Third Quarter Report · 2020-02-13 · quarter includes a gain of $ i o million on the sale of a...

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Third Quarter Report F O R T H E P E R I O D E N D E D S E P T E M B E R 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 September , were $ million or $ . per share, compared with $ million or $ . per share in .

Other items in the current period, not included in operating earnings, were a contribution of $ million, mainly comprised of net gains of $ million on Square Victoria Communications Group Inc.’s (SVCG) sale of non-core businesses, net of restructuring charges, and a contribution of $ million representing the Corporation’s share of a mark to market gain on the closing of the Lafarge SA (Lafarge) and Holcim Ltd (Holcim) merger.

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

N I N E M O N T H R E S U L T S

Operating earnings attributable to participating shareholders for the nine months ended September , 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

T H I R 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 September , of $ million or $ . per share, compared with $ million or $ . per share in .

Other items in the current quarter, not included in operating earnings, were a contribution of $ million consisting mainly of Power Financial’s share of a mark to market gain on the closing of the Lafarge and Holcim merger.

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 — T H I R D Q UA RT E R R E P O RT 2 0 1 5 1

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

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

Other items not included in operating earnings contributed $ 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 September , , 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 September , , and in . For the nine months ended September , , 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

T H I R D Q U A R T E R R E S U LT S

The contribution to earnings from income from investments was $ million for the quarter ended September , , compared with $ million in . Income from investments is mainly comprised of gains from Sagard China ($ million), Sagard Europe ($ million), and other investment and hedge funds ($ million). The contribution from other subsidiaries in the current quarter includes a gain of $ million on the sale of a business by a controlled portfolio investment.

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

The contribution to earnings from income from investments was $ million for the nine months ended September , , compared with $ million in . Income from investments includes gains of $ million from the Corporation’s investment activity in China.

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

November ,

2 P O W E R C O R P O R AT I O N O F C A N A DA — T H I R 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

P A R T A

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 nine months ended

September 30, 2015 and the unaudited interim condensed consolidated

fi nancial statements of the Corporation as at and for the three months and

nine months ended September 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 — T H I R 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 — T H I R 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 4

P O W E R C O R P O R AT I O N O F C A N A DA — T H I R 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 — T H I R 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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IGM Financial

POWER CORPORATION

Power Financial

Pargesa

Lifeco



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POWER FINANCIAL

Lifeco

IGM Financial

Pargesa and GBL



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Non-Current Assets Held for Sale and Discontinued Operations,

Other Activities of Power Financial

SAGARD INVESTMENT FUNDS

Sagard Europe



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Sagard Capital

Sagard China

OTHER SUBSIDIARIES

Square Victoria Communications Group

LaPresse+, La Presse

La Presse



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Power Energy

Controlled Portfolio Investments

OTHER INVESTMENTS



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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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>

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Power Financial

Square Victoria Communications Group

Power Energy

GBL

Sagard Europe

Sagard Capital

Sagard China

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 — T H I R D Q UA RT E R R E P O RT 2 0 1 5


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NON-IFRS FINANCIAL MEASURES AND PRESENTATION

operating earnings

other items

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


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RESULTS OF POWER CORPORATION OF CANADA

EARNINGS SUMMARY – CONDENSED SUPPLEMENTARY NON-CONSOLIDATED STATEMENTS OF EARNINGS

September 30,2015

September 30,2015

Operating earnings

1,129 391(44) (5)

1,085 386

309 144(99) (33)(39) (13)

1,256 484

Other items (non-operating earnings) [3]46 4(8) 20

183221 24

Net earnings (attributable to participating shareholders) 1,477 508

Earnings per share (attributable to participating shareholders)2.71 1.040.48 0.053.19 1.09

NET EARNINGS



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OPERATING EARNINGS

CONTRIBUTION TO OPERATING EARNINGS

Power Financial

September 30,2015

September 30,2015

1,401 486356 121111 37

1,868 644(50) (15)(98) (33)

1,720 596

1,129 391



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September 30,2015

September 30,2015

Canada256 91360 116358 153(41) (34)933 326

United States298 106(9) (8)(5) (2)

284 96

Europe652 229240 71(21) (4)871 296

Lifeco Corporate (9) 2

2,079 720

1,401 486



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September 30,2015

September 30,2015

571 190165 54104 36

840 280

(242) (81)598 199

356 121



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September 30,

2015

73.560.3(2.9)

130.9

2015

Q3

75.449.24.0

128.6



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September 30,2015

September 30,2015

77 2613

63 2337926 13

225 62

14 1378 2610 4(20) (5)307 100

111 37



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Other subsidiaries

CORPORATE OPERATIONS OF POWER CORPORATION

Income from investments

September 30,2015

September 30,2015

31 35(1) (2)

139 37

63 55

77 19309 144



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Operating and other expenses

OTHER ITEMS

September 30,2015

September 30,2015

62

(15)

58 5(5) (1)46 4(8) 20

183221 24



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Power Financial

Other subsidiaries

Corporate operations

Power Financial

Other subsidiaries



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FINANCIAL POSITION

CONSOLIDATED BALANCE SHEETS

September 30,2015

Assets5,776

165,327

2,366

37014,3665,57211,6346,1959,652

191,023412,281

Liabilities

158,3266,9407,89413,584

191,023377,767

Equity970

12,55520,98934,514412,281



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NON-CONSOLIDATED BALANCE SHEETS

September 30,2015

Assets899

1,95710,977

35914,192

Liabilities400267667

Equity970

12,55513,52514,192

Cash and cash equivalents



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Investments

September 30, 2015

141 39 180265 137 402451 18 469

282 28 310

342 254 5961,481 476 1,957

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

4,467(1,390)(2,028)

296

1,345

4,431

5,776

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS



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2015

Operating activities1,516(611)15

(493)33460

Financing activities(39)(422)47(2)

(416)Investing activities

1,048(608)(171)(9)

26024328571

Cash and cash equivalents, at September 30 899



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CAPITAL MANAGEMENT

September 30,2015

Debentures and debt instruments400250

5,2831,325679(43)

7,894Non-participating shares

9702,5802,514150

6,214Equity

12,55515,74528,30042,408



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RATINGS

RISK MANAGEMENT



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FINANCIAL INSTRUMENTS RISK

•

•

•



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FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

OFF-BALANCE SHEET ARRANGEMENTS

GUARANTEES

LETTERS OF CREDIT

September 30, 2015

42 (3)11

23,615 494 (1,991)2,902 64 (1)

29 (2)26,599 558 (1,997)



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CONTINGENT LIABILITIES

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

INCOME TAXES (NON-CONSOLIDATED BASIS)

TRANSACTIONS WITH RELATED PARTIES

SUMMARY OF CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS



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CHANGES IN ACCOUNTING POLICIES

FUTURE ACCOUNTING CHANGES

IFRS 4 – INSURANCE CONTRACTSInsurance Contracts

IFRS 9 – FINANCIAL INSTRUMENTSFinancial Instruments Financial Instruments: Recognition and

Measurement

IFRS 15 – REVENUE FROM CONTRACTSWITH CUSTOMERSRevenue from Contracts with Customers



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INTERNAL CONTROL OVER FINANCIAL REPORTING

SUMMARY OF QUARTERLY RESULTS

2015Q3

9,839

4841.04

240.05

5081.091.09

2015Q3

4420

24



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POWER CORPORATION OF CANADA

September 302015

,

Assets5,776

113,14328,9869,4005,2248,574

165,32714,3665,5722,7361,569558

7,5211,9866,1959,652

191,023Total assets 412,281

Liabilities157,451

8756,9407,8942,5558,9552,074

191,023Total liabilities 377,767

Equity

970678

10,3651,51213,52520,989

Total equity 34,514Total liabilities and equity 412,281



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2015 2015

Revenues

6,796 21,012(905) (2,673)5,891 18,339

1,714 5,166(84) (1,164)

