectionbelow.InvestmentsatMarch31,2012were$118.8billion, a$1.8 billion increase fromDecember31,2011primarilyrelatedtoLifeco.Seealsodiscussioninthe“CashFlows”sectionbelow.Liabilitiesincreasedfrom$229.9billionatDecember31,2011to$234.7billionatMarch31,2012,mainlyduetoanincreaseinLifeco’sinsuranceandinvestmentcontractsonaccountofunitholders.Debentures and other borrowings increased by $113million during the three‐month period endedMarch 31,2012,asfurtherexplainedinthe“CondensedConsolidatedCashFlows”sectionbelow.Non‐controllinginterestsincludetheCorporation’snon‐controllinginterestsinthecommonequityofLifecoandIGMaswellastheparticipatingaccountsurplusinLifeco’sinsurancesubsidiariesandperpetualpreferredsharesissuedbysubsidiariestothirdparties.



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

AssetsunderadministrationofLifecoandIGMareasfollows:(in billions of Canadian dollars)

March 31,2012

December 31,2011 AssetsundermanagementofLifeco Investedassets 115.5 114.6Othercorporateassets 27.7 27.6Segregatedfundsnetassets 100.5 96.6Proprietarymutualfundsandinstitutionalnetassets 131.1 125.4 374.8 364.2AssetsundermanagementofIGM 124.1 118.7Totalassetsundermanagement 498.9 482.9OtherassetsunderadministrationofLifeco 148.1 137.8

Totalassetsunderadministration 647.0 620.7Total assets under administration at March 31, 2012 increased by $26.3 billion (an increase at Lifeco of$20.9billionandanincreaseatIGMof$5.4billion)fromDecember31,2011: TotalassetsunderadministrationbyLifecoatMarch31,2012increasedby$20.9billionfromDecember31,2011. Segregated funds increased by approximately $3.9 billion and proprietary mutual funds andinstitutionalnetassetsincreasedby$5.7billion,primarilyasaresultofimprovedequitymarketlevels.Otherassetsunderadministrationincreasedby$10.3billion,primarilyasaresultofimprovedequitymarketlevelsand newplan sales. Invested assets increased by approximately $0.9 billion. See Part B of thisMD&A forfurtherinformationonLifeco’sassetsunderadministration. IGM’s assets undermanagement, atmarket value, were $124.1 billion atMarch 31, 2012, comparedwith$118.7billion at December 31, 2011. This increase of $5.4 billion in the quarter represents market andincome gains of $6.3 billion less net redemptions of $0.9 billion. See Part C of this MD&A for furtherinformationonIGM’sassetsundermanagement.

EQUITY BASIS Under the equity basis presentation, Lifeco and IGM are accounted for by the Corporation using the equitymethod. This presentation has no impact on Power Financial’s shareholders’ equity and is intended to assistreaders in isolating the contribution of Power Financial, as the parent company, to consolidated assets andliabilities.CashandcashequivalentsheldbyPowerFinancialamountedto$936millionatMarch31,2012,comparedwith$707millionattheendofDecember2011.TheamountofquarterlydividendsdeclaredbytheCorporationbutnotyetpaidwas$276millionatMarch31,2012.TheamountofdividendsdeclaredbyIGMbutnotyetreceivedbytheCorporationwas$80millionatMarch31,2012.Inmanagingitsowncashandcashequivalents,PowerFinancialmayholdcashbalancesorinvestinshort‐termpaperorequivalents,aswellasdeposits,denominatedinforeigncurrenciesandthusbeexposedtofluctuationsinexchangerates. Inorder toprotectagainstsuch fluctuations,PowerFinancialmay, fromtimeto time,enterinto currency‐hedging transactions with financial institutions with high credit ratings. As at March 31, 2012,essentiallyallofthe$936millionofcashandcashequivalentswasdenominatedinCanadiandollarsorinforeigncurrencieswithcurrencyhedgesinplace.



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N The carrying value at equity of Power Financial’s investments in Lifeco, IGM and Parjointco increased to$13,524 million at March 31, 2012, compared with $13,369 million at December 31, 2011. This increase isexplainedasfollows: Lifeco IGM Parjointco TotalCarryingvalue,atthebeginning 8,476 2,671 2,222 13,369Shareofoperatingearnings(loss) 306 114 (2) 418Shareofotheritems – – 83 83Shareofchangeinothercomprehensiveincome (59) (1) (9) (69)Dividends (199) (80) – (279)Other (1) 3 – 2Carryingvalue,attheend 8,523 2,707 2,294 13,524EQUITY Common shareholders’ equity was $11,646 million at March 31, 2012, compared with $11,516 million atDecember31,2011.Theincreaseof$130millionismainlydueto:

A$200millionincreaseinretainedearnings,reflectingprimarilynetearningsof$484million,lessdividendsdeclaredof$277millionandshareissuecostsof$7million. Changes to accumulated other comprehensive income in the negative amount of $72million, whichrepresents essentially the Corporation’s share of other comprehensive income of its subsidiaries andassociates.Nocommonshareswereissuedin2012bytheCorporationpursuanttotheCorporation’sEmployeeStockOptionPlan.As a result of the above, book value per common share of the Corporation was $16.45 at March 31, 2012,comparedwith$16.26attheendof2011.The Corporation filed a short‐formbase shelf prospectus dated November 23, 2010, pursuant towhich, for aperiodof25monthsthereafter, theCorporationmay issueuptoanaggregateof$1.5billionofFirstPreferredShares, Common Shares and debt securities, or any combination thereof. This filing provides the Corporationwith the flexibility to access debt and equitymarkets on a timely basis tomake changes to the Corporation’scapitalstructureinresponsetochangesineconomicconditionsandchangesinitsfinancialcondition.OnFebruary23,2012,theCorporationissued10,000,0005.5%Non‐CumulativeFirstPreferredSharesforgrossproceedsof$250million.

OUTSTANDING NUMBER OF COMMON SHARES Asof thedatehereof, therewere708,173,680CommonSharesof theCorporationoutstanding, thesameasatDecember 31, 2011. As of the date hereof, options were outstanding to purchase up to an aggregate of9,119,992CommonSharesoftheCorporationundertheCorporation’sEmployeeStockOptionPlan.

A 1 0 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2


PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

CASH FLOWS

CONDENSED CONSOLIDATED CASH FLOWS

Three months ended March 31 2012 2011Cashflowfromoperatingactivities 686 782Cashflowfromfinancingactivities 341 (356)Cashflowfrominvestingactivities (1,579) (158)Effectofchangesinexchangeratesoncashandcashequivalents (4) 4Increase(decrease)incashandcashequivalents–continuingoperations (556) 272Cashandcashequivalents,atthebeginning 3,385 3,656Less:cashandcashequivalentsfromdiscontinuedoperations–beginningofperiod – (288)Cashandcashequivalents,attheend–continuingoperations 2,829 3,640Onaconsolidatedbasis,cashandcashequivalentsfromcontinuingoperationsdecreasedby$556millioninthethree‐month period endedMarch 31, 2012, comparedwith an increase of $272million in the correspondingperiodin2011.Operating activities produced a net inflow of $686million in the three‐month period endedMarch 31, 2012,comparedwithanetinflowof$782millioninthecorrespondingperiodin2011.Operatingactivitiesduringthethree‐monthperiodendedMarch31,2012,comparedtothesameperiodin2011,included: Lifeco’s cash flow from operations was a net inflow of $611 million, compared with a net inflow of$661million in the corresponding period in 2011. Cash provided by operating activities is used by Lifecoprimarily to pay policy benefits, policyholder dividends and claims, as well as operating expenses andcommissions. Cash flows generated by operations aremainly invested by Lifeco to support future liabilitycashrequirements. Operating activities of IGM, after payment of commissions, generated $111 million, compared with$151millioninthecorrespondingperiodin2011.Cash flows fromfinancingactivities,which includedividendspaidon thecommonandpreferredsharesof theCorporation, aswell as dividends paid by subsidiaries to non‐controlling interests, resulted in a net inflowof$341millioninthethree‐monthperiodendedMarch31,2012,comparedwithanetoutflowof$356millioninthecorrespondingperiodin2011.Financingactivitiesduringthethree‐monthperiodendedMarch31,2012,comparedtothesameperiodin2011,included: DividendspaidbytheCorporationanditssubsidiariestonon‐controllinginterestsof$435 million,comparedwith$433millioninthecorrespondingperiodin2011. Issuanceof commonsharesbysubsidiariesof theCorporation foranamountof$9million, comparedwith$35millioninthecorrespondingperiodin2011. Issuance of preferred shares by the Corporation of $250 million, compared to no issuance in thecorrespondingperiodin2011.

P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 A 1 1


PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

IssuanceofpreferredsharesbysubsidiariesoftheCorporationof$250million,comparedtonoissuanceinthecorrespondingperiodin2011. Repurchase for cancellation by subsidiaries of the Corporation of their common shares for $39million,comparedwith$86millioninthecorrespondingperiodin2011. NetincreaseinotherdebtinstrumentsatLifecoof$134million,comparedtoanincreaseof$105millioninthecorrespondingperiodin2011. Anetincreaseof$190millionarisingfromobligationstosecuritizationentities,comparedwithanetincreaseof$21millioninthecorrespondingperiodin2011.Cashflowsfrominvestingactivitiesresultedinanetoutflowof$1,579millioninthethree‐monthperiodendedMarch31,2012,comparedwithanetoutflowof$158millioninthecorrespondingperiodin2011.Investingactivitiesduringthethree‐monthperiodendedMarch31,2012,comparedtothesameperiodin2011,included: Investing activities at Lifeco resulted in a net outflow of $1,105million, compared with a net outflow of$239millioninthecorrespondingperiodin2011. Investing activities at IGM resulted in a net outflow of $287million, compared with a net outflow of$77millioninthecorrespondingperiodin2011. In addition, the Corporation increased its level of fixed income securities with maturities of more than90days,resultinginanetoutflowof$187million,comparedwithareductioninthecorrespondingperiodin2011foranetinflowof$157million.Cash flows fromactivities of Lifeco and IGMaredescribed in their respectiveMD&As inPartsB andCof thisMD&A.

CASH FLOWS – CORPORATE

Three months ended March 31 2012 2011Cashflowfromoperatingactivities Netearningsbeforedividendsonperpetualpreferredshares 484 396EarningsfromsubsidiariesandPargesanotreceivedincash (223) (131)Other (1) (3) 260 262Cashflowfromfinancingactivities Dividendspaidoncommonandpreferredshares (274) (274)Issuanceofperpetualpreferredshares 250 –Shareissuecosts (7) – (31) (274)Increase(decrease)incashandcashequivalents 229 (12)Cashandcashequivalents,beginningofperiod 707 713Cashandcashequivalents,endofperiod 936 701



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

Power Financial is a holding company. As such, corporate cash flows from operations, before payment ofdividends,areprincipallymadeupofdividendsreceivedfromitssubsidiariesandassociatesand incomefrominvestments, lessoperatingexpenses,financingcharges,andincometaxes.TheabilityofLifecoandIGM,whichare alsoholding companies, tomeet theirobligationsgenerally andpaydividendsdepends inparticularuponreceiptof sufficient funds from their subsidiaries.Thepaymentof interest anddividendsbyLifeco’sprincipalsubsidiaries is subject to restrictions set out in relevant corporate and insurance laws and regulations,whichrequire that solvency and capital standards be maintained. As well, the capitalization of Lifeco’s principalsubsidiaries takes into account the views expressedby the various credit rating agencies that provide ratingsrelatedtofinancialstrengthandothermeasuresrelatingtothosecompanies.ThepaymentofdividendsbyIGM’sprincipal subsidiaries is subject to corporate laws and regulations which require that solvency standards bemaintained. In addition, certain subsidiaries of IGMmust also complywith capital and liquidity requirementsestablishedbyregulatoryauthorities.DividendsdeclaredbyLifecoandIGMduringthethree‐monthperiodendedMarch31,2012ontheircommonsharesamountedto$0.3075and$0.5375pershare,respectively,comparedwith$0.3075and$0.5125pershare,respectively, in the corresponding period in 2011. In the first quarter of 2012, the Corporation receiveddividends from Lifeco and IGM of $199 million ($199 million in the first quarter of 2011) and $80million($76millioninthefirstquarterof2011),respectively.Pargesapaysitsannualdividendsinthesecondquarter.ThedividendtobepaidtoParjointcoin2012,whichwasapprovedatPargesa’sannualmeetingof shareholdersheldonMay9,2012,will amount toSF2.57perbearershare,comparedwithSF2.72in2011.In the three‐month period ended March 31, 2012, dividend declared on the Corporation’s Common Sharesamountedto$0.35pershare,thesameasinthecorrespondingperiodin2011.SUMMARY OF CRITICAL ACCOUNTING ESTIMATES Thepreparationof financial statements requiresmanagement to exercise judgment in theprocessofapplyingaccounting policies and requires management to make estimates and assumptions that affect the amountsreportedinthosefinancialstatementsandaccompanyingnotes.Actualresultsmaydifferfromtheseestimates.Areaswhereestimatesareexercisedbymanagement include: the valuationandclassificationof insuranceandinvestmentcontract liabilities,determinationof the fairvalueandclassification forcertain financialassetsandliabilities, goodwill and indefinite life intangible assets, income taxes, deferred selling commissions,contingencies, and pension plans and other post‐employment benefits. The reported amounts and notedisclosuresaredeterminedusingmanagement’sbestestimates.Thekeyareaswherejudgmenthasbeenappliedinclude:theclassificationofinsuranceandinvestmentcontracts,theclassificationoffinancialinstruments,deferredincomereservesanddeferredacquisitioncosts,thevaluationofdeferred income taxassets, thedeterminationofwhich financialassetsshouldbederecognized, the levelofcomponentization of property, plant and equipment, the determination of relationshipswith subsidiaries andspecialpurposeentities,andtheidentificationofcashgeneratingunits.TheresultsoftheCorporationreflectmanagement’sjudgmentsregardingtheimpactofprevailingglobalcredit,equityandforeignexchangemarketconditions.Theestimationof insuranceandinvestmentcontract liabilitiesrelies upon investment credit ratings. Lifeco’s practice is to use third‐party independent credit ratingswhereavailable.TherewerenochangestotheCorporation’scriticalaccountingestimatesfromthosereportedatDecember31,2011.



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

ACCOUNTING POLICIES

CHANGES IN ACCOUNTING POLICIES TherewerenochangesinaccountingpoliciesadoptedbytheCorporationinthefirstquarterof2012.FUTURE ACCOUNTING CHANGES TheCorporationcontinuestomonitorthepotentialchangesproposedbytheInternationalAccountingStandardsBoard(IASB)andtoconsidertheimpactchangesinthestandardsmayhaveontheCorporation’soperations.Inaddition,theCorporationmaybeimpactedinthefuturebythefollowingIFRSandiscurrentlyevaluatingtheimpactthesefuturestandardswillhaveonitsconsolidatedfinancialstatementswhentheybecomeeffective:

IFRS4– InsuranceContracts The IASB issued an exposure draft proposing changes to the accountingstandardforinsurancecontractsinJuly2010.Theproposalwouldrequireaninsurertomeasureinsuranceliabilitiesusingamodelfocusingontheamount,timing,anduncertaintyoffuturecashflowsassociatedwithfulfilling its insurancecontracts.This isvastlydifferent fromtheconnectionbetween insuranceassetsandliabilitiesconsideredundertheCanadianAssetLiabilityMethod(CALM)andmaycausesignificantvolatilityintheresultsofLifeco.Theexposuredraftalsoproposeschangestothepresentationanddisclosurewithinthefinancialstatements.LifecowillcontinuetomeasureinsurancecontractliabilitiesusingCALMuntilsuchtimewhenanewIFRSforinsurance contractmeasurement is issued.A final standard isnot expected tobe implemented for severalyears;Lifecocontinuestoactivelymonitordevelopmentsinthisarea. IFRS7–Financial Instruments:Disclosure Effective for theCorporationon January1, 2013, the IASBissuedamendmentstoIFRS7regardingdisclosureofoffsetting financialassetsandfinancialliabilities.Theamendmentswillallowusersoffinancialstatementstoimprovetheirunderstandingoftransfertransactionsoffinancialassets(forexample,securitizations),includingunderstandingthepossibleeffectsofanyrisksthatmayremainwiththeentitythattransferredtheassets.Theamendmentsalsorequireadditionaldisclosuresifadisproportionateamountoftransfertransactionsareundertakenneartheendofareportingperiod. IFRS9–Financial Instruments The IASBapprovedtheadoptionof theproposednewIFRS9,FinancialInstrumentsstandardtobeeffectiveJanuary1,2015.Thenewstandardrequiresallfinancialassetstobeclassifiedoninitialrecognitionatamortizedcostorfairvalue while eliminating the existing categories of available for sale, held to maturity, and loans andreceivables.Thenewstandardalsorequires: embeddedderivativestobeassessedforclassificationtogetherwiththeirfinancialassethost; asingleexpectedlossimpairmentmethodbeusedforfinancialassets;and amendmentstothecriteriaforhedgeaccountingandmeasuringeffectiveness.ThefullimpactofIFRS9ontheCorporationwillbeevaluatedaftertheremainingstagesoftheIASB’sprojectto replace IAS 39, Financial Instruments:RecognitionandMeasurement – impairmentmethodology, hedgeaccounting,andassetand liabilityoffsetting–are finalized.TheCorporationcontinues toactivelymonitordevelopmentsinthisarea.

IFRS10–ConsolidatedFinancialStatements EffectivefortheCorporationonJanuary1,2013,IFRS10,ConsolidatedFinancialStatementsusesconsolidatedprinciplesbasedonareviseddefinitionof control.Thedefinition of control is dependent on thepower of the investor to direct the activities of the investee, theabilityoftheinvestortoderivevariablebenefitsfromitsholdingsintheinvestee,andadirectlinkbetweenthepowertodirectactivitiesandreceivebenefits.A 1 4 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2


PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

IFRS 11 – Joint Arrangements Effective for the Corporation on January 1, 2013, IFRS 11, JointArrangementsseparatesjointlycontrolledentitiesbetweenjointoperationsandjointventures.Thestandardhaseliminatedtheoptionofusingproportionateconsolidation inaccountingforinterestsinjointventures,nowrequiringanentitytousetheequitymethodofaccountingforinterestsinjointventures.

IFRS 12 –Disclosure of Interest inOther Entities Effective for the Corporation on January 1, 2013,IFRS12,Disclosure of Interest inOther Entities proposes new disclosure requirements for the interest anentity has in subsidiaries, joint arrangements, associates, and structured entities. The standard requiresenhanced disclosure, including how control was determined and any restrictions that might exist onconsolidatedassetsandliabilitiespresentedwithinthefinancialstatements.AsaconsequenceoftheissuanceofIFRS10,11and12,theIASBalsoissuedamendedandretitledIAS27,SeparateFinancialStatementsandIAS28,InvestmentsinAssociatesandJointVentures.ThenewrequirementsareeffectivefortheCorporationonJanuary1,2013.

IFRS13–FairValueMeasurement EffectivefortheCorporationonJanuary1,2013,IFRS13,FairValueMeasurement provides guidance for the measurement and disclosure of assets and liabilities held at fairvalue.Thestandarddefines fairvalue,providesasingle framework for themeasurementof fairvalueandsetsoutdisclosurerequirementsforfairvaluemeasurements.

IAS1–PresentationofFinancialStatements Effective for the Corporation on January 1, 2013, IAS 1,PresentationofFinancialStatementsincludesrequirementsthatothercomprehensiveincomebeclassifiedbynatureandgroupedbetweenthoseitemsthatwillbeclassifiedsubsequentlytoprofitorloss(whenspecificconditionsaremet)andthosethatwillnotbereclassified.

IAS18–Revenue The IASB issuedasecondexposuredraft inNovember 2011whichproposedasinglerevenuerecognitionstandardtoalignthefinancialreportingofrevenuefromcontractswithcustomersandrelatedcosts.Acompanywouldrecognizerevenuewhenittransfersgoodsorservicestoacustomerintheamountofconsiderationthecompanyexpectstoreceivefromthecustomer.Thefull impactofadoptionoftheproposedchangeswillbedeterminedoncethefinalrevenuerecognitionstandardisissued,whichistargetedforreleasein2012or2013. IAS19–EmployeeBenefits TheIASBpublishedanamendedversionof thisstandard in June2011thateliminates the corridor approach for actuarial gains and losses resulting in those gains and losses beingrecognizedimmediatelythroughothercomprehensive income.Asaresultthenetpensionassetor liabilitywillreflectthefullfundedstatusoftheplanonthebalancesheets.Further,thestandardincludeschangestohow the defined benefit obligation and the fair value of the plan assets would be presented within thefinancialstatementsofanentity.TheCorporationwill continue touse the corridormethoduntil January1,2013,when the revised IAS foremployeebenefitsbecomeseffective.InaccordancewiththetransitionalprovisionsinIAS19,thischangeinIFRSwillbeappliedretroactivelytoJanuary1,2012. IAS32–Financial Instruments:Presentation Effective for theCorporationon January1,2014, IAS32,Financial Instruments: Presentation clarifies the existing requirements for offsetting financial assets andfinancialliabilities.

RISK FACTORS TherearecertainrisksinherentinaninvestmentinthesecuritiesoftheCorporationandintheactivitiesoftheCorporation, including the following and others disclosed elsewhere in this MD&A, which investors shouldcarefullyconsiderbeforeinvestinginsecuritiesoftheCorporation.Thisdescriptionofrisksdoesnotincludeallpossiblerisks,andtheremaybeotherrisksofwhichtheCorporationisnotcurrentlyaware.P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 A 1 5


PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N PowerFinancialisaholdingcompanythatholdssubstantialinterestsinthefinancialservicessectorthroughitscontrolling interest ineachofLifecoandIGM.Asaresult, investors inPowerFinancialaresubject to therisksattributabletoitssubsidiaries, includingthosethatPowerFinancialhasastheprincipalshareholderofeachofLifecoandIGM.PartsBandCofthisMD&AfurtherdescriberisksrelatedtoLifecoandIGM,respectively.Asaholdingcompany,PowerFinancial’sabilitytopayinterestandotheroperatingexpensesanddividends,tomeet its obligations and to complete current or desirable future enhancement opportunities or acquisitionsgenerallydependsuponreceiptofsufficientdividendsfromitsprincipalsubsidiariesandotherinvestmentsanditsabilitytoraiseadditionalcapital.ThelikelihoodthatshareholdersofPowerFinancialwillreceivedividendswillbedependentupontheoperatingperformance,profitability, financialpositionandcreditworthinessoftheprincipalsubsidiariesofPowerFinancialandontheirabilitytopaydividendstoPowerFinancial.ThepaymentofinterestanddividendsbycertainoftheseprincipalsubsidiariestoPowerFinancialisalsosubjecttorestrictionsset forth in insurance, securities and corporate laws and regulationswhich require that solvency and capitalstandards bemaintained by such companies. If required, the ability of Power Financial to arrange additionalfinancinginthefuturewilldependinpartuponprevailingmarketconditionsaswellasthebusinessperformanceof Power Financial and its subsidiaries. In recent years, global financial conditions and market events haveexperiencedincreasedvolatilityandresultedinthetighteningofcreditthathasreducedavailableliquidityandoveralleconomicactivity.Therecanbenoassurancethatdebtorequityfinancingwillbeavailable,or,togetherwithinternallygeneratedfunds,willbesufficienttomeetorsatisfyPowerFinancial’sobjectivesorrequirementsor,iftheforegoingareavailabletoPowerFinancial,thattheywillbeontermsacceptabletoPowerFinancial.TheinabilityofPowerFinancialtoaccesssufficientcapitalonacceptabletermscouldhaveamaterialadverseeffecton Power Financial’s business, prospects, dividend paying capability and financial condition, and furtherenhancementopportunitiesoracquisitions.ThemarketpriceforPowerFinancial’ssecuritiesmaybevolatileandsubjecttowidefluctuationsinresponsetonumerous factors, many of which are beyond Power Financial’s control. Economic conditions may adverselyaffect Power Financial, including fluctuations in foreign exchange, inflation and interest rates, as well asmonetary policies, business investment and the health of capital markets in Canada, the United States andEurope.Inrecentyears,financialmarketshaveexperiencedsignificantpriceandvolumefluctuationsthathaveaffectedthemarketpricesofequitysecuritiesheldbytheCorporationanditssubsidiariesandthathaveoftenbeen unrelated to the operating performance, underlying asset values or prospects of such companies.Additionally,thesefactors,aswellasotherrelatedfactors,maycausedecreasesinassetvaluesthataredeemedtobesignificantorprolonged,whichmayresultinimpairmentlosses.Inperiodsofincreasedlevelsofvolatilityand related market turmoil, Power Financial’s subsidiaries’ operations could be adversely impacted and thetradingpriceofPowerFinancial’ssecuritiesmaybeadverselyaffected.OFF‐BALANCE SHEET ARRANGEMENTS

GUARANTEES Inthenormalcourseoftheirbusinesses,theCorporationanditssubsidiariesmayenterintocertainagreements,thenatureofwhichprecludesthepossibilityofmakingareasonableestimateofthemaximumpotentialamounttheCorporationorsubsidiarycouldberequiredtopaythirdparties,assomeoftheseagreementsdonotspecifyamaximumamountandtheamountsaredependentontheoutcomeoffuturecontingentevents,thenatureandlikelihoodofwhichcannotbedetermined.



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

LETTERS OF CREDIT Inthenormalcourseoftheirreinsurancebusiness,Lifeco’ssubsidiariesprovidelettersofcredittootherpartiesorbeneficiaries.AbeneficiarywilltypicallyholdaletterofcreditascollateralinordertosecurestatutorycreditforreservescededtooramountsduefromLifeco’ssubsidiaries.Aletterofcreditmaybedrawnupondemand.Ifanamountisdrawnonaletterofcreditbyabeneficiary,thebankissuingtheletterofcreditwillmakeapaymenttothebeneficiaryfortheamountdrawn,andLifeco’ssubsidiarieswillbecomeobligatedtorepaythisamounttothebank.Lifeco,throughcertainof itsoperatingsubsidiaries,hasprovidedlettersofcredittobothexternalandinternalparties,whicharedescribedinNote32totheCorporation’s2011ConsolidatedFinancialStatements.RELATED PARTY TRANSACTIONS Inthenormalcourseofbusiness,Great‐WestLifeentersintovarioustransactionswithrelatedcompanieswhichinclude providing insurance benefits to other companies within the Power Financial Corporation group ofcompanies.Inallcases,transactionsareatmarkettermsandconditions.COMMITMENTS/CONTRACTUAL OBLIGATIONS AsatMarch31,2012,therehadbeennomaterialchangesinthecontractualobligationsoftheCorporationanditssubsidiariesfromthosereportedinthe2011MD&A.FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS Inthecourseoftheiractivities,theCorporationanditssubsidiariesusederivativefinancialinstruments.Whenusingsuchderivatives,theyonlyactaslimitedend‐usersandnotasmarket‐makersinsuchderivatives.Theuseofderivativesismonitoredandreviewedonaregularbasisbyseniormanagementofthecompanies.TheCorporation and its subsidiaries have each established operating policies and processes relating to the use ofderivativefinancialinstruments,whichinparticularaimat: prohibitingtheuseofderivativeinstrumentsforspeculativepurposes; documentingtransactionsandensuringtheirconsistencywithriskmanagementpolicies; demonstratingtheeffectivenessofthehedgingrelationships;and monitoringthehedgingrelationship.TherewerenomajorchangestotheCorporation’sanditssubsidiaries’policiesandprocedureswithrespecttotheuseofderivative instruments in the firstquarterof2012.Therehasbeena slight increase in thenotionalamountoutstanding($15,151millionatMarch31,2012,comparedwith$14,948millionatDecember31,2011)andadecreaseintheexposuretocreditrisk($997millionatMarch31,2012,comparedwith$1,056millionatDecember31, 2011) that represents themarket value of those instruments,which are in a gain position. SeeNote28 to the Corporation’s 2011 Consolidated Financial Statements for more information on the type ofderivativefinancialinstrumentsusedbytheCorporationanditssubsidiaries.PleasealsorefertoPartsBandCofthisMD&ArelatingtoLifecoandIGM.

INTERNAL CONTROL OVER FINANCIAL REPORTING Duringthefirstquarterof2012,therehavebeennochangesintheCorporation’sinternalcontroloverfinancialreporting thathavemateriallyaffected,or are reasonably likely tomaterially affect, theCorporation’s internalcontroloverfinancialreporting.P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 A 1 7


PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

SUMMARY OF QUARTERLY RESULTS 2012 2011 2010 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1Totalrevenueincludingdiscontinuedoperations 7,110 8,575 9,136 7,794 6,928 5,888 9,720 8,005 8,946Operatingearningsattributabletocommon shareholders[1,2] 372 422 428 507 372 404 438 426 357 pershare–basic 0.52 0.60 0.60 0.72 0.52 0.57 0.62 0.61 0.50Otheritems[3] 83 111 (116) − (2) (15) (144) (4) 6pershare–basic 0.12 0.15 (0.16) − − (0.02) (0.20) (0.01) 0.01Netearningsattributabletocommonshareholders 455 533 312 507 370 389 294 422 363pershare–basic 0.64 0.75 0.44 0.72 0.52 0.55 0.42 0.60 0.51pershare–diluted 0.64 0.75 0.44 0.71 0.52 0.55 0.41 0.59 0.51Earningsfromdiscontinuedoperationsattributableto commonshareholders – 18 18 1 1 1 − − − pershare–basic – 0.03 0.03 − − − − − −pershare–diluted – 0.03 0.03 − − − − − −Earningsfromcontinuingoperationsattributableto commonshareholders 455 515 294 506 369 338 294 422 363 pershare–basic 0.64 0.72 0.41 0.72 0.52 0.55 0.42 0.60 0.51pershare–diluted 0.64 0.72 0.41 0.71 0.52 0.55 0.41 0.59 0.51[1] Operatingearningsattributabletocommonshareholdersandoperatingearningspersharearenon‐IFRSfinancialmeasures.Foradefinitionofthesenon‐IFRSfinancialmeasures,pleasereferto“BasisofPresentation–Non‐IFRSFinancialMeasures”aboveinthisMD&A.[2] ThecontributionfromPargesatotheCorporation’searningsishigherinthesecondandthirdquartersoftheyearasalargeportionofPargesa’searningsiscomposedofdividendswhicharemainlyreceivedinthesecondandthirdquartersoftheyear.[3] Otheritems: 2012 2011 2010 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1ShareofLifeco’s Litigationprovisions 88 (144) ShareofIGM’s GainondisposalofMRS 18 Changesinthestatusofcertainincometaxfilings 17 Employeebenefitsandrestructuringcosts (13) ShareofPargesa’s Impairmentcharges (133) (4) GainonpartialdisposalofPernodRicard 46 GainondisposalofArkema 43 Other (6) 5 (2) (2) 6 83 111 (116) − (2) (15) (144) (4) 6



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

P O W E R F I N A N C I A L C O R P O R A T I O N

March 31,2012

(unaudited)

December 31,2011

(audited)

Assets2,829 3,385

80,196 78,759

21,740 21,518

6,612 6,402

3,263 3,201

7,013 7,162

118,824 117,042

10,127 9,923

1,983 2,061

2,294 2,222

551 541

201 197

997 1,056

4,858 4,653

1,179 1,207

4,993 5,023

8,798 8,786

100,474 96,582

258,108 252,678

Liabilities114,798 114,730

763 782

147 151

169 169

4,018 3,827

6,001 5,888

534 533

370 427

6,157 5,516

1,228 1,258

100,474 96,582

234,659 229,863

Equity

2,255 2,005

639 639

10,943 10,743

64 134

13,901 13,521

9,548 9,294

23,449 22,815

258,108 252,678



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

2012 2011

Revenues

5,198 4,941

(669) (646)

4,529 4,295

1,460 1,456

(197) (198)

1,263 1,258

1,318 1,366

7,110 6,919

Expenses

4,606 4,423

(387) (333)

4,219 4,090

364 353

160 136

4,743 4,579

598 585

924 899

99 107

6,364 6,170

746 749

81 2

827 751

115 136

712 615

– 1

712 616

228 220

29 26

455 370

712 616

0.64 0.52

0.64 0.52

0.64 0.52

0.64 0.52



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

2012 2011

712 616

(22) (32)

1 1

(37) (43)

10 13

(48) (61)

4 23

(1) (9)

3 14

(62) (62)

(9) 147

(116) 38

596 654

184 179

29 26

383 449

596 654



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

Stated capital Reserves

Perpetualpreferred

sharesCommon

sharesRetainedearnings

Share basedcompensation

Investmentrevaluation

and cashflow hedges

Foreigncurrency

translation Total

Noncontrollinginterests

Totalequity

2,005 639 10,743 111 694 (671) 134 9,294 22,815

– – 484 – – – – 228 712

– – – – (44) (28) (72) (44) (116)

– – 484 – (44) (28) (72) 184 596

250 – – – – – – – 250

– – (29) – – – – – (29)

– – (248) – – – – – (248)

– – – – – – – (161) (161)

– – – 3 – – 3 1 4

– – – (1) – – (1) (1) (2)

– – – – – – – 231 231

– – (7) – – – – – (7)

2,255 639 10,943 113 650 (699) 64 9,548 23,449

Stated capital Reserves

Perpetualpreferred

sharesCommon

sharesRetainedearnings

Share basedcompensation

Investmentrevaluation

and cashflow hedges

Foreigncurrency

translation Total

Noncontrollinginterests

Totalequity

2,005 636 9,982 108 856 (776) 188 8,741 21,552

– – 396 – – – 220 616

– – – – 50 29 79 (41) 38

– – 396 – 50 29 79 179 654

– – (26) – – – – – (26)

– – (248) – – – – – (248)

– – – – – – – (157) (157)

– – – 2 – – 2 1 3

– – – (2) – – (2) (1) (3)

– – – – – – – (50) (50)

– – 10 – – – – – 10

2,005 636 10,114 108 906 (747) 267 8,713 21,735



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

2012 2011

Operating activities – continuing operations827 751

(54) (100)

149 116

(19) 131

11 –

7 (11)

75 (32)

197 191

(507) (264)

686 782

Financing activities – continuing operations

(161) (159)

(26) (26)

(248) (248)

(435) (433)

9 35

250 –

250 –

(39) (86)

134 105

(2) 6

190 21

(4) (4)

(12) –

341 (356)

Investment activities – continuing operations5,041 6,029

467 451

593 570

57 5

811 (32)

(7,233) (5,528)

(721) (897)

(566) (676)

(28) (80)

(1,579) (158)

(4) 4

(556) 272

3,385 3,656

– (288)

2,829 3,640

Net cash from continuing operating activities include1,250 1,248

77 72



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

P O W E R F I N A N C I A L C O R P O R A T I O N

NOTE 1 CORPORATE INFORMATION

NOTE 2 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Reporting

USE OF ESTIMATES AND JUDGMENT



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

NOTE 2 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COMPARATIVE FIGURES

FUTURE ACCOUNTING CHANGES

IFRS 4 – Insurance Contracts

IFRS 7 – Financial Instruments: Disclosure



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N


IFRS 9 – Financial Instruments FinancialInstruments

Financial Instruments: Recognition and Measurement

IFRS 10 – Consolidated Financial StatementsConsolidated Financial Statements

IFRS 11 – Joint Arrangements Joint Arrangements

IFRS 12 – Disclosure of Interest in Other EntitiesDisclosure of Interest in Other Entities

Separate Financial Statements Investments in Associates and Joint Ventures

IFRS 13 – Fair Value Measurement Fair ValueMeasurement

IAS 1 – Presentation of Financial StatementsPresentation of Financial Statements



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION


IAS 18 – Revenue

IAS 19 – Employee Benefits

IAS 32 – Financial Instruments: PresentationFinancial Instruments: Presentation

NOTE 3 INVESTMENTS

March 31, 2012 December 31, 2011

Carrying value Fair value Carrying value Fair value

60,191 60,191 60,112 60,112

1,859 1,859 1,853 1,853

8,374 8,374 7,050 7,050

9,772 10,940 9,744 10,785

80,196 81,364 78,759 79,800

21,282 22,453 21,226 22,514

458 458 292 292

21,740 22,911 21,518 22,806

5,715 5,715 5,502 5,502

897 897 900 900

6,612 6,612 6,402 6,402

3,263 3,263 3,201 3,201

7,013 7,013 7,162 7,162

118,824 121,163 117,042 119,371



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

NOTE 4 SEGREGATED FUNDS FOR THE RISK OF UNIT HOLDERS


23,370 21,594

2,253 2,303

66,018 63,885

5,562 5,457

5,252 5,334

298 287

(2,279) (2,278)

100,474 96,582

Three months ended March 31,

2012 2011

96,582 94,827

3,329 3,398

122 43

541 531

3,213 1,348

(144) (90)

(3,181) (2,777)

12 –

3,892 2,453

100,474 97,280

NOTE 5 INSURANCE AND INVESTMENT CONTRACT LIABILITIES

NOTE 6 OBLIGATION TO SECURITIZATION ENTITIES

Gross Ceded Net

114,798 1,983 112,815

763 – 763

115,561 1,983 113,578

Gross Ceded Net

114,730 2,061 112,669

782 – 782

115,512 2,061 113,451



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

NOTE 6 OBLIGATION TO SECURITIZATION ENTITIES (CONTINUED)

NOTE 7 INCOME TAXES


2012 2011

137 173

(22) (37)

115 136

Securitizedmortgages

Obligations tosecuritization

entities Net

2,705 2,772 (67)

1,181 1,246 (65)

3,886 4,018 (132)

3,948 4,102 (154)



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

NOTE 8 STATED CAPITAL

AUTHORIZED

ISSUED AND OUTSTANDING


Numberof shares

Statedcapital

Numberof shares

Statedcapital

Preferred Shares (perpetual)4,000,000 100 4,000,000 100

6,000,000 150 6,000,000 150

8,000,000 200 8,000,000 200

6,000,000 150 6,000,000 150

6,000,000 150 6,000,000 150

8,000,000 200 8,000,000 200

10,000,000 250 10,000,000 250

8,000,000 200 8,000,000 200

7,000,000 175 7,000,000 175

6,000,000 150 6,000,000 150

11,200,000 280 11,200,000 280

10,000,000 250 – –

2,255 2,005

Common Shares 708,173,680 639 708,013,680 639

Common Shares708,173,680 639 708,013,680 636

– – 160,000 3

708,173,680 639 708,173,680 639



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

NOTE 9 SHARE BASED COMPENSATION

2012 2011

4.9% 4.8%

19.3% 19.6%

2.2% 3.0%

9 9

$2.70 $3.48

$29.95 $30.18

NOTE 10 CAPITAL MANAGEMENT



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

NOTE 10 CAPITAL MANAGEMENT (CONTINUED)

Insurance Companies Act

NOTE 11 RISK MANAGEMENT

LIQUIDITY RISK



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

NOTE 11 RISK MANAGEMENT (CONTINUED)

CREDIT RISK



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N


MARKET RISK

Currency risk

Interest rate risk



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION


Equity price risk



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N


Caution related to risk sensitivities



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

NOTE 12 FINANCING CHARGES


2012 2011

85 93

8 8

6 6

99 107

NOTE 13 PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS


2012 2011

36 23

6 5

42 28

NOTE 14 EARNINGS PER SHARE


2012 2011

484 396

(29) (26)

455 370

(2) (3)

453 367

708.2 708.0

4.6 4.9

(4.0) (3.8)

708.8 709.1


2012 2011

0.64 0.52

– –

0.64 0.52

0.64 0.52

– –

0.64 0.52



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

NOTE 15 SEGMENTED INFORMATION



PO

WER

FINA

NC

IAL C

OR

PO

RA

TION

NOTE 15 SEGMENTED INFORMATION (CONTINUED)

INFORMATION ON PROFIT MEASURE

Lifeco IGM Parjointco Other Total

Revenues4,529 – – – 4,529

1,243 46 – (26) 1,263

724 627 – (33) 1,318

6,496 673 – (59) 7,110

Expenses4,743 – – – 4,743

410 222 – (34) 598

738 171 – 15 924

72 23 – 4 99

5,963 416 – (15) 6,364

533 257 – (44) 746

– – 81 – 81

533 257 81 (44) 827

57 56 – 2 115

476 201 81 (46) 712

– – – – –

476 201 81 (46) 712

170 87 – (29) 228

– – – 29 29

306 114 81 (46) 455

476 201 81 (46) 712



PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N

NOTE 15 SEGMENTED INFORMATION (CONTINUED)

INFORMATION ON PROFIT MEASURE

Lifeco IGM Parjointco Other Total

Revenues4,295 – – – 4,295

1,240 39 – (21) 1,258

720 672 – (26) 1,366

6,255 711 – (47) 6,919

Expenses4,579 – – – 4,579

377 234 – (26) 585

724 162 – 13 899

72 30 – 5 107

5,752 426 – (8) 6,170

503 285 – (39) 749

– – 2 – 2

503 285 2 (39) 751

69 72 – (5) 136

434 213 2 (34) 615

– 1 – – 1

434 214 2 (34) 616

150 93 – (23) 220

– – – 26 26

284 121 2 (37) 370

434 214 2 (34) 616



GR

EA

T-WEST LIFEC

O IN

C.


