Second Quarter Report - Power Corporation of Canada · 2020. 2. 13. · TO THE SHAREHOLDERS Power Corporation of Canada’s operating earnings attributable to participating shareholders

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Second Quarter Report F O R T H E P E R I O D E N D E D J U N E 3 0 , 2 0 1 5

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TO THE SHAREHOLDERS

Power Corporation of Canada’s operating earnings attributable to participating shareholders (a non-IFRS inancial measure) for the quarter ended June , were $ million or $ . per share, compared with $ million or $ . per share in .

Other items, not included in operating earnings, were a contribution of $ million mainly comprised of: a partial recovery of $ million of prior period impairment charges on the disposal of the Corporation’s investment in CITIC Limited; a recovery of $ million representing the Corporation’s share of the partial reversal of impairment charges recorded by Groupe Bruxelles Lambert (GBL) on its investment in Lafarge SA (Lafarge); and the Corporation’s share of impairment charges and restructuring costs of $ million related to the merger of Lafarge with Holcim, and impairment charges at Square Victoria Communications Group Inc. In the corresponding period of , other items represented a net charge of $ million.

Net earnings attributable to participating shareholders were $ million or $ . per share, compared with $ million or $ . per share in .

S I X M O N T H R E S U L T SOperating earnings attributable to participating shareholders for the six months ended June , were $ million or $ . per share, compared with $ million or $ . per share in .

Other items, not included in operating earnings, resulted in a contribution of $ million, compared with $ million in .

Net earnings attributable to participating shareholders were $ million or $ . per share, compared with $ million or $ . per share in .

R E S U L T S O F 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

S E C O N D Q U A R T E R R E S U LT S

Power Financial reported operating earnings attributable to common shareholders for the quarter ended June , of $ million or $ . per share, compared with $ million or $ . per share in .

Other items, not included in operating earnings, were a contribution of $ million mainly comprised of Power Financial’s share of GBL’s partial reversal of impairment charges on Lafarge, partially offset by impairment charges and restructuring costs recorded by Lafarge related to the merger with Holcim. In , other items represented a contribution of $ million.

Net earnings attributable to common shareholders were $ million or $ . per share, compared with $ million or $ . per share in .

P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 1

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S I X M O N T H R E S U LT S

Operating earnings attributable to common shareholders for the six months ended June , were $ , million or $ . per share, compared with $ million or $ . per share in .

Other items, not included in operating earnings, resulted in a contribution of $ million, compared with $ million in .

Net earnings attributable to common shareholders were $ , million or $ . per share, compared with $ , million or $ . per share in .

As at June , , Power Corporation held a . % economic interest in Power Financial. Power Financial’s contribution to Power Corporation’s operating earnings was $ million for the quarter ended June , , compared with $ million in . For the six months ended June , , Power Financial contributed $ million to Power Corporation’s operating earnings, compared with $ million in .

R E S U L T S F R O M O T H E R S U B S I D I A R I E S A N D I N C O M E F R O M I N V E S T M E N T S

S E C O N D Q U A R T E R R E S U LT S

The contribution to earnings from other subsidiaries and income from investments was $ million for the quarter ended June , compared with $ million in .

The contribution from other subsidiaries and income from investments includes gains of $ million from the Corporation’s investment activity in China. During the most recent six-month period, markets in China have been volatile and reached near record highs in June. As many of Sagard China’s portfolio investments reached historically high valuations, investment gains were realized on certain holdings.

On behalf of the Board of Directors,

Paul Desmarais, Jr., . ., . . André Desmarais, . ., . .Chairman and Co-Chief Executive Of icer Deputy Chairman, President and

Co-Chief Executive Of icer

August ,

2 P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5

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Signed, Signed,

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Power Corporation of Canada

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Power Financial Corporation

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Great-West Lifeco Inc.

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IGM Financial Inc.

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Pargesa Holding SA

P A R T E


T A B L E O F C O N T E N T S

This document contains management’s discussion and analysis of the

fi nancial condition and fi nancial performance of Power Corporation of Canada

(the Corporation) for the three months and six months ended June 30, 2015 and

the unaudited interim condensed consolidated fi nancial statements of the

Corporation as at and for the three months and six months ended June 30, 2015.

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 C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 3

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The trademarks contained in this report are owned by Power Corporation of Canada or by a Member of the Power Corporation Group of CompaniesTM. Trademarks that are not owned by Power Corporation are used with permission.

4 P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5

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P A R T A

Management’s Discussion and Analysis

P A G E A 2

Financial Statements and Notes

P A G E A 3 3

P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 A 1

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POWER CORPORATION OF CANADAMANAGEMENT’S DISCUSSION AND ANALYSIS

A 2 P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5


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ORGANIZATION OF THE INTERIM MD&A

OVERVIEW



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POWER FINANCIAL

Lifeco

IGM Financial

POWER CORPORATION

Power Financial

Pargesa

Lifeco



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IGM Financial

Pargesa and GBL

Non-Current Assets Held for Sale and Discontinued Operations,

Other Activities of Power Financial



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SAGARD INVESTMENT FUNDS

Sagard Europe

Sagard Capital



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Sagard China

OTHER SUBSIDIARIES

Square Victoria Communications Group

La Presse LaPresse+La Presse+

La Presse

Power Energy

Controlled Portfolio Investments



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OTHER INVESTMENTS

BASIS OF PRESENTATION

Interim Financial Reporting

Control Basis of Accounting Earnings and OtherComprehensive Income

Impairment Testing Impairment Reversal

> > > >

>

> > > >

> >

>

>

>

>

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>



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Power Financial

Square Victoria Communications Group

Power Energy

GBL

Sagard Europe

Sagard Capital

Sagard China



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NON-IFRS FINANCIAL MEASURES AND PRESENTATION

operating earnings

other items

A 1 0 P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5


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RESULTS OF POWER CORPORATION OF CANADA

EARNINGS SUMMARY – CONDENSED SUPPLEMENTARY NON-CONSOLIDATED STATEMENTS OF EARNINGS

June30,2015

June30,2015

Operating earnings

738 367(39) (21)699 346

165 124(66) (34)(26) (13)772 423

Other items (non-operating earnings) [3]42 37(28) (28)183 183197 192

Net earnings (attributable to participating shareholders) 969 615

Earnings per share (attributable to participating shareholders)1.67 0.910.43 0.422.10 1.33

NET EARNINGS

P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 A 1 1


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OPERATING EARNINGS

CONTRIBUTION TO OPERATING EARNINGS

Power Financial

June30,2015

June30,2015

915 442235 11674 55

1,224 613(35) (22)(65) (32)

1,124 559

738 367



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June30,2015

June30,2015

Canada165 88244 122205 96(7) 2

607 308

United States192 72(1) (3)(3) (2)

188 67

Europe423 207169 92(17) (10)575 289

Lifeco Corporate (11) (5)

1,359 659

915 442



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June30,2015

June30,2015

381 190111 5468 36560 280

(161) (81)399 199

235 116

June30,2015

75.863.0(2.8)

136.0



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2015Q2

76.850.64.0

131.4

June30,2015

June30,2015

51 2813 20

40 40379 913 13

163 110

44 43207 153

74 55



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Other subsidiaries

CORPORATE OPERATIONS OF POWER CORPORATION

Income from investments

June30,2015

June30,2015

(4) (2)1 4

102 68

8 7

58 47165 124



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Operating and other expenses

OTHER ITEMS

June30,2015

June30,2015

62 153 53

(15) (15)(4) (2)42 37(28) (28)183 183197 192



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Power Financial


Other subs diaries

Corporate operations

Power Financial

Other subsidiaries



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FINANCIAL POSITION

CONSOLIDATED BALANCE SHEETS

June30,2015

Assets4,728

160,321

2,543

36814,0505,13911,0875,9849,634

184,835398,689

Liabilities

153,1576,7997,81412,528

184,835365,133

Equity971

12,09720,48833,556398,689



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NON-CONSOLIDATED BALANCE SHEETS

June30,2015

Assets812

2,03710,508

36313,720

Liabilities400252652

Equity971

12,09713,06813,720

Cash and cash equivalents



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Investments

June30, 2015

162 47 209279 197 476363 85 448

282 28 310

352 242 5941,438 599 2,037

Investments in Power Financial and Other subsidiaries



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SHAREHOLDERS’ EQUITY

Non-Participating Shares

Participating Shareholders’ Equity

Outstanding Number of Participating Shares



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CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

2015

2,805(804)

(1,816)

112

297

4,431

4,728

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS



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2015

Operating activities995(375)

2(352)38308

Financing activities(26)(278)46(1)

(259)Investing activities

673(366)(109)(6)

192241571

Cash and cash equivalents, at June 30 812



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CAPITAL MANAGEMENT

June30,2015

Debentures and debt instruments400250

5,2651,325617(43)

7,814Non-participating shares

9712,5802,514150

6,215Equity

12,09715,24427,34141,370



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RATINGS

RISK MANAGEMENT



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FINANCIAL INSTRUMENTS RISK

•

•

•



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OFF-BALANCE SHEET ARRANGEMENTS

GUARANTEES

LETTERS OF CREDIT

CONTINGENT LIABILITIES

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

INCOME TAXES

TRANSACTIONS WITH RELATED PARTIES



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FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

June30, 2015

68 1 (2)9 1 1

24,963 466 (1,212)2,631 61 1

29 (1)27,700 529 (1,213)



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SUMMARY OF CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

CHANGES IN ACCOUNTING POLICIES

FUTURE ACCOUNTING CHANGES

IFRS 4 – INSURANCE CONTRACTSInsurance Contracts

IFRS 9 – FINANCIAL INSTRUMENTSFinancial Instruments Financial Instruments: Recognition and

Measurement



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IFRS 15 – REVENUE FROM CONTRACTSWITH CUSTOMERSRevenue from Contracts with Customers

INTERNAL CONTROL OVER FINANCIAL REPORTING



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SUMMARY OF QUARTERLY RESULTS

2015Q2

5,415

4230.91

1920.42

6151.331.32

2015Q2

3737(28)183192



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POWER CORPORATION OF CANADA

June302015

,

Assets4,728

109,17028,3019,4095,2208,221

160,32114,0505,1392,9111,492529

7,2301,8365,9849,634

184,835Total assets 398,689

Liabilities152,315

8426,7997,8141,7428,7592,027

184,835Total liabilities 365,133

Equity

971678

10,0551,36413,06820,488

Total equity 33,556Total liabilities and equity 398,689



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2015 2015

Revenues

6,410 14,216(894) (1,768)5,516 12,448

1,840 3,452(4,038) (1,080)(2,198) 2,372

1,896 3,810201 417

5,415 19,047

Expenses

5,127 10,767(490) (973)4,637 9,794374 755

(3,423) 9281,588 11,477777 1,514

1,711 3,408120 235

4,196 16,634

1,219 2,413

111 1361,330 2,549146 423

Net earnings 1,184 2,126

Attributable to556 1,13113 26615 969

1,184 2,126

Earnings per participating share

1.33 2.101.32 2.08



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2015 2015

Net earnings 1,184 2,126

Other comprehensive income (loss)Items that may be reclassified subsequently to net earnings

(64) 20638 3

(291) (403)4 16

(313) (178)

25 (110)(11) 40– 1

14 (69)

117 979(46) (46)

(14) 657 939

(43) 14Total – items that may be reclassified (285) 706

Items that will not be reclassified subsequently to net earnings412 165(87) (34)

4 –Total – items that will not be reclassified 329 131

Other comprehensive income (loss) 44 837

Total comprehensive income 1,228 2,963

Attributable to703 1,59613 26512 1,341

1,228 2,963



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Balance, beginning of year

Balance, end of period



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2015

Operating activities2,549(379)

(729)479(90)124

1,080(229)2,805

Financing activities

(603)(26)(278)(907)46148–

(266)–

884443

(804)Investment activities

16,8401,2801,762(104)(291)

(18,212)(1,330)(1,391)(370)

(1,816)112297

4,431Cash and cash equivalents, end of period 4,728

Net cash from operating activities includes2,751301



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NOTE 1 CORPORATE INFORMATION

NOTE 2 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




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USE OF SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS


IFRS 9 – Financial InstrumentsFinancial Instruments Financial Instruments: Recognition and

Measurements

IFRS 15 – Revenue from Contracts with CustomersRevenue from Contracts with Customers,



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NOTE 3 ACQUISITIONS

CONTROLLED PORTFOLIO INVESTMENTS – ALVEST AND LES DÉLICES DES 7 VALLÉES

Assets acquired including goodwill

Liabilities assumed

Net asset acquired

Consideration

LEGAL & GENERAL INTERNATIONAL (IRELAND) LIMITED – subsequent event



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NOTE 4 INVESTMENTS

NOTE 5 SEGREGATED FUNDS

INVESTMENTS ON ACCOUNT OF SEGREGATED FUND POLICYHOLDERS



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INSURANCE AND INVESTMENT CONTRACTS ON ACCOUNT OF SEGREGATED FUND POLICYHOLDERS




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NOTE 6 INSURANCE AND INVESTMENT CONTRACT LIABILITIES

INSURANCE AND INVESTMENT CONTRACT LIABILITIES



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NOTE 7 STATED CAPITAL

AUTHORIZED

ISSUED AND OUTSTANDING

Non Participating Shares

Participating Shares

Total Participating Shares



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NOTE 8 SHARE BASED COMPENSATION

STOCK OPTION PLAN

Compensation expense

,

,



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NOTE 9 CAPITAL MANAGEMENT

LIFECO



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Insurance Companies Act

IGM FINANCIAL



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NOTE 10 RISK MANAGEMENT



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POWER CORPORATION AND POWER FINANCIAL

Liquidity risk

Credit risk



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Market riska) Currency risk

b) Interest rate risk

c) Equity price risk



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LIFECO

Liquidity risk

Credit risk





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IGM FINANCIAL

Liquidity risk

Credit risk



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NOTE 11 PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS



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NOTE 12 INCOME TAXES

INCOME TAX EXPENSE

EFFECTIVE INCOME TAX RATE

DEFERRED TAX ASSETS



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NOTE 13 OTHER COMPREHENSIVE INCOME

NOTE 14 EARNINGS PER SHARE

Earnings

Number of participating shares (millions)

Net earnings per participating share



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NOTE 15 FAIR VALUE OF FINANCIAL INSTRUMENTS



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Financial assets recorded at fair value

Financial liabilities recorded at fair value





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Typeof asset Valuation approachSignificantunobservable input Input value

Inter relationshipbetweenkeyunobservable inputsand fair valuemeasurement



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NOTE 16 LEGAL PROVISIONS AND CONTINGENT LIABILITIES

NOTE 17 SEGMENTED INFORMATION



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Revenues

Expenses

Contribution to net earnings

Attributable to



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INFORMATION ON TOTAL ASSETS



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The attached documents concerning Power Financial Corporation 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 specific 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.

Power Financial Corporation

P A R T B


P A G E B 2


P A G E B 2 7

P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 B 1

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NPOWER FINANCIAL CORPORATIONMANAGEMENT’S DISCUSSION AND ANALYSIS

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ORGANIZATION OF THE INTERIM MD&A

OVERVIEW



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POWER FINANCIAL

Lifeco IGM Financial Pargesa

LIFECO

IGM FINANCIAL



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PARGESA AND GBL


OTHER ACTIVITIES



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Control Basis of Accounting Earnings and OtherComprehensive Income

Impairment Testing Impairment Reversal

> > > >

>

> > > >

> >

>

>

>

>

>

>



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NON-IFRS FINANCIAL MEASURES AND PRESENTATION

operating earnings

other items



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RESULTS OF POWER FINANCIAL CORPORATION

EARNINGS SUMMARY – CONDENSED SUPPLEMENTARY NON-CONSOLIDATED STATEMENTS OF EARNINGS

June30,2015

June30,2015

Operating earnings

915 442235 11674 55

1,224 613(35) (22)(65) (32)

1,124 559

Other items (non-operating earnings) [1]

65 5765 57

Net earnings (attributable to common shareholders) 1,189 616

Earnings per share (attributable to common shareholders)1.58 0.790.09 0.081.67 0.87

NET EARNINGS

OPERATING EARNINGS



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CONTRIBUTION TO OPERATING EARNINGS LIFECO, IGM AND PARGESA

Lifeco

June30,2015

June30,2015

Canada165 88244 122205 96(7) 2

607 308

United States192 72(1) (3)(3) (2)

188 67

Europe423 207169 92(17) (10)575 289

Lifeco Corporate (11) (5)

1,359 659

915 442



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IGM Financial

June30,2015

June30,2015

381 190111 5468 36560 280

(161) (81)399 199

235 116

June30,

2015

75.863.0(2.8)

136.0

B 1 0 P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5


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2015Q2

76.850.64.0

131.4

Pargesa

June30,2015

June30,2015

51 2813 20

40 40379 913 13

163 110

44 43207 153

74 55

P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 B 1 1


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CORPORATE OPERATIONS OF POWER FINANCIAL

Operating and other expenses

June30,2015

June30,2015

10

10(45) (22)(35) (22)



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OTHER ITEMS

June30,2015

June30,2015

94 280 80

(23) (23)(5) (2)65 57

Pargesa


IGM Financial

Pargesa



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FINANCIAL POSITION

CONSOLIDATED BALANCE SHEETS

June30,2015

Assets3,906

158,080

2,543

24614,0505,13910,1575,6949,162

184,835393,812

Liabilities153,1576,7996,79711,617

184,835363,205

Equity2,58015,67612,35130,607393,812



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NON-CONSOLIDATED BALANCE SHEETS

June30,2015

Assets89948

15,3752,543126

18,991

Liabilities250485735

Equity2,58015,67618,25618,991

Cash and cash equivalents



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Investment in Subsidiaries and Parjointco

SHAREHOLDERS’ EQUITY

Common Shareholders’ Equity

Outstanding Number of Common Shares



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CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

2015

2,799(1,140)(1,851)

109(83)

3,9893,906

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS



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2015

Operating activities1,254(617)18655

Financing activities(65)(515)

49(531)

Investing activities(10)(1)(11)113786

Cash and cash equivalents, at June 30 899



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CAPITAL MANAGEMENT

June30,2015

Debentures and debt instruments250

5,2651,325(43)

6,797Preferred shares

2,5802,514150

5,244Equity

15,6769,68725,36337,404



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RATINGS

RISK MANAGEMENT



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•

•

•



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OFF-BALANCE SHEET ARRANGEMENTS

GUARANTEES

LETTERS OF CREDIT

CONTINGENT LIABILITIES

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

INCOME TAXES




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DERIVATIVE FINANCIAL INSTRUMENTS

June30, 2015

9 1 124,963 466 (1,212)2,631 61 127,603 528 (1,210)



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SUMMARY OF CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS



IFRS 4 – INSURANCE CONTRACTSInsurance Contract

IFRS 9 – FINANCIAL INSTRUMENTSFinancial Instruments Financial Instruments: Recognition and

Measurement



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IFRS 15 – REVENUE FROM CONTRACTSWITH CUSTOMERSRevenue from Contracts with Customers,

INTERNAL CONTROL OVER FINANCIAL REPORTING



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2015Q2

4,901

5590.79

570.08

6160.870.86

2015

Q2

2

80

(23)(2)57



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POWER FINANCIAL CORPORATION

June302015

,

Assets3,906

108,99428,3017,3445,2208,221

158,08014,0505,1392,7891,023528

6,8011,8055,6949,162

184,835Total assets 393,812

Liabilities152,315

8426,7996,7971,7387,9471,932

184,835Total liabilities 363,205

Equity

2,580804

13,7741,09818,25612,351

Total equity 30,607Total liabilities and equity 393,812



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2015 2015

Revenues

6,410 14,216(894) (1,768)5,516 12,448

1,527 3,092(4,038) (1,080)(2,511) 2,012

1,896 3,8104,901 18,270

Expenses

5,127 10,767(490) (973)4,637 9,794374 755

(3,423) 9281,588 11,477777 1,514

1,440 2,870102 206

3,907 16,067

994 2,203

112 1391,106 2,342143 423

Net earnings 963 1,919

Attributable to315 66532 65616 1,189963 1,919

Earnings per common share

0.87 1.670.86 1.66



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2015 2015

Net earnings 963 1,919

Other comprehensive income (loss)Items that may be reclassified subsequently to net earnings

(141) (5)30 1(20) (94)3 15

(128) (83)

27 (108)(11) 40– 1

16 (67)

144 883

(14) 6130 889

(43) 14Total – items that may be reclassified (25) 753

Items that will not be reclassified subsequently to net earnings373 130(87) (34)

4 –Total – items that will not be reclassified 290 96

Other comprehensive income (loss) 265 849

Total comprehensive income 1,228 2,768

Attributable to399 92632 65797 1,777

1,228 2,768



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Balance, beginning of year

Balance, end of period



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2015

Operating activities2,342(375)

(729)479(90)124

1,080(32)

2,799Financing activities

(361)(65)(515)(941)49–

91–

(266)(161)4444

(1,140)Investment activities

16,5911,2801,089(104)

(18,090)(1,330)(997)(290)

(1,851)109(83)

3,989Cash and cash equivalents, end of period 3,906

Net cash from operating activities includes2,748280



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NOTE 1 CORPORATE INFORMATION





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USE OF SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS


IFRS 9 – Financial InstrumentsFinancial Instruments Financial Instruments: Recognition and

Measurements

IFRS 15 – Revenue from Contracts with CustomersRevenue from Contracts with Customers,



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NOTE 3 BUSINESS ACQUISITION

LEGAL & GENERAL INTERNATIONAL (IRELAND) LIMITED – subsequent event

NOTE 4 INVESTMENTS



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INSURANCE AND INVESTMENT CONTRACTS ON ACCOUNT OF SEGREGATED FUND POLICYHOLDERS




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NOTE 6 INSURANCE AND INVESTMENT CONTRACT LIABILITIES

INSURANCE AND INVESTMENT CONTRACT LIABILITIES



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NOTE 7 STATED CAPITAL

AUTHORIZED

ISSUED AND OUTSTANDING

First Preferred Shares (perpetual)

Common Shares

Common Shares



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NOTE 8 SHARE BASED COMPENSATION

STOCK OPTION PLAN

Compensation expense

,



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LIFECO



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Insurance Companies Act

IGM FINANCIAL



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POWER FINANCIALLiquidity risk

Credit risk




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LIFECO

Liquidity risk

Credit risk




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IGM FINANCIAL

Liquidity risk



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Credit risk






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NOTE 11 PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS



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NOTE 12 INCOME TAXES

INCOME TAX EXPENSE

EFFECTIVE INCOME TAX RATE

DEFERRED TAX ASSETS



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NOTE 13 OTHER COMPREHENSIVE INCOME

NOTE 14 EARNINGS PER SHARE

Earnings

Number of common shares (millions)

Net earnings per common share



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Typeof asset Valuation approachSignificantunobservable input Input value

Inter relationshipbetweenkeyunobservable inputsand fair valuemeasurement



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NOTE 16 LEGAL PROVISIONS AND CONTINGENT LIABILITIES




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Revenues

Expenses


Attributable to



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Revenues

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Attributable to



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Revenues

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Attributable to



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INFORMATION ON TOTAL ASSETS






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.

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 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.


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.

P A R T C


P A G E C 2


P A G E C 3 8

P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 C 1

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ECO

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Management's Discussion and Analysis

5

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE PERIOD ENDED JUNE 30, 2015

DATED: AUGUST 5, 2015

This Management’s Discussion and Analysis (MD&A) presents management’s view of the financial condition, results of operations and cash flows of Great-West Lifeco Inc. (Lifeco or the Company) for the three and six months ended June 30, 2015 and includes a comparison to the corresponding periods in 2014, to the three months ended March 31, 2015, and to the Company’s financial condition as at December 31, 2014. This MD&A provides an overall discussion, 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 in accordance with International Financial Reporting Standards (IFRS) unless otherwise noted and are presented in millions of Canadian dollars unless otherwise indicated. This MD&A should be read in conjunction with the Company's condensed consolidated financial statements for the period ended June 30, 2015. Please also refer to the 2014 Annual MD&A and consolidated financial statements in the Company's 2014 Annual Report.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATIONThis MD&A contains some forward-looking statements about the Company, including its business operations, strategy and expected 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 made concerning future financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions by the Company, including statements made with respect to the expected benefits of acquisitions and divestitures, are also forward-looking statements. Forward-looking statements are based on expectations and projections 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 and results could differ materially from those expressed or implied by forward-looking statements. Material factors and assumptions that were applied in formulating the forward-looking information contained herein include the assumption that the business and economic conditions affecting the Company’s operations will continue substantially in their current state, including, without limitation, with respect to market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, reinsurance, taxes, inflation, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, investment values, global equity and capital markets, business competition, continuity and availability of personnel and third party service providers, the Company's ability to complete strategic transactions and integrate acquisitions and that there will be no unplanned material changes to the Company’s facilities, customer and employee relations or credit arrangements. Many of these assumptions are based on factors and events that are not within the control of the Company and there is no assurance that they will prove to be correct. Other important factors and assumptions that could cause actual results to differ materially from those contained in forward-looking statements include technological change, breaches or failure of information systems and security (including cyber attacks), payments required under investment products, changes in local and international laws and regulations, changes in accounting policies and the effect of applying future accounting policy changes, unexpected judicial or regulatory proceedings and catastrophic events. The reader is cautioned that the foregoing list of assumptions and factors is not exhaustive, and there may be other factors listed in other filings with securities regulators, including factors set out in the Company's 2014 Annual MD&A under "Risk Management and Control Practices" and "Summary of Critical Accounting Estimates", which, along with other filings, is available for review at www.sedar.com. The reader is also cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements. Other than as specifically required by applicable law, the Company does not intend to update 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”, “assets under management”, “assets under administration” and other similar expressions. Non-IFRS financial measures are used to provide management and investors with additional measures of performance to help assess results where no comparable IFRS measure exists. However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directly comparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS.

C 2 P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5


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6

CONSOLIDATED OPERATING RESULTS

Selected consolidated financial information (in Canadian $ millions, except for per share amounts)

As at or for the three months ended For the six months endedJune 30

2015March 31

2015June 30 2014(2)(4)

June 302015

June 30 2014(2)(4)

Premiums and deposits:Amounts reported in the financial

statementsNet premium income (Life insurance,

guaranteed annuities and insured healthproducts) $ 5,516 $ 6,932 $ 5,764 $ 12,448 $ 11,031

Policyholder deposits (segregated funds):Individual products 3,031 2,981 2,830 6,012 5,776Group products 1,835 2,035 1,940 3,870 5,304

Premiums and deposits reported in thefinancial statements 10,382 11,948 10,534 22,330 22,111

Self-funded premium equivalents (Administrative services only contracts)(1) 659 662 658 1,321 1,316

Proprietary mutual funds and institutional deposits(1)(2) 11,032 12,938 9,592 23,970 21,887

Total premiums and deposits(1) 22,073 25,548 20,784 47,621 45,314

Fee and other income 1,226 1,258 1,110 2,484 2,169Paid or credited to policyholders(3) 1,588 9,889 7,580 11,477 15,069

EarningsNet earnings - common shareholders $ 659 $ 700 $ 615 $ 1,359 $ 1,202

Per common shareBasic earnings 0.661 0.702 0.616 1.363 1.203Dividends paid 0.326 0.326 0.3075 0.652 0.615Book value(4) 18.28 17.68 15.87

Return on common shareholders' equity(4)(5)

Operating earnings(6) 15.7% 16.0% 14.5%Net earnings 15.7% 16.0% 16.0%

Total assets per financial statements(4) $ 376,428 $ 381,331 $ 344,351Proprietary mutual funds and institutional net

assets(7) 232,168 238,650 200,113Total assets under management(4)(7) 608,596 619,981 544,464

Other assets under administration(8) 539,259 556,893 260,079Total assets under administration(4) $ 1,147,855 $ 1,176,874 $ 804,543Total equity(4) $ 23,470 $ 22,888 $ 20,951

(1) In addition to premiums and deposits reported in the financial statements, the Company includes premium equivalents on self-funded group insurance administrative services only (ASO) contracts and deposits on proprietary mutual funds and institutional accounts to calculate total premiums and deposits (a non-IFRS financial measure). This measure provides useful information as it is an indicator of top line growth.

(2) Comparative figures for premiums and deposits (a non-IFRS financial measure) have been restated to improve consistency across the Company's business units.(3) Paid or credited to policyholders includes the impact of changes in fair values of assets supporting insurance and investment contract liabilities.(4) Comparative figures have been adjusted as described in note 2 to the Company's condensed consolidated financial statements for the period ended June 30, 2015.(5) Return on shareholders' equity is detailed within the "Capital Allocation Methodology" section.(6) Operating earnings (a non-IFRS financial measure) excludes the impact of certain litigation provisions described in note 32 to the Company's December 31, 2014 annual consolidated financial

statements.(7) Total assets under management (a non-IFRS financial measure) provides an indicator of the size and volume of the overall business of the Company. Services provided in respect of assets

under management include the selection of investments, the provision of investment advice and discretionary portfolio management on behalf of clients. This includes internally and externally managed funds where the Company has oversight over the investment policies.

(8) Other assets under administration (a non-IFRS financial measure) includes assets where the Company only provides administration services for which the Company earns fee and other income. These assets are beneficially owned by clients and the Company does not direct the investing activities. Services provided relating to assets under administration includes recordkeeping, safekeeping, collecting investment income, settling of transactions or other administrative services. Administrative services are an important aspect of the overall business of the Company and should be considered when comparing volumes, size and trends.



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

Lifeco's net earnings attributable to common shareholders for the three month period ended June 30, 2015 were $659 million compared to $615 million a year ago and $700 million in the previous quarter. On a per share basis, this represents $0.661 per common share ($0.659 diluted) for the second quarter of 2015 compared to $0.616 per common share ($0.615 diluted) a year ago and $0.702 per common share ($0.700 diluted) in the previous quarter.

For the six months ended June 30, 2015, Lifeco's net earnings attributable to common shareholders were $1,359 million compared to $1,202 million a year ago. On a per share basis, this represents $1.363 per common share ($1.359 diluted) for 2015 compared to $1.203 per common share ($1.202 diluted) a year ago.

Net earnings - common shareholdersFor the three months ended For the six months ended

June 302015

March 312015

June 302014

June 302015

June 302014

CanadaIndividual Insurance $ 88 $ 77 $ 97 $ 165 $ 166Wealth Management 122 122 113 244 218Group Insurance 96 109 92 205 201Canada Corporate 2 (9) 2 (7) 13

308 299 304 607 598United States

Financial Services 72 120 78 192 172Asset Management (3) 2 (9) (1) (62)U.S. Corporate (2) (1) — (3) —

67 121 69 188 110Europe

Insurance & Annuities 207 216 184 423 384Reinsurance 92 77 72 169 135Europe Corporate (10) (7) (10) (17) (14)

289 286 246 575 505

Lifeco Corporate (5) (6) (4) (11) (11)Net earnings - common shareholders $ 659 $ 700 $ 615 $ 1,359 $ 1,202

The information in the table above is a summary of results for net earnings of the Company. Additional commentary regarding net earnings is included in the "Segmented Operating Results" section.



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MARKET IMPACTS

Interest Rate EnvironmentInterest rates in countries where the Company operates increased during the quarter, but did not impact the range of interest rate scenarios tested through the valuation process. The net change in interest rates had no material impact on net earnings and contributed to the increase in the Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio.

In order to mitigate the Company's exposure to interest rate fluctuations, the Company follows disciplined processes for managing the matching of assets and liabilities. As a result, the impact of changes in fair values of bonds backing insurance and investment contract liabilities recorded through profit or loss is mostly offset by a corresponding change in the insurance and investment contract liabilities.

Refer to note 5 to the Company's condensed consolidated financial statements for the period ended June 30, 2015 for a further description of the Company's sensitivity to interest rate fluctuations.

Equity MarketsIn all geographies where the Company operates, the average levels of the equity markets’ in the second quarter of 2015 were positive compared to the second quarter of 2014 and the first quarter of 2015; however, ended the quarter at lower market levels as compared to March 31, 2015. The change in average market levels during the quarter had a slightly positive impact on gross asset-based fee income and the costs related to guarantees of death, maturity or income benefits within certain wealth management products offered by the Company.

Comparing the second quarter of 2015 to the second quarter of 2014, the average equity market levels were up by 3% in Canada (as measured by S&P TSX), by 12% in broader Europe (as measured by Eurostoxx 50), by 2% in the U.K. (as measured by FTSE 100), and by 11% in the U.S. (as measured by S&P 500). The major equity indices finished the second quarter down 2% in Canada, down 6% in broader Europe, down 4% in the U.K. and flat in the U.S. compared to March 31, 2015.

Foreign CurrencyThroughout this document, a number of terms are used to highlight the impact of foreign exchange on results, such as: “constant currency basis”, “impact of currency movement” and “effect of currency translation fluctuations”. These measures have been calculated using the average or period end rates, as appropriate, in effect at the date of the comparative period. This non-IFRS measure provides useful information as it facilitates the comparability of results between periods.

During the second quarter of 2015, the average currency translation rate of the U.S. dollar and British pound increased, while the average currency translation rates of the euro declined compared to the second quarter of 2014. The overall impact of currency movement on the Company’s net earnings for the three month period ended June 30, 2015 was an increase of $12 million ($27 million year-to-date) compared to translation rates a year ago.

From March 31, 2015 to June 30, 2015, the market rates at the end of the reporting period used to translate the euro and the British pound assets and liabilities to the Canadian dollar increased, while the end of period market rates for the U.S. dollar assets and liabilities decreased. The movements in end of period market rates resulted in unrealized foreign exchange gains from the translation of foreign operations, including related hedging activities, of $132 million in-quarter ($885 million net unrealized gains year-to-date) recorded in other comprehensive income.

Translation rates for the reporting period and comparative periods are detailed in the "Translation of Foreign Currency" section.

ACTUARIAL ASSUMPTION CHANGES During the second quarter of 2015, the Company updated a number of assumptions resulting in a positive net earnings impact of $74 million, compared to a positive net earnings impact of $26 million for the same quarter last year and $82 million for the previous quarter. For the second quarter of 2015, assumption changes included refinements to annuitant longevity assumptions in Europe, updates to morbidity assumptions in Canada and a number of modeling refinements.



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For the six months ended June 30, 2015, assumption changes resulted in a positive net earnings impact of $156 million as compared to $65 million for the same period last year.

PREMIUMS AND DEPOSITS AND SALESTotal premiums and deposits (a non-IFRS financial measure) include premiums on risk-based insurance and annuity products (as defined under IFRS), premium equivalents on self-funded group insurance administrative services only (ASO) contracts, deposits on individual and group segregated fund products as well as deposits on proprietary mutual funds and institutional accounts. This measure provides an indicator of top line growth.

Sales (a non-IFRS financial measure) for risk-based insurance and annuity products include 100% of single premium and annualized premiums expected in the first twelve months of the plan. Group insurance and ASO sales reflect annualized premiums and premium equivalents for new policies and new benefits covered or expansion of coverage on existing policies. For individual wealth management products, sales include deposits on segregated fund products, proprietary mutual funds and institutional accounts as well as deposits on non-proprietary mutual funds. For group wealth management products, sales include assets transferred from a previous plan provider and the expected annual contributions from the new plan. This measure provides an indicator of new business growth.

Premiums and depositsFor the three months ended For the six months ended

June 302015

March 312015

June 30 2014(1)

June 302015

June 30 2014(1)

CanadaIndividual Insurance $ 1,216 $ 1,154 $ 1,122 $ 2,370 $ 2,199Wealth Management 2,713 2,811 2,736 5,524 6,787Group Insurance 1,940 1,948 1,912 3,888 3,812

5,869 5,913 5,770 11,782 12,798United States

Financial Services(1) 2,504 2,730 2,029 5,234 4,470Asset Management 8,507 10,232 8,041 18,739 18,013

11,011 12,962 10,070 23,973 22,483Europe

Insurance & Annuities 4,116 5,160 3,498 9,276 7,610Reinsurance 1,077 1,513 1,446 2,590 2,423

5,193 6,673 4,944 11,866 10,033Total premiums and deposits $ 22,073 $ 25,548 $ 20,784 $ 47,621 $ 45,314

SalesFor the three months ended For the six months ended

June 302015

March 31 2015(1)

June 302014

June 302015

June 302014

Canada $ 3,016 $ 3,183 $ 2,904 $ 6,199 $ 6,106United States(1) 18,131 20,123 10,480 38,254 23,639Europe - Insurance & Annuities 3,396 4,456 2,814 7,852 6,320

Total sales $ 24,543 $ 27,762 $ 16,198 $ 52,305 $ 36,065

(1) Comparative figures have been restated to improve consistency across the Company's business units.

The information in the table above is a summary of results for the Company's total premiums and deposits and sales. Additional commentary regarding premiums and deposits and sales is included in the "Segmented Operating Results" section.



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NET INVESTMENT INCOME

Net investment incomeFor the three months ended For the six months ended

June 302015

March 312015

June 302014

June 302015

June 302014

Investment income earned (net of investmentproperties expenses) $ 1,515 $ 1,475 $ 1,531 $ 2,990 $ 3,021

Allowances for credit losses on loans andreceivables — 1 1 1 —

Net realized gains 29 87 18 116 40Regular investment income 1,544 1,563 1,550 3,107 3,061Investment expenses (25) (27) (24) (52) (46)Regular net investment income 1,519 1,536 1,526 3,055 3,015Changes in fair value through profit or loss (4,037) 2,953 1,670 (1,084) 3,792Net investment income $ (2,518) $ 4,489 $ 3,196 $ 1,971 $ 6,807

Net investment income in the second quarter of 2015, which includes changes in fair value through profit or loss, decreased by $5,714 million compared to the same quarter last year. The change in fair values in the second quarter of 2015 was a decrease of $4,037 million compared to an increase of $1,670 million for the second quarter of 2014, primarily due to government and corporate bond yields increasing in the second quarter of 2015 compared to decreasing in the second quarter of 2014.

Regular net investment income in the second quarter of 2015 of $1,519 million, which excludes changes in fair value through profit or loss, was comparable to the same quarter last year as lower interest on fixed-income investments was mostly offset by the impact of currency movement and higher net realized gains. Net realized gains include gains on available-for-sale securities of $20 million in the second quarter of 2015 compared to $13 million for the same quarter last year.

For the six months ended June 30, 2015, net investment income decreased by $4,836 million compared to the same period last year. The change in fair values for the six month period in 2015 was a decrease of $1,084 million compared to an increase in fair values of $3,792 million during the same period in 2014. Government and corporate bond yields decreased in the first half of 2014. In the first half of 2015, Canadian long-term bond yields have declined less than in the first half of 2014, while U.S. and U.K. bond yields have increased across most durations. Regular net investment income for the six months ended June 30, 2015 increased by $40 million compared to the same period last year. The increase was primarily due to higher net realized gains and the impact of currency movement as the U.S. dollar and British pound strengthened against the Canadian dollar, partially offset by lower interest from fixed-income investments. Net realized gains include gains on available-for-sale securities of $94 million for the six months ended June 30, 2015, compared to $24 million for the same period last year.

Net investment income in the second quarter of 2015 decreased by $7,007 million compared to the previous quarter, primarily due to net decreases in fair values of $4,037 million in the second quarter of 2015 compared to net increases of $2,953 million in the previous quarter. The change in fair values was primarily due to an increase in bond yields during the second quarter compared to a decline in the previous quarter.



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Credit Markets In the second quarter of 2015, the Company experienced net recoveries on impaired investments, including dispositions, which positively impacted common shareholders’ net earnings by $4 million ($15 million net recovery in the second quarter of 2014). Changes in credit ratings in the Company's bond portfolio resulted in a net increase in provisions for future credit losses in insurance contract liabilities, which negatively impacted common shareholders' net earnings by $16 million ($9 million net charge in the second quarter of 2014).

For the six months ended June 30, 2015, the Company experienced net recoveries on impaired investments, including dispositions, which positively impacted common shareholders' net earnings by $7 million ($20 million net recovery year-to-date in 2014). Changes in credit ratings in the Company's bond portfolio resulted in a net increase in provisions for future credit losses in insurance contract liabilities, which negatively impacted common shareholders' net earnings by $22 million year-to-date ($12 million net charge year-to-date in 2014).

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

Fee and other incomeFor the three months ended For the six months ended

June 302015

March 312015

June 302014

June 302015

June 302014

CanadaSegregated funds, mutual funds and

other $ 327 $ 319 $ 318 $ 646 $ 624ASO contracts 39 39 38 78 76

366 358 356 724 700United States

Segregated funds, mutual funds andother

577 573 436 1,150 855

EuropeSegregated funds, mutual funds and

other 283 327 318 610 614Total fee and other income $ 1,226 $ 1,258 $ 1,110 $ 2,484 $ 2,169

The information in the table above is a summary of gross fee and other income for the Company. Additional commentary regarding fee and other income is included in the "Segmented Operating Results" section.