1,630 4,002

1,896 5,706422 839

9,839 28,886

Expenses

5,726 16,493(481) (1,454)5,245 15,039401 1,156187 1,115

5,833 17,310782 2,296

1,869 5,277130 365

8,614 25,248

1,225 3,638

36 1721,261 3,810154 577

Net earnings 1,107 3,233

Attributable to586 1,71713 39508 1,477

1,107 3,233

Earnings per participating share

1.09 3.191.09 3.18



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2015 2015

Net earnings 1,107 3,233

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

(15) 191– 3

(123) (526)2 18

(136) (314)

(118) (228)46 86– 1(1) (1)(73) (142)

986 1,965– (46)

(55) (50)8 9

939 1,878

(220) (206)Total – items that may be reclassified 510 1,216

Items that will not be reclassified subsequently to net earnings(63) 10217 (17)

(7) (7)Total – items that will not be reclassified (53) 78

Other comprehensive income 457 1,294

Total comprehensive income 1,564 4,527

Attributable to917 2,51313 39634 1,975

1,564 4,527



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Balance, beginning of year

Balance, end of period



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2015

Operating activities3,810(440)

(550)789(163)73

1,164(216)4,467

Financing activities

(904)(39)(422)

(1,365)47168–(2)

(451)–

(15)18345

(1,390)Investment activities

23,1241,9792,559(48)(304)

(24,399)(2,221)(2,521)(197)

(2,028)296

1,3454,431

Cash and cash equivalents, end of period 5,776

Net cash from operating activities includes4,120397



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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

Assets acquired including goodwill

Liabilities assumed

Net assets acquired

Consideration

LEGAL & GENERAL INTERNATIONAL (IRELAND) LIMITED



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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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NA

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NOTE 16 LEGAL PROVISIONS AND CONTINGENT LIABILITIES

NOTE 17 SEGMENTED INFORMATION



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CONTRIBUTION TO NET EARNINGS

Revenues

Expenses

Contribution to net earnings

Attributable to



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OF

CA

NA

DA



Revenues

Expenses


Attributable to



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F CA

NA

DA



Revenues

Expenses


Attributable to



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OF

CA

NA

DA



Revenues

Expenses


Attributable to

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 8

P O W E R C O R P O R AT I O N O F C A N A DA — T H I R 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

B 2 P O W E R C O R P O R AT I O N O F C A N A DA — T H I R 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 Pargesa

LIFECO

IGM FINANCIAL



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OR

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PARGESA AND GBL

Non-Current Assets Held for Sale and Discontinued Operations,

OTHER ACTIVITIES



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N



Control Basis of Accounting Earnings and OtherComprehensive Income

Impairment Testing Impairment Reversal

> > > >

>

> > > >

> >

>

>

>

>

>

>



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GBL

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

September 30,2015

September 30,2015

Operating earnings

1,401 486356 121111 37

1,868 644(50) (15)(98) (33)

1,720 596

Other items (non-operating earnings) [1]

71 671 6

Net earnings (attributable to common shareholders) 1,791 602

Earnings per share (attributable to common shareholders)2.41 0.830.10 0.012.51 0.84

NET EARNINGS

OPERATING EARNINGS



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CONTRIBUTION TO OPERATING EARNINGS LIFECO, IGM AND PARGESA

Lifeco

September 30,2015

September 30,2015

Canada256 91360 116358 153(41) (34)933 326

United States298 106(9) (8)(5) (2)

284 96

Europe652 229240 71(21) (4)871 296

Lifeco Corporate (9) 2

2,079 720

1,401 486



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FIN

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N

IGM Financial

September 30,2015

September 30,2015

571 190165 54104 36

840 280

(242) (81)598 199

356 121

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 — T H I R D Q UA RT E R R E P O RT 2 0 1 5


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September 30,

201573.560.3(2.9)

130.9

2015

Q3

75.449.24.0

128.6

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


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Pargesa

September 30,2015

September 30,2015

77 2613

63 2337926 13

225 62

14 1378 2610 4(20) (5)307 100

111 37



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CORPORATE OPERATIONS OF POWER FINANCIAL

Operating and other expenses

OTHER ITEMS

September 30,2015

September 30,2015

94

(23)

88 8(7) (2)71 6

September 30,2015

September 30,2015

19 9

(2) (2)17 7(67) (22)(50) (15)



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Pargesa

IGM Financial

Pargesa



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FINANCIAL POSITION

CONSOLIDATED BALANCE SHEETS

September 30,2015

Assets4,970

162,959

2,366

25314,3665,57210,5975,8899,205

191,023407,200

Liabilities158,3266,9406,81512,619

191,023375,723

Equity2,58016,27612,62131,477407,200



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N

NON-CONSOLIDATED BALANCE SHEETS

September 30,2015

Assets88448

16,1602,366123

19,581

Liabilities250475725

Equity2,58016,27618,85619,581

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

4,495(1,787)(1,993)

266981

3,9894,970

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS



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2015

Operating activities1,889(965)14938

Financing activities(98)(780)

49(829)

Investing activities(10)(1)(11)98786

Cash and cash equivalents, at September 30 884



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CAPITAL MANAGEMENT

September 30,2015

Debentures and debt instruments250

5,2831,325(43)

6,815Preferred shares

2,5802,514150

5,244Equity

16,2769,95726,23338,292



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RATINGS

RISK MANAGEMENT



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N


•

•

•



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DERIVATIVE FINANCIAL INSTRUMENTS

OFF-BALANCE SHEET ARRANGEMENTS

GUARANTEES

LETTERS OF CREDIT

September 30, 2015

1123,615 494 (1,991)2,902 64 (1)26,528 558 (1,992)



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CONTINGENT LIABILITIES

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

INCOME TAXES (NON-CONSOLIDATED BASIS)




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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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2015Q3

9,281

5960.83

60.01

6020.840.84

2015Q3

8

(2)6



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NPOWER FINANCIAL CORPORATION

September 302015

,

Assets4,970

112,77728,9867,3985,2248,574

162,95914,3665,5722,6191,065558

7,0171,9575,8899,205

191,023Total assets 407,200

Liabilities157,451

8756,9406,8152,5508,0741,995

191,023Total liabilities 375,723

Equity

2,580804

14,0291,44318,85612,621

Total equity 31,477Total liabilities and equity 407,200



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2015 2015

Revenues

6,796 21,012(905) (2,673)5,891 18,339

1,578 4,670(84) (1,164)

1,494 3,506

1,896 5,7069,281 27,551

Expenses

5,726 16,493(481) (1,454)5,245 15,039401 1,156187 1,115

5,833 17,310782 2,296

1,476 4,346106 312

8,197 24,264

1,084 3,287

32 1711,116 3,458141 564

Net earnings 975 2,894

Attributable to340 1,00533 98602 1,791975 2,894

Earnings per common share

0.84 2.510.84 2.50



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2015 2015

Net earnings 975 2,894

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

35 30(6) (5)(9) (103)3 1823 (60)

(120) (228)46 861 2(1) (1)(74) (141)

891 1,774

(55) (50)8 9

844 1,733

(220) (206)Total – items that may be reclassified 573 1,326

Items that will not be reclassified subsequently to net earnings(47) 8317 (17)

(7) (7)Total – items that will not be reclassified (37) 59

Other comprehensive income (loss) 536 1,385

Total comprehensive income 1,511 4,279

Attributable to562 1,48833 98916 2,693

1,511 4,279



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Balance, beginning of year

Balance, end of period



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2015

Operating activities3,458(436)

(550)789(163)73

1,164160

4,495Financing activities

(538)(98)(780)

(1,416)49–

96–

(451)(294)18346

(1,787)Investment activities

22,7541,9791,534(48)(4)

(23,966)(2,221)(1,884)(137)

(1,993)266981

3,989Cash and cash equivalents, end of period 4,970

Net cash from operating activities includes4,117370



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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

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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N


Insurance Companies Act

IGM FINANCIAL



PA

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OR

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PA

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OR

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N


POWER FINANCIALLiquidity risk

Credit risk




PA

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OR

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LIFECO

Liquidity risk

Credit risk




PA

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AN

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OR

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RA

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N





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IGM FINANCIAL

Liquidity risk



PA

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N


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



PA

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OR

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PA

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OR

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N




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OR

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Typeof asset Valuation approachSignificantunobservable input Input value

Inter relationshipbetweenkeyunobservable inputsand fair valuemeasurement



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N

NOTE 16 LEGAL PROVISIONS AND CONTINGENT LIABILITIES




PA

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FINA

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OR

PO

RA

TION



Revenues

Expenses


Attributable to



PA

RT

B

PO

WER

FIN

AN

CIA

L C

OR

PO

RA

TIO

N



Revenues

Expenses


Attributable to



PA

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B

PO

WER

FINA

NC

IAL C

OR

PO

RA

TION



Revenues

Expenses


Attributable to



PA

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FIN

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OR

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N



Revenues

Expenses


Attributable to

TOTAL ASSETS



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T-WE

ST LIFECO

INC

.