PA G E B 2


PA G E B 3 5


Please note that the bottom of each page in Part B contains two diff erent page numbers. A page number with the prefi x “B” refers to the number of such page in this document and the page number without any prefi x refers to the number of such page in the original document issued by Great-West Lifeco Inc.

The attached documents concerning Great-West Lifeco Inc. are documents prepared and publicly disclosed by such subsidiary. Certain statements in the attached documents, other than statements of historical fact, are forward-looking statements based on certain assumptions and refl ect the current expectations of the subsidiary as set forth therein. Forward-looking statements are provided for the purposes of assisting the reader in understanding the subsidiary’s fi nancial performance, fi nancial position and cash fl ows as at and for the periods ended on certain dates and to present information about the subsidiary’s management’s current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes.

By its nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specifi c and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved.

For further information provided by the subsidiary as to the material factors that could cause actual results to differ materially from the content of forward-looking statements, the material factors and assumptions that were applied in making the forward-looking statements, and the subsidiary’s policy for updating the content of forward-looking statements, please see the attached documents, including the section entitled Cautionary Note Regarding Forward-Looking Information. The reader is cautioned to consider these factors and assumptions carefully and not to put undue reliance on forward-looking statements.

Great-West Lifeco Inc.

PA RT B

P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 B 1

PFC_QUAT1_Eng02_GWL_2012-05-04_v1.indd C1PFC_QUAT1_Eng02_GWL_2012-05-04_v1.indd C1 12/05/12 3:30 PM12/05/12 3:30 PM

GR

EA

T-W

EST

LIFE

CO

INC

.

Management's Discussion & Analysis


FOR THE PERIOD ENDED MARCH 31, 2012

DATED: MAY 3, 2012

This Management’s Discussion and Analysis (MD&A) presents management’s view of the financial condition, results ofoperations and cash flows of Great-West Lifeco Inc. (Lifeco or the Company) for the three months ended March 31, 2012compared with the same period in 2011, and with the three months ended December 31, 2011. The MD&A provides an overalldiscussion, followed by analysis of the performance of Lifeco's three major reportable segments: Canada, United States (U.S.)and Europe.

BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIESThe consolidated financial statements of Lifeco, which are the basis for data presented in this report, have been prepared inaccordance with International Financial Reporting Standards (IFRS) unless otherwise noted and are presented in millions ofCanadian dollars unless otherwise indicated. This MD&A should be read in conjunction with the Company's condensedconsolidated financial statements for the period ended March 31, 2012. Please also refer to the 2011 Annual MD&A andconsolidated financial statements, in the Company's 2011 Annual Report.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATIONThis MD&A contains some forward-looking statements about the Company, including its business operations, strategy andexpected financial performance and condition. Forward-looking statements include statements that are predictive in nature,depend upon or refer to future events or conditions, or include words such as “expects”, “anticipates”, “intends”, “plans”,“believes”, “estimates” and similar expressions or negative versions thereof. In addition, any statement that may be madeconcerning future financial performance (including revenues, earnings or growth rates), ongoing business strategies orprospects, and possible future actions by the Company, including statements made with respect to the expected benefits ofacquisitions and divestitures, are also forward-looking statements. Forward-looking statements are based on expectations andprojections about future events that were current at the time of the statements and are inherently subject to, among other things,risks, uncertainties and assumptions about the Company, economic factors and the financial services industry generally,including the insurance and mutual fund industries. They are not guarantees of future performance, and actual events andresults could differ materially from those expressed or implied by forward-looking statements due to, but not limited to, importantfactors such as sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policylapse rates, taxes, general economic, political and market factors in North America and internationally, interest and foreignexchange rates, global equity and capital markets, business competition, technological change, changes in governmentregulations, changes in accounting policies and the effect of applying future accounting policy changes, unexpected judicial orregulatory proceedings, catastrophic events, and the Company's ability to complete strategic transactions and integrateacquisitions. The reader is cautioned that the foregoing list of important factors is not exhaustive, and there may be otherfactors, including factors set out under "Risk Management and Control Practices" and "Summary of Critical AccountingEstimates" in the Company's 2011 Annual MD&A and any listed in other filings with securities regulators, which are available forreview at www.sedar.com. The reader is also cautioned to consider these and other factors carefully and not to place unduereliance on forward-looking statements. Other than as specifically required by applicable law, the Company does not intend toupdate any forward-looking statements whether as a result of new information, future events or otherwise.

CAUTIONARY NOTE REGARDING NON-IFRS FINANCIAL MEASURESThis MD&A contains some non-IFRS financial measures. Terms by which non-IFRS financial measures are identified include,but are not limited to, “operating earnings”, “constant currency basis”, “premiums and deposits”, “sales”, and other similarexpressions. Non-IFRS financial measures are used to provide management and investors with additional measures ofperformance. However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directlycomparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-IFRSfinancial measures to measures prescribed by IFRS.

4

B 2 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2


GR

EA

T-WEST LIFEC

O IN

C.


CONSOLIDATED OPERATING RESULTS

Selected consolidated financial information(in Canadian $ millions, except for per share amounts) As at or for the three months ended

March 31 2012

Dec. 312011

March 31 2011

Premiums and deposits:Life insurance, guaranteed annuities and insured health products $ 4,529 $ 4,334 $ 4,295Self-funded premium equivalents (ASO contracts) 685 651 670

Segregated funds deposits:Individual products 1,559 1,829 1,905Group products 1,770 1,777 1,493

Proprietary mutual funds & institutional deposits 5,939 5,624 9,083Total premiums and deposits 14,482 14,215 17,446Fee and other income 724 740 720Paid or credited to policyholders 4,743 6,340 4,579Operating earnings - common shareholders 451 500 415Net earnings - common shareholders 451 624 415Per common shareOperating earnings $ 0.475 $ 0.528 $ 0.438Basic earnings 0.475 0.657 0.438Dividends paid 0.3075 0.3075 0.3075Book value 12.69 12.61 11.50Return on common shareholders' equity (trailing four quarters*)Net operating earnings %16.5 %16.6 %16.5Net earnings %17.5 %17.6 %14.6Total assets $ 243,702 $ 238,768 $ 231,343Proprietary mutual funds and institutional net assets 131,140 125,390 129,470Total assets under management 374,842 364,158 360,813Other assets under administration 148,068 137,807 134,412Total assets under administration $ 522,910 $ 501,965 $ 495,225Total equity $ 16,406 $ 16,104 $ 14,844

The Company uses operating earnings, a non-IFRS financial measure, which excludes the impact of certain litigation provisionsdescribed in note 30 to the Company’s December 31, 2011 consolidated financial statements.

* Return on common shareholders' equity is the trailing four quarter calculation of net earnings divided by common shareholders’equity.

5



GR

EA

T-W

EST

LIFE

CO

INC

.


NET EARNINGSConsolidated net earnings of Lifeco include the net earnings of The Great-West Life Assurance Company (Great-West) and its operating subsidiaries London Life Insurance Company (London Life) and The Canada LifeAssurance Company (Canada Life); Great-West Life & Annuity Insurance Company (GWL&A) and PutnamInvestments, LLC (Putnam), together with Lifeco’s Corporate operating results.

Lifeco's net earnings attributable to common shareholders for the three month period ended March 31, 2012 were$451 million compared to $415 million reported a year ago. On a per share basis, this represents $0.475 percommon share ($0.472 diluted) for the first quarter of 2012 compared to $0.438 per common share ($0.436 diluted)a year ago. Included in net earnings for the first quarter of 2011 was the establishment of catastrophe provisionsrelating to earthquake events in Japan and New Zealand with an after-tax shareholders' net earnings impact of $75million, or $0.08 per common share.

Lifeco's net earnings attributable to common shareholders for the three month period ended March 31, 2012 were$451 million compared to $624 million in the previous quarter. On a per share basis, this represents $0.475 percommon share ($0.472 diluted) for the first quarter of 2012 compared to $0.657 per common share ($0.651 diluted)in the fourth quarter of 2011. Included in net earnings in the fourth quarter of 2011, was the net impact of twounrelated litigation provisions which increased net earnings by $124 million after-tax or $0.129 per common share.

Net earnings - common shareholders1For the three months ended

March 312012

Dec. 31 2011

March 31 2011

CanadaIndividual Insurance $ 67 $ 41 $ 82Wealth Management 68 80 82Group Insurance 87 101 66Canada Corporate 20 22 15

242 244 245United States

Financial Services 89 83 98Asset Management (12) (8) (13)U.S. Corporate (2) 4 3

75 79 88Europe

Insurance & Annuities 106 117 125Reinsurance 34 73 (38)Europe Corporate 1 (9) (1)

141 181 86

Lifeco Corporate (7) (4) (4)Operating earnings 451 500 415Certain litigation provisions(1) - 124 -Net earnings $ 451 $ 624 $ 415

(1) Certain litigation provisions are described in the Lifeco Corporate section of the document.

The information in the table is a summary of results for net earnings of the Company. Additional commentaryregarding net earnings is included in the Segmented Operating Results.

6



GR

EA

T-WEST LIFEC

O IN

C.


PREMIUMS AND DEPOSITS AND SALESPremiums and deposits include premiums on risk-based insurance and annuity products, premium equivalents onself-funded group insurance administrative services only (ASO) contracts, deposits on individual and groupsegregated fund products and deposits on proprietary mutual funds and institutional accounts.

Sales include 100% of single premium and annualized recurring premium on risk-based and annuity products,deposits on individual and group segregated fund products, deposits on proprietary mutual funds and institutionalaccounts and deposits on non-proprietary mutual funds.

Premiums and depositsFor the three months ended

March 312012

Dec. 31 2011

March 312011

CanadaIndividual Insurance $ 926 $ 985 $ 875Wealth Management 2,481 2,134 2,425Group Insurance 1,855 1,812 1,787

5,262 4,931 5,087United States

Financial Services 1,506 1,761 1,327Asset Management 5,731 5,455 8,852

7,237 7,216 10,179Europe

Insurance & Annuities 1,047 1,181 1,376Reinsurance 936 887 804

1,983 2,068 2,180Total $ 14,482 $ 14,215 $ 17,446

SalesFor the three months ended

March 312012

Dec. 31 2011

March 312011

Canada $ 2,525 $ 2,301 $ 2,549United States 8,148 8,890 11,032Europe 755 881 1,108

Total $ 11,428 $ 12,072 $ 14,689

The information in the table is a summary of results for premiums and deposits and sales of the Company.Additional commentary regarding premiums and deposits and sales is included in the Segmented OperatingResults.

7



GR

EA

T-W

EST

LIFE

CO

INC

.


NET INVESTMENT INCOME

Net investment incomeFor the three months ended

March 312012

Dec. 31 2011

March 312011

Investment income earned (net of investment properties expenses) $ 1,410 $ 1,348 $ 1,395Recovery of credit losses on loans and receivables - 2 1Net realized gains 47 32 48Regular investment income 1,457 1,382 1,444Investment expenses (18) (17) (17)Regular net investment income 1,439 1,365 1,427Changes in fair value through profit or loss (196) 1,564 (187)Net investment income $ 1,243 $ 2,929 $ 1,240

Total net investment income in the first quarter of 2012, which includes changes in fair value through profit or loss,increased by $3 million compared to the same period last year. The change in fair values in first quarter of 2012was a decrease of $196 million compared to a decrease of $187 million for the first quarter of 2011. During thequarter, the fair value of bonds declined as a result of an increase in long-term government bond rates which waspartly offset by a narrowing of corporate spreads. Investment properties fair values increased $36 million in the firstquarter of 2012 compared to $65 million in the first quarter of 2011. Continued strong real estate fundamentalsresulted in increases in fair values in the Company’s Canadian portfolio, while fair values on investment propertiesin its European portfolio experienced net declines.

Regular net investment income in the first quarter of 2012, which excludes changes in fair value through profit orloss, increased by $12 million compared to the same period last year, reflecting both growth in invested assets aswell as lower fixed income yields in the continuing low interest rate environment.

Total net investment income in the fourth quarter of 2011 was higher than first quarter of 2012, primarily due tohigher changes in fair value through profit or loss of $1,564 million in the fourth quarter of 2011. The fair value ofthe Company’s bond investments increased in the fourth quarter of 2011 due to declining government bond rates inperiod. Investment property fair values had increased by $16 million in the fourth quarter of 2011. Regular netinvestment income in the fourth quarter of 2011 included a provision for the settlement of litigation relating to theCompany’s investment in a USA based private equity firm.

Credit MarketsIn the first quarter of 2012, net market value increases on previously impaired securities, including dispositionsduring the quarter, positively impacted common shareholders' net earnings by $8 million. New impairments in thequarter were not significant and had little impact on net earnings.

In the first quarter of 2012, changes in credit ratings in the Company's bond portfolio resulted in a net decrease inprovisions for future credit losses in insurance contract liabilities, which positively impacted common shareholders'net earnings by $5 million.

8



GR

EA

T-WEST LIFEC

O IN

C.


FEE AND OTHER INCOMEIn addition to providing traditional risk-based insurance products, the Company also provides certain products on afee-for-service basis. The most significant of these products are segregated funds and mutual funds, for which theCompany earns investment management fees on assets managed and other fees, and ASO contracts, underwhich the Company provides group benefit plan administration on a cost-plus basis.

Fee and other incomeFor the three months ended

March 312012

Dec. 31 2011

March 312011

CanadaSegregated funds, mutual funds and other $ 239 $ 231 $ 239ASO contracts 38 35 37

277 266 276United States

Segregated funds, mutual funds and other 302 304 314Europe

Segregated funds, mutual funds and other 145 170 130Total fee and other income $ 724 $ 740 $ 720

The information in the table is a summary of results of gross fee and other income for the Company. Additionalcommentary regarding fee and other income is included in the Segmented Operating Results.

PAID OR CREDITED TO POLICYHOLDERS1

Paid or credited to policyholdersFor the three months ended

March 312012

Dec. 312011

March 312011

Canada $ 2,185 $ 3,255 $ 2,181United States 1,003 956 950Europe 1,555 2,129 1,448Total $ 4,743 $ 6,340 $ 4,579

Amounts paid or credited to policyholders include changes in insurance and investment contract liabilities, claims,surrenders, annuity and maturity payments, segregated funds guarantee payments and dividend and experiencerefund payments for risk-based products. The change in insurance contract liabilities includes adjustments toinsurance contract liabilities for changes in fair value of certain invested assets backing those insurance contractliabilities, and changes in the provision for future credit losses in insurance contract liabilities. These amounts donot include benefit payment amounts for ASO contracts or redemptions of segregated funds and mutual funds.

9



GR

EA

T-W

EST

LIFE

CO

INC

.


For the three months ended March 31, 2012, consolidated amounts paid or credited to policyholders were $4.7billion, an increase of $164 million from the same period in 2011. The amounts paid or credited to policyholdersincreased by $4 million in Canada, $53 million in the U.S. and $107 million in Europe. In Canada, the increase isattributable primarily to higher benefit payments, partly offset by a larger decrease in fair value of invested assetsbacking insurance contract liabilities compared to the first quarter of 2011. In Europe, the increase is due to agrowth in fair value of invested assets backing insurance contract liabilities compared to the first quarter of 2011and higher benefit payments. Partly offsetting these increases was the establishment of catastrophe provisionsrelating to earthquake events in Japan and New Zealand in the first quarter of 2011. The increase in the U.S. isprimarily due to the impact of new Individual Markets business in the first quarter of 2012, partly offset by lowerbenefits payments and a smaller increase in fair value of invested assets backing insurance contract liabilities inthe first quarter of 2012.

Compared to the previous quarter, consolidated amounts paid or credited to policyholders decreased by $1.6billion. The amounts paid or credited to policyholders decreased by $1.1 billion in Canada and $574 million inEurope, offset by an increase of $47 million in the U.S. In Canada, the decrease was attributed primarily to anegative change in fair value of assets backing the insurance contract liabilities in the first quarter of 2012,compared to an increase in fair values in the fourth quarter of 2011. The decrease is also attributable to higherbenefit payments and insurance contract liability changes in the fourth quarter of 2011. The decrease in Europewas attributable to a negative change in fair value of assets backing the insurance contract liabilities in the firstquarter of 2012, compared to an increase in fair values in the fourth quarter of 2011, which was partly offset bynormal insurance contract liability changes in the U.K. relating to higher payout sales. The increase in the U.S. isprimarily due to higher benefit payments in the first quarter of 2012, partly offset by higher insurance contractliability changes in the fourth quarter of 2011.

INCOME TAXESThe Company had an effective income tax rate of 11.0% for the first quarter of 2012 compared to an effectiveincome tax rate of 14.0% and 19.4% for the first and fourth quarter of 2011. The effective income tax rate hasdecreased from the first and fourth quarter of 2011 due to a reduction in the statutory corporate income tax rates inCanada from 28% to 26.5% and in the U.K. from 26% to 24% as well as the impact of changes to statutory incometax rates on the adjustment within the insurance contract liabilities for deferred taxes. Also contributing to the lowerfirst quarter effective income tax rate was the recognition of prior year income tax benefits of $11 million in the U.S.segment.

Income taxes for the three month period ended March 31, 2012 were $57 million, compared to $69 million for thesame period in 2011. This decrease in income taxes for the quarter is due to the lower effective income tax ratedescribed above. Earnings before income taxes were $533 million for the three month period ended March 31,2012, compared to $503 million for the same period in 2011.

10



GR

EA

T-WEST LIFEC

O IN

C.


CONSOLIDATED FINANCIAL POSITIONASSETS

Assets under administrationMarch 31, 2012

Canada United States Europe TotalAssets

Invested assets $ 56,624 $ 27,756 $ 31,126 $ 115,506Goodwill and intangible assets 5,088 1,737 1,697 8,522Other assets 3,529 3,072 12,599 19,200Segregated funds net assets 51,590 23,061 25,823 100,474

Total assets 116,831 55,626 71,245 243,702Proprietary mutual funds and institutional net assets 3,479 127,661 - 131,140Total assets under management 120,310 183,287 71,245 374,842Other assets under administration 12,393 135,568 107 148,068Total assets under administration $ 132,703 $ 318,855 $ 71,352 $ 522,910

December 31, 2011 Canada United States Europe Total

AssetsInvested assets $ 56,374 $ 27,403 $ 30,851 $ 114,628Goodwill and intangible assets 5,089 1,769 1,697 8,555Other assets 3,453 3,050 12,500 19,003Segregated funds net assets 49,622 22,359 24,601 96,582

Total assets 114,538 54,581 69,649 238,768Proprietary mutual funds and institutional net assets 3,318 122,072 - 125,390Total assets under management 117,856 176,653 69,649 364,158Other assets under administration 11,458 126,247 102 137,807Total assets under administration $ 129,314 $ 302,900 $ 69,751 $ 501,965

Total assets under administration at March 31, 2012 increased by $20.9 billion from December 31, 2011.Segregated funds increased by approximately $3.9 billion and proprietary mutual funds and institutional net assetsincreased by $5.8 billion, primarily as a result of improved equity market levels. Other assets under administrationincreased $10.3 billion, primarily as a result of improved equity market levels and new plan sales. Invested assetsincreased by approximately $0.9 billion.

Provision for future credit lossesAs a component of insurance contract liabilities the total provision for future credit losses is determined consistentwith Canadian Actuarial Standards of Practice and includes provisions for adverse deviation.

At March 31, 2012, the total provision for future credit losses in insurance contract liabilities was $2,477 millioncompared to $2,500 million at December 31, 2011, a decrease of $23 million primarily due to higher interest rates.

The aggregate of impairment provisions of $207 million ($237 million at December 31, 2011) and $2,477 million($2,500 million at December 31, 2011) for future credit losses in insurance contract liabilities represents 2.5% ofbond and mortgage assets at March 31, 2012 (2.6% at December 31, 2011).

11



GR

EA

T-W

EST

LIFE

CO

INC

.


Holdings of Debt Securities of Governments

Carrying Value by Rating - March 31, 2012

AAA AA A BBBBB &Lower Total*

AmortizedCost*

Canada $ 9,077 $ 3,275 $ 2,346 $ - $ - $ 14,698 $ 13,371U.K. 9,530 636 141 429 - 10,736 9,681U.S. 4,978 1,184 92 10 - 6,264 5,879

23,585 5,095 2,579 439 - 31,698 28,931Portugal - - - - 10 10 13Ireland - - - 131 - 131 139Italy - - 42 - - 42 48Greece - - - - - - -Spain - - 37 - - 37 46

- - 79 131 10 220 246Germany 592 6 - - - 598 552France 480 31 - - - 511 501Netherlands 467 - - - - 467 440Austria 177 - - - - 177 173Australia 75 - - - - 75 75Supranationals 860 - - - - 860 784All other (9 countries) 375 64 - 18 - 457 440

3,026 101 - 18 - 3,145 2,965Total $ 26,611 $ 5,196 $ 2,658 $ 588 $ 10 $ 35,063 $ 32,142

* Includes certain funds held by ceding insurers with a carrying value of $3,528 million and an amortized cost of $3,204 million.

At March 31, 2012, the Company held government and government related debt securities (including certain assetsreported as funds held by ceding insurers) with an aggregate carrying value of $35.1 billion compared to $35.4billion at December 31, 2011. Included in this portfolio are debt securities issued by Portugal, Ireland, Italy andSpain, with an aggregate carrying value of $220 million. The Company does not hold any debt securities of thegovernment of Greece.

12

B 1 0 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2


GR

EA

T-WEST LIFEC

O IN

C.


Holdings of Debt Securities of Banks and Other Financial Institutions

Carrying Value by Rating - March 31, 2012

AAA AA A BBBBB &Lower Total*

AmortizedCost*

Canada $ 64 $ 510 $ 1,077 $ 70 $ - $ 1,721 $ 1,654U.K. 191 636 1,178 690 484 3,179 3,391U.S. 1 1,558 1,877 624 17 4,077 3,928

256 2,704 4,132 1,384 501 8,977 8,973Portugal - - - - - - -Ireland - - - 62 4 66 97Italy - 30 26 67 - 123 151Greece - - - - - - -Spain 58 3 123 68 - 252 288

58 33 149 197 4 441 536Germany 39 - 50 - - 89 87France 67 108 187 145 - 507 556Netherlands 1 206 160 - 47 414 424Australia 16 283 162 46 - 507 502All other (15 institutions) 16 65 308 118 - 507 504

139 662 867 309 47 2,024 2,073Total $ 453 $ 3,399 $ 5,148 $ 1,890 $ 552 $ 11,442 $ 11,582

Carrying Value by Seniority - March 31, 2012

Covered Senior DebtSubordinated

DebtUpper Tier

TwoCapital

Securities Total*Amortized

Cost*Canada $ 70 $ 989 $ 307 $ 77 $ 278 $ 1,721 $ 1,654U.K. 211 1,299 954 422 293 3,179 3,391U.S. 378 2,644 830 - 225 4,077 3,928

659 4,932 2,091 499 796 8,977 8,973Portugal - - - - - - -Ireland 62 - - - 4 66 97Italy 29 26 16 - 52 123 151Greece - - - - - - -Spain 64 - 117 37 34 252 288

155 26 133 37 90 441 536Germany 39 - 50 - - 89 87France 157 97 132 33 88 507 556Netherlands - 317 37 24 36 414 424Australia 16 309 146 - 36 507 502All other (15 institutions) 32 170 153 103 49 507 504

244 893 518 160 209 2,024 2,073Total $ 1,058 $ 5,851 $ 2,742 $ 696 $ 1,095 $ 11,442 $ 11,582

* Includes certain funds held by ceding insurers with a carrying value of $2,737 million and an amortized cost of $2,698 million.

13

P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 B 1 1


GR

EA

T-W

EST

LIFE

CO

INC

.


At March 31, 2012, the Company held debt securities issued by banks and other financial institutions (includingcertain assets reported as funds held by ceding insurers) with an aggregate carrying value of $11.4 billion,compared to $10.9 billion at December 31, 2011. Carrying values increased as a result of net acquisitions andincreased fair values as a result of narrowing corporate spreads. Included in this portfolio is $441 million of debtsecurities issued by banks and other financial institutions domiciled in Ireland, Italy and Spain. Of the Spainholdings of $252 million, $172 million are Sterling denominated bonds issued by U.K. domiciled Financial ServicesAuthority (FSA) regulated subsidiaries of Spanish financial institutions. The Company does not have any holdingsof banks and other financial institutions domiciled in Greece or Portugal.

At March 31, 2012, approximately 95% of the $11.4 billion carrying value of debt securities invested in banks andother financial institutions was rated investment grade.

Of the Company’s invested assets including certain funds withheld by ceding insurers, 2.8% are invested in bondsof governments and financial institutions of Eurozone countries as at March 31, 2012.

LIABILITIES

Total liabilitiesMarch 31 Dec. 31

2012 2011Insurance and investment contract liabilities $ 115,561 $ 115,512Other general fund liabilities 11,261 10,570Investment and insurance contracts on account of unit holders 100,474 96,582Total $ 227,296 $ 222,664

Total liabilities increased by $4.6 billion from $222.7 billion at December 31, 2011 to $227.3 billion at March 31,2012. The increase was driven by an increase in investment and insurance contracts on account of unit holders of$3.9 billion driven primarily by higher equity market levels. Also contributing to the increase were higher insuranceand investment contract liabilities of $49 million and an increase in other general fund liabilities of $691 million.

Investment Guarantees Associated with Wealth Management ProductsThe Company offers retail segregated fund products, unitized with profits (UWP) products and variable annuityproducts that provide for certain guarantees that are tied to the market values of the investment funds. The GMWBproducts offered by the Company offer levels of death and maturity guarantees. At March 31, 2012, the amount ofGMWB product in-force in Canada, the U.S., Ireland and Germany was $1,450 million ($1,256 million at December31, 2011). The Company has a hedging program in place to manage certain risks associated with optionsembedded in its GMWB products.

Segregated funds guarantee exposureMarch 31, 2012

Investment deficiency by benefit typeMarket value Income Maturity Death Total*

Canada $ 23,473 $ - $ 27 $ 183 $ 183United States 7,207 - - 63 63Europe

Insurance & Annuities 2,445 - 70 73 73Reinsurance** 1,031 550 2 37 590

3,476 550 72 110 663Total $ 34,156 $ 550 $ 99 $ 356 $ 909

* A policy can only receive a payout from one of the three trigger events (income election, maturity or death). Total deficiency measures thepoint-in-time exposure assuming the most costly trigger event for each policy occurred on March 31, 2012.

** Reinsurance exposure is to markets in Canada and the United States.

14



GR

EA

T-WEST LIFEC

O IN

C.


The investment deficiency measures the point-in-time exposure to a trigger event (i.e. income election, maturity, ordeath) assuming it occurred on March 31, 2012. For example, at March 31, 2012, investment guarantees resultedin a deficiency of $356 million with respect to death benefits. This should be interpreted to mean that if all of thepolicyholders with in-the-money GMDB had died on March 31, 2012, the Company would have been obligated topay $356 million more in death benefits than it would have if there had been no investment guarantees. The actualcost to the Company will depend on the trigger event having occurred and the market values at that time. Forexample, if markets were to remain at March 31, 2012 levels, the GMDB related payments due to investmentguarantees over the next twelve months are estimated to be $6 million.

SHARE CAPITAL AND SURPLUS Share capital outstanding at March 31, 2012 was $7,973 million, which comprises $5,829 million of commonshares, $1,664 million of non-cumulative First Preferred Shares, and $480 million of five-year rate reset FirstPreferred Shares.

At March 31, 2012, the Company had 949,808,440 common shares outstanding with a stated value of $5,829million compared to 949,764,141 common shares with a stated value of $5,828 million at December 31, 2011.

During the three months ended March 31, 2012, no common shares were purchased for cancellation pursuant tothe Company’s Normal Course Issuer Bid. Under the Company’s Stock Option Plan, 44,299 shares were issued fortotal proceeds of $0.8 million or an average of $18.18 per share.

On February 22, 2012, the Company issued 10,000,000, 5.4% non-cumulative fixed rate perpetual First PreferredShares, Series P, for gross proceeds of $250 million.

Great-West Life Capital Trust Securities (GREATs) - Subject to regulatory approval, Great-West Life CapitalTrust (GWLCT) may redeem the GREATs, in whole or in part, at any time, and the GREATs are callable at par onDecember 31, 2012.

Canada Life Capital Trust Securities (CLiCS) - Subject to regulatory approval, Canada Life Capital Trust (CLCT)may redeem the Series A CLiCS, in whole or in part, at any time, and the Series A CLiCS are callable at par onJune 30, 2012.

On April 18, 2012, following receipt of regulatory approval, CLCT announced that it intends to redeem all of itsoutstanding $300 million principal amount Series A CLiCS on June 30, 2012 at a redemption price per Series ACLiCS equal to $1,000 plus any Unpaid Indicated Yield to the date of redemption.

NON-CONTROLLING INTERESTSThe Company's non-controlling interests include participating account surplus in subsidiaries and non-controllinginterests in subsidiaries.

LIQUIDITY AND CAPITAL MANAGEMENT AND ADEQUACY

LIQUIDITYThe Company’s liquidity requirements are largely self-funded, with short-term obligations being met by generatinginternal funds and maintaining adequate levels of liquid investments. At March 31, 2012, Lifeco held cash andgovernment short-term investments of $4.7 billion ($5.5 billion at December 31, 2011) and government bonds of$25.2 billion ($25.1 billion at December 31, 2011). This includes approximately $0.8 billion ($0.6 billion atDecember 31, 2011) held directly at the holding company level. In addition, the Company maintains a $200 millioncommitted line of credit with a Canadian chartered bank.

15



GR

EA

T-W

EST

LIFE

CO

INC

.


The Company does not have a formal common shareholder dividend policy. Dividends on outstanding commonshares of the Company are declared and paid at the sole discretion of the Board of Directors of the Company. Thedecision to declare a dividend on the common shares of the Company takes into account a variety of factorsincluding the level of earnings, adequacy of capital, and availability of cash resources. As a holding company, theCompany’s ability to pay dividends is dependent upon the Company receiving dividends from its operatingsubsidiaries. The Company’s operating subsidiaries are subject to regulation in a number of jurisdictions, each ofwhich maintains its own regime for determining the amount of capital that must be held in connection with thedifferent businesses carried on by the operating subsidiaries. The requirements imposed by the regulators in anyjurisdiction may change from time to time, and thereby impact the ability of the operating subsidiaries to paydividends to the Company.

CASH FLOWS

Cash flowsFor the three months ended

March 312012 2011

Cash flows relating to the following activities:Operations $ 611 $ 661Financing 63 (196)Investment (1,105) (239)

(431) 226Effects of changes in exchange rates on cash and cash equivalents (4) 4Increase (decrease) in cash and cash equivalents in the period (435) 230Cash and cash equivalents, beginning of period 2,056 1,840Cash and cash equivalents, end of period $ 1,621 $ 2,070

The principal source of funds for the Company, on a consolidated basis, is cash provided by operating activities,including premium income, net investment income and fee income. In general, these funds are used primarily topay policy benefits, policyholder dividends and claims, as well as operating expenses and commissions. Cashflows generated by operations are mainly invested to support future liability cash requirements. Financing activitiesinclude the issuance and repayment of capital instruments, and associated dividends and interest payments.

In the first quarter, cash and cash equivalents decreased by $435 million from December 31, 2011. Cash flowsprovided by operations during the first quarter of 2012 were $611 million, a decrease of $50 million compared tothe first quarter of 2011. For the three months ended March 31, 2012, cash flows were used by the Company toacquire an additional $1,105 million of investment assets; $317 million of cash was utilized to pay dividends to thepreferred and common shareholders and $380 million was received from other financing activities.

COMMITMENTS/CONTRACTUAL OBLIGATIONSCommitments/contractual obligations have not changed materially from December 31, 2011.

16



GR

EA

T-WEST LIFEC

O IN

C.


CAPITAL MANAGEMENT AND ADEQUACY

CAPITAL ALLOCATION METHODOLOGYThe Company has a capital allocation methodology which allocates financing costs in proportion to allocatedcapital. For the Canadian and European segments (essentially The Great-West Life Assurance Company), thisallocation method tracks the regulatory capital requirements, while for U.S. Financial Services and U.S. AssetManagement (Putnam), it tracks the financial statement carrying value of the business units. Total leverage capitalis consistently allocated across all business units in proportion to total capital resulting in debt-to-equity ratio ineach business unit mirroring the consolidated Company.

The Company’s consolidated net earnings are presented on an IFRS basis after capital allocation. The Company'sreturn on common shareholders' equity (ROE) and net earnings are unaffected by the capital allocationmethodology as the process does not change the total, just the distribution of capital and net earnings among thebusiness units.

Return on EquityMarch 31

2012Dec. 31

2011March 31*

2011 Canada %21.4 %21.7 %22.8U.S. Financial Services (1) %19.5 %20.7 %26.8U.S. Asset Management (Putnam) %1.0 %0.9 %(2.3)Europe %18.3 %17.5 %16.5Lifeco Corporate (2) %(6.1) %(5.5) %(2.5)

Total Lifeco Net Earnings %17.5 %17.6 %14.6Total Lifeco Operating Earnings (2) %16.5 %16.6 %16.5

* As a result of an IFRS transition adjustment effective January 1, 2010 reflected in the fourth quarter of 2011, certain comparative ROEcalculations were adjusted accordingly.

(1) Includes U.S. Corporate. (2) The Company uses operating earnings, a non-IFRS financial measure, which excludes the impact of the provisions described in note 30 to

the Company's December 31, 2011 consolidated financial statements.

ROE is the trailing four quarter calculation of net earnings divided by common shareholders' equity.

The Company reported ROE based on net earnings of 17.5% compared to 17.6% at December 31, 2011 on anIFRS basis. The Company achieved a 16.5% ROE on operating earnings, which compares favourably with itslong-term objective of 15.0%.

In Canada, the Office of the Superintendent of Financial Institutions (OSFI) has established a capital adequacymeasurement for life insurance companies incorporated under the Insurance Companies Act (Canada) and theirsubsidiaries, known as the MCCSR ratio. The internal target range of the MCCSR ratio for Lifeco's majorCanadian operating subsidiaries is 175% to 200% (on a consolidated basis).

Great-West Life’s MCCSR ratio at March 31, 2012 was 205% (204% at December 31, 2011). London Life’sMCCSR ratio at March 31, 2012 was 236% (239% at December 31, 2011). Canada Life's MCCSR ratio at March31, 2012 was 209% (204% at December 31, 2011). The MCCSR ratio does not include any impact fromapproximately $0.8 billion of liquidity at the Lifeco holding company level.

At December 31, 2011, the Risk Based Capital (RBC) ratio of GWL&A, Lifeco's regulated U.S. operating company,was 440% of the Company Action Level set by the National Association of Insurance Commissioners. GWL&Areports its RBC ratio annually to U.S. insurance regulators.

17



GR

EA

T-W

EST

LIFE

CO

INC

.


Under OSFI’s Advisory on Conversion to International Financial Reporting Standards by Federally RegulatedEntities, the Company's federally regulated subsidiaries have elected to phase in the impact of $636 million for theconversion to IFRS on capital for MCCSR regulatory reporting purposes over eight quarters which commencedJanuary 1, 2011. As at March 31, 2012, the amount phased in to the Great-West Life MCCSR was $398 million. Inthe years following the Company's initial adoption of IFRS, as a result of the proposed changes to the IFRS formeasurement of insurance contract liabilities and the evolving nature of IFRS, there will likely be further regulatorycapital and accounting changes, some of which may be significant.

RATINGS Lifeco and its major operating subsidiaries receive strong ratings from the five rating agencies that rate theCompany as set out below. The operating companies below have the same financial strength ratings from eachrating agency, commonly known as a “fleet” rating which is predominantly supported by the Company’s leadingposition in the Canadian insurance market and competitive positions in the U.S. and Europe. Great-West Life,London Life and Canada Life have common management, governance, and strategy, as well as an integratedbusiness platform. Each operating company benefits from the strong implicit financial support and collectiveownership by Lifeco. There were no rating changes to the Company's credit ratings during the first quarter of 2012.

Rating agency Measurement Lifeco Great-WestLondon

LifeCanada

Life GWL&AA.M. Best Company Financial Strength A+ A+ A+ A+DBRS Limited Claims Paying Ability

Senior DebtSubordinated Debt

AA (low)IC-1 IC-1 IC-1

AA (low)

NR

Fitch Ratings Insurer Financial StrengthSenior Debt A

AA AA AA AA

Moody's Investors Service Insurance Financial Strength Aa3 Aa3 Aa3 Aa3Standard & Poor's RatingsServices

Insurer Financial StrengthSenior DebtSubordinated Debt

A+AA AA AA

AA-

AA

RISK MANAGEMENT AND CONTROL PRACTICESInsurance companies are in the business of assessing, structuring, pricing, assuming and managing risk. Thetypes of risks are many and varied, and will be influenced by factors, both internal and external to the businessesoperated by the insurer. These risks, and the control practices used to manage the risks, are discussed in detail inthe Company's 2011 Annual MD&A and have not substantially changed.