PAID OR CREDITED TO POLICYHOLDERS

Paid or credited to policyholdersFor the three months ended For the six months ended

June 302015

March 312015

June 302014

June 302015

June 302014

Canada $ 1,460 $ 3,765 $ 3,367 $ 5,225 $ 6,732United States 543 1,121 1,295 1,664 2,593Europe (415) 5,003 2,918 4,588 5,744Total $ 1,588 $ 9,889 $ 7,580 $ 11,477 $ 15,069



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Amounts paid or credited to policyholders include life and health claims, policy surrenders, annuity and maturity payments, segregated fund guarantee payments, policyholder dividend and experience refund payments and changes in insurance and investment contract liabilities. The change in contract liabilities includes the impact of changes in fair value of certain invested assets supporting those liabilities as well as changes in the provision for future credit losses. The amounts do not include benefit payments for ASO contracts or segregated funds and mutual funds.

For the three months ended June 30, 2015, consolidated amounts paid or credited to policyholders were $1.6 billion, including $5.0 billion of policyholder benefit payments and a $3.4 billion decrease in contract liabilities. The decrease of $6.0 billion from the same period in 2014 consisted of a $6.5 billion decrease in the change in contract liabilities and a $0.5 billion increase in benefit payments. The decrease in contract liabilities was primarily due to fair value adjustments to insurance contract liabilities as a result of changes in interest rates in Canada, the U.S. and Europe as well as a Dutch-based annuity reinsurance agreement entered into during the second quarter of 2014. The increase in benefit payments was primarily due to new and restructured reinsurance treaties and the positive impact of currency movement.

For the six months ended June 30, 2015, consolidated amounts paid or credited to policyholders were $11.5 billion, including $10.5 billion of policyholder benefit payments and a $1.0 billion increase in contract liabilities. The decrease of $3.6 billion from the same period in 2014 consisted of a $5.0 billion decrease in the change in contract liabilities and a $1.4 billion increase in benefit payments. The decrease in contract liabilities was primarily due to fair value adjustments to insurance contract liabilities as a result of changes in interest rates in Canada, the U.S. and Europe as well as the impact of a Dutch-based annuity reinsurance agreement entered into during the second quarter of 2014, partially offset by the acquisition of Equitable Life's annuity business during the first quarter of 2015. The increase in benefit payments was primarily due to new and restructured reinsurance treaties and the positive impact of currency movement.

Compared to the previous quarter, consolidated amounts paid or credited to policyholders decreased by $8.3 billion. The decrease consisted of a $7.8 billion decrease in the change in contract liabilities, primarily due to fair value adjustments to insurance contract liabilities as a result of changes in interest rates in Canada, the U.S. and Europe as well as the acquisition of Equitable Life's annuity business during the first quarter of 2015. The decrease also consisted of a $0.5 billion decrease in benefit payments primarily due to lower business volumes.

INCOME TAXESThe Company's effective income tax rate is generally lower than the statutory income tax rate of 26.75% due to benefits related to non-taxable investment income and lower income tax in foreign jurisdictions.

In the second quarter of 2015, the Company had an effective income tax rate of 11%, down from 19% in the second quarter of 2014. The decrease in the effective income tax rate for the second quarter of 2015 was primarily due to a higher percentage of income subject to lower rates of income tax in foreign jurisdictions as well as changes to certain tax estimates that resulted in a positive earnings impact.

The Company had an effective income tax rate of 17% for the six months ended June 30, 2015 compared to 20% for the same period last year. The decrease in the Company's effective income tax rate was primarily due to the same items discussed for the in-quarter results.

The second quarter effective income tax rate of 11% was lower than the first quarter rate of 23%. The decrease in the effective income tax rate compared to the previous quarter was primarily due to the same items discussed for the in-quarter results.



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CONSOLIDATED FINANCIAL POSITION

ASSETS

Assets under administrationJune 30, 2015

Canada United States Europe TotalAssets

Invested assets $ 66,272 $ 39,235 $ 48,004 $ 153,511Goodwill and intangible assets 5,119 2,218 2,296 9,633Other assets 3,266 4,214 20,969 28,449Segregated funds net assets 70,878 33,201 80,756 184,835

Total assets 145,535 78,868 152,025 376,428Proprietary mutual funds and institutional net assets 5,028 205,049 22,091 232,168Total assets under management 150,563 283,917 174,116 608,596Other assets under administration 15,123 476,600 47,536 539,259Total assets under administration $ 165,686 $ 760,517 $ 221,652 $ 1,147,855

December 31, 2014Canada United States Europe Total

AssetsInvested assets $ 64,718 $ 36,198 $ 45,440 $ 146,356Goodwill and intangible assets 5,123 2,061 2,296 9,480Other assets 3,277 3,613 19,017 25,907Segregated funds net assets 68,372 31,030 75,564 174,966

Total assets 141,490 72,902 142,317 356,709Proprietary mutual funds and institutional net assets 4,718 190,817 20,736 216,271Total assets under management 146,208 263,719 163,053 572,980Other assets under administration 14,793 433,754 41,806 490,353Total assets under administration $ 161,001 $ 697,473 $ 204,859 $ 1,063,333

Total assets under administration at June 30, 2015 increased by $84.5 billion to $1.1 trillion compared to December 31, 2014, primarily as a result of the impact of currency movement.

INVESTED ASSETSThe Company manages its general fund assets to support the cash flow, liquidity and profitability requirements of the Company's insurance and investment products. The Company follows prudent and conservative investment policies, so that assets are not unduly exposed to concentration, credit or market risks. The Company implements strategies within the overall framework of the Company’s policies, reviewing and adjusting them on an ongoing basis in light of liability cash flows and capital market conditions. The majority of investments of the general fund are in medium-term and long-term fixed-income investments, primarily bonds and mortgages, reflecting the characteristics of the Company’s liabilities.

Bond portfolio – It is the Company's policy to acquire only investment grade bonds subject to prudent and well-defined investment policies. The total bond portfolio, including short-term investments, was $108.5 billion or 71% of invested assets at June 30, 2015 and $103.2 billion or 71% at December 31, 2014. The overall quality of the bond portfolio remained high, with 99% of the portfolio rated investment grade and 81% rated A or higher. The Company's bond exposure to the Oil & Gas industry, including funds held by ceding insurers, was 3% of invested assets at June 30, 2015.

C 1 0 P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5


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Bond portfolio qualityJune 30, 2015 December 31, 2014

AAA $ 34,660 32% $ 34,332 34%AA 19,496 18 18,954 18A 33,731 31 31,133 30BBB 19,145 18 17,370 17BB or lower 1,420 1 1,379 1

Total $ 108,452 100% $ 103,168 100%

Mortgage portfolio – It is the Company’s practice to acquire only high quality commercial mortgages meeting strict underwriting standards and diversification criteria. The Company has a well-defined risk-rating system, which it uses in its underwriting and credit monitoring processes for commercial loans. Residential loans are originated by the Company’s mortgage specialists in accordance with well-established underwriting standards and are well diversified across each geographic region, including specific diversification requirements for non-insured mortgages.

Mortgage portfolioJune 30, 2015 December 31, 2014

Mortgage loans by type Insured Non-insured Total TotalSingle family residential $ 788 $ 1,149 $ 1,937 9% $ 1,916 9%Multi-family residential 2,882 2,655 5,537 26 5,322 26Commercial 230 13,400 13,630 65 13,308 65

Total $ 3,900 $ 17,204 $ 21,104 100% $ 20,546 100%

The total mortgage portfolio was $21.1 billion or 14% of invested assets at June 30, 2015, compared to $20.5 billion or 14% of invested assets at December 31, 2014. Total insured loans were $3.9 billion or 18% of the mortgage portfolio.

Single family residential mortgages

Region June 30, 2015 December 31, 2014Ontario $ 940 49% $ 933 49%Quebec 401 21 401 21Alberta 134 7 134 7British Columbia 118 6 111 6Newfoundland 101 5 102 5Saskatchewan 82 4 78 4Nova Scotia 62 3 62 3Manitoba 54 3 51 3New Brunswick 41 2 41 2Other 4 — 3 —

Total $ 1,937 100% $ 1,916 100%

P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 C 1 1


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During the six months ended June 30, 2015, single family mortgage originations, including renewals, were $284 million, of which 34% were insured. Insured mortgages include mortgages where insurance is provided by a third party and protects the Company in the event that the borrower is unable to fulfill their mortgage obligations. Loans that are insured are subject to the requirements of the mortgage default insurance provider. For new originations of non-insured residential mortgages, the Company’s investment policies limit the amortization period to a maximum of 25 years and the loan-to-value to a maximum of 80% of the purchase price or current appraised value of the property. The weighted average remaining amortization period for the single family residential mortgage portfolio is 22 years as at June 30, 2015.

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

At June 30, 2015, the total actuarial provision for future credit losses in insurance contract liabilities was $3,317 million compared to $3,133 million at December 31, 2014, an increase of $184 million primarily due to the impact of currency movement, normal business and credit rating activity.

The aggregate of impairment provisions of $24 million ($22 million at December 31, 2014) and actuarial provisions for future credit losses in insurance contract liabilities of $3,317 million ($3,133 million at December 31, 2014) represents 2.4% of bond and mortgage assets, including funds held by ceding insurers, at June 30, 2015 (2.4% at December 31, 2014).

LIABILITIES

Total liabilitiesJune 30 December 31

2015 2014Insurance and investment contract liabilities $ 153,157 $ 146,055Other general fund liabilities 14,966 13,791Investment and insurance contracts on account of segregated fund policyholders 184,835 174,966Total $ 352,958 $ 334,812

Total liabilities increased by $18.1 billion to $353.0 billion at June 30, 2015 from December 31, 2014.

Investment and insurance contracts on account of segregated fund policyholders increased by $9.9 billion, primarily due to the combined impact of market value gains and investment income of $6.1 billion and the impact of currency movement of $4.0 billion, partially offset by net withdrawals of $0.6 billion. Insurance and investment contract liabilities increased by $7.1 billion. The increase was primarily due to the strengthening of the U.S. dollar and British pound against the Canadian dollar and the impact of new business, including the acquisition of Equitable Life's annuity business, partially offset by increasing interest rates reflected in the fair value adjustments. Segregated Fund and Variable Annuity GuaranteesThe Company offers retail segregated fund products, unitized with profits (UWP) products and variable annuity products that provide for certain guarantees that are tied to the market values of the investment funds.

The guaranteed minimum withdrawal benefit (GMWB) products offered by the Company provide levels of death and maturity guarantees. At June 30, 2015, the market value of GMWB product in-force in Canada, the U.S., Ireland and Germany was $3,347 million ($3,016 million at December 31, 2014). The Company has a hedging program in place to manage certain risks associated with options embedded in its GMWB products.



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Segregated fund and variable annuity guarantee exposureJune 30, 2015

Investment deficiency by benefit typeMarket Value Income Maturity Death Total(1)

Canada $ 29,776 $ — $ 29 $ 111 $ 111United States 11,287 6 — 45 51Europe

Insurance & Annuities 8,303 3 — 370 370Reinsurance(2) 1,206 353 — 23 376

9,509 356 — 393 746Total $ 50,572 $ 362 $ 29 $ 549 $ 908

(1) A policy can only receive a payout from one of the three trigger events (income election, maturity or death). Total deficiency measures the point-in-time exposure assuming the most costly trigger event for each policy occurred on June 30, 2015.

(2) Reinsurance exposure is to markets in Canada and the United States.

The investment deficiency measures the point-in-time exposure to a trigger event (i.e., income election, maturity or death) assuming it occurred on June 30, 2015. The actual cost to the Company will depend on the trigger event having occurred and the market values at that time. The actual claims before tax associated with these guarantees were $3 million in-quarter ($3 million for the second quarter of 2014) and $6 million year-to-date ($5 million year-to-date for 2014), with the majority arising in the Reinsurance business unit in the Europe segment.

SHARE CAPITAL AND SURPLUSShare capital outstanding at June 30, 2015 was $9,680 million, which comprises $7,166 million of common shares, $2,264 million of non-cumulative First Preferred Shares and $250 million of non-cumulative five-year rate reset First Preferred Shares.

The Company commenced a normal course issuer bid on December 9, 2014, terminating December 8, 2015, to purchase and cancel up to 8,000,000 of its common shares at market prices in order to mitigate the dilutive effect of stock options under the Company's Stock Option Plan. During the six months ended June 30, 2015, the Company repurchased and subsequently cancelled 2,126,298 common shares (2014 - 726,304) at an average cost per share of $35.87 (2014 - $30.72) under its normal course issuer bid program.

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



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LIQUIDITY AND CAPITAL MANAGEMENT AND ADEQUACY

LIQUIDITYThe Company’s liquidity requirements are largely self-funded, with short-term obligations being met by internal funds and maintaining adequate levels of liquid investments. The Company holds cash, cash equivalents and short-term bonds at the Lifeco holding company level and with the Lifeco consolidated subsidiary companies. At June 30, 2015, the Company and its operating subsidiaries held cash, cash equivalents and short-term bonds of $9.5 billion ($7.3 billion at December 31, 2014) and other available government bonds of $31.0 billion ($32.8 billion at December 31, 2014). Included in the cash, cash equivalents and short-term bonds at June 30, 2015 was approximately $0.9 billion ($0.7 billion at December 31, 2014) at the Lifeco holding company level. In addition, the Company maintains sufficient committed lines of credit with Canadian chartered banks for unanticipated liquidity needs, if required.

The Company does not have a formal common shareholder dividend policy. Dividends on outstanding common shares of the Company are declared and paid at the sole discretion of the Board of Directors of the Company. The decision to declare a dividend on the common shares of the Company takes into account a variety of factors including the level of earnings, adequacy of capital and availability of cash resources.

As a holding company, the Company’s ability to pay dividends is dependent upon the Company receiving dividends from its operating subsidiaries. The Company’s operating subsidiaries are subject to regulation in a number of jurisdictions, each of which maintains its own regime for determining the amount of capital that must be held in connection with the different businesses carried on by the operating subsidiaries. The requirements imposed by the regulators in any jurisdiction may change from time to time, and thereby impact the ability of the operating subsidiaries to pay dividends to the Company. For entities based in Europe, the local solvency capital regime will be changing to the Solvency II basis, effective January 1, 2016. Uncertainty around the rules and regulatory interpretation of their application could increase the near-term risk of additional local capital requirements. The Company continues to assess the impact of this change, remains in regular contact with its regulators through the preparatory phase in 2015 and will take appropriate steps to respond to the new regulatory environment.

CASH FLOWS

Cash flowsFor the three months ended

June 30For the six months ended

June 302015 2014 2015 2014

Cash flows relating to the following activities:Operations $ 1,404 $ 1,381 $ 2,496 $ 2,654Financing (491) (222) (871) (632)Investment (1,440) (1,172) (1,544) (1,733)

(527) (13) 81 289Effects of changes in exchange rates on cash and

cash equivalents 18 (74) 109 29Increase (decrease) in cash and cash equivalents

in the period (509) (87) 190 318Cash and cash equivalents, beginning of period 3,197 3,196 2,498 2,791Cash and cash equivalents, end of period $ 2,688 $ 3,109 $ 2,688 $ 3,109

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 to pay policy benefits, policyholder dividends and claims, as well as operating expenses and commissions. Cash flows generated by operations are mainly invested to support future liability cash requirements. Cash flow related financing activities include the issuance and repayment of capital instruments, and associated dividends and interest payments.



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In the second quarter of 2015, cash and cash equivalents decreased by $509 million from March 31, 2015. Cash flows provided by operations during the second quarter of 2015 were $1,404 million, an increase of $23 million compared to the second quarter of 2014. Cash flows used in financing were $491 million, primarily used for payment of dividends to the preferred and common shareholders of $356 million and a decrease to a line of credit of a subsidiary of $118 million. For the three months ended June 30, 2015, cash flows were used by the Company to acquire an additional $1,440 million of investment assets.

For the six months ended June 30, 2015, cash and cash equivalents increased by $190 million from December 31, 2014. Cash flows provided by operations were $2,496 million, a decrease of $158 million compared to the same period in 2014. Cash flows used in financing were $871 million, primarily used for payment of dividends to the preferred and common shareholders of $713 million and a decrease in a line of credit of a subsidiary of $161 million. In the first quarter of 2015, the Company increased the quarterly dividend to common shareholders from $0.3075 per common share to $0.3260 per common share. For the six months ended June 30, 2015, cash flows were used by the Company to acquire an additional $1,544 million of investment assets.

COMMITMENTS/CONTRACTUAL OBLIGATIONSCommitments/contractual obligations have not changed materially from December 31, 2014.

CAPITAL MANAGEMENT AND ADEQUACYAt 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.

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. Other foreign operations and foreign subsidiaries are required to comply with local capital or solvency requirements in their respective jurisdictions. The capitalization decisions of the Company and its operating subsidiaries also give consideration to the impact such actions may have on the opinions expressed by various credit rating agencies that provide financial strength and other ratings to the Company.

In Canada, the Office of the Superintendent of Financial Institutions (OSFI) has established a capital adequacy measurement for life insurance companies incorporated under the Insurance Companies Act (Canada) and their subsidiaries, known as the MCCSR ratio. The internal target range of the MCCSR ratio for Lifeco's major Canadian operating subsidiaries is 175% to 215% (on a consolidated basis).

Great-West Life’s MCCSR ratio at June 30, 2015 was 229% (224% at December 31, 2014). London Life’s MCCSR ratio at June 30, 2015 was 233% (247% at December 31, 2014). Canada Life's MCCSR ratio at June 30, 2015 was 248% (237% at December 31, 2014). The MCCSR ratio does not take into account any impact from $0.9 billion of liquidity at the Lifeco holding company level at June 30, 2015 ($0.7 billion at December 31, 2014).

In calculating the MCCSR position, available regulatory capital is reduced by goodwill and intangible assets, subject to a prescribed inclusion for a portion of intangible assets. The OSFI MCCSR Guideline also prescribes that quarterly re-measurements to defined benefit plans, impacting available capital for the Company’s federally regulated subsidiaries, are amortized over twelve quarters.

Due to the evolving nature of IFRS and proposed future changes to IFRS for the measurement of insurance contract liabilities, there will likely be further regulatory capital and accounting changes, some of which may be significant.



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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 reinsurance, under which the amount of insurance risk passed to the reinsurer or its reinsureds may be more limited.

The Company has 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 capital plan is designed to ensure that the Company maintains adequate capital, taking into account the Company's strategy, risk profile and business plans. The Board of Directors reviews and approves the annual capital plan as well as capital transactions undertaken by management pursuant to the plan.

OSFI Regulatory Capital Initiatives OSFI has commenced work on a number of initiatives that will have or may have application to the calculation and reporting of the MCCSR of the Company or certain of its subsidiaries.

These initiatives are discussed in the 2013 OSFI Life Insurance Regulatory Framework. Within the Framework, there are three broad categories specific to regulatory capital amounts: the review of methodology used to determine capital requirements in connection with segregated fund guarantees; the review of the qualifying criteria and capital components of Available Capital; and the new regime for calculating capital requirements relating to credit, market, insurance and operational risk. In tandem with these reviews, OSFI will consider the extent of diversification benefits and hedging credits to reflect in its new framework.

The Company is presently reviewing the OSFI proposals that have been released to the industry to date, and is in ongoing dialogue with OSFI, the Canadian Institute of Actuaries, the Canadian Life and Health Insurance Association and other industry participants. The Company is also actively participating in OSFI Quantitative Impact Studies relating to its Life Insurance Regulatory Framework initiatives. At this point, the Company cannot determine what the final outcome of these initiatives will be.

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

The capital allocation methodology allows the Company to calculate comparable Return on Equity (ROE) for each business unit. These ROEs are therefore based on the capital the business unit has been allocated and the financing charges associated with that capital.

Return on Equity(1)

June 30 March 31 Dec. 312015 2015 2014

Canada 22.2 % 22.2 % 22.1 %U.S. Financial Services(2) 15.0 % 16.0 % 16.3 %U.S. Asset Management (Putnam) (0.4)% (0.7)% (3.6)%Europe 18.1 % 18.0 % 17.7 %Lifeco Corporate (4.5)% (5.1)% (5.3)%

Total Lifeco Operating Earnings Basis(3) 15.7 % 16.0 % 15.7 %Total Lifeco Net Earnings Basis 15.7 % 16.0 % 15.7 %

(1) Return on Equity is the calculation of net earnings divided by the average common shareholders' equity over the trailing four quarters.(2) Includes U.S. Corporate.(3) Operating earnings (a non-IFRS financial measure) excludes the impact of certain litigation provisions described in note 32 to the Company's

December 31, 2014 annual consolidated financial statements, which is reflected in the results of Lifeco Corporate.



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RATINGS Great-West Lifeco maintains ratings from five independent ratings companies. In the second quarter of 2015, the credit ratings for Lifeco and its major operating subsidiaries were unchanged (set out in table below). The Company continues to receive strong ratings relative to its North American peer group resulting from its conservative risk profile, stable net earnings and consistent dividend track record.

Lifeco's operating companies are assigned a group rating from each rating agency. This group rating is predominantly supported by the Company’s leading position 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 integrated business platform. Each operating company benefits from the strong implicit financial support and collective ownership by Lifeco. There were no changes to the Company's group credit ratings in the second quarter of 2015.

Rating agency Measurement LifecoGreat-West

LifeLondon

LifeCanada

LifeGreat-WestFinancial

A.M. Best Company Financial Strength A+ A+ A+ A+DBRS Limited Claims Paying Ability IC-1 IC-1 IC-1 NR

Senior Debt AA (low)Subordinated Debt AA (low)

Fitch Ratings Insurer Financial Strength AA AA AA AASenior Debt A

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

Insurer Financial Strength AA AA AA AASenior Debt A+Subordinated Debt AA-

Irish Life Assurance Plc (ILA) is not part of the group ratings. ILA is rated AA- by Fitch Ratings and was upgraded from A to A+ by Standard & Poor's Ratings Services during the quarter. The ILA €200 million perpetual capital notes assumed on the acquisition of Irish Life are rated A- by Fitch Ratings and were upgraded from BBB+ to A- by Standard & Poor's Ratings Services during the quarter.

RISK MANAGEMENT AND CONTROL PRACTICES

The Board of Directors is ultimately accountable and responsible for the governance and oversight of risk throughout the Company and regularly reviews and approves the Company's Risk Appetite Framework and Enterprise Risk Management. During the second quarter of 2015, there were no significant changes to the Company's risk management and control practices. Refer to the Company's 2014 Annual MD&A for a detailed description of the Company's risk management and control practices.

DERIVATIVE FINANCIAL INSTRUMENTSThere were no major changes to the Company's policies and procedures with respect to the use of derivative financial instruments in the second quarter of 2015. The Company’s derivative transactions are generally governed by International Swaps and Derivatives Association, Inc. (ISDA) Master Agreements, which provide for legally enforceable set-off and close-out netting of exposure to specific counterparties in the event of early termination of a transaction, which includes but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from a counterparty against payables to the same counterparty, in the same legal entity, arising out of all included transactions. The Company’s ISDA Master Agreements may include Credit Support Annex provisions, which require both the pledging and accepting of collateral in connection with its derivative transactions. At June 30, 2015, total financial collateral, including initial margin and overcollateralization, received on derivative assets was $119 million ($52 million at December 31, 2014) and pledged on derivative liabilities was $407 million ($299 million at December 31, 2014).



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During the six month period ended June 30, 2015, the outstanding notional amount of derivative contracts increased by $9.5 billion to $25.0 billion, primarily due to an increase of $8.9 billion in forward settling to-be-announced security transactions.

The Company’s exposure to derivative counterparty credit risk, which reflects the current fair value of those instruments in a gain position, decreased to $466 million at June 30, 2015 from $652 million at December 31, 2014. The decrease was primarily due to certain interest rate swaps that were in an unrealized gain position of $202 million at December 31, 2014 that were unwound in the first quarter of 2015.

ACCOUNTING POLICIES

INTERNATIONAL FINANCIAL REPORTING STANDARDSDue to the evolving nature of IFRS, there are a number of IFRS changes impacting the Company in 2015, as well as standards that could impact the Company in future reporting periods. The Company actively monitors future IFRS changes proposed by the International Accounting Standards Board (IASB) to assess if the changes to the standards may have an impact on the Company's results or operations.

The Company adopted the narrow scope amendments to IFRS for Annual Improvements 2010 - 2012 Cycle, Annual Improvements 2011 - 2013 Cycle and IAS 19, Employee Benefits effective January 1, 2015. The adoption of these narrow scope amendments did not have a significant impact on the Company’s financial statements.

In July 2015, the IASB deferred the effective date of IFRS 15, Revenue from Contracts with Customers from January 1, 2017, as disclosed in the Company's 2014 Annual MD&A, to January 1, 2018. The Company continues to evaluate the impact of the adoption of this standard.

In regards to future accounting policy changes that could impact the Company, other than the change to IFRS 15 noted above, there have been no significant changes from the disclosure included in the Company's 2014 Annual MD&A.

SEGMENTED OPERATING RESULTS

The consolidated operating results of Lifeco, including the comparative figures, are presented on an IFRS basis after capital allocation. Consolidated operating results for Lifeco comprise the net earnings of Great-West Life and its operating subsidiaries, London Life and Canada Life; Great-West Financial and Putnam, together with Lifeco's corporate results.

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 corporate structure of the companies.

CANADAThe Canada segment of Lifeco includes the operating results of the Canadian businesses operated by Great-West Life, London Life and Canada Life. There are three primary business units included in this segment. Through its Individual Insurance business unit, the Company provides life, disability and critical illness insurance products to individual clients. Through its Wealth Management business unit, the Company provides accumulation products and 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 in Canada.



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Selected consolidated financial information - CanadaFor the three months ended For the six months ended

June 302015

March 312015

June 302014

June 302015

June 302014

Premiums and deposits $ 5,869 $ 5,913 $ 5,770 $ 11,782 $ 12,798Sales 3,016 3,183 2,904 6,199 6,106Fee and other income 366 358 356 724 700Net earnings - common shareholders 308 299 304 607 598

Total assets $ 145,535 $ 147,372 $ 138,167Proprietary mutual funds and institutional net

assets 5,028 5,019 4,587Total assets under management 150,563 152,391 142,754Other assets under administration 15,123 15,164 14,225Total assets under administration $ 165,686 $ 167,555 $ 156,979

2015 DEVELOPMENTS• Premiums and deposits for the three months ended June 30, 2015 of $5,869 million were $99 million higher than

the same quarter last year.

• Sales for the three months ended June 30, 2015 were $3,016 million, an increase of $112 million compared to the same quarter in 2014, which reflects strong sales across all lines of business.

• Fee and other income for the three months ended June 30, 2015 was $366 million, an increase of $10 million compared to the same quarter in 2014, primarily due to growth in assets under management driven by higher average market levels and positive net cash flows.

• Net earnings for the three months ended June 30, 2015 of $308 million were comparable to the same quarter last year.

• A new business area has been formed within the Canada segment to focus on building out new organizational capabilities in the areas of digital services, customer segmentation, innovation and data analytics.

BUSINESS UNITS - CANADA

INDIVIDUAL INSURANCE

OPERATING RESULTS

For the three months ended For the six months endedJune 30

2015March 31

2015June 30

2014June 30

2015June 30

2014Premiums and deposits $ 1,216 $ 1,154 $ 1,122 $ 2,370 $ 2,199Sales 138 113 125 251 247Net earnings 88 77 97 165 166



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Premiums and depositsIndividual Insurance premiums for the second quarter of 2015 increased by $94 million to $1,216 million compared to the same quarter last year. Individual Life premiums for the quarter increased by $91 million to $1,132 million compared to the same quarter last year, primarily due to an 11% increase in participating life premiums. Living Benefits premiums increased by $3 million to $84 million compared to the same quarter last year.

For the six months ended June 30, 2015, Individual Insurance premiums increased by $171 million to $2,370 million compared to the same period last year. Individual Life premiums increased by $169 million to $2,204 million compared to the same period last year, primarily due to an 11% increase in participating life premiums. Living Benefits premiums of $166 million were comparable to the same period last year.

Individual Insurance premiums for the second quarter of 2015 increased by $62 million compared to the previous quarter, primarily due to a 9% increase in participating life premiums.

SalesIndividual Insurance sales for the second quarter of 2015 increased by $13 million to $138 million compared to the same quarter last year. Participating life insurance sales remained strong, up $18 million or 22%. Universal Life and Term Life insurance product sales decreased by $5 million or 15%, impacted by application processing delays as a result of new business process system issues. While second quarter non-participating life insurance sales were down year-over-year, results continued to improve during the quarter as the Company continues to work on returning to normal service levels during 2015.

For the six months ended June 30, 2015, Individual Insurance sales increased by $4 million to $251 million compared to the same period last year. Participating life insurance sales increased $19 million or 12%, while Universal Life and Term Life insurance product sales decreased $15 million or 23%, primarily due to the same reasons discussed for the in-quarter results.

Individual Insurance sales for the second quarter of 2015 increased by $25 million compared to the previous quarter, primarily due to growth in participating life insurance sales, which increased by $18 million or 22%. Universal Life and Term Life insurance product sales increased by $5 million or 22% compared to the previous quarter, reflecting improved new business processing times as the Company continues to work on returning to normal service levels.

Net earningsNet earnings for the second quarter of 2015 decreased by $9 million to $88 million compared to the same quarter last year. The decrease was primarily due to higher new business strain, lower contributions from insurance contract liability basis changes as well as less favourable mortality and morbidity experience. In addition, net earnings for the second quarter of 2015 were positively impacted by changes to certain income tax estimates, which did not occur in 2014.

For the six months ended June 30, 2015, net earnings of $165 million were comparable to the same period last year. Higher new business strain and lower contributions from insurance contract liability basis changes were mostly offset by favourable investment and mortality experience as well as lower income taxes as discussed for the in-quarter results.

Net earnings for the second quarter of 2015 increased by $11 million compared to the previous quarter. The increase was primarily due to higher contributions from insurance contract liability basis changes and favourable mortality experience, partially offset by less favourable morbidity and policyholder behaviour experience. In addition, net earnings for the second quarter of 2015 were positively impacted by changes to certain income tax estimates, which did not occur in the first quarter of 2015.

For the second quarter of 2015, the net earnings attributable to the participating account decreased by $8 million to $16 million compared to the same quarter last year, primarily due to higher new business strain.



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For the six months ended June 30, 2015, the net earnings attributable to the participating account increased by $3 million to $49 million compared to the same period last year. The increase was primarily due to higher contributions from investment experience on par surplus assets, mostly offset by higher new business strain.

The net earnings attributable to the participating account for the second quarter of 2015 decreased by $17 million compared to the previous quarter, primarily due to lower contributions from investment experience on par surplus assets.

WEALTH MANAGEMENT

OPERATING RESULTS


2015March 31

2015June 30

2014June 30

2015June 30

2014Premiums and deposits $ 2,713 $ 2,811 $ 2,736 $ 5,524 $ 6,787Sales 2,757 2,944 2,673 5,701 5,606Fee and other income 313 308 301 621 595Net earnings 122 122 113 244 218

Premiums and depositsPremiums and deposits for the second quarter of 2015 decreased by $23 million to $2,713 million compared to same quarter last year. The decrease was primarily due to lower premiums related to group capital accumulation plans (GCAP), group investment only (IO) products and single premium group annuities (SPGAs), partially offset by an increase in premiums and deposits related to individual investment funds.

Excluding the impact of the conversion of certain pension plan assets into segregated fund products of $1,066 million in the first quarter of 2014, premiums and deposits for the six months ended June 30, 2015 decreased by $197 million to $5,524 million for the same reasons discussed for the in-quarter results.

Premiums and deposits for the second quarter of 2015 decreased by $98 million compared to the previous quarter. The decrease was primarily driven by lower premiums and deposits related to individual investment funds due to the positive impact of registered retirement savings plan (RRSP) season on first quarter premiums and deposits, partially offset by higher premiums related to SPGAs.

SalesSales for the second quarter of 2015 increased by $84 million to $2,757 million compared to the same quarter last year. The increase was primarily due to higher sales of individual investment funds, partially offset by lower sales of group IO products and SPGAs.

For the six months ended June 30, 2015, sales increased by $95 million to $5,701 million compared to the same period last year, primarily due to higher sales of individual investment funds, partially offset by lower sales of GCAP products, group IO products and SPGAs.

Sales for the second quarter of 2015 decreased by $187 million compared to the previous quarter. The decrease was primarily driven by lower sales of individual investment funds due to the positive impact of RRSP season on first quarter sales, partially offset by higher sales of SPGAs and GCAP products.



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Net cash inflows for the second quarter of 2015 were $159 million compared to $290 million in the same quarter last year and $250 million in the previous quarter. For the six months ended June 30, 2015, net cash inflows were $409 million compared to $1,602 million for the same period last year, which included $1,066 million related to the conversion of certain pension plan assets into segregated fund products. Excluding this conversion, net cash inflows decreased by $127 million due to the same drivers as the decrease in premiums and deposits.

Fee and other incomeFee and other income for the second quarter of 2015 increased by $12 million to $313 million compared to the same quarter last year. The increase was primarily due to growth in assets under management driven by higher average market levels and positive net cash flows, partially offset by lower fee margins. Lower margins were primarily driven by the development of the market for high-net-worth segregated fund and mutual fund products.

For the six months ended June 30, 2015, fee and other income increased by $26 million to $621 million compared to the same period last year, for the same reasons discussed for the in-quarter results.

Fee and other income for the second quarter of 2015 increased by $5 million compared to the previous quarter, primarily due to growth in assets under management driven by higher average market levels and positive net cash flows.

Net earningsNet earnings for the second quarter of 2015 increased by $9 million to $122 million compared to the same quarter last year. The increase was primarily driven by higher fee income, increased acquisition expense deferrals and higher contributions from insurance contract liability basis changes, partially offset by lower contributions from investment experience and increased operating expenses. During the quarter, acquisition expense deferrals increased due to an update to expense allocations, which resulted in a higher allocation to deferrable acquisition costs.

For the six months ended June 30, 2015, net earnings increased by $26 million to $244 million compared to the same period last year. The increase was primarily due to higher fee income, higher contributions from investment experience, increased acquisition expense deferrals, as discussed for the in-quarter results, and more favourable longevity experience. The increase was partially offset by lower contributions from insurance contract liability basis changes and increased operating expenses.

Net earnings for the second quarter of 2015 of $122 million were comparable to the previous quarter as increased acquisition expense deferrals, as discussed for the in-quarter results, and higher fee income were offset by lower contributions from investment experience and less favourable longevity experience.

GROUP INSURANCE

OPERATING RESULTS


2015March 31

2015June 30

2014June 30

2015June 30

2014Premiums and deposits $ 1,940 $ 1,948 $ 1,912 $ 3,888 $ 3,812Sales 121 126 106 247 253Fee and other income 39 39 38 78 76Net earnings 96 109 92 205 201

Premiums and depositsPremiums and deposits for the second quarter of 2015 increased by $28 million to $1,940 million compared to the same quarter last year, primarily due to an increase in mid-size case market premiums and deposits.



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For the six months ended June 30, 2015, premiums and deposits increased by $76 million to $3,888 million compared to the same period last year, primarily due to an increase in mid-size and large case market premiums and deposits.

Premiums and deposits for the second quarter of 2015 decreased by $8 million compared to the previous quarter, primarily due to a decrease in large case market premiums and deposits.

SalesSales for the second quarter of 2015 increased by $15 million to $121 million compared to the same quarter last year. The increase was primarily due to higher sales in the small and mid-size case markets and higher creditor sales, partially offset by lower sales in the large case market. Sales of creditor/direct marketing products can be highly variable from quarter to quarter.

For the six months ended June 30, 2015, sales decreased by $6 million to $247 million compared to the same period last year. The decrease was primarily due to lower creditor sales in the large case market, partially offset by higher sales in the small and mid-size case markets.

Sales for the second quarter of 2015 decreased by $5 million compared to the previous quarter. The decrease was primarily due to lower sales in the large case market, partially offset by higher sales in the small and mid-size case markets and higher creditor sales.

Fee and other incomeFee and other income of $39 million for the second quarter of 2015 was both comparable to the same quarter last year and the previous quarter.

Fee and other income of $78 million for the six months ended June 30, 2015 was comparable to the same period last year.

Net earningsNet earnings for the second quarter of 2015 increased by $4 million to $96 million compared to the same quarter last year. The increase was primarily due to higher contributions from investment experience, partially offset by less favourable morbidity experience and lower contributions from insurance contract liability basis changes. In addition, net earnings for the second quarter of 2015 were positively impacted by changes to certain income tax estimates, which did not occur in 2014.

For the six months ended June 30, 2015, net earnings increased by $4 million to $205 million compared to the same period last year, for the same reasons discussed for the in-quarter result.

Net earnings for the second quarter of 2015 decreased by $13 million compared to the previous quarter. The decrease was primarily due to less favourable morbidity experience as well as lower contributions from insurance contract liability basis changes and investment experience, partially offset by lower operating expenses and lower income taxes.

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

For the second quarter of 2015, Canada Corporate net earnings of $2 million were comparable to the same quarter last year, as higher investment income and lower operating expenses were offset by increased allocated financing charges.

For the six months ended June 30, 2015, Canada Corporate had a net loss of $7 million compared to net earnings of $13 million for the same period in 2014, primarily due to increased allocated financing charges.



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For the second quarter of 2015, Canada Corporate net earnings increased to $2 million from a net loss of $9 million in the previous quarter, primarily due to an increase in reserves for uncertain tax positions, which negatively impacted earnings in the first quarter of 2015, partially offset by lower investment income in the second quarter of 2015.

UNITED STATESThe United States operating results for Lifeco include the results of Great-West Financial, Putnam and the results of the insurance businesses in the United States branches 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, and specifically the Empower Retirement brand, the Company provides an array of financial security products, including employer-sponsored defined contribution plans, administrative and recordkeeping services, individual retirement accounts, fund management as well as investment and advisory services. The Company also provides life insurance, annuity and executive benefits products.

Through Putnam, the Company's Asset Management business unit provides investment management, certain administrative functions, distributions and related services through a broad range of investment products.

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

Currency translation impact is a non-IFRS financial measure that highlights the impact of changes in currency translation rates on IFRS results. This measure provides useful information as it facilitates comparability of results between periods. Refer to the Cautionary Note regarding non-IFRS Financial Measures at the beginning of this document.

Selected consolidated financial information - United StatesFor the three months ended For the six months ended

June 302015

March 31 2015(2)

June 30 2014(1)(3)

June 302015

June 30 2014(1)(3)

Premiums and deposits(1) $ 11,011 $ 12,962 $ 10,070 $ 23,973 $ 22,483Sales(2) 18,131 20,123 10,480 38,254 23,639Fee and other income 577 573 436 1,150 855Net earnings - common shareholders 67 121 69 188 110Net earnings - common shareholders (US$) 55 98 63 153 100

Total assets(3) $ 78,868 $ 81,216 $ 66,714Proprietary mutual funds and institutional net


(1) Comparative figures for premiums and deposits (a non-IFRS financial measure) have been restated to improve consistency across the Company's business units.

(2) Comparative figures for sales (a non-IFRS financial measure) have been restated to improve consistency across the Company's business units.

(3) Comparative figures have been restated for a prior period adjustment described in note 2 to the Company's condensed consolidated financial statements for the period ended June 30, 2015.



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2015 DEVELOPMENTS • Under the Empower Retirement brand, effective January 1, 2015, the retirement services businesses of Great-

West Financial, the acquired J.P. Morgan Retirement Plan Services (RPS) and Putnam have merged, creating the second largest recordkeeping provider in the U.S. with nearly 7.4 million participant accounts. Empower Retirement also includes the individual retirement account (IRA) business that was previously reported with Great-West Financial's Individual Markets results.

• Within the business unit sections, 2015 figures are aligned with the new business structure, while 2014 comparative figures reflect the previous structure. For the full year in 2014, Putnam's retirement service business recorded a net loss of approximately US$20 million. As noted above, in 2015 this business is integrated within the Empower Retirement operations.

• Net earnings for the three months ended June 30, 2015 were US$55 million, a decrease of US$8 million compared to the same quarter last year, primarily due to higher strategic and business development expenses related to Empower Retirement. Net earnings for the three months ended June 30, 2015 decreased by US$43 million compared to the first quarter of 2015 primarily due to lower contributions from investment experience.

BUSINESS UNITS – UNITED STATES

FINANCIAL SERVICES

2015 DEVELOPMENTS• Sales for three months ended June 30, 2015 were US$7.8 billion, an increase of US$5.6 billion compared to the

same quarter last year, primarily due to an increased number of large plan sales in Empower Retirement.

• Fee and other income for the three months ended June 30, 2015 was US$242 million, an increase of US$69 million from the same quarter last year, primarily due to the addition of RPS fee income of US$46 million, which was acquired August 29, 2014.

• Premiums and deposits for the three months ended June 30, 2015 were US$2,035 million, an increase of US$172 million from the same quarter last year, primarily due to higher Empower Retirement sales.