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 9

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ECO

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Management's Discussion and Analysis

5

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE PERIOD ENDED SEPTEMBER 30, 2015

DATED: NOVEMBER 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 nine months ended September 30, 2015 and includes a comparison to the corresponding periods in 2014, to the three months ended June 30, 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 September 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 — T H I R 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 nine months endedSept. 30

2015June 30

2015Sept. 30 2014(2)(4)

Sept. 302015

Sept. 30 2014(2)

Premiums and deposits:Amounts reported in the financial

statementsNet premium income (Life insurance,

guaranteed annuities and insured healthproducts) $ 5,891 $ 5,516 $ 4,690 $ 18,339 $ 15,721

Policyholder deposits (segregated funds):Individual products 3,157 3,031 2,865 9,169 8,641Group products 2,738 1,835 1,824 6,608 7,128

Premiums and deposits reported in thefinancial statements 11,786 10,382 9,379 34,116 31,490

Self-funded premium equivalents (Administrative services only contracts)(1) 639 659 633 1,960 1,949

Proprietary mutual funds and institutional deposits(1)(2) 16,807 11,032 10,690 40,777 32,577

Total premiums and deposits(1) 29,232 22,073 20,702 76,853 66,016

Fee and other income 1,241 1,226 1,092 3,725 3,261Paid or credited to policyholders(3) 5,833 1,588 5,966 17,310 21,035

EarningsNet earnings - common shareholders $ 720 $ 659 $ 687 $ 2,079 $ 1,889

Per common shareBasic earnings 0.724 0.661 0.687 2.086 1.891Dividends paid 0.326 0.326 0.3075 0.978 0.9225Book value(4) 19.40 18.28 16.36

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

Operating earnings(6) 15.2% 15.7% 15.1%Net earnings 15.2% 15.7% 16.5%

Total assets per financial statements(4) $ 389,935 $ 376,428 $ 349,041Proprietary mutual funds and institutional net

assets(7) 239,050 232,168 207,451Total assets under management(4)(7) 628,985 608,596 556,492

Other assets under administration(8) 524,813 539,259 465,264Total assets under administration(4) $ 1,153,798 $ 1,147,855 $ 1,021,756Total equity(4) $ 24,534 $ 23,470 $ 21,448

(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 September 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 September 30, 2015 were $720 million compared to $687 million a year ago and $659 million in the previous quarter. On a per share basis, this represents $0.724 per common share ($0.722 diluted) for the third quarter of 2015 compared to $0.687 per common share ($0.686 diluted) a year ago and $0.661 per common share ($0.659 diluted) in the previous quarter.

For the nine months ended September 30, 2015, Lifeco's net earnings attributable to common shareholders were $2,079 million compared to $1,889 million a year ago. On a per share basis, this represents $2.086 per common share ($2.081 diluted) for 2015 compared to $1.891 per common share ($1.889 diluted) a year ago.

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

Sept. 302015

June 302015

Sept. 302014

Sept. 302015

Sept. 302014

CanadaIndividual Insurance $ 91 $ 88 $ 109 $ 256 $ 275Wealth Management 116 122 96 360 314Group Insurance 153 96 125 358 326Canada Corporate (34) 2 — (41) 13

326 308 330 933 928United States

Financial Services(1) 106 72 117 298 289Asset Management (8) (3) (8) (9) (70)U.S. Corporate(1) (2) (2) (2) (5) (2)

96 67 107 284 217Europe

Insurance & Annuities 229 207 208 652 592Reinsurance 71 92 59 240 194Europe Corporate (4) (10) (8) (21) (22)

296 289 259 871 764

Lifeco Corporate 2 (5) (9) (9) (20)Net earnings - common shareholders $ 720 $ 659 $ 687 $ 2,079 $ 1,889

(1) The Company has reclassified comparative figures for presentation adjustments.

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.

MARKET IMPACTSInterest Rate EnvironmentGovernment bond yields in countries where the Company operates decreased during the quarter, while corporate credit spreads generally widened. The net change in interest rates did not impact the range of interest rate scenarios tested through the valuation process and had no material impact on net earnings or on the Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio.



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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 September 30, 2015 for a further description of the Company's sensitivity to interest rate fluctuations.

Equity MarketsIn the geographies where the Company operates, average equity market levels in the third quarter of 2015 were mixed compared to the third quarter of 2014; however, they ended the quarter at lower market levels compared to June 30, 2015. The change in average market levels and market volatility during the quarter had a negative impact on net earnings of approximately $27 million ($21 million year-to-date), relative to the Company's expectation, related to 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. In addition, equity market levels at the end of the period negatively impacted net earnings by approximately $6 million ($1 million year-to-date) related to seed money investments held in the Asset Management and Canada Corporate business units.

Comparing the third quarter of 2015 to the third quarter of 2014, average equity market levels were up by 3% in the U.S. (as measured by S&P 500) and by 7% in broader Europe (as measured by Eurostoxx 50); however, they were down by 9% in Canada (as measured by S&P TSX) and by 5% in the U.K. (as measured by FTSE 100). The major equity indices finished the third quarter down 7% in the U.S., 9% in broader Europe, 9% in Canada and 7% in the U.K. compared to June 30, 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 third quarter of 2015, the average currency translation rate of the U.S. dollar, the British pound and the euro increased compared to the third quarter of 2014. The overall impact of currency movement on the Company’s net earnings for the three month period ended September 30, 2015 was an increase of $40 million ($67 million year-to-date) compared to translation rates a year ago.

From June 30, 2015 to September 30, 2015, the market rates at the end of the reporting period used to translate U.S. dollar, British pound and euro assets and liabilities to the Canadian dollar increased. 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 $841 million in-quarter ($1,726 million net unrealized gains year-to-date) recorded in other comprehensive income and was the primary driver of the increase in book value per share from $18.28 at June 30, 2015 to $19.40 at September 30, 2015.

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

ACTUARIAL ASSUMPTION CHANGESDuring the third quarter of 2015, the Company updated a number of assumptions resulting in a positive net earnings impact of $123 million, compared to $98 million for the same quarter last year and $74 million for the previous quarter. In addition to regular experience studies, a significant number of reviews were completed earlier than usual, in anticipation of the adoption of Solvency II in 2016. In Europe, net earnings were positively impacted by actuarial assumption changes of $82 million, primarily due to refinements to annuitant longevity assumptions in the Insurance & Annuities business unit, partially offset by the strengthening of mortality provisions in the Reinsurance business unit. In Canada, mortality and morbidity assumption refinements were the primary drivers of the $20 million positive net earnings impact. Net earnings in the U.S. were positively impacted by $21 million, primarily due to updated provisions for future credit losses.