DERIVATIVE FINANCIAL INSTRUMENTSThere were no major changes to the Company’s and its subsidiaries’ policies and procedures with respect to theuse of derivative financial instruments in the first quarter of 2012. During the three month period ended March 31,2012, the outstanding notional amount of derivative contracts decreased by $70 million. The Company’s exposureto credit risk, which reflects the current fair value of those instruments in a gain position, decreased to $930 millionat March 31, 2012 from $968 million at December 31, 2011.

18



GR

EA

T-WEST LIFEC

O IN

C.


ACCOUNTING POLICIESInternational Financial Reporting Standards – The Company issued its first annual consolidated financialstatements in compliance with International Financial Reporting Standards (IFRS) for the year-ended December31, 2011.

Due to the evolving nature of IFRS, there are a number of IFRS changes that could impact the Company in thefuture. The Company actively monitors future IFRS changes proposed by the International Accounting StandardsBoard (IASB) to assess if the changes to the standards may have an impact on the Company's results oroperations. In addition, the Company considers potential changes to financial reporting, disclosure controls andprocedures, or information systems of the Company as a result of these IFRS changes.

IFRS that will change in the future and could impact the Company are included in the following table:

Revised standard Summary of Future ChangesIFRS 4 - InsuranceContracts

The IASB issued an exposure draft proposing changes to the accounting standard forinsurance contracts in July 2010. The proposal would require an insurer to measureinsurance liabilities using a model focusing on the amount, timing, and uncertainty offuture cash flows associated with fulfilling its insurance contracts. This is vastly differentfrom the connection between insurance assets and liabilities considered under CALMand may cause significant volatility in the results of the Company. The exposure draftalso proposes changes to the presentation and disclosure within the financialstatements.

The Company will continue to measure insurance contract liabilities using CALM untilsuch time when a new IFRS for insurance contract measurement is issued. A finalstandard is not expected to be implemented for several years; the Company continuesto actively monitor developments in this area.

IFRS 9 - FinancialInstruments

The IASB tentatively approved the adoption of the proposed new IFRS 9, FinancialInstruments standard to be effective January 1, 2015.

The new standard requires all financial assets to be classified on initial recognition atamortized cost or fair value while eliminating the existing categories of available-for-sale, held to maturity, and loans and receivables.

The new standard also requires:• embedded derivatives to be assessed for classification together with their financial

asset host;• a single expected loss impairment method be used for financial assets; and• amendments to the criteria for hedge accounting and measuring effectiveness

The full impact of IFRS 9 on the Company will be evaluated after the remaining stagesof the IASB’s project to replace IAS 39, Financial Instruments impairment methodology,hedge accounting, and asset and liability offsetting are finalized. The Companycontinues to actively monitor developments in this area.

19



GR

EA

T-W

EST

LIFE

CO

INC

.


IFRS 10 - ConsolidatedFinancial Statements;IFRS 11 - JointArrangements;IFRS 12 - Disclosure ofInterests in OtherEntities

Effective January 1, 2013, the Company plans to adopt IFRS 10, Consolidated FinancialStatements, IFRS 11, Joint Arrangements, and IFRS 12, Disclosure of Interest in OtherEntities for the presentation and preparation of its consolidated financial statements.

IFRS 10, Consolidated Financial Statements uses consolidation principles based on arevised definition of control. The definition of control is dependent on the power of theinvestor to direct the activities of the investee, the ability of the investor to derivevariable benefits from its holdings in the investee, and a direct link between the power todirect activities and receive benefits.

IFRS 11, Joint Arrangements separates jointly controlled entities between jointoperations and joint ventures. The standard has eliminated the option of usingproportionate consolidation for accounting for the interests in joint ventures, nowrequiring an entity to use the equity method of accounting for interests in joint ventures.

IFRS 12, Disclosure of Interests in Other Entities proposes new disclosure requirementsfor the interest an entity has in subsidiaries, joint arrangements, associates, andstructured entities. The standard requires enhanced disclosure including how controlwas determined and any restrictions that might exist on consolidated assets andliabilities presented within the financial statements. The Company is evaluating the impact of the above standards on its consolidationprocedures and disclosure in preparation of the January 1, 2013 effective date.

IFRS 13 - Fair ValueMeasurement

Effective January 1, 2013, the Company will adopt the guidance in IFRS 13, Fair ValueMeasurement for the measurement and disclosure of assets and liabilities held at fairvalue. The standard defines fair value, provides a single framework for themeasurement of fair value and disclosure requirements for fair value measurements.

The Company is currently evaluating the impact this standard will have on its financialstatements when it becomes effective January 1, 2013.

IAS 1 - Presentation ofFinancial Statements

Effective January 1, 2013, the Company will adopt the guidance in the amended IAS 1,Presentation of Financial Statements. The amended standard includes requirementsthat other comprehensive income (OCI) be classified by nature and grouped betweenthose items that will be reclassified subsequently to profit or loss (when specificconditions are met) and those that will not be reclassified.

The Company is actively evaluating the impact this standard will have on thepresentation of its financial statements.

IAS 17 - Leases The IASB issued an exposure draft proposing a new accounting model for leases whereboth lessees and lessors would record the assets and liabilities on the balance sheet atthe present value of the lease payments arising from all lease contracts. The newclassification would be the right-of-use model, replacing the operating and finance leaseaccounting models that currently exist.

The full impact of adoption of the proposed changes will be determined once the finallease standard is issued, which is expected to be in 2012.

20



GR

EA

T-WEST LIFEC

O IN

C.


IAS 18 - RevenueRecognition

The IASB issued a second exposure draft in November 2011 which proposed a singlerevenue recognition standard to align the financial reporting of revenue from contractswith customers and related costs. A company would recognize revenue when ittransfers goods or services to a customer in the amount of consideration the companyexpects to receive from the customer.

The full impact of adoption of the proposed changes will be determined once the finalrevenue recognition standard is issued, which is targeted for release in 2012 or 2013.

IAS 19 - EmployeeBenefits

The IASB published an amended version of this standard in June 2011 that eliminatesthe corridor approach for actuarial gains and losses resulting in those gains and lossesbeing recognized immediately through OCI. As a result the net pension asset or liabilitywill reflect the full funded status of the pension plan on the Consolidated BalanceSheets. Further, the standard includes changes to how the defined benefit obligationand the fair value of the plan assets would be presented and disclosed within thefinancial statements of an entity.

The Company will continue to use the corridor method until January 1, 2013 when therevised standard for employee benefits becomes effective. In accordance with thetransitional provisions in IAS 19, this change in IFRS will be applied retroactively toJanuary 1, 2012.

IFRS 7 – FinancialInstruments: Disclosure

Effective January 1, 2013, the Company will adopt the guidance in the amendments toIFRS 7, Financial Instruments. The amended standard introduces financial instrumentdisclosures related to rights of offset and related arrangements under master nettingagreements.

The Company is evaluating the impact this standard will have on the presentation of itsfinancial statements.

IAS 32 – FinancialInstruments:Presentation

Effective January 1, 2014, the Company will adopt the guidance in the amendments toIAS 32, Financial Instruments - Presentation. The amended standard clarifies therequirements for offsetting financial assets and financial liabilities.

The Company is evaluating the impact this standard will have on the presentation of itsfinancial statements.

21



GR

EA

T-W

EST

LIFE

CO

INC

.


SEGMENTED OPERATING RESULTS

The consolidated operating results of Lifeco including the comparative figures are presented on an IFRS basis aftercapital allocation. The operating results include Great-West Life, London Life, Canada Life, GWL&A and Putnam.

For reporting purposes, the consolidated operating results are grouped into four reportable segments, Canada,United States, Europe and Lifeco Corporate, reflecting geographic lines as well as the management and corporatestructure of the companies.

CANADAThe Canada segment of Lifeco includes the operating results of the Canadian businesses operated by Great-WestLife, London Life and Canada Life. There are three primary business units included in this segment. Through itsIndividual Insurance business unit, the Company provides life, disability and critical illness insurance products toindividual clients. Through its Wealth Management business unit, the Company provides accumulation productsand annuity products for both group and individual clients in Canada. Through its Group Insurance business unit,the Company provides life, health, critical illness, disability and creditor insurance products to group clients inCanada.

Selected consolidated financial information - CanadaFor the three months ended

March 312012

Dec. 31 2011

March 312011

Premiums and deposits $ 5,262 $ 4,931 $ 5,087Sales 2,525 2,301 2,549Fee and other income 277 266 276Net earnings - common shareholders 242 244 245

Total assets $ 116,831 $ 114,538 $ 113,823Proprietary mutual funds net assets 3,479 3,318 3,439Total assets under management 120,310 117,856 117,262Other assets under administration 12,393 11,458 10,900Total assets under administration $ 132,703 $ 129,314 $ 128,162

2012 DEVELOPMENTSNet earnings attributable to common shareholders for the first quarter of 2012 were $242 million compared to$245 million for the first quarter of 2011. Sales in the first quarter of $2,525 million were comparable with the first quarter of 2011. Premiums and deposits of $5,262 million were 3% higher than the first quarter of 2011.Fee income did not change materially quarter-over-quarter, as lower average equity index levels were mostlyoffset by higher fixed income values.Individual Insurance launched new rates for level cost of insurance and limited pay universal life as well ascritical illness in February 2012.The Quadrus U.S. and International Specialty Corporate Class Fund, of Wealth Management, received a LipperAward for its five year performance. The fund was judged best in the global small/mid cap equity category forits strong and consistent performance over the past five years. In 2011, the same fund won the award for bothits five-year and three-year performance.

22



GR

EA

T-WEST LIFEC

O IN

C.


BUSINESS UNITS - CANADA

INDIVIDUAL INSURANCE1

OPERATING RESULTS

For the three months ended March 31

2012Dec. 31 2011

March 31 2011

Premiums and deposits $ 926 $ 985 $ 875Sales 115 117 98Net earnings 67 41 82

Premiums and depositsIndividual Life premiums for the quarter increased by $46 million to $846 million compared with the same quarterlast year, primarily due to a 7% increase in participating life premiums. Living Benefits premiums for the quarterincreased by $5 million to $80 million compared with the same period last year. Individual Insurance premiums decreased by $59 million to $926 million compared to the previous quarter, primarilydue to a 9% decrease in participating life premiums due to the normal seasonality of life insurance sales.

SalesFor the quarter, Individual Life sales increased by $16 million to $105 million compared with the same quarter lastyear. The increase was driven by a 41% increase in participating life sales. Sales of Living Benefits of $10 millionwere $1 million higher than the same quarter last year.

Individual Life sales decreased by $1 million to $105 million compared with the previous quarter. The decreasewas primarily driven by an 8% decrease in participating life sales due to the normal seasonal variations in lifeinsurance sales. Living Benefits sales of $10 million were $1 million lower than the previous quarter.

Net earningsNet earnings for the quarter decreased by $15 million compared with the first quarter of 2011. This decrease isprimarily due to less favourable expense related basis changes of $20 million. Net earnings, excluding the impactof basis changes, increased by $5 million, driven by a $15 million increase in investment and policyholderbehaviour gains, partially offset by $6 million lower mortality and morbidity gains and $3 million higher newbusiness strain on sales made prior to recent repricing to address low interest rates.

Net earnings increased by $26 million compared with the previous quarter. This increase is primarily due to morefavourable basis changes in the first quarter of 2012 compared to the fourth quarter of 2011. The first quarter of2012 reflects favourable expense related basis changes and the fourth quarter of 2011 reflects unfavourableinvestment and lapse assumption related basis changes. Net earnings, excluding the impact of basis changes,decreased by $28 million, driven by $20 higher new business strain due to lower interest rates and $8 million lowerinvestment gains.

The net loss attributable to the participating account was $6 million in the first quarter of 2012 compared to netearnings of $1 million in the first quarter of 2011. The primary contributor to this change was an increase in newbusiness strain as a result of 41% growth in participating insurance sales. Net earnings of the participating accountdecreased by $105 million from the fourth quarter of 2011. During the fourth quarter of 2011, the Company re-evaluated and reduced the litigation provision established in the third quarter of 2010, which positively impacted netearnings attributable to the participants account. The decrease is largely attributable to the release of a litigationprovision last year.

23



GR

EA

T-W

EST

LIFE

CO

INC

.


WEALTH MANAGEMENT

OPERATING RESULTS


2012Dec. 31 2011

March 31 2011

Premiums and deposits $ 2,481 $ 2,134 $ 2,425Sales 2,276 2,026 2,314Fee and other income 228 220 230Net earnings 68 80 82

Premiums and depositsPremiums and deposits to proprietary retail investment funds for the first quarter decreased by $108 million to$1,074 million compared with the same quarter last year. This decrease is consistent with weaker flows into equityproducts in the overall investment funds market in the first quarter of 2012 as investors looked to avoid equitymarket volatility. Premiums and deposits to retail guaranteed interest rate and payout annuity products of $83million were $38 million lower than the first quarter of 2011. This decrease was in part due to the lower long-terminterest rates as investors moved to more price sensitive, lower margin short-term guarantees. Premiums anddeposits to group retirement products of $1,324 million were $202 million higher compared to the same quarter lastyear. This result was driven by strong lump sum transfers from new group capital accumulation plan clients andincreased investment only plan deposits offset by lower group payout annuity sales.

Premiums and deposits to proprietary retail investment funds increased by $140 million with retail guaranteedinterest rate and payout annuity products increasing by $10 million compared to the previous quarter, due toRegistered Retirement Savings Plan (RRSP) season. Premiums to group retirement products increased by $197million compared to the previous quarter due to higher lump sum transfers and investment only sales.

SalesSales of proprietary retail investment funds decreased by $115 million to $1,318 million compared to the samequarter last year. Sales of retail guaranteed interest rate and payout annuity products of $194 million were $58million lower than the same quarter last year. Sales of group retirement products of $501 million were $157 millionhigher than the same quarter last year. These changes are consistent with the first quarter experience in theCanadian marketplace. Sales of proprietary retail investment funds increased by $141 million compared to the previous quarter due toRRSP season. Sales of retail guaranteed interest rate and payout annuity products were $5 million lower than theprevious quarter when payout annuity sales were very strong. Group retirement products sales increased by $54million, for the same reasons as noted for the quarter-over-quarter premiums and deposits comparison.

Fee and other incomeFee income declined slightly from 2011. Lower average TSX equity index levels of 9.5% were mostly offset byhigher fixed income values. This resulted in a shift of retail investment fund asset mix towards fixed incomeproducts, which have lower margins. Fee and other income increased by $8 million compared with the previous quarter due to the higher average equitymarket levels than in the fourth quarter of 2011.

24



GR

EA

T-WEST LIFEC

O IN

C.


Net earningsNet earnings for the first quarter of 2012 decreased by $14 million compared with the same quarter last year. Thisdecrease is primarily from lower mortality gains, lower insurance contract liability basis changes and higheroperating expenses.

Net earnings decreased by $12 million compared to the previous quarter. The decrease reflects higher operatingexpenses partially offset by higher fee income. The first quarter generally has higher operating expenses as aresult of RRSP season and the costs associated with year-end client statements.

GROUP INSURANCE

OPERATING RESULTS


2012Dec. 31 2011

March 31 2011

Premiums and deposits $ 1,855 $ 1,812 $ 1,787Sales 134 158 137Fee and other income 38 35 37Net earnings 87 101 66

Premiums and depositsPremiums and deposits for the first quarter of 2012 increased by $68 million to $1.9 billion compared with the sameperiod last year, primarily due to an increase in health and long-term disability premiums.

Premiums and deposits increased by $43 million compared with the previous quarter. Large case premiums anddeposits increased by $35 million while small/mid-size case market increased by $8 million.

SalesFor the first quarter of 2012, sales decreased by $3 million to $134 million compared with the same quarter lastyear. The decrease was primarily due to lower sales in creditor/direct marketing. This decrease was partly offsetby higher sales in the small/mid-size case market and the large case market.

Sales decreased by $24 million to $134 million compared to the previous quarter due to decreased sales in thesmall/mid-size market. The decrease was also due to lower sales in the creditor/direct marketing market. Thesedecreases were partly offset by higher sales in the large case market. The large case market exhibits significantvolatility resulting in quarter-over-quarter variances.

Fee and other incomeFee and other income is derived primarily from ASO contracts, whereby the Company provides group insurancebenefit plan administration on a cost-plus basis.

Fee and other income for the quarter was $1 million higher when compared with the first quarter of 2011 mainlydue to an increase in ASO premium equivalents.

Fee and other income for the quarter was $3 million higher than the previous quarter mainly due to an increase inASO premium equivalents.

25



GR

EA

T-W

EST

LIFE

CO

INC

.


Net earningsNet earnings for the first quarter of 2012 increased by $21 million compared with the same period last year,primarily due to higher investment and mortality gains as well as favourable interest related basis changes.

Net earnings decreased by $14 million, reflecting normal seasonality, when compared with the previous quarterprimarily due to lower morbidity and expense gains than in fourth quarter 2011 partly offset by higher investmentgains.

CANADA CORPORATECanada Corporate consists of items not associated directly with or allocated to the Canadian business units.

Canada Corporate reported net earnings for the quarter of $20 million, compared with net earnings of $15 million inthe first quarter of 2011. The increase in net earnings is primarily due to an expense recovery in a private equityfund of $7 million partially offset by slightly lower investment gains on assets backing corporate surplus.

Compared to the previous quarter, net earnings decreased by $2 million.

UNITED STATESThe United States operating results for Lifeco include the results of Great-West Life & Annuity Insurance Company(GWL&A), Putnam Investments, LLC (Putnam), and the results of the insurance businesses in the United Statesbranches of Great-West Life and Canada Life, together with an allocation of a portion of Lifeco's corporate results.Through its Financial Services business unit, the Company provides an array of financial security products,including employer-sponsored defined contribution plans, administrative and record-keeping services, fundmanagement, investment and advisory services. It also provides individual retirement accounts, life insurance andannuity products, and business owned life insurance and executive benefits products. Through its AssetManagement business unit, the Company provides investment management, certain administrative functions,distributions, and related services through a broad range of investment products.

Selected consolidated financial information - United StatesFor the three months ended

March 312012

Dec. 31 2011

March 31 2011

Premiums and deposits $ 7,237 $ 7,216 $ 10,179Sales 8,148 8,890 11,032Fee and other income 302 304 314Net earnings - common shareholders 75 79 88Net earnings - common shareholders (US$) 75 78 89

Total assets $ 55,626 $ 54,581 $ 50,797Proprietary mutual funds and institutional net assets 127,661 122,072 126,031Total assets under management 183,287 176,653 176,828Other assets under administration 135,568 126,247 123,401Total assets under administration $ 318,855 $ 302,900 $ 300,229

26



GR

EA

T-WEST LIFEC

O IN

C.


BUSINESS UNITS – UNITED STATES

In the first quarter, comparing 2012 to 2011, the Canadian dollar weakened against the U.S. dollar. As a result ofcurrency movement, net earnings were positively impacted by $1 million compared to the first quarter of 2011.

TRANSLATION OF FOREIGN CURRENCYForeign currency assets and liabilities are translated into Canadian dollars at the market rate at the end of thefinancial period. All income and expense items are translated at an average rate for the period.

Currency translation impact is a non-IFRS financial measure which attempts to remove the impact of changes incurrency translation rates on IFRS results. Refer to the Cautionary Note regarding non-IFRS Financial Measuresat the beginning of this document.

FINANCIAL SERVICES1

2012 DEVELOPMENTSSales in the first quarter of 2012 were US$2.4 billion, compared to US$2.2 billion in the same period of 2011due to increased sales for both Individual Markets and Retirement Services. The addition of severalwholesalers as well as overall improved productivity through added resources resulted in strong first quartersales in the Individual Markets retail bank channel.Net earnings for the first quarter of 2012 were up US$7 million from previous quarter primarily due to higher taxbenefits but down US$10 million from first quarter 2011 primarily due to unfavourable mortality experience year-over-year of US$12 million as a result of an abnormally high number of large claims in the closed block ofbusiness.Premiums and deposits were US$1.5 billion or 12% higher than the first quarter of 2011.Fee and other income for the three months ended March 31, 2012 was US$122 million, an increase of US$5million from the first quarter of 2011.The Maxim Lifetime Asset Allocation Series mutual funds and the Maxim SecureFoundation Portfolios togetherincreased by US$1.2 billion or 80% to US$2.7 billion assets under management over the last twelve months.The first quarter of 2012 contributed more than US$700 million to this increase illustrating significant progresson the strategic initiative to convert clients assets under administration to assets under management.Financial Services was the first provider to receive certification from DALBAR, Inc., an industry communicationsfirm, that its plan sponsor fee disclosure document complied with the U.S. Department of Labor’s new feedisclosure regulation. Financial Services also was one of the first retirement plan providers in the U.S. tocomplete delivery of its fee disclosure document to its plan sponsors.

27



GR

EA

T-W

EST

LIFE

CO

INC

.


OPERATING RESULTS


2012Dec. 31 2011

March 31 2011

Premiums and deposits $ 1,506 $ 1,761 $ 1,327Sales 2,417 3,435 2,180Fee and other income 122 121 116Net earnings 89 83 98

Premiums and deposits (US$) $ 1,506 $ 1,726 $ 1,340Sales (US$) 2,417 3,368 2,202Fee and other income (US$) 122 118 117Net earnings (US$) 89 82 99

Premiums and depositsPremiums and deposits for the first quarter of 2012 increased by US$166 million compared to the first quarter of2011. The increase was primarily due to an increase of US$93 million in Individual Markets and US$73 million inRetirement Services. The increases were from higher sales in both markets in the first quarter of 2012.

Premiums and deposits decreased by US$220 million compared with the previous quarter primarily due to a largesale in the Retirement Services market in the previous quarter.

SalesFor the first quarter, sales increased by US$215 million compared to the first quarter of 2011 primarily due to anincrease of US$121 million in Retirement Services and US$94 million in Individual Markets. The retail bank marketof Individual Markets experienced a strong first quarter in 2012 with US$115 million in sales, an increase of 62%over the first quarter of 2011 primarily due to the addition of several wholesalers as well as overall improvedproductivity from the adoption of electronic sales and marketing tools. Increased penetration of newer bankdistribution relationships and the addition of an accelerated benefit rider also contributed to the positive salesgrowth in the quarter.

Sales decreased by US$1.0 billion compared with the previous quarter primarily due to lower sales in thepublic/non-profit and 401(k) markets as a result of large sales in the fourth quarter of 2011 not repeated in the firstquarter of 2012.

Fee and other incomeFee and other income for the quarter of 2012 increased by US$5 million compared to the first quarter of 2011primarily due to increased average asset levels, driven by higher average equity market levels and positive netasset flows.

Fee and other income increased by US$4 million compared with the previous quarter primarily due to increasedaverage asset levels as a result of higher in-quarter equity market levels and positive net asset flows.

Net earningsNet earnings for the first quarter of 2012 decreased by US$10 million compared to the first quarter of 2011 primarilydue to unfavourable mortality experience year-over-year of US$12 million as a result of an abnormally high numberof large claims in the closed block of business.

28



GR

EA

T-WEST LIFEC

O IN

C.


Net earnings increased by US$7 million compared with the previous quarter primarily due to income tax benefits inquarter and higher net investment margins as a result of lowering interest crediting rates paid to policyholders,offset by unfavourable mortality experience in the closed block as a result of an abnormally high number of claimsin the first quarter of 2012.

ASSET MANAGEMENT1

2012 DEVELOPMENTS Premiums and deposits are up 7% from the prior quarter, but have decreased by US$3.2 billion as compared tothe same period last year, reflecting continued caution being exercised by equity investors due to marketvolatility. Assets Under Management (AUM) grew by US$7.6 billion from the previous quarter as strong market gains ofUS$9.6 billion outpaced net cash outflows of US$2.0 billion.Four Putnam mutual funds: The Putnam Global Income Trust, Putnam U.S. Government Income Trust, PutnamIncome Fund and The Putnam Massachusetts Tax Exempt Income Fund received 2012 Lipper Fund Awards fortheir consistent, strong risk-adjusted performance relative to peers for periods of three years or more.Putnam has entered into a strategic alliance with Bank of America Merrill Lynch. Through this alliance, Putnam’sdefined contribution plan products and services will be made available through the Merrill Lynch AdvisorAlliance program to Merrill Lynch Financial Advisors and their small and middle market clients. The AdvisorAlliance program includes a unique combination of Merrill Lynch investment services and recordkeeping andretirement plan administration services from a diverse selection of preferred alliance partners.

OPERATING RESULTS


2012Dec. 31 2011

March 31 2011

Premiums and deposits $ 5,731 $ 5,455 $ 8,852Fee and other income

Investment management fees 131 128 135Performance fees 2 1 7Service fees 34 38 38Underwriting & distribution fees 12 15 16

Fee and other income 179 182 196Net loss (12) (8) (13)

Premiums and deposits (US$) $ 5,731 $ 5,348 $ 8,941Fee and other income (US$)

Investment management fees (US$) 131 126 136Performance fees (US$) 2 1 7Service fees (US$) 34 37 38Underwriting & distribution fees (US$) 12 14 17

Fee and other income (US$) 179 178 198Net loss (US$) (12) (8) (13)

Premiums and depositsPremiums and deposits decreased by US$3.2 billion, compared to the same period in 2011. The quarterlydecrease is a result of strong overall sales in the first quarter of 2011 and continued caution exercised by equityinvestors due to market volatility.

29



GR

EA

T-W

EST

LIFE

CO

INC

.


Premiums and deposits increased by US$383 million or 7% compared with the previous quarter largely due topositive growth in institutional sales in the first quarter of 2012.

Fee and other incomeRevenue is derived primarily from investment management fees, performance fees, transfer agency and otherservice fees and underwriting and distribution fees. Generally, fees are earned based on AUM and may depend onfinancial markets, the relative performance of Putnam’s investment products, the number of retail accounts andsales.

Fee and other income for the first quarter of 2012 decreased by US$19 million compared to the same period in2011 primarily due to a decrease in investment management and distribution fees from lower average AUM and achange in asset mix, a decrease in performance fees, and lower service fees from a modest drop in retail accounts.

Fee and other income increased by US$1 million compared with the previous quarter, primarily due to an increasein investment management fees from higher average AUM and an increase in performance fees, partially offset bylower service and distribution fees from a reduction in retail accounts and sales.

Net earningsNet earnings for the first quarter increased by US$1 million compared with the same period last year. In quarterearnings include a release of a legal provision of US$16 million and lower operating expenses which was offset byincreases in fair value adjustments related to share-based compensation of US$9 million as well as lower feeincome.

Net earnings decreased by US$4 million compared with the previous quarter due to the increase in fair valueadjustments on share-based compensation of US$15 million and higher operating expenses of US$6 million,mostly offset by the partial release of a legal provision of US$16 million in the first quarter of 2012, and an increasein unrealized gains from seed capital portfolios.

ASSETS UNDER MANAGEMENT

Assets under management(US$ millions)


2012Dec. 31 2011

March 31 2011

Beginning assets $ 116,652 $ 113,871 $ 121,213Sales (includes dividends reinvested) 5,731 5,348 8,941Redemptions (7,700) (7,160) (7,102)

Net asset flows (1,969) (1,812) 1,839Impact of market/performance 9,596 4,593 4,159

Ending assets $ 124,279 $ 116,652 $ 127,211

Average assets under management $ 122,345 $ 117,077 $ 124,239

Average AUM for the three months ended March 31, 2012 was US$122 billion, comprising mutual funds of US$62billion and institutional accounts of US$60 billion. Average AUM decreased by US$1.9 billion compared to thethree months ended March 31, 2011 primarily due to net asset outflows in the first quarter of 2012 and the secondhalf of 2011 outweighing the impact of positive market performance during that period.

Average AUM increased by US$5.3 billion compared to the previous quarter primarily due to the impact offavourable market conditions in the first quarter of 2012 partially offset by net asset outflows.

30



GR

EA

T-WEST LIFEC

O IN

C.


UNITED STATES CORPORATEUnited States Corporate net earnings decreased by US$5 million compared to the first quarter of 2011 primarilydue to an income tax benefit in the first quarter of 2011.

Net earnings decreased by US$6 million compared with the previous quarter primarily due to a change in taxestimate in the fourth quarter of 2011.

EUROPE The Europe segment comprises two distinct business units: Insurance & Annuities and Reinsurance. Insurance &Annuities consists of operations in the U.K., Isle of Man, Ireland and Germany which offer protection and wealthmanagement products including payout annuity products, conducted through Canada Life and its subsidiaries.Reinsurance operates primarily in the U.S., Barbados and Ireland, and is conducted through Canada Life, LondonLife and their subsidiaries.

TRANSLATION OF FOREIGN CURRENCYForeign currency assets and liabilities are translated into Canadian dollars at the market rate at the end of thefinancial period. All income and expense items are translated at an average rate for the period.

Currency translation impact is a non-IFRS financial measure which attempts to remove the impact of changes incurrency translation rates on IFRS results. Refer to the Cautionary Note regarding non-IFRS Financial Measuresat the beginning of this document.

Selected consolidated financial information - EuropeFor the three months ended

March 312012

Dec. 31 2011

March 31 2011

Premiums and deposits $ 1,983 $ 2,068 $ 2,180Sales 755 881 1,108Fee and other income 145 170 130Net earnings - common shareholders 141 181 86

Total assets $ 71,245 $ 69,649 $ 66,723Other assets under administration 107 102 111Total assets under administration $ 71,352 $ 69,751 $ 66,834

2012 DEVELOPMENTSNet earnings for the first quarter of 2012 were $141 million, an increase of $55 million compared to the firstquarter of 2011. Included in net earnings for the first quarter of 2011 was the establishment of catastropheprovisions relating to earthquake events in Japan and New Zealand with an after-tax shareholders' net earningsimpact of $75 million.Fee and other income for the first quarter of 2012 was $145 million, up 11% compared to the same period of2011. Compared to the fourth quarter of 2011, fee and other income is down $25 million mainly due to thetiming of fee income recognized in Ireland in the fourth quarter of 2011 and currency movement.Insurance & Annuities sales for the first quarter of 2012 were $755 million, down by 32% compared to the sameperiod of 2011 reflecting challenging market conditions and weak consumer confidence. The reduction of corporate tax rates in the U.K. from 26% to 24% favourably impacted net earnings in the firstquarter of 2012 by $6 million.

31



GR

EA

T-W

EST

LIFE

CO

INC

.


BUSINESS UNITS – EUROPE

Comparing 2012 to 2011, the Canadian dollar strengthened against the British pound and the euro for the firstquarter of 2012. As a result of currency movement, net earnings were negatively impacted by $1 million comparedto the first quarter of 2011.

INSURANCE & ANNUITIES1

OPERATING RESULTS


2012Dec. 31 2011

March 31 2011

Premiums and deposits $ 1,047 $ 1,181 $ 1,376Sales 755 881 1,108Fee and other income 132 157 120Net earnings 106 117 125

Premiums and depositsPremiums and deposits for the first quarter decreased by $329 million, compared with the same quarter last year,primarily due to lower sales of savings products in the U.K. and Isle of Man and payout annuities in the U.K. Theseresults reflect current challenging conditions including historically low interest rates and weak consumerconfidence.

Premiums and deposits decreased by $134 million compared with the previous quarter mainly due to currencymovement, lower sales of savings products in the U.K., as well as pension products in Ireland and Germany, for thesame reasons above. These decreases were partially offset by increased sales of payout annuities in the U.K.

SalesCompared to the same quarter last year, overall sales decreased by $353 million due to lower sales of singlepremium savings products in the U.K. reflecting the generally difficult market environment, the timing of sales oftranches of single premium investment products and particularly strong sales of U.K. payout annuities in the firstquarter of 2011. Lower sales of single premium savings products in the Isle of Man reflect normal fluctuations inthe number of large cases. Sales of pension products in Ireland declined due to a general market slowdown andaggressive competitor pricing in this market.

Sales decreased by $126 million from the previous quarter primarily due to declines in both sales of single premiumsavings products in the U.K. and Isle of Man. Lower sales of pension products in Ireland and Germany ascompared to the fourth quarter of 2011 reflect the normal seasonality in these markets. Partly offsetting thesedecreases was a $153 million increase in payout annuities in the U.K. as a result of the Company’s position in thismarket being more competitive.

Fee and other incomeFee and other income increased by $12 million compared to the same quarter last year due mainly to higheraverage assets under management in Germany and the U.K.

Fee and other income for the quarter decreased by $25 million compared to the previous quarter due mainly to thetiming of fee income recognized in Ireland in the fourth quarter of 2011 and currency movement.

32



GR

EA

T-WEST LIFEC

O IN

C.


Net earnings Net earnings for the first quarter of 2012 decreased by $19 million compared to the same quarter last year. Netearnings in the first quarter of 2011 included a positive impact of $44 million from changes in valuationmethodology of insurance contract liability reserves backed by investment properties. Investment experience in thefirst quarter of 2012 was $25 million higher than the same quarter last year.

Net earnings decreased by $11 million compared to the previous quarter. Net earnings in the fourth quarter of2011 included the positive impact of $72 million of actuarial basis changes resulting from the incorporation of thenew actuarial guidance on mortality improvements. Investment experience in the first quarter of 2012 was $54million higher than the fourth quarter of 2011. Reductions in U.K. corporate tax rates in the first quarter of 2012positively impacted net earnings by $6 million.

REINSURANCE1

OPERATING RESULTS


2012Dec. 31 2011

March 31 2011

Premiums and deposits $ 936 $ 887 $ 804Fee and other income 13 13 10Net earnings (loss) 34 73 (38)

Premiums and depositsPremiums and deposits for the first quarter of 2012 increased by $132 million compared with last year primarily dueto higher volumes in the life businesses and currency movement.

Premiums and deposits increased by $49 million compared with the previous quarter due primarily to highervolumes in the life businesses partially offset by currency movement.

Fee and other incomeFee and other income for the first quarter of 2012 increased by $3 million compared with the first quarter of 2011due to higher volumes. Fee and other income was at the same level compared to the previous quarter.

Net earningsNet earnings for the first quarter of 2012 increased by $72 million compared to the same period last year. Includedin net earnings for the first quarter of 2011 was the establishment of catastrophe provisions relating to earthquakeevents in Japan and New Zealand with an after-tax shareholders' net earnings impact of $75 million. Excludingthese impacts, net earnings were down $3 million. Unfavourable mortality experience in traditional life of $12million and strengthening of interest margins and other reserve strengthening of $19 million were offset by a $10million increase in new business gains, favourable claims experience in the annuity business of $10 million, and adecrease in unitized with profit contract liabilities of $10 million.

Net earnings for the first quarter of 2012 decreased by $39 million compared to the previous quarter due primarilyto interest risk margin strengthening in insurance contract liabilities this period compared to a net release frommortality improvement and policyholder behaviour assumptions changes last quarter. In addition, mortalityexperience in traditional life was unfavourable by $18 million, but this impact was largely offset by a $4 millionincrease in new business gains and a net Property & Casualty liability strengthening of $15 million in the priorquarter that was not repeated.

33



GR

EA

T-W

EST

LIFE

CO

INC

.


EUROPE CORPORATEThe Europe Corporate account includes financing charges, the impact of certain non-continuing items as well asthe results for the legacy international businesses.

Europe Corporate net earnings were $1 million for the three months ended March 31, 2012, an increase of $2million compared to the same period in 2011.

Compared to the previous quarter net earnings increased by $10 million primarily due to the negative impact ofbasis changes in the legacy international operations in the fourth quarter of 2011.

LIFECO CORPORATE OPERATING RESULTSThe Lifeco Corporate segment includes operating results for activities of Lifeco that are not associated with themajor business units of the Company.

For the three months ended March 31, 2012, Lifeco Corporate reported a net loss of $7 million compared to a netloss of $4 million in the first quarter of 2011. The increase in the net loss of $3 million is primarily due to lowerinvestment income in the first quarter of 2012.

Net earnings decreased by $127 million compared to the previous quarter primarily due to the impact of twounrelated litigation provisions in the fourth quarter of 2011. During the fourth quarter of 2011 the Company re-evaluated and reduced the litigation provision established in the third quarter of 2010 which positively impactedcommon shareholders' net earnings by $223 million after-tax. Additionally, the Company established provisions for$99 million after-tax in respect of the settlement of litigation relating to the Company’s investment in a USA basedprivate equity firm. The net impact of these two unrelated matters was $124 million after-tax or $0.129 per commonshare.

34



GR

EA

T-WEST LIFEC

O IN

C.


OTHER INFORMATION

QUARTERLY FINANCIAL INFORMATION

Quarterly financial information(in $ millions, except per share amounts)

2012 2011 2010Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2

Total revenue $ 6,496 $ 8,003 $ 8,506 $ 7,134 $ 6,255 $ 5,247 $ 9,116 $ 7,413

Common ShareholdersNet earnings

Total 451 624 457 526 415 465 267 455Basic - per share 0.475 0.657 0.481 0.553 0.438 0.491 0.281 0.480Diluted - per share 0.472 0.651 0.478 0.550 0.436 0.488 0.281 0.477

Operating earnings(1)

Total 451 500 457 526 415 465 471 455Basic - per share 0.475 0.528 0.481 0.553 0.438 0.491 0.497 0.480Diluted - per share 0.472 0.523 0.478 0.550 0.436 0.488 0.494 0.477

(1) Operating earnings are presented as a non-IFRS financial measure of earnings performance before certain other items that managementconsiders to be of a non-recurring nature. Refer to the "Non-IFRS Financial Measures" section of this report.

Lifeco's consolidated net earnings attributable to common shareholders were $451 million for the first quarter of2012 compared to $415 million reported a year ago. On a per share basis, this represents $0.475 per commonshare ($0.472 diluted) for the first quarter of 2012 compared to $0.438 per common share ($0.436 diluted) a yearago.

Total revenue for the first quarter of 2012 was $6,496 million and comprises premium income of $4,529 million,regular net investment income of $1,439 million, a negative change in fair value through profit or loss on investmentassets of $196 million, and fee and other income of $724 million. Total revenue for the first quarter of 2011 was$6,255 million, including premium income of $4,295 million, regular net investment income of $1,427 million, anegative change in fair value through profit or loss on investment assets of $187 million and fee and other incomeof $720 million.