• Net earnings for the three months ended June 30, 2015 were US$58 million, a decrease of US$13 million over the same quarter last year, primarily due to higher strategic and business development expenses related to Empower Retirement. Empower Retirement's focus continues on enhancements, which will improve the client-facing experience as well as streamline the back-office processing over the next several years. The Company expects that these enhancements will drive future sales and increased market share. The Company anticipates investing approximately US$150 million on this multi-year initiative with expected impact to net earnings of approximately US$35 million in 2015 and US$20 million in 2016. For the six months ended June 30, 2015, these costs have impacted net earnings by US$16 million. Subsequent to 2016, the Company expects these costs to decline and normalize and will include amortization expense from the system and infrastructure enhancements.

• Empower Retirement exceeded 2 million retirement plan participants in the defined contribution government sector during the three months ended June 30, 2015. Empower Retirement now serves approximately 600 government clients at the state, county or local levels with more than US$90 billion in assets under administration.



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OPERATING RESULTS


2015March 31

2015(2)June 30 2014(1)

June 302015

June 30 2014(1)

Premiums and deposits(1) $ 2,504 $ 2,730 $ 2,029 $ 5,234 $ 4,470Sales(2) 9,624 9,891 2,439 19,515 5,626Fee and other income 297 295 189 592 374Net earnings 72 120 78 192 172

Premiums and deposits (US$)(1) $ 2,035 $ 2,202 $ 1,863 $ 4,237 $ 4,082Sales (US$)(2) 7,825 7,977 2,238 15,802 5,135Fee and other income (US$) 242 238 173 480 342Net earnings (US$) 58 97 71 155 156

(1) Comparative figures for premiums and deposits (a non-IFRS financial measure) have been restated to improve consistency across the Company's business units.

(2) Comparative figures for sales (a non-IFRS financial measure) have been restated to improve consistency across the Company's business units.

Premiums and depositsPremiums and deposits for the second quarter of 2015 increased by US$172 million to US$2,035 million compared to the same quarter last year, due to an increase of US$309 million in Empower Retirement, which was partially offset by a decrease of US$137 million in Individual Markets. The increase in Empower Retirement was primarily due to an increase in defined contribution plan sales. The decrease in Individual Markets was primarily due to lower sales in the retail bank life insurance and executive benefits lines of business. In the second quarter of 2014, IRA premiums and deposits of US$41 million were included in Individual Markets; in 2015, these are included in Empower Retirement.

For the six months ended June 30, 2015, premiums and deposits increased by US$155 million to US$4,237 million compared to the same period last year, due to an increase of US$420 million in Empower Retirement, which was partially offset by a decrease of US$265 million in Individual Markets. The increase in Empower Retirement was primarily due to higher sales, partially offset by lower contributions from participants of existing plans. The decrease in Individual Markets was primarily due to lower sales in the executive benefits and retail bank life insurance lines of business. For the six months ended June 30, 2014, IRA premiums and deposits of US$100 million were included in Individual Markets; in 2015, these are included in Empower Retirement.

Premiums and deposits for the second quarter of 2015 decreased by US$167 million compared to the previous quarter. Empower Retirement premiums decreased by US$167 million, primarily due to a decrease in sales, partly offset by higher contributions from participants of existing plans.

SalesSales in the second quarter of 2015 increased by US$5,587 million to US$7,825 million compared to the same quarter last year, due to an increase of US$5,782 million in Empower Retirement, partially offset by a decrease of US$195 million in Individual Markets. The increase in Empower Retirement sales was primarily due to an increase in large plan sales. The decrease in Individual Markets sales reflects lower sales in the retail bank life insurance line of business. In the second quarter of 2014, IRA sales of US$117 million were included in Individual Markets; in 2015, these are included in Empower Retirement.

For the six months ended June 30, 2015, sales increased by US$10,667 million to US$15,802 million compared to the same period last year. The increase was driven by an increase of US$11,046 million in Empower Retirement and a decrease in Individual Markets of US$379 million, primarily due to the same reasons discussed for the in-quarter results. For the six months ended June 30, 2014, IRA sales of US$250 million were included in Individual Markets; in 2015, these are included in Empower Retirement.



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Sales in the second quarter of 2015 decreased by US$152 million compared to the previous quarter, due to a decrease of US$209 million in Empower Retirement, which was partially offset by an increase of US$57 million in Individual Markets. The decrease in Empower Retirement sales was due to lower plan mergers, partly offset by higher annualized sales premiums. The increase in Individual Markets was due to higher sales in the executive benefits and bank annuity lines of business. Individual Markets' executive benefits and bank annuity lines of business sales increased for the second quarter of 2015 compared to the previous quarter by 72% and 9%, respectively.

Fee and other incomeFee and other income for the second quarter of 2015 increased by US$69 million to US$242 million compared to the same quarter last year. The increase was primarily due to higher fees resulting from the RPS acquisition of US$46 million, increased asset levels driven by higher average equity market levels and positive cash flows as well as the impact of the transfer of the defined contribution business from Putnam to Empower Retirement on January 1, 2015. In the second quarter of 2014, Putnam fee income included US$8 million related to the transferred defined contribution business.

For the six months ended June 30, 2015, fee and other income increased by US$138 million to US$480 million compared to the same period last year, for the same reasons discussed for the in-quarter results. RPS fees for the six months ended June 30, 2015 were US$95 million. For the six months ended June 30, 2014, Putnam fee income included US$15 million related to the transferred defined contribution business.

Fee and other income for the second quarter of 2015 increased by US$4 million compared to the previous quarter, primarily due to increased average asset levels driven by higher average equity market levels and positive cash flows.

Net earningsNet earnings for the second quarter of 2015 decreased by US$13 million to US$58 million compared to the same quarter last year. The decrease was primarily due to higher strategic and business development expenses related to Empower Retirement of US$8 million as well as the impact of the transfer of the defined contribution business from Putnam to Empower Retirement, partially offset by higher contributions from investment experience. In the second quarter of 2014, Putnam net earnings included a net loss of US$6 million related to the transferred defined contribution business.

For the six months ended June 30, 2015, net earnings decreased by US$1 million to US$155 million compared to the same period last year, as increased strategic and business development expenses related to Empower Retirement of US$14 million and the impact of the transfer of the defined contribution business from Putnam to Empower Retirement were mostly offset by higher contributions from investment experience. For the six months ended June 30, 2014, Putnam net earnings included a net loss of US$11 million related to the transferred defined contribution business.

Net earnings for the second quarter of 2015 decreased by US$39 million compared to the previous quarter, primarily due to lower contributions from investment experience and increased strategic and business development expenses related to Empower Retirement of US$2 million.

ASSET MANAGEMENT

2015 DEVELOPMENTS• Putnam’s ending assets under management (AUM) at June 30, 2015 of US$156.3 billion decreased by US$2.2

billion compared to the same quarter last year, while average AUM of US$160.4 billion increased by US$5.8 billion compared to the same quarter last year.

• Sales for the three months ended June 30, 2015 were US$6.9 billion, a decrease of US$0.5 billion compared to the same quarter last year.

• Fee income for the three months ended June 30, 2015 was US$228 million, an increase of US$1 million compared to the same quarter last year.



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• Putnam agreed to continue its strategic alliance through 2020 with Nissay Asset Management (NAM), the asset management arm of Nippon Life Insurance Company. Putnam will continue to hold a 10% ownership stake in NAM, serve as a sub-advisor for retail funds distributed by NAM and act as an investment advisor for pension fund clients of NAM.

• Putnam continues to sustain strong investment performance relative to its peers. As of June 30, 2015, approximately 93% and 78% of Putnam’s fund assets performed at levels above the Lipper median on a three-year and five-year basis, respectively. Additionally, approximately 81% of Putnam’s fund assets performed at levels in the Lipper Top Quartile on a three-year basis.

OPERATING RESULTS


2015March 31

2015June 30

2014June 30

2015June 30

2014Sales $ 8,507 $ 10,232 $ 8,041 $ 18,739 $ 18,013Fee income

Investment management fees 214 213 182 427 357Performance fees 6 3 7 9 10Service fees 42 42 44 84 87Underwriting & distribution fees 18 20 14 38 27

Fee income 280 278 247 558 481

Core net earnings (loss)(1) 10 15 4 25 (10)Less: Financing and other expenses

(after-tax)(1) (13) (13) (13) (26) (52)Reported net earnings (loss) (3) 2 (9) (1) (62)

Sales (US$) $ 6,916 $ 8,252 $ 7,377 $ 15,168 $ 16,442Fee income (US$)

Investment management fees (US$) 174 172 168 346 326Performance fees (US$) 5 3 6 8 9Service fees (US$) 34 34 40 68 79Underwriting & distribution fees (US$) 15 15 13 30 25

Fee income (US$) 228 224 227 452 439

Core net earnings (loss) (US$)(1) 8 12 4 20 (9)Less: Financing and other expenses

(after-tax) (US$)(1) (10) (10) (12) (20) (47)Reported net earnings (loss) (US$) (2) 2 (8) — (56)

Pre-tax operating margin (US$)(2) 6.6% 9.2% 4.2% 7.9% (0.2)%

(1) Core net earnings (loss) (a non-IFRS financial measure) is a measure of the Asset Management business unit's performance. Core net earnings (loss) includes the impact of dealer commissions and software amortization, and excludes the impact of corporate financing charges and allocations and fair value adjustments related to stock-based compensation.

(2) Pre-tax operating margin (a non-IFRS financial measure) is a measure of the Asset Management business unit's pre-tax core net earnings (loss) divided by the sum of fee income and net investment income.



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SalesSales in the second quarter of 2015 decreased by US$0.5 billion to US$6.9 billion compared to the same quarter last year, due to a decrease in mutual fund sales of US$1.2 billion, partially offset by higher institutional sales of US$0.7 billion.

For the six months ended June 30, 2015, sales decreased by US$1.3 billion to US$15.2 billion compared to the same period last year, due to a decrease in mutual fund sales of US$2.0 billion, partially offset by higher institutional sales of US$0.7 billion.

Sales in the second quarter of 2015 decreased by US$1.3 billion compared to the previous quarter, due to a decrease in mutual fund sales of US$1.1 billion and a decrease in institutional sales of US$0.2 billion.

Fee incomeFee income is derived primarily from investment management fees, performance fees, transfer agency and other service fees, as well as underwriting and distribution fees. Generally, fees are earned based on AUM and may depend on financial markets, the relative performance of Putnam’s investment products, the number of retail accounts and sales.

Fee income for the second quarter of 2015 of US$228 million was comparable to the same quarter last year. Fee income for the second quarter of 2014 included US$8 million related to the defined contribution business, which was transferred to Empower Retirement ("transferred defined contribution business") on January 1, 2015. Excluding the impact of the transferred defined contribution business, fee income increased by US$9 million, primarily due to increased investment management fees driven by growth in average assets under management.

For the six months ended June 30, 2015, fee income increased by US$13 million to US$452 million compared to the same period last year. Fee income for the six months ended June 30, 2014 included US$15 million related to the defined contribution business that was transferred to Empower Retirement. Excluding the impact of the transferred defined contribution business, fee income increased by US$28 million, primarily due to increased investment management fees driven by growth in average assets under management and an increased number of accounts.

Fee income for the second quarter of 2015 increased by US$4 million compared to the previous quarter, primarily due to increased investment management fees and performance fees on both mutual funds and institutional portfolios.

Net earningsCore net earnings (a non-IFRS financial measure) for the second quarter of 2015 were US$8 million compared to US$4 million in the same quarter last year. Core net earnings for the second quarter of 2014 included a net loss of US$6 million attributable to the transferred defined contribution business. Excluding the impact of the transferred defined contribution business, core net earnings decreased US$2 million, primarily due to lower net investment income, mostly offset by higher fee income and lower operating expenses. Net investment income in the second quarter of 2015 included unrealized losses of US$2 million on seed capital as a result of lower equity market levels, while the second quarter of 2014 included unrealized and realized gains of US$7 million, primarily due to the redemption of seed capital as a result of successful product launches. In the second quarter of 2015, the reported net loss, including financing and other expenses, was US$2 million compared to a net loss of US$8 million for the same quarter last year. Financing and other expenses for the second quarter of 2015 decreased by US$2 million to US$10 million compared to the same quarter last year.



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For the six months ended June 30, 2015, core net earnings were US$20 million compared to a net loss of US$9 million in the same period last year. Core net earnings for the six months ended June 30, 2014 included a net loss of US$11 million attributable to the transferred defined contribution business. Excluding the impact of the transferred defined contribution business, core net earnings increased US$18 million, primarily due to higher fee income and lower operating expenses, partially offset by lower net investment income. Reported net earnings, including financing and other expenses, for the six months ended June 30, 2015 were nil compared to a net loss of US$56 million for the same period last year. Financing and other expenses for the six month period ended June 30, 2015 decreased by US$27 million to US$20 million compared to the same period last year. On a year-to-date basis, 2014 financing and other expenses included the impact of share-based liability compensation expenses of US$21 million and proxy expenses for the Putnam Funds of US$4 million, which did not recur in 2015.

Core net earnings for the second quarter of 2015 decreased by US$4 million compared to the previous quarter. The previous quarter included US$5 million of expense recoveries that did not recur. Excluding the impact of these expense recoveries, core net earnings increased US$1 million, primarily due to higher fee income and lower operating expenses, mostly offset by lower net investment income. The reported net loss, including financing and other expenses, for the second quarter of 2015 was US$2 million compared to net earnings of US$2 million in the previous quarter. Financing and other expenses for the second quarter of 2015 of US$10 million were comparable to the previous quarter.

ASSETS UNDER MANAGEMENT

Assets under management ($US)For the three months ended For the six months ended

June 302015

March 312015

June 302014

June 302015

June 302014

Beginning assets $ 159,208 $ 157,572 $ 153,432 $ 157,572 $ 149,556

Sales - Mutual funds 4,500 5,608 5,677 10,108 12,053Redemptions - Mutual funds (5,508) (5,166) (3,986) (10,674) (7,915)Net asset flows - Mutual funds (1,008) 442 1,691 (566) 4,138

Sales - Institutional 2,416 2,644 1,700 5,060 4,389Redemptions - Institutional (3,222) (3,063) (3,222) (6,285) (7,268)Net asset flows - Institutional (806) (419) (1,522) (1,225) (2,879)

Net asset flows - Total (1,814) 23 169 (1,791) 1,259

Impact of market/performance (1,046) 1,613 4,970 567 7,756

Ending assets $ 156,348 $ 159,208 $ 158,571 $ 156,348 $ 158,571

Average assets under managementMutual funds 87,896 87,269 82,016 87,588 80,240Institutional assets 72,459 71,127 72,516 71,803 72,279Total average assets under management $ 160,355 $ 158,396 $ 154,532 $ 159,391 $ 152,519

Average AUM for the three months ended June 30, 2015 was US$160.4 billion. Average AUM increased by US$5.8 billion compared to the same quarter last year, primarily due to the impact of positive market and investment performance over the twelve month period. Net asset outflows for the second quarter of 2015 were US$1.8 billion compared to net asset inflows of US$0.2 billion in the same quarter last year. In-quarter mutual fund net asset outflows were US$1.0 billion and institutional net asset outflows were US$0.8 billion.



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Average AUM for the six months ended June 30, 2015 increased by US$6.9 billion to US$159.4 billion compared to the same period last year, primarily due to the impact of positive market and investment performance. Net asset outflows for the six months ended June 30, 2015 were US$1.8 billion compared to net asset inflows of US$1.3 billion for the same period last year. Year-to-date mutual fund net asset outflows were US$0.6 billion and institutional net asset outflows were US$1.2 billion.

Average AUM increased by US$2.0 billion compared to the previous quarter, primarily due to positive market and investment performance.

UNITED STATES CORPORATEUnited States Corporate consists of items not associated directly with or allocated to the United States business units, including the impact of certain non-continuing items related to the U.S. segment.

In the second quarter of 2015, United States Corporate had a net loss of US$1 million compared to nil for the same quarter last year, due to RPS acquisition related restructuring costs in 2015.

For the six months ended June 30, 2015, Corporate had a net loss of US$2 million compared to nil for the same period in 2014, for the same reasons discussed for the in-quarter results.

The net loss for the three months ended June 30, 2015 of US$1 million was comparable to the previous quarter.

EUROPEThe Europe segment comprises two distinct business units: Insurance & Annuities, where the Company offers protection and wealth management products, including payout annuity products, through subsidiaries of Canada Life in the U.K., the Isle of Man and Germany, as well as through Irish Life in Ireland; and Reinsurance, which operates primarily in the U.S., Barbados and Ireland. Reinsurance products are provided through Canada Life, London Life and their subsidiaries.

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

Currency translation impact is a non-IFRS financial measure that highlights the impact of changes in currency translation rates on IFRS results. This measure provides useful information as it facilitates comparability of results between periods. Refer to the Cautionary Note regarding non-IFRS Financial Measures at the beginning of this document.

Selected consolidated financial information - Europe


2015March 31

2015June 30

2014June 30

2015June 30

2014Premiums and deposits $ 5,193 $ 6,673 $ 4,944 $ 11,866 $ 10,033Fee and other income 283 327 318 610 614Net earnings - common shareholders 289 286 246 575 505

Total assets $ 152,025 $ 152,743 $ 139,470Proprietary mutual funds and institutional net




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2015 DEVELOPMENTS• Net earnings for the second quarter of 2015 were $289 million, an increase of $43 million from the same quarter

last year, primarily due to higher contributions from insurance contract liability basis changes as well as lower income taxes.

• Premiums and deposits for the three months ended June 30, 2015 were $5.2 billion, an increase of $249 million from the same quarter last year, primarily due to higher fund management sales in Ireland.

• Fee and other income for the three months ended June 30, 2015 was $283 million, a decrease of $35 million compared to the same quarter last year, primarily driven by the impact of currency movement and lower net fee income in Ireland.

• The last of the policy migration activities for the Irish Life integration successfully concluded during the second quarter of 2015. The Company now expects to realize €48 million of annualized synergies from the acquisition of Irish Life, exceeding the annualized synergy target of €40 million by 20%.

• The 2014 U.K. Budget changes became effective in April 2015 and have reduced, and will continue to impact, the sales of annuities in the U.K. In the second quarter of 2015, U.K. retail payout annuities sales were 45% of the sales levels in the second quarter of 2014. During the quarter, the Company successfully launched its new range of pension products, designed to take advantage of the new flexibilities given to individuals with defined contribution pensions in the U.K.

• On July 1, 2015, the Company, through its subsidiary The Canada Life Group (U.K.) Limited, completed the acquisition of Legal & General International (Ireland) Limited (LGII), a Dublin-based subsidiary of the Legal & General Group Plc. LGII provides quality investment and wealth management solutions, primarily focused on the U.K. high-net-worth market and has over 4,300 investment bond policies with assets under administration of approximately £2.8 billion (as at June 30, 2015). LGII will now operate as Canada Life International Assurance (Ireland) (CLIAI).

• In Europe, the Company continues to develop and implement systems and processes to meet the new Solvency II regulations in advance of the effective date of January 1, 2016. The implementation of Solvency II regulations will remain the focus of all of the Company's regulated European businesses during 2015. Progress continues to be made, with the submission of Preparatory Phase I reporting to the Company's local regulators: the Prudential Regulation Authority (PRA) and the Central Bank of Ireland (CBI) during the quarter.

• In May 2015, Irish Life Investment Managers (ILIM) was appointed by Ark Life (now part of the U.K. based Guardian group) to manage in excess of €2 billion of its asset portfolio and provide the associated asset servicing requirements, effective August 2015. Prior to the appointment, a subsidiary of Irish Life provided the policyholder recordkeeping and administrative functions for this portfolio and will continue to provide these services going forward.

• At the IPD/IPF U.K. Property Investment Awards, Canada Life Investments, a subsidiary of Canada Life in the U.K. was awarded "Small Balanced Funds (below £100m at Dec 2013) - Highest 3 year annualized return".



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BUSINESS UNITS – EUROPE

INSURANCE & ANNUITIES

OPERATING RESULTS


2015March 31

2015June 30

2014June 30

2015June 30

2014Premiums and deposits $ 4,116 $ 5,160 $ 3,498 $ 9,276 $ 7,610Sales 3,396 4,456 2,814 7,852 6,320Fee and other income 277 322 307 599 593Net earnings 207 216 184 423 384

Premiums and depositsPremiums and deposits for the second quarter of 2015 increased by $0.6 billion to $4.1 billion compared to the same quarter last year. The increase was primarily due to higher sales across most product lines in Ireland and Germany. The increase was partially offset by lower retail U.K. payout annuity sales and the impact of currency movement, driven by the weakening of the euro during the quarter compared to the second quarter of 2014.

For the six months ended June 30, 2015, premiums and deposits increased by $1.7 billion to $9.3 billion compared to the same period last year. The increase was primarily due to the acquisition of Equitable Life's annuity business in the first quarter of 2015, higher fund management sales as well as higher sales across most product lines in Ireland and Germany. The increase was partially offset by the impact of currency movement, driven by the weakening of the euro compared to the same period in 2014.

Premiums and deposits for the second quarter of 2015 decreased by $1.0 billion compared to the previous quarter, primarily due to the $1.6 billion acquisition of Equitable Life's annuity business in the previous quarter, which was partially offset by higher fund management, pension and annuity sales in Ireland.

SalesSales for the second quarter of 2015 increased by $0.6 billion to $3.4 billion compared to the same quarter last year. For the six months ended June 30, 2015, sales increased to $7.9 billion from $6.3 billion in the same period last year. The increases in both the three month and six month periods were due to the same reasons discussed for premiums and deposits for the respective periods.

Sales for the second quarter of 2015 decreased by $1.1 billion from the previous quarter, due to the same reasons discussed for premiums and deposits for the same period.

Fee and other incomeFee and other income for the second quarter of 2015 decreased by $30 million to $277 million compared to the same quarter last year. The decrease reflects the impact of currency movement, driven by the weakening of the euro during the quarter compared to the second quarter of 2014 and lower gain related fee income amounts associated with a closed block of Irish unit-linked business. The fee income on this block of business is particularly sensitive to market levels at the start and end of a reporting period.

For the six months ended June 30, 2015, fee and other income increased by $6 million to $599 million compared to the same period last year, due to higher asset management fees in Ireland and Germany, primarily driven by growth in assets under management, partially offset by the impact of currency movement, driven by the weakening of the euro compared to the same period in 2014.

Fee and other income for the second quarter of 2015 decreased by $45 million compared to the previous quarter, primarily due to lower net fee income in Ireland as described for the in-quarter results.



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Net earnings Net earnings for the second quarter of 2015 increased by $23 million to $207 million compared to the same quarter last year, primarily due to higher contributions from insurance contract liability basis changes, which include refinements to annuitant longevity assumptions and modeling refinements. The increase was partially offset by less favourable mortality, morbidity and investment experience as well as the impact of lower U.K. payout annuity new business volumes. Net earnings include $60 million in Ireland, up $3 million from the same quarter in 2014, due to an increase in benefits from integration synergies and higher contributions from insurance contract liability basis changes, offset by lower net fee income.

Net earnings for the six months ended June 30, 2015 increased by $39 million to $423 million compared to the same period last year. The growth was primarily due to higher contributions from insurance contract liability basis changes, higher asset management fees and improved morbidity in Ireland. These items were mostly offset by the impact of lower U.K. payout annuity new business volumes, lower contributions from investment experience, less favourable mortality experience in the U.K. and Ireland as well as higher income taxes. Net earnings include $140 million in Ireland, up $31 million from the same period in 2014 for the reasons discussed above as well as an increase in benefits from integration synergies.

Net earnings for the second quarter of 2015 decreased by $9 million compared to the previous quarter. The decrease was primarily due to less favourable morbidity experience in Ireland, lower net fee income in Ireland and lower contributions from insurance contract liability basis changes, which were partially offset by higher contributions from investment experience.

REINSURANCE

OPERATING RESULTS


2015March 31

2015June 30

2014June 30

2015June 30

2014Premiums and deposits $ 1,077 $ 1,513 $ 1,446 $ 2,590 $ 2,423Fee and other income 6 5 11 11 21Net earnings 92 77 72 169 135

Premiums and depositsReinsurance premiums can vary significantly from period to period depending on the terms of underlying treaties. For certain life reinsurance transactions, premiums will vary based on the form of the transaction. Treaties where insurance contract liabilities are assumed on a proportionate basis will typically have significantly higher premiums than treaties where claims are not incurred by the reinsurer until a threshold is exceeded.

Premiums and deposits for the second quarter of 2015 decreased by $369 million to $1,077 million compared to the same quarter last year. The decrease was primarily due to a Dutch-based annuity reinsurance agreement entered into during the second quarter of 2014, partially offset by new and restructured reinsurance treaties and the positive impact of currency movement.

For the six months ended June 30, 2015, premiums and deposits increased by $167 million to $2,590 million compared to the same period last year. The increase was primarily due to new business volumes and restructured reinsurance agreements as well as the positive impact of currency movement, partially offset by commuted treaties and a Dutch-based annuity reinsurance agreement entered into during 2014.

Premiums and deposits for the second quarter of 2015 decreased by $436 million compared to the previous quarter, primarily due to lower business volumes.



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Fee and other incomeFee and other income for the second quarter of 2015 decreased by $5 million to $6 million compared to the same quarter last year. Certain life treaties were restructured in the fourth quarter of 2014 and result in lower fee income on an ongoing basis.

For the six months ended June 30, 2015, fee and other income decreased by $10 million to $11 million compared to the same period last year, as discussed for the in-quarter results.

Fee and other income for the second quarter of 2015 was comparable to the previous quarter.

Net earningsNet earnings for the second quarter of 2015 increased by $20 million to $92 million compared to the same quarter last year. The increase was primarily due to higher contributions from insurance contract liability basis changes and the positive impact of currency movement, partially offset by higher new business strain in the traditional life business and less favourable claims experience. In addition, net earnings for the second quarter of 2015 were positively impacted by changes to certain income tax estimates.

For the six months ended June 30, 2015, net earnings increased by $34 million to $169 million compared to the same period last year. The increase was primarily due to higher contributions from insurance contract liability basis changes and investment experience, the positive impact of currency movement as well as lower income taxes as discussed for the in-quarter results. These increases were partially offset by higher new business strain in the traditional life business.

Net earnings for the second quarter of 2015 increased by $15 million compared to the previous quarter. The increase was primarily due to lower income taxes discussed for the in-quarter results, partially offset by lower contributions from insurance contract liability basis changes and investment experience.

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

In the second quarter of 2015, Europe Corporate had a net loss of $10 million, which was comparable to the same quarter last year. Second quarter 2015 results include restructuring costs of $9 million relating to the acquisition of Irish Life, compared to $8 million for the same quarter last year.

For the six months ended June 30, 2015, Europe Corporate had a net loss of $17 million compared to a net loss of $14 million for the same period last year. Included in the year-to-date net loss was $15 million of Irish Life related restructuring costs in 2015, compared to $13 million for the same period in 2014.

The net loss for the three months ended June 30, 2015, increased from $7 million in the previous quarter to $10 million in the current quarter, due to an increase in Irish Life related restructuring costs.

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

For the three months ended June 30, 2015, Lifeco Corporate had a net loss of $5 million, an increase from a net loss of $4 million in the second quarter of 2014, primarily due to lower investment income.

For the six months ended June 30, 2015, Lifeco Corporate had a net loss of $11 million, which was comparable to the same period last year.

The net loss for the three months ended June 30, 2015 of $5 million decreased from a net loss of $6 million for the previous quarter, primarily due to higher investment income.



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OTHER INFORMATION

QUARTERLY FINANCIAL INFORMATION

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

2015 2014 2013Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3

Total revenue(1)(2) $ 4,224 $12,679 $10,723 $ 8,451 $10,070 $ 9,937 $ 8,056 $ 7,206

Common shareholdersNet earnings

Total $ 659 700 657 687 615 587 717 523Basic - per share 0.661 0.702 0.658 0.687 0.616 0.587 0.717 0.527Diluted - per share 0.659 0.700 0.657 0.686 0.615 0.587 0.716 0.522

Operating earnings(3)

Total $ 659 700 657 687 615 587 491 523Basic - per share 0.661 0.702 0.658 0.687 0.616 0.587 0.491 0.527Diluted - per share 0.659 0.700 0.657 0.686 0.615 0.587 0.490 0.522

(1) The Company reclassified comparative figures for presentation adjustments in 2013.(2) Revenue includes the change in fair value through profit or loss on investment assets.(3) Operating earnings (a non-IFRS financial measure) excludes the impact of certain litigation provisions. Refer to the "Cautionary Note Regarding

Non-IFRS Financial Measures" section of this document.

Lifeco's consolidated net earnings attributable to common shareholders were $659 million for the second quarter of 2015 compared to $615 million reported a year ago. On a per share basis, this represents $0.661 per common share ($0.659 diluted) for the second quarter of 2015 compared to $0.616 per common share ($0.615 diluted) a year ago.

Total revenue for the second quarter of 2015 was $4,224 million and comprises premium income of $5,516 million, regular net investment income of $1,519 million, a negative change in fair value through profit or loss on investment assets of $4,037 million and fee and other income of $1,226 million.

DISCLOSURE CONTROLS AND PROCEDURESThe Company’s disclosure controls and procedures are designed to provide reasonable assurance that information relating to the Company which is required 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 securities legislation, and (b) accumulated and communicated to the Company's senior management, including the President and Chief Executive Officer and the Executive Vice-President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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

There have been no changes in the Company's internal control over financial reporting during the six month period ending June 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.



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

Translation of foreign currencyPeriod ended June 30

2015Mar. 31

2015Dec. 31

2014Sept. 30

2014June 30

2014Mar. 31

2014United States dollarBalance sheet $ 1.25 $ 1.27 $ 1.16 $ 1.12 $ 1.07 $ 1.11Income and expenses $ 1.23 $ 1.24 $ 1.14 $ 1.09 $ 1.09 $ 1.10

British poundBalance sheet $ 1.96 $ 1.88 $ 1.81 $ 1.82 $ 1.83 $ 1.84Income and expenses $ 1.89 $ 1.88 $ 1.80 $ 1.82 $ 1.84 $ 1.83

EuroBalance sheet $ 1.39 $ 1.36 $ 1.40 $ 1.42 $ 1.46 $ 1.52Income and expenses $ 1.36 $ 1.40 $ 1.42 $ 1.44 $ 1.50 $ 1.51

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



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

For the three months ended For the six months endedJune 30 March 31 June 30 June 30 June 302015 2015 2014 2015 2014

IncomePremium income

Gross premiums written $ 6,410 $ 7,806 $ 6,646 $ 14,216 $ 12,757Ceded premiums (894) (874) (882) (1,768) (1,726)

Total net premiums 5,516 6,932 5,764 12,448 11,031Net investment income (note 4)

Regular net investment income 1,519 1,536 1,526 3,055 3,015Changes in fair value through profit or

loss (4,037) 2,953 1,670 (1,084) 3,792Total net investment income (2,518) 4,489 3,196 1,971 6,807Fee and other income 1,226 1,258 1,110 2,484 2,169

4,224 12,679 10,070 16,903 20,007Benefits and expenses

Policyholder benefitsInsurance and investment contracts

Gross 5,127 5,640 4,592 10,767 9,393Ceded (490) (483) (476) (973) (951)

Total net policyholder benefits 4,637 5,157 4,116 9,794 8,442Policyholder dividends and experience

refunds 374 381 358 755 746Changes in insurance and investment

contract liabilities (3,423) 4,351 3,106 928 5,881Total paid or credited to policyholders 1,588 9,889 7,580 11,477 15,069

Commissions 554 515 546 1,069 1,051Operating and administrative expenses 1,081 1,078 915 2,159 1,848Premium taxes 80 84 83 164 168Financing charges (note 9) 75 77 76 152 152Amortization of finite life intangible assets 37 36 32 73 65Restructuring and acquisition expenses 14 7 10 21 15

Earnings before income taxes 795 993 828 1,788 1,639Income taxes (note 14) 86 224 156 310 329Net earnings before non-controlling

interests 709 769 672 1,478 1,310Attributable to non-controlling interests 19 37 28 56 50Net earnings 690 732 644 1,422 1,260Preferred share dividends 31 32 29 63 58Net earnings - common shareholders $ 659 $ 700 $ 615 $ 1,359 $ 1,202

Earnings per common share (note 11)Basic $ 0.661 $ 0.702 $ 0.616 $ 1.363 $ 1.203

Diluted $ 0.659 $ 0.700 $ 0.615 $ 1.359 $ 1.202



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

For the three months ended For the six months endedJune 30 March 31 June 30 June 30 June 30

2015 2015 2014 2015 2014(note 2) (note 2)

Net earnings $ 690 $ 732 $ 644 $ 1,422 $ 1,260Other comprehensive income (loss)Items that may be reclassified

subsequently to ConsolidatedStatements of Earnings

Unrealized foreign exchange gains(losses) on translation of foreignoperations 146 733 (335) 879 185

Unrealized foreign exchange gains(losses) on euro debt designated ashedge of the net investment in foreignoperations (15) 20 30 5 5

Income tax benefit 1 — — 1 —Unrealized gains (losses) on available-for-sale assets (141) 130 57 (11) 152

Income tax (expense) benefit 30 (28) (13) 2 (34)Realized gains on available-for-saleassets (20) (73) (11) (93) (22)

Income tax expense 3 12 4 15 7Unrealized gains (losses) on cash flowhedges 29 (135) 66 (106) 7

Income tax (expense) benefit (11) 51 (25) 40 (3)Realized losses on cash flow hedges — 1 1 1 1Non-controlling interests 35 (42) (18) (7) (46)

Income tax (expense) benefit (10) 11 5 1 12Total items that may be reclassified 47 680 (239) 727 264

Items that will not be reclassified toConsolidated Statements of Earnings

Re-measurements on defined benefitpension and other post-employmentbenefit plans (note 13) 325 (223) (119) 102 (239)

Income tax (expense) benefit (77) 48 28 (29) 57Non-controlling interests (19) 7 8 (12) 17

Income tax (expense) benefit 5 (1) (2) 4 (4)Total items that will not be reclassified 234 (169) (85) 65 (169)

Total other comprehensive income (loss) 281 511 (324) 792 95Comprehensive income $ 971 $ 1,243 $ 320 $ 2,214 $ 1,355



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

June 30 December 312015 2014

AssetsCash and cash equivalents $ 2,688 $ 2,498Bonds (note 4) 108,452 103,168Mortgage loans (note 4) 21,104 20,546Stocks (note 4) 7,826 7,820Investment properties (note 4) 5,220 4,613Loans to policyholders 8,221 7,711

153,511 146,356Funds held by ceding insurers 14,050 12,154Goodwill 5,865 5,855Intangible assets 3,768 3,625Derivative financial instruments 466 652Owner occupied properties 629 619Fixed assets 255 228Reinsurance assets (note 8) 5,139 5,151Premiums in course of collection, accounts and interest receivable 3,444 3,056Other assets 2,662 2,368Current income taxes 69 48Deferred tax assets 1,735 1,631Investments on account of segregated fund policyholders (note 7) 184,835 174,966Total assets $ 376,428 $ 356,709

LiabilitiesInsurance contract liabilities (note 8) $ 152,315 $ 145,198Investment contract liabilities (note 8) 842 857Debentures and other debt instruments 5,265 5,355Funds held under reinsurance contracts 328 313Derivative financial instruments 1,678 1,195Accounts payable 2,061 1,480Other liabilities 3,326 3,099Current income taxes 537 737Deferred tax liabilities 1,609 1,450Capital trust debentures 162 162Investment and insurance contracts on account of segregated fund policyholders (note 7) 184,835 174,966Total liabilities 352,958 334,812

EquityNon-controlling interests Participating account surplus in subsidiaries 2,547 2,480 Non-controlling interests in subsidiaries 185 163Shareholders' equity Share capital (note 10) Preferred shares 2,514 2,514 Common shares 7,166 7,102 Accumulated surplus 9,779 9,134 Accumulated other comprehensive income 1,170 378 Contributed surplus 109 126Total equity 23,470 21,897Total liabilities and equity $ 376,428 $ 356,709



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

June 30, 2015

Sharecapital

Contributedsurplus

Accumulatedsurplus

Accumulatedother

comprehensiveincome

Non-controllinginterests

Totalequity

Balance, beginning of year $ 9,616 $ 126 $ 9,134 $ 378 $ 2,643 $ 21,897Net earnings — — 1,422 — 56 1,478Other comprehensive income — — — 792 14 806

9,616 126 10,556 1,170 2,713 24,181Dividends to shareholders

Preferred shareholders (note 11) — — (63) — — (63) Common shareholders — — (650) — — (650)

Shares exercised and issued under share-basedpayment plans (note 10) 79 (46) — — 39 72

Share-based payment plans expense — 29 — — — 29Equity settlement of Putnam share-based plans — — — — (23) (23)Shares purchased and cancelled under Normal

Course Issuer Bid (note 10) (76) — — — — (76)Excess of redemption proceeds over stated capital

per Normal Course Issuer Bid (note 10) 61 — (61) — — —Dilution loss on non-controlling interests — — (3) — 3 —Balance, end of period $ 9,680 $ 109 $ 9,779 $ 1,170 $ 2,732 $ 23,470

June 30, 2014 (note 2)

Sharecapital

Contributedsurplus

Accumulatedsurplus

Accumulatedother

comprehensiveincome

Non-controllinginterests

Totalequity

Balance, beginning of year $ 9,426 $ 57 $ 7,899 $ 86 $ 2,362 $ 19,830Net earnings — — 1,260 — 50 1,310Other comprehensive income — — — 95 21 116

9,426 57 9,159 181 2,433 21,256Dividends to shareholders

Preferred shareholders (note 11) — — (58) — — (58) Common shareholders — — (614) — — (614)

Shares exercised and issued under share-basedpayment plans (note 10) 8 (1) — — — 7

Share-based payment plans expense — 5 — — — 5Modification to share-based plans — 26 — — 217 243Equity settlement of Putnam share-based plans — — — — (62) (62)Shares purchased and cancelled under Normal

Course Issuer Bid (note 10) (22) — — — — (22)Excess of redemption proceeds over stated capital

per Normal Course Issuer Bid (note 10) 17 — (17) — — —Issuance of preferred shares 200 — — — — 200Share issue costs — — (4) — — (4)Balance, end of period $ 9,629 $ 87 $ 8,466 $ 181 $ 2,588 $ 20,951



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

For the six monthsended June 30

2015 2014Operations Earnings before income taxes $ 1,788 $ 1,639 Income taxes paid, net of refunds received (265) (410) Adjustments: Change in insurance and investment contract liabilities (729) 5,389 Change in funds held by ceding insurers 479 247 Change in funds held under reinsurance contracts (90) 17 Change in deferred acquisition costs 24 30 Change in reinsurance assets 124 (245) Changes in fair value through profit or loss 1,084 (3,792) Other 81 (221)

2,496 2,654Financing Activities Issue of common shares (note 10) 79 8 Issue of preferred shares — 200 Share issue costs — (4) Purchased and cancelled common shares (note 10) (76) (22) Decrease in line of credit of subsidiary (161) (142) Dividends paid on common shares (650) (614) Dividends paid on preferred shares (63) (58)

(871) (632)Investment Activities Bond sales and maturities 16,396 15,293 Mortgage loan repayments 1,280 975 Stock sales 1,025 1,943 Investment property sales 4 98 Change in loans to policyholders (104) (50) Investment in bonds (17,821) (17,231) Investment in mortgage loans (1,161) (1,820) Investment in stocks (917) (836) Investment in investment properties (246) (105)

(1,544) (1,733)

Effect of changes in exchange rates on cash and cash equivalents 109 29

Increase in cash and cash equivalents 190 318

Cash and cash equivalents, beginning of period 2,498 2,791

Cash and cash equivalents, end of period $ 2,688 $ 3,109

Supplementary cash flow information Interest income received $ 2,499 $ 2,465 Interest paid $ 157 $ 158 Dividend income received $ 120 $ 127



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CONDENSED NOTES TO 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 (Toronto Stock Exchange: 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 (Power Financial) group of companies and its direct parent is Power Financial.

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 and Europe 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 (Great-West Financial) and Putnam Investments, LLC (Putnam).

The condensed consolidated interim unaudited financial statements (financial statements) of the Company as at and for the three and six months ended June 30, 2015 were approved by the Board of Directors on August 5, 2015.

2. Basis of Presentation and Summary of Accounting Policies

These financial statements should be read in conjunction with the Company's December 31, 2014 consolidated annual audited financial statements and notes thereto. Certain June 30, 2014 comparative figures in these financial statements have been restated for the prior period adjustment disclosed in note 35 to the Company's December 31, 2014 consolidated annual financial statements. For the three and six months ended June 30, 2014 this adjustment resulted in an increase of $6 and a decrease of $2, respectively, to other comprehensive income as a result of unrealized foreign exchange losses on translation of foreign operations. This adjustment had no impact on the net earnings or earnings per share for the periods presented within these financial statements.

The financial statements of Lifeco at June 30, 2015 have been prepared in compliance 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, 2014 except as described below.