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For the nine months ended September 30, 2015, assumption changes resulted in a positive net earnings impact of $279 million, compared to $163 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 nine months ended

Sept. 302015

June 302015

Sept. 30 2014(1)

Sept. 302015

Sept. 30 2014(1)

CanadaIndividual Insurance $ 1,220 $ 1,216 $ 1,117 $ 3,590 $ 3,316Wealth Management 2,504 2,713 2,386 8,028 9,173Group Insurance 1,948 1,940 1,965 5,836 5,777

5,672 5,869 5,468 17,454 18,266United States

Financial Services(1) 3,477 2,504 2,290 8,711 6,760Asset Management 10,242 8,507 8,958 28,981 26,971

13,719 11,011 11,248 37,692 33,731Europe

Insurance & Annuities 8,354 4,116 3,446 17,630 11,056Reinsurance 1,487 1,077 540 4,077 2,963

9,841 5,193 3,986 21,707 14,019Total premiums and deposits $ 29,232 $ 22,073 $ 20,702 $ 76,853 $ 66,016

SalesFor the three months ended For the nine months ended

Sept. 302015

June 302015

Sept. 302014

Sept. 302015

Sept. 302014

Canada $ 2,944 $ 3,016 $ 2,747 $ 9,143 $ 8,853United States 25,831 18,131 15,686 64,085 39,325Europe - Insurance & Annuities 7,716 3,396 2,913 15,568 9,233

Total sales $ 36,491 $ 24,543 $ 21,346 $ 88,796 $ 57,411

(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 nine months ended

Sept. 302015

June 302015

Sept. 302014

Sept. 302015

Sept. 302014

Investment income earned (net of investmentproperties expenses) $ 1,555 $ 1,515 $ 1,493 $ 4,545 $ 4,514

Allowances for credit losses on loans andreceivables — — (9) 1 (9)

Net realized gains 19 29 18 135 58Regular investment income 1,574 1,544 1,502 4,681 4,563Investment expenses (28) (25) (23) (80) (69)Regular net investment income 1,546 1,519 1,479 4,601 4,494Changes in fair value through profit or loss (82) (4,037) 1,190 (1,166) 4,982Net investment income $ 1,464 $ (2,518) $ 2,669 $ 3,435 $ 9,476

Net investment income in the third quarter of 2015, which includes changes in fair value through profit or loss, decreased by $1,205 million compared to the same quarter last year. The change in fair values in the third quarter of 2015 was a decrease of $82 million compared to an increase of $1,190 million for the third quarter of 2014. In the third quarter of 2015, the impact of a decline in Canadian equity markets was mostly offset by an increase in U.K. bond values due to a decline in U.K. government bond yields. In the third quarter of 2014, bond values increased primarily due to declining U.K. government and corporate bond yields as well as narrowing Canadian corporate spreads.

Regular net investment income in the third quarter of 2015 of $1,546 million, which excludes changes in fair value through profit or loss, increased by $67 million compared to the third quarter of 2014. The increase was primarily due to the impact of currency movement as the U.S. dollar and British pound strengthened against the Canadian dollar, partially offset by lower income on fixed-income investments. Net realized gains include gains on available-for-sale securities of $8 million in the third quarter of 2015 compared to $11 million for the same quarter last year.

For the nine months ended September 30, 2015, net investment income decreased by $6,041 million compared to the same period last year. The change in fair values for the nine month period in 2015 was a decrease of $1,166 million compared to an increase in fair values of $4,982 million during the same period in 2014. For the first nine months of 2015 global bond yields were mixed, compared to global bond yields decreasing for the first nine months of 2014, particularly for longer durations. As well, Canadian equity markets declined in the first nine months of 2015, compared to increasing for the same period in 2014.

Regular net investment income for the nine months ended September 30, 2015 increased by $107 million compared to the same period last year. The increase was primarily due to the impact of currency movement as the U.S. dollar and British pound strengthened against the Canadian dollar as well as higher net realized gains, partially offset by lower income from fixed-income investments. Net realized gains include gains on available-for-sale securities of $102 million for the nine months ended September 30, 2015, compared to $35 million for the same period last year.

Net investment income in the third quarter of 2015 increased by $3,982 million compared to the previous quarter, primarily due to net decreases in fair values of $82 million in the third quarter of 2015 compared to net decreases of $4,037 million in the previous quarter. The net change in fair values during the third quarter was primarily due to a decline in Canadian equity markets partially offset by a decline in U.K. government bond yields, compared to an increase in bond yields during the previous quarter.



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Credit Markets In the third quarter of 2015, the Company experienced net recoveries on impaired investments, including dispositions, which positively impacted common shareholders’ net earnings by $1 million ($1 million net recovery in the third 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 $8 million ($4 million net charge in the third quarter of 2014).

For the nine months ended September 30, 2015, the Company experienced net recoveries on impaired investments, including dispositions, which positively impacted common shareholders' net earnings by $8 million ($21 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 $30 million year-to-date ($16 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 nine months ended

Sept. 302015

June 302015

Sept. 302014

Sept. 302015

Sept. 302014

CanadaSegregated funds, mutual funds and

other $ 328 $ 327 $ 323 $ 974 $ 947ASO contracts 38 39 37 116 113

366 366 360 1,090 1,060United States

Segregated funds, mutual funds andother 591 577 443 1,741 1,298

EuropeSegregated funds, mutual funds and

other 284 283 289 894 903Total fee and other income $ 1,241 $ 1,226 $ 1,092 $ 3,725 $ 3,261

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 nine months ended

Sept. 302015

June 302015

Sept. 302014

Sept. 302015

Sept. 302014

Canada $ 1,967 $ 1,460 $ 2,617 $ 7,192 $ 9,349United States 1,390 543 1,079 3,054 3,672Europe 2,476 (415) 2,270 7,064 8,014Total $ 5,833 $ 1,588 $ 5,966 $ 17,310 $ 21,035



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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 September 30, 2015, consolidated amounts paid or credited to policyholders were $5.8 billion, including $5.6 billion of policyholder benefit payments and a $0.2 billion increase in contract liabilities. The decrease of $0.1 billion from the same period in 2014 consisted of a $1.2 billion decrease in the change in contract liabilities and a $1.1 billion increase in benefit payments. The decrease in contract liabilities was primarily due to fair value adjustments to insurance contract liabilities as result of changes in interest rates in Canada, the U.S. and Europe. The increase in benefit payments was primarily due to new and restructured reinsurance treaties and the impact of currency movement.

For the nine months ended September 30, 2015, consolidated amounts paid or credited to policyholders were $17.3 billion, including $16.2 billion of policyholder benefit payments and a $1.1 billion increase in contract liabilities. The decrease of $3.7 billion from the same period in 2014 consisted of a $6.2 billion decrease in the change in contract liabilities and a $2.5 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 the impact of a Dutch-based annuity reinsurance agreement entered into during the second quarter of 2014. The decrease was 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 impact of currency movement.

Compared to the previous quarter, consolidated amounts paid or credited to policyholders increased by $4.2 billion. The increase consisted of a $3.6 billion increase 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. The increase also consisted of a $0.6 billion increase in benefit payments primarily due to higher business volumes and the impact of currency movement.

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 third quarter of 2015, the Company had an effective income tax rate of 10%, down from 15% in the third quarter of 2014. The decrease in the effective income tax rate for the third quarter of 2015 was primarily due to a higher percentage of non-taxable investment income and income subject to lower rates of income tax in foreign jurisdictions. Also contributing to the lower effective income tax rate in the third quarter of 2015 were net changes to certain income tax estimates, including the true-up of prior year tax provisions to tax filings.

The Company had an effective income tax rate of 15% for the nine months ended September 30, 2015 compared to 18% for the same period last year. The decrease in the Company's effective income tax rate was primarily due to a higher percentage of income subject to lower rates of income tax in foreign jurisdictions. Also contributing to the lower effective income tax rate in 2015 were net changes to certain income tax estimates, including the true-up of prior year tax provisions to tax filings.

The third quarter effective income tax rate of 10% was lower than the second quarter rate of 11%. The decrease in the effective income tax rate was primarily due to a higher percentage of non-taxable investment income and income subject to lower rates of income tax in foreign jurisdictions.