DISCLOSURE CONTROLS AND PROCEDURESBased on their evaluations as of March 31, 2012, the President and Chief Executive Officer and the ExecutiveVice-President and Chief Financial Officer have concluded that the Company's disclosure controls and proceduresare effective at the reasonable assurance level in ensuring that information relating to the Company which isrequired to be disclosed in reports filed under provincial and territorial securities legislation is: (a) recorded,processed, summarized and reported within the time periods specified in the provincial and territorial securitieslegislation, and (b) accumulated and communicated to the Company's senior management, including the Presidentand Chief Executive Officer and the Executive Vice-President and Chief Financial Officer, as appropriate, to allowtimely decisions regarding required disclosure.

INTERNAL CONTROL OVER FINANCIAL REPORTINGThe Company’s internal control over financial reporting is designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance withIFRS. The Company’s management is responsible for establishing and maintaining adequate internal control overfinancial reporting for Lifeco. All internal control systems have inherent limitations and may become inadequatebecause of changes in conditions. Therefore, even those systems determined to be effective can provide onlyreasonable assurance with respect to financial statement preparation and presentation.

35



GR

EA

T-W

EST

LIFE

CO

INC

.


There have been no changes in the Company’s internal control over financial reporting during the period endedMarch 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

TRANSLATION OF FOREIGN CURRENCYThrough its operating subsidiaries, Lifeco conducts business in multiple currencies. The four primary currenciesare the Canadian dollar, the U.S. dollar, the British pound and the euro. Throughout this document, foreigncurrency assets and liabilities are translated into Canadian dollars at the market rate at the end of the financialperiod. All income and expense items are translated at an average rate for the period. The rates employed are:

Translation of foreign currencyPeriod ended Mar. 31

2012Dec. 31

2011Sept. 30

2011June 30

2011Mar. 31

2011United States dollarBalance sheet $1.00 $1.02 $1.04 $0.96 $0.97Income and expenses $1.00 $1.02 $0.98 $0.97 $0.99

British poundBalance sheet $1.60 $1.58 $1.62 $1.55 $1.56Income and expenses $1.57 $1.61 $1.58 $1.58 $1.58

EuroBalance sheet $1.33 $1.32 $1.40 $1.40 $1.38Income and expenses $1.31 $1.38 $1.38 $1.39 $1.35

MUTUAL FUNDS DEPOSITS AND ASO PREMIUM EQUIVALENTS (ASO CONTRACTS)The financial statements of a life insurance company do not include the assets, liabilities, deposits and withdrawalsof mutual funds or the claims payments related to ASO group health contracts. However, the Company does earnfee and other income related to these contracts. Mutual funds and ASO contracts are an important aspect of theoverall business of the Company and should be considered when comparing volumes, size and trends.

Additional information relating to Lifeco, including Lifeco's most recent consolidated financial statements, CEO/CFOcertification and Annual Information Form are available at www.sedar.com.

36



GR

EA

T-WEST LIFEC

O IN

C.

37

CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) (in Canadian $ millions except per share amounts)

For the three months ended March 31 December 31 March 31 2012 2011 2011 Income Premium income Gross premiums written $ 5,198 $ 5,033 $ 4,941 Ceded premiums (669) (699) (646) Total net premiums 4,529 4,334 4,295 Net investment income (note 3) Regular net investment income 1,439 1,365 1,427

Changes in fair value through profit or loss (196) 1,564 (187) Total net investment income 1,243 2,929 1,240 Fee and other income 724 740 720 6,496 8,003 6,255 Benefits and expenses Policyholder benefits

Insurance and investment contracts Gross 4,606 4,165 4,423 Ceded (387) (275) (333) 4,219 3,890 4,090

Policyholder dividends and experience refunds 364 309 353 Change in insurance and investment contract liabilities 160 2,141 136

Total paid or credited to policyholders 4,743 6,340 4,579 Commissions 410 409 377 Operating and administrative expenses 640 142 645 Premium taxes 72 76 56 Financing charges (note 7) 72 73 72

Amortization of finite life intangible assets 26 28 23 Earnings before income taxes 533 935 503 Income taxes (note 13) 57 181 69 Net earnings before non-controlling interests 476 754 434 Attributable to non-controlling interests - 106 (5) Net earnings 476 648 439 Perpetual preferred share dividends 25 24 24 Net earnings - common shareholders $ 451 $ 624 $ 415 Earnings per common share (note 12)

Basic $ 0.475 $ 0.657 $ 0.438 Diluted $ 0.472 $ 0.651 $ 0.436



GR

EA

T-W

EST

LIFE

CO

INC

.

38

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) (in Canadian $ millions)


2012 December 31

2011 March 31

2011 Net earnings $ 476 $ 648 $ 439 Other comprehensive income (loss) Unrealized foreign exchange gains (losses) on translation of foreign

operations

(61)

(210)

(63) Income tax (expense) benefit - - 2

Unrealized gains (losses) on available for sale assets (21) 33 (32)

Income tax (expense) benefit 1 (5) 1 Realized (gains) losses on available for sale assets (36) (27) (42)

Income tax expense (benefit) 10 6 13 Unrealized gains (losses) on cash flow hedges 3 43 23

Income tax (expense) benefit (1) (16) (9) Realized (gains) losses on cash flow hedges - 1 -

Income tax expense (benefit) - (1) - Non-controlling interests 24 (33) 13

Income tax (expense) benefit (5) 22 - (86) (187) (94) Comprehensive income $ 390 $ 461 $ 345



GR

EA

T-WEST LIFEC

O IN

C.

39

CONSOLIDATED BALANCE SHEETS (unaudited) (in Canadian $ millions)

March 31 December 31 2012 2011 Assets Cash and cash equivalents $ 1,621 $ 2,056 Bonds (note 3) 79,323 78,073 Mortgage loans (note 3) 17,368 17,432 Stocks (note 3) 6,918 6,704 Investment properties (note 3) 3,263 3,201 Loans to policyholders 7,013 7,162

115,506 114,628 Funds held by ceding insurers 10,127 9,923 Goodwill 5,398 5,401 Intangible assets 3,124 3,154 Derivative financial instruments 930 968 Owner occupied properties 501 491 Fixed assets 139 137 Reinsurance assets (note 6) 1,983 2,061 Other assets 4,409 4,283 Deferred tax assets 1,111 1,140 Segregated funds for the risk of unitholders (note 5) 100,474 96,582 Total assets

$ 243,702

$ 238,768

Liabilities Insurance contract liabilities (note 6) $ 114,798 $ 114,730 Investment contract liabilities (note 6) 763 782 Debentures and other debt instruments 4,426 4,313 Funds held under reinsurance contracts 169 169 Derivative financial instruments 290 316 Other liabilities 4,119 4,287 Deferred tax liabilities 890 929 Repurchase agreements 833 23 Capital trust securities 534 533 Investment and insurance contracts on account of unitholders (note 5) 100,474 96,582 Total liabilities

227,296

222,664

Equity Non-controlling interests Participating account surplus in subsidiaries 2,208 2,227 Non-controlling interests in capital stock 3 3 Shareholders' equity Share capital (note 8) Perpetual preferred shares 2,144 1,894 Common shares 5,829 5,828 Accumulated surplus 6,481 6,327 Accumulated other comprehensive income (loss) (319) (233) Contributed surplus 60 58 Total equity 16,406 16,104 Total liabilities and equity

$ 243,702

$ 238,768



GR

EA

T-W

EST

LIFE

CO

INC

.

40

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited) (in Canadian $ millions)

March 31, 2012

Share capital

Contributed surplus

Accumulated surplus

Accumulated other

comprehensive income (loss)

Non-

controlling interests

Total equity

Balance, beginning of year $ 7,722 $ 58 $ 6,327 $ (233) $ 2,230 $ 16,104 Net earnings - - 476 - - 476 Other comprehensive income (loss) - - - (86) (19) (105) 7,722 58 6,803 (319) 2,211 16,475 Share issue costs - - (5) - - (5) Dividends to shareholders Perpetual preferred - - (25) - - (25) Common shareholders - - (292) - - (292) Shares issued under stock option

plan

1

-

-

-

-

1 Issuance of new preferred shares

(note 8)

250

-

-

-

-

250 Share based payments - 2 - - - 2 Balance, end of period $ 7,973 $ 60 $ 6,481 $ (319) $ 2,211 $ 16,406 December 31, 2011

Share capital

Contributed surplus

Accumulated surplus

Accumulated other


Non-


Total equity

Balance, beginning of year $ 7,699 $ 55 $ 5,474 $ (459) $ 2,047 $ 14,816 Net earnings - - 2,118 - 121 2,239 Other comprehensive income (loss) - - - 226 62 288 7,699 55 7,592 (233) 2,230 17,343 Dividends to shareholders Perpetual preferred - - (96) - - (96) Common shareholders - - (1,169) - - (1,169) Shares issued under stock option

plan

26

-

-

-

-

26 Surrender of preferred shares (3) - - - - (3) Share based payments - 3 - - - 3 Balance, end of year $ 7,722 $ 58 $ 6,327 $ (233) $ 2,230 $ 16,104 March 31, 2011

Share capital

Contributed surplus

Accumulated surplus

Accumulated other


Non-


Total equity

Balance, beginning of year $ 7,699 $ 55 $ 5,474 $ (459) $ 2,047 $ 14,816 Net earnings - - 439 - (5) 434 Other comprehensive income (loss) - - - (94) (13) (107) 7,699 55 5,913 (553) 2,029 15,143 Dividends to shareholders Perpetual preferred - - (24) - - (24) Common shareholders - - (291) - - (291) Decrease in non-controlling

interests in capital stock

-

-

-

-

1

1 Shares issued under stock option

plan

14

-

-

-

-

14 Share based payments - 1 - - - 1 Balance, end of period $ 7,713 $ 56 $ 5,598 $ (553) $ 2,030 $ 14,844



GR

EA

T-WEST LIFEC

O IN

C.

41

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in Canadian $ millions)

For the three months ended March 31 2012 2011 Operations Earnings before income taxes $ 533 $ 503 Income taxes paid, net of refunds received 38 (8) Adjustments: Change in insurance and investment contract liabilities 149 116 Change in funds held by ceding insurers (19) 131 Change in funds held under reinsurance contracts 11 - Change in deferred acquisition costs 7 (11) Change in reinsurance assets 75 (32) Changes in fair value through profit or loss 196 187 Other (379) (225) Cash flows from operations 611 661 Financing Activities Issue of common shares 1 14 Issue of preferred shares 250 - Increase in line of credit of subsidiary 135 99 Increase in (repayment of) debentures and other debt instruments (1) 6 Share issue costs (5) - Dividends paid on common shares (292) (291) Dividends paid on preferred shares (25) (24) 63 (196) Investment Activities Bond sales and maturities 4,927 5,784 Mortgage loan repayments 467 451 Stock sales 586 559 Change in loans to policyholders 57 5 Change in repurchase agreements 811 (32) Investment in bonds (6,932) (5,441) Investment in mortgage loans (439) (819) Investment in stocks (560) (671) Investment in investment properties (22) (75) (1,105) (239) Effect of changes in exchange rates on cash and cash equivalents (4) 4 Increase (decrease) in cash and cash equivalents (435) 230 Cash and cash equivalents, beginning of period 2,056 1,840 Cash and cash equivalents, end of period $ 1,621 $ 2,070

Supplementary cash flow information

Interest income received $ 1,142 $ 1,148 Interest paid $ 29 $ 32 Dividend income received $ 55 $ 47



GR

EA

T-W

EST

LIFE

CO

INC

.

42

Notes to the Condensed Consolidated Interim Financial Statements (unaudited)

(in Canadian $ millions except per share amounts)

1. Corporate Information Great-West Lifeco Inc. (Lifeco or the Company) is a publicly listed company (TSX: GWO), incorporated and domiciled in Canada. The registered address of the Company is 100 Osborne Street North, Winnipeg, Manitoba, Canada, R3C 1V3. Lifeco is a member of the Power Financial Corporation group of companies and its direct parent is Power Financial Corporation. Lifeco is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment management and reinsurance businesses, primarily in Canada, the United States, Europe and Asia through its major operating subsidiaries The Great-West Life Assurance Company (Great-West Life), London Life Insurance Company (London Life), The Canada Life Assurance Company (Canada Life), Great-West Life & Annuity Insurance Company (GWL&A) and Putnam Investments, LLC (Putnam LLC). The condensed consolidated interim unaudited financial statements (financial statements) of the Company for the quarter ended March 31, 2012 were authorized for issue by the Board of Directors on May 3, 2012.

2. Basis of Presentation and Summary of Accounting Policies The financial statements of Lifeco at March 31, 2012 have been prepared in accordance with the requirements of International Accounting Standard (IAS) 34, Interim Financial Reporting (IAS 34) as issued by the International Accounting Standards Board (IASB) using the same accounting policies and methods of computation followed in the consolidated financial statements for the year ended December 31, 2011. During the three months ended March 31, 2012 the Company did not adopt any changes in accounting policy that resulted in a material impact to the financial statements of the Company. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company's annual report dated December 31, 2011. Critical Estimates and Judgments The preparation of financial statements in conformity with International Financial Reporting Standards (IFRS) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. The valuation of insurance and investment contract liabilities, certain financial assets and liabilities, goodwill and indefinite life intangible assets, income taxes, contingencies and pension plans and other post-employment benefits are the most significant components of the Company’s financial statements subject to management estimates. The financial statements of the Company are measured using the functional currency which is in the primary economic environment in which the Company operates within. Management has applied judgments in the classification of insurance and investment contracts, and financial instruments within the financial statements. In addition, the financial statements required management's judgments in accounting for deferred income reserves (DIR) and deferred acquisition costs (DAC), the valuation of deferred income tax assets, the level of componentization of property, plant and equipment, determination of relationships with subsidiaries and special purpose entities and the identification of cash generating units and operating segments. The year to date results of the Company reflect management's judgments regarding the impact of prevailing global credit, equity and foreign exchange market conditions. The estimation of insurance and investment contract liabilities relies upon investment credit ratings. The Company's practice is to use third party independent credit ratings where available. Credit rating changes may lag developments in the current environment. Subsequent credit rating adjustments will impact insurance and investment contract liabilities.



GR

EA

T-WEST LIFEC

O IN

C.

43

Future Accounting Policies The Company may be impacted in the future by the IFRS set out in the following table:

Revised Standard Summary of Future Changes IFRS 4 - Insurance Contracts The IASB issued an exposure draft proposing changes to the accounting

standard for insurance contracts in July 2010. The proposal would require an insurer to measure insurance liabilities using a model focusing on the amount, timing, and uncertainty of future cash flows associated with fulfilling its insurance contracts. This is vastly different from the connection between insurance assets and liabilities considered under the Canadian Asset Liability Method (CALM) and may cause significant volatility in the results of the Company. The exposure draft also proposes changes to the presentation and disclosure within the financial statements. The Company will continue to measure insurance contract liabilities using CALM until such time when a new IFRS for insurance contract measurement is issued. A final standard is not expected to be implemented for several years; the Company continues to actively monitor developments in this area.

IFRS 9 - Financial Instruments The IASB tentatively approved the adoption of the proposed new IFRS 9, Financial Instruments standard to be effective January 1, 2015. The new standard requires all financial assets to be classified on initial recognition at amortized cost or fair value while eliminating the existing categories of available for sale, held to maturity, and loans and receivables. The new standard also requires:

embedded derivatives to be assessed for classification together with their financial asset host;

a single expected loss impairment method be used for financial assets; and amendments to the criteria for hedge accounting and measuring

effectiveness The full impact of IFRS 9 on the Company will be evaluated after the remaining stages of the IASB’s project to replace IAS 39, Financial Instruments impairment methodology, hedge accounting, and asset and liability offsetting are finalized. The Company continues to actively monitor developments in this area.



GR

EA

T-W

EST

LIFE

CO

INC

.

44

Revised Standard Summary of Future Changes IFRS 10 - Consolidated Financial Statements; IFRS 11 - Joint Arrangements; IFRS 12 - Disclosure of Interests in Other Entities

Effective January 1, 2013, the Company plans to adopt IFRS 10, Consolidated Financial Statements, IFRS 11, Joint Arrangements, and IFRS 12, Disclosure of Interest in Other Entities for the presentation and preparation of its consolidated financial statements. IFRS 10, Consolidated Financial Statements uses consolidation principles based on a revised definition of control. The definition of control is dependent on the power of the investor to direct the activities of the investee, the ability of the investor to derive variable benefits from its holdings in the investee, and a direct link between the power to direct activities and receive benefits. IFRS 11, Joint Arrangements separates jointly controlled entities between joint operations and joint ventures. The standard has eliminated the option of using proportionate consolidation for accounting for the interests in joint ventures, now requiring an entity to use the equity method of accounting for interests in joint ventures. IFRS 12, Disclosure of Interests in Other Entities proposes new disclosure requirements for the interest an entity has in subsidiaries, joint arrangements, associates, and structured entities. The standard requires enhanced disclosure including how control was determined and any restrictions that might exist on consolidated assets and liabilities presented within the financial statements. The Company is evaluating the impact of the above standards on its consolidation procedures and disclosure in preparation of the January 1, 2013 effective date.

IFRS 13 - Fair Value Measurement

Effective January 1, 2013, the Company will adopt the guidance in IFRS 13, Fair Value Measurement for the measurement and disclosure of assets and liabilities held at fair value. The standard defines fair value, provides a single framework for the measurement of fair value and disclosure requirements for fair value measurements. The Company is currently evaluating the impact this standard will have on its financial statements when it becomes effective January 1, 2013.

IAS 1 - Presentation of Financial Statements

Effective January 1, 2013, the Company will adopt the guidance in the amended IAS 1, Presentation of Financial Statements. The amended standard includes requirements that other comprehensive income (OCI) be classified by nature and grouped between those items that will be reclassified subsequently to profit or loss (when specific conditions are met) and those that will not be reclassified. The Company is actively evaluating the impact this standard will have on the presentation of its financial statements.



GR

EA

T-WEST LIFEC

O IN

C.

45

Revised Standard Summary of Future Changes IAS 17 - Leases The IASB issued an exposure draft proposing a new accounting model for leases

where both lessees and lessors would record the assets and liabilities on the balance sheet at the present value of the lease payments arising from all lease contracts. The new classification would be the right-of-use model, replacing the operating and finance lease accounting models that currently exist. The full impact of adoption of the proposed changes will be determined once the final lease standard is issued, which is expected to be in 2012.

IAS 18 - Revenue The IASB issued a second exposure draft in November 2011 which proposed a single revenue recognition standard to align the financial reporting of revenue from contracts with customers and related costs. A company would recognize revenue when it transfers goods or services to a customer in the amount of consideration the company expects to receive from the customer. The full impact of adoption of the proposed changes will be determined once the final revenue recognition standard is issued, which is targeted for release in 2012 or 2013.

IAS 19 - Employee Benefits The IASB published an amended version of this standard in June 2011 that eliminates the corridor approach for actuarial gains and losses resulting in those gains and losses being recognized immediately through OCI. As a result the net pension asset or liability will reflect the full funded status of the pension plan on the Consolidated Balance Sheets. Further, the standard includes changes to how the defined benefit obligation and the fair value of the plan assets would be presented and disclosed within the financial statements of an entity. The Company will continue to use the corridor method until January 1, 2013 when the revised standard for employee benefits becomes effective. In accordance with the transitional provisions in IAS 19, this change in IFRS will be applied retroactively to January 1, 2012.

IFRS 7 - Financial Instruments: Disclosure

Effective January 1, 2013, the Company will adopt the guidance in the amendments to IFRS 7, Financial Instruments. The amended standard introduces financial instrument disclosures related to rights of offset and related arrangements under master netting agreements. The Company is evaluating the impact this standard will have on the presentation of its financial statements.

IAS 32 - Financial Instruments: Presentation

Effective January 1, 2014, the Company will adopt the guidance in the amendments to IAS 32, Financial Instruments–Presentation. The amended standard clarifies the requirements for offsetting financial assets and financial liabilities. The Company is evaluating the impact this standard will have on the presentation of its financial statements.



GR

EA

T-W

EST

LIFE

CO

INC

.

46

3. Portfolio Investments (a) Carrying values and estimated market values of portfolio investments are as follows:

March 31, 2012 December 31, 2011 Carrying

value Market value

Carrying value

Market value

Bonds Designated fair value through profit or loss (1) $ 59,935 $ 59,935 $ 59,856 $ 59,856 Classified fair value through profit or loss (1) 1,859 1,859 1,853 1,853 Available for sale 7,757 7,757 6,620 6,620 Loans and receivables 9,772 10,940 9,744 10,785 79,323 80,491 78,073 79,114 Mortgage loans Residential 5,966 6,350 5,996 6,424 Non-residential 11,402 12,125 11,436 12,238 17,368 18,475 17,432 18,662 Stocks Designated fair value through profit or loss (1) 5,711 5,711 5,502 5,502 Available for sale 865 865 864 864 Other 342 426 338 406 6,918 7,002 6,704 6,772 Investment properties 3,263 3,263 3,201 3,201 $ 106,872 $ 109,231 $ 105,410 $ 107,749

(1) Investments can be fair value through profit or loss in two ways: designated as fair value through profit or

loss at the option of management; or, classified as fair value through profit or loss if they are actively traded for the purpose of earning investment income.

(b) Included in portfolio investments are the following:

Carrying amount of impaired investments March 31

2012 December 31

2011 Impaired amounts by type

Fair value through profit or loss $ 307 $ 290 Available for sale 28 51 Loans and receivables 26 35

Total $ 361 $ 376

Provisions on loans and receivables were $36 at March 31, 2012 and $36 at December 31, 2011.



GR

EA

T-WEST LIFEC

O IN

C.

47

(c) Net investment income comprises the following: For the three months ended March 31, 2012

Bonds

Mortgage loans

Stocks

Investment properties

Other

Total

Regular net investment income:

Investment income earned $ 925 $ 226 $ 56 $ 62 $ 156 $ 1,425 Net realized gains (losses) (available for sale) 35 - 1 - - 36

Net realized gains (losses) (other classifications) 3 8 - - - 11

Other income and expenses - - - (15) (18) (33) 963 234 57 47 138 1,439 Changes in fair value on fair value through profit or loss assets:

Net realized/unrealized gains (losses) (classified fair value through profit or loss)

(7)

-

-

-

-

(7)

Net realized/unrealized gains (losses) (designated fair value through profit or loss)

(374)

-

243

36

(94)

(189)

(381) - 243 36 (94) (196) Net investment income $ 582 $ 234 $ 300 $ 83 $ 44 $ 1,243

For the three months ended March 31, 2011

Bonds

Mortgage loans

Stocks

Investment properties

Other

Total

Regular net investment income:

Investment income earned $ 946 $ 215 $ 42 $ 61 $ 147 $ 1,411 Net realized gains (losses) (available for sale) 39 - 3 - - 42

Net realized gains (losses) (other classifications) 1 5 - - - 6

Net recovery (provision) for credit losses (loans and receivables)

1

-

-

-

-

1

Other income and expenses - - - (16) (17) (33) 987 220 45 45 130 1,427 Changes in fair value on fair value through profit or loss assets:

Net realized/unrealized gains (losses) (classified fair value through profit or loss)

(16)

-

-

-

-

(16)

Net realized/unrealized gains (losses) (designated fair value through profit or loss)

(406)

-

276

65

(106)

(171)

(422) - 276 65 (106) (187) Net investment income $ 565 $ 220 $ 321 $ 110 $ 24 $ 1,240



GR

EA

T-W

EST

LIFE

CO

INC

.

48

Investment income earned comprises income from investments that are classified as available for sale, loans and receivables and classified or designated as fair value through profit or loss. Investment income from bonds and mortgages includes interest income and premium and discount amortization. Income from stocks includes dividends and equity income from the investment in IGM Financial Inc. (IGM). Investment properties income includes rental income earned on investment properties, ground rent income earned on leased and sub-leased land, fee recoveries, lease cancellation income, and interest and other investment income earned on investment properties.

4. Risk Management

The Company has policies relating to the identification, measurement, monitoring, mitigating, and controlling of risks associated with financial instruments. The key risks related to financial instruments are credit risk, liquidity risk and market risk (currency, interest rate and equity). Our risk governance structure and risk management approach have not substantially changed from that described in Lifeco's 2011 Annual Report. Certain risks have been outlined below. For a complete discussion of our risk governance structure and our risk management approach, see the "Financial Instruments Risk Management" note in the Company's December 31, 2011 consolidated financial statements. The Company has also established policies and procedures designed to identify, measure and report all material risks. Management is responsible for establishing capital management procedures for implementing and monitoring the capital plan. The Board of Directors reviews and approves all capital transactions undertaken by management. (a) Credit Risk

Credit risk is the risk of financial loss resulting from the failure of debtors making payments when due. Concentration of Credit Risk Concentrations of credit risk arise from exposures to a single debtor, a group of related debtors or groups of debtors that have similar credit risk characteristics in that they operate in the same geographic region or in similar industries. No significant changes have occurred from the year ended December 31, 2011.

(b) Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet all cash outflow obligations as they come due. The following policies and procedures are in place to manage this risk: The Company closely manages operating liquidity through cash flow matching of assets and liabilities and

forecasting earned and required yields, to ensure consistency between policyholder requirements and the yield of assets.

Management closely monitors the solvency and capital positions of its principal subsidiaries opposite liquidity requirements at the holding company. Additional liquidity is available through established lines of credit or the capital markets. The Company maintains a $200 million committed line of credit with a Canadian chartered bank.

(c) Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market factors which include three types: currency risk, interest rate (including related inflation) risk and equity risk.



GR

EA

T-WEST LIFEC

O IN

C.

49

(i) Currency Risk

Currency risk relates to the Company operating and holding financial instruments in different currencies. For the assets backing insurance and investment contract liabilities that are not matched by currency, changes in foreign exchange rates can expose the Company to the risk of foreign exchange losses not offset by liability decreases. The Company has net investments in foreign operations. In addition, the Company’s debt obligations are mainly denominated in Canadian dollars. In accordance with IFRS, foreign currency translation gains and losses from net investments in foreign operations, net of related hedging activities and tax effects, are recorded in accumulated other comprehensive income (AOCI). Strengthening or weakening of the Canadian dollar spot rate compared to the U.S. dollar, British pound and euro spot rates impacts the Company’s total share capital and surplus. Correspondingly, the Company’s book value per share and capital ratios monitored by rating agencies are also impacted. A 10% weakening of the Canadian dollar against foreign currencies would be expected to increase

non-participating insurance and investment contract liabilities and their supporting assets by approximately the same amount resulting in an immaterial change to net earnings. A 10% strengthening of the Canadian dollar against foreign currencies would be expected to decrease non-participating insurance and investment contract liabilities and their supporting assets by approximately the same amount resulting in an immaterial change in net earnings.

(ii) Interest Rate Risk

Interest rate risk exists if asset and liability cash flows are not closely matched and interest rates change causing a difference in value between the asset and liability. Projected cash flows from the current assets and liabilities are used in CALM to determine insurance contract liabilities. Valuation assumptions have been made regarding rates of returns on supporting assets, fixed income, equity and inflation. The valuation assumptions use best estimates of future reinvestment rates and inflation assumptions with an assumed correlation together with margins for adverse deviation set in accordance with professional standards. These margins are necessary to provide for possibilities of misestimation and/or future deterioration in the best estimate assumptions and provide reasonable assurance that insurance contract liabilities cover a range of possible outcomes. Margins are reviewed periodically for continued appropriateness. Testing under several interest rate scenarios (including increasing and decreasing rates) is done to assess reinvestment risk. One way of measuring the interest rate risk associated with this assumption is to determine the effect on the insurance and investment contract liabilities impacting the shareholder earnings of the Company of a 1% immediate parallel shift in the yield curve. These interest rate changes will impact the projected cash flows. The effect of an immediate 1% parallel increase in the yield curve would be to decrease these

insurance and investment contract liabilities by approximately $131 causing an increase in net earnings of approximately $90.

The effect of an immediate 1% parallel decrease in the yield curve would be to increase these insurance and investment contract liabilities by approximately $602 causing a decrease in net earnings of approximately $427.

In addition to above, if this change in the yield curve persisted for an extended period the range of the tested scenarios might change. The effect of an immediate 1% parallel decrease or increase in the yield curve persisting for a year would have immaterial additional effects on the reported insurance and investment contract liability.



GR

EA

T-W

EST

LIFE

CO

INC

.

50

(iii) Equity Risk

Equity risk is the uncertainty associated with the valuation of assets arising from changes in equity markets. To mitigate price risk, the Company has investment policy guidelines in place that provide for prudent investment in equity markets within clearly defined limits. The risks associated with segregated fund guarantees have been mitigated through a hedging program for lifetime Guaranteed Minimum Withdrawal Benefit guarantees (GMWB) using equity futures, currency forwards, and interest rate derivatives. For policies with segregated fund guarantees, the Company generally determines insurance contract liabilities at a conditional tail expectation of 75 (CTE75) level. Some insurance and investment contract liabilities are supported by investment properties, common stocks and private equities, for example segregated fund products and products with long-tail cash flows. Generally these liabilities will fluctuate in line with equity market values. There will be additional impacts on these liabilities as equity market values fluctuate. A 10% increase in equity markets would be expected to additionally decrease non-participating insurance and investment contract liabilities by approximately $27 causing an increase in net earnings of approximately $22. A 10% decrease in equity markets would be expected to additionally increase non-participating insurance and investment contract liabilities by approximately $78 causing a decrease in net earnings of approximately $59. The best estimate return assumptions for equities are primarily based on long-term historical averages. Changes in the current market could result in changes to these assumptions and will impact both asset and liability cash flows. A 1% increase in the best estimate assumption would be expected to decrease non-participating insurance contract liabilities by approximately $379 causing an increase in net earnings of approximately $287. A 1% decrease in the best estimate assumption would be expected to increase non-participating insurance contract liabilities by approximately $411 causing a decrease in net earnings of approximately $310.

Caution Related to Risk Sensitivities In this document we have provided estimates of sensitivities and risk exposure measures for certain risks. These include the sensitivity due to specific changes in interest rate levels projected and market prices as at the valuation date. Actual results can differ significantly from these estimates for a variety of reasons including: Assessment of the circumstances that led to the scenario may lead to changes in (re)investment

approaches and interest rate scenarios considered, Changes in actuarial, investment return and future investment activity assumptions, Actual experience differing from the assumptions, Changes in business mix, effective tax rates and other market factors, Interactions among these factors and assumptions when more than one changes, and The general limitations of our internal models.

For these reasons, the sensitivities should only be viewed as directional estimates of the underlying sensitivities for the respective factors based on the assumptions outlined above. Given the nature of these calculations, we cannot provide assurance that the actual impact on net earnings attributed to shareholders will be as indicated.



GR

EA

T-WEST LIFEC

O IN

C.

51

5. Segregated Funds for the Risk of Unitholders (a) Segregated funds - consolidated net assets

March 31 2012

December 31 2011

Bonds $ 23,370 $ 21,594 Mortgage loans 2,253 2,303 Stocks 66,018 63,885 Investment properties 5,562 5,457 Cash and cash equivalents 5,252 5,334 Accrued income 298 287 Other liabilities (2,279) (2,278) $ 100,474 $ 96,582

(b) Segregated funds - consolidated statements of changes in net assets


2012 2011 Segregated funds net assets, beginning of year $ 96,582 $ 94,827 Additions (deductions): Policyholder deposits 3,329 3,398 Net investment income 122 43 Net realized capital gains (losses) on investments 541 531 Net unrealized capital gains (losses) on investments 3,213 1,348 Unrealized gains (losses) due to changes in foreign exchange rates (144) (90) Policyholder withdrawals (3,181) (2,777) Net transfer from General Fund 12 - 3,892 2,453 Segregated funds net assets, end of period $ 100,474 $ 97,280

6. Insurance and Investment Contract Liabilities

March 31, 2012 Gross Ceded Net Insurance contract liabilities $ 114,798 $ 1,983 $ 112,815 Investment contract liabilities 763 - 763 $ 115,561 $ 1,983 $ 113,578

December 31, 2011 Gross Ceded Net Insurance contract liabilities $ 114,730 $ 2,061 $ 112,669 Investment contract liabilities 782 - 782 $ 115,512 $ 2,061 $ 113,451



GR

EA

T-W

EST

LIFE

CO

INC

.

52

7. Financing Charges Financing charges consist of the following: For the three months

ended March 31 2012 2011 Operating charges:

Interest on operating lines and short-term debt instruments $ 1 $ 1 Financial charges:

Interest on long-term debentures and other debt instruments 58 58 Net interest on capital trust securities 8 8 Other 5 5

71 71 $ 72 $ 72

Capital Trust Securities On April 18, 2012 Canada Life Capital Trust, a trust established by Canada Life, announced that it intends to redeem all of its outstanding $300 principal amount Canada Life Capital Securities-Series A on June 30, 2012 at par.

8. Share Capital

(a) Preferred Shares On February 22, 2012 the Company issued 10,000,000 Series P, 5.40% Non-Cumulative First Preferred Shares at $25.00 per share. The shares are redeemable at the option of the Company on or after March 31, 2017 for $25.00 per share plus a premium if redeemed prior to March 31, 2021, together in each case with all declared and unpaid dividends up to but excluding the date fixed for redemption. Transaction costs incurred in connection with the preferred share issue of $7 ($5 after-tax) were charged to surplus.

(b) Common Shares Common Shares Issued and outstanding March 31, 2012 December 31, 2011

Number Carrying

value

Number Carrying

value Common shares: Balance, beginning of year 949,764,141 $ 5,828 948,458,395 $ 5,802 Issued under stock option plan (exercised) 44,299 1 1,305,746 26 Balance, end of period 949,808,440 $ 5,829 949,764,141 $ 5,828

9. Capital Management

At the holding company level, the Company monitors the amount of consolidated capital available, and the amounts deployed in its various operating subsidiaries. The amount of capital deployed in any particular company or country is dependent upon local regulatory requirements as well as the Company’s internal assessment of capital requirements in the context of its operational risks and requirements, and strategic plans.



GR

EA

T-WEST LIFEC

O IN

C.

53

Since the timing of available funds cannot always be matched precisely to commitments, imbalances may arise when demands for funds exceed those on hand. Also, a demand for funds may arise as a result of the Company taking advantage of current investment opportunities. The sources of the funds that may be required in such situations include bank financing and the issuance of debentures and equity securities. The Company’s practice is to maintain the capitalization of its regulated operating subsidiaries at a level that will exceed the relevant minimum regulatory capital requirements in the jurisdictions in which they operate. The capitalization of the Company and its operating subsidiaries will also take into account the views expressed by the various credit rating agencies that provide financial strength and other ratings to the Company. In Canada, the Office of the Superintendent of Financial Institutions Canada (OSFI) has established a capital adequacy measurement for life insurance companies incorporated under the Insurance Companies Act (Canada) and their subsidiaries, known as the Minimum Continuing Capital and Surplus Requirements (MCCSR). For Canadian regulatory reporting purposes, capital is defined by OSFI in its MCCSR guideline. The following table provides the MCCSR information and ratios for Great-West Life: March 31 December 31 2012 2011 Capital Available: Adjusted Net Tier 1 Capital $ 8,064 $ 7,918 Net Tier 2 Capital 1,612 1,698 Total Available Capital $ 9,676 $ 9,616 Capital Required: Total Capital Required $ 4,730 $ 4,709 MCCSR ratios: Tier 1 170% 168% Total 205% 204% The result of adoption of IFRS as at January 1, 2011 is a reduction in Total Available Capital subject to phase-in of $636. This impact is to be phased-in over eight quarters beginning March 31, 2011 in accordance with the IFRS transition guidance outlined by OSFI. At December 31, 2011, the Risk Based Capital ratio (RBC) of GWL&A, Lifeco's regulated U.S. operating company was 440% of the Company Action Level set by the National Association of Insurance Commissioners. GWL&A reports its RBC ratio annually to U.S. insurance regulators. In the United Kingdom, Canada Life Limited (CLL) is required to satisfy the capital resources requirements set out in the Integrated Prudential Sourcebook, part of the Financial Services Authority Handbook. The capital requirements are set prescribed by a formulaic capital requirement (Pillar 1) and an individual capital adequacy framework which requires an entity to self-assess an appropriate amount of capital it should hold, based on the risks encountered from its business activities. At the end of 2011, CLL complied with the minimum capital resource requirements in the United Kingdom. At December 31, 2011 the Company maintained capital levels above the minimum local regulatory requirements in each of its other foreign operations.



GR

EA

T-W

EST

LIFE

CO

INC

.

54

The Company is both a user and a provider of reinsurance, including both traditional reinsurance, which is undertaken primarily to mitigate against assumed insurance risks, and financial or finite reinsurance, under which the amount of insurance risk passed to the reinsurer or its reinsured may be more limited. The Company is required to put amounts on deposit for certain reinsurance transactions. These amounts on deposit are presented in funds held by ceding insurers on the Consolidated Balance Sheets. Some of these amounts on deposit support surplus.

10. Share Based Payments Under the Company’s stock option plan, 2,138,100 options were granted during the three months ended March 31, 2012 (1,638,700 options were granted during the first quarter of 2011). The weighted average fair value of options granted was $3.17 per option during the three months ended March 31, 2012 ($4.41 per option in the first quarter of 2011). Compensation expense relating to the Company's stock option plan of $2 after-tax has been recognized in the Consolidated Statements of Earnings for the three months ended March 31, 2012 ($1 after-tax for the three months ended March 31, 2011). The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.

11. Pension Benefits and Other Post-Employment Benefits The total benefit costs included in operating expenses are as follows: For the three months ended March 31 2012 2011 Pension benefits $ 29 $ 19 Other post-employment benefits 5 5 $ 34 $ 24



GR

EA

T-WEST LIFEC

O IN

C.

55

12. Earnings per Common Share The following table provides the reconciliation between basic and diluted earnings per common share: For the three months ended March 31 2012 2011 Earnings Net earnings $ 476 $ 439 Perpetual preferred share dividends (25) (24) Net earnings - common shareholders 451 415 Capital trust securities 3 3 Net earnings - common shareholders - diluted basis

$ 454

$ 418 Number of common shares Average number of common shares outstanding 949,781,011 948,761,795 Add:

- Capital trust units 10,405,100 9,440,126 - Potential exercise of outstanding stock options 297,241 698,868

Average number of common shares outstanding - diluted basis 960,483,352 958,900,789 Basic earnings per common share $ 0.475 $ 0.438 Diluted earnings per common share $ 0.472 $ 0.436 Dividends per common share $ 0.3075 $ 0.3075



GR

EA

T-W

EST

LIFE

CO

INC

.

56

13. Income Taxes (a) Income Tax Expense

Income tax expense consists of the following: For the three months ended March 31 2012 2011 Current income taxes $ 86 $ 133 Deferred income taxes (29) (64) $ 57 $ 69

(b) Effective Income Tax Rate

The overall effective income tax rate for Lifeco for the three months ended March 31, 2012 was 11% compared to 17% for the full year 2011 and 14% for the three months ended March 31, 2011. The full year 2011 effective income tax rate reflected benefits related to non-taxable investment income and lower tax in foreign jurisdictions. Also reducing the effective income tax rate were the impacts of reductions to statutory income tax rates primarily in the Company’s Europe segment and the impact of the adjustment within the insurance contract liabilities for deferred taxes. The three months ended March 31, 2012 effective income tax rate reflects the impacts of reductions to statutory income tax rates in the Company’s Europe segment and the impact of changes to statutory rates on the adjustment within the insurance contract liabilities for deferred taxes.