The Company adopted the narrow scope amendments to International Financial Reporting Standards (IFRS) for Annual Improvements 2010 - 2012 Cycle, Annual Improvements 2011 - 2013 Cycle and IAS 19 Employee Benefits effective January 1, 2015. The adoption of these narrow scope amendments did not have a significant impact on the Company’s financial statements.

Future Accounting PoliciesIn July 2015, the IASB deferred the effective date of IFRS 15, Revenue from Contracts with Customers from January 1, 2017, as disclosed in the December 31, 2014 consolidated annual audited financial statements, to January 1, 2018. The Company continues to evaluate the impact of the adoption of this standard.

There have been no other significant changes to the future accounting policies that could impact the Company, as disclosed in the December 31, 2014 consolidated annual audited financial statements.



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2. Basis of Presentation and Summary of Accounting Policies (cont'd)

47

Use of Significant Judgments, Estimates and AssumptionsIn preparation of these financial statements, management is required to make significant judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, net earnings and related disclosures. Although some uncertainty is inherent in these judgments and estimates, management believes that the amounts recorded are reasonable. Key sources of estimation uncertainty and areas where significant judgments have been made are further described in the relevant accounting policies as described in note 2 of the Company's December 31, 2014 consolidated annual audited financial statements and notes thereto.

The results of the Company reflect management's judgments regarding the impact of prevailing global credit, equity and foreign exchange market conditions. The provision for future credit losses within the Company's insurance contract liabilities relies upon investment credit ratings. The Company's practice is to use third party independent credit ratings where available.

3. Business Acquisitions

(a) J.P. Morgan Retirement Plan Services

On August 29, 2014, the Company, through its wholly owned subsidiary Great-West Financial, completed the acquisition of all of the voting equity interests in the J.P. Morgan Retirement Plan Services (RPS) large-market recordkeeping business. The Company disclosed the allocation of the purchase price to the amounts of assets acquired, goodwill and liabilities assumed in note 3 to the December 31, 2014 consolidated annual audited financial statements. During the first quarter of 2015 the Company finalized the purchase price allocation with no adjustments from those balances reported as at December 31, 2014.

(b) Legal & General International (Ireland) Limited - Subsequent Event

On July 1, 2015, the Company, through its indirect wholly owned subsidiary Canada Life Group, acquired Legal & General International (Ireland) Limited, a provider of investment and wealth management solutions for high net worth individuals in the United Kingdom.

The estimated impact upon acquisition is that approximately $5 billion of unit-linked funds will be recognized within investments on account of segregated fund policyholders and investment and insurance contracts on account of segregated fund policyholder liabilities on the Company’s balance sheet. The Company continues to finalize the allocation of the purchase price of this acquisition. The acquisition will not have a material impact on the Company's financial results.



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4. Portfolio Investments

(a) Carrying values and estimated fair values of portfolio investments are as follows:

June 30, 2015 December 31, 2014Carrying

valueFair

valueCarrying

valueFair

valueBonds

Designated fair value through profit or loss (1) $ 77,820 $ 77,820 $ 77,833 $ 77,833Classified fair value through profit or loss (1) 1,917 1,917 2,167 2,167Available-for-sale 13,394 13,394 9,990 9,990Loans and receivables 15,321 16,810 13,178 14,659

108,452 109,941 103,168 104,649Mortgage loans

Residential 7,474 7,876 7,238 7,653Non-residential 13,630 14,712 13,308 14,514

21,104 22,588 20,546 22,167Stocks

Designated fair value through profit or loss (1) 6,629 6,629 6,617 6,617Available-for-sale 52 52 50 50Available-for-sale, at cost (2) 557 N/A 560 N/AEquity method 588 598 593 664

7,826 7,279 7,820 7,331Investment properties 5,220 5,220 4,613 4,613Total $ 142,602 $ 145,028 $ 136,147 $ 138,760

(1) A financial asset is designated as fair value through profit or loss on initial recognition if it eliminates or significantly reduces an accounting mismatch. Changes in the fair value of financial assets designated as fair value through profit or loss are generally offset by changes in insurance contract liabilities, since the measurement of insurance contract liabilities is determined with reference to the assets supporting the liabilities.

A financial asset is classified as fair value through profit or loss on initial recognition if it is part of a portfolio that is actively traded for the purpose of earning investment income.

(2) Fair value cannot be reliably measured, therefore the investments are held at cost and excluded from the total fair value amount presented.

(b) Included in portfolio investments are the following:

Carrying amount of impaired investments


Impaired amounts by classificationFair value through profit or loss $ 355 $ 355Available-for-sale 15 14Loans and receivables 24 15

Total $ 394 $ 384

The above carrying values for loans and receivables are net of allowances of $19 at June 30, 2015 and $18 at December 31, 2014.



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4. Portfolio Investments (cont'd)

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(c) Net investment income comprises the following:

For the three monthsBonds

Mortgageloans Stocks

Investmentproperties Other Totalended June 30, 2015

Regular net investment income:Investment income earned $ 1,035 $ 238 $ 60 $ 87 $ 121 $ 1,541Net realized gains (losses)

Available-for-sale 20 — — — — 20Other classifications 2 (8) 15 — — 9

Net allowances for creditlosses on loans andreceivables — — — — — —

Other income and expenses — — — (26) (25) (51)1,057 230 75 61 96 1,519

Changes in fair value on fair valuethrough profit or loss assets:

Classified fair value throughprofit or loss (26) — — — — (26)

Designated fair value throughprofit or loss (3,966) — (134) 81 8 (4,011)

(3,992) — (134) 81 8 (4,037)Total $ (2,935) $ 230 $ (59) $ 142 $ 104 $ (2,518)

For the three monthsBonds



Regular net investment income:Investment income earned $ 1,037 $ 238 $ 63 $ 80 $ 130 $ 1,548Net realized gains

Available-for-sale 4 — 9 — — 13Other classifications 3 2 — — — 5

Net allowances for creditlosses on loans andreceivables — 1 — — — 1



Classified fair value throughprofit or loss 18 — — — — 18

Designated fair value throughprofit or loss 1,231 — 292 47 82 1,652

1,249 — 292 47 82 1,670Total $ 2,293 $ 241 $ 364 $ 110 $ 188 $ 3,196



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For the six monthsBonds




Available-for-sale 93 — 1 — — 94Other classifications 7 — 15 — — 22

Net allowances for creditlosses on loans andreceivables — 1 — — — 1




Designated fair value throughprofit or loss (1,389) — 28 136 122 (1,103)

(1,370) — 28 136 122 (1,084)Total $ 782 $ 482 $ 166 $ 260 $ 281 $ 1,971

For the six monthsBonds




Available-for-sale 16 — 8 — — 24Other classifications 12 4 — — — 16

Net allowances for creditlosses on loans andreceivables — — — — — —




Designated fair value throughprofit or loss 2,943 — 502 137 160 3,742

2,993 — 502 137 160 3,792Total $ 5,065 $ 476 $ 644 $ 261 $ 361 $ 6,807

Investment income earned comprises income from investments that are classified as available-for-sale, loans and receivables and investments 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. and Allianz Ireland. 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.



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5. Financial Instruments 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 financial market risk (currency, interest rate and equity). The Risk Committee of the Board of Directors is responsible for the oversight of the Company's key risks. The Company's approach to risk management has not substantially changed from that described in Lifeco's 2014 Annual Report. Certain risks have been outlined below. For a discussion of the Company's risk governance structure and risk management approach, see the "Financial Instruments Risk Management" note in the Company's December 31, 2014 consolidated audited financial statements and the "Risk Management and Control Practices" section in the Company's December 31, 2014 Management's Discussion and Analysis.

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 to make payments when due.

Concentration of Credit RiskConcentrations 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, 2014.

(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 via capital market transactions. The Company maintains committed lines of credit with Canadian chartered banks.

(c) Financial 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.

Caution Related to Risk SensitivitiesThese financial statements include estimates of sensitivities and risk exposure measures for certain risks, such as 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 income tax rates and other market factors,• Interactions among these factors and assumptions when more than one changes, and• The general limitations of the Company's internal models.



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52

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, the Company cannot provide assurance that the actual impact on net earnings attributed to shareholders will be as indicated.

(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. 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 equity. 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 the Canadian Asset Liability Method 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 a number of interest rate scenarios (including increasing, decreasing and fluctuating rates) is done to assess reinvestment risk. The total provision for interest rates is sufficient to cover a broader or more severe set of risks than the minimum arising from the current Canadian Institute of Actuaries prescribed scenarios.

The range of interest rates covered by these provisions is set in consideration of long-term historical results and is monitored quarterly with a full review annually. An immediate 1% parallel shift in the yield curve would not have a material impact on the Company’s view of the range of interest rates to be covered by the provisions. If sustained however, the parallel shift could impact the Company’s range of scenarios covered.



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The total provision for interest rates also considers the impact of the Canadian Institute of Actuaries prescribed scenarios:

• The effect of an immediate 1% parallel increase in the yield curve on the prescribed scenarios would not change the total provision for interest rates.

• The effect of an immediate 1% parallel decrease in the yield curve on the prescribed scenarios would not change the total provision for interest rates.

Another 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 shareholders net earnings of the Company of a 1% change in the Company's view of the range of interest rates to be covered by these provisions:

• The effect of an immediate 1% increase in the low and high end of the range of interest rates recognized in the provisions would be to decrease these insurance and investment contract liabilities by approximately $124 causing an increase in net earnings of approximately $74.

• The effect of an immediate 1% decrease in the low and high end of the range of interest rates recognized in the provisions would be to increase these insurance and investment contract liabilities by approximately $593 causing a decrease in net earnings of approximately $403.

(iii) Equity Risk

Equity risk is the uncertainty associated with the valuation of assets and liabilities arising from changes in equity markets and other pricing risk. To mitigate pricing 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 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 values. There will be additional impacts on these liabilities as equity values fluctuate. A 10% increase in equity values would be expected to additionally decrease non-participating insurance and investment contract liabilities by approximately $56 causing an increase in net earnings of approximately $47. A 10% decrease in equity values would be expected to additionally increase non-participating insurance and investment contract liabilities by approximately $156 causing a decrease in net earnings of approximately $124.

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 $490 causing an increase in net earnings of approximately $395. A 1% decrease in the best estimate assumption would be expected to increase non-participating insurance contract liabilities by approximately $519 causing a decrease in net earnings of approximately $411.



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6. Fair Value Measurement

The Company’s assets and liabilities recorded at fair value have been categorized based upon the following fair value hierarchy:

Level 1: Fair value measurements utilize observable, quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Assets and liabilities utilizing Level 1 inputs include actively exchange traded equity securities, exchange-traded futures, and mutual and segregated funds which have available prices in an active market with no redemption restrictions.

Level 2: Fair value measurements utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. The fair values for some Level 2 securities were obtained from a pricing service. The pricing service inputs include, but are not limited to, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, offers and reference data. Level 2 assets and liabilities include those priced using a matrix which is based on credit quality and average life, government and agency securities, restricted stock, some private bonds and equities, most investment-grade and high-yield corporate bonds, most asset-backed securities, most over-the-counter derivatives, and mortgage loans. Investment contracts that are measured at fair value through profit or loss are mostly included in the Level 2 category.

Level 3: Fair value measurements utilize one or more significant inputs that are not based on observable market inputs and include situations where there is little, if any, market activity for the asset or liability. The values of the majority of Level 3 securities were obtained from single broker quotes, internal pricing models, or external appraisers. Assets and liabilities utilizing Level 3 inputs generally include certain bonds, certain asset-backed securities, some private equities, investments in mutual and segregated funds where there are redemption restrictions, certain over-the-counter derivatives, and investment properties.



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The following presents the Company’s assets and liabilities measured at fair value on a recurring basis by hierarchy level:

June 30, 2015Assets measured at fair value Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 2,688 $ — $ — $ 2,688Financial assets at fair value through profit or loss

Bonds — 79,728 9 79,737Stocks 6,575 7 47 6,629

Total financial assets at fair value through profit or loss 6,575 79,735 56 86,366Available-for-sale financial assets

Bonds — 13,393 1 13,394Stocks 51 — 1 52

Total available-for-sale financial assets 51 13,393 2 13,446

Investment properties — — 5,220 5,220Derivatives (1) 3 463 — 466Other assets:

Trading account assets in Putnam 271 195 1 467Other trading assets 86 — — 86Other (2) 111 — — 111

Total assets measured at fair value $ 9,785 $ 93,786 $ 5,279 $ 108,850

Liabilities measured at fair valueDerivatives (3) $ 1 $ 1,677 $ — $ 1,678Investment contract liabilities — 813 29 842Other liabilities - other 111 — — 111Total liabilities measured at fair value $ 112 $ 2,490 $ 29 $ 2,631

(1) Excludes collateral received of $119. (2) Includes cash collateral under securities lending agreements. (3) Excludes collateral pledged of $348.

There were no transfers of the Company's assets and liabilities between Level 1 and Level 2 in the period.



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December 31, 2014Assets measured at fair value Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 2,498 $ — $ — $ 2,498Financial assets at fair value through profit or loss

Bonds — 79,914 86 80,000Stocks 6,594 6 17 6,617

Total financial assets at fair value through profit or loss 6,594 79,920 103 86,617

Available-for-sale financial assetsBonds — 9,989 1 9,990Stocks 49 — 1 50

Total available-for-sale financial assets 49 9,989 2 10,040

Investment properties — — 4,613 4,613Derivatives (1) 1 651 — 652Other assets:

Trading account assets in Putnam 184 143 — 327Other trading assets 78 — — 78Other (2) 16 — — 16

Total assets measured at fair value $ 9,420 $ 90,703 $ 4,718 $ 104,841

Liabilities measured at fair valueDerivatives (3) $ 4 $ 1,191 $ — $ 1,195Investment contract liabilities — 829 28 857Other liabilities - other 16 — — 16

Total liabilities measured at fair value $ 20 $ 2,020 $ 28 $ 2,068

(1) Excludes collateral received of $52. (2) Includes cash collateral under securities lending agreements. (3) Excludes collateral pledged of $273.

There were no transfers of the Company's assets and liabilities between Level 1 and Level 2 in the period.



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The following presents additional information about assets and liabilities measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

June 30, 2015

Fair valuethroughprofit or

loss bonds

Available-for-sale bonds

Fair value through profit or

lossstocks (3)

Available-for-sale stocks

Investmentproperties

Other assets-trading

account (4)

TotalLevel 3 assets

Investmentcontractliabilities

Balance, beginning ofyear $ 86 $ 1 $ 17 $ 1 $ 4,613 $ — $ 4,718 $ 28

Total gainsIncluded in netearnings 5 — 3 — 136 — 144 —

Included in other comprehensive income (1) — — — — 238 — 238 —

Purchases — — 34 — 246 1 281 —Sales — — (3) — (4) — (7) —Repayments (48) — — — — — (48) —Other — — — — (9) — (9) 1Transfers into Level 3 (2) — — — — — — — —Transfers out of Level 3 (2) (34) — (4) — — — (38) —

Balance, end of period $ 9 $ 1 $ 47 $ 1 $ 5,220 $ 1 $ 5,279 $ 29

Total gains for theperiod included innet investmentincome $ 5 $ — $ 3 $ — $ 136 $ — $ 144 $ —

Change in unrealized gains for the period

included in earnings for assets held at June 30, 2015 $ 5 $ — $ 2 $ — $ 125 $ — $ 132 $ —

(1) Other comprehensive income for investment properties represents the unrealized gains on foreign exchange. (2) Transfers into Level 3 are due primarily to decreased observability of inputs in valuation methodologies.

Transfers out of Level 3 are due primarily to increased observability of inputs in valuation methodologies as evidenced by corroboration of market prices with multiple pricing vendors or the lifting of redemption restrictions on investments in mutual and segregated funds.

(3) Includes investments in mutual and segregated funds where there are redemption restrictions. The fair value is based on observable, quoted prices.

(4) Includes illiquid equities where prices are not quoted; however, the Company does not believe changing the inputs to reasonably alternate assumptions would change the values significantly.



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December 31, 2014

Fair valuethrough

profit or lossbonds

Available-for-sale bonds

Fair value through profit or

lossstocks (3)

Available-for-sale stocks


Other assets - trading

account (4)

TotalLevel 3 assets

Investmentcontractliabilities

Balance, beginning ofyear $ 333 $ 24 $ 24 $ 1 $ 4,288 $ 21 $ 4,691 $ 30

Total gains (losses)Included in netearnings 6 — (1) — 262 1 268 —

Included in other comprehensive income (1) — 1 — — 56 — 57 —

Purchases 33 — 8 — 127 — 168 —Sales — — (13) — (98) (22) (133) —Repayments (1) — — — — — (1) —Transferred to owner

occupied properties — — — — (13) — (13) —Other — — — — (9) — (9) (2)Transfers into Level 3 (2) — — — — — — — —Transfers out of Level 3 (2) (285) (24) (1) — — — (310) —

Balance, end of year $ 86 $ 1 $ 17 $ 1 $ 4,613 $ — $ 4,718 $ 28

Total gains (losses) forthe year included innet investment income $ 6 $ — $ (1) $ — $ 262 $ 1 $ 268 $ —

Change in unrealized gains (losses) for

the year included in earnings for assets held at

December 31, 2014 $ 6 $ — $ (3) $ — $ 229 $ 1 $ 233 $ —

(1) Other comprehensive income for investment properties represents the unrealized gains on foreign exchange. (2) Transfers into Level 3 are due primarily to decreased observability of inputs in valuation methodologies.

Transfers out of Level 3 are due primarily to increased observability of inputs in valuation methodologies as evidenced by corroboration of market prices with multiple pricing vendors or the lifting of redemption restrictions on investments in mutual and segregated funds.

(3) Includes investments in mutual and segregated funds where there are redemption restrictions. The fair value is based on observable, quoted prices.

(4) Includes illiquid equities where prices are not quoted; however, the Company does not believe changing the inputs to reasonably alternate assumptions would change the values significantly.



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The following sets out information about significant unobservable inputs used at period-end in measuring assets and liabilities categorized as Level 3 in the fair value hierarchy.

Type of asset Valuation approachSignificantunobservable input Input value

Inter-relationship betweenkey unobservable inputs andfair value measurement


Investment property valuations are generally determined using property valuation models based on expected capitalization rates and models that discount expected future net cash flows. The determination of the fair value of investment property requires the use of estimates such as future cash flows (such as future leasing assumptions, rental rates, capital and operating expenditures) and discount, reversionary and overall capitalization rates applicable to the asset based on current market rates.

Discount rate Range of 3.5% - 11.0% A decrease in the discount rate would result in an increase in fair value. An increase in the discount rate would result in a decrease in fair value.

Reversionary rate Range of 5.0% - 8.3% A decrease in the reversionary rate would result in an increase in fair value. An increase in the reversionary rate would result in a decrease in fair value.

Vacancy rate Weighted average of 2.9% A decrease in the expected vacancy rate would generally result in an increase in fair value. An increase in the expected vacancy rate would generally result in a decrease in fair value.

7. Segregated Funds

The following presents details of the investments, determined in accordance with the relevant statutory reporting requirements of each region of the Company's operations, on account of segregated fund policyholders:

(a) Investments on account of segregated fund policyholders


Cash and cash equivalents $ 11,076 $ 11,052Bonds 39,580 37,912Mortgage loans 2,510 2,508Stocks and units in unit trusts 73,579 68,911Mutual funds 49,425 46,707Investment properties 9,886 9,533

186,056 176,623Accrued income 363 364Other liabilities (2,917) (3,033)Non-controlling mutual funds interest 1,333 1,012Total $ 184,835 $ 174,966



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(b) Investment and insurance contracts on account of segregated fund policyholders

For the six monthsended June 30

2015 2014

Balance, beginning of year $ 174,966 $ 160,779Additions (deductions):

Policyholder deposits 9,882 11,080Net investment income 951 1,035Net realized capital gains on investments 2,771 2,476Net unrealized capital gains on investments 2,377 5,250Unrealized gains due to changes in foreign exchange rates 4,017 774Policyholder withdrawals (10,505) (10,674)Segregated Fund investment in General Fund 31 (382)General Fund investment in Segregated Fund (6) —Net transfer from General Fund 30 35Non-controlling mutual funds interest 321 10Other — (1)

Total 9,869 9,603Balance, end of period $ 184,835 $ 170,382

(c) Investments on account of segregated fund policyholders by fair value hierarchy level (note 6)

June 30, 2015Level 1 Level 2 Level 3 Total

Investments on account of segregated fund policyholders (1) $ 118,323 $ 58,168 $ 10,760 $ 187,251

(1) Excludes other liabilities, net of other assets, of $2,416.

December 31, 2014Level 1 Level 2 Level 3 Total

Investments on account of segregated fund policyholders (1) $ 112,189 $ 54,942 $ 10,390 $ 177,521

(1) Excludes other liabilities, net of other assets, of $2,555.

During the first six months of 2015 certain foreign stock holdings valued at $321 have been transferred from Level 1 to Level 2 ($2,234 were transferred from Level 1 to Level 2 at December 31, 2014) based on the Company's ability to utilize observable, quoted prices in active markets.

Level 2 assets include those assets where fair value is not available from normal market pricing sources and where the Company does not have visibility through to the underlying assets.



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The following presents additional information about the Company's investments on account of segregated fund policyholders for which the Company has utilized Level 3 inputs to determine fair value:


Balance, beginning of year $ 10,390 $ 9,298Total gains included in segregated fund investment income 369 782Purchases 275 919Sales (273) (603)Transfers into Level 3 — 4Transfers out of Level 3 (1) (10)Balance, end of period $ 10,760 $ 10,390

Transfers into Level 3 are due primarily to decreased observability of inputs in valuation methodologies. Transfers out of Level 3 are due primarily to increased observability of inputs in valuation methodologies as evidenced by corroboration of market prices with multiple pricing vendors.

For further details on the Company's risk and guarantee exposure and the management of these risks, refer to the Segregated Fund and Variable Annuity Guarantees section of the Company's Management's Discussion and Analysis for the period ended June 30, 2015 and the Risk Management and Control Practice section of the Company's December 31, 2014 Management's Discussion and Analysis.

8. Insurance and Investment Contract Liabilities

June 30, 2015Grossliability

Reinsuranceassets Net

Insurance contract liabilities $ 152,315 $ 5,139 $ 147,176Investment contract liabilities 842 — 842Total $ 153,157 $ 5,139 $ 148,018

December 31, 2014Grossliability

Reinsuranceassets Net

Insurance contract liabilities $ 145,198 $ 5,151 $ 140,047Investment contract liabilities 857 — 857Total $ 146,055 $ 5,151 $ 140,904



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9. Financing Charges

Financing charges consist of the following:

For the three months For the six monthsended June 30 ended June 30

2015 2014 2015 2014

Operating charges:Interest on operating lines and short-term debtinstruments $ 2 $ 2 $ 3 $ 3

Financial charges:Interest on long-term debentures and other debtinstruments 65 65 131 131

Interest on capital trust debentures 2 2 5 5Other 6 7 13 13

73 74 149 149Total $ 75 $ 76 $ 152 $ 152

10. Share Capital

Common Shares

For the six months ended June 302015 2014

Carrying CarryingNumber Value Number Value

Common sharesBalance, beginning of year 996,699,371 $ 7,102 999,402,079 $ 7,112Purchased and cancelled under Normal

Course Issuer Bid (2,126,298) (76) (726,304) (22)Excess of redemption proceeds over stated

capital per Normal Course Issuer Bid — 61 — 17Exercised and issued under stock option

plan 2,306,036 79 260,802 8Balance, end of period 996,879,109 $ 7,166 998,936,577 $ 7,115

On December 5, 2014, the Company announced a normal course issuer bid commencing December 9, 2014 and terminating December 8, 2015 to purchase for cancellation up to but not more than 8,000,000 of its common shares at market prices.

During the six months ended June 30, 2015, the Company repurchased and subsequently cancelled 2,126,298 common shares at a cost of $76 (726,304 during the six months ended June 30, 2014 under the previous normal course issuer bid at a cost of $22). The Company’s share capital was reduced by the average carrying value of the shares repurchased for cancellation. The excess paid over the average carrying value was $61 and was recognized as a reduction to equity ($17 during the six months ended June 30, 2014 under the previous normal course issuer bid).

During the six months ended June 30, 2015, 2,306,036 common shares were exercised under the Company’s stock plan with a carrying value of $79 (260,802 with a carrying value of $8 during the six months ended June 30, 2014).



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11. Earnings per Common Share


2015 2014 2015 2014EarningsNet earnings $ 690 $ 644 $ 1,422 $ 1,260Preferred share dividends (31) (29) (63) (58)Net earnings - common shareholders $ 659 $ 615 $ 1,359 $ 1,202

Number of common sharesAverage number of common shares

outstanding 997,371,589 999,058,528 997,113,344 999,136,645Add: Potential exercise of outstanding

stock options 2,768,324 926,027 2,512,342 1,091,114Average number of common shares

outstanding - diluted basis 1,000,139,913 999,984,555 999,625,686 1,000,227,759

Basic earnings per common share $ 0.661 $ 0.616 $ 1.363 $ 1.203

Diluted earnings per common share $ 0.659 $ 0.615 $ 1.359 $ 1.202

Dividends per common share $ 0.3260 $ 0.3075 $ 0.6520 $ 0.6150



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12. Capital Management

(a) Policies and Objectives

Managing capital is the continual process of establishing and maintaining the quantity and quality of capital appropriate for the Company and ensuring capital is deployed in a manner consistent with the expectations of the Company’s stakeholders. For these purposes, the Board considers the key stakeholders to be the Company’s shareholders, policyholders and holders of subordinated liabilities in addition to the relevant regulators in the various jurisdictions where the Company and its subsidiaries operate.

The Company manages its capital on both a consolidated basis as well as at the individual operating subsidiary level. The primary objectives of the Company’s capital management strategy are:

• 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;

• to maintain strong credit and financial strength ratings of the Company ensuring stable access to capital markets; and

• to provide an efficient capital structure to maximize shareholders value in the context of the Company’s operational risks and strategic plans.

The capital planning process is the responsibility of the Company’s Chief Financial Officer. The capital plan is reviewed by the Executive Committee of the Board of Directors and approved by the Company’s Board of Directors on an annual basis. The Board of Directors reviews and approves all capital transactions undertaken by management.

The target level of capitalization for the Company and its subsidiaries is assessed by considering various factors such as the probability of falling below the minimum regulatory capital requirements in the relevant operating jurisdiction, the views expressed by various credit rating agencies that provide financial strength and other ratings to the Company, and the desire to hold sufficient capital to be able to honour all policyholder and other obligations of the Company with a high degree of confidence.

(b) Regulatory Capital

In Canada, the Office of the Superintendent of Financial Institutions Canada 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. For this purpose, various additions or deductions from capital are mandated by the guidelines issued by the Office of the Superintendent of Financial Institutions Canada. The following provides a summary of the Minimum Continuing Capital and Surplus Requirements information and ratios for Great-West Life:


Adjusted Net Tier 1 Capital $ 12,064 $ 11,132Net Tier 2 Capital 2,508 2,530Total Capital Available $ 14,572 $ 13,662Total Capital Required $ 6,370 $ 6,092

Tier 1 Ratio 189% 183%Total Ratio 229% 224%

Other foreign operations and foreign subsidiaries of the Company are required to comply with local capital or solvency requirements in their respective jurisdictions. At December 31, 2014 the Company maintained capital levels above the minimum local regulatory requirements in each of its other foreign operations.



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13. Pension Plans and Other Post-Employment Benefits

The total pension plans and other post-employment benefits expense included in operating expenses and other comprehensive income are as follows:


2015 2014 2015 2014Pension plans

Service costs $ 52 $ 40 $ 102 $ 79Net interest cost 7 — 13 1

59 40 115 80Other post-employment benefits

Service costs — 1 1 1Net interest cost 4 4 8 9

4 5 9 10Pension plans and other post-employment

benefits expense - Consolidated Statements ofEarnings 63 45 124 90

Pension plans - re-measurementsActuarial (gain) loss (571) 237 (34) 462Return on assets less (greater) than assumed 236 (135) (184) (254)Administrative expenses greater (less) than

assumed 1 — 1 (1)Change in the asset ceiling 27 — 112 (7)Actuarial loss - investment in associate (1) 2 8 6 12Pension plans re-measurement (income) loss (305) 110 (99) 212

Other post-employment benefits -re-measurementsActuarial (gain) loss (20) 9 (3) 27

Pension plans and other post-employmentbenefits expense - other comprehensive(income) loss (325) 119 (102) 239

Total pension plans and other post-employment benefits (income) expense $ (262) $ 164 $ 22 $ 329

(1) This includes the Company's share of pension plan re-measurements for an investment in an associate accounted for under the equity method.

The following sets out the weighted average pension plans and other post-employment benefits discount rate used to re-measure the defined benefit obligation at the following dates:

Weighted averagediscount rate

June 30, 2015 (June 30, 2014) 3.7% (4.0%)

March 31, 2015 (March 31, 2014) 3.1% (4.3%)

December 31, 2014 (December 31, 2013) 3.5% (4.7%)



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14. Income Taxes

(a) Income Tax Expense

Income tax expense consists of the following:


2015 2014 2015 2014

Current income taxes $ 31 $ 82 $ 180 $ 188Deferred income taxes 55 74 130 141Total income tax expense $ 86 $ 156 $ 310 $ 329

(b) Effective Income Tax Rate

The overall effective income tax rate for Lifeco for the three months ended June 30, 2015 was 11% compared to 19% for the three months ended June 30, 2014. The overall effective income tax rate for Lifeco for the six months ended June 30, 2015 was 17% compared to 19% for the full year 2014 and 20% for the six months ended June 30, 2014. The effective income tax rates are generally lower than the Company's statutory income tax rate of 26.75% due to benefits related to non-taxable investment income and lower income tax in foreign jurisdictions.

The effective income tax rate for the three months ended June 30, 2015 is lower than the effective tax rate for the same period last year primarily due to a higher percentage of foreign income subject to lower rates of income tax in foreign jurisdictions as well as changes to certain tax estimates resulting in a reduced current income tax expense.

The effective income tax rate for the six months ended June 30, 2015 is lower than the six months ended June 30, 2014 and the full year 2014 effective income tax rates primarily driven by the same items discussed for the in-quarter results.

(c) Deferred Tax Assets

A deferred income tax asset is recognized for deductible temporary differences and unused losses and carryforwards only to the extent that realization of the related income tax benefit through future taxable profits is probable.

Recognition is based on the fact that it is probable that the entity will have taxable profits and/or tax planning opportunities will be available to allow the deferred income tax asset to be utilized. 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 income tax assets. The Company's annual financial planning process provides a significant basis for the measurement of deferred income tax assets.

The deferred income 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 income tax asset for the most significant entities where this applies is $1,279 at June 30, 2015 ($1,216 at December 31, 2014).



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15. Legal Provisions and Contingent Liabilities (changes since December 31, 2014 Consolidated Financial Statements)

On April 15, 2015 the United States Court of Appeals for the Second Circuit issued its decision in the second civil litigation matter involving a subsidiary of the Company, Putnam Advisory Company, LLC. The decision overturned the dismissal of the action and remanded the matter for further proceedings.

16. Segmented Information

Consolidated Net Earnings

For the three months ended June 30, 2015

CanadaUnitedStates Europe

LifecoCorporate Total

IncomeTotal net premiums $ 2,839 $ 905 $ 1,772 $ — $ 5,516Net investment income

Regular net investment income 630 390 498 1 1,519Changes in fair value through profit or loss (1,181) (566) (2,290) — (4,037)

Total net investment income (551) (176) (1,792) 1 (2,518)Fee and other income 366 577 283 — 1,226

2,654 1,306 263 1 4,224

Benefits and expensesPaid or credited to policyholders 1,460 543 (415) — 1,588Other (1) 775 614 322 4 1,715Financing charges 29 35 10 1 75Amortization of finite life intangible assets 15 18 4 — 37Restructuring and acquisition expenses — 3 11 — 14

Earnings (loss) before income taxes 375 93 331 (4) 795Income taxes (recovery) 47 22 18 (1) 86Net earnings (loss) before non-controllinginterests 328 71 313 (3) 709

Non-controlling interests 16 2 1 — 19Net earnings (loss) 312 69 312 (3) 690Preferred share dividends 26 — 5 — 31Net earnings (loss) before capitalallocation 286 69 307 (3) 659

Impact of capital allocation 22 (2) (18) (2) —Net earnings (loss) - commonshareholders $ 308 $ 67 $ 289 $ (5) $ 659

(1) Includes commissions, operating and administrative expenses and premium taxes.



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16. Segmented Information (cont'd)

68

For the three months ended June 30, 2014



IncomeTotal net premiums $ 2,776 $ 832 $ 2,156 $ — $ 5,764Net investment income

Regular net investment income 643 352 529 2 1,526Changes in fair value through profit or loss 780 302 588 — 1,670

Total net investment income 1,423 654 1,117 2 3,196Fee and other income 356 436 318 — 1,110

4,555 1,922 3,591 2 10,070

Benefits and expensesPaid or credited to policyholders 3,367 1,295 2,918 — 7,580Other (1) 728 478 332 6 1,544Financing charges 29 35 12 — 76Amortization of finite life intangible assets 13 14 5 — 32Restructuring and acquisition expenses — — 10 — 10

Earnings (loss) before income taxes 418 100 314 (4) 828Income taxes (recovery) 90 25 42 (1) 156Net earnings (loss) before non-controlling interests 328 75 272 (3) 672

Non-controlling interests 24 2 2 — 28Net earnings (loss) 304 73 270 (3) 644Preferred share dividends 24 — 5 — 29Net earnings (loss) before capital allocation 280 73 265 (3) 615Impact of capital allocation 24 (4) (19) (1) —Net earnings (loss) - common shareholders $ 304 $ 69 $ 246 $ (4) $ 615




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For the six months ended June 30, 2015



IncomeTotal net premiums $ 5,506 $ 1,634 $ 5,308 $ — $ 12,448Net investment income

Regular net investment income 1,259 785 1,011 — 3,055Changes in fair value through profit or loss 195 (334) (945) — (1,084)

Total net investment income 1,454 451 66 — 1,971Fee and other income 724 1,150 610 — 2,484

7,684 3,235 5,984 — 16,903

Benefits and expensesPaid or credited to policyholders 5,225 1,664 4,588 — 11,477Other (1) 1,538 1,200 646 8 3,392Financing charges 58 71 22 1 152Amortization of finite life intangible assets 29 35 9 — 73Restructuring and acquisition expenses — 4 17 — 21

Earnings (loss) before income taxes 834 261 702 (9) 1,788Income taxes (recovery) 170 66 76 (2) 310Net earnings (loss) before non-controllinginterests 664 195 626 (7) 1,478

Non-controlling interests 49 4 3 — 56Net earnings (loss) 615 191 623 (7) 1,422Preferred share dividends 52 — 11 — 63Net earnings (loss) before capitalallocation 563 191 612 (7) 1,359

Impact of capital allocation 44 (3) (37) (4) —Net earnings (loss) - commonshareholders $ 607 $ 188 $ 575 $ (11) $ 1,359




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For the six months ended June 30, 2014



IncomeTotal net premiums $ 5,389 $ 1,644 $ 3,998 $ — $ 11,031Net investment income

Regular net investment income 1,281 709 1,027 (2) 3,015Changes in fair value through profit or loss 1,727 625 1,440 — 3,792

Total net investment income 3,008 1,334 2,467 (2) 6,807Fee and other income 700 855 614 — 2,169

9,097 3,833 7,079 (2) 20,007

Benefits and expensesPaid or credited to policyholders 6,732 2,593 5,744 — 15,069Other (1) 1,443 972 642 10 3,067Financing charges 58 70 24 — 152Amortization of finite life intangible assets 26 29 10 — 65Restructuring and acquisition expenses — — 15 — 15

Earnings (loss) before income taxes 838 169 644 (12) 1,639Income taxes (recovery) 195 48 89 (3) 329Net earnings (loss) before non-controlling interests 643 121 555 (9) 1,310

Non-controlling interests 46 3 1 — 50Net earnings (loss) 597 118 554 (9) 1,260Preferred share dividends 47 — 11 — 58Net earnings (loss) before capital allocation 550 118 543 (9) 1,202Impact of capital allocation 48 (8) (38) (2) —Net earnings (loss) - common shareholders $ 598 $ 110 $ 505 $ (11) $ 1,202







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Please note that the bottom of each page in Part D contains two diff erent page numbers. A page number with the prefi x “D” 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.


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.


P A G E D 2


P A G E D 5 1

IGM Financial Inc.

P A R T D

P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 D 1

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The Management’s Discussion and Analysis (MD&A) presents management’s view of the results of operations and financial condition of IGM Financial Inc. (IGM Financial or the Company) as at and for the three and six months ended June 30, 2015 and should be read in conjunction with the unaudited Interim Condensed Consolidated Financial Statements (Interim Financial Statements) as well as the 2014 IGM Financial Inc. Annual Report and the 2015 IGM Financial Inc. First Quarter Report to Shareholders filed on www.sedar.com. Commentary in the MD&A as at and for the three and six months ended June 30, 2015 is as of August 6, 2015.

Certain statements in this MD&A, other than statements of historical fact, are forward-looking statements based on certain assumptions and reflect IGM Financial’s current expectations. Forward-looking statements are provided to assist the reader in understanding the Company’s financial position and results of operations as at and for the periods ended on certain dates and to present information about management’s current expectations and plans relating to the future. Readers are cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of the Company, as well as the outlook for North American and international economies, for the current fiscal year and subsequent periods. 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”, “plans”, “believes”, “estimates”, “seeks”, “intends”, “targets”, “projects”, “forecasts” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may”, “will”, “should”, “would” and “could”. This information is based upon certain material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking statements,

including the perception of historical trends, current conditions and expected future developments, as well as other factors that are believed to be appropriate in the circumstances. While the Company considers these assumptions to be reasonable based on information currently available to management, they may prove to be incorrect. By its nature, this information is subject to inherent risks and uncertainties that may be general or specific 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. A variety of material factors, many of which are beyond the Company’s and its subsidiaries’ control, affect the operations, performance and results of the Company, and its subsidiaries, and their businesses, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, management of market liquidity and funding risks, changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates), the effect of applying future accounting changes, operational and reputational risks, business

competition, technological change, changes in government regulations and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, the Company’s ability to complete strategic transactions, integrate acquisitions and implement other growth strategies, and the Company’s and its subsidiaries’ success in anticipating and managing the foregoing factors. The reader is cautioned that the foregoing list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. The reader is also cautioned to consider these and other factors, uncertainties and potential events carefully and not place undue reliance on forward-looking statements. Other than as specifically required by applicable Canadian law, the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise. Additional information about the risks and uncertainties of the Company’s business and material factors or assumptions on which information contained in forward-looking statements is based is provided in its disclosure materials, including this Management’s Discussion and Analysis and its most recent Annual Information Form, filed with the securities regulatory authorities in Canada, available at www.sedar.com.

FORWARD-LOOKING STATEMENTS

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

Net earnings available to common shareholders, which is an additional measure in accordance with IFRS, may be 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 a non-recurring nature or that could make the period-over-period comparison of results from operations less 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 to provide management and investors with additional measures to assess earnings performance. These non-IFRS financial

measures do not have standard meanings prescribed by IFRS and may not be directly comparable to similar measures used by other companies. “Earnings before interest and taxes” (EBIT), “earnings before interest, taxes, depreciation and amortization” (EBITDA) and “adjusted earnings before interest, taxes, depreciation and amortization” (Adjusted EBITDA) are also non-IFRS financial measures. EBIT, EBITDA and Adjusted EBITDA are alternative measures of performance utilized by management, investors and investment analysts to evaluate and analyze the Company’s results. EBITDA is a common measure used in the asset management industry to assess profitability before the impact of different financing methods, income taxes, depreciation of capital assets and amortization of intangible assets. Other items of a non-recurring nature, or that could make the period-

over-period comparison of results from operations less meaningful, are further excluded to arrive at Adjusted EBITDA. These non-IFRS financial measures do not have standard meanings prescribed by IFRS and may not be directly comparable to similar measures used by other companies. “Earnings before income taxes” and “net earnings available to common shareholders” are additional IFRS measures which are used to provide management and investors with additional measures to assess earnings performance. These measures are considered additional IFRS measures as they are in addition to the minimum line items required by IFRS and are relevant to an understanding of the entity’s financial performance. Refer to the appropriate reconciliations of non-IFRS financial measures to reported results in accordance with IFRS in Tables 1 to 4.

NON-IFRS FINANCIAL MEASURES AND ADDITIONAL IFRS MEASURES

igm financial inc. second quarter report 2015 / management’s discussion and analysis 5

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IGM Financial Inc.Summary of Consolidated Operating Results

IGM Financial Inc. (TSX:IGM) is one of Canada’s premier financial services companies. The Company’s principal businesses are Investors Group Inc. and Mackenzie Financial Corporation, each operating distinctly primarily within the advice segment of the financial services market. Mutual fund assets under management were $129.7 billion at June 30, 2015 compared with $125.2 billion at June 30, 2014. Average mutual fund assets under management for the second quarter of 2015 were $131.4 billion compared to $123.6 billion in the second quarter of 2014. Average mutual fund assets under management for the six months ended June 30, 2015 were $130.7 billion compared to $121.7 billion for the six months ended June 30, 2014.