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CONSOLIDATED FINANCIAL POSITION

ASSETS

Assets under administrationSeptember 30, 2015

Canada United States Europe TotalAssets

Invested assets $ 66,738 $ 42,416 $ 50,239 $ 159,393Goodwill and intangible assets 5,122 2,387 2,352 9,861Other assets 3,439 4,493 21,726 29,658Segregated funds net assets 68,634 34,304 88,085 191,023

Total assets 143,933 83,600 162,402 389,935Proprietary mutual funds and institutional net assets 4,896 206,579 27,575 239,050Total assets under management 148,829 290,179 189,977 628,985Other assets under administration 14,955 468,712 41,146 524,813Total assets under administration $ 163,784 $ 758,891 $ 231,123 $ 1,153,798

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 September 30, 2015 increased by $90.5 billion to $1.2 trillion compared to December 31, 2014, primarily due to 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 $112.3 billion or 70% of invested assets at September 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 September 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 — T H I R D Q UA RT E R R E P O RT 2 0 1 5


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Bond portfolio qualitySeptember 30, 2015 December 31, 2014

AAA $ 34,119 30% $ 34,332 34%AA 20,811 19 18,954 18A 35,391 32 31,133 30BBB 20,374 18 17,370 17BB or lower 1,564 1 1,379 1

Total $ 112,259 100% $ 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 portfolioSeptember 30, 2015 December 31, 2014

Mortgage loans by type Insured Non-insured Total TotalSingle family residential $ 767 $ 1,163 $ 1,930 9% $ 1,916 9%Multi-family residential 3,015 2,806 5,821 27 5,322 26Commercial 221 13,732 13,953 64 13,308 65

Total $ 4,003 $ 17,701 $ 21,704 100% $ 20,546 100%

The total mortgage portfolio was $21.7 billion or 14% of invested assets at September 30, 2015, compared to $20.5 billion or 14% of invested assets at December 31, 2014. Total insured loans were $4.0 billion or 18% of the mortgage portfolio.

Single family residential mortgages

Region September 30, 2015 December 31, 2014Ontario $ 934 49% $ 933 49%Quebec 400 21 401 21Alberta 133 7 134 7British Columbia 118 6 111 6Newfoundland 103 5 102 5Saskatchewan 82 4 78 4Nova Scotia 62 3 62 3Manitoba 54 3 51 3New Brunswick 40 2 41 2Other 4 — 3 —

Total $ 1,930 100% $ 1,916 100%

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During the nine months ended September 30, 2015, single family mortgage originations, including renewals, were $450 million, of which 35% 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 September 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 September 30, 2015, the total actuarial provision for future credit losses in insurance contract liabilities was $3,362 million compared to $3,133 million at December 31, 2014, an increase of $229 million primarily due to the impact of currency movement, credit rating activity and normal business activity, partially offset by the impact of basis changes.

The aggregate of impairment provisions of $23 million ($22 million at December 31, 2014) and actuarial provisions for future credit losses in insurance contract liabilities of $3,362 million ($3,133 million at December 31, 2014) represents 2.3% of bond and mortgage assets, including funds held by ceding insurers, at September 30, 2015 (2.4% at December 31, 2014).

LIABILITIES

Total liabilitiesSeptember 30 December 31

2015 2014Insurance and investment contract liabilities $ 158,326 $ 146,055Other general fund liabilities 16,052 13,791Investment and insurance contracts on account of segregated fund policyholders 191,023 174,966Total $ 365,401 $ 334,812

Total liabilities increased by $30.6 billion to $365.4 billion at September 30, 2015 from December 31, 2014.

Investment and insurance contracts on account of segregated fund policyholders increased by $16.1 billion, primarily due to the impact of currency movement of $11.5 billion and the $5.5 billion impact of the Legal & General International (Ireland) Limited (LGII) acquisition, partially offset by net withdrawals of $0.8 billion and the combined impact of market value losses and investment income of $0.4 billion. Insurance and investment contract liabilities increased by $12.3 billion. The increase was primarily due to the strengthening of the U.S. dollar, euro and British pound against the Canadian dollar and the acquisition of Equitable Life's annuity business. 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 September 30, 2015, the market value of GMWB product in-force in Canada, the U.S., Ireland and Germany was $3,359 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 exposureSeptember 30, 2015

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

Canada $ 28,922 $ — $ 51 $ 264 $ 264United States 11,042 40 — 62 102Europe

Insurance & Annuities 8,566 6 — 487 487Reinsurance(2) 1,186 507 — 30 537

9,752 513 — 517 1,024Total $ 49,716 $ 553 $ 51 $ 843 $ 1,390

(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 September 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 September 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 $5 million in-quarter ($3 million for the third quarter of 2014) and $11 million year-to-date ($8 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 September 30, 2015 was $9,657 million, which comprises $7,143 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 nine months ended September 30, 2015, the Company repurchased and subsequently cancelled 5,936,420 common shares (2014 - 1,137,757) at an average cost per share of $35.21 (2014 - $31.06) 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.

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 September 30, 2015, the Company and its operating subsidiaries held cash, cash equivalents and short-term bonds of $10.0 billion ($7.3 billion at December 31, 2014) and other available government bonds of $31.2 billion ($32.8 billion at December 31, 2014). Included in the cash, cash equivalents and short-term bonds at September 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.



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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 and address the impact of this change, remains in regular contact with its regulators through the final preparatory phase during the remainder of 2015 and is taking appropriate steps to respond to the new regulatory environment.

CASH FLOWS

Cash flowsFor the three months ended

September 30For the nine months ended

September 302015 2014 2015 2014

Cash flows relating to the following activities:Operations $ 1,564 $ 2,077 $ 4,060 $ 4,731Financing (618) (444) (1,489) (1,076)Investment (78) (1,342) (1,622) (3,075)

868 291 949 580Effects of changes in exchange rates on cash and

cash equivalents 157 26 266 55Increase (decrease) in cash and cash equivalents

in the period 1,025 317 1,215 635Cash and cash equivalents, beginning of period 2,688 3,109 2,498 2,791Cash and cash equivalents, end of period $ 3,713 $ 3,426 $ 3,713 $ 3,426

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. 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.

In the third quarter of 2015, cash and cash equivalents increased by $1,025 million from June 30, 2015. Cash flows provided by operations during the third quarter of 2015 were $1,564 million, a decrease of $513 million compared to the third quarter of 2014. Cash flows used in financing were $618 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 $130 million. For the three months ended September 30, 2015, cash flows were used by the Company to acquire an additional $78 million of investment assets.

For the nine months ended September 30, 2015, cash and cash equivalents increased by $1,215 million from December 31, 2014. Cash flows provided by operations were $4,060 million, a decrease of $671 million compared to the same period in 2014. Cash flows used in financing were $1,489 million, primarily used for payment of dividends to the preferred and common shareholders of $1,069 million and a decrease in a line of credit of a subsidiary of $291 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 nine months ended September 30, 2015, cash flows were used by the Company to acquire an additional $1,622 million of investment assets.



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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. 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 September 30, 2015 was 234% (224% at December 31, 2014). London Life’s MCCSR ratio at September 30, 2015 was 227% (247% at December 31, 2014). Canada Life's MCCSR ratio at September 30, 2015 was 255% (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 September 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.

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.



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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)

Sept. 30 June 30 Dec. 312015 2015 2014

Canada 21.4 % 22.2 % 22.1 %U.S. Financial Services(2) 14.2 % 15.0 % 16.3 %U.S. Asset Management (Putnam) (0.4)% (0.4)% (3.6)%Europe 17.3 % 18.1 % 17.7 %Lifeco Corporate (2.4)% (4.5)% (5.3)%

Total Lifeco Operating Earnings Basis(3) 15.2 % 15.7 % 15.7 %Total Lifeco Net Earnings Basis 15.2 % 15.7 % 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 third 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 third 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 has an insurer financial strength rating of AA- from Fitch Ratings and a long-term credit rating of A+ from Standard & Poor's Ratings Services, unchanged from the second quarter of 2015. The ILA €200 million perpetual capital notes assumed on the acquisition of Irish Life are rated A- by Fitch Ratings and A- by Standard & Poor's Ratings Services, unchanged from the second quarter of 2015.