(c) Deferred Tax Assets

A deferred tax asset is recognized for a tax loss carryforward only to the extent that realization of the related tax benefit through the future taxable profits is more likely than not. Recognition is based on the fact that it is more likely than not that the entity will have taxable profits and/or can utilize tax planning opportunities before expiration of the deferred tax assets. Changes in circumstances in future periods may adversely impact the assessment of the recoverability. The uncertainty of the recoverability is taken into account in establishing the deferred tax assets. The deferred tax asset includes balances which are dependent on future taxable profits while the relevant entities have incurred losses in either the current year or the preceding year. The aggregate deferred tax asset for the most significant entities where this applies is $1,091 at March 31, 2012 ($1,110 at December 31, 2011).



GR

EA

T-WEST LIFEC

O IN

C.

57

14. Segmented Information Consolidated Net Earnings For the three months ended March 31, 2012 United Lifeco Canada States Europe Corporate Total Income: Premium income $ 2,365 $ 821 $ 1,343 $ - $ 4,529 Net investment income

Regular net investment income 654 324 463 (2) 1,439 Changes in fair value through profit or loss (150) 21 (67) - (196)

Total net investment income 504 345 396 (2) 1,243 Fee and other income 277 302 145 - 724

Total income 3,146 1,468 1,884 (2) 6,496

Benefits and expenses: Paid or credited to policyholders 2,185 1,003 1,555 - 4,743 Other 647 330 141 4 1,122 Financing charges 34 33 5 - 72 Amortization of finite life intangible assets 11 13 2 - 26

Earnings before income taxes 269 89 181 (6) 533

Income taxes 34 9 16 (2) 57

Net earnings before non-controlling interests 235 80 165 (4) 476

Non-controlling interests (6) 2 4 - -

Net earnings 241 78 161 (4) 476

Perpetual preferred share dividends 18 - 6 1 25

Net earnings before capital allocation 223 78 155 (5) 451

Impact of capital allocation

19

(3)

(14)

(2)

-

Net earnings - common shareholders

$ 242

$ 75

$ 141

$ (7)

$ 451



GR

EA

T-W

EST

LIFE

CO

INC

.

58

For the three months ended March 31, 2011 United Lifeco Canada States Europe Corporate Total Income: Premium income $ 2,279 $ 752 $ 1,264 $ - $ 4,295 Net investment income

Regular net investment income 616 328 481 2 1,427 Changes in fair value through profit or loss (64) 31 (154) - (187)

Total net investment income 552 359 327 2 1,240 Fee and other income 276 314 130 - 720

Total income 3,107 1,425 1,721 2 6,255

Benefits and expenses: Paid or credited to policyholders 2,181 950 1,448 - 4,579 Other 615 335 125 3 1,078 Financing charges 34 33 5 - 72 Amortization of finite life intangible assets 10 11 2 - 23

Earnings before income taxes 267 96 141 (1) 503

Income taxes 22 9 38 - 69

Net earnings before non-controlling interests 245 87 103 (1) 434

Non-controlling interests - (2) (3) - (5)

Net earnings 245 89 106 (1) 439

Perpetual preferred share dividends 19 - 5 - 24

Net earnings before capital allocation 226 89 101 (1) 415

Impact of capital allocation

19

(1)

(15)

(3)

-

Net earnings - common shareholders

$ 245

$ 88

$ 86

$ (4)

$ 415



IGM

FINA

NC

IAL IN

C.


PA G E C 2


PA G E C 3 9


Please note that the bottom of each page in Part C contains two diff erent page numbers. A page number with the prefi x “C” refers to the number of such page in this document and the page number without any prefi x refers to the number of such page in the original document issued by IGM Financial Inc.

The attached documents concerning IGM Financial Inc. are documents prepared and publicly disclosed by such subsidiary. Certain statements in the attached documents, other than statements of historical fact, are forward-looking statements based on certain assumptions and refl ect the current expectations of the subsidiary as set forth therein. Forward-looking statements are provided for the purposes of assisting the reader in understanding the subsidiary’s fi nancial performance, fi nancial position and cash fl ows as at and for the periods ended on certain dates and to present information about the subsidiary’s management’s current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes.

By its nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specifi c and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved.

For further information provided by the subsidiary as to the material factors that could cause actual results to diff er materially from the content of forward-looking statements, the material factors and assumptions that were applied in making the forward-looking statements, and the subsidiary’s policy for updating the content of forward-looking statements, please see the attached documents, including the section entitled Forward-Looking Statements. The reader is cautioned to consider these factors and assumptions carefully and not to put undue reliance on forward-looking statements.

IGM Financial Inc.

PA RT C

P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 C 1

PFC_QUAT1_Eng03_IGM_2012-05-04_v1.indd D1PFC_QUAT1_Eng03_IGM_2012-05-04_v1.indd D1 12/05/12 3:34 PM12/05/12 3:34 PM

IGM

FIN

AN

CIA

L IN

C.

4 i gm f inanc ial inc . f i r st quarter report 2012 / management ’s d i scuss ion and analys i s

Management’s Discussion and Analysis

The Management’s Discussion and Analysis (MD&A) presents management’s view of the results of operations andfinancial condition of IGM Financial Inc. (IGM Financial or the Company) as at and for the three months endedMarch 31, 2012 and should be read in conjunction with the unaudited interim Condensed Consolidated FinancialStatements (Interim Financial Statements) as well as the 2011 IGM Financial Inc. Annual Report filed on www.sedar.com.Commentary in the MD&A as at and for the three months ended March 31, 2012 is as of May 4, 2012.

Certain statements in this MD&A, other than statementsof historical fact, are forward-looking statements basedon certain assumptions and reflect IGM Financial’scurrent expectations. Forward-looking statements areprovided for the purposes of assisting the reader inunderstanding the Company’s financial position andresults of operations as at and for the periods ended oncertain dates and to present information aboutmanagement’s current expectations and plans relatingto the future and readers are cautioned that suchstatements may not be appropriate for other purposes.These statements may include, without limitation,statements regarding the operations, business, financialcondition, expected financial results, performance,prospects, opportunities, priorities, targets, goals,ongoing objectives, strategies and outlook of theCompany, as well as the outlook for North American andinternational economies, for the current fiscal year andsubsequent periods. Forward-looking statementsinclude statements that are predictive in nature,depend upon or refer to future events or conditions, orinclude words such as “expects”, “anticipates”,“plans”, “believes”, “estimates”, “seeks”, “intends”,“targets”, “projects”, “forecasts” or negative versionsthereof and other similar expressions, or future orconditional verbs such as “may”, “will”, “should”,“would” and “could”.

This information is based upon certain materialfactors or assumptions that were applied in drawing a

conclusion or making a forecast or projection asreflected in the forward-looking statements, includingthe perception of historical trends, current conditionsand expected future developments, as well as otherfactors that are believed to be appropriate in thecircumstances.

By its nature, this information is subject toinherent risks and uncertainties that may be generalor specific and which give rise to the possibility thatexpectations, forecasts, predictions, projections orconclusions will not prove to be accurate, thatassumptions may not be correct and that objectives,strategic goals and priorities will not be achieved.

A variety of material factors, many of which arebeyond the Company’s and its subsidiaries’ control,affect the operations, performance and results of theCompany, and its subsidiaries, and their businesses,and could cause actual results to differ materiallyfrom current expectations of estimated or anticipatedevents or results. These factors include, but are notlimited to: the impact or unanticipated impact ofgeneral economic, political and market factors inNorth America and internationally, interest and foreignexchange rates, global equity and capital markets,management of market liquidity and funding risks,changes in accounting policies and methods used toreport financial condition (including uncertaintiesassociated with critical accounting assumptions andestimates), the effect of applying future accounting

changes, operational and reputational risks, businesscompetition, technological change, changes ingovernment regulations and legislation, changes in taxlaws, unexpected judicial or regulatory proceedings,catastrophic events, the Company’s ability to completestrategic transactions, integrate acquisitions andimplement other growth strategies, and the Company’ssuccess in anticipating and managing the foregoingfactors.

The reader is cautioned that the foregoing list offactors is not exhaustive of the factors that may affectany of the Company’s forward-looking statements.The reader is also cautioned to consider these andother factors, uncertainties and potential eventscarefully and not place undue reliance on forward-looking statements.

Other than as specifically required by law, theCompany undertakes no obligation to update anyforward-looking statements to reflect events orcircumstances after the date on which suchstatements are made, or to reflect the occurrence ofunanticipated events, whether as a result of newinformation, future events or results, or otherwise.

Additional information about the risks anduncertainties of the Company’s business is providedin its disclosure materials filed with the securitiesregulatory authorities in Canada, available atwww.sedar.com.

FORWARD-LOOKING STATEMENTS

Basis of Presentation and Summary of Accounting Policies

The Interim Financial Statements of IGM Financial, which are the basis of the information presented in theCompany’s MD&A, have been prepared in accordance with International Accounting Standard 34, Interim FinancialReporting (IFRS) and are presented in Canadian dollars (Note 2 of the Interim Financial Statements).

C 2 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2


IGM

FINA

NC

IAL IN

C.

i gm f inanc ial inc . f i r st quarter report 2012 / management ’s d i scuss ion and analys i s 5

IGM Financial Inc.Summary of Consolidated Operating Results

IGM Financial Inc. (TSX:IGM) is one of Canada’spremier financial services companies. The Company’sprincipal businesses are Investors Group Inc. andMackenzie Financial Corporation, each operatingdistinctly within the advice segment of the financialservices market.

Total assets under management were $124.1 billionas at March 31, 2012 compared with $134.1 billion atMarch 31, 2011 and $118.7 billion at December 31,2011. Average total assets under management for thefirst quarter of 2012 were $122.8 billion compared to$131.9 billion in the first quarter of 2011.

Net earnings available to common shareholdersfor the three months ended March 31, 2012 were$199.7 million or 78 cents per share compared tooperating earnings available to common shareholders,excluding other items outlined below, of $211.2 million

or 81 cents per share in 2011. This represents a decreaseof 3.7% on a per share basis. Net earnings available tocommon shareholders, including other items, for thefirst quarter ended March 31, 2011 were $212.1 millionor 81 cents per share.

Other items for the three months ended March 31,2011 consisted of net earnings from discontinuedoperations of $0.9 million related to the sale of M.R.S.Trust Company and M.R.S. Inc. (MRS).

Shareholders’ equity was $4.5 billion as at March 31,2012 unchanged from December 31, 2011. Return onaverage common equity based on operating earningsfor the first quarter ended March 31, 2012 was 18.4%compared with 20.3% in 2011. The quarterly dividendper common share declared in the first quarter of 2012was 53.75 cents, unchanged from the fourth quarterof 2011.

TABLE 1: RECONCILIATION OF NON-IFRS FINANCIAL MEASURES

2012 2011 2011Three months ended march 31 december 31 march 31

($ millions) net earnings eps net earnings eps net earnings eps

Operating earnings available to common shareholders – Non-IFRS measure $ 199.7 $ 0.78 $ 196.0 $ 0.76 $ 211.2 $ 0.81

Net earnings – Discontinued operations – – 29.6 0.11 0.9 –Proportionate share of affiliate’s provision – – 5.0 0.02 – –

Net earnings available to common shareholders – IFRS $ 199.7 $ 0.78 $ 230.6 $ 0.89 $ 212.1 $ 0.81

EBITDA – Non-IFRS measure $ 360.5 $ 354.6 $ 396.3Commission amortization (70.0) (69.0) (72.5)Amortization of capital assets and intangible assets

and other (8.9) (10.3) (8.0)Interest expense on long-term debt (22.9) (23.2) (30.3)Proportionate share of affiliate’s provision – 5.0 –

Earnings before income taxes anddiscontinued operations 258.7 257.1 285.5

Income taxes (56.8) (53.9) (72.1)Net earnings – Discontinued operations – 29.6 0.9Perpetual preferred share dividends (2.2) (2.2) (2.2)

Net earnings available to common shareholders – IFRS $ 199.7 $ 230.6 $ 212.1



IGM

FIN

AN

CIA

L IN

C.


DISCONTINUED OPERATIONS

On November 16, 2011, the Company completedthe sale of 100% of the common shares of MRS. Inaccordance with IFRS 5 – Non-Current Assets Held forSale and Discontinued Operations, the operating resultsand cash flows of MRS, which were previously includedin the Mackenzie reportable segment, have beenclassified as discontinued operations.

Net earnings from discontinued operations for allperiods under review in 2011 are reported as a separateline item on the following tables: Table 1 – Reconciliationof Non-IFRS Financial Measures; Table 2 and Table 3 –Consolidated Operating Results by Segment; and Table 6 –Summary of Quarterly Results.

Refer to Note 3 of the Interim Financial Statementsfor additional information.

NON-IFRS FINANCIAL MEASURES AND ADDITIONAL IFRS MEASURES

Net earnings available to common shareholders, whichis an additional measure in accordance with IFRS, maybe subdivided into two components consisting of:• Operating earnings available to common

shareholders; and• Other items, which include the after-tax impact of

any item that management considers to be of anon-recurring nature or that could make the period-over-period comparison of results from operationsless meaningful. “Operating earnings available to common

shareholders”, “operating diluted earnings per share”(EPS) and “operating return on average common equity”(ROE) are non-IFRS financial measures which are used

TABLE 2: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q1 2012 VS. Q1 2011

investors group mackenzie corporate & other totalThree months ended 2012 2011 2012 2011 2012 2011 2012 2011($ millions) mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31

RevenuesFee income $ 385.8 $ 403.2 $ 195.9 $ 216.2 $ 45.4 $ 49.6 $ 627.1 $ 669.0Net investment income

and other 21.5 21.3 (0.2) 0.8 24.7 20.3 46.0 42.4

407.3 424.5 195.7 217.0 70.1 69.9 673.1 711.4

ExpensesCommission 123.6 124.0 68.2 76.0 29.6 33.6 221.4 233.6Non-commission 92.1 85.8 65.7 63.5 12.3 12.7 170.1 162.0

215.7 209.8 133.9 139.5 41.9 46.3 391.5 395.6

Earnings before interest and taxes $ 191.6 $ 214.7 $ 61.8 $ 77.5 $ 28.2 $ 23.6 281.6 315.8

Interest expense (22.9) (30.3)

Earnings before income taxes and discontinued operations 258.7 285.5Income taxes 56.8 72.1

Net earnings from continuing operations 201.9 213.4Net earnings from discontinued operations – 0.9

Net earnings 201.9 214.3Perpetual preferred share dividends 2.2 2.2

Net earnings available to common shareholders $ 199.7 $ 212.1

Operating earnings available to common shareholders(1) $ 199.7 $ 211.2

(1) Refer to Non-IFRS Financial Measures disclosure in the Summary of Consolidated Operating Results for an explanation of the Company’s use of non-IFRS financial measures.



IGM

FINA

NC

IAL IN

C.


to provide management and investors with additionalmeasures to assess earnings performance. These non-IFRS financial measures do not have standard meaningsprescribed by IFRS and may not be directly comparableto similar measures used by other companies.

“Earnings before interest and taxes” (EBIT) and“earnings before interest, taxes, depreciation andamortization” (EBITDA) are also non-IFRS financialmeasures. EBIT and EBITDA are alternative measuresof performance utilized by management, investors andinvestment analysts to evaluate and analyze the Company’sresults. These non-IFRS financial measures do not havestandard meanings prescribed by IFRS and may notbe directly comparable to similar measures used byother companies.

“Earnings before income taxes and discontinuedoperations”, “net earnings from continuing operations”and “net earnings available to common shareholders”are additional IFRS measures which are used to providemanagement and investors with additional measures toassess earnings performance. These measures areconsidered additional IFRS measures as they are inaddition to the minimum line items required by IFRSand are relevant to an understanding of the entity’sfinancial performance.

Refer to the appropriate reconciliations of non-IFRSfinancial measures to reported results in accordancewith IFRS in Tables 1, 2 and 3.

TABLE 3: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q1 2012 VS. Q4 2011

investors group mackenzie corporate & other totalThree months ended 2012 2011 2012 2011 2012 2011 2012 2011($ millions) mar. 31 dec. 31 mar. 31 dec. 31 mar. 31 dec. 31 mar. 31 dec. 31

RevenuesFee income $ 385.8 $ 373.7 $ 195.9 $ 192.2 $ 45.4 $ 42.4 $ 627.1 $ 608.3Net investment income

and other 21.5 16.3 (0.2) 0.2 24.7 19.9 46.0 36.4

407.3 390.0 195.7 192.4 70.1 62.3 673.1 644.7

ExpensesCommission 123.6 120.1 68.2 66.4 29.6 27.5 221.4 214.0Non-commission 92.1 87.8 65.7 57.1 12.3 10.5 170.1 155.4

215.7 207.9 133.9 123.5 41.9 38.0 391.5 369.4

Earnings before interest and taxes $ 191.6 $ 182.1 $ 61.8 $ 68.9 $ 28.2 $ 24.3 281.6 275.3

Interest expense (22.9) (23.2)Proportionate share of affiliate’s provision – 5.0

Earnings before income taxes and discontinued operations 258.7 257.1Income taxes 56.8 53.9

Net earnings from continuing operations 201.9 203.2Net earnings from discontinued operations – 29.6

Net earnings 201.9 232.8Perpetual preferred share dividends 2.2 2.2


Operating earnings available to common shareholders(1) $ 199.7 $ 196.0

(1) Refer to Non-IFRS Financial Measures disclosure in the Summary of Consolidated Operating Results for an explanation of the Company’s use of non-IFRS financial measures.



IGM

FIN

AN

CIA

L IN

C.


REPORTABLE SEGMENTS

IGM Financial’s reportable segments, which reflect thecurrent organizational structure and internal financialreporting, are:• Investors Group• Mackenzie• Corporate and Other.

Management measures and evaluates theperformance of these segments based on EBIT asshown in Tables 2 and 3. Segment operations arediscussed in each of their respective Review of SegmentOperating Results sections of the MD&A.

Certain items reflected in Tables 2 and 3 are notallocated to segments:• Interest expense – represents interest expense on long-

term debt. The change in interest expense for thefirst quarter of 2012 compared to the first quarter of2011 reflected the repayment of the $450 million2001 Series 6.75% debentures on May 9, 2011.

• 2011 Proportionate share of affiliate’s provision –represents changes in litigation provisions recordedby Lifeco in the fourth quarter of 2011. Lifecorecorded net changes in litigation provisions andthe Company’s after-tax proportionate share was abenefit of $5.0 million.

• Income taxes – changes in the effective tax rates areshown in Table 4.

Tax planning may result in the Company recordinglower levels of income taxes. Management monitorsthe status of its income tax filings, and regularlyassesses the overall adequacy of its provision for

income taxes and, as a result, income taxes recordedin prior years may be adjusted in the current year.Any changes in management’s best estimates arereflected in Other items, which also includes, but isnot limited to, the effect of lower effective incometax rates on foreign operations.

• 2011 Net earnings from discontinued operations –represents the operating results of MRS, previouslyreported in the Mackenzie segment. Net earningsfrom discontinued operations were $0.9 million forthe first quarter of 2011 and $29.6 million for thefourth quarter of 2011.

Net earnings from discontinued operations for thefourth quarter ended December 31, 2011 includedthe after-tax gain on the sale of MRS of $30.3 million.Excluding the after-tax gain, the net loss for MRS inthe fourth quarter of 2011 totalled $0.7 million.

• Perpetual preferred share dividends – represents thedividends declared on the Company’s 5.90% non-cumulative first preferred shares.

SUMMARY OF CHANGES IN TOTAL ASSETS UNDER MANAGEMENT

Total assets under management were $124.1 billion atMarch 31, 2012 compared to $134.1 billion at March 31,2011. Changes in total assets under management aredetailed in Table 5.

Changes in assets under management for InvestorsGroup and Mackenzie are discussed further in eachof their respective Review of Business sections inthe MD&A.

TABLE 4: EFFECTIVE INCOME TAX RATE

2012 2011 2011Three months ended mar. 31 dec. 31 mar. 31

Income taxes at Canadian federal and provincial statutory rates 26.48 % 28.14 % 28.16 %Effect of:

Proportionate share of affiliate’s earnings (2.03) (2.05) (1.68)Loss consolidation(1) (1.90) (2.93) (1.04)Other items (0.58) (1.64) (0.18)

Effective income tax rate – operating earnings 21.97 21.52 25.26Proportionate share of affiliate’s provision – (0.55) –

Effective income tax rate – net earnings continuing operations 21.97 % 20.97 % 25.26 %

(1) See the Transactions with Related Parties section of this MD&A for additional information.



IGM

FINA

NC

IAL IN

C.


TABLE 5: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT

investment planning investors group mackenzie counsel consolidated(1)

Three months ended 2012 2011 2012 2011 2012 2011 2012 2011($ millions) mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31

Mutual fundsGross sales – money market $ 185.2 $ 212.6 $ 113.6 $ 156.0 $ 19.3 $ 19.4 $ 318.1 $ 388.0Gross sales – long term 1,648.4 1,833.3 1,358.3 1,805.9 120.8 149.4 3,127.0 3,788.2

Total mutual fund gross sales $ 1,833.6 $ 2,045.9 $ 1,471.9 $ 1,961.9 $ 140.1 $ 168.8 $ 3,445.1 $ 4,176.2

Net sales – money market $ 11.9 $ 30.7 $ (25.6) $ (35.8) $ 13.9 $ 15.0 $ 0.2 $ 9.9Net sales – long term 163.3 473.3 (483.8) (7.4) 16.8 58.4 (304.2) 523.9

Total mutual fund net sales $ 175.2 $ 504.0 $ (509.4) $ (43.2) $ 30.7 $ 73.4 $ (304.0) $ 533.8

Sub-advisory, institutionaland other accounts

Gross sales $ – $ – $ 1,248.7 $ 1,524.3 $ – $ – $ 912.0 $ 1,400.0Net sales – – (423.6) 163.9 – – (549.1) 85.2

CombinedGross sales $ 1,833.6 $ 2,045.9 $ 2,720.6 $ 3,486.2 $ 140.1 $ 168.8 $ 4,357.1 $ 5,576.2Net sales 175.2 504.0 (933.0) 120.7 30.7 73.4 (853.1) 619.0

Change in total assets under management

Net sales $ 175.2 $ 504.0 $ (933.0) $ 120.7 $ 30.7 $ 73.4 $ (853.1) $ 619.0Market and income 2,717.2 1,759.3 3,647.4 2,211.9 114.8 72.1 6,286.4 3,977.6

Net change in assets 2,892.4 2,263.3 2,714.4 2,332.6 145.5 145.5 5,433.3 4,596.6Beginning assets 57,735.3 61,785.3 61,652.0 68,346.3 2,811.5 2,688.1 118,712.8 129,483.5

Ending assets $ 60,627.7 $ 64,048.6 $ 64,366.4 $ 70,678.9 $ 2,957.0 $ 2,833.6 $124,146.1 $134,080.1

(1)Total Gross Sales and Net Sales excluded $338 million and $126 million respectively in accounts sub-advised by Mackenzie on behalf of Investors Group and InvestmentPlanning Counsel ($124 million and $79 million in 2011).Total assets under management excluded $3.8 billion of assets sub-advised by Mackenzie on behalf of Investors Group and Investment Planning Counsel ($3.5 billion atMarch 31, 2011).

SUMMARY OF QUARTERLY RESULTS

The Summary of Quarterly Results in Table 6 includesthe eight most recent quarters and the reconciliation ofnon-IFRS financial measures to net earnings inaccordance with IFRS.

Quarterly operating earnings available to commonshareholders are primarily dependent on the level ofmutual fund assets under management. Average dailymutual fund assets under management are shown inTable 6. Average daily mutual fund assets under

management remained relatively constant in the secondand third quarter of 2010 and increased in the fourthquarter of 2010 and the first quarter of 2011, consistentwith improving market conditions. Average daily mutualfund assets under management remained relativelyconstant in the second quarter of 2011 and decreased inboth the third and fourth quarters of 2011 as a result ofdeclining domestic and international markets. Averagedaily mutual fund assets increased in the first quarter of2012 consistent with overall market increases.



IGM

FIN

AN

CIA

L IN

C.


TABLE 6: SUMMARY OF QUARTERLY RESULTS

2012 2011 2011 2011 2011 2010 2010 2010q1 q4 q3 q2 q1 q4 q3 q2

Consolidated Statements of Earnings ($ millions)Revenues

Management fees $ 456.6 $ 444.2 $ 464.6 $ 491.8 $ 492.1 $ 479.1 $ 452.6 $ 455.5Administration fees 85.3 84.3 85.2 87.9 87.5 85.4 82.6 83.7Distribution fees 85.2 79.8 80.8 83.5 89.4 83.4 68.7 71.6Net investment income and other 46.0 36.4 43.2 34.4 42.4 47.0 36.8 14.4

673.1 644.7 673.8 697.6 711.4 694.9 640.7 625.2Expenses

Commission 221.4 214.0 218.6 228.7 233.6 221.6 207.5 212.1Non-commission 170.1 155.4 156.0 164.1 162.0 153.5 150.2 150.7Interest 22.9 23.2 23.2 26.1 30.3 28.7 27.8 27.6

414.4 392.6 397.8 418.9 425.9 403.8 385.5 390.4Earnings before undernoted 258.7 252.1 276.0 278.7 285.5 291.1 255.2 234.8Non-recurring items related to

transition to IFRS – – – – – (29.3) – –Proportionate share of affiliate’s provision – 5.0 – – – – (8.2) –Earnings before income taxes 258.7 257.1 276.0 278.7 285.5 261.8 247.0 234.8Income taxes 56.8 53.9 60.8 63.7 72.1 71.2 71.9 56.4Net earnings from continuing operations 201.9 203.2 215.2 215.0 213.4 190.6 175.1 178.4Net earnings from discontinued

operations – 29.6 31.0 1.1 0.9 1.5 0.5 (0.4)Net earnings 201.9 232.8 246.2 216.1 214.3 192.1 175.6 178.0Perpetual preferred share dividends 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2Net earnings available to

common shareholders $ 199.7 $ 230.6 $ 244.0 $ 213.9 $ 212.1 $ 189.9 $ 173.4 $ 175.8

Reconciliation of Non-IFRS Financial Measures(1) ($ millions)Operating earnings available to common

shareholders – non-IFRS measure $ 199.7 $ 196.0 $ 213.0 $ 212.8 $ 211.2 $ 210.2 $ 181.1 $ 176.2Other items:

Net earnings from discontinued operations – 29.6 31.0 1.1 0.9 1.5 0.5 (0.4)

Non-recurring items related to transition to IFRS, net of tax – – – – – (21.8) – –

Proportionate share of affiliate’s provision – 5.0 – – – – (8.2) –

Net earnings available to commonshareholders – IFRS $ 199.7 $ 230.6 $ 244.0 $ 213.9 $ 212.1 $ 189.9 $ 173.4 $ 175.8

Earnings per Share (¢)Operating earnings available to

common shareholders(1)

– Basic 78 76 83 82 82 81 69 67– Diluted 78 76 82 82 81 80 69 67

Net earnings available to common shareholders

– Basic 78 90 95 83 82 73 66 67– Diluted 78 89 94 82 81 73 66 67

Average Daily Mutual Fund Assets ($ billions) $ 103.6 $ 99.6 $ 103.5 $ 109.9 $ 110.0 $ 105.0 $ 99.4 $ 100.5

Total Mutual Fund AssetsUnder Management ($ billions) $ 105.1 $ 99.7 $ 97.7 $ 108.6 $ 111.7 $ 107.9 $ 102.3 $ 96.5

Total Assets Under Management ($ billions) $ 124.1 $ 118.7 $ 116.7 $ 130.2 $ 134.1 $ 129.5 $ 122.7 $ 115.7

(1) Refer to the Summary of Consolidated Operating Results section included in this MD&A for an explanation of Other items used to calculate the Company’s Non-IFRSfinancial measures.



IGM

FINA

NC

IAL IN

C.


Investors GroupReview of the Business

INVESTORS GROUP STRATEGY

Investors Group strives to ensure that the interests ofshareholders, clients, Consultants and employees areclosely aligned. Investors Group’s business strategy isfocused on:• Growing our distribution network by expanding the

number of region offices, attracting new Consultantsto our industry and supporting existing Consultantsin their growth and development.

• Emphasizing the delivery of financial planning advice,products and services through our exclusive networkof Consultants.

• Providing an effective level of administrative supportto our Consultants and clients, including activecommunication during all economic cycles.

• Extending the diversity and range of productsoffered by Investors Group as we continue to buildand maintain enduring client relationships.

• Maximizing returns on business investment byfocusing resources on initiatives that have directbenefits to clients and Consultants and result inincreased efficiency and improved control overexpenditures.

CONSULTANT NETWORK

Investors Group distinguishes itself from its competitionby offering personal financial planning to its clientswithin the context of long-term relationships. At thecentre of this relationship is a national distributionnetwork of Consultants based in region offices acrossCanada. One new region office in Calgary was recentlyannounced which will expand our network to 107region offices.

At March 31, 2012, Investors Group had 4,522Consultants, compared with 4,608 at the end of 2011and 4,586 one year ago. In early 2011, Investors Grouprefined its selection and recruitment practices whichwill be beneficial to the future growth of the Consultantnetwork. Although this change resulted in a short-termreduction in the number of Consultant appointments inthe first quarter of 2011, other quarters in 2011 showedstability and modest growth. During the first quarter of2012 there was a reduction in the number of Consultantsprimarily due to slower recruiting in the early part ofthe year.

The number of Consultants with more than fouryears experience increased to 2,714 at March 31, 2012

compared to 2,705 at the end of 2011 and 2,655 ayear earlier.

ADMINISTRATIVE SUPPORT AND COMMUNICATION FOR CONSULTANTS AND CLIENTS

Administrative support for Consultants and clientsincludes timely and accurate client account record-keepingand reporting, effective problem resolution support, andcontinuous improvements to servicing systems.

This administrative support is provided from boththe Company’s Quebec General Office located inMontreal for Consultants and clients residing in Quebecand from the Company’s head office in Winnipeg forConsultants and clients in the rest of Canada. TheQuebec General Office has over 200 employees andoperating units for most functions supporting both theapproximately 800 Consultants throughout Quebec andthe 19 Quebec region offices. Mutual fund assets undermanagement in Quebec were in excess of $10 billion asat March 31, 2012.

Regular communication with our clients includesquarterly reporting of their Investors Group mutualfund holdings and the change in asset values of theseholdings during the quarter. Individual clients experiencedifferent returns as a result of their net cash flow andfund holdings in each quarter as illustrated on theaccompanying chart. This chart reflects in-quarterclient median rates of return for the five most recentquarters and also illustrates upper and lower range ofrates of return around the median for 90% of InvestorsGroup clients.

-20

-15

-10

-5

0

5

10

Q1 11 Q2 11 Q3 11 Q4 11

RO

R %

In-Quarter Client Rate of Return (ROR) Experience

2.7 (2.6) (9.0) 2.3 4.7

MedianReturns - %

90% of clients rate of return range

Q1 12



IGM

FIN

AN

CIA

L IN

C.


For the three months ending March 31, 2012, theclient median rate of return was approximately 4.7%and 99% of clients experienced positive returns. Forthe twelve months ending March 31, 2012, the clientmedian rate of return was approximately (4.7)%.

Communications to Consultants and clients haveincreased substantially as a result of the significantmarket volatility experienced in the last few years.Consultants, in turn, maintain a high degree of contactwith our clients, continuing to reinforce the importanceof long-term planning and a diversified investmentportfolio. Ongoing surveys of our clients indicate astrong appreciation of the value of advice provided byour Consultants through varying economic cycles.


The level of mutual fund assets under management isinfluenced by three factors: sales, redemptions and netasset values of our funds. Changes in assets undermanagement for the periods under review are reflectedin Table 7.

Fund PerformanceAt March 31, 2012, 59% of Investors Group mutualfunds (Investors, partner and portfolio funds) had arating of three stars or better from the Morningstar†

fund ranking service and 15% had a rating of four orfive stars. This compared to the Morningstar† universeof 66% for three stars or better and 28% for four andfive star funds at March 31, 2012. Morningstar Ratings†

are an objective, quantitative measure of a fund’s three,five and ten year risk-adjusted performance relative tocomparable funds.

Change in Mutual Fund Assets Under Management – Q1 2012 vs. Q1 2011Investors Group’s mutual fund assets under managementwere $60.6 billion at March 31, 2012, a decrease of5.3% from $64.0 billion at March 31, 2011. Averagedaily mutual fund assets were $59.8 billion in the firstquarter of 2012, down 5.1% from $63.0 billion in thefirst quarter of 2011.

For the first quarter ended March 31, 2012, sales ofInvestors Group mutual funds through its Consultantnetwork were $1.8 billion, a decrease of 10.4% from2011. Mutual fund redemptions totalled $1.7 billion, anincrease of 7.6% from 2011. Investors Group’s twelvemonth trailing redemption rate for long-term funds was9.1% at March 31, 2012 compared to 8.4% at March 31,2011, and remains well below the most recently availablecorresponding average redemption rate for all othermembers of the Investment Funds Institute of Canada(IFIC) of approximately 15.6% at December 31, 2011.Net sales of Investors Group mutual funds for the firstquarter of 2012 were $175 million compared with netsales of $504 million in 2011. Sales of long-term fundswere $1.6 billion for the first quarter of 2012, comparedwith $1.8 billion in 2011, a decrease of 10.1%. Net salesof long-term funds for the first quarter of 2012 were$163 million compared to net sales of $473 million in

TABLE 7: CHANGE IN MUTUAL FUND ASSETS UNDER MANAGEMENT – INVESTORS GROUP

% change

Three months ended 2012 2011 2011 2011 2011($ millions) mar. 31 dec. 31 mar. 31 dec. 31 mar. 31

Sales $ 1,833.6 $ 1,284.9 $ 2,045.9 42.7 % (10.4)%Redemptions 1,658.4 1,442.4 1,541.9 15.0 7.6

Net sales (redemptions) 175.2 (157.5) 504.0 n/m (65.2)Market and income 2,717.2 1,390.4 1,759.3 95.4 54.4

Net change in assets 2,892.4 1,232.9 2,263.3 134.6 27.8Beginning assets 57,735.3 56,502.4 61,785.3 2.2 (6.6)

Ending assets $ 60,627.7 $ 57,735.3 $ 64,048.6 5.0 % (5.3)%

Average daily assets $ 59,762.8 $ 57,525.7 $ 63,005.6 3.9 % (5.1)%

C 1 0 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2


IGM

FINA

NC

IAL IN

C.


2011. During the first quarter, market and incomeresulted in an increase of $2.7 billion in mutual fundassets compared to an increase of $1.8 billion in the firstquarter of 2011.

Change in Mutual Fund Assets Under Management – Q1 2012 vs. Q4 2011Investors Group’s mutual fund assets under managementwere $60.6 billion at March 31, 2012, an increase of5.0% from $57.7 billion at December 31, 2011. Averagedaily mutual fund assets were $59.8 billion in the firstquarter of 2012 compared to $57.5 billion in the fourthquarter of 2011, an increase of 3.9%.

For the first quarter ended March 31, 2012, sales ofInvestors Group mutual funds through its Consultantnetwork were $1.8 billion, an increase of 42.7% fromthe fourth quarter of 2011. Mutual fund redemptions,which totalled $1.7 billion for the same period, increased15.0% from the previous quarter. Net sales of InvestorsGroup mutual funds for the current quarter were$175 million compared with net redemptions of$158 million in the previous quarter. Sales of long-termfunds were $1.6 billion for the current quarter,compared with $1.1 billion in the previous quarter, anincrease of 48.5%. Net sales of long-term funds for thecurrent quarter were $163 million compared to netredemptions of $145 million in the previous quarter.

OTHER PRODUCTS AND SERVICES

Segregated FundsThe Guaranteed Investment Funds (GIFs) offering ofGreat-West Life segregated funds includes 14 segregatedfund-of-fund portfolios and 6 segregated funds. Thesefunds offer an enhanced selection of death benefit andmaturity guarantees and also include a Lifetime IncomeBenefit (LIB) protection feature on select GIFs. Theinvestment components of these segregated funds aremanaged by Investors Group. At March 31, 2012, totalsegregated fund assets were $1.1 billion compared to$958 million at March 31, 2011.

InsuranceInvestors Group distributes insurance products throughI.G. Insurance Services Inc. For the three months endedMarch 31, 2012, sales of insurance products as measuredby new annualized premiums were $16.1 million, anincrease of 8.4% over $14.9 million in 2011.

Securities OperationsInvestors Group provides securities services to clientsthrough Investors Group Securities Inc. At March 31,2012, total assets under administration were $6.5 billioncompared to $6.4 billion at March 31, 2011.

Mortgage Operations Investors Group is a national mortgage lender thatoffers a full suite of competitively positioned residentialmortgage options to new and existing Investors Groupclients. Short and long term, variable and fixed ratemortgages with competitive pricing and features areoffered to clients as part of a comprehensive financialplan. Investors Group mortgage planning specialists arelocated throughout each province in Canada, and workwith our clients and their Consultants as allowed by theregulations to develop mortgage strategies that meetthe individual needs and goals of each client. AtMarch 31, 2012, there were 72 mortgage planningspecialists compared to 66 at March 31, 2011.

Mortgage originations were $589 million in the firstquarter of 2012 compared to $330 million in the firstquarter of 2011, an increase of 78.5%. At March 31,2012, mortgages serviced by Investors Group related toits mortgage banking operations totalled $6.5 billioncompared to $6.3 billion at December 31, 2011.

Through its mortgage banking operations, mortgagesoriginated by Investors Group mortgage planningspecialists are sold to the Investors Mortgage and ShortTerm Income Fund, Investors Canadian CorporateBond Fund, securitization programs, and institutionalinvestors. Certain subsidiaries of Investors Group areCMHC-approved issuers of National Housing ActMortgage-Backed Securities (NHA MBS) and aresellers of NHA MBS into the Canada Mortgage BondProgram (CMB Program). Securitization programs thatthese subsidiaries participate in also include certainbank-sponsored asset-backed commercial paper (ABCP)programs. Residential mortgages are also held byInvestors Group’s intermediary operations.

Solutions Banking†

Investors Group’s Solutions Banking† continues toexperience high rates of utilization by Consultants andclients. The offering consists of a wide range ofproducts and services provided by the National Bank ofCanada under a long-term distribution agreement andincludes: investment loans, lines of credit, personal

P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 C 1 1


IGM

FIN

AN

CIA

L IN

C.


Review of Segment Operating Results

Investors Group’s earnings before interest and taxes arepresented in Table 8.