Total assets under management were $136.0 billion at June 30, 2015 compared with $141.4 billion at June 30, 2014. Average total assets under management for the second quarter of 2015 were $145.6 billion compared to $138.9 billion in the second quarter of 2014. Average total assets under management for the six months ended June 30, 2015 were $145.8 billion compared to $136.6 billion for the six months ended June 30, 2014. Operating earnings available to common shareholders for the three months ended June 30, 2015 were $198.5 million or 80 cents per share compared to operating earnings available to common shareholders, excluding other items outlined below, of $203.9 million or 81 cents per share for the comparative period in 2014.

TABLE 1: RECONCILIATION OF NON-IFRS FINANCIAL MEASURES

three months ended six months ended

2015 2015 2014 2015 2014($ millions) jun. 30 mar. 31 jun. 30 jun. 30 jun. 30

Operating earnings available to common shareholders – Non-IFRS measure $ 198.5 $ 200.3 $ 203.9 $ 398.8 $ 398.3 Restructuring and other charges, net of tax – – (13.6) – (13.6)

Net earnings available to common shareholders – IFRS $ 198.5 $ 200.3 $ 190.3 $ 398.8 $ 384.7

Operating earnings per share(1) available to common shareholders – Non-IFRS measure $ 0.80 $ 0.80 $ 0.81 $ 1.59 $ 1.57 Restructuring and other charges, net of tax – – (0.06) – (0.05)

Net earnings per share(1) available to common shareholders – IFRS $ 0.80 $ 0.80 $ 0.75 $ 1.59 $ 1.52

Adjusted EBITDA – Non-IFRS measure $ 349.4 $ 348.9 $ 349.5 $ 698.3 $ 694.5 Restructuring and other charges – – (18.3) – (18.3)

EBITDA – Non-IFRS measure 349.4 348.9 331.2 698.3 676.2 Commission amortization (57.9) (58.7) (58.2) (116.6) (118.9) Amortization of capital assets and intangible assets and other (11.9) (9.8) (9.7) (21.7) (18.1) Interest expense on long-term debt (22.9) (22.8) (22.9) (45.7) (45.7)

Earnings before income taxes 256.7 257.6 240.4 514.3 493.5 Income taxes (56.0) (55.1) (47.9) (111.1) (104.4) Perpetual preferred share dividends (2.2) (2.2) (2.2) (4.4) (4.4)

Net earnings available to common shareholders – IFRS $ 198.5 $ 200.3 $ 190.3 $ 398.8 $ 384.7

(1) Diluted earnings per share

6 igm financial inc. second quarter report 2015 / management’s discussion and analysis



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Net earnings available to common shareholders for the three months ended June 30, 2015 were $198.5 million or 80 cents per share compared to net earnings available to common shareholders of $190.3 million or 75 cents per share for the comparative period in 2014. Operating earnings available to common shareholders for the six months ended June 30, 2015 were $398.8 million or $1.59 per share compared to operating earnings available to common shareholders, excluding other items outlined below, of $398.3 million or $1.57 per share for the comparative period in 2014. Net earnings available to common shareholders for the six months ended June 30, 2015 were $398.8 million or $1.59 per share compared to net earnings available to common shareholders of $384.7 million or $1.52 per share for the comparative period in 2014. Other items for the three and six months ended June 30, 2014 consisted of an after-tax charge of $13.6 million related to restructuring and other charges.

Shareholders’ equity was $4.8 billion as at June 30, 2015, unchanged from December 31, 2014. Return on average common equity based on operating earnings for the six months ended June 30, 2015 was 17.0% compared with 17.3% for the comparative period in 2014. The quarterly dividend per common share declared in the second quarter of 2015 was 56.25 cents, unchanged from the first quarter of 2015.

REPORTABLE SEGMENTS

IGM Financial’s reportable segments, which reflect the current organizational structure and internal financial reporting, are:• Investors Group• Mackenzie Investments (Mackenzie Investments or

Mackenzie)• Corporate and Other.

TABLE 2: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q2 2015 VS. Q2 2014

investors group mackenzie corporate & other totalThree months ended 2015 2014 2015 2014 2015 2014 2015 2014 ($ millions) jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30

Revenues Fee income $ 450.2 $ 425.6 $ 206.0 $ 207.1 $ 62.4 $ 56.6 $ 718.6 $ 689.3 Net investment income and other 14.2 5.9 – 0.4 30.4 26.2 44.6 32.5

464.4 431.5 206.0 207.5 92.8 82.8 763.2 721.8

Expenses Commission 147.4 132.8 77.5 74.8 42.8 38.1 267.7 245.7 Non-Commission 127.1 113.6 74.5 66.8 14.3 14.1 215.9 194.5

274.5 246.4 152.0 141.6 57.1 52.2 483.6 440.2

Earnings before interest and taxes $ 189.9 $ 185.1 $ 54.0 $ 65.9 $ 35.7 $ 30.6 279.6 281.6

Interest expense (22.9) (22.9)Restructuring and other charges – (18.3)

Earnings before income taxes 256.7 240.4Income taxes 56.0 47.9

Net earnings 200.7 192.5Perpetual preferred share dividends 2.2 2.2

Net earnings available to common shareholders $ 198.5 $ 190.3

Operating earnings available to common shareholders(1) $ 198.5 $ 203.9

(1) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A for an explanation of the Company’s use of non-IFRS financial measures.




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Management measures and evaluates the performance of these segments based on EBIT as shown in Tables 2, 3, and 4. Segment operations are discussed in each of their respective Review of Segment Operating Results sections of the MD&A. Certain items reflected in Tables 2, 3, and 4 are not allocated to segments:• Interest expense – represents interest expense on long-

term debt. • 2014 Restructuring and other charges – primarily

reflects severance and other costs associated with Mackenzie cost rationalization activities as well as senior management changes announced and implemented during the second quarter.

• Income taxes – changes in the effective tax rates are shown in Table 5.

Tax planning may result in the Company recording lower levels of income taxes. Management monitors the status of its income tax filings and regularly assesses the overall adequacy of its provision for income taxes and, as a result, income taxes recorded in prior years may be adjusted in the current year. The effect of changes in management’s best estimates reported in operating earnings is reflected in Other items, which also includes, but is not limited to, the effect of lower effective income tax rates on foreign operations.

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

TABLE 3: CONSOLIDATED OPERATING RESULTS BY SEGMENT – YTD 2015 VS. YTD 2014

investors group mackenzie corporate & other totalSix months ended 2015 2014 2015 2014 2015 2014 2015 2014 ($ millions) jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30

Revenues Fee income $ 885.7 $ 840.8 $ 412.7 $ 408.1 $ 126.1 $ 113.8 $ 1,424.5 $ 1,362.7 Net investment income and other 35.7 19.1 4.2 1.7 59.7 53.1 99.6 73.9

921.4 859.9 416.9 409.8 185.8 166.9 1,524.1 1,436.6


540.8 486.8 306.0 286.2 117.3 106.1 964.1 879.1


Interest expense (45.7) (45.7)Restructuring and other charges – (18.3)









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TABLE 4: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q2 2015 VS. Q1 2015

investors group mackenzie corporate & other totalThree months ended 2015 2015 2015 2015 2015 2015 2015 2015 ($ millions) jun. 30 mar. 31 jun. 30 mar. 31 jun. 30 mar. 31 jun. 30 mar. 31

Revenues Fee income $ 450.2 $ 435.5 $ 206.0 $ 206.7 $ 62.4 $ 63.7 $ 718.6 $ 705.9 Net investment income and other 14.2 21.5 – 4.2 30.4 29.3 44.6 55.0

464.4 457.0 206.0 210.9 92.8 93.0 763.2 760.9


274.5 266.3 152.0 154.0 57.1 60.2 483.6 480.5


Interest expense (22.9) (22.8)






TABLE 5: EFFECTIVE INCOME TAX RATE

three months ended six months ended

2015 2015 2014 2015 2014 jun. 30 mar. 31 jun. 30 jun. 30 jun. 30

Income taxes at Canadian federal and provincial statutory rates 26.83 % 26.61 % 26.60 % 26.72 % 26.60 % Effect of: Proportionate share of affiliate’s earnings (3.09) (2.70) (2.68) (2.89) (2.36) Loss consolidation(1) (2.36) (2.29) (2.10) (2.33) (1.96) Other items 0.45 (0.25) (1.88) 0.10 (1.12)

Effective income tax rate – net earnings 21.83 % 21.37 % 19.94 % 21.60 % 21.16 %

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




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SUMMARY OF CHANGES IN TOTAL ASSETS UNDER MANAGEMENT

Total assets under management were $136.0 billion at June 30, 2015 compared to $141.4 billion at June 30, 2014. Changes in total assets under management are detailed in Tables 6 and 7.

Changes in assets under management for Investors Group and Mackenzie are discussed further in each of their respective Review of the Business sections in the MD&A.

TABLE 6: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – Q2 2015 VS. Q2 2014

investment planning investors group mackenzie counsel consolidated(1)

Three months ended 2015 2014 2015 2014 2015 2014 2015 2014 ($ millions) jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30

Mutual funds Gross sales – money market $ 273.1 $ 173.7 $ 110.5 $ 98.2 $ 15.3 $ 19.1 $ 398.9 $ 291.0 Gross sales – long term 1,620.5 1,495.4 1,744.5 1,625.9 141.9 161.7 3,503.8 3,276.2

Total mutual fund gross sales $ 1,893.6 $ 1,669.1 $ 1,855.0 $ 1,724.1 $ 157.2 $ 180.8 $ 3,902.7 $ 3,567.2

Net sales – money market $ 76.6 $ 12.2 $ 35.9 $ 10.7 $ 12.9 $ 15.2 $ 125.3 $ 38.1 Net sales – long term (50.0) (51.2) (580.9) 104.0 8.0 49.0 (621.9) 96.0

Total mutual fund net sales $ 26.6 $ (39.0) $ (545.0) $ 114.7 $ 20.9 $ 64.2 $ (496.6) $ 134.1

Sub-advisory, institutional and other accounts Gross sales $ – $ – $ 1,178.0 $ 2,628.9 $ – $ – $ 533.0 $ 1,902.6 Net sales(2) – – (10,127.3) 1,299.8 – – (10,310.8) 1,159.1

Combined Gross sales $ 1,893.6 $ 1,669.1 $ 3,033.0 $ 4,353.0 $ 157.2 $ 180.8 $ 4,435.7 $ 5,469.8 Net sales(2) 26.6 (39.0) (10,672.3) 1,414.5 20.9 64.2 (10,807.4) 1,293.2

Change in total assets under management Net sales(2) $ 26.6 $ (39.0) $ (10,672.3) $ 1,414.5 $ 20.9 $ 64.2 $ (10,807.4) $ 1,293.2 Market and income (680.2) 1,562.4 (906.6) 1,299.1 (94.8) 78.5 (1,610.0) 2,826.3

Net change in assets (653.6) 1,523.4 (11,578.9) 2,713.6 (73.9) 142.7 (12,417.4) 4,119.5 Beginning assets 76,497.1 70,876.8 74,604.1 68,367.0 4,126.5 3,587.2 148,387.9 137,315.0

Ending assets $ 75,843.5 $ 72,400.2 $ 63,025.2 $ 71,080.6 $ 4,052.6 $ 3,729.9 $ 135,970.5 $ 141,434.5

(1) Total Gross Sales and Net Sales excluded $648 million and $184 million, respectively, in accounts sub-advised by Mackenzie on behalf of Investors Group and Investment Planning Counsel ($734 million and $146 million in 2014). Total assets under management excluded $6.9 billion of assets sub-advised by Mackenzie on behalf of Investors Group and Investment Planning Counsel ($5.8 billion at June 30, 2014).

(2) During the second quarter of 2015, MD Financial Management re-assigned sub-advisory responsibilities on four fixed income mandates (totalling $10.3 billion) advised by Mackenzie. In addition, in the second quarter of 2015, certain third party programs which include Mackenzie mutual funds made fund allocation changes which resulted in gross sales of $141 million, redemptions of $597 million and net redemptions of $456 million. In the second quarter of 2014, there were tactical rebalances by an institutional client that resulted in gross sales of $1.2 billion, redemptions of $0.3 billion and net sales of $0.9 billion into separately managed account investment mandates advised by Mackenzie.




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The Summary of Quarterly Results in Table 8 includes the eight most recent quarters and the reconciliation of non-IFRS financial measures to net earnings in accordance with IFRS.

Average daily mutual fund assets under management, as shown in Table 8, have increased in each of the eight most recent quarters with the exception of a decrease of 1.3% in the fourth quarter of 2014, consistent with the movement in domestic and foreign markets.

TABLE 7: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – 2015 VS. 2014

investment planning investors group mackenzie counsel consolidated(1)

Six months ended 2015 2014 2015 2014 2015 2014 2015 2014 ($ millions) jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30 jun. 30

Mutual funds Gross sales – money market $ 534.0 $ 383.3 $ 212.8 $ 213.5 $ 33.9 $ 35.7 $ 780.7 $ 632.5 Gross sales – long term 3,724.9 3,514.8 3,615.7 3,884.4 319.1 302.1 7,649.0 7,691.3

Total mutual fund gross sales $ 4,258.9 $ 3,898.1 $ 3,828.5 $ 4,097.9 $ 353.0 $ 337.8 $ 8,429.7 $ 8,323.8

Net sales – money market $ 168.0 $ 59.6 $ 51.1 $ 37.9 $ 26.5 $ 26.9 $ 245.6 $ 124.4 Net sales – long term(2) 446.5 311.7 (701.7) 430.5 54.3 77.2 (205.1) 811.9

Total mutual fund net sales $ 614.5 $ 371.3 $ (650.6) $ 468.4 $ 80.8 $ 104.1 $ 40.5 $ 936.3

Sub-advisory, institutional and other accounts Gross sales $ – $ – $ 2,893.5 $ 4,121.3 $ – $ – $ 1,517.7 $ 2,863.6 Net sales(2) – – (9,452.9) 1,727.8 – – (9,878.6) 1,458.4

Combined Gross sales $ 4,258.9 $ 3,898.1 $ 6,722.0 $ 8,219.2 $ 353.0 $ 337.8 $ 9,947.4 $ 11,187.4 Net sales(2) 614.5 371.3 (10,103.5) 2,196.2 80.8 104.1 (9,838.1) 2,394.7

Change in total assets under management Net sales(2) $ 614.5 $ 371.3 $ (10,103.5) $ 2,196.2 $ 80.8 $ 104.1 $ (9,838.1) $ 2,394.7 Market and income 1,770.4 3,774.2 2,252.6 3,569.2 121.5 219.8 3,889.3 7,263.3

Net change in assets 2,384.9 4,145.5 (7,850.9) 5,765.4 202.3 323.9 (5,948.8) 9,658.0 Beginning assets 73,458.6 68,254.7 70,876.1 65,315.2 3,850.3 3,406.0 141,919.3 131,776.5

Ending assets $ 75,843.5 $ 72,400.2 $ 63,025.2 $ 71,080.6 $ 4,052.6 $ 3,729.9 $ 135,970.5 $ 141,434.5

(1) Total Gross Sales and Net Sales excluded $1.4 billion and $431 million, respectively, in accounts sub-advised by Mackenzie on behalf of Investors Group and Investment Planning Counsel ($1.3 billion and $276 million in 2014). Total assets under management excluded $6.9 billion of assets sub-advised by Mackenzie on behalf of Investors Group and Investment Planning Counsel ($5.8 billion at June 30, 2014).

(2) During the second quarter of 2015, MD Financial Management re-assigned sub-advisory responsibilities on four fixed income mandates (totalling $10.3 billion) advised by Mackenzie. In addition, in the second quarter of 2015, third party programs which include Mackenzie mutual funds made fund allocation changes which resulted in gross sales of $141 million, redemptions of $597 million and net redemptions of $456 million. In the second quarter of 2014, there were tactical rebalances by an institutional client that resulted in gross sales of $1.2 billion, redemptions of $0.3 billion and net sales of $0.9 billion into separately managed account investment mandates advised by Mackenzie.




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TABLE 8: SUMMARY OF QUARTERLY RESULTS

2015 2015 2014 2014 2014 2014 2013 2013 q2 q1 q4 q3 q2 q1 q4 q3

Consolidated statements of earnings ($ millions) Revenues Management fees $ 517.3 $ 509.1 $ 507.4 $ 517.0 $ 503.9 $ 485.8 $ 475.6 $ 462.2 Administration fees 106.0 102.3 100.7 102.0 99.3 95.2 93.7 90.4 Distribution fees 95.3 94.5 87.7 85.0 86.1 92.4 85.6 76.2 Net investment income and other 44.6 55.0 46.2 46.2 32.5 41.4 36.7 38.7

763.2 760.9 742.0 750.2 721.8 714.8 691.6 667.5

Expenses Commission 267.7 266.9 253.9 249.8 245.7 243.2 229.3 219.8 Non-commission 215.9 213.6 198.8 190.8 194.5 195.7 179.9 173.0 Interest 22.9 22.8 23.3 23.2 22.9 22.8 23.3 23.2

506.5 503.3 476.0 463.8 463.1 461.7 432.5 416.0

Earnings before undernoted 256.7 257.6 266.0 286.4 258.7 253.1 259.1 251.5Client distributions and other costs – – (81.0) – – – – –Restructuring and other charges – – – – (18.3) – (14.6) –Proportionate share of affiliate’s provision – – – – – – 9.0 –

Earnings before income taxes 256.7 257.6 185.0 286.4 240.4 253.1 253.5 251.5Income taxes 56.0 55.1 33.9 64.5 47.9 56.5 54.2 55.9

Net earnings 200.7 202.5 151.1 221.9 192.5 196.6 199.3 195.6Perpetual preferred share dividends 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2

Net earnings available to common shareholders $ 198.5 $ 200.3 $ 148.9 $ 219.7 $ 190.3 $ 194.4 $ 197.1 $ 193.4

Reconciliation of Non-IFRS financial measures(1) ($ millions)

Operating earnings available to common shareholders – non-IFRS measure $ 198.5 $ 200.3 $ 208.1 $ 219.7 $ 203.9 $ 194.4 $ 198.7 $ 193.4Other items: Client distributions and other costs, net of tax – – (59.2) – – – – – Restructuring and other charges, net of tax – – – – (13.6) – (10.6) – Proportionate share of affiliate’s provision – – – – – – 9.0 –

Net earnings available to common shareholders – IFRS $ 198.5 $ 200.3 $ 148.9 $ 219.7 $ 190.3 $ 194.4 $ 197.1 $ 193.4

Earnings per Share(¢) Operating earnings available to common shareholders(1)

– Basic 80 80 83 87 81 77 79 77 – Diluted 80 80 83 87 81 77 79 77Net earnings available to common shareholders – Basic 80 80 59 87 75 77 78 77 – Diluted 80 80 59 87 75 77 78 77

Average daily mutual fund assets ($ billions) $ 131.4 $ 129.9 $ 124.6 $ 126.2 $ 123.6 $ 119.7 $ 114.6 $ 110.2

Total mutual fund assets under management ($ billions) $ 129.7 $ 131.5 $ 126.0 $ 125.2 $ 125.2 $ 122.5 $ 117.6 $ 111.2

Total assets under management ($ billions) $ 136.0 $ 148.4 $ 141.9 $ 140.6 $ 141.4 $ 137.3 $ 131.8 $ 126.0

(1) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in addition 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-IFRS financial measures.




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Investors GroupReview of the Business

INVESTORS GROUP STRATEGY

Investors Group strives to ensure that the interests of shareholders, clients, Consultants and employees are closely aligned. Investors Group’s business strategy is focused on:• Growing our distribution network by expanding the

number of region offices, attracting new Consultants to our industry and supporting existing Consultants in their growth and development.

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

• Providing an effective level of administrative support to our Consultants and clients, including active communication during all economic cycles.

• Extending the diversity and range of products offered by Investors Group as we continue to build and maintain enduring client relationships.

• Maximizing returns on business investment by focusing resources on initiatives that have direct benefits to clients and Consultants and result in increased efficiency and improved control over expenditures.

CONSULTANT NETWORK

Investors Group distinguishes itself from its competition by offering comprehensive planning to its clients within the context of long-term relationships. At the centre of these relationships is a national distribution network of Consultants based in 110 region offices across Canada. Four new region offices have been announced in 2015: two in Montreal, one in Peterborough and one in Edmonton. These additions will expand our network to 114 region offices. At June 30, 2015, Investors Group had a Consultant network of 5,176, up from 4,871 at June 30, 2014. This represents the highest level in the history of the company. The individuals in the Consultant network with more than four years of Investors Group experience was at an all time quarter end high of 2,824 at June 30, 2015 compared to 2,784 a year earlier. At June 30, 2015, 1,528 individuals in our Consultant network held the Certified Financial Planner (CFP) designation, or its Quebec equivalent, the Financial Planner (F.Pl.) designation. The CFP and F.Pl. designations are nationally accepted financial planning

qualifications that require an individual to demonstrate financial planning competence through education, standardized examinations, continuing education requirements, and accountability to ethical standards.

ADMINISTRATIVE SUPPORT AND COMMUNICATION FOR CONSULTANTS AND CLIENTS

Administrative support for Consultants and clients includes timely and accurate client account record-keeping and reporting, effective problem resolution support, and continuous improvements to servicing systems. This administrative support is provided from both Investors Group’s Quebec General Office located in Montreal for Consultants and clients residing in Quebec and from Investors Group’s head office in Winnipeg, Manitoba for Consultants and clients in the rest of Canada. The Quebec General Office has approximately 200 employees and operating units for most functions supporting over 1,000 Consultants throughout Quebec and the 19 Quebec region offices. Mutual fund assets under management in Quebec were approximately $13 billion as at June 30, 2015.

Quarterly StatementsRegular communication with our clients includes quarterly reporting of their Investors Group mutual fund holdings and the change in asset values of these holdings during the quarter. Individual clients experience different returns as a result of their net cash flow and fund holdings in each quarter as illustrated on the accompanying chart. This chart reflects in-quarter client account median rates of return for the current year. The chart also illustrates upper and lower ranges of rates of return around the median for 90% of Investors Group clients.

Client Account Rate of Return (ROR) Experience

-4

-2

0

2

4

6

8

10

RO

R %

3.0 1.8

Q1 15

(0.9)

Q2 15 YTD 15

90% ofclients rate of returnrange

MedianReturns - %


D 1 0 P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5


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For the three months ended June 30, 2015, the client account median rate of return was approximately (0.9)% and 9% of clients experienced positive returns. For the six months ended June 30, 2015, the client account median rate of return was approximately 1.8% and 82% of clients experienced positive returns.

New Client Performance and Rate of Return ReportingInvestors Group has long believed that providing our clients with personal account level performance and rate of return information over multiple time periods will be a meaningful benefit to our clients and further demonstrates the value provided through advice over the history of our client relationships. That is why in 2009 we took initial steps to develop this information for clients and we began capturing the necessary information to calculate account level money-weighted internal rates of return. In March 2013, the Canadian Securities Administrators adopted a new set of rules as Phase 2 of the Client Relationship Model, often referred to as CRM2. One of the most significant aspects of these rules required all dealers to provide their clients with account level rates of return for various historical periods on a comprehensive money-weighted basis. This is an industry-wide regulatory rule focused on ensuring that clients are well informed regarding the performance of their investments. Investors Group fully supports this initiative and we have added multiple-period account rate of return reporting to most Investors Group’s client statements for the June 30, 2015 client statement period and we will continue reporting on this basis in subsequent

quarters. As the required data has been gathered since 2009, clients now have a multiple-period view of their performance, including one year, three year and five year rates of return. This new client feature has been introduced a full two years earlier than the regulatory requirements and shows at least a five year history for our long-term clients. The regulations only required us to provide this information by June 30, 2017 and only on a one year basis initially with longer time frames emerging over time.

Client Experience SurveyConsultants maintain a high degree of contact with our clients, continuing to reinforce the importance of long-term planning and a diversified investment portfolio. Ongoing surveys of our clients indicate a strong appreciation of the value of advice and service provided by our Consultants through varying economic cycles. In 2014, Investors Group introduced an ongoing program of surveys to measure client experience for new and existing clients:• All new Investors Group clients receive a survey at

their three month anniversary date.• All existing clients are surveyed annually. The results of the surveys for the four quarters ending June 30, 2015 are detailed in Table 9.


The level of mutual fund assets under management is influenced by three factors: sales, redemptions and net asset values of our funds. Changes in assets under

TABLE 9: CLIENT EXPERIENCE SURVEY – INVESTORS GROUP

Surveys completed for the four quarters ending June 30, 2015

New client households surveyed 90 days after account opening Satisfied with service 96 % Offered a financial plan 91 Satisfied with discussion about goals and concerns 96 Willing to refer 93

Client households with 12+ months tenure Satisfied with service 93 % Have a financial plan 85 Satisfied with level of contact 93 Willing to refer 88


P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 D 1 1


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management for the periods under review are reflected in Table 10.

Fund PerformanceAt June 30, 2015, 44.1% of Investors Group mutual funds had a rating of three stars or better from the Morningstar† fund ranking service and 9.3% had a rating of four or five stars. This compared to the Morningstar† universe of 64.4% for three stars or better and 26.7% for four and five star funds at June 30, 2015. Morningstar Ratings† are an objective, quantitative measure of a fund’s three, five and ten year risk-adjusted performance relative to comparable funds.

Additions to Mutual Fund Product OfferingInvestors Group continues to enhance the performance, scope and diversity of our investment offering with the introduction of new funds that are well-suited to the long-term diverse needs of Canadian investors.

Investors Group introduced new investment options which became available for sale in July 2015:• Three distinct Maestro Portfolios which are available

in both unit trust and Corporate Class offerings. – Maestro Income Balanced Portfolio / Portfolio Class

– Maestro Balanced Portfolio / Portfolio Class – Maestro Growth Focused Portfolio / Portfolio Class

The new portfolios combine a long-term investment management outlook with dynamic asset allocation strategies to adapt to market movements that may create investment opportunities. The result is an ability to better manage volatility to help clients continue to build wealth.

• Two new low volatility mandates, available in both unit trust and Corporate Class offerings, which are designed for investors who want exposure to equity

TABLE 10: CHANGE IN MUTUAL FUND ASSETS UNDER MANAGEMENT – INVESTORS GROUP

% change

Three months ended 2015 2015 2014 2015 2014 ($ millions) jun. 30 mar. 31 jun. 30 mar. 31 jun. 30

Sales $ 1,893.6 $ 2,365.3 $ 1,669.1 (19.9) % 13.5 %Redemptions 1,867.0 1,777.4 1,708.1 5.0 9.3

Net sales (redemptions) 26.6 587.9 (39.0) (95.5) n/m Market and income (680.2) 2,450.6 1,562.4 n/m n/m

Net change in assets (653.6) 3,038.5 1,523.4 n/m n/m Beginning assets 76,497.1 73,458.6 70,876.8 4.1 7.9

Ending assets $ 75,843.5 $ 76,497.1 $ 72,400.2 (0.9) % 4.8 %

Average daily assets $ 76,782.7 $ 75,456.4 $ 71,523.7 1.8 % 7.4 %

Six months ended 2015 2014 ($ millions) jun. 30 jun. 30 % change

Sales $ 4,258.9 $ 3,898.1 9.3 %Redemptions 3,644.4 3,526.8 3.3

Net sales (redemptions) 614.5 371.3 65.5 Market and income 1,770.4 3,774.2 (53.1)

Net change in assets 2,384.9 4,145.5 (42.5) Beginning assets 73,458.6 68,254.7 7.6

Ending assets $ 75,843.5 $ 72,400.2 4.8 %

Average daily assets $ 76,123.2 $ 70,414.3 8.1 %




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markets due to the higher growth potential that stocks offer, but in an investment that seeks lower volatility than the broader equity markets: – Investors Low Volatility Canadian Equity Fund / Class which aim to provide long-term capital growth by investing primarily in Canadian equity securities. This mandate will be advised by I.G. Investment Management, Ltd.

– Investors Low Volatility Global Equity Fund / Class which aim to provide long-term capital growth by investing primarily in companies around the world. This mandate will be advised by I.G. Investment Management, Ltd. and sub-advised by Irish Life Investment Managers Limited.

Pricing for Households with Investment Assets in Excess of $500,000During 2012 and 2013, Investors Group introduced investment solutions with differentiated pricing for households with investments in Investors Group funds in excess of $500,000.• Series J was introduced in the third quarter of

2012 and had assets of $22.8 billion at June 30, 2015, an increase of 121.8% from $10.3 billion at June 30, 2014.

• Series U was introduced in the third quarter of 2013 and provides a pricing structure which separates the advisory fee, which is charged directly to a client’s account, from the fees charged to the underlying investment funds. At June 30, 2015, Series U assets under management had increased to $3.1 billion, compared to $1.0 billion at June 30, 2014, an increase of 223.3%.

At June 30, 2015, substantially all clients eligible for Series J or U had transferred to these solutions. Investors Group will provide distributions to clients for their period of eligibility, up to the earlier of when they transferred or to April 30, 2015. These distributions are expected to be made in the latter part of 2015.

iProfile™This is a unique portfolio management program, launched in 2001, that is available for households with assets held at Investors Group in excess of $250,000. iProfile investment portfolios have been designed to maximize returns and manage risk by diversifying across asset classes, management styles and geographic regions. The iProfile program has a pricing structure which separates the advisory fee, which is charged directly to a

client’s account, from the fees charged to the underlying investment funds. At June 30, 2015, the iProfile program assets under management were $1.3 billion, an increase of 49.0% from $872 million at June 30, 2014.

Unbundled Fee StructuresA growing portion of Investors Group’s client assets are in Series U and iProfile, which are products with unbundled fee structures where a separate advisory fee is charged to the client account by the dealer. At June 30, 2015, $4.4 billion, or 5.8% of Investors Group’s mutual fund assets under management, were in products with unbundled fee structures, compared to $1.8 billion, or 2.5%, at June 30, 2014.

Change in Mutual Fund Assets Under Management – 2015 vs. 2014Investors Group’s mutual fund assets under management were $75.8 billion at June 30, 2015, representing an increase of 4.8% from $72.4 billion at June 30, 2014. Average daily mutual fund assets were $76.8 billion in the second quarter of 2015, up 7.4% from $71.5 billion in the second quarter of 2014. For the quarter ended June 30, 2015, sales of Investors Group mutual funds through its Consultant network were $1.9 billion, an increase of 13.5% from the comparative period in 2014. Mutual fund redemptions totalled $1.9 billion, an increase of 9.3% from 2014. Net sales of Investors Group mutual funds for the second quarter of 2015 were $27 million compared with net redemptions of $39 million in 2014, an improvement of $66 million. During the second quarter, market and income resulted in a decrease of $680 million in mutual fund assets compared to an increase of $1.6 billion in the second quarter of 2014. Sales of long-term funds were $1.6 billion for the second quarter of 2015, an increase of 8.4% from the previous year. Net redemptions of long-term funds for the second quarter of 2015 were $50 million compared to net redemptions of $51 million in 2014. Investors Group’s annualized quarterly redemption rate for long-term funds was 8.9% in the second quarter of 2015 compared to 8.8% in the second quarter of 2014. Investors Group’s twelve month trailing redemption rate for long-term funds was 8.5% at June 30, 2015 compared to 9.1% at June 30, 2014, and remains well below the corresponding average redemption rate for all other members of the Investment Funds Institute of Canada (IFIC) of approximately 15.6% at June 30, 2015.




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Over the last several years, a growing component of the redemptions included in Investors Group’s long-term redemption rate has related to the Cornerstone funds and transfers to Investors Group Series of Guaranteed Investment Funds (GIFs). The Cornerstone funds are income portfolio funds which invest between 30% and 50% of their assets in Investors Canadian Money Market Fund. These funds are used by our clients as a substitute for money market funds which have higher redemption activity and, together with the transfers to GIFs, account for 0.3% of our long-term redemption rate at June 30, 2015. Excluding such items, the twelve month trailing redemption rate for long-term funds would have been 8.2%. For the six months ended June 30, 2015, sales of Investors Group mutual funds through its Consultant network were $4.3 billion, an increase of 9.3% from 2014. Mutual fund redemptions totalled $3.6 billion, an increase of 3.3% from 2014. Net sales of Investors Group mutual funds were $615 million compared with net sales of $371 million in 2014. Sales of long-term funds for the six month period in 2015 were $3.7 billion, compared with $3.5 billion in 2014, an increase of 6.0%. Net sales of long-term funds were $447 million compared to net sales of $312 million in 2014. During 2015, market and income resulted in an increase of $1.8 billion in mutual fund assets compared to an increase of $3.8 billion in 2014.

Change in Mutual Fund Assets Under Management – Q2 2015 vs. Q1 2015Investors Group’s mutual fund assets under management were $75.8 billion at June 30, 2015, a decrease of 0.9% from $76.5 billion at March 31, 2015. Average daily mutual fund assets were $76.8 billion in the second quarter of 2015 compared to $75.5 billion in the first quarter of 2015, an increase of 1.8%. For the quarter ended June 30, 2015, sales of Investors Group mutual funds through its Consultant network were $1.9 billion, a decrease of 19.9% from the first quarter of 2015. Mutual fund redemptions, which totalled $1.9 billion for the second quarter, increased 5.0% from the previous quarter and the annualized quarterly redemption rate was 8.9% in the second quarter compared to 8.8% in the first quarter of 2015. Net sales of Investors Group mutual funds for the current quarter were $27 million compared with net sales of $588 million in the previous quarter. Sales of long-

term funds were $1.6 billion for the current quarter, compared to $2.1 billion in the previous quarter, a decrease of 23.0%. Net redemptions of long-term funds for the current quarter were $50 million compared to net sales of $497 million in the previous quarter.

OTHER PRODUCTS AND SERVICES

Segregated FundsInvestors Group has offered segregated funds since 2001 and introduced the Investors Group Series of Guaranteed Investment Funds (GIFs) in November 2009. GIFs are segregated fund policies issued by The Great-West Life Assurance Company and include 14 fund-of-fund segregated portfolios and six individual segregated funds. These segregated funds provide for long-term investment growth potential combined with risk management, full and partial maturity and death benefit guarantee features, potential creditor protection and estate planning efficiencies. Select GIF policies allow for a Lifetime Income Benefit (LIB) option to provide guaranteed retirement income for life. The investment components of these segregated funds are managed by Investors Group. At June 30, 2015, total segregated fund assets were $1.7 billion compared to $1.6 billion at June 30, 2014.

InsuranceInvestors Group distributes insurance products through I.G. Insurance Services Inc. For the quarter ended June 30, 2015, sales of insurance products as measured by new annualized premiums were $19 million, an increase of 18.8% from $16 million in 2014. For the six months ended June 30, 2015, sales of insurance products as measured by new annualized premiums were $35 million, an increase of 10.7% from $32 million in 2014.

Securities OperationsInvestors Group provides securities services to clients through Investors Group Securities Inc., an investment dealer registered in all Canadian provinces and territories.

Mortgage OperationsInvestors Group is a national mortgage lender that offers residential mortgages to Investors Group clients as part of a comprehensive financial plan. Investors Group Mortgage Planning Specialists are located throughout each province in Canada, and work with




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our clients and their Consultants as permitted by the regulations to develop mortgage strategies that meet the individual needs and goals of each client. Through its mortgage banking operations, mortgages originated by Investors Group Mortgage Planning Specialists are sold to the Investors Mortgage and Short Term Income Fund, Investors Canadian Corporate Bond Fund, securitization programs, and institutional investors. Certain subsidiaries of Investors Group are Canada Mortgage and Housing Corporation (CMHC)-approved issuers of National Housing Act Mortgage-Backed Securities (NHA MBS) and are approved sellers of NHA MBS into the Canada Mortgage Bond Program (CMB Program). Securitization programs also include certain bank-sponsored asset-backed commercial paper (ABCP) programs. Residential mortgages are also held by Investors Group’s intermediary operations. Mortgage fundings for the three and six months ended June 30, 2015, were $578 million and $967 million, compared to $734 million and $1.1 billion in 2014, a decrease of 21.3% and 8.6%, respectively. At June 30, 2015, mortgages serviced by Investors Group related to

its mortgage banking operations totalled $10.2 billion, compared to $9.0 billion at June 30, 2014, an increase of 13.5%.

Solutions Banking†

Investors Group’s Solutions Banking† continues to experience high rates of utilization by Consultants and clients. The offering consists of a wide range of products and services provided by the National Bank of Canada under a long-term distribution agreement and includes: investment loans, lines of credit, personal loans, creditor insurance, deposit accounts and credit cards. Clients have access to a network of banking machines, as well as a private labeled client website and client service centre. The Solutions Banking† offering supports Investors Group’s approach to delivering total financial solutions for our clients through a broad financial planning platform.

Additional Products and ServicesInvestors Group also provides its clients with guaranteed investment certificates offered by Investors Group Trust Co. Ltd., as well as a number of other financial institutions.




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Review of Segment Operating Results

Investors Group’s earnings before interest and taxes are presented in Table 11.

2015 VS. 2014

Fee IncomeFee income is generated from the management, administration and distribution of Investors Group mutual funds. The distribution of insurance and

Solutions Banking† products and the provision of securities services provide additional fee income. Investors Group earns management fees for investment management services provided to its mutual funds, which depend largely on the level and composition of mutual fund assets under management. Management fees were $323.5 million in the second quarter of 2015, an increase of $11.5 million or 3.7% from $312.0 million in 2014. For the six months ended

TABLE 11: OPERATING RESULTS – INVESTORS GROUP

% change


Revenues Management fees $ 323.5 $ 316.2 $ 312.0 2.3 % 3.7 % Administration fees 77.3 73.0 69.4 5.9 11.4 Distribution fees 49.4 46.3 44.2 6.7 11.8

450.2 435.5 425.6 3.4 5.8 Net investment income and other 14.2 21.5 5.9 (34.0) 140.7

464.4 457.0 431.5 1.6 7.6

Expenses Commission 77.5 76.7 71.2 1.0 8.8 Asset retention bonus and premium 69.9 68.3 61.6 2.3 13.5 Non-commission 127.1 121.3 113.6 4.8 11.9

274.5 266.3 246.4 3.1 11.4

Earnings before interest and taxes $ 189.9 $ 190.7 $ 185.1 (0.4) % 2.6 %


Revenues Management fees $ 639.7 $ 612.7 4.4 % Administration fees 150.3 135.4 11.0 Distribution fees 95.7 92.7 3.2

885.7 840.8 5.3 Net investment income and other 35.7 19.1 86.9

921.4 859.9 7.2

Expenses Commission 154.2 141.0 9.4 Asset retention bonus and premium 138.2 122.3 13.0 Non-commission 248.4 223.5 11.1

540.8 486.8 11.1

Earnings before interest and taxes $ 380.6 $ 373.1 2.0 %




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June 30, 2015, management fees were $639.7 million, an increase of $27.0 million or 4.4% from $612.7 million in 2014. The net increase in management fees in the three and six months ended June 30, 2015 was due to the increase in average daily mutual fund assets of 7.4% and 8.1%, respectively, as shown in Table 10. The average management fee rate in the second quarter of 2015 was 169.5 basis points of daily mutual fund assets compared to 175.0 basis points in 2014. The management fee rate for the six month period ended June 30, 2015 was 169.7 basis points compared to 175.5 basis points in 2014. This decline in basis points resulted primarily from transfers of eligible clients into lower fee investment solutions. Investors Group’s efforts to encourage and accelerate transfers of eligible clients into lower fee investment solutions, as announced last quarter, resulted in the weighted average management fee rate declining by approximately 4 basis points in the first quarter of 2015 relative to the fourth quarter of 2014. Management fee income and average management fee rates for both periods also reflected the effect of Investors Group having waived a portion of the investment management fees on its money market funds. For the three and six month periods in 2015, these waivers totalled $0.9 million and $1.6 million, respectively, compared to $0.6 million and $1.5 million in the prior year. Investors Group receives administration fees for providing administrative services to its mutual funds and trusteeship services to its unit trust mutual funds, which also depend largely on the level and composition of mutual fund assets under management. Administration fees totalled $77.3 million in the current quarter compared to $69.4 million a year ago, an increase of 11.4%. Administration fees were $150.3 million for the six month period ended June 30, 2015 compared to $135.4 million in 2014, an increase of 11.0%. The increase in both periods resulted primarily from the change in average mutual fund assets under management. Distribution fees are earned from:• Redemption fees on mutual funds sold with a

deferred sales charge.• Portfolio fund distribution fees.• 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†. Distribution fee income of $49.4 million for the second quarter of 2015 increased by $5.2 million from $44.2 million in 2014, due primarily to increases in distribution fee income from insurance products. For the six month period, distribution fee income of $95.7 million increased by $3.0 million from $92.7 million in 2014. The net increase in the six month period was due to an increase in distribution fee income from insurance products offset by a decrease in redemption fees. Redemption fee income varies depending on the level of deferred sales charge attributable to fee-based redemptions.