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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 third 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 third 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 September 30, 2015, total financial collateral, including initial margin and overcollateralization, received on derivative assets was $106 million ($52 million at December 31, 2014) and pledged on derivative liabilities was $609 million ($299 million at December 31, 2014).

During the nine month period ended September 30, 2015, the outstanding notional amount of derivative contracts increased by $8.1 billion to $23.6 billion, primarily due to an increase of $6.8 billion in forward settling to-be-announced security transactions and regular hedging activities.

The Company’s exposure to derivative counterparty credit risk, which reflects the current fair value of those instruments in a gain position, decreased to $494 million at September 30, 2015 from $652 million at December 31, 2014. The decrease was primarily due to 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. In September 2015, the IASB announced that it would issue an Exposure Draft, expected by the end of 2015, proposing the deferral of the effective date of IFRS 9, Financial Instruments for companies whose business is predominantly insurance from January 1, 2018, as disclosed in the Company's 2014 Annual MD&A, to the earlier of January 1, 2021 or January 1, 2020, if the new Insurance Contracts standard is issued with a January 1, 2020 effective date. The Company continues to evaluate the impact of the adoption of these standards.

In regards to future accounting policy changes that could impact the Company, other than the change to IFRS 15 and IFRS 9 noted above, there have been no significant changes from the disclosure included in the Company's 2014 Annual MD&A.



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SEGMENTED OPERATING RESULTSThe 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.

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

Sept. 302015

June 302015

Sept. 302014

Sept. 302015

Sept. 302014

Premiums and deposits $ 5,672 $ 5,869 $ 5,468 $ 17,454 $ 18,266Sales 2,944 3,016 2,747 9,143 8,853Fee and other income 366 366 360 1,090 1,060Net earnings - common shareholders 326 308 330 933 928

Total assets $ 143,933 $ 145,535 $ 139,609Proprietary mutual funds and institutional net

assets 4,896 5,028 4,639Total assets under management 148,829 150,563 144,248Other assets under administration 14,955 15,123 14,336Total assets under administration $ 163,784 $ 165,686 $ 158,584

2015 DEVELOPMENTS• Premiums and deposits for the three months ended September 30, 2015 were $5.7 billion, a 4% increase from the

same quarter last year.

• Sales for the three months ended September 30, 2015 were $2.9 billion, a 7% increase from the same quarter in 2014, which reflects strong sales across all lines of business.

• Fee and other income for the three months ended September 30, 2015 was $366 million, an increase of $6 million compared to the same quarter in 2014, primarily due to growth in average assets under management.

• Net earnings for the three months ended September 30, 2015 of $326 million were comparable to the same quarter last year.

• Group Insurance won a large provincial government group case effective September 1, 2015. This included opening a new claims office in the respective region.

• As part of the continued focus on digital technology and service enhancements, Group Retirement Services introduced Enrolment Express, a new online enrolment service.



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BUSINESS UNITS - CANADA

INDIVIDUAL INSURANCE

OPERATING RESULTS

For the three months ended For the nine months endedSept. 30

2015June 30

2015Sept. 30

2014Sept. 30

2015Sept. 30

2014Premiums and deposits $ 1,220 $ 1,216 $ 1,117 $ 3,590 $ 3,316Sales 142 138 130 393 377Net earnings 91 88 109 256 275

Premiums and depositsIndividual Insurance premiums for the third quarter of 2015 increased by $103 million to $1,220 million compared to the same quarter last year. Individual Life premiums for the quarter increased by $102 million to $1,138 million compared to the same quarter last year, primarily due to a 13% increase in participating life premiums. Living Benefits premiums of $82 million were comparable to same quarter last year.

For the nine months ended September 30, 2015, Individual Insurance premiums increased by $274 million to $3,590 million compared to the same period last year. Individual Life premiums increased by $271 million to $3,342 million compared to the same period last year, primarily due to an 11% increase in participating life premiums. Living Benefits premiums increased by $3 million to $248 million compared to the same period last year.

Individual Insurance premiums for the third quarter of 2015 increased by $4 million compared to the previous quarter, primarily due to a 3% increase in non-participating life premiums.

SalesIndividual Insurance sales for the third quarter of 2015 increased by $12 million to $142 million compared to the same quarter last year. Participating life insurance sales remained strong, up $15 million or 16%. Universal Life and Term Life insurance product sales decreased by $4 million or 13%. While third quarter non-participating life insurance sales were down year-over-year, results continued to improve during the quarter as the Company returns to normal service levels for application processing.

For the nine months ended September 30, 2015, Individual Insurance sales increased by $16 million to $393 million compared to the same period last year. Participating life insurance sales increased $34 million or 13%, while Universal Life and Term Life insurance product sales decreased $17 million or 17%, primarily due to application processing delays earlier in the year.

Individual Insurance sales for the third quarter of 2015 increased by $4 million compared to the previous quarter, primarily due to growth in participating life insurance sales, which increased by $6 million or 6%. Universal Life and Term Life insurance product sales decreased by $3 million or 10% compared to the previous quarter. New business processing times have improved as the Company returns to normal service levels.



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Net earningsNet earnings for the third quarter of 2015 decreased by $18 million to $91 million compared to the same quarter last year. The decrease was primarily due to lower contributions from insurance contract liability basis changes, partially offset by favourable mortality and policyholder behaviour experience. In addition, net earnings for the third quarter of 2015 were positively impacted by changes to certain income tax estimates.

For the nine months ended September 30, 2015, net earnings decreased by $19 million to $256 million compared to the same period last year. The decrease was primarily due to lower contributions from insurance contract liability basis changes and higher new business strain, partially offset by favourable investment, mortality and policyholder behaviour experience as well as lower income taxes discussed for the in-quarter results.

Net earnings for the third quarter of 2015 increased by $3 million compared to the previous quarter. The increase was primarily due to favourable morbidity and policyholder behaviour experience, partially offset by less favourable investment experience.

For the third quarter of 2015, the net earnings attributable to the participating account increased by $4 million to $22 million compared to the same quarter last year, primarily due to lower income taxes, partially offset by higher new business strain.

For the nine months ended September 30, 2015, the net earnings attributable to the participating account increased by $7 million to $71 million compared to the same period last year. The increase was primarily due to higher contributions from investment experience on par surplus assets and lower income taxes, partially offset by higher new business strain.

The net earnings attributable to the participating account for the third quarter of 2015 increased by $6 million compared to the previous quarter, primarily due to lower income taxes, partially offset by higher new business strain.

WEALTH MANAGEMENT

OPERATING RESULTS


2015June 30

2015Sept. 30

2014Sept. 30

2015Sept. 30

2014Premiums and deposits $ 2,504 $ 2,713 $ 2,386 $ 8,028 $ 9,173Sales 2,551 2,757 2,408 8,252 8,014Fee and other income 310 313 308 931 903Net earnings 116 122 96 360 314

Premiums and depositsPremiums and deposits for the third quarter of 2015 increased by $118 million to $2,504 million compared to the same quarter last year. The increase was primarily due to higher premiums related to group capital accumulation plan (GCAP) products and single premium group annuities (SPGAs).

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 nine months ended September 30, 2015 decreased by $79 million to $8,028 million. The decrease was primarily due to lower premiums and deposits related to GCAP and group investment only (IO) products, partially offset by an increase in premiums and deposits related to individual investment funds.



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Premiums and deposits for the third quarter of 2015 decreased by $209 million compared to the previous quarter. The decrease was primarily driven by lower premiums related to SPGAs and individual investment funds. SalesSales for the third quarter of 2015 increased by $143 million to $2,551 million compared to the same quarter last year. The increase was primarily due to higher sales of SPGAs, GCAP products and individual investment funds.