Q1 2012 VS. Q1 2011

Fee IncomeFee income is generated from the management,administration and distribution of Investors Groupmutual funds. The distribution of insurance andSolutions Banking† products and the provision ofsecurities services provide additional fee income.

Investors Group earns management fees forinvestment management services provided to itsmutual funds, which depend largely on the level and

composition of mutual fund assets under management.Management fees were $281.0 million in the firstquarter of 2012, a decrease of $16.6 million or 5.6%from $297.6 million in 2011. Management fee incomedecreased consistent with the decrease in average dailymutual fund assets of 5.1%, as shown in Table 7, andthe decrease in the management fee rate to 189 basispoints of average daily mutual fund assets from 192basis points in 2011. In addition, there was one morecalendar day in the first quarter of 2012 than in the firstquarter of 2011 which resulted in a $2.5 million increasein fee income in the current quarter. Management feeincome and average management fee rates for bothperiods also reflected the effect of Investors Group

loans, creditor insurance, deposit accounts and creditcards. Clients have access to a network of bankingmachines, as well as a private labeled client website andprivate labeled client service centre. The SolutionsBanking† offering supports Investors Group’s approachto delivering total financial solutions for our clientsthrough a broad financial planning platform.

Additional Products and Services Investors Group also provides its clients with guaranteedinvestment certificates offered by Investors GroupTrust Co. Ltd., as well as a number of other financialinstitutions.

TABLE 8: OPERATING RESULTS – INVESTORS GROUP

% change


RevenuesManagement fees $ 281.0 $ 273.0 $ 297.6 2.9 % (5.6)%Administration fees 55.5 54.3 57.9 2.2 (4.1)Distribution fees 49.3 46.4 47.7 6.3 3.4

385.8 373.7 403.2 3.2 (4.3)Net investment income and other 21.5 16.3 21.3 31.9 0.9

407.3 390.0 424.5 4.4 (4.1)

ExpensesCommission 70.3 67.8 67.8 3.7 3.7Asset retention bonus and premium 53.3 52.3 56.2 1.9 (5.2)Non-commission 92.1 87.8 85.8 4.9 7.3

215.7 207.9 209.8 3.8 2.8

Earnings before interest and taxes $ 191.6 $ 182.1 $ 214.7 5.2 % (10.8)%



IGM

FINA

NC

IAL IN

C.


having waived a portion of the investment managementfees on its money market funds to ensure that thesefunds maintained a positive yield. These waiverstotalled $1.0 million in the first quarter of 2012,unchanged from the prior year.

Investors Group receives administration fees forproviding administrative services to its mutual funds andtrusteeship services to its unit trust mutual funds, whichalso depend largely on the level and composition ofmutual fund assets under management. Administrationfees totalled $55.5 million in the current quartercompared to $57.9 million a year ago, a decrease of4.1%, as a result of the change in average daily mutualfund assets under management.

Distribution fees are earned from:• Redemption fees on mutual funds sold with a

deferred sales charge. • Distribution of insurance products through

I.G. Insurance Services Inc.• Securities trading services provided through

Investors Group Securities Inc.• Banking services provided through Solutions

Banking†, an arrangement with the National Bankof Canada.Distribution fee income of $49.3 million for the

first quarter of 2012 increased by $1.6 million from$47.7 million in 2011, primarily due to increases inredemption fees and distribution fee income frominsurance products. Redemption fee income increasedby $0.8 million to $14.5 million in the first quarter of2012 compared to 2011. Redemption fee incomevaries depending on the level of deferred sales chargeattributable to fee-based redemptions.

Net Investment Income and OtherNet investment income and other includes incomerelated to mortgage banking operations as well asinterest earned on cash and cash equivalents, securitiesand mortgage loans related to intermediary operations.Investors Group reports net investment income as thedifference between investment income and interestexpense. Interest expense includes interest on depositliabilities and interest on bank indebtedness, if any.

Net investment income and other was $21.5 millionin the first quarter of 2012, an increase of $0.2 millionfrom $21.3 million in 2011.

Net investment income related to Investors Group’smortgage banking operations totalled $21.2 million for

the first quarter of 2012 compared to $20.9 million in2011, an increase of $0.3 million. A summary of mortgagebanking operations for the three month periods underreview are presented in Table 9. The changes in mortgagebanking income were primarily due to:• Net interest income on securitized loans – which

decreased by $3.5 million for the three month periodended March 31, 2012 to $12.9 million. The declineresulted from lower net interest margins and thedecline of the proportion of securitized loans in theABCP programs, which currently have a higherinterest income margin than loans securitized in theCMB program.

• Gains realized on the sale of residential mortgages –which increased by $0.5 million for the three monthperiod ended March 31, 2012 to $3.7 million. Theincrease in gains was due to improvements in netinterest margins on mortgage sales to institutionalinvestors and certain Investors Group managedmutual funds.

• Fair value adjustments and other income – whichincreased by $3.3 million for the three month periodended March 31, 2012 to $4.6 million. The increaseresulted from favourable fair value adjustments tointerest rate swaps utilized for hedging purposes andthe impact of prepayment penalties related to higherrenewal and refinance activity over the period. Thisincrease was partially offset by higher issuance costsassociated with higher origination volumes.

ExpensesInvestors Group incurs commission expense inconnection with the distribution of its mutual fundsand other financial services and products. Commissionsare paid on the sale of these products and fluctuatewith the level of sales. The expense for deferred sellingcommissions consists of the amortization of the assetover its useful life and the reduction of the unamortizeddeferred selling commission asset associated withredemptions. Commissions paid on the sale of mutualfunds are deferred and amortized over a maximumperiod of seven years. Commission expense for thefirst quarter of 2012 increased by $2.5 million to$70.3 million compared with $67.8 million in 2011.This increase was due to higher redemptions on mutualfunds sold with a deferred sales charge as well asincreases in the distribution of other financial servicesand products.



IGM

FIN

AN

CIA

L IN

C.


Asset retention bonus and premium expense iscomprised of the following:• Asset retention bonus, which is based on the value of

assets under management, decreased by $2.5 millionto $45.3 million in the first quarter of 2012 comparedto 2011 primarily due to changes in average assetsunder management.

• Asset retention premium, which is a deferredcomponent of compensation designed to promoteConsultant retention, is based on assets undermanagement at each year-end. Asset retention

premium expense decreased by $0.4 million inthe first quarter of 2012 to $8.0 million, comparedto 2011.Non-commission expenses incurred by Investors

Group primarily related to the support of the Consultantnetwork, the administration, marketing and managementof its mutual funds and other products, as well assubadvisory fees related to mutual funds undermanagement. Non-commission expenses were$92.1 million for the first quarter of 2012 compared to$85.8 million in 2011, an increase of $6.3 million or 7.3%.

TABLE 9: MORTGAGE BANKING OPERATIONS – INVESTORS GROUP

% change

2012 2011 2011 2011 2011($ millions) mar. 31 dec. 31 mar. 31 dec. 31 mar. 31

(As at)Mortgages serviced $ 6,503 $ 6,269 $ 5,808 3.7 % 12.0 %Mortgage warehouse(1) $ 435 $ 284 $ 289 53.2 % 50.5 %

(Three months ended)Average mortgages serviced

CMB/MBS Programs $ 2,653 $ 2,638 $ 2,113 0.6 % 25.6 %Bank-sponsored ABCP programs 1,046 1,011 1,281 3.5 (18.3)

Securitizations 3,699 3,649 3,394 1.4 9.0Other 2,647 2,579 2,367 2.6 11.8

$ 6,346 $ 6,228 $ 5,761 1.9 % 10.2 %

Mortgage originations(2) $ 589 $ 328 $ 330 79.6 % 78.5 %

Mortgage sales to:(3)

Securitizations $ 512 $ 534 $ 291 (4.1)% 75.9 %Other(4) 165 180 198 (8.3) (16.7)

$ 677 $ 714 $ 489 (5.2)% 38.4 %

Total mortgage banking incomeNet interest income on securitized loans

Interest income $ 35.6 $ 36.4 $ 36.8 (2.2)% (3.3)%Interest expense (22.7) (22.1) (20.4) (2.7) (11.3)

Net interest income 12.9 14.3 16.4 (9.8) (21.3)Gains on sales(5) 3.7 4.5 3.2 (17.8) 15.6Fair value adjustments and other income 4.6 (2.2) 1.3 n/m n/m

$ 21.2 $ 16.6 $ 20.9 27.7 % 1.4 %

(1) Warehouse activities include mortgage fundings, mortgage renewals and mortgage refinances.(2) Excludes renewals and refinances.(3) Represents principal amounts sold.(4)(5) Represents sales to institutional investors through private placements, to Investors Mortgage and Short Term Income Fund, and to Investors Canadian Corporate Bond

Fund as well as gains realized on those sales.



IGM

FINA

NC

IAL IN

C.


Q1 2012 VS. Q4 2011

Fee IncomeManagement fee income increased by $8.0 million or2.9% to $281.0 million in the first quarter of 2012compared with the fourth quarter of 2011. Managementfee income increased consistent with the increase inaverage daily mutual fund assets of 3.9% as shown inTable 7 and the increase in the management fee rate to189 basis points of average daily mutual fund assetsfrom 188 basis points in the prior quarter. In addition,there was one less calendar day in the first quarter of2012 than in the fourth quarter of 2011 which resultedin a $3.0 million reduction in fee income in the currentquarter. Money market fund waivers totalled $1.0 millionin the first quarter of 2012 compared to $1.2 million inthe fourth quarter of 2011.

Administration fees increased to $55.5 million in thefirst quarter of 2012 from $54.3 million in the fourthquarter of 2011 primarily due to the increase in averagedaily mutual fund assets.

Distribution fee income of $49.3 million in thefirst quarter of 2012 increased by $2.9 million from$46.4 million in the fourth quarter due to an increasein redemption fee income of $3.2 million.

Net Investment Income and OtherNet investment income and other was $21.5 million inthe first quarter of 2012, an increase of $5.2 millionfrom $16.3 million in the previous quarter. The increasein net investment income primarily related to InvestorsGroup’s mortgage banking operations.

Net investment income related to Investors Group’smortgage banking operations totalled $21.2 million inthe first quarter, an increase of $4.6 million from

$16.6 million in the previous quarter as shown inTable 9. The changes in mortgage banking income wereprimarily due to:• Net interest income on securitized loans – which

decreased by $1.4 million relative to the previousquarter to $12.9 million due to lower net interestmargins during the period as a result of mortgageinterest yield declines.

• Gains realized on the sale of residential mortgages –which decreased by $0.8 million relative to theprevious quarter to $3.7 million due to lowermortgage sale volumes to institutional investors.

• Fair value adjustments and other income – whichincreased by $6.8 million relative to the previousquarter to $4.6 million. The increase resulted fromfavourable fair value adjustments to interest rateswaps utilized for hedging purposes and the impactof prepayment penalties related to higher renewaland refinance activity over the period. This increasewas partially offset by higher issuance costsassociated with higher origination volumes.

ExpensesCommission expense in the current quarter was$70.3 million compared with $67.8 million in theprevious quarter. This increase was due to higherredemptions on mutual funds sold with a deferred salescharge as well as increases in the distribution of otherfinancial services and products. The asset retention bonusand premium expense increased by $1.0 million to$53.3 million in the first quarter of 2012 consistent withthe change in the level of assets under management.

Non-commission expenses were $92.1 million in thecurrent quarter, an increase of $4.3 million or 4.9%from $87.8 million in the fourth quarter of 2011.



IGM

FIN

AN

CIA

L IN

C.


MACKENZIE STRATEGY

Mackenzie strives to ensure that the interests ofshareholders, dealers, advisors, investment clients andemployees are closely aligned. Mackenzie’s businessapproach embraces current trends and practices in theglobal financial services industry and our strategic planis focused on: • The delivery of consistent long-term investment

performance.• Offering a diversified suite of investment solutions

for financial advisors and investors.• Continuing to build and solidify our distribution

relationships. • Maximizing returns on business investment by

focusing resources on initiatives that have directbenefits to investment management, distributionand client experience.Founded in 1967, Mackenzie continues to build an

investment advisory business through proprietaryinvestment research and portfolio management whileutilizing strategic partners in a selected sub-advisorycapacity. Our sales model focuses on multiple distributionchannels: Retail, Strategic Alliances and Institutional.

Mackenzie distributes its retail investment productsthrough third party financial advisors. Mackenzie’s salesteams work with many of the more than 30,000independent financial advisors and their firms acrossCanada. In addition to its retail distribution team,Mackenzie also has specialty teams focused on strategicalliances and the institutional marketplace. Within thestrategic alliance channel Mackenzie offers certain seriesof its mutual funds and provides sub-advisory servicesto third party investment programs offered by banks,insurance companies and other investment companies.Mackenzie’s primary distribution relationship is withthe head office of the respective bank, insurancecompany or investment company. In the institutionalchannel Mackenzie provides investment managementservices to pension plans, foundations and otherinstitutions. Mackenzie attracts new institutionalbusiness through its relationships with pension andmanagement consultants, through direct sales effortsand through additional mandates from its existingclient relationships.

In the retail distribution channel, Mackenzie facesstrong competition from other asset managementcompanies, banks, insurance companies and otherfinancial institutions which distribute their products

and services to the same customers that Mackenzie isseeking to attract. In addition, due to the relative size ofstrategic alliance and institutional accounts, gross saleand redemption activity in these accounts can be morepronounced than in the retail channel. Mackenziecontinues to be well positioned to continue to buildand enhance its distribution relationships given its teamof experienced investment professionals, broad productshelf, competitively priced products and its focus onclient experience and investment excellence.

Sale of M.R.S. Trust Company and M.R.S. Inc. (MRS)On November 16, 2011, Mackenzie completed the saleof 100% of the common shares of MRS. The MackenzieReview of Segment Operating Results in this MD&Aexcludes the results of operations of MRS, which havebeen classified as discontinued operations.


The changes in assets under management are summarizedin Table 10.

The change in Mackenzie’s assets under managementis determined by: (1) the increase or decrease in themarket value of the securities held in the portfolios ofinvestments; (2) the level of sales as compared to thelevel of redemptions; and (3) acquisitions.

Fund PerformanceLong-term investment performance is a key measure ofMackenzie’s ongoing success. At March 31, 2012, 54%of Mackenzie’s mutual funds were rated in the top twoperformance quartiles for the one year time frame,51% for the three year time frame and 65% for thefive year time frame. Mackenzie also monitors its fundperformance relative to the ratings it receives on itsmutual funds from the Morningstar† fund rankingservice. At March 31, 2012, 80% of Mackenzie’s mutualfund assets measured by Morningstar† had a rating ofthree stars or better and 43% had a rating of four orfive stars. This compared to the Morningstar† universeof 81% for three stars or better and 42% for four andfive star funds at March 31, 2012.

Additions to Mutual Fund Product OfferingMackenzie’s diversified suite of investment products isdesigned to meet the needs and goals of investors.Mackenzie continues to adjust its product shelf byproviding enhanced investment solutions for financialadvisors to offer their investment clients. Initiatives

MackenzieReview of the Business



IGM

FINA

NC

IAL IN

C.


TABLE 10: CHANGE IN ASSETS UNDER MANAGEMENT – MACKENZIE

% change


Sales $ 2,720.6 $ 2,087.7 $ 3,486.2 30.3 % (22.0)%Redemptions 3,653.6 3,333.6 3,365.5 9.6 8.6

Net sales (redemptions) (933.0) (1,245.9) 120.7 25.1 n/mMarket and income 3,647.4 1,981.7 2,211.9 84.1 64.9

Net change in assets 2,714.4 735.8 2,332.6 268.9 16.4Beginning assets 61,652.0 60,916.2 68,346.3 1.2 (9.8)

Ending assets $ 64,366.4 $ 61,652.0 $ 70,678.9 4.4 % (8.9)%

Consists of:Mutual funds $ 41,534.9 $ 39,140.7 $ 44,824.2 6.1 % (7.3)%Sub-advisory, institutional and

other accounts 22,831.5 22,511.3 25,854.7 1.4 (11.7)

$ 64,366.4 $ 61,652.0 $ 70,678.9 4.4 % (8.9)%

Daily average mutual fund assets $ 40,922.3 $ 39,317.4 $ 44,219.0 4.1 % (7.5)%

Monthly average total assets(1) $ 63,829.5 $ 62,160.7 $ 69,546.5 2.7 % (8.2)%

(1) Based on daily average mutual fund assets and month-end average sub-advisory, institutional and other assets.

undertaken in the first quarter of 2012 included theintroduction of two new services: One-Step DollarCost Averaging and the Flexible Payment Service.

Mackenzie’s One-Step Dollar Cost Averagingprovides investors with a proven, systematic means ofinvesting in the financial markets and staying investedover time.

The Flexible Payment Service (FPS) was designedfor investors who are drawing cash from their investments.Mackenzie’s FPS allows investors to customize theamount of cash they receive by choosing monthlypayments, either at a percentage rate or a specificdollar amount.

Change in Assets under Management – Q1 2012 vs. Q1 2011 Mackenzie’s total assets under management at March 31,2012 were $64.4 billion, a decrease of 8.9% from$70.7 billion at March 31, 2011. Mackenzie’s mutualfund assets under management were $41.5 billion atMarch 31, 2012, a decrease of 7.3% from $44.8 billionat March 31, 2011. Mackenzie’s sub-advisory, institutionaland other accounts at March 31, 2012 were $22.8 billion,a decrease of 11.7% from $25.9 billion last year.

In the three months ended March 31, 2012,Mackenzie’s gross sales were $2.7 billion, a declineof 22.0% from $3.5 billion in the comparative periodlast year. Redemptions in the current period were$3.6 billion, an increase of 8.6% from $3.4 billion lastyear. Net redemptions for the three months endedMarch 31, 2012 were $0.9 billion, as compared tonet sales of $0.1 billion last year. During the currentquarter, market and income resulted in assets increasingby $3.7 billion as compared to an increase of $2.2 billionlast year.

Redemptions of long-term mutual funds in thecurrent quarter were $1.8 billion unchanged from thefirst quarter of 2011. As at March 31, 2012, Mackenzie’stwelve-month trailing redemption rate for long-termfunds was 16.2%, as compared to 16.5% last year. Themost recently available corresponding average twelve-month trailing redemption rate for long-term funds forall other members of IFIC was approximately 14.8% atDecember 31, 2011. Mackenzie’s twelve-month trailingredemption rate is comprised of the weighted averageredemption rate for front-end load assets, deferred salescharge and low load assets with redemption fees, and



IGM

FIN

AN

CIA

L IN

C.


Mackenzie’s earnings before interest and taxes arepresented in Table 11.

Q1 2012 VS. Q1 2011

RevenuesMackenzie’s management fee revenues are earned fromservices it provides as fund manager to its mutual fundsand as investment advisor to sub-advisory and

institutional accounts. The majority of Mackenzie’smutual fund assets are purchased on a retail basis.Mackenzie also offers certain series of its mutual fundswith management fees that are designed for fee-basedprograms, institutional investors and third partyinvestment programs offered by banks, insurancecompanies and investment dealers. Mackenzie does notpay commissions on these non-retail series of its mutualfunds. At March 31, 2012, there were $10.4 billion or

deferred sales charge assets without redemption fees(matured assets). Generally, redemption rates for front-end load assets and matured assets are higher than theredemption rates for deferred sales charge and low loadassets with redemption fees.

Change in Assets under Management – Q1 2012 vs. Q4 2011 Mackenzie’s total assets under management at March 31,2012 were $64.4 billion, an increase of 4.4% from$61.7 billion at December 31, 2011 as summarized inTable 10. Mackenzie’s mutual fund assets under

management increased $2.4 billion or 6.1% to$41.5 billion in the quarter and Mackenzie’s sub-advisory, institutional and other accounts increased$0.3 billion or 1.4% to $22.8 billion at March 31, 2012.

Redemptions of long-term mutual fund assets inthe current quarter were $1.8 billion as compared to$1.5 billion in the quarter ended December 31, 2011.Mackenzie’s annualized quarterly redemption rate forlong-term funds for the quarter ended March 31, 2012was 18.6% as compared to 16.0% in the fourth quarterof 2011.

Review of Segment Operating Results

TABLE 11: OPERATING RESULTS – MACKENZIE (1)

% change


RevenuesManagement fees $ 164.0 $ 159.9 $ 183.3 2.6 % (10.5)%Administration fees 26.9 27.4 27.0 (1.8) (0.4)Distribution fees 5.0 4.9 5.9 2.0 (15.3)

195.9 192.2 216.2 1.9 (9.4)Net investment income and other (0.2) 0.2 0.8 n/m n/m

195.7 192.4 217.0 1.7 (9.8)

ExpensesCommission 22.2 22.5 25.7 (1.3) (13.6)Trailing commission 46.0 43.9 50.3 4.8 (8.5)Non-commission 65.7 57.1 63.5 15.1 3.5

133.9 123.5 139.5 8.4 (4.0)

Earnings before interest and taxes $ 61.8 $ 68.9 $ 77.5 (10.3)% (20.3)%

(1) 2011 Results exclude the operating results of Discontinued Operations.



IGM

FINA

NC

IAL IN

C.


24.9% of mutual fund assets in these series of funds, ascompared to $10.6 billion or 23.7% at March 31, 2011.

Management fees were $164.0 million for thethree months ended March 31, 2012, a decrease of$19.3 million or 10.5% from $183.3 million last year.The change in management fees was consistent withthe decrease in Mackenzie’s monthly average total assetsunder management combined with the change in mix ofassets under management. In addition, there was onemore calendar day in the first quarter of 2012 than inthe first quarter of 2011 which resulted in an increase inmanagement fees in the current quarter.

Monthly average total assets under managementwere $63.8 billion in the three month period endedMarch 31, 2012 compared to $69.5 billion in 2011,a decrease of 8.2%.

Mackenzie’s average management fee rate was 103.3basis points in the three month period ended March 31,2012, compared to 106.9 basis points in 2011. Factorscontributing to the decrease in the average managementfee rate as compared to 2011 are as follows:• Institutional assets and non-retail mutual funds have

lower management fees than retail mutual funds.The proportion of Mackenzie’s institutional accountsand non-retail mutual funds increased as a percentageof Mackenzie’s total assets under managementresulting in a decrease to the average managementfee rate.

• Changes in the relative proportion of equity andfixed income assets under management, due tomarket and income as well as net cash flows, asaccounts with fixed income mandates have lowermanagement fees.Mackenzie earns administration fees primarily from

providing services to its mutual funds. Administrationfees were $26.9 million for the three months endedMarch 31, 2012, as compared to $27.0 million in 2011.

Effective August 1, 2007, Mackenzie assumedresponsibility for the operating expenses of the Mackenziefunds, other than GST/HST and certain specified fundcosts, in return for a fixed rate administration feeestablished for each fund based on the following criteria: • From August 1, 2007 until December 31, 2009, and

thereafter as may be applicable, the funds that existedas at August 1, 2007 may be required to pay amonthly operating expense adjustment to Mackenzieif the combined average monthly net assets for allMackenzie funds and series that were subject to the

administration fee proposal that was approved byinvestors on August 7, 2007 fall to a level that is95% of the amount of their total net assets onAugust 1, 2007. If it becomes payable, Mackenziewill be entitled to receive an operating expenseadjustment for that month from each of those fundsand series in such amount that will result in all ofthose series, collectively, paying an administrationfee for the month equal to the administration feethat would have been payable had the monthly netassets equaled 95% of the net assets on August 1,2007 throughout the month.

• As the applicable mutual fund asset levels as atDecember 31, 2009 were below 95% of the net assetlevels on August 1, 2007, the monthly operatingexpense adjustment continues until the first monthwhere average asset levels exceed 95% of the netasset levels on August 1, 2007. If, in a subsequentmonth, the monthly net assets increase to an amountequal to or greater than 95% of the net assets onAugust 1, 2007, the operating expense adjustmentwill no longer be payable.Due to the level of mutual fund assets, Mackenzie

continued to receive an operating expense adjustment inthe current period. The operating expense adjustmentsin the three months ended March 31, 2012 were$4.1 million as compared to $1.6 million in 2011.

Mackenzie earns distribution fee income onredemptions of mutual fund assets sold on a deferredsales charge purchase option and on a low load purchaseoption. Distribution fees charged for deferred salescharge assets range from 5.5% in the first year anddecrease to zero after seven years. Distribution fees forlow load assets range from 3.0% in the first year anddecrease to zero after three years. Distribution feeincome in the three months ended March 31, 2012was $5.0 million, a decrease of $0.9 million from$5.9 million last year.

ExpensesMackenzie’s expenses were $133.9 million for thethree months ended March 31, 2012, a decrease of$5.6 million or 4.0% from $139.5 million last year.

Mackenzie pays selling commissions to the dealersthat sell its mutual funds on a deferred sales charge andlow load purchase option. The expense for deferredselling commissions consists of the amortization of theasset over its useful life and the reduction of theunamortized deferred selling commission asset



IGM

FIN

AN

CIA

L IN

C.


associated with redemptions. Mackenzie amortizesselling commissions over a maximum period of threeyears from the date of original purchase of the applicablelow load assets and over a maximum period of sevenyears from the date of original purchase of the applicabledeferred sales charge assets. Commission expenses were$22.2 million in the three months ended March 31,2012, as compared to $25.7 million last year.

Trailing commissions paid to dealers are calculatedas a percentage of mutual fund assets under managementand vary depending on the fund type and the purchaseoption upon which the fund was sold: front-end, deferredsales charge or low load. Trailing commissions were$46.0 million in the three months ended March 31, 2012,a decrease of $4.3 million or 8.5% from $50.3 millionlast year. The change in trailing commissions in thethree month period ended March 31, 2012 is consistentwith the period over period movement in averagemutual fund assets under management and the changein asset mix within Mackenzie’s mutual funds. Trailingcommissions as a percentage of average mutual fundassets under management were 45.2 basis points in thethree months ended March 31, 2012 as compared to46.1 basis points last year.

Non-commission expenses are incurred by Mackenziein the administration, marketing and management of itsassets under management. Non-commission expenseswere $65.7 million in the three months ended March 31,2012, an increase of $2.2 million or 3.5% from$63.5 million last year. Mackenzie actively managesits non-commission expenses to enhance its futureoperating capabilities while at the same time investingin revenue generating initiatives to further growits business.

Q1 2012 VS. Q4 2011

RevenuesManagement fees were $164.0 million for the currentquarter, an increase of $4.1 million or 2.6% from$159.9 million in the fourth quarter of 2011. Factorscontributing to the net increase in management feesare as follows:

• Monthly average total assets under managementwere $63.8 billion in the current quarter comparedto $62.2 billion in the quarter ended December 31,2011, an increase of 2.7%.

• Mackenzie’s average management fee rate was 103.3basis points in the current quarter as compared to102.1 basis points in the fourth quarter of 2011.

• There was one less calendar day in the first quarterof 2012 than in the fourth quarter of 2011.Administration fees were $26.9 million in the

current quarter compared to $27.4 million in thequarter ended December 31, 2011. Included inadministration fees for the current quarter were fundoperating expense adjustments of $4.1 million ascompared to $4.7 million in the fourth quarter of 2011.

ExpensesMackenzie’s expenses were $133.9 million for thecurrent quarter, an increase of $10.4 million or 8.4%from $123.5 million in the fourth quarter of 2011.

Commission expense, which represents theamortization of selling commissions, was $22.2 millionin the quarter ended March 31, 2012, as compared to$22.5 million in the fourth quarter of 2011. Trailingcommissions were $46.0 million in the current quarter,an increase of $2.1 million or 4.8% from $43.9 millionin the fourth quarter of 2011.

Non-commission expenses were $65.7 million in thecurrent quarter, an increase of $8.6 million or 15.1%from $57.1 million in the fourth quarter of 2011. Dueto the increase in sales activities and transactionalvolumes in the first quarter of the year, Mackenzie’snon-commission expenses are generally higher in thisquarter as compared to other quarters.



IGM

FINA

NC

IAL IN

C.


Corporate and OtherReview of Segment Operating Results

TABLE 12: OPERATING RESULTS – CORPORATE AND OTHER

% change


RevenuesFee income $ 45.4 $ 42.4 $ 49.6 7.1 % (8.5)%Net investment income and other 24.7 19.9 20.3 24.1 21.7

70.1 62.3 69.9 12.5 0.3

ExpensesCommission 29.6 27.5 33.6 7.6 (11.9)Non-commission 12.3 10.5 12.7 17.1 (3.1)

41.9 38.0 46.3 10.3 (9.5)

Earnings before interest and taxes $ 28.2 $ 24.3 $ 23.6 16.0 % 19.5)%

Q1 2012 VS. Q1 2011

Net investment income and other totalled $24.7 millionin the first quarter of 2012, an increase of $4.4 millioncompared with 2011.

Earnings before interest and taxes related toInvestment Planning Counsel were $0.2 million higherin the first quarter of 2012 compared to the sameperiod in 2011.

Q1 2012 VS. Q4 2011

Net investment income and other totalled $24.7 millionin the first quarter of 2012, an increase of $4.8 millionfrom the previous quarter.

Earnings before interest and taxes related toInvestment Planning Counsel were $1.0 million lowerin the first quarter of 2012 compared with theprevious quarter.

The Corporate and Other segment includes netinvestment income not allocated to the Investors Groupor Mackenzie segments, the Company’s proportionateshare of earnings of its affiliate, Great-West Lifeco Inc.,

operating results for Investment Planning Counsel Inc.,other income, as well as consolidation elimination entries.

Corporate and other earnings before interest andtaxes are presented in Table 12.



IGM

FIN

AN

CIA

L IN

C.


IGM Financial’s total assets were $11.3 billion atMarch 31, 2012, compared to $11.2 billion atDecember 31, 2011.

SECURITIES

The composition of the Company’s securities holdingsis detailed in Table 13.

Fair Value Through Profit or Loss SecuritiesSecurities classified as fair value through profit or lossinclude common shares, Canada Mortgage Bonds,which are discussed below, and fixed income securitiescomprised of the restructured notes of the master assetvehicle (MAV) conduits. Unrealized gains and losses arerecorded in Net investment income and other in theConsolidated Statements of Earnings.

Canada Mortgage Bonds were initially purchasedin 2009 as part of the Company’s ongoing interest raterisk management activities related to its participation inthe Canada Mortgage Bond Program (CMB Program).The Canada Mortgage Bonds are financed throughrepurchase agreements, which represent short-termfunding transactions where the Company sells securitiesthat it owns and commits to repurchase these securitiesat a specified price on a specified date in the future.

Canada Mortgage Bonds had a fair value of$223.7 million at March 31, 2012. The obligation torepurchase the securities is recorded at amortized costand had a carrying value of $225.0 million. The interestexpense related to these obligations is recorded on anaccrual basis in Net investment income and other in theConsolidated Statements of Earnings.

LOANS

Loans totalled $4.4 billion at March 31, 2012 andrepresented 38.7% of total assets, compared to 36.6%at December 31, 2011. Loans consisted of residentialmortgages:• Sold to securitization programs which are classified

as loans and receivables and totalled $3.9 billioncompared to $3.8 billion at December 31, 2011.An offsetting liability, Obligations to securitizationentities, has been recorded and totalled $4.0 billionat March 31, 2012, compared to $3.8 billion atDecember 31, 2011.

• Related to the Company’s mortgage bankingoperations which are classified as held for trading andtotalled $458.6 million compared to $292.1 millionat December 31, 2011. These loans are held by theCompany pending sale or securitization.

• Related to the Company’s intermediary operationswhich are classified as loans and receivables andtotalled $28.8 million, compared to $31.3 millionat December 31, 2011.The collective allowance for credit losses was

$0.7 million at March 31, 2012, compared to$0.8 million at December 31, 2011.

Residential mortgages originated by Investors Groupare funded primarily through sales to third parties on afully serviced basis, including CMHC or Canadian banksponsored securitization programs. Investors Groupservices residential mortgages of $8.4 billion, including$1.9 billion originated by subsidiaries of Great-WestLifeco Inc.

IGM Financial Inc.Consolidated Financial Position

TABLE 13: SECURITIES

march 31, 2012 december 31, 2011

($ millions) cost fair value cost fair value

Available for saleCommon shares $ – $ – $ 4.9 $ 4.9Proprietary investment funds 30.0 31.8 30.7 31.1

30.0 31.8 35.6 36.0

Fair value through profit or lossCommon shares 4.8 4.6 – –Canada Mortgage Bonds 220.4 223.7 220.5 227.2Fixed income securities 30.7 31.6 30.8 29.2

255.9 259.9 251.3 256.4

$ 285.9 $ 291.7 $ 286.9 $ 292.4



IGM

FINA

NC

IAL IN

C.


Derecognition of financial assets in accordance withIFRS is based on the transfer of risks and rewards ofownership. The Company has retained prepaymentrisk and certain elements of credit risk associated withthe transferred assets. As a result, the Company’ssecuritization transactions through the CMB andABCP programs are accounted for as securedborrowings. The Company records the transactionsunder these programs as follows: (i) the mortgages andrelated obligations are carried at amortized cost; and(ii) interest income and interest expense, utilizing theeffective interest rate method, are recorded over theterm of the mortgages.

In the first quarter of 2012, the Company securitizedloans through its mortgage banking operations withcash proceeds of $505 million compared to $289 millionin 2011. The fair value of the Company’s retainedinterest was $40.5 million at March 31, 2012 comparedto $24.3 million at December 31, 2011. The retainedinterest includes cash reserve accounts of $13.0 million,which are reflected on the balance sheet, and rights tofuture excess spread of $85.0 million, which are notreflected on the balance sheet. The retained interestalso includes the component of a swap entered intounder the CMB Program whereby the Company payscoupons on Canada Mortgage Bonds and receivesinvestment returns on the reinvestment of repaidmortgage principal. This component of the swap isrecorded on the balance sheet and had a negative fairvalue of $57.5 million at March 31, 2012. Additionalinformation related to the Company’s securitizationactivities can be found in the Financial Instrumentssection of this MD&A and in Note 6 of the InterimFinancial Statements.

The Company’s exposure to and management of creditrisk and interest rate risk related to its loan portfolios andits mortgage banking operations is discussed in theFinancial Instruments section of this MD&A.

INVESTMENT IN AFFILIATE

The Company currently has a 4% equity interest inGreat-West Lifeco Inc. (Lifeco), an affiliated company.Both IGM Financial and Lifeco are controlled byPower Financial Corporation.

The equity method is used to account for IGMFinancial’s investment in Lifeco, as it exercises significantinfluence over Lifeco. The Company’s proportionateshare of Lifeco’s earnings is recorded in Net investmentincome and other in the Corporate and other reportablesegment. Changes in the carrying value for the threemonth period ended March 31, 2012 compared with thesame period in 2011 are shown in Table 14.

SECURITIZATION ARRANGEMENTS

Through the Company’s mortgage banking operations,residential mortgages originated by Investors Groupmortgage planning specialists are sold to securitizationtrusts sponsored by third parties that in turn issuesecurities to investors. The Company securitizesresidential mortgages through the Canada Mortgageand Housing Corporation (CMHC) sponsored NationalHousing Act Mortgage-Backed Securities (NHA MBS)and the CMB Program and through Canadian bank-sponsored ABCP programs. The Company retainsservicing responsibilities and certain elements of creditrisk and prepayment risk associated with the transferredassets. The Company’s credit risk on its securitizedmortgages is mitigated through the use of insurance.

TABLE 14: INVESTMENT IN AFFILIATE

Three months ended March 31($ millions) 2012 2011

Carrying value, beginning of period $ 612.5 $ 580.5Proportionate share of earnings 19.7 16.9Dividends received (11.6) (11.6)Proportionate share of other comprehensive income (loss) and other adjustments (8.7) (16.5)

Carrying value, end of period $ 611.9 $ 569.3

Fair value, end of period $ 925.8 $ 1,015.7



IGM

FIN

AN

CIA

L IN

C.


LIQUIDITY

Cash and cash equivalents totalled $889.9 million atMarch 31, 2012 compared with $1.05 billion and$1.48 billion at December 31, 2011 and March 31,2011, respectively. Cash and cash equivalents relatedto the Company’s deposit operations were $14.2 millionat March 31, 2012 compared with $14.0 million and$287.4 million at December 31, 2011 and March 31,2011, respectively, as shown in Table 15.

Working capital totalled $1.01 billion at March 31,2012 compared with $979.7 million and $723.6 millionat December 31, 2011 and March 31, 2011, respectively.Working capital excludes the Company’s depositoperations as shown in Table 15.

Working capital is utilized to:• Finance ongoing operations, including the funding

of selling commissions.• Temporarily finance mortgages in its mortgage

banking operations.• Pay interest and dividends related to long-term debt

and preferred shares. • Maintain liquidity requirements for regulated entities.• Pay quarterly dividends on its outstanding common

shares.• Finance common share purchases related to the

Company’s normal course issuer bid.

IGM Financial continues to generate significantcash flows from its operations. Earnings before interest,taxes, depreciation and amortization (EBITDA) totalled$360.5 million in the first quarter of 2012 comparedto $396.3 million in the first quarter of 2011 and$354.6 million in the fourth quarter of 2011. EBITDAfor each period under review excludes the impact ofamortization of deferred selling commissions whichtotalled $70.0 million in the first quarter of 2012compared to $72.5 million in the first quarter of 2011and $69.0 million in the fourth quarter of 2011. As wellas being an important alternative measure of performance,EBITDA is a common measure utilized by investmentanalysts and credit rating agencies in reviewing assetmanagement companies.

Refer to the Financial Instruments section of thisMD&A for information related to other sources ofliquidity and to the Company’s exposure to andmanagement of liquidity risk.

Cash Flows Table 16 – Cash Flows is a summary of the ConsolidatedStatements of Cash Flows which forms part of theInterim Financial Statements for the quarter endedMarch 31, 2012. Cash and cash equivalents fromcontinuing operations decreased by $162.5 million inthe quarter compared to a decrease of $103.9 million inthe first quarter of 2011.

Consolidated Liquidity and Capital Resources

TABLE 15: DEPOSIT OPERATIONS – F INANCIAL POSITION

2012 2011 2011($ millions) mar. 31 dec. 31 mar. 31(1)

AssetsCash and cash equivalents $ 14.2 $ 14.0 $ 287.4Securities – – 213.9Accounts & other receivables 119.0 122.3 68.5Loans 27.8 28.0 420.5

Total assets $ 161.0 $ 164.3 $ 990.3

Liabilities and shareholders’ equityDeposit liabilities $ 147.1 $ 150.7 $ 818.2Other liabilities 1.0 1.0 53.9Subordinated debt – – 20.0Shareholders’ equity 12.9 12.6 98.2

Total liabilities and shareholders’ equity $ 161.0 $ 164.3 $ 990.3

(1) March 31, 2011 includes assets, liabilities and shareholder’s equity of MRS Trust which was sold in November 2011.



IGM

FINA

NC

IAL IN

C.