Net Investment Income and OtherNet investment income and other includes income related to mortgage banking operations and net interest income related to intermediary operations. Net investment income and other was $14.2 million in the second quarter of 2015, an increase of $8.3 million from $5.9 million in 2014. For the six months ended June 30, 2015, net investment income and other totalled $35.7 million, an increase of $16.6 million from $19.1 million in 2014. Net investment income related to Investors Group’s mortgage banking operations totalled $14.6 million for the second quarter of 2015 compared to $5.5 million in 2014, an increase of $9.1 million. For the six months ended June 30, 2015, net investment income related to Investors Group’s mortgage banking operations totalled $35.7 million compared to $18.3 million in 2014, an increase of $17.4 million. A summary of mortgage banking operations for the three and six month periods under review is presented in Table 12. The changes in mortgage banking income were due to:• Net interest income on securitized loans – increased

by $2.4 million and $3.3 million for the three and six month periods ended June 30, 2015 to $13.4 million and $25.1 million, respectively, compared to 2014. The increase resulted from higher average securitized loans.

• Gains realized on the sale of residential mortgages – increased by $2.8 million and $7.0 million for the three and six month periods ended June 30, 2015 to $5.1 million and $12.2 million, respectively, compared to 2014. The increase in gains in the three and six month periods resulted from a higher level of sale activity as well as an increase in the




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TABLE 12: MORTGAGE BANKING OPERATIONS – INVESTORS GROUP

% change


Total mortgage banking income Net interest income on securitized loans Interest income $ 47.1 $ 47.1 $ 42.9 – % 9.8 % Interest expense 33.7 35.4 31.9 (4.8) 5.6

Net interest income 13.4 11.7 11.0 14.5 21.8 Gains on sales(1) 5.1 7.1 2.3 (28.2) 121.7 Fair value adjustments (1.7) 4.0 (3.2) n/m 46.9 Other(2) (2.2) (1.7) (4.6) (29.4) 52.2

$ 14.6 $ 21.1 $ 5.5 (30.8) % 165.5 %

Average mortgages serviced Securitizations $ 6,557 $ 6,526 $ 5,594 0.5 % 17.2 % Other 3,534 3,404 3,134 3.8 12.8

$ 10,091 $ 9,930 $ 8,728 1.6 % 15.6 %

Mortgage sales to:(3)

Securitizations $ 607 $ 378 $ 543 60.6 % 11.8 % Other(1) 309 332 234 (6.9) 32.1

$ 916 $ 710 $ 777 29.0 % 17.9 %


Total mortgage banking income Net interest income on securitized loans Interest income $ 94.2 $ 84.5 11.5 % Interest expense 69.1 62.7 10.2

Net interest income 25.1 21.8 15.1 Gains on sales(1) 12.2 5.2 134.6 Fair value adjustments 2.3 (2.8) n/m Other(2) (3.9) (5.9) 33.9

$ 35.7 $ 18.3 95.1 %

Average mortgages serviced Securitizations $ 6,542 $ 5,530 18.3 % Other 3,469 3,096 12.0

$ 10,011 $ 8,626 16.1 %

Mortgage sales to:(3)

Securitizations $ 985 $ 996 (1.1) % Other(1) 641 449 42.8

$ 1,626 $ 1,445 12.5 %

(1) 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.

(2) Represents mortgage issuance and insurance costs, interest earned on warehoused mortgages, and servicing and other.(3) Represents principal amounts sold.




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proportion of sales made to institutional investors compared to mutual funds.

• Fair value adjustments – increased by $1.5 million and $5.1 million for the three and six month periods ended June 30, 2015 to ($1.7) million and $2.3 million, respectively, compared to 2014. The increase during the six month period was primarily due to favourable fair value adjustments on certain securitization related financial instruments.

ExpensesInvestors Group incurs commission expense in connection with the distribution of its mutual funds and other financial services and products. Commissions are paid on the sale of these products and fluctuate with the level of sales. The expense for deferred selling commissions consists of the amortization of the asset over its useful life and the reduction of the unamortized deferred selling commission asset associated with redemptions. Commissions paid on the sale of mutual funds are deferred and amortized over a maximum period of seven years. Commission expense was $77.5 million for the second quarter of 2015, an increase of $6.3 million from $71.2 million in 2014. For the six month period, commission expense increased by $13.2 million to $154.2 million compared with $141.0 million in 2014. The increase in both periods was primarily related to a new program that provides Consultants with higher income potential in their first two years with Investors Group. The increase also resulted from higher mutual fund commission amortization and compensation related to the distribution of other financial services and products. Asset retention bonus and premium expense is comprised of the following:• Asset retention bonus, which is based on the value of

assets under management, increased by $7.1 million and $13.5 million for the three and six month periods ended June 30, 2015 to $58.7 million and $115.8 million, respectively, compared to 2014. The increase in both periods was primarily due to the increase in assets under management.

• Asset retention premium, which is a deferred component of compensation designed to promote Consultant retention, is based on assets under management at each year end. Asset retention premium expense increased by $1.2 million and $2.4 million for the three and six month periods to $11.2 million and $22.4 million, respectively,

compared to 2014. The increase in both periods was related to the increase in assets under management.

Non-commission expenses incurred by Investors Group primarily relate to the support of the Consultant network, the administration, marketing and management of its mutual funds and other products, as well as sub-advisory fees related to mutual funds under management. Non-commission expenses were $127.1 million for the second quarter of 2015 compared to $113.6 million in 2014, an increase of $13.5 million or 11.9%. For the six month period, non-commission expenses were $248.4 million compared to $223.5 million in 2014, an increase of $24.9 million or 11.1%. Pension expense increased in the three and six month periods primarily as a result of interest rate declines which had the effect of increasing current service costs on the related pension obligation. Excluding the impact of the increased pension expense of $2.4 million and $5.0 million in the three and six month periods, the increase in non-commission expenses was 9.8% and 8.9%, respectively. These increases included additional expenses related to Consultant network expansion and other business development efforts.

Q2 2015 VS. Q1 2015

Fee IncomeManagement fee income increased by $7.3 million or 2.3% to $323.5 million in the second quarter of 2015 compared with the first quarter of 2015. The net increase in management fees in the second quarter was primarily due to:• The increase in average daily mutual fund assets of

1.8% for the quarter as shown in Table 10.• An increase of $2.7 million due to one additional

calendar day in the second quarter compared to the first quarter of 2015.

The average management fee rate in the second quarter of 2015 decreased to 169.5 basis points of daily mutual fund assets from 169.9 basis points in the prior quarter. Money market fund waivers totalled $0.9 million in the second quarter of 2015 compared with $0.7 million in the first quarter of 2015. Administration fees increased to $77.3 million in the second quarter of 2015 from $73.0 million in the first quarter of 2015. The net increase resulted from the increase in average daily mutual fund assets compared with the first quarter of 2015.




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Distribution fee income of $49.4 million in the second quarter of 2015 increased by $3.1 million from $46.3 million in the first quarter primarily due to an increase in insurance product sales.

Net Investment Income and OtherNet investment income and other was $14.2 million in the second quarter of 2015 compared to $21.5 million in the previous quarter, a decrease of $7.3 million primarily related to Investors Group’s mortgage banking operations. Net investment income related to Investors Group’s mortgage banking operations totalled $14.6 million in the second quarter of 2015, a decrease of $6.5 million from $21.1 million in the previous quarter as shown in Table 12. The changes in mortgage banking income were due to:• Net interest income on securitized loans – increased

by $1.7 million in the second quarter of 2015 to $13.4 million, compared to $11.7 million in the previous quarter primarily due to higher margins.

• Gains realized on the sale of residential mortgages – decreased by $2.0 million in the second quarter of

2015 to $5.1 million, compared to $7.1 million in the previous quarter. The decrease in gains resulted from lower margins on these sales.

• Fair value adjustments – decreased by $5.7 million in the second quarter of 2015 to ($1.7) million, compared to $4.0 million in the previous quarter. The decrease was primarily due to favourable fair value adjustments on certain securitization related financial instruments during the first quarter as a result of interest rate changes.

ExpensesCommission expense in the current quarter was $77.5 million compared with $76.7 million in the previous quarter. The asset retention bonus and premium expense increased by $1.6 million to $69.9 million in the second quarter of 2015 largely due to increases in average assets under management. Non-commission expenses were $127.1 million in the current quarter, an increase of $5.8 million or 4.8% from $121.3 million in the first quarter of 2015. This increase related primarily to the seasonal nature of certain expenses normally incurred in the second quarter.




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MACKENZIE STRATEGY

Mackenzie strives to ensure that the interests of shareholders, dealers, advisors, clients and employees are closely aligned. In the fourth quarter of 2013, Mackenzie affirmed its vision and established a number of strategic priorities to drive future business success. Our vision: We are committed to the financial success of investors, through their eyes.• Getting the basics right; every time, everywhere• Delivering competitive and consistent risk-adjusted

performance• Transforming distribution to drive sales and

market share• Delivering high quality products to investors and

advisors and actively anticipating their future needs• Reinvigorating the brand and leading the industry

on key investor and advisor issues• Building a winning culture Mackenzie seeks to maximize returns on business investment by focusing resources on initiatives that have direct benefits to investment management, distribution and client experience. Founded in 1967, Mackenzie continues to build an investment advisory business through proprietary investment research and portfolio management while utilizing strategic partners in a selected sub-advisory capacity. Our business focuses on multiple distribution channels: Retail, Strategic Alliances and Institutional. Mackenzie distributes its retail investment products through third party financial advisors. Mackenzie’s sales teams work with many of the more than 30,000 independent financial advisors and their firms across Canada. In addition to its retail distribution team, Mackenzie also has specialty teams focused on strategic alliances and the institutional marketplace. Within the strategic alliance channel Mackenzie offers certain series of its mutual funds and provides sub-advisory services to third party and related party investment programs offered by banks, insurance companies and other investment companies. Strategic alliances with related parties include providing advisory services to Investors Group, Investment Planning Counsel and Great-West Lifeco Inc. (Lifeco) subsidiaries, and also include a private label mutual fund arrangement with Lifeco subsidiary Quadrus. Within the strategic alliance channel, Mackenzie’s primary distribution relationship is with the head office of the respective

bank, insurance company or investment company. In the institutional channel Mackenzie provides investment management services to pension plans, foundations and other institutions. Mackenzie attracts new institutional business through its relationships with pension and management consultants. Gross sales and redemption activity in strategic alliance and institutional accounts can be more pronounced than in the retail channel given the relative size and the nature of the distribution relationships of these accounts. These accounts are also subject to ongoing reviews and rebalance activities which may result in a significant change in the level of assets under management. Mackenzie is positioned to continue to build and enhance its distribution relationships given its team of experienced investment professionals, strength of its distribution network, broad product shelf, competitively priced products and its focus on client experience and investment excellence.

Sponsorship InitiativeDuring the second quarter of 2015, Mackenzie announced a new, six-year agreement with the PGA TOUR, making Mackenzie the umbrella sponsor of PGA TOUR Canada. The Tour was renamed the Mackenzie Tour – PGA TOUR Canada with the season-opening event in Vancouver. This is the first umbrella sponsorship for PGA TOUR Canada and will enable it to continue to strengthen and grow the Tour throughout Canada. This is the second significant sports sponsorship as Mackenzie also entered into a long-term sponsorship with Snow Sports Canada during the third quarter of 2014, which was expanded earlier this year with a sponsorship agreement with three time Olympic downhill racer Manny Osborne-Paradis.


The changes in mutual fund assets under management are summarized in Table 13 and the changes in total assets under management are summarized in Table 14. At June 30, 2015, Mackenzie’s mutual fund and total assets under management were $49.9 billion and $63.0 billion, respectively. The change in Mackenzie’s assets under management is determined by the increase or decrease in the market value of the securities held in the portfolios of investments and by the level of sales as compared to the level of redemptions.

Mackenzie InvestmentsReview of the Business




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TABLE 13: CHANGE IN MUTUAL FUND ASSETS UNDER MANAGEMENT – MACKENZIE

% change


Sales $ 1,855.0 $ 1,973.5 $ 1,724.1 (6.0) % 7.6 %Redemptions 2,400.0 2,079.1 1,609.4 15.4 49.1

Net sales (redemptions)(1) (545.0) (105.6) 114.7 n/m n/mMarket and income (545.9) 2,267.5 932.3 n/m n/m

Net change in assets (1,090.9) 2,161.9 1,047.0 n/m n/mBeginning assets 50,943.8 48,781.9 48,059.2 4.4 6.0

Ending assets $ 49,852.9 $ 50,943.8 $ 49,106.2 (2.1) % 1.5 %

Daily average mutual fund assets $ 50,578.3 $ 50,492.4 $ 48,483.1 0.2 % 4.3 %


Sales $ 3,828.5 $ 4,097.9 (6.6) %Redemptions 4,479.1 3,629.5 23.4

Net sales (redemptions)(1) (650.6) 468.4 n/mMarket and income 1,721.6 2,613.4 (34.1)

Net change in assets 1,071.0 3,081.8 (65.2)Beginning assets 48,781.9 46,024.4 6.0

Ending assets $ 49,852.9 $ 49,106.2 1.5 %

Daily average mutual fund assets $ 50,536.0 $ 47,720.9 5.9 %

(1) In the second quarter of 2015, certain third party programs which include Mackenzie mutual funds made fund allocation changes which resulted in gross sales of $141 million, redemptions of $597 million and net redemptions of $456 million.

Fund PerformanceLong-term investment performance is a key measure of Mackenzie’s ongoing success. At June 30, 2015, 28.6% of Mackenzie mutual funds were rated in the top two performance quartiles for the one year time frame, 25.4% for the three year time frame and 38.4% for the five year time frame. Mackenzie also monitors its fund performance relative to the ratings it receives on its mutual funds from the Morningstar† fund ranking service. At June 30, 2015, 60.0% of Mackenzie mutual funds measured by Morningstar† had a rating of three stars or better and 14.7% had a rating of four or five stars. This compared to the Morningstar† universe of 64.4% for three stars or better and 26.7% for four and five star funds at June 30, 2015. These ratings exclude the Quadrus Group of Funds†.

Changes to Mutual Fund Product OfferingMackenzie’s diversified suite of investment products is designed to meet the needs and goals of investors. Mackenzie continues to evolve its product shelf by providing enhanced investment solutions for financial advisors to offer their investment clients. Initiatives undertaken during the second quarter of 2015 included the following:• On May 20, 2015, Mackenzie launched the

Mackenzie Global Tactical Investment Grade Bond Fund to help investors diversify their fixed income. This product maintains an overall average credit quality of A- or higher, while employing a qualitative and quantitative approach to selection across the global fixed income universe.




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• On May 20, 2015, Mackenzie doubled its U.S. dollar (USD) funds by launching four new mandates: Mackenzie USD Ultra Short Duration Income Fund, Mackenzie USD Global Tactical Bond Fund, Mackenzie USD Global Strategic Income Fund, and Mackenzie USD Convertible Securities Fund. The result is a comprehensive suite of USD solutions to

meet longevity and income needs, while controlling volatility. These funds are primarily exposed to U.S. dollars through U.S. securities and/or hedging non-U.S. currency exposure back to U.S. dollars, and can be purchased, settled, redeemed and have their performance and net asset value reported in U.S. dollars.

TABLE 14: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – MACKENZIE

% change


Sales $ 3,033.0 $ 3,689.0 $ 4,353.0 (17.8) % (30.3) %Redemptions 13,705.3 3,120.2 2,938.5 n/m n/m

Net sales (redemptions)(1) (10,672.3) 568.8 1,414.5 n/m n/m Market and income (906.6) 3,159.2 1,299.1 n/m n/m

Net change in assets (11,578.9) 3,728.0 2,713.6 n/m n/m Beginning assets 74,604.1 70,876.1 68,367.0 5.3 9.1

Ending assets $ 63,025.2 $ 74,604.1 $ 71,080.6 (15.5) % (11.3) %

Consists of: Mutual funds $ 49,852.9 $ 50,943.8 $ 49,106.2 (2.1) % 1.5 % Sub-advisory, institutional and other accounts 13,172.3 23,660.3 21,974.4 (44.3) (40.1)

$ 63,025.2 $ 74,604.1 $ 71,080.6 (15.5) % (11.3) %

Monthly average total assets(2) $ 71,700.5 $ 73,591.6 $ 69,353.1 (2.6) % 3.4 %


Sales $ 6,722.0 $ 8,219.2 (18.2) %Redemptions 16,825.5 6,023.0 179.4

Net sales (redemptions)(1) (10,103.5) 2,196.2 n/m Market and income 2,252.6 3,569.2 (36.9)

Net change in assets (7,850.9) 5,765.4 n/m Beginning assets 70,876.1 65,315.2 8.5

Ending assets $ 63,025.2 $ 71,080.6 (11.3) %

Monthly average total assets(2) $ 72,424.9 $ 68,059.0 6.4 %

(1) During the second quarter of 2015, MD Financial Management re-assigned sub-advisory responsibilities on four fixed income mandates (totalling $10.3 billion) advised by Mackenzie. In addition, in the second quarter of 2015, certain third party programs which include Mackenzie mutual funds made fund allocation changes which resulted in gross sales of $141 million, redemptions of $597 million and net redemptions of $456 million. In the second quarter of 2014, there were tactical rebalances by an institutional client that resulted in gross sales of $1.2 billion, redemptions of $0.3 billion and net sales of $0.9 billion into separately managed account investment mandates advised by Mackenzie.

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




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Change in Assets under Management – 2015 vs. 2014Mackenzie’s mutual fund assets under management were $49.9 billion at June 30, 2015, an increase of 1.5% from $49.1 billion at June 30, 2014. Mackenzie’s sub-advisory, institutional and other accounts at June 30, 2015 were $13.2 billion, a decrease of 40.1% from $22.0 billion last year. Mackenzie’s total assets under management at June 30, 2015 were $63.0 billion, a decrease of 11.3% from $71.1 billion at June 30, 2014. On June 5, 2015, MD Financial Management Inc. (“MD”) reassigned sub-advisory responsibilities on four fixed income mandates advised by Mackenzie. The pro-forma impact on Mackenzie’s pre-tax earnings from these mandate changes is not meaningful. The mandates had $10.3 billion in assets on June 5, 2015 and are included in Mackenzie’s redemptions in both the three and six month periods ended June 30, 2015 in Table 14. Following the change, Mackenzie continues to advise MD on a number of fixed income, balanced and equity mandates. In the three months ended June 30, 2015, Mackenzie’s mutual fund gross sales were $1.9 billion, an increase of 7.6% from $1.7 billion in the comparative period last year. Mutual fund redemptions in the current period were $2.4 billion, an increase of 49.1% from last year. Mutual fund net redemptions for the three months ended June 30, 2015 were $545 million, as compared to net sales of $115 million last year. During the current quarter, market and income resulted in assets decreasing by $546 million as compared to an increase of $932 million last year. During the second quarter of 2015, certain third party programs which include Mackenzie mutual funds made fund allocation changes which resulted in gross sales of $141 million, redemptions of $597 million and net redemptions of $456 million. Excluding these transactions, gross sales declined 0.6% and redemptions increased 12.0% in the three months ended June 30, 2015 compared to last year and net redemptions were $89 million in the current quarter compared to net sales of $115 million last year. In the three months ended June 30, 2015, Mackenzie’s gross sales for total assets under management were $3.0 billion, a decrease of 30.3% from $4.4 billion in the comparative period last year. Redemptions in the current period were $13.7 billion compared to $3.0 billion last year. Net redemptions for the three months ended June 30, 2015 were $10.7 billion, as compared to net sales

of $1.4 billion last year. Excluding the MD transaction and other mutual fund transactions in the second quarter of 2015 discussed previously, and a tactical rebalance from MD that resulted in gross sales of $1.2 billion, redemptions of $0.3 billion and net sales of $0.9 billion in the second quarter of 2014, net sales were $84 million in the second quarter of 2015 compared to net sales of $474 million last year. During the current quarter, market and income resulted in assets decreasing by $907 million as compared to an increase of $1.3 billion last year. In the six months ended June 30, 2015, Mackenzie’s mutual fund gross sales were $3.8 billion, a decrease of 6.6% from $4.1 billion in the comparative period last year. Mutual fund redemptions in the current period were $4.5 billion, an increase of 23.4% from the previous year. Mutual fund net redemptions for the six months ended June 30, 2015, were $651 million, as compared to net sales of $469 million last year. During the period, market and income resulted in assets increasing by $1.7 billion as compared to an increase of $2.6 billion last year. Excluding the other mutual fund transactions in the second quarter of 2015 discussed previously, gross sales declined 10.0% and redemptions increased 7.0% in the six months ended June 30, 2015 compared to last year and net sales were $195 million compared to net sales of $469 million last year. Redemptions of long-term mutual funds in the three and six month periods ended June 30, 2015, were $2.3 billion and $4.3 billion, respectively, as compared to $1.5 billion and $3.5 billion last year. Mackenzie’s annualized quarterly redemption rate for long-term mutual funds of 18.7% in the second quarter of 2015 was higher than the 12.7% in the second quarter of 2014. Mackenzie’s annualized quarterly redemption rate for long-term funds, excluding rebalance transactions, was 13.9% in the second quarter of 2015. Mackenzie’s twelve-month trailing redemption rate for long-term mutual funds was 15.9% at June 30, 2015, as compared to 15.1% last year. Mackenzie’s twelve-month trailing redemption rate for long-term funds, excluding the other mutual fund transactions in the second quarter of 2015 discussed previously, was 14.1% at June 30, 2015. The corresponding average twelve-month trailing redemption rate for long-term mutual funds for all other members of IFIC was approximately 15.0% at June 30, 2015. Mackenzie’s twelve-month trailing redemption rate is comprised of the weighted average redemption rate for front-end load assets, deferred sales




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charge and low load assets with redemption fees, and deferred sales charge assets without redemption fees (matured assets). Generally, redemption rates for front-end load assets and matured assets are higher than the redemption rates for deferred sales charge and low load assets with redemption fees. In the six months ended June 30, 2015, Mackenzie’s gross sales for total assets under management were $6.7 billion, a decrease of 18.2% from $8.2 billion in the comparative period last year. Redemptions in the current period were $16.8 billion compared to $6.0 billion last year. Net redemptions for the six months ended June 30, 2015, were $10.1 billion, as compared to net sales of $2.2 billion last year. Excluding the MD transactions in the second quarter of both 2015 and 2014 and the other mutual fund transactions in the second quarter of 2015 discussed previously, net sales were $653 million in the six months ended June 30, 2015, as compared to net sales of $1.3 billion last year. During the period, market and income resulted in assets increasing by $2.3 billion as compared to an increase of $3.6 billion last year.

Change in Assets under Management – Q2 2015 vs. Q1 2015Mackenzie’s mutual fund assets under management were $49.9 billion at June 30, 2015, a decrease of 2.1% from $50.9 billion at March 31, 2015. Mackenzie’s sub-advisory, institutional and other accounts decreased $10.5 billion from $23.7 billion to $13.2 billion at June 30, 2015. Mackenzie’s total assets under management at June 30, 2015, were $63.0 billion, a decrease of 15.5% from $74.6 billion at March 31, 2015, as summarized in Table 14. In the second quarter of 2015, MD Financial Management Inc. re-assigned sub-advisory responsibilities on four fixed

income mandates advised by Mackenzie resulting in redemptions of $10.3 billion. Excluding this redemption by MD, total assets under management decreased 1.7% from March 31, 2015. For the quarter ended June 30, 2015, Mackenzie mutual fund gross sales were $1.9 billion, a decrease of 6.0% from the first quarter of 2015. Mutual fund redemptions, which totalled $2.4 billion for the second quarter, increased 15.4% from the previous quarter. Net redemptions of Mackenzie mutual funds for the current quarter were $545 million compared with net redemptions of $106 million in the previous quarter. Excluding the other mutual fund transactions in the second quarter of 2015 discussed previously, gross sales declined 13.1% and redemptions declined 13.3% in the second quarter of 2015 compared to the first quarter, and net redemptions were $89 million compared to net redemptions of $106 million in the first quarter. Redemptions of long-term mutual fund assets in the current quarter were $2.3 billion, compared to $2.0 billion in the first quarter of 2015. Mackenzie’s annualized quarterly redemption rate for long-term mutual funds for the quarter ended June 30, 2015 was 18.7%, compared to 16.2% for the first quarter of 2015. Mackenzie’s annualized quarterly redemption rate for long-term funds, excluding rebalance transactions, was 13.9% in the second quarter of 2015. Net redemptions of long-term funds for the current quarter were $581 million compared to net redemptions of $121 million in the previous quarter. Excluding rebalance transactions during the second quarter of 2015, net redemptions of long-term funds for the current quarter were $125 million.




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Review of Segment Operating Results

Mackenzie’s earnings before interest and taxes are presented in Table 15.

2015 VS. 2014

RevenuesThe largest component of Mackenzie’s revenues is management fees. The amount of management fees depends on the level and composition of assets under

management. Management fee rates vary depending on the investment objective and the account type of the underlying assets under management. For example, equity-based mandates have higher management fee rates than fixed income mandates and retail mutual fund accounts have higher management fee rates than sub-advised and institutional accounts. The majority of Mackenzie’s mutual fund assets are purchased on a retail basis.

TABLE 15: OPERATING RESULTS – MACKENZIE

% change


Revenues Management fees $ 178.6 $ 178.0 $ 177.8 0.3 % 0.4 % Administration fees 24.9 25.5 26.5 (2.4) (6.0) Distribution fees 2.5 3.2 2.8 (21.9) (10.7)

206.0 206.7 207.1 (0.3) (0.5) Net investment income and other – 4.2 0.4 (100.0) (100.0)

206.0 210.9 207.5 (2.3) (0.7)

Expenses Commission 14.5 15.7 15.8 (7.6) (8.2) Trailing commission 63.0 62.1 59.0 1.4 6.8 Non-commission 74.5 76.2 66.8 (2.2) 11.5

152.0 154.0 141.6 (1.3) 7.3

Earnings before interest and taxes $ 54.0 $ 56.9 $ 65.9 (5.1) % (18.1) %


Revenues Management fees $ 356.6 $ 349.5 2.0 % Administration fees 50.4 52.6 (4.2) Distribution fees 5.7 6.0 (5.0)

412.7 408.1 1.1 Net investment income and other 4.2 1.7 147.1

416.9 409.8 1.7

Expenses Commission 30.2 32.7 (7.6) Trailing commission 125.1 115.9 7.9 Non-commission 150.7 137.6 9.5

306.0 286.2 6.9

Earnings before interest and taxes $ 110.9 $ 123.6 (10.3) %




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Within Mackenzie’s retail mutual fund offering, certain series are offered for fee-based programs of participating dealers whereby dealer compensation is charged directly by the dealer to a client (primarily Series F). As Mackenzie does not pay the dealer compensation, these series have lower management fees. At June 30, 2015, these series had $3.3 billion in assets, an increase of 31.5% from the prior year. Management fees were $178.6 million for the three months ended June 30, 2015, an increase of $0.8 million or 0.4% from $177.8 million last year. For the six months ended June 30, 2015, management fees were $356.6 million, an increase of $7.1 million or 2.0% from $349.5 million last year. The net increase in management fees in both the three and six months ended June 30, 2015 was due to the increase in average assets under management of 3.4% and 6.4%, respectively, offset by a decline in average management fee rate. Mackenzie’s average management fee rate in the second quarter of 2015 was 100.2 basis points compared to 102.9 basis points in 2014. The average management fee rate for the six month period ended June 30, 2015 was 99.4 basis points compared to 103.6 basis points in 2014. The decline in the average management fee rate in both periods was due to a change in the composition of assets under management and the pricing changes made to retail mutual funds which became effective on September 29, 2014. The impact of these pricing changes was a decline in management fees of $1.9 million for the current quarter and $3.9 million for the six month period ended June 30, 2015. Mackenzie earns administration fees primarily from providing services to its mutual funds. Administration fees were $24.9 million for the three months ended June 30, 2015, as compared to $26.5 million in 2014. Administration fees were $50.4 million for the six months ended June 30, 2015, compared to $52.6 million in 2014. The impact of the pricing changes, which became effective on September 29, 2014, was a decline in administration fees of $1.2 million and $2.3 million for the three and six months ended June 30, 2015. Effective April 1, 2015, as part of the retail pricing changes previously announced, the fund operating expense adjustment that had been in place since August 1, 2007 was discontinued. Under this adjustment, Mackenzie was entitled to a payment from certain funds should such funds not exceed a pre-established

level of net assets. The elimination of this adjustment resulted in a $1.3 million and $2.2 million reduction in administration fees for the three and six month period ended June 30, 2015 relative to the prior year. Mackenzie earns distribution fee income on redemptions of mutual fund assets sold on a deferred sales charge purchase option and on a low load purchase option. Redemption fees charged for deferred sales charge assets range from 5.5% in the first year and decrease to zero after seven years. Redemption fees for low load assets range from 2.0% to 3.0% in the first year and decrease to zero after two or three years, depending on the purchase option. Distribution fee income in the three months ended June 30, 2015 was $2.5 million, a decrease of $0.3 million from $2.8 million last year. Distribution fee income in the six months ended June 30, 2015 was $5.7 million, a decrease of $0.3 million from $6.0 million last year. Net investment income and other includes investment returns related to Mackenzie’s investments in proprietary funds. These investments are generally made in the process of launching a fund and are sold as third party investors subscribe. Net investment income and other was nil for the three months ended June 30, 2015 compared to $0.4 million last year and $4.2 million for the six months ended June 30, 2015, an increase of $2.5 million from $1.7 million last year.

ExpensesMackenzie’s expenses were $152.0 million for the three months ended June 30, 2015, an increase of $10.4 million or 7.3% from $141.6 million in 2014. Expenses for the six months ended June 30, 2015 were $306.0 million, an increase of $19.8 million or 6.9% from $286.2 million last year. Mackenzie pays selling commissions to the dealers that sell its mutual funds on a deferred sales charge and low load purchase option. The expense for deferred selling commissions consists of the amortization of the asset over its useful life and the reduction of the unamortized deferred selling commission asset associated with redemptions. Mackenzie amortizes selling commissions over a maximum period of three years from the date of original purchase of the applicable low load assets and over a maximum period of seven years from the date of original purchase of the applicable deferred sales charge assets. Commission expense was $14.5 million in the three months ended June 30, 2015,




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as compared to $15.8 million last year. Commission expense in the six months ended June 30, 2015 was $30.2 million compared to $32.7 million in 2014. This decline is consistent with the lower amount of deferred sales commissions paid in recent years combined with lower write-offs of the unamortized balance of deferred sales commissions associated with redemptions. Trailing commissions paid to dealers are paid on certain classes of retail mutual funds and are calculated as a percentage of mutual fund assets under management. These fees vary depending on the fund type and the purchase option upon which the fund was sold: front-end, deferred sales charge or low load. Trailing commissions were $63.0 million in the three months ended June 30, 2015, an increase of $4.0 million or 6.8% from $59.0 million last year. Trailing commissions in the six months ended June 30, 2015 were $125.1 million, an increase of $9.2 million or 7.9% from $115.9 million last year. The change in trailing commissions resulted both from the period over period increase in average mutual fund assets as well as a change in the composition of mutual fund assets towards series of mutual funds that pay higher trailer rates. During the period, this included both the impact of having a higher weighting of equity funds as well as having a higher weighting of no load series of funds, both of which are subject to higher trailer rates. Trailing commissions as a percentage of average mutual fund assets under management were 49.8 basis points in the three months ended June 30, 2015 and 49.5 basis points in the six months ended June 30, 2015 as compared to 48.7 basis points and 48.6 basis points, respectively, in 2014. Non-commission expenses are incurred by Mackenzie in the administration, marketing and management of its assets under management. Non-commission expenses were $74.5 million in the three months ended June 30, 2015, an increase of $7.7 million or 11.5% from $66.8 million in 2014. Non-commission expenses in the six months ended June 30, 2015 were $150.7 million, an increase of $13.1 million or 9.5% from $137.6 million in 2014. Mackenzie continues to attract, retain and develop employees and invest strategically in systems and technology to enhance its future operating capabilities while at the same time investing in revenue generating initiatives to further grow its business.

Q2 2015 VS. Q1 2015

RevenuesMackenzie’s revenues were $206.0 million for the current quarter, a decrease of $4.9 million or 2.3% from $210.9 million in the first quarter of 2015. Management fees were $178.6 million for the current quarter, an increase of $0.6 million or 0.3% from $178.0 million in the first quarter of 2015. Factors contributing to the net increase in management fees are as follows:• Mackenzie’s average management fee rate was 100.2

basis points in the current quarter as compared to 98.1 basis points in the first quarter of 2015 due to a change in the composition of assets under management, including the impact of having a greater share in retail-priced products following the loss of certain of the sub-advisory mandates to MD Financial Management Inc. as discussed previously.

• There was one additional calendar day in the second quarter of 2015 than in the first quarter, which had an impact of $2.0 million.

• Average total assets under management were $71.7 billion in the current quarter compared to $73.6 billion in the quarter ended March 31, 2015, a decrease of 2.6%.

Administration fees were $24.9 million in the current quarter, a decrease of $0.6 million or 2.4% from $25.5 million in the prior quarter. The elimination of the fund operating expense adjustment effective April 1, 2015 resulted in a $1.0 million reduction in administration fees for the three month period ended June 30, 2015 relative to last quarter. Net investment income and other includes investment returns related to Mackenzie’s investments in proprietary funds. These investments are generally made in the process of launching a fund and are sold as third party investors subscribe. Net investment income and other was nil for the current quarter compared to a gain of $4.2 million in the first quarter of 2015.

ExpensesMackenzie’s expenses were $152.0 million for the current quarter, a decrease of $2.0 million or 1.3% from $154.0 million in the first quarter of 2015. Commission expense, related to the amortization of selling commissions, was $14.5 million in the quarter ended June 30, 2015, a decrease of 7.6% from the first quarter of 2015.




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Trailing commissions were $63.0 million in the current quarter, an increase of $0.9 million or 1.4% from $62.1 million in the first quarter of 2015. The change in trailing commissions reflects the 0.2% period over period increase in average mutual fund assets under management. The effective trailing commission rate for

the second quarter was 49.8 basis points as compared to 49.2 basis points in the first quarter of 2015. Non-commission expenses were $74.5 million in the current quarter compared to $76.2 million in the first quarter of 2015.




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Corporate and OtherReview of Segment Operating Results

The Corporate and Other segment includes net investment income not allocated to the Investors Group or Mackenzie segments, the Company’s proportionate share of earnings of its affiliate, Great-West Lifeco Inc. (Lifeco), operating results for Investment Planning Counsel Inc., other income, as well as consolidation elimination entries. Corporate and other earnings before interest and taxes are presented in Table 16.

2015 VS. 2014

Net investment income and other increased to $30.4 million in the second quarter of 2015 compared to $26.2 million in 2014. Net investment income and other increased to $59.7 million for the six months ended June 30, 2015 compared to $53.1 million in 2014. The increase in the three and six month periods was largely due to increases in the Company’s proportionate share of Lifeco’s earnings as discussed

in the Consolidated Financial Position section of this MD&A. Earnings before interest and taxes related to Investment Planning Counsel were $0.7 million higher in the second quarter of 2015 compared to the same period in 2014 and $1.0 million higher in the six months ended June 30, 2015 compared with 2014.

Q2 2015 VS. Q1 2015

Net investment income and other totalled $30.4 million in the second quarter of 2015 compared to $29.3 million in the first quarter of 2015 primarily due to an increase in the Company’s proportionate share of Lifeco’s earnings as discussed in the Consolidated Financial Position section of this MD&A. Earnings before interest and taxes related to Investment Planning Counsel were $1.7 million higher in the second quarter of 2015 compared with the previous quarter.

TABLE 16: OPERATING RESULTS – CORPORATE AND OTHER

% change


Revenues Fee income $ 62.4 $ 63.7 $ 56.6 (2.0) % 10.2 % Net investment income and other 30.4 29.3 26.2 3.8 16.0

92.8 93.0 82.8 (0.2) 12.1

Expenses Commission 42.8 44.1 38.1 (2.9) 12.3 Non-commission 14.3 16.1 14.1 (11.2) 1.4

57.1 60.2 52.2 (5.1) 9.4

Earnings before interest and taxes $ 35.7 $ 32.8 $ 30.6 8.8 % 16.7 %


Revenues Fee income $ 126.1 $ 113.8 10.8 % Net investment income and other 59.7 53.1 12.4

185.8 166.9 11.3

Expenses Commission 86.9 77.0 12.9 Non-commission 30.4 29.1 4.5

117.3 106.1 10.6

Earnings before interest and taxes $ 68.5 $ 60.8 12.7 %




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IGM Financial’s total assets were $14.5 billion at June 30, 2015 compared to $14.4 billion at December 31, 2014.

SECURITIES

The composition of the Company’s securities holdings is detailed in Table 17.

Available for Sale SecuritiesSecurities classified as available for sale include investments in proprietary investment funds. Unrealized gains and losses on available for sale securities are recorded in Other comprehensive income until they are realized or until management determines that there is objective evidence of impairment, at which time they are recorded in the Consolidated Statements of Earnings and any subsequent losses are also recorded in net earnings.

Fair Value Through Profit or Loss SecuritiesSecurities classified as fair value through profit or loss include equity securities and proprietary investment funds. Unrealized gains and losses are recorded in Net investment income and other in the Consolidated Statements of Earnings. Certain proprietary investment funds are consolidated where the Company has made the assessment that it controls the investment fund as discussed in Note 2 of the Consolidated Financial Statements included in the 2014 IGM Financial Inc. Annual Report (Annual Financial Statements). The underlying securities of these funds are classified as held for trading and recognized at fair value through profit or loss.

LOANS

The composition of the Company’s loans is detailed in Table 18.

Loans consisted of residential mortgages and represented 49.7% of total assets at June 30, 2015, compared to 48.7% at December 31, 2014. Loans classified as loans and receivables are primarily comprised of residential mortgages sold to securitization programs sponsored by third parties that in turn issue securities to investors. An offsetting liability, Obligations to securitization entities, has been recorded and totalled $6.8 billion at June 30, 2015, unchanged from December 31, 2014. Loans classified as held for trading are residential mortgages held temporarily by the Company pending sale or securitization. Residential mortgages originated by Investors Group are funded primarily through sales to third parties on a fully serviced basis, including Canada Mortgage and Housing Corporation (CMHC) or Canadian bank sponsored securitization programs. Investors Group services $12.5 billion of residential mortgages, including $2.3 billion originated by subsidiaries of Lifeco.

SECURITIZATION ARRANGEMENTS

Through the Company’s mortgage banking operations, residential mortgages originated by Investors Group mortgage planning specialists are sold to securitization trusts sponsored by third parties that in turn issue securities to investors. The Company securitizes residential mortgages through the CMHC sponsored National Housing Act Mortgage-Backed Securities (NHA MBS) and the Canada Mortgage Bond Program (CMB Program) and through Canadian bank-sponsored asset-backed commercial paper (ABCP) programs. The Company retains servicing responsibilities and certain

IGM Financial Inc.Consolidated Financial Position

TABLE 17: SECURITIES

june 30, 2015 december 31, 2014 ($ millions) cost fair value cost fair value

Available for sale Proprietary investment funds $ 12.9 $ 13.3 $ 9.6 $ 10.2

Fair value through profit or loss Equity securities 10.9 11.6 11.0 10.2 Proprietary investment funds 75.5 81.0 66.4 69.1

86.4 92.6 77.4 79.3

$ 99.3 $ 105.9 $ 87.0 $ 89.5




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operations with cash proceeds of $594.9 million compared to $534.2 million in 2014. Additional information related to the Company’s securitization activities, including the Company’s hedges of related reinvestment and interest rate risk, can be found in the Financial Instruments Risk section of this MD&A and in Note 4 of the Interim Financial Statements.