For the nine months ended September 30, 2015, sales increased by $238 million to $8,252 million compared to the same period last year, primarily due to higher sales of individual investment funds, partially offset by lower sales of GCAP and group IO products.

Sales for the third quarter of 2015 decreased by $206 million compared to the previous quarter. The decrease was primarily driven by lower sales of individual investment funds and SPGAs, partially offset by higher sales of GCAP products.

For GCAP and proprietary individual investment fund business, net cash inflows for the third quarter of 2015 were $21 million compared to $286 million in the same quarter last year and $159 million in the previous quarter. For the nine months ended September 30, 2015, net cash inflows were $430 million compared to $1,888 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 $392 million.

Fee and other incomeFee and other income for the third quarter of 2015 increased by $2 million to $310 million compared to the same quarter last year, primarily due to growth in average assets under administration driven by positive fund performance and net cash flows, partially offset by lower margins. The growth in assets under administration was driven by positive fixed-income and U.S. equity fund returns due to lower interest rates and the strengthening of the U.S. dollar, respectively. This was partially offset by negative returns on Canadian equity funds due to lower average equity market levels. Lower margins were primarily driven by the development of the market for high-net-worth segregated fund and mutual fund products.

Fee and other income for the nine months ended September 30, 2015 increased by $28 million to $931 million compared to the same period last year, primarily due to growth in average assets under administration driven by positive fund performance and net cash flows, partially offset by lower margins related to high-net-worth products discussed for the in-quarter results. The growth in assets under administration was driven by positive fixed-income and U.S. equity fund returns due to lower interest rates and the strengthening of the U.S. dollar, respectively.

Fee and other income for the third quarter of 2015 decreased by $3 million compared to the previous quarter, primarily due to lower average assets under management, driven by lower average market levels.

Net earningsNet earnings for the third quarter of 2015 increased by $20 million to $116 million compared to the same quarter last year. The increase was primarily due to higher contributions from insurance contract liability basis changes, partially offset by increased operating expenses.

For the nine months ended September 30, 2015, net earnings increased by $46 million to $360 million compared to the same period last year. The increase was primarily due to higher contributions from investment experience, higher fee income and more favourable longevity experience, partially offset by increased operating expenses.



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Net earnings for the third quarter of 2015 decreased by $6 million compared to the previous quarter, primarily due to lower contributions from investment experience, lower acquisition expense deferrals and lower fee income. During the second quarter of 2015, acquisition expense deferrals increased due to an update to expense allocations, which resulted in a higher allocation to deferrable acquisition costs. In addition, net earnings for the third quarter of 2015 were positively impacted by changes to certain income tax estimates, which did not occur in the second quarter of 2015.

GROUP INSURANCE

OPERATING RESULTS


2015June 30

2015Sept. 30

2014Sept. 30

2015Sept. 30

2014Premiums and deposits $ 1,948 $ 1,940 $ 1,965 $ 5,836 $ 5,777Sales 251 121 209 498 462Fee and other income 38 39 37 116 113Net earnings 153 96 125 358 326

Premiums and depositsPremiums and deposits for the third quarter of 2015 decreased by $17 million to $1,948 million compared to the same quarter last year, primarily due to a decrease in large case market premiums and deposits, partially offset by an increase in mid-size case market premiums and deposits.

For the nine months ended September 30, 2015, premiums and deposits increased by $59 million to $5,836 million compared to the same period last year, primarily due to an increase in mid-size case market premiums and deposits.

Premiums and deposits for the third quarter of 2015 increased by $8 million compared to the previous quarter, primarily due to an increase in large case market premiums and deposits.

SalesSales for the third quarter of 2015 increased by $42 million to $251 million compared to the same quarter last year. The increase was primarily due to higher creditor sales and higher sales in the large case market, which includes a large government plan sale, partially offset by lower sales in the mid-size case market. Sales of creditor/direct marketing products can be highly variable from quarter to quarter.

For the nine months ended September 30, 2015, sales increased by $36 million to $498 million compared to the same period last year. The increase was primarily due to higher sales in the large case market and higher creditor sales.

Sales for the third quarter of 2015 increased by $130 million compared to the previous quarter, primarily due to higher sales in the large case market, including a large government plan sale discussed for the in-quarter results as well as higher creditor sales.

Fee and other incomeFee and other income of $38 million for the third quarter of 2015 was both comparable to the same quarter last year and the previous quarter.

Fee and other income of $116 million for the nine months ended September 30, 2015 was comparable to the same period last year.



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Net earningsNet earnings for the third quarter of 2015 increased by $28 million to $153 million compared to the same quarter last year. The increase was primarily due to the positive impact of changes to certain income tax estimates and higher contributions from investment experience, partially offset by less favourable morbidity experience.

For the nine months ended September 30, 2015, net earnings increased by $32 million to $358 million compared to the same period last year. In addition to the reasons discussed for the in-quarter result, the increase was partially offset by higher operating expenses and lower contributions from insurance contract liability basis changes.

Net earnings for the third quarter of 2015 increased by $57 million compared to the previous quarter, primarily due to the positive impact of changes to certain income tax estimates, more favourable morbidity experience and higher contributions from investment experience.

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

For the third quarter of 2015, Canada Corporate had a net loss of $34 million compared to nil for the same quarter last year. The net loss was primarily due to changes to certain income tax estimates, which did not occur in 2014, as well as increased allocated financing charges, partially offset by higher investment income.

For the nine months ended September 30, 2015, Canada Corporate had a net loss of $41 million compared to net earnings of $13 million for the same period in 2014. The change in net earnings was primarily due to changes to certain income tax estimates, which did not occur in 2014, as well as increased allocated financing charges, partially offset by lower net expenses.

For the third quarter of 2015, Canada Corporate had a net loss of $34 million compared to net earnings of $2 million in the previous quarter. The change in net earnings was primarily due to changes to certain income tax estimates, which did not occur in the second quarter of 2015, partially offset by higher investment income.

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 the Individual Markets operations.

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.



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

Sept. 302015

June 30,2015

Sept. 30 2014(1)(2)

Sept. 302015

Sept. 30 2014(1)

Premiums and deposits(1) $ 13,719 $ 11,011 $ 11,248 $ 37,692 $ 33,731Sales 25,831 18,131 15,686 64,085 39,325Fee and other income 591 577 443 1,741 1,298Net earnings - common shareholders 96 67 107 284 217Net earnings - common shareholders (US$) 73 55 97 226 197

Total assets(2) $ 83,600 $ 78,868 $ 69,911Proprietary 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 have been restated for a prior period adjustment described in note 2 to the Company's condensed consolidated financial statements for the period ended September 30, 2015.

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. The number of participant accounts has grown from 7.1 million at December 31, 2014 to 7.5 million at September 30, 2015. 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.

• Net earnings for the three months ended September 30, 2015 were US$73 million, a decrease of US$24 million compared to the same quarter last year, primarily due to lower contributions from basis changes. Net earnings for the third quarter of 2015 increased by US$18 million compared to the second quarter, primarily due to higher contributions from basis changes.

BUSINESS UNITS – UNITED STATES

FINANCIAL SERVICES

2015 DEVELOPMENTS• Sales for the three months ended September 30, 2015 were US$11.9 billion, an increase of US$5.7 billion compared

to the same quarter last year, primarily due to higher large plan sales in Empower Retirement.

• Premiums and deposits for the three months ended September 30, 2015 were US$2.7 billion, a 26% increase from the same quarter last year, primarily due to higher sales.

• Fee and other income for the three months ended September 30, 2015 was US$233 million, an increase of US$63 million from the same quarter last year, primarily due to a US$28 million increase in RPS fee income as well as the impact of the transfer of the defined contribution business from Putnam to Empower Retirement on January 1, 2015. RPS was acquired August 29, 2014.



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• Net earnings for the three months ended September 30, 2015 were US$81 million, a decrease of US$26 million over the same quarter last year, primarily due to lower contributions from basis changes.