Operating activities from continuing operations,before payment of commissions, generated $183.7 millionduring the quarter ended March 31, 2012, as comparedto $238.8 million in 2011. Cash commissions paid were$72.2 million in 2012 compared to $88.2 million in2011. Net cash flows from operating activities, net ofcommissions paid, were $111.5 million in 2012 ascompared to $150.6 million in 2011.

Financing activities from continuing operationsduring the first quarter of 2012 compared to 2011primarily related to:• A net decrease of $3.6 million in deposits and

certificates in 2012 compared to a net decrease of$3.9 million in 2011.

• A net payment of $2.3 million in 2012 arising fromobligations related to assets sold under repurchaseagreements compared to net proceeds of $6.0 millionin 2011.

• A net increase of $190.5 million in 2012 arisingfrom obligations to securitization entities comparedto a net increase of $21.5 million in 2011.

• Proceeds received on the issuance of common sharesof $7.8 million in 2012 compared with $20.7 millionin 2011.

• The purchase of 845,000 common shares in 2012under IGM Financial’s normal course issuer bid at acost of $39.0 million compared with the purchase of

2,000,000 common shares at a cost of $86.2 millionin 2011.

• The payment of perpetual preferred share dividendswhich totalled $2.2 million in 2012, unchangedfrom 2011.

• The payment of regular common share dividendswhich totalled $138.0 million in 2012 compared to$133.1 million in 2011. Investing activities from continuing operations

during the first quarter of 2012 compared to 2011primarily related to:• The purchases of securities totalling $6.0 million

and sales of securities with proceeds of $7.4 millionin 2012 compared to $5.4 million and $11.5 million,respectively, in 2011.

• A net increase in loans of $282.2 million in 2012compared to a net increase of $77.7 million in 2011primarily related to residential mortgages in theCompany’s mortgage banking operations.

CAPITAL RESOURCES

The Company’s capital management objective is tomaximize shareholder returns while ensuring that theCompany is capitalized in a manner which appropriatelysupports regulatory requirements, working capitalneeds and business expansion. The Company’s capitalmanagement practices are focused on preserving the

TABLE 16: CASH FLOWS

Three months ended March 31($ millions) 2012 2011 change

Operating activities – continuing operationsBefore payment of commissions $ 183.7 $ 238.8 (23.1)%Commissions paid (72.2) (88.2) 18.1

Net of commissions paid 111.5 150.6 (26.0)Financing activities – continuing operations 13.2 (177.2) 107.4Investing activities – continuing operations (287.2) (77.3) n/m

Decrease in cash and cash equivalents from continuing operations (162.5) (103.9) (56.4)Increase in cash and cash equivalents from discontinued operations – 12.0 (100.0)Cash and cash equivalents from continuing and discontinued operations,

beginning of period 1,052.4 1,573.6 (33.1)

Cash and cash equivalents, end of period 889.9 1,481.7 (39.9)Less: Cash and cash equivalents from discontinued operations, end of period – (299.8) 100.0

Cash and cash equivalents, end of period – continuing operations $ 889.9 $ 1,181.9 (24.7)%



IGM

FIN

AN

CIA

L IN

C.


quality of its financial position by maintaining a solidcapital base and a strong balance sheet. Capital of theCompany consists of long-term debt, perpetual preferredshares and common shareholders’ equity which totalled$5.8 billion at March 31, 2012, unchanged fromDecember 31, 2011. The Company regularly assessesits capital management practices in response tochanging economic conditions.

The Company’s capital is primarily utilized in itsongoing business operations to support working capitalrequirements, long-term investments made by theCompany, business expansion and other strategicobjectives. Subsidiaries subject to regulatory capitalrequirements include investment dealers, mutual funddealers, exempt market dealers, portfolio managers,investment fund managers and a trust company. Thesesubsidiaries are required to maintain minimum levelsof capital based on either working capital, liquidity orshareholders’ equity. The Company’s subsidiaries havecomplied with all regulatory capital requirements.

The total outstanding long-term debt was$1,325.0 million at March 31, 2012, unchanged fromDecember 31, 2011. Long-term debt is comprised ofdebentures which are senior unsecured debt obligationsof the Company subject to standard covenants,including negative pledges, but which do not includeany specified financial or operational covenants.

Perpetual preferred shares of $150 million remainunchanged.

The Company purchased 845,000 common sharesin the first quarter of 2012 at a cost of $39.0 millionunder its normal course issuer bid (refer to Note 7 tothe Interim Financial Statements). The Companycommenced a normal course issuer bid on April 12,2012 to purchase up to 5% of its common shares inorder to mitigate the dilutive effect of stock optionsissued under the Corporation’s stock option plan andfor other capital management purposes. Other activitiesin the first quarter of 2012 included the declaration ofperpetual preferred share dividends of $2.2 million or$0.36875 per share and common share dividends of$137.7 million or $0.5375 per share. Changes incommon share capital are reflected in the ConsolidatedStatements of Changes in Shareholders’ Equity.

The current rating by Standard & Poor’s (S&P) ofthe Company’s senior debt and liabilities is “A+” with astable outlook. Dominion Bond Rating Service’s (DBRS)current rating on the Company’s senior unsecured

debentures is “A (High)” with a stable outlook.Credit ratings are intended to provide investors

with an independent measure of the credit quality ofthe securities of a company and are indicators of thelikelihood of payment and the capacity of a company tomeet its obligations in accordance with the terms ofeach obligation. Descriptions of the rating categoriesfor each of the agencies set forth below have beenobtained from the respective rating agencies’ websites.

These ratings are not a recommendation to buy,sell or hold the securities of the Company and do notaddress market price, nor other factors that mightdetermine suitability of a specific security for a particularinvestor. The ratings also may not reflect the potentialimpact of all risks on the value of securities and aresubject to revision or withdrawal at any time by therating organization.

The “A+” rating assigned to the Company’s seniorunsecured debentures by S&P is the third highest of theten major rating categories for long-term debt andindicates S&P’s view that the Company’s capacity tomeet its financial commitment on the obligation isstrong, but the Company is somewhat more susceptibleto the adverse effects of changes in circumstances andeconomic conditions than companies in higher ratedcategories. S&P uses “+” or “-” designations to indicatethe relative standing within the major rating categories.

According to S&P, the “Stable” rating outlookmeans that S&P considers that the rating is unlikely tochange over the intermediate term. A stable outlook isnot necessarily a precursor to an upgrade.

The A (High) rating assigned to IGM Financial’ssenior unsecured debentures by DBRS is the thirdhighest of the ten rating categories for long-term debt.Under the DBRS system, debt securities rated A (High)are of good credit quality and protection of interestand principal is considered substantial. While this is afavourable rating, entities in the A (High) category areconsidered to be more susceptible to adverse economicconditions and have greater cyclical tendencies thanhigher-rated companies. A reference to “high” or “low”reflects the relative strength within the rating category,while the absence of either a “high” or “low” designationindicates the rating is placed in the middle of the category.

According to DBRS, the “Stable” rating trend helpsgive investors an understanding of DBRS’s opinionregarding the outlook for the rating.



IGM

FINA

NC

IAL IN

C.


FINANCIAL INSTRUMENTS

Table 17 presents the carrying value and the fair valueof financial instruments.

Fair value is determined using the followingmethods and assumptions:• The fair value of short-term financial instruments

approximate carrying value. These include cash andcash equivalents, accounts and other receivables,certain other financial assets, accounts payable andaccrued liabilities, repurchase agreements, andcertain other financial liabilities.

• Securities are valued using quoted prices from activemarkets, when available. When a quoted marketprice is not readily available, valuation techniquesare used that require assumptions related to discountrates and the timing and amount of future cash flows.Wherever possible, observable market inputs areused in the valuation techniques.

• Loans are valued by discounting the expected futurecash flows at market interest rates for loans withsimilar credit risk and maturity.

• Obligations to securitization entities are valued bydiscounting the expected future cash flows byprevailing market yields for securities issued by thesesecuritization entities having like maturities andcharacteristics.

• Deposits and certificates are valued by discountingthe contractual cash flows using market interest ratescurrently offered for deposits with similar terms andcredit risks.

• Long-term debt is valued using quoted prices foreach debenture available in the market.

• Derivative financial instruments are valuedbased on quoted market prices, where available,prevailing market rates for instruments with similarcharacteristics and maturities, or discounted cashflow analysis.See Note 23 to the Annual Consolidated Financial

Statements included in the 2011 IGM Financial Inc.Annual Report (Annual Financial Statements) whichprovides additional discussion on the determination offair value of financial instruments.

TABLE 17: F INANCIAL INSTRUMENTS

march 31, 2012 december 31, 2011

($ millions) carrying value fair value carrying value fair value

AssetsCash and cash equivalents $ 889.9 $ 889.9 $ 1,052.4 $ 1,052.4 Securities 291.7 291.7 292.5 292.5 Accounts and other receivables 319.7 319.7 282.0 282.0 Loans 4,372.4 4,435.8 4,085.9 4,144.3 Derivative instruments 67.2 67.2 88.1 88.1 Other financial assets 1.8 1.8 6.3 6.3

Total financial assets $ 5,942.7 $ 6,006.1 $ 5,807.2 $ 5,865.6

LiabilitiesAccounts payable and accrued labilities $ 288.9 $ 288.9 $ 300.1 $ 300.1 Repurchase agreements 225.0 225.0 227.3 227.3 Derivative instruments 80.5 80.5 111.4 111.4 Deposits and certificates 147.1 148.7 150.7 152.0 Other financial liabilities 221.2 221.2 221.3 221.3 Obligations to securitization entities 4,017.6 4,102.1 3,827.4 3,930.4 Long-term debt 1,325.0 1,593.7 1,325.0 1,586.7

Total financial liabilities $ 6,305.3 $ 6,660.1 $ 6,163.2 $ 6,529.2



IGM

FIN

AN

CIA

L IN

C.


Although there were changes to both the carryingvalues and fair values of financial instruments, thesechanges did not have a material impact on the financialcondition of the Company for the three months endedMarch 31, 2012. The Company actively manages risksthat arise as a result of holding financial instrumentswhich include liquidity, credit and market risk.

Liquidity RiskLiquidity risk is the risk that the Company cannotmeet a demand for cash or fund its obligations as theycome due. The Company’s liquidity managementpractices include:• Controls over liquidity management processes.• Stress testing of various operating scenarios.• Oversight of liquidity management by Committees

of the Board of Directors.As part of ongoing liquidity management during

2012 and 2011, the Company:• Repaid the $450.0 million 2001 Series 6.75%

debentures on maturity.• Continued to assess additional funding sources for

the Company’s mortgage banking operations.A key liquidity requirement for the Company is the

funding of commissions paid on the sale of mutual funds.Commissions on the sale of mutual funds continue to bepaid from operating cash flows.

The Company also maintains sufficient liquidity tofund and temporarily hold mortgages. Through itsmortgage banking operations, residential mortgagesare sold or securitized to:• Investors Mortgage and Short Term Income Fund

and Investors Canadian Corporate Bond Fund;• Third parties, including CMHC or Canadian bank

sponsored securitization trusts; or• Institutional investors through private placements.

Certain subsidiaries of Investors Group are approvedissuers of NHA MBS and are approved sellers into theCMB Program. This issuer and seller status providesInvestors Group with additional funding sources forresidential mortgages. The Company’s continued abilityto fund residential mortgages through Canadian bank-sponsored securitization trusts and NHA MBS isdependent on securitization market conditions that aresubject to change. A condition of the NHA MBS andCMB Programs is that securitized loans be insured byan insurer that is approved by CMHC. The availabilityof mortgage insurance is similarly dependent uponmarket conditions that are subject to change.

The Company’s contractual obligations are reflectedin Table 18.

In addition to IGM Financial’s current balance ofcash and cash equivalents, liquidity is available throughthe Company’s operating lines of credit. The Company’soperating lines of credit with various Schedule ICanadian chartered banks totalled $325 million as atMarch 31, 2012, unchanged from December 31, 2011.The operating lines of credit as at March 31, 2012consisted of committed lines of $150 million anduncommitted lines of $175 million. The Company hasaccessed its uncommitted operating lines of credit inthe past, however, any advances made by a bank underthe uncommitted operating lines are at the bank’s solediscretion. As at March 31, 2012 and December 31,2011, the Company was not utilizing its committed linesof credit or its uncommitted operating lines of credit.

The Company accessed the capital markets mostrecently in December 2010, however, its ability to accesscapital markets to raise funds in future is dependent onmarket conditions.

TABLE 18: CONTRACTUAL OBLIGATIONS

As at March 31, 2012 less than 1 – 5 after($ millions) demand 1 year years 5 years total

Deposits and certificates $ 118.5 $ 9.7 $ 14.3 $ 4.6 $ 147.1 Derivative instruments – 30.0 48.0 2.5 80.5 Obligations to securitization entities – 663.7 3,342.3 11.6 4,017.6 Long-term debt – – – 1,325.0 1,325.0 Operating leases(1) – 47.6 138.2 81.9 267.7

Total contractual obligations $ 118.5 $ 751.0 $ 3,542.8 $ 1,425.6 $ 5,837.9

(1) Includes office space and equipment used in the normal course of business. Lease payments are charged to earnings in the period of use.



IGM

FINA

NC

IAL IN

C.


Management believes cash flows from operations,available cash balances and other sources of liquiditydescribed above will be sufficient to meet the Company’sliquidity needs. The Company continues to have theability to meet its operational cash flow requirements,its contractual obligations, and its declared dividends.The current practice of the Company is to declare andpay dividends to common shareholders on a quarterlybasis at the discretion of the Board of Directors. Thedeclaration of dividends by the Board of Directors isdependent on a variety of factors, including earningswhich are significantly influenced by the performanceof debt and equity markets. The Company’s liquidityposition and its management of liquidity risk have notchanged materially since December 31, 2011.

Credit Risk Credit risk is the potential for financial loss to theCompany if a counterparty in a transaction fails to meetits obligations. The Company’s cash and cash equivalents,securities holdings, mortgage portfolios, and derivativesare subject to credit risk. The Company monitors itscredit risk management practices on an ongoing basisto evaluate their effectiveness.

At March 31, 2012, cash and cash equivalents of$889.9 million consisted of cash balances of $88.3 millionon deposit with Canadian chartered banks and cashequivalents of $801.6 million. Cash equivalents areprimarily comprised of Government of Canada treasurybills totalling $155.8 million, provincial governmentand government guaranteed commercial paper of$363.7 million and bankers’ acceptances issued byCanadian chartered banks of $281.7 million. TheCompany regularly reviews the credit ratings of itscounterparties. The maximum exposure to credit risk onthese financial instruments is their carrying value. TheCompany manages credit risk related to cash and cashequivalents by adhering to its Investment Policy thatoutlines credit risk parameters and concentration limits.

Fair value through profit or loss securities includeCanada Mortgage Bonds with a fair value of$223.7 million and fixed income securities which arecomprised of the restructured notes of the MAVconduits with a fair value of $31.7 million. These fairvalues represent the maximum exposure to credit riskat March 31, 2012. Refer to Note 5 to the AnnualFinancial Statements for information related to thevaluation of the MAV conduits.

The Company regularly reviews the credit qualityof the mortgage portfolios, related to the Company’smortgage banking operations and its intermediaryoperations, as well as the adequacy of the collectiveallowance. As at March 31, 2012, mortgages totalled$4.4 billion and consisted of residential mortgages:• Sold to securitization programs which are classified

as loans and receivables and totalled $3.9 billioncompared to $3.8 billion at December 31, 2011.An offsetting liability, Obligations to securitizationentities, has been recorded and totalled $4.0 billionat March 31, 2012, compared to $3.8 billion atDecember 31, 2011.

• Related to the Company’s mortgage banking operationswhich are classified as held for trading and totalled$458.6 million compared to $292.1 million atDecember 31, 2011. These loans are held by theCompany pending sale or securitization.

• Related to the Company’s intermediary operationswhich are classified as loans and receivables andtotalled $28.8 million at March 31, 2012, comparedto $31.3 million at December 31, 2011.As at March 31, 2012, the mortgage portfolios

related to the Company’s intermediary operations weregeographically diverse, 100% residential (December 31,2011 – 100%) and 99.5% insured (December 31,2011 – 99.4%). As at March 31, 2012, impaired anduninsured non-performing mortgages over 90 days were$0.1 million, compared to nil at December 31, 2011.The characteristics of the mortgage portfolio have notchanged significantly during 2012.

The NHA MBS and CMB Program requires that allsecuritized mortgages be insured against default by anapproved insurer. At March 31, 2012, 80.9% of loanssecuritized through ABCP programs are also insured. AtMarch 31, 2012, 89.7% of the securitized portfolio andthe residential mortgages classified as held for tradingwere insured compared to 93.0% at December 31,2011. As at March 31, 2012, impaired loans on theseportfolios were $1.8 million, compared to $1.1 millionat December 31, 2011. Uninsured non-performingmortgages over 90 days on these portfolios were$0.8 million at March 31, 2012, compared to nil atDecember 31, 2011.

The collective allowance for credit losses was$0.7 million at March 31, 2012, compared to$0.8 million at December 31, 2011, and is considered



IGM

FIN

AN

CIA

L IN

C.


adequate by management to absorb all credit relatedlosses in the mortgage portfolios.

The Company retains certain elements of creditrisk on securitized loans. At March 31, 2012, 94.2% ofsecuritized loans were insured against credit losses. TheCompany’s credit risk on its securitization activities islimited to its retained interest. The fair value of theCompany’s retained interests in securitized mortgageswas $40.5 million at March 31, 2012 compared to$24.3 million at December 31, 2011. Retainedinterests include:• Cash reserve accounts and rights to future net interest

income – which were $13.0 million and $85.0 million,respectively, at March 31, 2012. Cash reserve accountsare reflected on the balance sheet, whereas rights tofuture net interest income are not reflected on thebalance sheet and will be recorded over the life ofthe mortgages.

The portion of this amount pertaining to Canadianbank-sponsored securitization trusts of $43.3 millionis subordinated to the interests of the trust andrepresents the maximum exposure to credit risk forany failure of the borrowers to pay when due. Creditrisk on these mortgages is mitigated by any insuranceon these mortgages, as previously discussed, and theCompany’s credit risk on insured loans is to the insurer.

Rights to future net interest income under theNHA MBS and CMB Program totalled $54.7 million.Under the NHA MBS and CMB Program, theCompany has an obligation to make timely paymentsto security holders regardless of whether amountsare received from mortgagors. All mortgagessecuritized under the NHA MBS and CMB Programare insured by CMHC or another approved insurerunder the program. Outstanding mortgagessecuritized under these programs are $2.7 billion.

• Fair value of principal reinvestment account swaps – hada negative fair value of $57.5 million at March 31,2012 which is reflected on the Company’s balancesheet. These swaps represent the component of aswap entered into under the CMB Program wherebythe Company pays coupons on Canada MortgageBonds and receives investment returns on thereinvestment of repaid mortgage principal. Thenotional amount of these swaps was $622.9 millionat March 31, 2012. The Company’s exposure to and management of

credit risk related to cash and cash equivalents, fixed

income securities and mortgage portfolios has notchanged materially since December 31, 2011.

The Company utilizes derivatives to hedge interestrate risk and reinvestment risk associated with itsmortgage banking and securitization activities, as wellas market risk related to certain stock-basedcompensation arrangements.

The Company participates in the CMB Program byentering into back-to-back swaps whereby CanadianSchedule I chartered banks designated by the Companyare between the Company and the Canadian HousingTrust. The Company receives coupons on NHA MBSand eligible principal reinvestments and pays couponson the Canada Mortgage Bonds. The Company alsoenters into interest rate swaps to hedge interest rateand reinvestment risk associated with the CMBProgram. The negative fair value of these swaps totalled$27.6 million at March 31, 2012 and the outstandingnotional amount was $4.6 billion. Certain of theseswaps relate to securitized mortgages that have beenrecorded in the Company’s balance sheet with anassociated obligation. Accordingly, these swaps, with anoutstanding notional amount of $2.8 billion and havinga negative fair value of $31.8 million, are not reflectedon the balance sheet. Principal reinvestment accountswaps and hedges of reinvestment and interest rate risk,with an outstanding notional amount of $1.8 billion andhaving fair value of $4.2 million, are reflected on thebalance sheet. The exposure to credit risk, which islimited to the fair value of swaps in a gain position,totalled $64.7 million at March 31, 2012 compared to$87.1 million at December 31, 2011.

The Company utilizes interest rate swaps to hedgeinterest rate risk associated with mortgages securitizedthrough Canadian bank-sponsored ABCP programs.The negative fair value of these interest rate swapstotalled $16.2 million on an outstanding notional amountof $847.0 million at March 31, 2012. The exposure tocredit risk, which is limited to the fair value of swaps ina gain position, totalled $0.4 million at March 31, 2012compared to $0.6 million at December 31, 2011.

The Company also utilizes interest rate swaps tohedge interest rate risk associated with its investmentsin Canada Mortgage Bonds. The negative fair value ofthese interest rate swaps totalled $3.5 million on anoutstanding notional amount of $200.0 million atMarch 31, 2012. The exposure to credit risk, which islimited to the fair value of the interest rate swaps which



IGM

FINA

NC

IAL IN

C.


are in a gain position, was nil at March 31, 2012,unchanged from December 31, 2011.

The Company enters into other derivative contractswhich primarily consist of interest rate swaps utilizedto hedge interest rate risk related to mortgages heldpending sale, or committed to, by the Company as wellas total return swaps and forward agreements on IGMFinancial common shares utilized to hedge deferredcompensation arrangements. The fair value of interestrate swaps, total return swaps and forward agreementswas $2.2 million on an outstanding notional amount of$277.5 million at March 31, 2012 compared to a fairvalue of nil on an outstanding notional amount of$76.4 million at December 31, 2011. The exposureto credit risk, which is limited to the fair value ofthose instruments which are in a gain position, was$2.5 million at March 31, 2012, compared to$0.8 million at December 31, 2011.

The aggregate credit risk exposure related toderivatives that are in a gain position of $67.6 milliondoes not give effect to any netting agreements orcollateral arrangements. The exposure to credit risk,considering netting agreements and collateralarrangements, was $0.1 million at March 31, 2012.Counterparties are all Canadian Schedule I charteredbanks and, as a result, management has determined thatthe Company’s overall credit risk related to derivativeswas not significant at March 31, 2012. Management ofcredit risk related to derivatives has not changedmaterially since December 31, 2011.

Additional information related to the Company’ssecuritization activities and utilization of derivativecontracts can be found in Note 6 of the InterimFinancial Statements and Notes 2, 7 and 22 to theAnnual Financial Statements.

Market Risk Market risk is the potential for loss to the Companyfrom changes in the values of its financial instrumentsdue to changes in foreign exchange rates, interest ratesor equity prices. The Company’s financial instrumentsare generally denominated in Canadian dollars, and donot have significant exposure to changes in foreignexchange rates.

Interest Rate RiskThe Company is exposed to interest rate risk on its loanportfolio, fixed income securities, Canada MortgageBonds and on certain of the derivative financial

instruments used in the Company’s mortgage bankingand intermediary operations.

The objective of the Company’s asset and liabilitymanagement is to control interest rate risk related toits intermediary operations by actively managing itsinterest rate exposure. As at March 31, 2012, the totalgap between deposit assets and liabilities was within theCompany’s trust subsidiary’s stated guidelines.

The Company utilizes interest rate swaps withCanadian Schedule I chartered bank counterparties inorder to reduce the impact of fluctuating interest rateson its mortgage banking operations, as follows: • The Company has funded fixed rate mortgages with

ABCP as part of the securitization transactions withbank-sponsored securitization trusts. The Companyenters into interest rate swaps with CanadianSchedule I chartered banks to hedge the risk thatABCP rates rise. However, the Company remainsexposed to the basis risk that ABCP rates are greaterthan the bankers’ acceptances rates that it receiveson its hedges.

• The Company has in certain instances fundedfloating rate mortgages with fixed rate CanadaMortgage Bonds as part of the securitizationtransactions under the CMB Program. TheCompany enters into interest rate swaps withCanadian Schedule I chartered banks to hedge therisk that the interest rates earned on floating ratemortgages declines. As previously discussed, as partof the CMB Program, the Company also is entitledto investment returns on reinvestment of principalrepayments of securitized mortgages and is obligatedto pay Canada Mortgage Bond coupons that aregenerally fixed rate. The Company hedges the riskthat reinvestment returns decline by entering intointerest rate swaps with Canadian Schedule Ichartered bank counterparties.

• The Company is exposed to the impact that changesin interest rates may have on the value of itsinvestments in Canada Mortgage Bonds. TheCompany enters into interest rate swaps withCanadian Schedule I chartered bank counterpartiesto hedge interest rate risk on these bonds.

• The Company is also exposed to the impact thatchanges in interest rates may have on the value ofmortgages held, or committed to, by the Company.The Company may enter into interest rate swaps tohedge this risk.



IGM

FIN

AN

CIA

L IN

C.


As at March 31, 2012, the impact to annual netearnings of a 100 basis point change in interest rateswould have been approximately $4.3 million. TheCompany’s exposure to and management of interest raterisk has not changed materially since December 31, 2011.

Equity Price RiskThe Company is exposed to equity price risk on itsproprietary investment funds which are classified asavailable for sale securities and on its common shareswhich are classified as fair value through profit or loss,as shown in Table 13. Unrealized gains and losses onavailable for sale securities are recorded in Othercomprehensive income until they are realized or untilmanagement determines there is objective evidence ofimpairment in value, at which time they are recorded inthe Consolidated Statements of Earnings.

The Company sponsors a number of deferredcompensation arrangements where payments toparticipants are linked to the performance of thecommon shares of IGM Financial. The Companyhedges this risk through the use of forward agreementsand total return swaps.

RISKS RELATED TO ASSETS UNDER MANAGEMENT

At March 31, 2012, IGM Financial’s total assetsunder management were $124.1 billion compared to$118.7 billion at December 31, 2011.

The Company is subject to the risk of asset volatilityfrom changes in the Canadian and global financial andequity markets. Changes in these markets have causedin the past, and will cause in the future, changes in theCompany’s assets under management, revenues andearnings. Global economic conditions, exacerbated byfinancial crises, changes in the equity marketplace,currency exchange rates, interest rates, inflation rates,the yield curve, defaults by derivative counterpartiesand other factors including political and government

instability that are difficult to predict affect the mix,market values and levels of assets under management.

The Company’s assets under management may besubject to unanticipated redemptions as a result of suchevents. Changing market conditions may also cause ashift in asset mix between equity and fixed incomeassets due to market and income as well as net cashflows, potentially resulting in a decline in the Company’srevenue and earnings depending upon the nature of theassets under management and the level of managementfees earned.

Interest rates at unprecedented low levels havesignificantly decreased the yields of the Company’smoney market and managed yield mutual funds. Since2009, Investors Group and Mackenzie have waived aportion of investment management fees or absorbedsome expenses to ensure that these funds maintainedpositive yields. The Company will review its practices inthis regard in response to changing market conditions.

Redemption rates for long-term funds are summarizedin Table 19 and are discussed in the Investors Groupand Mackenzie Segment Operating Results sections ofthis MD&A.

IGM Financial provides Consultants, independentfinancial advisors, and strategic alliance and institutionalclients with a high level of service and support and abroad range of investment products based on asset classes,countries or regions, and investment management styleswhich, in turn, should result in maintaining strongclient relationships and lower rates of redemptions. TheCompany’s subsidiaries also continually review productpricing to ensure competitiveness in the marketplace inrelation to the nature and quality of services provided.

The mutual fund industry and financial advisorscontinue to take steps to educate Canadian investorson the merits of financial planning, diversification andlong-term investing. In periods of volatility Consultantsand independent financial advisors play a key role inassisting investors to maintain perspective and focus ontheir long-term objectives.

TABLE 19: TWELVE MONTH TRAILING REDEMPTION RATE FOR LONG-TERM FUNDS

As at March 31 2012 2011

IGM Financial Inc.Investors Group 9.1 % 8.4 %Mackenzie 16.2 % 16.5 %Counsel 11.2 % 12.2 %



IGM

FINA

NC

IAL IN

C.


OTHER RISK FACTORS

Distribution RiskInvestors Group Consultant Network – Investors Groupderives all of its mutual fund sales through itsConsultant network. Investors Group Consultants haveregular direct contact with clients which can lead to astrong and personal client relationship based on theclient’s confidence in that individual Consultant. Themarket for financial advisors is extremely competitive.The loss of a significant number of key Consultantscould lead to the loss of client accounts which couldhave an adverse effect on Investors Group’s results ofoperations and business prospects. Investors Group isfocused on growing its distribution network ofConsultants and on responding to the complex financialneeds of its clients by delivering a diverse range ofproducts and services in the context of personalizedfinancial advice, as discussed in the Investors GroupReview of the Business section of this MD&A.

Mackenzie – Mackenzie derives the majority of itsmutual fund sales through an independent retailfinancial advisor network. Financial advisors generallyoffer their clients investment products in addition to,and in competition with Mackenzie. Mackenzie alsoderives sales of its investment products and servicesfrom its strategic alliance and institutional clients. Dueto the nature of the distribution relationship in theserelationships and the relative size of these accounts,gross sale and redemption activity can be morepronounced in these accounts than in a retailrelationship. Mackenzie’s ability to market its investmentproducts is highly dependent on continued access tothese distribution networks. The inability to havesuch access could have a material adverse effect onMackenzie’s operating results and business prospects.Mackenzie is well positioned to manage this risk andto continue to build and enhance its distributionrelationships. Mackenzie’s diverse portfolio of financialproducts and its long-term investment performancerecord, marketing, educational and service support hasmade Mackenzie one of Canada’s leading investmentmanagement companies. These factors are discussedfurther in the Mackenzie Review of the Business sectionof this MD&A.

The Regulatory EnvironmentIGM Financial is subject to complex and changing legal,taxation and regulatory requirements, including the

requirements of agencies of the federal, provincial andterritorial governments in Canada which regulate theCompany and its activities. The Company and itssubsidiaries are also subject to the requirements of self-regulatory organizations to which they belong. Theseand other regulatory bodies regularly adopt new laws,rules, regulations and policies that apply to the Companyand its subsidiaries. These requirements include thosethat apply to IGM Financial as a publicly traded companyand those that apply to the Company's subsidiaries basedon the nature of their activities. They include regulationsrelated to securities markets, the provision of financialproducts and services, including fund management,distribution, insurance and mortgages, and otheractivities carried on by the Company in the markets inwhich it operates. Regulatory standards affecting theCompany and the financial services industry are increasing.The Company and its subsidiaries are subject to regularregulatory reviews as part of the normal ongoing processof oversight by the various regulators.

Failure to comply with laws, rules or regulationscould lead to regulatory sanctions and civil liability, andmay have an adverse reputational or financial effect onthe Company. The Company manages regulatory riskthrough its efforts to promote a strong culture ofcompliance. It monitors regulatory developments andtheir impact on the Company. It also continues todevelop and maintain compliance policies, processesand oversight, including specific communications oncompliance and legal matters, training, testing,monitoring and reporting. The Audit Committee of theCompany receives regular reporting on complianceinitiatives and issues.

Particular regulatory initiatives may have the effectof making the products of the Company’s subsidiariesappear to be less competitive than the products of otherfinancial service providers, to third party distributionchannels and to clients. Regulatory differences that mayimpact the competitiveness of the Company’s productsinclude regulatory costs, tax treatment, disclosurerequirements, transaction processes or other differencesthat may be as a result of differing regulation orapplication of regulation. While the Company and itssubsidiaries actively monitor such initiatives, and wherefeasible comment upon or discuss them with regulators,the ability of the Company and its subsidiaries tomitigate the imposition of differential regulatorytreatment of financial products or services is limited.



IGM

FIN

AN

CIA

L IN

C.


ContingenciesThe Company is subject to legal actions arising in thenormal course of its business. Although it is difficult topredict the outcome of any such legal actions, based oncurrent knowledge and consultation with legal counsel,management does not expect the outcome of any ofthese matters, individually or in aggregate, to have amaterial adverse effect on the Company’s consolidatedfinancial position.

Acquisition RiskThe Company undertakes thorough due diligence priorto completing an acquisition, but there is no assurancethat the Company will achieve the expected strategicobjectives or cost and revenue synergies subsequent toan acquisition. Subsequent changes in the economicenvironment and other unanticipated factors may affectthe Company’s ability to achieve expected earnings

growth or expense reductions. The success of anacquisition is dependent on retaining assets undermanagement, clients, and key employees of an acquiredcompany.

Model RiskThe Company uses a variety of models to assist in: thevaluation of financial instruments; operational scenariotesting; management of cash flows; capital management;and assessment of potential acquisitions. These modelsincorporate internal assumptions, observable marketinputs and available market prices. Effective controlsexist over the development, implementation andapplication of these models. However, changes in theinternal assumptions or other factors affecting themodels could have an adverse effect on the Company’sconsolidated financial position.



IGM

FINA

NC

IAL IN

C.


THE FINANCIAL SERVICES ENVIRONMENT

According to Investor Economics, Canadians held$2.9 trillion in discretionary financial assets withfinancial institutions at December 31, 2010. The natureof holdings was diverse, ranging from demand depositsheld for short term cash management purposes tolonger-term investments held for retirement purposes.Over 60% ($1.8 trillion) of these financial assets areheld within the context of a relationship with a financialadvisor, and this is the primary channel serving thelonger-term savings needs of Canadians. Of the$1.1 trillion held outside of a financial advisoryrelationship, nearly 70% consisted of bank deposits.

Financial advisors represent the primary distributionchannel for the Company’s products and services, andthe core emphasis of the Company’s business model isto support these financial advisors as they work withclients to plan for and achieve their financial goals.Multiple sources of emerging research show significantlybetter financial outcomes for Canadians who use financialadvisors compared to those who do not. The Companyactively promotes the value of financial advice and theimportance of a relationship with an advisor to developand remain focused on long-term financial plansand goals.

Over 35% of Canadian discretionary financialassets or $1.0 trillion resided in investment funds atDecember 31, 2010, making it the largest financialasset class held by Canadians. Other asset types includedeposit products and direct securities such as stocks andbonds. Approximately 75% of investment funds arecomprised of mutual fund products, with other productcategories including segregated funds, hedge funds,pooled funds, closed end funds and exchange tradedfunds. With approximately $100 billion in mutual fundassets under management, the Company is among thecountry’s largest investment fund managers. Managementbelieves that investment funds are likely to remain thepreferred savings vehicle of Canadians. Investment fundsprovide investors with the benefits of diversification,professional management, flexibility and convenience,and are available in a broad range of mandates andstructures to meet most investor requirements andpreferences.

Deregulation, competition and technology havefostered a trend towards financial service providersoffering a comprehensive range of proprietary products

and services. Traditional distinctions between bankbranches, full service brokerages, financial planningfirms and insurance agent sales forces have becomeobscured as many of these financial service providersstrive to offer comprehensive financial adviceimplemented through access to a broad product shelf.Accordingly, the Canadian financial services industryis characterized by a number of large, diversified,vertically-integrated participants, similar to IGM,who offer both financial planning and investmentmanagement services.

Canadian banks distribute financial products andservices through their traditional bank branches, as wellas through their full service and discount brokeragesubsidiaries. Bank branches continue to place increasedemphasis on both financial planning and mutual funds.In addition, each of the “big six” banks has one ormore mutual fund management subsidiary. Collectively,mutual fund assets of the “big six” bank-owned mutualfund managers and affiliated firms represented 52%of total industry long-term mutual fund assets atDecember 31, 2011.

As a result of consolidation activity in the last severalyears, the Canadian mutual fund management industryis characterized by large, often vertically-integrated,firms. The industry continues to be very concentrated,with the ten largest firms and their subsidiariesrepresenting 84% of both industry long-term mutualfund assets and total mutual fund assets undermanagement at December 31, 2011. Managementanticipates continuing consolidation in this segment ofthe industry as smaller participants are acquired bylarger organizations.

Management believes that the financial servicesindustry will continue to be influenced by thefollowing trends:• Shifting demographics as the number of Canadians

in their prime savings years continue to increase. • Changes in investor attitudes based on economic

conditions.• Continued importance of the role of the financial

advisor.• Public policy related to retirement savings.• Changes in the regulatory environment.• An evolving competitive landscape.• Advancing and changing technology.

Outlook



IGM

FIN

AN

CIA

L IN

C.


THE COMPETITIVE LANDSCAPE

IGM Financial and its subsidiaries operate in a highlycompetitive environment. Investors Group andInvestment Planning Counsel compete directly withother retail financial service providers, including otherfinancial planning firms, as well as full servicebrokerages, banks and insurance companies. InvestorsGroup, Mackenzie and Investment Planning Counselcompete directly with other investment managers forassets under management, and their products competewith stocks, bonds and other asset classes for a share ofthe investment assets of Canadians.

IGM Financial continues to focus on its commitmentto provide quality investment advice and financialproducts, service innovations, effective management ofthe Company and long-term value for its clients andshareholders. Management believes that the Companyis well-positioned to meet competitive challenges andcapitalize on future opportunities.

The Company enjoys several competitive strengths,including: • Broad and diversified distribution with an emphasis

on those channels emphasizing comprehensivefinancial planning through a relationship with afinancial advisor.

• Broad product capabilities, leading brands andquality sub-advisory relationships.

• Enduring client relationships and the long-standingheritages and cultures of its subsidiaries.

• Benefits of being part of the Power Financial groupof companies.

Broad and Diversified DistributionIGM Financial’s distribution strength is a competitiveadvantage. In addition to owning two of Canada’s largestfinancial planning organizations, Investors Group andInvestment Planning Counsel, IGM Financial has,through Mackenzie, access to distribution through over30,000 independent financial advisors. Mackenzie also,in its growing strategic alliance business, partners withCanadian and U.S. manufacturing and distributioncomplexes to provide investment management to anumber of retail investment fund mandates.

Broad Product CapabilitiesIGM Financial’s subsidiaries continue to develop andlaunch innovative products and strategic investmentplanning tools to assist advisors in building optimizedportfolios for clients.

Enduring RelationshipsIGM Financial enjoys significant advantages as a resultof the enduring relationships that advisors enjoy withclients. In addition, the Company’s subsidiaries havestrong heritages and cultures which are challenging forcompetitors to replicate.

Benefits of Being Part of Power Financial Group of CompaniesAs part of the Power Financial group of companies,IGM Financial benefits through expense savings fromshared service arrangements, as well as through accessto distribution, products, and capital.



IGM

FINA

NC

IAL IN

C.


SUMMARY OF CRITICAL ACCOUNTING ESTIMATES

There were no changes to the Company’s criticalaccounting estimates from those reported at December31, 2011.

CHANGES IN ACCOUNTING POLICIES

IFRS 7 Financial Instruments DisclosuresOn January 1, 2012, the Company adopted Disclosures –Transfers of Financial Assets (Amendments to IFRS 7).The amendments require additional disclosures relatedto the Company’s securitization transactions (Note 6 tothe Interim Financial Statements).