INVESTMENT IN AFFILIATE

Investment in affiliate represents the Company’s 4% equity interest in Great-West Lifeco Inc. (Lifeco). IGM Financial and Lifeco are controlled by Power Financial Corporation. The equity method is used to account for IGM Financial’s investment in Lifeco, as it exercises significant influence. The Company’s proportionate share of Lifeco’s earnings is recorded in Net investment income and other in the Corporate and other reportable segment. Changes in the carrying value for the six months ended June 30, 2015 compared with 2014 are shown in Table 19.

elements of credit risk and prepayment risk associated with the transferred assets. The Company’s credit risk on its securitized mortgages is mitigated through the use of insurance. Derecognition of financial assets in accordance with IFRS is based on the transfer of risks and rewards of ownership. As the Company has retained prepayment risk and certain elements of credit risk associated with the Company’s securitization transactions through the CMB and ABCP programs, they are accounted for as secured borrowings. The Company records the transactions under these programs as follows: (i) the mortgages and related obligations are carried at amortized cost, with interest income and interest expense, utilizing the effective interest rate method, recorded over the term of the mortgages, (ii) the component of swaps entered into under the CMB Program whereby the Company pays coupons on Canada Mortgage Bonds and receives investment returns on the reinvestment of repaid mortgage principal, are recorded at fair value, and (iii) cash reserves held under the ABCP program are carried at amortized cost. In the second quarter of 2015, the Company securitized loans through its mortgage banking

TABLE 18: LOANS

2015 2014 ($ millions) june 30 december 31

Loans and receivables $ 6,643.3 $ 6,653.5 Less: Collective allowance 0.6 0.8

6,642.7 6,652.7Held for trading 553.9 366.2

$ 7,196.6 $ 7,018.9

TABLE 19: INVESTMENT IN AFFILIATE

Six months ended 2015 2014 ($ millions) jun. 30 jun. 30

Carrying value, beginning of period $ 794.4 $ 717.8 Proportionate share of earnings 55.4 43.4 Dividends received (25.9) (24.4) Proportionate share of other comprehensive income (loss) and other adjustments 14.1 37.4

Carrying value, end of period $ 838.0 $ 774.2

Fair value, end of period $ 1,444.9 $ 1,196.5




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LIQUIDITY

Cash and cash equivalents totalled $903.8 million at June 30, 2015 compared with $1.22 billion at December 31, 2014 and $917.9 million at June 30, 2014. Cash and cash equivalents related to the Company’s deposit operations were $4.5 million at June 30, 2015, unchanged from December 31, 2014, and compared with $5.6 million at June 30, 2014, as shown in Table 20. Working capital totalled $1,160.7 million at June 30, 2015 compared with $1,196.4 million at December 31, 2014 and $1,227.1 million at June 30, 2014. Working capital excludes the Company’s deposit operations. 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 repurchases related to the

Company’s normal course issuer bid. IGM Financial continues to generate significant cash flows from its operations. Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) totalled $349.4 million in the

second quarter of 2015 compared to $349.5 million in the second quarter of 2014 and $348.9 million in the first quarter of 2015. Adjusted EBITDA totalled $698.3 million for the six months ended June 30, 2015 compared to $694.5 million in 2014. Adjusted EBITDA for each period under review excludes the impact of amortization of deferred selling commissions which totalled $57.9 million in the second quarter of 2015 compared to $58.2 million in the second quarter of 2014 and $58.7 million in the first quarter of 2015. As well as being an important alternative measure of performance, EBITDA is a common measure utilized by investment analysts and credit rating agencies in reviewing asset management companies. Refer to the Financial Instruments Risk section of this MD&A for information related to other sources of liquidity and to the Company’s exposure to and management of liquidity and funding risk.

Cash FlowsTable 21 – Cash Flows is a summary of the Consolidated Statements of Cash Flows which forms part of the Interim Financial Statements for the three and six months ended June 30, 2015. Cash and cash equivalents decreased by $219.1 million in the quarter compared to a decrease of $210.2 million in 2014. For the six month period, cash and cash equivalents decreased by $312.2 million in 2015 compared to a decrease of $164.5 million in 2014.

Consolidated Liquidity and Capital Resources

TABLE 20: DEPOSIT OPERATIONS – FINANCIAL POSITION

2015 2014 2014 ($ millions) jun. 30 dec. 31 jun. 30

Assets Cash and cash equivalents $ 4.5 $ 4.5 $ 5.6 Accounts and other receivables 249.1 204.4 181.1 Loans 23.9 25.0 28.1

Total assets $ 277.5 $ 233.9 $ 214.8

Liabilities and shareholders’ equity Deposit liabilities $ 266.4 $ 223.3 $ 201.8 Other liabilities 0.5 0.7 0.8 Shareholders’ equity 10.6 9.9 12.2

Total liabilities and shareholders’ equity $ 277.5 $ 233.9 $ 214.8




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Operating activities, before payment of commissions, generated $215.4 million and $431.9 million during the three and six month periods ended June 30, 2015, as compared to $227.1 million and $410.5 million in 2014. Cash commissions paid were $59.7 million and $144.5 million for the three and six month periods in 2015 compared to $58.8 million and $141.0 million in 2014. Cash flows from operating activities, net of commissions paid, were $155.7 million and $287.4 million for the three and six month periods in 2015 as compared to $168.3 million and $269.5 million in 2014. Financing activities during the second quarter of 2015 compared to 2014 related to:• A net increase of $13.9 million in deposits and

certificates in 2015 compared to a net increase of $12.1 million in 2014.

• A net increase of $105.6 million in 2015 arising from obligations to securitization entities compared to a net increase of $190.3 million in 2014.

• Proceeds received on the issuance of common shares of $0.1 million in 2015 compared with $7.2 million in 2014.

• The purchase of 2,935,500 common shares in 2015 under IGM Financial’s normal course issuer bid at a cost of $127.8 million compared with the purchase of 315,000 common shares at a cost of $16.4 million in 2014.

• The payment of perpetual preferred share dividends which totalled $2.2 million in 2015, unchanged from 2014.

• The payment of regular common share dividends which totalled $141.0 million in 2015 compared to $135.7 million in 2014.

Financing activities during the six months ended June 30, 2015 compared to 2014 related to:• A net increase of $43.1 million in deposits and

certificates in 2015 compared to a net increase of $15.4 million in 2014.

• A net increase of $43.9 million in 2015 arising from obligations to securitization entities compared to a net increase of $345.8 million in 2014.

• Proceeds received on the issuance of common shares of $12.3 million in 2015 compared with $21.9 million in 2014.

• The purchase of 4,320,500 common shares in 2015 under IGM Financial’s normal course issuer bid at a cost of $189.9 million compared with the purchase of 625,000 common shares at a cost of $33.2 million in 2014.

• The payment of perpetual preferred share dividends which totalled $4.4 million in 2015, unchanged from 2014.

• The payment of regular common share dividends which totalled $282.4 million in 2015 compared to $271.3 million in 2014.

TABLE 21: CASH FLOWS

three months ended june 30 six months ended june 30

($ millions) 2015 2014 % change 2015 2014 % change

Operating activities Before payment of commissions $ 215.4 $ 227.1 (5.2) % $ 431.9 $ 410.5 5.2 % Commissions paid (59.7) (58.8) (1.5) (144.5) (141.0) (2.5)

Net of commissions paid 155.7 168.3 (7.5) 287.4 269.5 6.6Financing activities (151.4) 55.2 n/m (377.4) 74.1 n/mInvesting activities (223.4) (433.7) 48.5 (222.2) (508.1) 56.3

Decrease in cash and cash equivalents (219.1) (210.2) (4.2) (312.2) (164.5) (89.8)Cash and cash equivalents, beginning of period 1,122.9 1,128.1 (0.5) 1,216.0 1,082.4 12.3

Cash and cash equivalents, end of period $ 903.8 $ 917.9 (1.5) % $ 903.8 $ 917.9 (1.5) %




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Investing activities during the second quarter of 2015 compared to 2014 primarily related to:• The purchases of securities totalling $60.2 million

and sales of securities with proceeds of $41.9 million in 2015 compared to $25.7 million and $15.3 million, respectively, in 2014.

• A net increase in loans of $177.1 million in 2015 compared to a net increase of $410.9 million in 2014 primarily related to residential mortgages in the Company’s mortgage banking operations.

Investing activities during the six months ended June 30, 2015 compared to 2014 primarily related to:• The purchases of securities totalling $70.2 million

and sales of securities with proceeds of $63.7 million in 2015 compared to $32.6 million and $26.0 million, respectively, in 2014.

• A net increase in loans of $169.2 million in 2015 compared to a net increase of $479.3 million in 2014 primarily related to residential mortgages in the Company’s mortgage banking operations.

CAPITAL RESOURCES

The Company’s capital management objective is to maximize shareholder returns while ensuring that the Company is capitalized in a manner which appropriately supports regulatory requirements, working capital needs and business expansion. The Company’s capital management practices are focused on preserving the quality of its financial position by maintaining a solid capital base and a strong balance sheet. Capital of the Company consists of long-term debt, perpetual preferred shares and common shareholders’ equity which totalled $6.1 billion at June 30, 2015, compared to $6.2 billion at December 31, 2014. The Company regularly assesses its capital management practices in response to changing economic conditions. The Company’s capital is primarily utilized in its ongoing business operations to support working capital requirements, long-term investments made by the Company, business expansion and other strategic objectives. Subsidiaries subject to regulatory capital requirements include investment dealers, mutual fund dealers, exempt market dealers, portfolio managers, investment fund managers and a trust company. These subsidiaries are required to maintain minimum levels of capital based on either working capital, liquidity or shareholders’ equity. The Company’s subsidiaries have complied with all regulatory capital requirements.

The total outstanding long-term debt was $1,325.0 million at June 30, 2015, unchanged from December 31, 2014. Long-term debt is comprised of debentures which are senior unsecured debt obligations of the Company subject to standard covenants, including negative pledges, but which do not include any specified financial or operational covenants. Perpetual preferred shares of $150 million at June 30, 2015 remain unchanged from December 31, 2014. The Company purchased 4,320,500 common shares during the six months ended June 30, 2015 at a cost of $189.9 million under its normal course issuer bid (refer to Note 5 to the Interim Financial Statements). The Company commenced a normal course issuer bid on March 20, 2015 to purchase up to 5% of its common shares in order to mitigate the dilutive effect of stock options issued under the Company’s stock option plan and for other capital management purposes. Other activities in the first six months of 2015 included the declaration of perpetual preferred share dividends of $4.4 million or $0.7375 per share and common share dividends of $280.2 million or $1.125 per share. Changes in common share capital are reflected in the Consolidated Statements of Changes in Shareholders’ Equity. In connection with its normal course issuer bid, the Company has established an automatic securities purchase plan for its common shares. The automatic securities purchase plan provides standard instructions regarding how IGM Financial’s common shares are to be purchased under its normal course issuer bid during certain pre-determined trading blackout periods. Outside of these pre-determined trading blackout periods, purchases under the Company’s normal course issuer bid will be completed based upon management’s discretion. The current rating by Standard & Poor’s (S&P) of the Company’s senior debt and liabilities is “A” with a stable outlook. Dominion Bond Rating Service’s (DBRS) current rating on the Company’s senior unsecured debentures is “A (High)” with a stable rating trend. Credit ratings are intended to provide investors with an independent measure of the credit quality of the securities of a company and are indicators of the likelihood of payment and the capacity of a company to meet its obligations in accordance with the terms of each obligation. Descriptions of the rating categories for each of the agencies set forth below have been obtained from the respective rating agencies’ websites.




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These ratings are not a recommendation to buy, sell or hold the securities of the Company and do not address market price or other factors that might determine suitability of a specific security for a particular investor. The ratings also may not reflect the potential impact of all risks on the value of securities and are subject to revision or withdrawal at any time by the rating organization. The A rating assigned to IGM Financial’s senior unsecured debentures by S&P is the sixth highest of the 22 ratings used for long-term debt. This rating indicates S&P’s view that the Company’s capacity to meet its financial commitment on the obligation is strong, but the obligation is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. According to S&P, the “Stable” rating outlook means that S&P considers that the rating is unlikely to change over the intermediate term. The A (High) rating assigned to IGM Financial’s senior unsecured debentures by DBRS is the fifth highest of the 26 ratings used for long-term debt. Under the DBRS long-term rating scale, debt securities rated A (High) are of good credit quality and the capacity for the

payment of financial obligations is substantial. While this is a favourable rating, entities in the A (High) category may be vulnerable to future events, but qualifying negative factors are considered manageable. According to DBRS, the “Stable” rating trend helps give investors an understanding of DBRS’s opinion regarding the outlook for the rating.


Table 22 presents the carrying amounts and fair values of financial assets and financial liabilities. The table excludes fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. These items include cash and cash equivalents, accounts and other receivables, certain other financial assets, accounts payable and accrued liabilities, and certain other financial liabilities. Fair value is determined using the following methods and assumptions:• Securities and other financial assets and liabilities

are valued using quoted prices from active markets, when available. When a quoted market price is not

TABLE 22: FINANCIAL INSTRUMENTS

june 30, 2015 december 31, 2014 ($ millions) carrying value fair value carrying value fair value

Financial assets recorded at fair value Securities – Available for sale $ 13.3 $ 13.3 $ 10.2 $ 10.2 – Held for trading 92.6 92.6 79.3 79.3 Loans – Held for trading 553.9 553.9 366.2 366.2 Derivative financial instruments 61.0 61.0 39.4 39.4 Other financial assets 9.3 9.3 – –Financial assets recorded at amortized cost Loans – Loans and receivables 6,642.7 6,922.3 6,652.7 6,849.3Financial liabilities recorded at fair value Derivative financial instruments 59.6 59.6 29.8 29.8 Other financial liabilities 7.0 7.0 6.6 6.6Financial liabilities recorded at amortized cost Deposits and certificates 266.4 267.9 223.3 225.3 Obligations to securitization entities 6,798.6 7,115.0 6,754.0 6,858.9 Long-term debt 1,325.0 1,685.0 1,325.0 1,682.0




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readily available, valuation techniques are used that require assumptions related to discount rates and the timing and amount of future cash flows. Wherever possible, observable market inputs are used in the valuation techniques.

• Loans classified as held for trading are valued using market interest rates for loans with similar credit risk and maturity.

• Loans classified as loans and receivables are valued by discounting the expected future cash flows at prevailing market yields.

• Obligations to securitization entities are valued by discounting the expected future cash flows at prevailing market yields for securities issued by these securitization entities having similar terms and characteristics.

• Deposits and certificates are valued by discounting the contractual cash flows using market interest rates

currently offered for deposits with similar terms and credit risks.

• Long-term debt is valued using quoted prices for each debenture available in the market.

• Derivative financial instruments are valued based on quoted market prices, where available, prevailing market rates for instruments with similar characteristics and maturities, or discounted cash flow analysis.

See Note 10 of the Interim Financial Statements which provides additional discussion on the determination of fair value of financial instruments. Although there were changes to both the carrying values and fair values of financial instruments, these changes did not have a material impact on the financial condition of the Company for the six months ended June 30, 2015.




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The Company is exposed to a variety of risks that are inherent in its business activities. The Company’s ability to manage these risks is key to its ongoing success and includes emphasizing a strong risk management culture and effective risk management approach. The Company’s risk management approach coordinates risk management across the organization and its business units and seeks to ensure prudent and measured risk-taking in order to achieve an appropriate balance between risk and return. The Company’s risk governance structure emphasizes a comprehensive and consistent framework throughout the Company and its subsidiaries, with clearly identified ownership of risk management in each business unit and oversight by an executive Risk Management Committee accountable to the Executive Committee of the Board. Additional oversight is provided by a Risk Management Department, corporate and sales compliance groups, and the Company’s Internal Audit Department. The Board of Directors provides oversight and carries out its risk management mandate primarily through the following committees:• The Executive Committee is responsible for

the oversight of enterprise risk management by: i) ensuring that appropriate procedures are in place to identify and manage risks and establish risk tolerances, ii) ensuring that appropriate policies, procedures and controls are implemented to manage risks, and iii) reviewing the risk management process on a regular basis to ensure that it is functioning effectively.

• The Investment Committee oversees management of the Company’s financial risks, being market risk, credit risk, and liquidity and funding risk by: i) ensuring that appropriate procedures are in place to identify and manage financial risks in accordance with tolerances, ii) monitoring the implementation and maintenance of appropriate policies, procedures and controls to manage financial risks, and iii) reviewing the financial risk management process on a regular basis to ensure that it is functioning effectively.

• The Audit Committee has specific risk oversight responsibilities as it oversees financial disclosure, internal controls and the control environment as well as the Company’s compliance activities.

• Other committees having specific risk oversight responsibilities include: i) the Compensation Committee which oversees compensation policies

and practices, ii) the Governance and Nominating Committee which oversees corporate governance practices, and iii) the Related Party and Conduct Review Committee which oversees conflicts of interest and recommends to the Board a code of business conduct and ethics.

The executive Risk Management Committee is comprised of the Co-Presidents and Chief Executive Officers, the Chief Financial Officer, and the General Counsel and Chief Compliance Officer. The committee is responsible for providing oversight of the Company’s risk management process by: i) establishing and maintaining the risk framework and policy, ii) defining the Company’s risk appetite, iii) ensuring the Company’s risk profile and processes are aligned with corporate strategy and risk appetite, and iv) establishing “tone at the top” and reinforcing a strong culture of risk management. The Chief Executive Officers of the respective operating companies, being Investors Group, Mackenzie and Investment Planning Counsel, have overall responsibility for overseeing risk management of their respective companies. The leaders of the various business units and support functions have primary ownership and accountability for the ongoing risk management associated with their respective activities. Responsibilities of business unit and support function leaders include: i) establishing and maintaining procedures for the identification, assessment, documentation and escalation of risks, ii) implementing control activities to mitigate risks, iii) identifying opportunities for risk reduction or transfer, and iv) aligning business and operational strategies with the risk culture and risk appetite of the organization as established by the Risk Management Committee. The Risk Management Department provides oversight, analysis and reporting on the level of risks relative to the established risk appetite to the Risk Management Committee. Other responsibilities include: i) developing and maintaining the enterprise risk management program and framework, ii) managing the enterprise risk management process, and iii) providing guidance and training to business unit and support function leaders. A Technical Review Committee of senior business leaders supports the Risk Management Department by performing critical reviews of risk assessments developed by business units and support functions. Other oversight accountabilities reside with the Company’s: a) corporate and sales

Risk Management




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compliance groups – which are responsible for ensuring compliance with policies, laws and regulations, and b) financial risk management function – which is independent from the Treasury Department and is responsible for assessing financial risk management processes and exposures and monitoring compliance with the Investment Policy and other relevant policies. The Internal Audit Department provides independent assurance to senior management and the Board of Directors on the effectiveness of risk management policies, processes and practices.


The Company actively manages risks that arise as a result of holding financial instruments which include liquidity and funding risk, credit risk and market risk.

Liquidity and Funding RiskLiquidity and funding risk is the risk of the inability to generate or obtain sufficient cash in a timely and cost-effective manner to meet contractual or anticipated commitments as they come due or arise. The Company’s liquidity management practices 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 2015 and 2014, the Company:• Continued to expand our funding channels by

issuing National Housing Act Mortgage-Backed Securities (NHA MBS) to multiple purchasers.

• 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 be paid from operating cash flows. The Company also maintains sufficient liquidity to fund and temporarily hold mortgages. Through its mortgage banking operations, residential mortgages are sold to third parties including certain mutual funds, institutional investors through private placements, Canadian bank-sponsored securitization trusts, and by issuance and sale of NHA MBS securities including sales to Canada Housing Trust under the CMB Program. Certain subsidiaries of the Company are approved issuers of NHA MBS and are approved sellers into

the CMB Program. Capacity for sales under the CMB Program consists of participation in new CMB issues and reinvestment of principal repayments held in Principal Reinvestment Accounts. The Company maintains committed capacity within certain Canadian bank-sponsored securitization trusts. The Company’s continued ability to fund residential mortgages through Canadian bank-sponsored securitization trusts and NHA MBS is dependent on securitization market conditions that are subject to change. A condition of the NHA MBS and CMB Program is that securitized loans be insured by an insurer that is approved by CMHC. The availability of mortgage insurance is dependent upon market conditions that are subject to change. The Company’s contractual obligations are reflected in Table 23. In addition to IGM Financial’s current balance of cash and cash equivalents, liquidity is available through the Company’s lines of credit. The Company’s lines of credit with various Schedule I Canadian chartered banks totalled $525 million as at June 30, 2015, unchanged from December 31, 2014. The lines of credit as at June 30, 2015 consisted of committed lines of $350 million (2014 – $350 million) and uncommitted lines of $175 million (2014 – $175 million). The Company has accessed its uncommitted lines of credit in the past; however, any advances made by a bank under the uncommitted lines of credit are at the bank’s sole discretion. As at June 30, 2015 and December 31, 2014, the Company was not utilizing its committed lines of credit or its uncommitted lines of credit. The last actuarial valuation for funding purposes related to the Company’s registered defined benefit pension plan was based on a measurement date of December 31, 2013. Based on the actuarial valuation, the registered pension plan had a solvency deficit of $23.4 million which is required to be funded over five years. The annual contributions are $19.7 million and include annual current service costs of $13.4 million. The Company has made contributions of $8.2 million in 2015 (2014 – $12.5 million). Pension contribution decisions are subject to change, as contributions are affected by many factors including market performance, regulatory requirements, changes in assumptions and management’s ability to change funding policy. The next required actuarial valuation will be based on a measurement date of December 31, 2016.




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Management believes cash flows from operations, available cash balances and other sources of liquidity described above are sufficient to meet the Company’s liquidity needs. The Company continues to have the ability to meet its operational cash flow requirements, its contractual obligations, and its declared dividends. The current practice of the Company is to declare and pay dividends to common shareholders on a quarterly basis at the discretion of the Board of Directors. The declaration of dividends by the Board of Directors is dependent on a variety of factors, including earnings which are significantly influenced by the impact that debt and equity market performance has on the Company’s fee income and commission and certain other expenses. The Company’s liquidity position and its management of liquidity and funding risk have not changed materially since December 31, 2014.

Credit RiskCredit risk is the potential for financial loss to the Company if a counterparty to a transaction fails to meet its obligations. The Company’s cash and cash equivalents, securities holdings, mortgage portfolios, and derivatives are subject to credit risk. The Company monitors its credit risk management practices on an ongoing basis to evaluate their effectiveness. At June 30, 2015, cash and cash equivalents of $903.8 million (December 31, 2014 – $1,216.0 million) consisted of cash balances of $61.0 million (December 31, 2014 – $106.8 million) on deposit with Canadian chartered banks and cash equivalents of $842.8 million

(December 31, 2014 – $1,109.2 million). Cash equivalents are comprised of Government of Canada treasury bills totalling $37.4 million (December 31, 2014 – $190.8 million), provincial government and government guaranteed commercial paper of $465.3 million (December 31, 2014 – $665.8 million) and bankers’ acceptances issued by Canadian chartered banks of $340.1 million (December 31, 2014 – $252.6 million). The Company regularly reviews the credit ratings of its counterparties. The maximum exposure to credit risk on these financial instruments is their carrying value. The Company manages credit risk related to cash and cash equivalents by adhering to its Investment Policy that outlines credit risk parameters and concentration limits. As at June 30, 2015, residential mortgages, recorded on the Company’s balance sheet, of $7.2 billion (December 31, 2014 – $7.0 billion) consisted of $6.6 billion sold to securitization programs (December 31, 2014 – $6.6 billion), $553.9 million held pending sale or securitization (December 31, 2014 – $366.2 million) and $27.6 million related to the Company’s intermediary operations (December 31, 2014 – $29.5 million). The Company manages credit risk related to residential mortgages through: • Its lending policy, underwriting standards, and loan

servicing capabilities; • Use of client-insured mortgage default insurance

and mortgage portfolio default insurance held by the Company; and

• Its practice of originating its mortgages exclusively through its own network of Investors Group

TABLE 23: CONTRACTUAL OBLIGATIONS

As at June 30, 2015 less than 1 – 5 after ($ millions) demand 1 year years 5 years total

Derivative financial instruments $ – $ 16.8 $ 42.8 $ – $ 59.6Deposits and certificates 248.5 6.1 8.4 3.4 266.4Obligations to securitization entities – 1,511.1 5,243.2 44.3 6,798.6Long-term debt – – 525.0 800.0 1,325.0Operating leases(1) – 55.3 146.5 41.2 243.0Pension funding(2) – 11.5 19.7 – 31.2

Total contractual obligations $ 248.5 $ 1,600.8 $ 5,985.6 $ 888.9 $ 8,723.8

(1) Includes office space and equipment used in the normal course of business. Lease payments are charged to earnings in the period of use.(2) The next required actuarial valuation will be completed based on a measurement date of December 31, 2016. Pension funding requirements beyond 2016 are subject to

significant variability and will be determined based on future actuarial valuations. Pension contribution decisions are subject to change, as contributions are affected by many factors including market performance, regulatory requirements, changes in assumptions and management’s ability to change funding policy.




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Consultants and Mortgage Planning Specialists as part of a client’s comprehensive financial plan.

In certain instances, credit risk is also limited by the terms and nature of securitization transactions as described below: • Under the NHA MBS program totalling $4.6 billion

(December 31, 2014 – $4.6 billion), the Company is obligated to make timely payment of principal and coupons irrespective of whether such payments were received from the mortgage borrower. However, as required by the NHA MBS program, 100% of the loans are insured by an approved insurer.

• Credit risk for mortgages securitized by transfer to bank-sponsored securitization trusts totalling $2.0 billion (December 31, 2014 – 2.0 billion) is limited to amounts held in cash reserve accounts and future net interest income, the fair values of which were $34.3 million (December 31, 2014 - $35.1 million) and $30.0 million (December 31, 2014 – $30.0 million) respectively, at June 30, 2015. Cash reserve accounts are reflected on the balance sheet, whereas rights to future net interest income are not reflected on the balance sheet and will be recorded over the life of the mortgages. This risk is further mitigated by insurance with 48.8% of mortgages held in ABCP Trusts insured at June 30, 2015 (December 31, 2014 – 51.0%).

At June 30, 2015, residential mortgages recorded on balance sheet totalling $7.2 billion (December 31, 2014 – $7.0 billion) were 81.5% insured (December 31, 2014 – 83.7%). As at June 30, 2015, impaired mortgages on these portfolios were $2.7 million, compared to $2.1 million at December 31, 2014. Uninsured non-performing mortgages over 90 days on these portfolios were $1.0 million at June 30, 2015, compared to $0.3 million at December 31, 2014. The Company also retains certain elements of credit risk on mortgage loans sold to the Investors Mortgage and Short Term Income Fund and to the Investors Canadian Corporate Bond Fund through an agreement to repurchase mortgages in certain circumstances benefiting the funds. These loans are not recorded on the Company’s balance sheet as the Company has transferred substantially all of the risks and rewards of ownership associated with these loans. The Company regularly reviews the credit quality of the mortgages and the adequacy of the collective allowance for credit losses.

The Company’s collective allowance for credit losses was $0.6 million at June 30, 2015, compared to $0.8 million at December 31, 2014, and is considered adequate by management to absorb all credit-related losses in the mortgage portfolios based on: i) historical credit performance experience and recent trends, ii) current portfolio credit metrics and other relevant characteristics, and iii) regular stress testing of losses under adverse real estate market conditions. The Company’s exposure to and management of credit risk related to cash and cash equivalents, fixed income securities and mortgage portfolios have not changed materially since December 31, 2014. The Company is exposed to credit risk through derivative contracts it utilizes to hedge interest rate risk, to facilitate securitization transactions, and to hedge market risk related to certain stock-based compensation arrangements. These derivatives are discussed more fully under the Market Risk section of this MD&A. To the extent that the fair value of the derivatives is in a gain position, the Company is exposed to credit risk that its counterparties fail to fulfill their obligations under these arrangements. The aggregate credit risk exposure related to derivatives that are in a gain position of $61.3 million (December 31, 2014 – $43.3 million) does not give effect to any netting agreements or collateral arrangements. The exposure to credit risk, considering netting agreements and collateral arrangements and including rights to future net interest income, was $2.1 million at June 30, 2015 (December 31, 2014 – $2.5 million). Counterparties are all Canadian Schedule I chartered banks and, as a result, management has determined that the Company’s overall credit risk related to derivatives was not significant at June 30, 2015. Management of credit risk related to derivatives has not changed materially since December 31, 2014. Additional information related to the Company’s securitization activities and utilization of derivative contracts can be found in Note 4 of the Interim Financial Statements and Notes 2, 6 and 21 to the Annual Financial Statements.

Market RiskMarket risk is the potential for loss to the Company from changes in the values of its financial instruments due to changes in foreign exchange rates, interest rates or equity prices. The Company’s financial instruments are generally denominated in Canadian dollars, and




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do not have significant exposure to changes in foreign exchange rates.

Interest Rate RiskThe Company is exposed to interest rate risk on its loan portfolio and on certain of the derivative financial instruments used in the Company’s mortgage banking operations. The Company utilizes interest rate swaps with Canadian Schedule I chartered bank counterparties in order to reduce the impact of fluctuating interest rates on its mortgage banking operations, as follows:• The Company has in certain instances funded floating

rate mortgages with fixed rate Canada Mortgage Bonds as part of the securitization transactions under the CMB Program. As previously discussed, as part of the CMB Program, the Company is party to a swap whereby it is entitled to receive investment returns on reinvested mortgage principal and is obligated to pay Canada Mortgage Bond coupons. This swap had a negative fair value of $46.3 million (December 31, 2014 – negative $26.3 million) and an outstanding notional value of $558 million at June 30, 2015 (December 31, 2014 – $437 million). The Company enters into interest rate swaps with Canadian Schedule I chartered banks to hedge the risk that the interest rates earned on floating rate mortgages and reinvestment returns decline. The fair value of these swaps totalled $55.7 million (December 31, 2014 – $35.2 million), on an outstanding notional amount of $1.9 billion at June 30, 2015 (December 31, 2014 – $2.0 billion). The net fair value of these swaps of $9.4 million at June 30, 2015 (December 31, 2014 – $8.9 million) are recorded on balance sheet and have an outstanding notional amount of $2.4 billion (December 31, 2014 – $2.4 billion).

• The Company is exposed to the impact that changes in interest rates may have on the value of mortgages held, or committed to, by the Company. The Company enters into interest rate swaps to hedge the interest rate risk related to funding costs for mortgages held by the Company pending sale or securitization. The negative fair value of these swaps totalled $1.1 million (December 31, 2014 – negative $0.5 million) on an outstanding notional amount of $148 million at June 30, 2015 (December 31, 2014 – $101 million).

As at June 30, 2015, the impact to annual net earnings of a 100 basis point increase in interest

rates would have been a decrease of approximately $2.5 million (2014 – an increase of $0.7 million). The Company’s exposure to and management of interest rate risk have not changed materially since December 31, 2014.

Equity Price RiskThe Company is exposed to equity price risk on its proprietary investment funds which are classified as available for sale securities and on its equity securities and proprietary investment funds which are classified as fair value through profit or loss, as shown in Table 17. Unrealized gains and losses on available for sale securities are recorded in Other comprehensive income until they are realized or until management determines there is objective evidence of impairment in value, at which time they are recorded in the Consolidated Statements of Earnings. The Company sponsors a number of deferred compensation arrangements where payments to participants are linked to the performance of the common shares of IGM Financial Inc. The Company hedges this risk through the use of forward agreements and total return swaps.

RISKS RELATED TO ASSETS UNDER MANAGEMENT

At June 30, 2015, IGM Financial’s total assets under management were $136.0 billion compared to $141.9 billion at December 31, 2014. The Company is subject to the risk of asset volatility from changes in the Canadian and global financial and equity markets. Changes in these markets have caused in the past, and will cause in the future, changes in the Company’s assets under management, revenues and earnings. Global economic conditions, exacerbated by financial crises, changes in the equity marketplace, currency exchange rates, interest rates, inflation rates, the yield curve, defaults by derivative counterparties and 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 be subject to unanticipated redemptions as a result of such events. Changing market conditions may also cause a shift in asset mix between equity and fixed income assets due to market and income as well as net cash flows, potentially resulting in a decline in the Company’s




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revenue and earnings depending upon the nature of the assets under management and the level of management fees earned. Interest rates at unprecedented low levels have significantly decreased the yields of the Company’s money market and managed yield mutual funds. Since 2009, Investors Group and Mackenzie have waived a portion of investment management fees or absorbed some expenses to ensure that these funds maintained positive yields. The Company continuously reviews its practices in this regard in response to changing market conditions. Redemption rates for long-term funds are summarized in Table 25 and are discussed in the Investors Group and Mackenzie Segment Operating Results sections of this MD&A. IGM Financial provides Consultants, independent financial advisors, and strategic alliance and institutional clients with a high level of service and support and a broad range of investment products based on

asset classes, countries or regions, and investment management styles which, in turn, should result in maintaining strong client relationships and lower rates of redemptions. The Company’s subsidiaries also continually review product pricing to ensure competitiveness in the marketplace in relation to the nature and quality of services provided. The mutual fund industry and financial advisors continue to take steps to educate Canadian investors on the merits of financial planning, diversification and long-term investing. In periods of volatility Consultants and independent financial advisors play a key role in assisting investors to maintain perspective and focus on their long-term objectives.

OTHER RISK FACTORS

Distribution RiskInvestors Group Consultant network – Investors Group derives all of its mutual fund sales through its

TABLE 24: ASSETS UNDER MANAGEMENT – ASSET AND CURRENCY MIX

consolidated As at June 30, 2015 mutual funds total

Cash 0.9 % 1.2 %Short-term fixed income and mortgages 8.0 7.9 Other fixed income 23.3 24.2 Domestic equity 31.1 30.5 Foreign equity 33.6 33.2 Real Property 3.1 3.0

100.0 % 100.0 %

CAD 64.8 % 64.2 %USD 23.0 23.3 Other 12.2 12.5

100.0 % 100.0 %

TABLE 25: TWELVE MONTH TRAILING REDEMPTION RATE FOR LONG-TERM FUNDS

2015 2014 jun. 30 jun. 30

IGM Financial Inc. Investors Group 8.5 % 9.1 % Mackenzie 15.9 % 15.1 % Counsel 12.8 % 12.3 %




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Consultant network. Investors Group Consultants have regular direct contact with clients which can lead to a strong and personal client relationship based on the client’s confidence in that individual Consultant. The market for financial advisors is extremely competitive. The loss of a significant number of key Consultants could lead to the loss of client accounts which could have an adverse effect on Investors Group’s results of operations and business prospects. Investors Group is focused on growing its distribution network of Consultants and on responding to the complex financial needs of its clients by delivering a diverse range of products and services in the context of personalized financial advice, as discussed in the Investors Group Review of the Business section of this MD&A. Mackenzie – Mackenzie derives the majority of its mutual fund sales through third party financial advisors. Financial advisors generally offer their clients investment products in addition to, and in competition with Mackenzie. Mackenzie also derives sales of its investment products and services from its strategic alliance and institutional clients. Due to the nature of the distribution relationship in these relationships and the relative size of these accounts, gross sale and redemption activity can be more pronounced in these accounts than in a retail relationship. Mackenzie’s ability to market its investment products is highly dependent on continued access to these distribution networks. The inability to have such access could have a material adverse effect on Mackenzie’s operating results and business prospects. Mackenzie is well positioned to manage this risk and to continue to build and enhance its distribution relationships. Mackenzie’s diverse portfolio of financial products and its long-term investment performance record, marketing, educational and service support has made Mackenzie one of Canada’s leading investment management companies. These factors are discussed further in the Mackenzie Review of the Business section of 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 and territorial governments in Canada which regulate the Company and its activities. The Company and its subsidiaries are also subject to the requirements of self-regulatory organizations to which they belong. These and other regulatory bodies regularly adopt

new laws, rules, regulations and policies that apply to the Company and its subsidiaries. These requirements include those that apply to IGM Financial as a publicly traded company and those that apply to the Company’s subsidiaries based on the nature of their activities. They include regulations related to securities markets, the provision of financial products and services, including fund management, distribution, insurance and mortgages, and other activities carried on by the Company in the markets in which it operates. Regulatory standards affecting the Company and the financial services industry are significant and are being continually enhanced. The Company and its subsidiaries are subject to regulatory reviews as part of the normal ongoing process of oversight by the various regulators. Failure to comply with laws, rules or regulations could lead to regulatory sanctions and civil liability, and may have an adverse reputational or financial effect on the Company. The Company manages regulatory risk through its efforts to promote a strong culture of compliance. It monitors regulatory developments and their impact on the Company. It also continues to develop and maintain compliance policies, processes and oversight, including specific communications on compliance and legal matters, training, testing, monitoring and reporting. The Audit Committee of the Company receives regular reporting on compliance initiatives and issues. Particular regulatory initiatives may have the effect of making the products of the Company’s subsidiaries appear to be less competitive than the products of other financial service providers, to third party distribution channels and to clients. Regulatory differences that may impact the competitiveness of the Company’s products include regulatory costs, tax treatment, disclosure requirements, transaction processes or other differences that may be as a result of differing regulation or application of regulation. Regulatory developments may also impact product structures, pricing, dealer and advisor compensation. While the Company and its subsidiaries actively monitor such initiatives, and where feasible comment upon or discuss them with regulators, the ability of the Company and its subsidiaries to mitigate the imposition of differential regulatory treatment of financial products or services is limited. In March 2013, the Canadian Securities Administrators (CSA) adopted a new set of rules as Phase 2 of the Client Relationship Model that will




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require dealers, among other things, to provide their clients with enhanced information on the performance of their investments and the costs associated with them, including the compensation paid to the dealer (the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada have published rules that are to the same effect). These new requirements are effective for annual periods commencing no later than July 15, 2016 and comprise the following:• Performance and Rate of Return Reporting – Dealers

must provide clients with annual multiple-period performance information, including percentage rate of return results, on each of a client’s accounts. The rule mandates use of a dollar-weighted methodology which takes into consideration all cashflows into and out of the account and all underlying funds and investments. This prescribed calculation methodology is one that the Company supports. This approach ensures that client cashflows to, from, and within their accounts are properly reflected in the rate of return calculations. This provides a helpful view of the results of clients’ many decisions to save, invest, transfer between different investments and withdraw funds.

• Cost and Compensation Disclosure – Dealers must also provide clients with an annual report on all charges associated with their accounts, including direct and indirect compensation that the dealer receives related to a client’s account. These new requirements will provide important information to our clients and will build on already existing disclosure including information already provided through Fund Facts and the Management Report of Fund Performance (MRFP) related to distribution and fund management costs.

The CSA has been reviewing and conducting research related to Canada’s mutual fund fee structures. As part of this effort, the CSA awarded a contract to the research firm, Brondesbury Group, with a mandate to evaluate existing literature and determine if the use of fee-based versus commission-based compensation changes the nature of advice and investment outcomes over the long term. Commission-based compensation in this context means arrangements where a mutual fund sales commission is paid on a transaction and where dealer compensation is embedded within the mutual fund management expense ratio and trailer fees based

on assets are paid to the dealer by the product manager on an ongoing basis. Fee-based compensation in this context means dealer compensation is paid directly by the client, which often occurs as an advisory fee charged to the client account and expressed as an annual percentage of client assets. On June 11, 2015, the results of this comprehensive research were made public. One of the key conclusions from the research was: “Evidence on the impact of compensation is conclusive enough to justify the development of new compensation policies. All forms of compensation affect advice and outcomes. There is conclusive evidence that commission-based compensation creates problems that must be addressed. Fee-based compensation is likely a better alternative, but there is not enough evidence to state with certainty that it will lead to better long-term outcomes for investors.” The report also identifies gaps in the research and suggests that filling these gaps would improve policy formulation regarding compensation practices. One of the report’s observations states: “In our view, no empirical studies have been done to document whether investors have greater after-fee investment returns with fee-based compensation instead of commission-based compensation.” The cautions in this report will temper any research-based policy changes considered by the CSA. The Company believes this research, one of the most comprehensive and substantive reviews performed globally on the topic, is a valuable contribution to the discussion surrounding appropriate forms of compensation in the mutual fund and financial services industry. The CSA also awarded a contract to a professor from York University to further the research on mutual fund fee structures. The CSA requested mutual fund asset managers to provide extensive, historical mutual fund data from 2003 onwards, including sales, redemptions, performance, and fund fee related information on a fund by fund basis, with a response deadline of January 16, 2015. The Company provided the requested information by the deadline and it supports the CSA’s efforts to further its understanding of the importance mutual funds have in the investment needs of Canadians. The Company will continue to monitor developments and engage with the industry and regulators on any relevant findings or proposals that result from this research. In 2013, the Government of Canada, as part of its Economic Action Plan, indicated an intention to establish a common securities regulator for Canada’s




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capital markets working cooperatively with the provinces and territories. In September 2014, the Government of Canada published two proposed pieces of legislation to implement the cooperative capital markets regulatory system, namely the Provincial Capital Markets Act and the Capital Markets Stability Act. Comments on the proposed legislation closed in December 2014 and supporting regulations are expected to be issued for comment by the Government of Canada in the latter half of 2015. The Company is continuing to monitor this initiative and the potential effect it will have on its activities and those of its subsidiaries, particularly in the area of the regulation of mutual funds.

ContingenciesThe Company is subject to legal actions arising in the normal course of its business. Although it is difficult to predict the outcome of any such legal actions, based on current knowledge and consultation with legal counsel, management does not expect the outcome of any of these matters, individually or in aggregate, to have a material adverse effect on the Company’s consolidated financial position.

Acquisition RiskThe Company undertakes thorough due diligence prior to completing an acquisition, but there is no assurance that the Company will achieve the expected strategic objectives or cost and revenue synergies subsequent to an acquisition. Subsequent changes in the economic environment and other unanticipated factors may affect the Company’s ability to achieve expected earnings growth or expense reductions. The success of an acquisition is dependent on retaining assets under management, clients, and key employees of an acquired company.

Model RiskThe Company uses a variety of models to assist in: the valuation of financial instruments, operational scenario testing, management of cash flows, capital management, and assessment of potential acquisitions. These models incorporate internal assumptions, observable market inputs and available market prices. Effective controls exist over the development, implementation and application of these models. However, changes in the internal assumptions or other factors affecting the models could have an adverse effect on the Company’s consolidated financial position.




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50

THE FINANCIAL SERVICES ENVIRONMENT

Canadians held $3.6 trillion in discretionary financial assets with financial institutions at December 31, 2014 based on the most recent report from Investor Economics. The nature of holdings was diverse, ranging from demand deposits held for short-term cash management purposes to longer-term investments held for retirement purposes. Over 65% ($2.4 trillion) of these financial assets are held within the context of a relationship with a financial advisor, and this is the primary channel serving the longer-term savings needs of Canadians. Of the $1.2 trillion held outside of a financial advisory relationship, approximately 61% consisted of bank deposits. Financial advisors represent the primary distribution channel for the Company’s products and services, and the core emphasis of the Company’s business model is to support these financial advisors as they work with clients to plan for and achieve their financial goals. Multiple sources of emerging research show significantly better financial outcomes for Canadians who use financial advisors compared to those who do not. The Company actively promotes the value of financial advice and the importance of a relationship with an advisor to develop and remain focused on long-term financial plans and goals. Approximately 40% of Canadian discretionary financial assets or $1.4 trillion resided in investment funds at December 31, 2014, making it the largest financial asset class held by Canadians. Other asset types include deposit products and direct securities such as stocks and bonds. Approximately 77% of investment funds are comprised of mutual fund products, with other product categories including segregated funds, hedge funds, pooled funds, closed end funds and exchange traded funds. With $130 billion in mutual fund assets under management, the Company is among the country’s largest investment fund managers. Management believes that investment funds are likely to remain the preferred savings vehicle of Canadians. Investment funds provide investors with the benefits of diversification, professional management, flexibility and convenience, and are available in a broad range of mandates and structures to meet most investor requirements and preferences. Competition and technology have fostered a trend towards financial service providers offering a

comprehensive range of proprietary products and services. Traditional distinctions between bank branches, full service brokerages, financial planning firms and insurance agent sales forces have become obscured as many of these financial service providers strive to offer comprehensive financial advice implemented through access to a broad product shelf. Accordingly, the Canadian financial services industry is characterized by a number of large, diversified, vertically-integrated participants, similar to IGM Financial, who offer both financial planning and investment management services. Canadian banks distribute financial products and services through their traditional bank branches, as well as through their full service and discount brokerage subsidiaries. Bank branches continue to place increased emphasis on both financial planning and mutual funds. In addition, each of the “big six” banks has one or more mutual fund management subsidiaries. Collectively, mutual fund assets of the “big six” bank-owned mutual fund managers and affiliated firms represented 47% of total industry long-term mutual fund assets at June 30, 2015. As a result of consolidation activity in the last several years, the Canadian mutual fund management industry is characterized by large, often vertically-integrated, firms. The industry continues to be very concentrated, with the ten largest firms and their subsidiaries representing 72% of industry long-term mutual fund assets and 73% of total mutual fund assets under management at June 30, 2015. Management anticipates continuing consolidation in this segment of the industry as smaller participants are acquired by larger organizations. Management believes that the financial services industry will continue to be influenced by the following trends:• Shifting demographics as the number of Canadians

in their prime savings and retirement 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




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THE COMPETITIVE LANDSCAPE

IGM Financial and its subsidiaries operate in a highly competitive environment. Investors Group and Investment Planning Counsel compete directly with other retail financial service providers, including other financial planning firms, as well as full service brokerages, banks and insurance companies. Investors Group, Mackenzie and Investment Planning Counsel compete directly with other investment managers for assets under management, and their products compete with stocks, bonds and other asset classes for a share of the investment assets of Canadians. Competition from other financial service providers, alternative product types or delivery channels, and changes in regulations or public preferences could impact the characteristics of product and service offerings of the Company, including pricing, product structures, dealer and advisor compensation and disclosure. The Company monitors developments on an ongoing basis, and engages in policy discussions and develops product and service responses as appropriate. IGM Financial continues to focus on its commitment to provide quality investment advice and financial products, service innovations, effective management of the Company and long-term value for its clients and shareholders. Management believes that the Company is well-positioned to meet competitive challenges and capitalize on future opportunities. The Company enjoys several competitive strengths, including:• Broad and diversified distribution with an emphasis

on those channels emphasizing comprehensive financial planning through a relationship with a financial advisor.

• Broad product capabilities, leading brands and quality sub-advisory relationships.

• Enduring client relationships and the long-standing heritages and cultures of its subsidiaries.

• Benefits of being part of the Power Financial group of companies.

Broad and Diversified DistributionIGM Financial’s distribution strength is a competitive advantage. In addition to owning two of Canada’s largest financial planning organizations, Investors Group and Investment Planning Counsel, IGM Financial has, through Mackenzie, access to distribution through over 30,000 independent financial advisors. Mackenzie also, in its growing strategic alliance business, partners with Canadian and U.S. manufacturing and distribution complexes to provide investment management to a number of retail investment fund mandates.

Broad Product CapabilitiesIGM Financial’s subsidiaries continue to develop and launch innovative products and strategic investment planning tools to assist advisors in building optimized portfolios for clients.

Enduring RelationshipsIGM Financial enjoys significant advantages as a result of the enduring relationships that advisors enjoy with clients. In addition, the Company’s subsidiaries have strong heritages and cultures which are challenging for competitors to replicate.

Benefits of Being Part of the Power Financial Group of CompaniesAs part of the Power Financial group of companies, IGM Financial benefits through expense savings from shared service arrangements, as well as through access to distribution, products and capital.




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SUMMARY OF CRITICAL ACCOUNTING ESTIMATES

There were no changes to the Company’s assumptions related to critical accounting estimates from those reported at December 31, 2014. The Company completed its annual impairment tests of goodwill and indefinite life intangible assets based on March 31, 2015 financial information and determined there was no impairment in the value of those assets. The Company tests the fair value of goodwill and indefinite life intangible assets for impairment at least once a year and more frequently if an event or circumstance indicates the asset may be impaired. An impairment loss is recognized if the amount of the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash generating units). Finite life intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. These tests involve the use of estimates and assumptions appropriate in the circumstances. In assessing the recoverable amounts, valuation approaches are used that include discounted cash flow analysis and application of capitalization multiples to financial and operating metrics based upon precedent acquisition transactions and trading comparables. Assumptions and estimates employed include future changes in assets under management resulting from net sales and investment returns, pricing and profit margin changes, discount rates, and capitalization multiples.


There were no changes to the Company’s accounting policies from those reported at December 31, 2014.


The 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.

IFRS 9 Financial InstrumentsThe IASB issued IFRS 9 which replaces IAS 39, the current standard for accounting for financial instruments. The standard was completed in three separate phases:• Classification and measurement: This phase requires

that financial assets be classified at either amortized cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

• Impairment methodology: This phase replaces the current incurred loss model for impairment of financial assets with an expected loss model.

• Hedge accounting: This phase replaces the current rule-based hedge accounting requirements in IAS 39 with guidance that more closely aligns the accounting with an entity’s risk management activities.

This standard is effective for annual periods beginning on or after January 1, 2018 and the impact of the standard is currently being assessed.

IFRS 15 Revenue from Contracts with CustomersThe IASB issued IFRS 15 which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The model requires an entity to recognize revenue as the goods or services are transferred to the customer in an amount that reflects the expected consideration. This standard is effective for annual periods beginning on or after January 1, 2018 and the impact of the standard is currently being assessed.

OtherThe IASB is currently undertaking several projects which will result in changes to existing IFRS standards that may affect the Company:

IFRS Standard Expected date of issuance

Leases Q4 2015 – Final StandardMacro Hedge Accounting Q3 2015 – Redeliberations

Source: IFRS website at www.ifrs.org

Critical Accounting Estimates and Policies




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During the second quarter of 2015, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Internal Control Over Financial Reporting


The Company entered into tax loss consolidation transactions with its parent company, Power Financial Corporation, after obtaining advance tax rulings:• On January 7, 2014, the Company acquired

$1.67 billion of 4.51% preferred shares of a wholly-owned subsidiary of Power Financial Corporation. As sole consideration for the preferred shares, the Company issued $1.67 billion of 4.50% 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.

• On January 6, 2015, the Company acquired $0.33 billion of 4.51% preferred shares of a wholly-owned subsidiary of Power Financial Corporation. As sole consideration for the preferred shares, the Company issued $0.33 billion of 4.50% 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.

The preferred shares and debentures and related dividend income and interest expense are offset in the Consolidated Financial Statements of the Company.

Tax savings arise due to the tax deductibility of the interest expense. For further information on transactions involving related parties, see Notes 8 and 25 to the Company’s Annual Financial Statements.

OUTSTANDING SHARE DATA

Outstanding common shares of IGM Financial as at June 30, 2015 totalled 247,478,366. Outstanding stock options as at June 30, 2015 totalled 7,597,233, of which 3,543,261 were exercisable. As at July 31, 2015, outstanding common shares totalled 247,117,066 and outstanding stock options totalled 7,595,913 of which 3,541,941 were exercisable. Perpetual preferred shares of $150 million were outstanding as at June 30, 2015, unchanged at July 31, 2015.

SEDAR

Additional information relating to IGM Financial, including the Company’s most recent financial statements and Annual Information Form, is available at www.sedar.com.

Other Information




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54 igm financial inc. second quarter report 2015 / interim condensed consolidated financial statements

Consolidated Statements of Earnings

(unaudited) three months ended june 30 six months ended june 30(in thousands of Canadian dollars, except shares and per share amounts) 2015 2014 2015 2014

Revenues Management fees $ 517,279 $ 503,887 $ 1,026,390 $ 989,653 Administration fees 105,995 99,309 208,231 194,532 Distribution fees 95,286 86,113 189,819 178,524 Net investment income and other 15,161 6,921 44,242 28,923 Proportionate share of affiliate’s earnings 29,508 23,995 55,410 43,439

763,229 720,225 1,524,092 1,435,071

Expenses Commission 267,687 245,699 534,554 488,868 Non-commission 215,853 211,162 429,475 406,939 Interest 22,964 22,964 45,714 45,713

506,504 479,825 1,009,743 941,520

Earnings before income taxes 256,725 240,400 514,349 493,551Income taxes 56,051 47,937 111,116 104,427

Net earnings 200,674 192,463 403,233 389,124Perpetual preferred share dividends 2,212 2,212 4,425 4,425

Net earnings available to common shareholders $ 198,462 $ 190,251 $ 398,808 $ 384,699

Average number of common shares (in thousands) (Note 11)

– Basic 248,957 252,286 250,076 252,327 – Diluted 249,128 253,126 250,266 253,261

Earnings per share (in dollars) (Note 11)

– Basic $ 0.80 $ 0.75 $ 1.59 $ 1.52 – Diluted $ 0.80 $ 0.75 $ 1.59 $ 1.52

(See accompanying notes to interim condensed consolidated financial statements.)

Interim Condensed Consolidated Financial Statements



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igm financial inc. second quarter report 2015 / interim condensed consolidated financial statements 55

Consolidated Statements of Comprehensive Income

(unaudited) three months ended june 30 six months ended june 30(in thousands of Canadian dollars) 2015 2014 2015 2014

Net earnings $ 200,674 $ 192,463 $ 403,233 $ 389,124

Other comprehensive income (loss), net of tax Items that will not be reclassified to Net earnings Employee benefits Net actuarial gains (losses), net of tax of $(9,562), $4,266, $(4,774) and $9,818 25,858 (11,536) 12,908 (26,552)

Investment in affiliate – employee benefits and other Other comprehensive income (loss), net of tax of nil (6,710) (3,343) (12,446) 2,413

Items that may be reclassified subsequently to Net earnings Available for sale securities Net unrealized gains (losses), net of tax of $(104), $(10), $(1,289) and $(54) 290 26 3,498 148 Reclassification of realized (gains) losses to net earnings, net of tax of $99, $(6), $332 and $34 (275) 20 (912) (91)

15 46 2,586 57 Investment in affiliate and other Other comprehensive income (loss), net of tax of $412, $122, $361 and $526 25,929 19,858 35,528 34,899

45,092 5,025 38,576 10,817

Comprehensive income $ 245,766 $ 197,488 $ 441,809 $ 399,941




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Consolidated Balance Sheets

(unaudited) JUNE 30 december 31(in thousands of Canadian dollars) 2015 2014

Assets Cash and cash equivalents $ 903,792 $ 1,215,980 Securities 105,861 89,545 Accounts and other receivables 536,516 470,708 Income taxes recoverable 16,693 22,710 Loans (Note 3) 7,196,629 7,018,893 Derivative financial instruments 60,980 39,449 Other assets 57,243 45,757 Investment in affiliate 837,960 794,381 Capital assets 123,539 121,854 Deferred selling commissions 738,378 710,447 Deferred income taxes 65,684 69,405 Intangible assets 1,187,348 1,161,513 Goodwill 2,659,856 2,656,539

$ 14,490,479 $ 14,417,181

Liabilities Accounts payable and accrued liabilities $ 373,913 $ 374,369 Income taxes payable 20,314 30,916 Derivative financial instruments 59,583 29,788 Deposits and certificates 266,384 223,328 Other liabilities 511,288 528,289 Obligations to securitization entities (Note 4) 6,798,617 6,754,048 Deferred income taxes 322,513 310,564 Long-term debt 1,325,000 1,325,000

9,677,612 9,576,302

Shareholders’ Equity Share capital Perpetual preferred shares 150,000 150,000 Common shares 1,641,626 1,655,581 Contributed surplus 33,430 33,504 Retained earnings 3,059,953 3,112,512 Accumulated other comprehensive income (loss) (72,142) (110,718)

4,812,867 4,840,879

$ 14,490,479 $ 14,417,181

These interim condensed consolidated financial statements were approved and authorized for issuance by the Board of Directors on August 6, 2015.




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igm financial inc. second quarter report 2015 / interim condensed consolidated financial statements 57

Consolidated Statements of Changes in Shareholders’ Equity

six months ended june 30

share capital

accumulated perpetual other preferred common comprehensive total (unaudited) shares shares contributed retained income (loss) shareholders’ (in thousands of Canadian dollars) (Note 5) (Note 5) surplus earnings (Note 8) equity

2015Balance, beginning of period $ 150,000 $ 1,655,581 $ 33,504 $ 3,112,512 $ (110,718) $ 4,840,879

Net earnings – – – 403,233 – 403,233Other comprehensive income (loss), net of tax – – – – 38,576 38,576

Total comprehensive income (loss) – – – 403,233 38,576 441,809

Common shares Issued under stock option plan – 14,688 – – – 14,688 Purchased for cancellation – (28,643) – – – (28,643)Stock options Current period expense – – 2,301 – – 2,301 Exercised – – (2,375) – – (2,375)Perpetual preferred share dividends – – – (4,425) – (4,425)Common share dividends – – – (280,190) – (280,190)Common share cancellation excess and other (Note 5) – – – (171,177) – (171,177)

Balance, end of period $ 150,000 $ 1,641,626 $ 33,430 $ 3,059,953 $ (72,142) $ 4,812,867

2014Balance, beginning of period $ 150,000 $ 1,630,844 $ 32,627 $ 2,977,083 $ (82,959) $ 4,707,595

Net earnings – – – 389,124 – 389,124Other comprehensive income (loss), net of tax – – – – 10,817 10,817

Total comprehensive income (loss) – – – 389,124 10,817 399,941

Common shares Issued under stock option plan – 23,828 – – – 23,828 Purchased for cancellation – (4,074) – – – (4,074)Stock options Current period expense – – 3,177 – – 3,177 Exercised – – (3,295) – – (3,295)Perpetual preferred share dividends – – – (4,425) – (4,425)Common share dividends – – – (271,206) – (271,206)Common share cancellation excess and other (Note 5) – – – (30,416) – (30,416)

Balance, end of period $ 150,000 $ 1,650,598 $ 32,509 $ 3,060,160 $ (72,142) $ 4,821,125




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Consolidated Statements of Cash Flows

(unaudited) six months ended june 30(in thousands of Canadian dollars) 2015 2014

Operating activities Earnings before income taxes $ 514,349 $ 493,551 Income taxes paid (108,899) (113,543) Adjustments to determine net cash from operating activities Deferred selling commission amortization 116,588 118,814 Amortization of capital and intangible assets 19,125 16,672 Changes in operating assets and liabilities and other (109,255) (104,989)

431,908 410,505 Deferred selling commissions paid (144,519) (141,005)

287,389 269,500

Financing activities Net increase in deposits and certificates 43,056 15,416 Net increase in obligations to securitization entities 43,948 345,778 Issue of common shares 12,313 21,859 Common shares purchased for cancellation (189,868) (33,224) Perpetual preferred share dividends paid (4,425) (4,425) Common share dividends paid (282,390) (271,269)

(377,366) 74,135

Investing activities Purchase of securities (70,155) (32,617) Proceeds from the sale of securities 63,674 25,980 Net increase in loans (169,223) (479,324) Net additions to capital assets (10,291) (6,099) Net cash used in acquisitions and additions to intangible assets (36,216) (16,076)

(222,211) (508,136)

Decrease in cash and cash equivalents (312,188) (164,501)Cash and cash equivalents, beginning of period 1,215,980 1,082,437

Cash and cash equivalents, end of period $ 903,792 $ 917,936

Cash $ 60,955 $ 51,458Cash equivalents 842,837 866,478

$ 903,792 $ 917,936

Supplemental disclosure of cash flow information related to operating activities Interest and dividends received $ 126,485 $ 113,799 Interest paid $ 113,751 $ 107,110




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igm financial inc. second quarter report 2015 / notes to the interim condensed consolidated financial statements 59

Notes to the Interim Condensed Consolidated Financial Statementsjune 30, 2015 (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. The Company is controlled by Power Financial Corporation. IGM Financial Inc. is a financial services company which serves the financial needs of Canadians through its principal subsidiaries, each operating distinctly within the advice segment of the financial services market. The Company’s wholly-owned principal subsidiaries 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 accounting policies as set out in Note 2 to the Consolidated Financial Statements for the year ended December 31, 2014. The Interim Financial Statements should be read in conjunction with the Consolidated Financial Statements in the 2014 IGM Financial Inc. Annual Report.

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.

IFRS 9 Financial InstrumentsThe IASB issued IFRS 9 which replaces IAS 39, the current standard for accounting for financial instruments. The standard was completed in three separate phases:• Classification and measurement: This phase requires that financial assets be classified at either amortized cost or

fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

• Impairment methodology: This phase replaces the current incurred loss model for impairment of financial assets with an expected loss model.

• Hedge accounting: This phase replaces the current rule-based hedge accounting requirements in IAS 39 with guidance that more closely aligns the accounting with an entity’s risk management activities.

This standard is effective for annual periods beginning on or after January 1, 2018 and the impact of the standard is currently being assessed.

IFRS 15 Revenue from Contracts with CustomersThe IASB issued IFRS 15 which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The model requires an entity to recognize revenue as the goods or services are transferred to the customer in an amount that reflects the expected consideration. This standard is effective for annual periods beginning on or after January 1, 2018 and the impact of the standard is currently being assessed.



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60 igm financial inc. second quarter report 2015 / notes to the interim condensed consolidated financial statements

3. LOANS

CONTRACTUAL MATURITY

JUNE 30 december 31 1 YEAR 1 – 5 OVER 2015 2014 OR LESS YEARS 5 YEARS TOTAL total

Loans and receivables Residential mortgages $ 1,400,579 $ 5,237,818 $ 4,976 $ 6,643,373 $ 6,653,428

Less: Collective allowance 648 762

6,642,725 6,652,666Held for trading 553,904 366,227

$ 7,196,629 $ 7,018,893

The change in the collective allowance for credit losses is as follows:Balance, beginning of period $ 762 $ 728Write-offs, net of recoveries (70) (236)Provision for credit losses (44) 270

Balance, end of period $ 648 $ 762

Total impaired loans as at June 30, 2015 were $2,729 (December 31, 2014 – $2,056). Total interest income on loans classified as loans and receivables was $94.7 million (2014 – $85.2 million). Total interest expense on obligations to securitization entities, related to securitized loans, was $69.1 million (2014 – $62.7 million). Gains realized on the sale of residential mortgages totalled $12.2 million (2014 – $5.2 million). Fair value adjustments related to mortgage banking operations totalled $2.3 million (2014 – negative $2.8 million). These amounts were included in Net investment income and other. Net investment income and other also includes other mortgage banking related items including interest income on mortgages held for trading, portfolio insurance, issue costs, and other items.

4. 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. These transactions do not meet the requirements for derecognition as the Company retains prepayment risk and certain elements of credit risk. Accordingly, the Company has retained these mortgages on its balance sheets and has recorded an offsetting 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 part of the CMB transactions, the Company enters into a swap transaction whereby the Company pays coupons on CMBs and receives investment 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 recorded as a derivative and had a negative fair value of $46.3 million at June 30, 2015 (December 31, 2014 – negative $26.3 million). Under the NHA MBS and CMB Program, the Company has an obligation to make timely payments to security holders regardless of whether amounts are received from mortgagors. All mortgages securitized under the NHA MBS and CMB 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 these cash reserves and future net interest income as the ABCP Trusts have no recourse to the Company’s other assets for failure to make payments when due. Credit risk is further limited to the extent these mortgages are insured.



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obligations to securitized securitization JUNE 30, 2015 mortgages entities net

Carrying value NHA MBS and CMB Program $ 4,611,122 $ 4,709,661 $ (98,539) Bank sponsored ABCP 2,004,609 2,088,956 (84,347)

Total $ 6,615,731 $ 6,798,617 $ (182,886)

Fair value $ 6,894,383 $ 7,114,974 $ (220,591)

december 31, 2014

Carrying value NHA MBS and CMB Program $ 4,611,253 $ 4,691,792 $ (80,539) Bank sponsored ABCP 2,012,702 2,062,256 (49,554)

Total $ 6,623,955 $ 6,754,048 $ (130,093)

Fair value $ 6,819,531 $ 6,858,924 $ (39,393)

The carrying value of Obligations to securitization entities, which is recorded net of issue costs, includes principal payments received on securitized mortgages that are not due to be settled until after the reporting period. Issue costs are amortized over the life of the obligation on an effective interest rate basis.

5. SHARE CAPITAL

AuthorizedUnlimited number of: First preferred shares, issuable in series Second preferred shares, issuable in series Class 1 non-voting shares Common shares, no par value

Issued and outstanding JUNE 30, 2015 june 30, 2014

stated stated shares value shares value

Perpetual preferred shares – classified as equity: First preferred shares, Series B 6,000,000 $ 150,000 6,000,000 $ 150,000

Common shares: Balance, beginning of period 251,469,346 $ 1,655,581 252,309,767 $ 1,630,844 Issued under Stock Option Plan (Note 7) 329,520 14,688 498,911 23,828 Purchased for cancellation (4,320,500) (28,643) (625,000) (4,074)

Balance, end of period 247,478,366 $ 1,641,626 252,183,678 $ 1,650,598

4. SECURITIZATIONS (continued)



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Normal course issuer bidIn the second quarter of 2015, 2,935,500 shares (2014 – 315,000) were purchased at a cost of $127.8 million (2014 – $16.4 million). In the six months ended June 30, 2015, 4,320,500 shares (2014 – 625,000) were purchased at a cost of $189.9 million (2014 – $33.2 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 on March 20, 2015 which is effective until March 19, 2016. Pursuant to this bid, the Company may purchase up to 12.5 million or 5% of its common shares outstanding as at March 13, 2015. On April 14, 2014, the Company commenced a normal course issuer bid, effective until March 19, 2015, which authorized it to purchase up to 12.6 million or 5% of its common shares outstanding as at March 31, 2014. In connection with its normal course issuer bid, the Company has established an automatic securities purchase plan for its common shares. The automatic securities purchase plan provides standard instructions regarding how the Company’s common shares are to be purchased under its normal course issuer bid during certain pre-determined trading blackout periods. Outside of these pre-determined trading blackout periods, purchases under the Company’s normal course issuer bid will be completed based upon management’s discretion.

6. CAPITAL MANAGEMENT

The capital management policies, procedures and activities of the Company are discussed in the Capital Resources section of the Company’s Management’s Discussion and Analysis contained in the Second Quarter 2015 Report to Shareholders and in Note 17 to the Consolidated Financial Statements in the 2014 IGM Financial Inc. Annual Report and have not changed significantly since December 31, 2014.

7. SHARE-BASED PAYMENTS

Stock option plan JUNE 30 december 31 2015 2014

Common share options – Outstanding 7,597,233 6,940,248 – Exercisable 3,543,261 3,124,226

In the second quarter of 2015, the Company granted 2,695 options to employees (2014 – nil). In the six months ended June 30, 2015, the Company granted 1,295,770 options to employees (2014 – 1,024,685). The weighted average fair value of options granted during the six months ended June 30, 2015 has been estimated at $3.49 per option (2014 – $6.59) using the Black-Scholes option pricing model. The weighted average closing share price at the grant dates was $44.09. The assumptions used in these valuation models include: six months ended june 30 2015 2014

Exercise price $ 43.97 $ 53.81Risk-free interest rate 1.04% 1.90%Expected option life 6 years 6 yearsExpected volatility 20.00% 21.00%Expected dividend yield 5.12% 4.00%

Expected volatility has been estimated based on the historic volatility of the Company’s share price over six years which is reflective of the expected option life. Options vest over a period of up to 7.5 years from the grant date and are exercisable no later than 10 years after the grant date. A portion of the outstanding options can only be exercised once certain performance targets are met.

5. SHARE CAPITAL (continued)



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8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

available investment employee for sale in affiliate JUNE 30, 2015 benefits securities and other total

Balance, beginning of period $ (123,510) $ 194 $ 12,598 $ (110,718)Other comprehensive income (loss) 12,908 2,586 23,082 38,576

Balance, end of period $ (110,602) $ 2,780 $ 35,680 $ (72,142)

june 30, 2014

Balance, beginning of period $ (68,593) $ 420 $ (14,786) $ (82,959)Other comprehensive income (loss) (26,552) 57 37,312 10,817

Balance, end of period $ (95,145) $ 477 $ 22,526 $ (72,142)

Amounts are recorded net of tax.

9. RISK MANAGEMENT

The risk management policies and procedures of the Company are discussed in the Financial Instruments Risk section of the Company’s Management’s Discussion and Analysis contained in the Second Quarter 2015 Report to Shareholders and in Note 20 to the Consolidated Financial Statements in the 2014 IGM Financial Inc. Annual Report and have not changed significantly since December 31, 2014.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair values are management’s estimates and are generally calculated using market conditions at a specific point in time and may not reflect future fair values. The calculations are subjective in nature, involve uncertainties and are matters of significant judgment. All financial instruments measured at fair value and those for which fair value is disclosed are classified into one of three levels that distinguish fair value measurements by the significance of the inputs used for valuation. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in the most advantageous market, utilizing a hierarchy of three different valuation techniques, based on the lowest level input that is significant to the fair value measurement in its entirety. Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 – Observable inputs other than Level 1 quoted prices for similar assets or liabilities in active markets; quoted

prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable or corroborated by observable market data; and

Level 3 – Unobservable inputs that are supported by little or no market activity. Valuation techniques are primarily model-based.

Markets are considered inactive when transactions are not occurring with sufficient regularity. Inactive markets may be characterized by a significant decline in the volume and level of observed trading activity or through large or erratic bid/offer spreads. In those instances where traded markets are not considered sufficiently active, fair value is measured using valuation models which may utilize predominantly observable market inputs (Level 2) or may utilize predominantly non-observable market inputs (Level 3). Management considers all reasonably available information including indicative broker quotations, any available pricing for similar instruments, recent arm’s length market transactions, any relevant observable market inputs, and internal model-based estimates. Management exercises judgment in determining the most appropriate inputs and the weighting ascribed to each input as well as in the selection of valuation methodologies.



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Fair value is determined using the following methods and assumptions:

Securities and other financial assets and financial liabilities are valued using quoted prices from active markets, when available. When a quoted market price is not readily available, valuation techniques are used that require assumptions related to discount rates and the timing and amount of future cash flows. Wherever possible, observable market inputs are used in the valuation techniques.

Loans classified as Level 2 are valued using market interest rates for loans with similar credit risk and maturity.

Loans classified as Level 3 are valued by discounting the expected future cash flows at prevailing market yields.

Obligations to securitization entities are valued by discounting the expected future cash flows at prevailing market yields for securities issued by these securitization entities having similar terms and characteristics.

Deposits and certificates are valued by discounting the contractual cash flows using market interest rates currently offered for deposits with similar terms and credit risks.

Long-term debt is valued using quoted prices for each debenture available in the market.

Derivative financial instruments are valued based on quoted market prices, where available, prevailing market rates for instruments with similar characteristics and maturities, or discounted cash flow analysis.

Level 1 financial instruments include exchange-traded equity securities and open-end investment fund units and other financial liabilities in instances where there are quoted prices available from active markets. Level 2 assets and liabilities include fixed income securities, loans, derivative financial instruments, deposits and certificates and long-term debt. The fair value of fixed income securities is determined using quoted market prices or independent dealer price quotes. The fair value of derivative financial instruments and deposits and certificates are determined using valuation models, discounted cash flow methodologies, or similar techniques using primarily observable market inputs. The fair value of long-term debt is determined using indicative broker quotes. Level 3 assets and liabilities include securities with little or no trading activity valued using broker-dealer quotes, loans, other financial assets, obligations to securitization entities and derivative financial instruments. Derivative financial instruments consist of principal reinvestment account swaps which represent the component of a swap entered into under the CMB Program whereby the Company pays coupons on Canada Mortgage Bonds and receives investment returns on the reinvestment of repaid mortgage principal. Fair value is determined by discounting the projected cashflows of the swaps. The notional amount, which is an input used to determine the fair value of the swap, is determined using an average unobservable prepayment rate of 15% which is based on historical prepayment patterns. An increase (decrease) in the assumed mortgage prepayment rate increases (decreases) the notional amount of the swap. The following table presents the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. The table distinguishes between those financial instruments recorded at fair value and those recorded at amortized cost. The table also excludes fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. These items include cash and cash equivalents, accounts and other receivables, certain other financial assets, accounts payable and accrued liabilities, and certain other financial liabilities.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)



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fair value

carrying value level 1 level 2 level 3 total

JUNE 30, 2015 Financial assets recorded at fair value Securities – Available for sale $ 13,295 $ 13,295 $ – $ – $ 13,295 – Held for trading 92,566 89,612 1,620 1,334 92,566 Loans – Held for trading 553,904 – 553,904 – 553,904 Derivative financial instruments 60,980 – 60,279 701 60,980 Other financial assets 9,273 – – 9,273 9,273Financial assets recorded at amortized cost Loans – Loans and receivables 6,642,725 – 27,947 6,894,383 6,922,330Financial liabilities recorded at fair value Derivative financial instruments 59,583 – 12,554 47,029 59,583 Other financial liabilities 7,043 7,043 – – 7,043Financial liabilities recorded at amortized cost Deposits and certificates 266,384 – 267,884 – 267,884 Obligations to securitization entities 6,798,617 – – 7,114,974 7,114,974 Long-term debt 1,325,000 – 1,684,988 – 1,684,988

december 31, 2014Financial assets recorded at fair value Securities – Available for sale $ 10,220 $ 10,220 $ – $ – $ 10,220 – Held for trading 79,325 76,953 769 1,603 79,325 Loans – Held for trading 366,227 – 366,227 – 366,227 Derivative financial instruments 39,449 – 39,449 – 39,449Financial assets recorded at amortized cost Loans – Loans and receivables 6,652,666 – 29,749 6,819,531 6,849,280Financial liabilities recorded at fair value Derivative financial instruments 29,788 – 3,461 26,327 29,788 Other financial liabilities 6,585 6,585 – – 6,585Financial liabilities recorded at amortized cost Deposits and certificates 223,328 – 225,266 – 225,266 Obligations to securitization entities 6,754,048 – – 6,858,924 6,858,924 Long-term debt 1,325,000 – 1,681,954 – 1,681,954

There were no significant transfers between Level 1 and Level 2 in 2015 and 2014.




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The following table provides a summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis. gains/(losses)

gains/ included in

(losses) other purchases balance included in comprehensive and transfers balance january 1 net earnings(1) income(2) issuances settlements in/out june 30

JUNE 30, 2015 Assets Securities – Held for trading $ 1,603 $ 67 $ – $ 69 $ – $ (405) $ 1,334 Other financial assets(3) – – 3,562 – – 5,711 9,273Liabilities Derivative financial instruments, net 26,327 (25,731) – (689) 5,041 – 46,328

june 30, 2014Assets Securities – Held for trading $ 1,446 $ 187 $ – $ 138 $ 48 $ – $ 1,723Liabilities Derivative financial instruments, net 16,163 (18,967) – (970) 9,592 – 24,568

(1) Included in Net investment income in the Consolidated Statements of Earnings.(2) Included in Available for sale securities – Net unrealized gains (losses) in the Consolidated Statements of Comprehensive Income.(3) Other financial assets previously recorded at cost were re-measured at fair value using recent market transactions.

11. EARNINGS PER COMMON SHARE

three months ended june 30 six months ended june 30 2015 2014 2015 2014

Earnings Net earnings $ 200,674 $ 192,463 $ 403,233 $ 389,124 Perpetual preferred share dividends 2,212 2,212 4,425 4,425

Net earnings available to common shareholders $ 198,462 $ 190,251 $ 398,808 $ 384,699

Number of common shares (in thousands)

Average number of common shares outstanding 248,957 252,286 250,076 252,327 Add: Potential exercise of outstanding stock options 171 840 190 934

Average number of common shares outstanding – diluted basis 249,128 253,126 250,266 253,261

Earnings per common share (in dollars)

Basic $ 0.80 $ 0.75 $ 1.59 $ 1.52 Diluted $ 0.80 $ 0.75 $ 1.59 $ 1.52




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12. 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 measures and evaluates the performance of these segments based on earnings before interest and taxes. Investors Group earns fee-based revenues in the conduct of its core business activities which are primarily related to the distribution, management and administration of its investment funds. It also earns fee revenues from the provision of brokerage services and the distribution of insurance and banking products. In addition, Investors Group earns intermediary revenues primarily from mortgage banking and servicing activities and from the assets funded by deposit and certificate products. Mackenzie earns fee-based revenues from services it provides as fund manager to its investment funds and as investment advisor to sub-advisory and institutional accounts. Corporate and Other includes Investment Planning Counsel, equity income from its investment in Great-West Lifeco Inc. (Lifeco), net investment income on unallocated investments, other income, and also includes consolidation elimination entries.

2015

investors corporate Three months ended June 30 group mackenzie and other total

Revenues Management fees $ 323,556 $ 178,640 $ 15,083 $ 517,279 Administration fees 77,226 24,847 3,922 105,995 Distribution fees 49,428 2,505 43,353 95,286 Net investment income and other 14,231 2 30,436 44,669

464,441 205,994 92,794 763,229

Expenses Commission 147,450 77,450 42,787 267,687 Non-commission 127,099 74,539 14,215 215,853

274,549 151,989 57,002 483,540

Earnings before undernoted $ 189,892 $ 54,005 $ 35,792 279,689

Interest expense 22,964

Earnings before income taxes 256,725Income taxes 56,051

Net earnings 200,674Perpetual preferred share dividends 2,212

Net earnings available to common shareholders $ 198,462



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2014

investors corporate Three months ended June 30 group mackenzie and other total

Revenues Management fees $ 312,021 $ 177,836 $ 14,030 $ 503,887 Administration fees 69,359 26,580 3,370 99,309 Distribution fees 44,214 2,760 39,139 86,113 Net investment income and other 5,913 350 26,215 32,478

431,507 207,526 82,754 721,787


246,374 141,671 52,062 440,107


Interest expense (22,964)Restructuring and other charges (18,316)




12. SEGMENTED INFORMATION (continued)



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2015

investors corporate Six months ended June 30 group mackenzie and other total

Revenues Management fees $ 639,737 $ 356,602 $ 30,051 $ 1,026,390 Administration fees 150,255 50,387 7,589 208,231 Distribution fees 95,698 5,751 88,370 189,819 Net investment income and other 35,749 4,220 59,683 99,652

921,439 416,960 185,693 1,524,092


540,859 306,033 117,137 964,029


Interest expense 45,714




Identifiable assets $ 8,492,929 $ 1,362,374 $ 1,975,320 $ 11,830,623Goodwill 1,347,781 1,168,580 143,495 2,659,856

Total assets $ 9,840,710 $ 2,530,954 $ 2,118,815 $ 14,490,479




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2014

investors corporate Six months ended June 30 group mackenzie and other total

Revenues Management fees $ 612,703 $ 349,556 $ 27,394 $ 989,653 Administration fees 135,368 52,625 6,539 194,532 Distribution fees 92,709 5,974 79,841 178,524 Net investment income and other 19,156 1,709 53,059 73,924

859,936 409,864 166,833 1,436,633


486,774 286,251 106,028 879,053


Interest expense (45,713)Restructuring and other charges (18,316)




Identifiable assets $ 7,506,339 $ 1,349,614 $ 1,864,032 $ 10,719,985Goodwill 1,347,781 1,168,580 140,178 2,656,539

Total assets $ 8,854,120 $ 2,518,194 $ 2,004,210 $ 13,376,524







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Pargesa Holding SA

P A R T E

The attached document discloses information relating to the fi nancial results of Pargesa Holding SA as issued by Pargesa Holding SA.

P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5 E 1

PCC_QUAT2_ENG05_PAR_2015-08-04_v1.indd E1PCC_QUAT2_ENG05_PAR_2015-08-04_v1.indd E1 15-08-06 9:01 PM15-08-06 9:01 PM

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PARGESA HOLDING SA

HIGHLIGHTSThe group’s portfolio

E 2 P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5


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Company organization



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ECONOMIC PRESENTATION OF PARGESA’S FINANCIAL RESULTS

FIRST HALF2015

Operating contribution of the main shareholdingsConsolidated

51.2

Equity method12.5

Non consolidated:40.437.312.78.90.3

Operating contribution of the main shareholdings 163.3per share [SF] 1.93 2.27

0.751.96.0

(14.7)Economic operating income 207.2per share [SF] 2.45 1.75

(76.2)267.6

Net income 398.6per share [SF] 4.71 4.47

84,659

1.056



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CONSOLIDATED AND EQUITY ACCOUNTED HOLDINGS

Imerys

Lafarge

NON CONSOLIDATED HOLDINGS

Total

Engie

Pernod Ricard

SGS



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CONTRIBUTION FROM PRIVATE EQUITY ACTIVITIES AND OTHER INVESTMENT FUNDS

NET FINANCIAL INCOME AND EXPENSES

GENERAL EXPENSES AND TAXES



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NON OPERATING INCOME



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PRESENTATION OF RESULTS IN ACCORDANCE WITH IFRS

FIRST HALF2015

2,362.8(2,153.3)545.4

Operating profit 754.9202.449.3(66.2)(86.3)

Consolidated net profit 854.1455.5

Attributable to Pargesa shareholders 398.6

84,659

Basic earnings per share attributable to Pargesa shareholders [SF] 4.71 4.47

1.056



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ADJUSTED NET ASSET VALUE

Pargesa’s flow through adjusted net asset value

Total portfolio

Adjusted net asset value

per Pargesa share 62.9 SF 94.8




E 1 0 P O W E R C O R P O R AT I O N O F C A N A DA — S E C O N D Q UA RT E R R E P O RT 2 0 1 5


Power Corporation of Canada has been designated

“A Caring Company” by Imagine, a national program to

promote corporate and public giving, volunteering and

support in the community.

To learn more about the organizations we support, visit

www.powercorporationcommunity.com.

CORPORATE INFORMATION

This document is also available on the Corporation’s website

and on SEDAR at www.sedar.com.

STOCK LISTINGS

Shares of Power Corporation of Canada are listed on the

Toronto Stock Exchange:

Subordinate Voting Shares: POW

Participating Preferred Shares: POW.PR.E

First Preferred Shares 1986 Series: POW.PR.F

First Preferred Shares, Series A: POW.PR.A

First Preferred Shares, Series B: POW.PR.B

First Preferred Shares, Series C: POW.PR.C

First Preferred Shares, Series D: POW.PR.D

First Preferred Shares, Series G: POW.PR.G

TRANSFER AGENT AND REGISTRAR

Computershare Investor Services Inc.

Offices in:

Montréal, Québec; Toronto, Ontario;

Vancouver, British Columbia

www.computershare.com

SHAREHOLDER SERVICES

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, 8th 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


751 Victoria Square

Montréal, Québec, Canada H2Y 2J3

514-286-7400

161 Bay Street, Suite 5000

Toronto, Ontario, Canada M5J 2S1

www.powercorporation.com

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Second Quarter Report - Power Corporation of Canada · 2020. 2. 13. · TO THE SHAREHOLDERS Power Corporation of Canada’s operating earnings attributable to participating shareholders

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