FUTURE ACCOUNTING CHANGES

The Company continuously monitors the potentialchanges proposed by the International AccountingStandards Board (IASB) and analyzes the effect thatchanges in the standards may have on the Company’soperations.

IAS 19 Employee BenefitsThe IASB issued IAS 19 that amends the measurement,presentation and disclosure requirements for definedbenefit plans. The standard is applied retroactively andis effective for periods beginning on or after January 1,2013. The Company intends to adopt the standardeffective January 1, 2013. Amendments include:• The elimination of the deferral and amortization

approach (corridor approach) for recognizingactuarial gains and losses in net earnings. Actuarialgains and losses are to be recognized immediately inOther comprehensive income (OCI). Actuarial gainsand losses recognized in OCI are not reclassified tonet earnings in subsequent periods. This amendmentwill have no impact on the Company as actuarialgains and losses are currently recognized in OCI.

• Changes in the recognition of past service costs. Pastservice costs resulting from plan amendments orcurtailments are recognized in net earnings in theperiod in which the plan amendments or curtailmentoccurs, without regard to vesting.

• The elimination of the concept of an expectedreturn on assets (EROA). Amended IAS 19 requiresthe use of the discount rate in the place of EROA inthe determination of the net interest component ofthe pension expense. The adoption of this standard is not expected to

have a significant impact on the Company’s financialposition or results of operations.

Other The IASB is currently undertaking several projectswhich will result in changes to existing IFRS standardsthat may affect the Company:

Expected date IFRS Standard of issuance

IFRS 9: Financial InstrumentsClassification and

Measurement Q3 2012 – Exposure DraftImpairment Q3 2012 – Exposure DraftHedge Accounting –

General Hedge Accounting Q3 2012 – Final StandardHedge Accounting –

Macro Hedge Accounting Q3 2012 – Exposure DraftLeases Q3 2012 – Exposure DraftRevenue Recognition Q4 2012 – Final Standard

Source: IASB website at www.iasb.org

Critical Accounting Estimates and Policies



IGM

FIN

AN

CIA

L IN

C.


TRANSACTIONS WITH RELATED PARTIES

The Company entered into tax loss consolidationtransactions with its parent company, Power FinancialCorporation, after obtaining advance tax rulings:• On February 23, 2011, the Company acquired

$1.0 billion of 6.01% preferred shares of a wholly-owned subsidiary of Power Financial Corporation.As sole consideration for the preferred shares, theCompany issued $1.0 billion of 6.00% secureddemand debentures to Power Financial Corporation.

• On January 10, 2012, the Company acquired$250 million of 6.01% preferred shares of a wholly-owned subsidiary of Power Financial Corporation.As sole consideration for the preferred shares, theCompany issued $250 million of 6.00% secureddemand debentures to Power Financial Corporation. The Company has legally enforceable rights to

settle these financial instruments on a net basis and theCompany intends to exercise these rights. Accordingly,the preferred shares and debentures and related dividendincome and interest expense are offset in the ConsolidatedFinancial Statements of the Company. Tax savings arisedue to the tax deductibility of the interest expense.

For further information on transactions involvingrelated parties, see Notes 9 and 26 to the AnnualFinancial Statements.

OUTSTANDING SHARE DATA

Outstanding common shares of IGM Financial as atMarch 31, 2012 totalled 256,073,610. As at May 2, 2012,outstanding common shares totalled 256,074,610.

SEDAR

Additional information relating to IGM Financial,including the Company’s most recent financialstatements and Annual Information Form, is availableat www.sedar.com.

Other Information

During the first quarter of 2012, there have been nochanges in the Company’s internal control overfinancial reporting that have materially affected, or arereasonably likely to materially affect, the Company’sinternal control over financial reporting.

Internal Control Over Financial Reporting



IGM

FINA

NC

IAL IN

C.

i gm f inanc ial inc . f i r st quarter report 2012 / inter im condensed consol idated f inanc ial statements 41

Consolidated Statements of Earnings

(unaudited) three months ended march 31(in thousands of Canadian dollars, except shares and per share amounts) 2012 2011

RevenuesManagement fees $ 456,618 $ 492,115 Administration fees 85,264 87,500 Distribution fees 85,179 89,361 Net investment income and other 26,331 25,433 Proportionate share of affiliate’s earnings 19,697 16,980

673,089 711,389

ExpensesCommission 221,384 233,650 Non-commission 170,091 161,964 Interest 22,911 30,271

414,386 425,885

Earnings before income taxes and discontinued operations 258,703 285,504 Income taxes 56,839 72,127

Net earnings from continuing operations 201,864 213,377 Net earnings from discontinued operations (Note 3) – 968

Net earnings 201,864 214,345 Perpetual preferred share dividends 2,213 2,213

Net earnings available to common shareholders $ 199,651 $ 212,132

Average number of common shares (in thousands) (Note 12)

– Basic 256,568 259,289 – Diluted 257,383 260,332

Earnings per share (in dollars) (Note 12)

Net earnings from continuing operations– Basic $ 0.78 $ 0.82 – Diluted $ 0.78 $ 0.81

Net earnings available to common shareholders– Basic $ 0.78 $ 0.82 – Diluted $ 0.78 $ 0.81

(See accompanying notes to interim condensed consolidated financial statements.)

Interim Condensed Consolidated Financial Statements



IGM

FIN

AN

CIA

L IN

C.

42 i gm f inanc ial inc . f i r st quarter report 2012 / inter im condensed consol idated f inanc ial statements

Consolidated Statements of Comprehensive Income

(unaudited) three months ended march 31(in thousands of Canadian dollars) 2012 2011

Net earnings $ 201,864 $ 214,345

Other comprehensive income (loss), net of taxEmployee benefits

Net actuarial gains (losses), net of tax of $2,209 and $(1,781) (5,981) 4,814

Available for sale securitiesNet unrealized gains (losses), net of tax of $(421) and $20 1,400 (491)Reclassification of realized (gains) losses to net earnings, net of tax of $77 and $328 (443) (890)

957 (1,381)Investment in affiliate and other

Other comprehensive income (loss), net of tax of $(163) and $(100) (7,071) (15,703)

(12,095) (12,270)

Comprehensive income $ 189,769 $ 202,075




IGM

FINA

NC

IAL IN

C.


Consolidated Balance Sheets

(unaudited) MARCH 31 december 31(in thousands of Canadian dollars) 2012 2011

AssetsCash and cash equivalents $ 889,869 $ 1,052,423 Securities (Note 4) 291,668 292,432 Accounts and other receivables 319,722 281,982 Income taxes recoverable 41,660 27,796 Loans (Note 5) 4,372,399 4,085,929 Derivative instruments 67,251 88,092 Other assets 35,607 40,228 Investment in affiliate 611,885 612,480 Capital assets 111,082 109,953 Deferred selling commissions 752,926 750,763 Deferred income taxes 61,797 59,612 Intangible assets 1,115,729 1,117,858 Goodwill 2,640,523 2,640,523

$ 11,312,118 $ 11,160,071

LiabilitiesAccounts payable and accrued liabilities $ 288,853 $ 300,094 Income taxes payable 35,764 62,816 Repurchase agreements (Note 4) 224,984 227,280 Derivative instruments 80,535 111,424 Deposits and certificates 147,114 150,716 Other liabilities 369,307 357,959 Obligations to securitization entities (Note 6) 4,017,588 3,827,339 Deferred income taxes 315,738 308,968 Long-term debt 1,325,000 1,325,000

6,804,883 6,671,596

Shareholders’ EquityShare capital

Perpetual preferred shares 150,000 150,000 Common shares 1,582,266 1,578,270

Contributed surplus 35,794 35,842 Retained earnings 2,747,211 2,726,285 Accumulated other comprehensive income (loss) (8,036) (1,922)

4,507,235 4,488,475

$ 11,312,118 $ 11,160,071

These interim condensed consolidated financial statements were approved and authorized for issuance by the Board ofDirectors on May 4, 2012.




IGM

FIN

AN

CIA

L IN

C.

44 i gm f inanc ial inc . f i r st quarter report 2012 / inter im condensed consol idated f inanc ial statements

Consolidated Statements of Changes in Shareholders’ Equity

three months ended march 31

share capital

accumulatedperpetual otherpreferred common comprehensive total

(unaudited) shares shares contributed retained income (loss) shareholders’(in thousands of Canadian dollars) (Note 7) (Note 7) surplus earnings (Note 10) equity

2012Balance, beginning of period $ 150,000 $1,578,270 $ 35,842 $2,726,285 $ (1,922) $4,488,475

Net earnings – – – 201,864 – 201,864Net actuarial losses on employee

benefit plans, net of tax – – – (5,981) – (5,981)Other comprehensive income

(loss), net of tax – – – – (6,114) (6,114)

Total comprehensive income (loss) – – – 195,883 (6,114) 189,769

Common sharesIssued under stock option plan – 9,204 – – – 9,204 Purchased for cancellation – (5,208) – – – (5,208)

Stock optionsCurrent period expense – – 1,236 – – 1,236 Exercised – – (1,284) – – (1,284)

Perpetual preferred share dividends – – – (2,213) – (2,213)Common share dividends – – – (137,682) – (137,682)Common share cancellation excess

and other (Note 7) – – – (35,062) – (35,062)

Balance, end of period $ 150,000 $1,582,266 $ 35,794 $2,747,211 $ (8,036) $4,507,235

2011Balance, beginning of period $ 150,000 $ 1,567,725 $ 37,785 $ 2,559,237 $ 2,538 $ 4,317,285

Net earnings – – – 214,345 – 214,345 Net actuarial gains on employee

benefit plans, net of tax – – – 4,814 – 4,814 Other comprehensive income

(loss), net of tax – – – – (17,084) (17,084)

Total comprehensive income (loss) – – – 219,159 (17,084) 202,075

Common sharesIssued under stock option plan – 22,106 – – – 22,106 Purchased for cancellation – (12,145) – – – (12,145)

Stock optionsCurrent period expense – – 1,272 – – 1,272 Exercised – – (2,603) – – (2,603)

Perpetual preferred share dividends – – – (2,213) – (2,213)Common share dividends – – – (132,426) – (132,426)Common share cancellation excess

and other (Note 7) – – – (74,578) – (74,578)

Balance, end of period $ 150,000 $ 1,577,686 $ 36,454 $ 2,569,179 $ (14,546) $ 4,318,773




IGM

FINA

NC

IAL IN

C.


Consolidated Statements of Cash Flows

(unaudited) three months ended march 31(in thousands of Canadian dollars) 2012 2011

Operating activities – continuing operationsEarnings before income taxes and discontinued operations $ 258,703 $ 285,504 Income taxes paid (91,453) (92,268)Adjustments to determine net cash from operating activities

Commission amortization 70,029 72,469 Amortization of capital and intangible assets 8,713 8,052 Changes in operating assets and liabilities and other (62,302) (34,917)

183,690 238,840 Commissions paid (72,192) (88,215)

111,498 150,625

Financing activities – continuing operationsNet decrease in deposits and certificates (3,602) (3,863)Net (decrease) increase in obligations related to assets sold under repurchase agreements (2,296) 6,048 Net increase in obligations to securitization entities 190,487 21,491 Issue of common shares 7,827 20,704 Common shares purchased for cancellation (39,036) (86,244)Perpetual preferred share dividends paid (2,213) (2,213)Common share dividends paid (137,954) (133,105)

13,213 (177,182)

Investing activities – continuing operationsPurchase of securities (5,980) (5,357)Proceeds from the sale of securities 7,432 11,465 Net increase in loans (282,242) (77,654)Net additions to capital assets (4,691) (3,851)Net additions to intangible assets (1,784) (1,970)

(287,265) (77,367)

Decrease in cash and cash equivalents from continuing operations (162,554) (103,924)Increase in cash and cash equivalents from discontinued operations (Note 3) – 11,986 Cash and cash equivalents from continuing and discontinued operations, beginning of period 1,052,423 1,573,626

Cash and cash equivalents, end of period 889,869 1,481,688 Less: Cash and cash equivalents from discontinued operations, end of period – (299,821)

Cash and cash equivalents, end of period – continuing operations $ 889,869 $ 1,181,867

Cash $ 88,254 $ 81,668 Cash equivalents 801,615 1,100,199

$ 889,869 $ 1,181,867

Supplemental disclosure of cash flow information related to operating activitiesAmount of interest and dividends received $ 49,841 $ 51,874 Amount of interest paid during the period $ 39,362 $ 30,968




IGM

FIN

AN

CIA

L IN

C.

46 igm financial inc. first quarter report 2012 / notes to the interim condensed consolidated financial statements

Notes to the Interim Condensed Consolidated Financial Statementsmarch 31, 2012 (unaudited) (In thousands of Canadian dollars, except shares and per share amounts)

1. CORPORATE INFORMATION

IGM Financial Inc. (the Company) is a publicly listed company (TSX: IGM), incorporated and domiciled in Canada.The registered address of the Company is 447 Portage Avenue, Winnipeg, Manitoba, Canada, R3C 3B6. The Companyis controlled by Power Financial Corporation.

IGM Financial Inc. is a financial services company which serves the financial needs of Canadians through its principalsubsidiaries, each operating distinctly within the advice segment of the financial services market. The Company’s principalsubsidiaries are Investors Group Inc. and Mackenzie Financial Corporation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The unaudited interim Condensed Consolidated Financial Statements of the Company (Interim Financial Statements)have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, using the sameaccounting policies as set out in Note 2 to the Consolidated Financial Statements for the year ended December 31, 2011.The Interim Financial Statements should be read in conjunction with the Consolidated Financial Statements in the 2011IGM Financial Inc. Annual Report.

Changes in accounting policies

IFRS 7 Financial Instruments DisclosuresOn January 1, 2012, the Company adopted Disclosures – Transfers of Financial Assets (Amendments to IFRS 7). Theamendments require additional disclosures related to the Company’s securitization transactions (Note 6).

Future accounting changesThe Company continuously monitors the potential changes proposed by the International Accounting Standards Board(IASB) and analyzes the effect that changes in the standards may have on the Company’s operations.

IAS 19 Employee BenefitsThe IASB issued IAS 19 that amends the measurement, presentation and disclosure requirements for defined benefitplans. The standard is applied retroactively and is effective for periods beginning on or after January 1, 2013. TheCompany intends to adopt the standard effective January 1, 2013. Amendments include:• The elimination of the deferral and amortization approach (corridor approach) for recognizing actuarial gains and

losses in net earnings. Actuarial gains and losses are to be recognized immediately in Other comprehensive income(OCI). Actuarial gains and losses recognized in OCI are not reclassified to net earnings in subsequent periods. Thisamendment will have no impact on the Company as actuarial gains and losses are currently recognized in OCI.

• Changes in the recognition of past service costs. Past service costs resulting from plan amendments or curtailmentsare recognized in net earnings in the period in which the plan amendments or curtailment occurs, without regardto vesting.

• The elimination of the concept of an expected return on assets (EROA). Amended IAS 19 requires the use of thediscount rate in the place of EROA in the determination of the net interest component of the pension expense. The adoption of this standard is not expected to have a significant impact on the Company’s financial position or

results of operations.



IGM

FINA

NC

IAL IN

C.

igm financial inc. first quarter report 2012 / notes to the interim condensed consolidated financial statements 47

3. DISCONTINUED OPERATIONS

On November 16, 2011, the Company completed the sale of 100% of the common shares of M.R.S. Trust Company andM.R.S Inc. (MRS). Cash consideration was $198.7 million in addition to the repayment of $20 million of subordinateddebt and the assumption of the liability related to amounts held on deposit with MRS by Investors Group Securities Inc.

In accordance with IFRS 5 – Non-Current Assets Held for Sale and Discontinued Operations, the operating results andcash flows of MRS, which were previously included in the Mackenzie reportable segment, have been classified asdiscontinued operations.

Net earnings from discontinued operationsthree months ended

march 31, 2011

Revenues $ 9,119 Expenses 6,998

Earnings before income taxes 2,121 Income taxes 1,153

Net earnings from discontinued operations $ 968

Cash flows from discontinued operationsIncluded within the Company’s cash flows are the following amounts attributable to discontinued operations:

three months endedmarch 31, 2011

Net cash flowsOperating activities $ (9,688)Financing activities (12,745)Investing activities 34,419

Net increase in cash and cash equivalents $ 11,986

4. SECURITIES

MARCH 31, 2012 december 31, 2011

cost fair value cost fair value

Available for sale:Common shares $ – $ – $ 4,876 $ 4,876 Proprietary investment funds 30,010 31,768 30,725 31,173

30,010 31,768 35,601 36,049

Fair value through profit or loss:Common shares 4,786 4,563 – – Canada Mortgage Bonds 220,432 223,684 220,432 227,206 Fixed income securities 30,693 31,653 30,817 29,177

255,911 259,900 251,249 256,383

$ 285,921 $ 291,668 $ 286,850 $ 292,432



IGM

FIN

AN

CIA

L IN

C.


Fair value through profit or loss

Canada Mortgage BondsAs part of the Company’s interest rate risk management activities relating to its mortgage banking operations, CanadaMortgage Bonds were purchased and subsequently sold under repurchase agreements, which represent short-termfunding transactions whereby the Company sells securities that it owns and commits to repurchase these securities at aspecified price on a specified date in the future.

These securities had a fair value of $223.7 million at March 31, 2012. The obligation to repurchase the securities isrecorded at amortized cost and had a carrying value of $225.0 million. The interest expense related to these obligationsis recorded on an accrual basis in Net investment income and other in the Consolidated Statements of Earnings.

Fixed income securitiesFixed income securities of $31.7 million at March 31, 2012 (December 31, 2011 – $29.2 million) were comprised of therestructured notes of the master asset vehicle (MAV) conduits. The Company’s valuation of the restructured notes of theMAV conduits was based on its assessment of the prevailing conditions at March 31, 2012.

5. LOANS

CONTRACTUAL MATURITY

MARCH 31 december 311 YEAR 1 – 5 OVER 2012 2011

OR LESS YEARS 5 YEARS TOTAL total

Loans and receivablesResidential mortgages $ 564,597 $ 3,344,743 $ 5,158 $ 3,914,498 $ 3,794,613

Less: Collective allowance 671 793

3,913,827 3,793,820 Held for trading 458,572 292,109

$ 4,372,399 $ 4,085,929

Total impaired loans as at March 31, 2012 were $1,986 (December 31, 2011 – $1,078).Total interest income on loans classified as loans and receivables was $35.9 million (2011 – $37.1 million). Total

interest expense on obligations to securitization entities, related to securitized loans, was $22.6 million (2011 –$20.4 million). These amounts were included in Net investment income and other. Net investment income and otheralso includes mortgage banking related gains on sales and fair value adjustments, and other items.

6. SECURITIZATIONS

The Company securitizes residential mortgages through the Canada Mortgage and Housing Corporation (CMHC)sponsored National Housing Act Mortgage-Backed Securities (NHA MBS) Program and Canada Mortgage Bond(CMB) Program and through Canadian bank-sponsored asset-backed commercial paper (ABCP) programs. Thesetransactions do not meet the requirements for derecognition as the Company retains prepayment risk and certainelements of credit risk. Accordingly, the Company has retained these mortgages on its balance sheets and has recorded anoffsetting liability for the net proceeds received as Obligations to securitization entities which is carried at amortized cost.

The Company earns interest on the mortgages and pays interest on the obligations to securitization entities. As partof the CMB transactions, the Company enters into a swap whereby the Company pays coupons on CMBs and receivesinvestment returns on the NHA MBS and the reinvestment of repaid mortgage principal. A component of this swap,related to the obligation to pay CMB coupons and receive investment returns on repaid mortgage principal is recordedas a derivative and had a negative fair value of $57.5 million at March 31, 2012.

4. SECURITIES (continued)



IGM

FINA

NC

IAL IN

C.


Under the NHA MBS and CMB Program, the Company has an obligation to make timely payments to securityholders regardless of whether amounts are received from mortgagors. All mortgages securitized under the NHA MBS andCMB Program are insured by CMHC or another approved insurer under the program. As part of the ABCP transactions,the Company has provided cash reserves for credit enhancement which are carried at cost. Credit risk is limited to thesecash reserves and future net interest income as the ABCP Trusts have no recourse to the Company’s other assets for failureto make payments when due. Credit risk is further limited to the extent these mortgages are insured.

MARCH 31, 2012

obligations tosecuritized securitizationmortgages entities net

Carrying valueNHA MBS and CMB Program $ 2,705,261 $ 2,772,038 $ (66,777)Bank sponsored ABCP 1,180,412 1,245,550 (65,138)

Total $ 3,885,673 $ 4,017,588 $ (131,915)

Fair value $ 3,948,444 $ 4,102,064 $ (153,620)

The carrying value of Obligations to securitization entities, which are recorded net of issue costs, includes principalpayments received on securitized mortgages that are not due to be settled until after the reporting period. Issue costs areamortized over the life of the obligation on an effective interest rate basis.

7. SHARE CAPITAL

AuthorizedUnlimited number of:

First preferred shares, issuable in seriesSecond preferred shares, issuable in seriesClass 1 non-voting sharesCommon shares

Issued and outstandingMARCH 31, 2012 march 31, 2011

stated statedshares value shares value

Perpetual preferred shares – classified as equity:First preferred shares, 5.90%, Series B 6,000,000 $ 150,000 6,000,000 $ 150,000

Common shares:Balance, beginning of period 256,658,488 $ 1,578,270 259,717,507 $ 1,567,725 Issued under Stock Option Plan 260,122 9,204 675,109 22,106 Purchased for cancellation (845,000) (5,208) (2,000,000) (12,145)

Balance, end of period 256,073,610 $ 1,582,266 258,392,616 $ 1,577,686

Normal course issuer bidIn the first quarter of 2012, 845,000 (2011 – 2,000,000) shares were purchased at a cost of $39.0 million (2011 –$86.2 million). The premium paid to purchase the shares in excess of the stated value was charged to Retained earnings.

The Company commenced a normal course issuer bid, effective for one year, on April 12, 2012. Pursuant to this bid,the Company may purchase up to 12.8 million or 5% of its common shares outstanding as at March 31, 2012. OnApril 12, 2011, the Company commenced a normal course issuer bid, effective for one year, authorizing it to purchase upto 12.9 million or 5% of its common shares outstanding as at March 31, 2011.

6. SECURITIZATIONS (continued)



IGM

FIN

AN

CIA

L IN

C.


8. CAPITAL MANAGEMENT

The capital management policies, procedures and activities of the Company are discussed in the Company’s Management’sDiscussion and Analysis (MD&A), contained in the First Quarter 2012 Report to Shareholders and have not changedsignificantly since December 31, 2011.

9. SHARE-BASED PAYMENTS

Stock option planMARCH 31 december 31

2012 2011

Common share options– Outstanding 9,226,600 8,414,392 – Exercisable 4,084,896 3,737,122

In the first quarter of 2012, the Company granted 1,120,855 options to employees (2011 – 872,085). The weighted-average fair value of options granted during the three months ended March 31, 2012 has been estimated at $5.23 peroption (2011 – $6.59) using the Black-Scholes option pricing model. The weighted-average share price at the grant dateswas $45.20. The assumptions used in the valuation model include:

2012 2011

Exercise price $ 45.63 $ 46.72 Risk-free interest rate 1.80% 3.02%Expected option life 6 years 6 yearsExpected volatility 22.00% 22.00%Expected dividend yield 4.71% 4.39%

Expected volatility has been estimated based on the historic volatility of the Company’s share price over six yearswhich is reflective of the expected option life. Options vest over a period of up to 7.5 years from the grant date and areexercisable no later than 10 years after the grant date. A portion of the outstanding options can only be exercised ifcertain performance targets are met.

10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

available investmentfor sale in affiliate

Three months ended March 31 securities and other total

2012Balance, beginning of period $ 323 $ (2,245) $ (1,922)Other comprehensive income (loss) 957 (7,071) (6,114)

Balance, end of period $ 1,280 $ (9,316) $ (8,036)

2011Balance, beginning of period $ 5,600 $ (3,062) $ 2,538 Other comprehensive income (loss) (1,381) (15,703) (17,084)

Balance, end of period $ 4,219 $ (18,765) $ (14,546)

11. RISK MANAGEMENT

The risk management policies and procedures of the Company are discussed in the Company’s MD&A contained in theFirst Quarter 2012 Report to Shareholders and have not changed significantly since December 31, 2011.



IGM

FINA

NC

IAL IN

C.


12. EARNINGS PER COMMON SHARE

three months ended march 31

2012 2011

EarningsNet earnings from continuing operations $ 201,864 $ 213,377 Net earnings from discontinued operations – 968

Net earnings 201,864 214,345 Perpetual preferred share dividends 2,213 2,213

Net earnings available to common shareholders $ 199,651 $ 212,132

Number of common shares (in thousands)

Average number of common shares outstanding 256,568 259,289 Add:

– Potential exercise of outstanding stock options 815 1,043

Average number of common shares outstanding – diluted basis 257,383 260,332

Earnings per common share (in dollars)

BasicFrom continuing operations $ 0.78 $ 0.82 From discontinued operations – –


DilutedFrom continuing operations $ 0.78 $ 0.81 From discontinued operations – –


13. RELATED PARTY TRANSACTIONS

Transactions and balances with related entitiesThe Company entered into tax loss consolidation transactions with its parent company, Power Financial Corporation,after obtaining advance tax rulings:• On February 23, 2011, the Company acquired $1.0 billion of 6.01% preferred shares of a wholly-owned subsidiary

of Power Financial Corporation. As sole consideration for the preferred shares, the Company issued $1.0 billion of6.00% secured demand debentures to Power Financial Corporation.

• On January 10, 2012, the Company acquired $250 million of 6.01% preferred shares of a wholly-owned subsidiaryof Power Financial Corporation. As sole consideration for the preferred shares, the Company issued $250 million of6.00% secured demand debentures to Power Financial Corporation.The Company has legally enforceable rights to settle these financial instruments on a net basis and the Company

intends to exercise these rights. Accordingly, the preferred shares and debentures and related dividend income andinterest expense are offset in the Consolidated Financial Statements of the Company. Tax savings arise due to the taxdeductibility of the interest expense.



IGM

FIN

AN

CIA

L IN

C.


14. SEGMENTED INFORMATION

The Company’s reportable segments are:• Investors Group• Mackenzie• Corporate and Other

These segments reflect the current organizational structure and internal financial reporting. Management measuresand evaluates the performance of these segments based on earnings before interest and taxes.

Investors Group and Mackenzie earn fee-based revenues in the conduct of their core business activities which areprimarily related to the distribution, management and administration of their mutual funds. Fee revenues are also derivedfrom the provision of brokerage services. Intermediary revenues are derived primarily from mortgage banking andservicing activities and from the assets funded by deposit and certificate products. In addition, Investors Group earns feerevenue from the distribution of insurance products.

The operating results of Mackenzie for 2011 exclude discontinued operations (Note 3).Corporate and Other includes Investment Planning Counsel, equity income from the Company’s investment in

Great-West Lifeco Inc., net investment income on unallocated investments, and also includes consolidation eliminationentries.

2012

investors corporateThree months ended March 31 group mackenzie and other total

RevenuesManagement fees $ 280,984 $ 164,043 $ 11,591 $ 456,618 Administration fees 55,469 26,854 2,941 85,264Distribution fees 49,282 5,049 30,848 85,179 Net investment income and other 21,524 (196) 24,700 46,028

407,259 195,750 70,080 673,089

ExpensesCommission 123,608 68,218 29,558 221,384 Non-commission 92,042 65,721 12,328 170,091

215,650 133,939 41,886 391,475

Earnings before undernoted $ 191,609 $ 61,811 $ 28,194 281,614

Interest expense 22,911


Net earnings 201,864 Perpetual preferred share dividends 2,213

Net earnings available to common shareholders $ 199,651

Identifiable assets $ 5,673,626 $ 1,341,615 $ 1,656,354 $ 8,671,595 Goodwill 1,347,781 1,170,149 122,593 2,640,523

Total assets $ 7,021,407 $ 2,511,764 $ 1,778,947 $11,312,118



IGM

FINA

NC

IAL IN

C.


2011

investors corporateThree months ended March 31 group mackenzie and other total

RevenuesManagement fees $ 297,679 $ 183,303 $ 11,133 $ 492,115 Administration fees 57,890 27,004 2,606 87,500 Distribution fees 47,685 5,900 35,776 89,361 Net investment income and other 21,300 783 20,330 42,413

424,554 216,990 69,845 711,389

ExpensesCommission 124,061 75,999 33,590 233,650 Non-commission 85,757 63,488 12,719 161,964

209,818 139,487 46,309 395,614

Earnings before undernoted $ 214,736 $ 77,503 $ 23,536 315,775

Interest expense 30,271


Net earnings from continuing operations 213,377 Net earnings from discontinued operations 968

Net earnings 214,345 Perpetual preferred share dividends 2,213

Net earnings available to common shareholders $ 212,132

Identifiable assets $ 5,313,624 $ 2,291,371 $ 1,927,860 $ 9,532,855Goodwill 1,347,781 1,172,749 122,593 2,643,123

Total assets $ 6,661,405 $ 3,464,120 $ 2,050,453 $ 12,175,978

14. SEGMENTED INFORMATION (continued)



PAR

GESA

HO

LDIN

G SA

Pargesa Holding SA

PA RT D


P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 D 1

PFC_QUAT1_Eng04_PGA_2012-05-12_v1.indd E1PFC_QUAT1_Eng04_PGA_2012-05-12_v1.indd E1 12/05/12 3:34 PM12/05/12 3:34 PM

PAR

GES

A H

OLD

ING

SA

PARGESA HOLDING SA ECONOMIC PRESENTATION OF PARGESA RESULTS

As a supplement to the accounts drawn up under the IFRS format, Pargesa is continuing to publish an economic presentation of its results, in order to provide homogeneous and continuous information over the long term about the contribution of each of its major shareholdings to its results. Because the IFRS standards impose different accounting treatments depending on the group’s percentage holding in each of its investments (full integration of Imerys, equity accounting of Lafarge, and classification of Total, GDF Suez, Suez Environnement, and Pernod Ricard as financial instruments), this continuous view would be interrupted without this complementary information.

The economic presentation shows, in terms of group share, the operating contribution of the main shareholdings to the consolidated income of Pargesa together with the income from the operations of the holding companies (Pargesa and GBL). The analysis also draws a distinction between the operating and non-operating items in the income, the non-operating part being composed of capital gains in connection with disposals and any restructuring costs and impairment.

According to this approach, the economic results for the first quarter of 2012 can be analyzed as follows: [IN MILLIONS OF SWISS FRANCS] [UNAUDITED]

FIRSTQUARTER

2012

FIRSTQUARTER

2011

FULLYEAR

2011

Operating contribution of the main shareholdings Consolidated [Imerys] or equity-accounted [Lafarge]:

Imerys share of operating income 28.2 38.5 121.6 Lafarge share of operating income 2.4 (4.1) 55.5 Non-consolidated: Total net dividend 164.3 GDF Suez net dividend 114.2 Suez Environnement net dividend 15.0 Pernod Ricard net dividend 24.5Operating contribution of the main shareholdings 30.6 34.4 495.1per share [SF] 0.36 0.41 5.85 Operating contribution of other shareholdings (1.4) (1.7) (1.4)Operating income contributed by holding companies (34.8) (18.7) (151.2)Operating income (5.6) 14.0 342.5per share [SF] (0.07) 0.17 4.05 Non-operating income from consolidated or equity-accounted companies (9.2) (0.4) 16.5Non-operating income contributed by holding companies 280.4 (7.2) (423.9)Net income 265.6 6.4 (64.9)per share [SF] 3.14 0.08 (0.77) Average number of shares in circulation [thousands] 84,638 84,638 84,638€/SF average exchange rate 1.208 1.287 1.234

CONSOLIDATED OR EQUITY-ACCOUNTED HOLDINGS

Imerys recorded a 9.8% higher net operating income of €78.8 million in the first quarter of 2012. Pargesa’s share of Imerys operating income, expressed in Swiss francs, dropped by -26.8% to SF28.2 million, mainly as a result of Pargesa’s decrease, from 41.7% to 29.6%, in the economic interest it holds in Imerys, further to the sale to GBL, in April 2011, of the Imerys stake previously held directly by Pargesa.

Lafarge recorded net earnings of -€44 million in the first quarter of 2012. This figure includes -€62 million of non-recurring items related to restructuring costs. The Pargesa share of the operating contribution of Lafarge, expressed in Swiss francs, was SF2.4 million.

D 2 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2


PAR

GESA

HO

LDIN

G SA

NON-CONSOLIDATED HOLDINGS

The contributions from Total, GDF Suez, Suez Environnement and Pernod Ricard represent the Pargesa share of the net dividends received by GBL from these companies. They do not contribute in the first quarter, since their dividends are to be distributed from the second quarter onwards.

The NET OPERATING CONTRIBUTION OF OTHER SHAREHOLDINGS includes the contribution of Ergon Capital Partners I & II, held by GBL.

OPERATING INCOME CONTRIBUTED BY HOLDING COMPANIES, which is the net sum of financial income and expenses, overheads and taxes, stands at -SF34.8 million, compared with -SF18.7 million in the first quarter of 2011.

NON-OPERATING INCOME: The non-operating income from consolidated or equity-accounted companies includes the Pargesa share of the non-operating income of Imerys and Lafarge. The non-operating income contributed by holding companies of SF280.4 million primarily includes, for respectively SF138.6 million and SF150.5 million, Pargesa’s share of capital gains recorded by GBL during the first quarter on the sale of the Arkema and Pernod Ricard shares. Regarding the Pernod Ricard shares sold, an aggregate impairment of -SF77 million had been recorded in 2008 and 2009.

PRESENTATION OF RESULTS IN ACCORDANCE WITH IFRS

The simplified presentation of the income statement in accordance with IFRS is as follows: [IN MILLIONS OF SWISS FRANCS] [UNAUDITED]

FIRSTQUARTER

2012

FIRSTQUARTER

2011

FULLYEAR

2011

Operating income 1,270.8 1,162.7 4,833.0Operating expenses (1,137.5) (1,024.1) (4,337.1)Other income and expenses 531.7 (2.4) (732.0)Operating profit 665.0 136.2 (236.1)Dividends and interest from long-term investments 617.5Other financial income [expenses] (49.2) (35.8) (255.1)Taxes (35.6) (38.2) (147.4)Income from associates and joint ventures (12.1) (8.2) 153.8Consolidated net profit [including minorities] 568.1 54.0 132.7Attributable to minority interests 302.5 47.6 197.6Attributable to Pargesa shareholders [group share] 265.6 6.4 (64.9)Average number of shares in circulation [thousands] 84,638 84,638 84,638 Basic earnings per share, group share [SF] 3.14 0.08 (0.77)€/SF average exchange rate 1.208 1.287 1.234

Operating income and expenses are principally the turnover and operating expenses of Imerys, whose accounts are 100% integrated into those of Pargesa.

Other income and expenses are the net capital gains and losses and impairment on group shareholdings and operations. In the first quarter, this figure mainly represents the capital gain recorded on the sale by GBL of Arkema and Pernod Ricard shares.

The dividends and interest from long-term investments item comprised in 2011 the total net dividends received by the group from its non-consolidated investments, principally from Total, GDF Suez, Suez Environnement and Pernod Ricard. Those dividends are mainly distributed from the second quarter onwards.

The other financial income (expenses) and taxes items consolidate the figures for Pargesa, GBL and Imerys.

Income from associates and joint ventures represents the share in the consolidated net profit contributed by shareholdings accounted for in the Pargesa financial statements using the equity method. It includes in particular the contribution of Lafarge.

Minority interests essentially concerns the share of results due to the minority shareholders of GBL and Imerys, these two companies being 100% integrated into the Pargesa group accounts.

P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2 D 3


PAR

GES

A H

OLD

ING

SA

ADJUSTED NET ASSET VALUE

Pargesa’s flow-through adjusted net asset value, which is calculated on the basis of the current market value and exchange rates for the listed shareholdings, and on the share of consolidated shareholders’ equity and current exchange rates for unlisted investments, was SF78.6 per share at April 30, 2012, and breaks down as follows:

PARGESA’S FLOW-THROUGH ADJUSTED NET ASSET VALUE AT APRIL 30, 2012

[IN MILLIONS OF SWISS FRANCS] %

CAPITAL

%ECONOMIC

INTEREST

SHARE PRICECURRENCY

[€]

FLOW-THROUGH

VALUE

WEIGHTINGAS % OF

TOTALTotal 4.0 2.0 36.1 2,036 31GDF Suez 5.2 2.6 17.4 1,224 18Imerys 57.0 28.5 42.9 1,105 17Lafarge 21.0 10.5 29.5 1,067 16Pernod Ricard 7.5 3.8 78.4 937 14Suez Environnement 6.9 3.5 10.7 224 3Other shareholdings 249 4Total portfolio 6,842 103Net cash (debt) (187) (3)Adjusted net asset value 6,655 100 per Pargesa share SF60.8 78.63 €/SF exchange rate 1.202

Pargesa’s adjusted net asset value is published every week on the Pargesa website.

DIVIDEND The annual general meeting of Pargesa Holding SA, held in Geneva on May 9, 2012, approved the payment of a dividend of SF2.57 per bearer share for 2011, compared with SF2.72 for the previous year, a total distribution of SF218 million, which will be paid on May 16, 2012.

D 4 P O W E R F I N A N C I A L C O R P O R AT I O N — F I R S T Q UA RT E R R E P O RT 2 0 1 2


Corporate Information

S T O C K L I S T I N G S

Shares of Power Financial Corporation are listed on the Toronto Stock Exchange:

COMMON SHARES: PWF

FIRST PREFERRED SHARES:

Series A: PWF.PR.A Series H: PWF.PR.H Series M: PWF.PR.M

Series D: PWF.PR.E Series I: PWF.PR.I Series O: PWF.PR.O

Series E: PWF.PR.F Series K: PWF.PR.K Series P: PWF.PR.P

Series F: PWF.PR.G Series L: PWF.PR.L Series R: PWF.PR.R

T R A N S F E R A G E N T A N D R E G I S T R A R

Computershare Investor Services Inc.

Offices in:

Montréal (QC); Toronto (ON)

www.computershare.com

S H A R E H O L D E R S E R V I C E S

Shareholders with questions relating to the payment of dividends, change of

address and share certificates should contact the Transfer Agent:

Computershare Investor Services Inc.

Shareholder Services

100 University Avenue, 9th Floor

Toronto, Ontario, Canada M5J 2Y1

Telephone: 1-800-564-6253 (toll-free in Canada and the U.S.)

or 514-982-7555

www.computershare.com

W E B S I T E

www.powerfinancial.com

PR

IN

TE

D I

N C

AN

AD

A

751 Victoria Square

Montréal, Québec, Canada H2Y 2J3

514-286-7430

www.powerfinancial.com

Documents

First Quarter Report - Power Financial · to common shareholders in the irst quarter of were $ m illion. IGM’s contribution to Power Financial’s operating earnings was $ million