• Empower Retirement continues to incur strategic and business development expenses as it focuses on enhancements, which will improve the client-facing experience as well as streamline the back-office processing over the next several years. The Company anticipates investing approximately US$150 million on this multi-year initiative, with an expected decrease to net earnings of approximately US$35 million in 2015 and US$20 million in 2016. For the three and nine months ended September 30, 2015, these costs have decreased net earnings by US$9 million and US$25 million, respectively. After 2016, the Company expects these costs to decline and normalize. Ongoing operations will include amortization expense from system and infrastructure enhancements. The Company expects that these enhancements will increase market share by driving future sales and improving the retention of participants and assets.

The Company has set an annual costs savings target of US$40 to US$50 million pre-tax. Integration activities are expected to be completed by the second quarter of 2017 with the annual reduction of operating costs fully reflected upon the completion of the business transformation in the next three to four years. These synergies are expected to be achieved through efficiencies from the conversion of business onto a single back-office platform, increased utilization of Great-West Global, which launched in the third quarter of 2015 with over 250 Bangalore-based professionals, and scale-driven cost improvement.

OPERATING RESULTS


2015June 30

2015Sept. 30 2014(1)

Sept. 302015

Sept. 30 2014(1)

Premiums and deposits(1) $ 3,477 $ 2,504 $ 2,290 $ 8,711 $ 6,760Sales 15,589 9,624 6,728 35,104 12,354Fee and other income 306 297 186 898 560Net earnings(2) 106 72 117 298 289

Premiums and deposits (US$)(1) $ 2,655 $ 2,035 $ 2,100 $ 6,892 $ 6,182Sales (US$) 11,900 7,825 6,172 27,702 11,307Fee and other income (US$) 233 242 170 713 512Net earnings (US$)(2) 81 58 107 236 263

(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) The Company has reclassified comparative figures for presentation adjustments.

Premiums and depositsPremiums and deposits for the third quarter of 2015 increased by US$555 million to US$2,655 million compared to the same quarter last year, due to an increase of US$850 million in Empower Retirement, partially offset by a decrease of US$295 million in Individual Markets. The increase in Empower Retirement was primarily due to higher sales. The decrease in Individual Markets was primarily due to lower sales in the executive benefits and retail bank life insurance lines of business. In the third quarter of 2014, IRA premiums and deposits of US$64 million were included in Individual Markets; in 2015, these are included in Empower Retirement.

For the nine months ended September 30, 2015, premiums and deposits increased by US$710 million to US$6,892 million compared to the same period last year, due to an increase of US$1,270 million in Empower Retirement, partially offset by a decrease of US$560 million in Individual Markets. The increase in Empower Retirement was primarily due to higher sales. 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 nine months ended September 30, 2014, IRA premiums and deposits of US$164 million were included in Individual Markets; in 2015, these are included in Empower Retirement.



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Premiums and deposits for the third quarter of 2015 increased by US$620 million compared to the previous quarter primarily due to an increase in Empower Retirement premiums driven by higher sales.

SalesSales in the third quarter of 2015 increased by US$5.7 billion to US$11.9 billion compared to the same quarter last year, due to an increase of US$6.2 billion in Empower Retirement, partially offset by a decrease of US$0.5 billion 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 executive benefits and retail bank life insurance lines of business. In the third quarter of 2014, IRA sales of US$0.2 billion were included in Individual Markets; in 2015, these are included in Empower Retirement.

For the nine months ended September 30, 2015, sales increased by US$16.4 billion to US$27.7 billion compared to the same period last year. The increase was due to an increase of US$17.2 billion in Empower Retirement, partially offset by a decrease in Individual Markets of US$0.8 billion for the same reasons discussed for the in-quarter results. For the nine months ended September 30, 2014, IRA sales of US$0.5 billion were included in Individual Markets; in 2015, these are included in Empower Retirement.

Sales in the third quarter of 2015 increased by US$4.1 billion compared to the previous quarter, primarily due to an increase in Empower Retirement large plan sales.

Fee and other incomeFee and other income for the third quarter of 2015 increased by US$63 million to US$233 million compared to the same quarter last year. The increase was primarily due to a US$28 million increase in RPS fee income, increased average assets under administration 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 third quarter of 2014, Putnam fee income included US$8 million related to the transferred defined contribution business.

For the nine months ended September 30, 2015, fee and other income increased by US$201 million to US$713 million compared to the same period last year, for the same reasons discussed for the in-quarter results. RPS fees for the nine months ended September 30, 2015 were US$137 million, an increase of US$123 million compared to the same period last year. For the nine months ended September 30, 2014, Putnam fee income included US$23 million related to the transferred defined contribution business.

Fee and other income for the third quarter of 2015 decreased by US$9 million compared to the previous quarter, primarily due to lower fees in Individual Markets and a decrease in average assets under administration driven by lower average equity market levels.

Net earningsNet earnings for the third quarter of 2015 decreased by US$26 million to US$81 million compared to the same quarter last year. Third quarter 2015 results include US$7 million of strategic and business development expenses related to Empower Retirement, compared to US$3 million for the third quarter of 2014. Excluding these expenses, the net earnings decreased by US$22 million, primarily due to lower contributions from basis changes and 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 third quarter of 2014, Putnam's net loss included a net loss of US$4 million related to the transferred defined contribution business.

For the nine months ended September 30, 2015, net earnings decreased by US$27 million to US$236 million compared to the same period last year. Included in the year-to-date net earnings was US$21 million of strategic and development expenses related to Empower Retirement, compared to US$3 million for the same period in 2014. Excluding these expenses, the net earnings decreased by US$9 million, primarily due to the same reasons discussed for the in-quarter results. For the nine months ended September 30, 2014, Putnam's net loss included a net loss of US$15 million related to the transferred defined contribution business.



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Net earnings for the third quarter of 2015 increased by US$23 million compared to the previous quarter, primarily due to higher contributions from basis changes.

ASSET MANAGEMENT

2015 DEVELOPMENTS• Putnam’s ending assets under management (AUM) at September 30, 2015 of US$146.6 billion decreased by

US$10.4 billion compared to the same quarter last year, while average AUM of US$153.3 billion decreased by US$4.7 billion compared to the same quarter last year.

• Sales for the three months ended September 30, 2015 were US$7.8 billion, a decrease of US$0.4 billion compared to the same quarter last year.

• Fee income for the three months ended September 30, 2015 was US$217 million, a decrease of US$19 million compared to the same quarter last year.

• Putnam continues to sustain strong investment performance relative to its peers. As of September 30, 2015, approximately 85% and 63% of Putnam’s fund assets performed at levels above the Lipper median on a three-year and five-year basis, respectively.

• DALBAR Inc. ranked Putnam's financial professionals website first among mutual fund companies for six consecutive quarters, including all four quarters of 2014 and the first two quarters of 2015, as well as the DALBAR designation of "Excellent" for the second quarter of 2015.



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OPERATING RESULTS


2015June 30

2015Sept. 30

2014Sept. 30

2015Sept. 30

2014Sales $ 10,242 $ 8,507 $ 8,958 $ 28,981 $ 26,971Fee income

Investment management fees 219 214 189 646 546Performance fees 5 6 7 14 17Service fees 45 42 44 129 131Underwriting & distribution fees 16 18 17 54 44

Fee income 285 280 257 843 738

Core net earnings (loss)(1) 8 10 (5) 33 (15)Less: Financing and other expenses

(after-tax)(1) (16) (13) (3) (42) (55)Reported net earnings (loss) (8) (3) (8) (9) (70)

Sales (US$) $ 7,818 $ 6,916 $ 8,218 $ 22,986 $ 24,660Fee income (US$)

Investment management fees (US$) 167 174 173 513 499Performance fees (US$) 4 5 6 12 15Service fees (US$) 34 34 41 102 120Underwriting & distribution fees (US$) 12 15 16 42 41

Fee income (US$) 217 228 236 669 675

Core net earnings (loss) (US$)(1) 6 8 (5) 26 (14)Less: Financing and other expenses

(after-tax) (US$)(1) (12) (10) (3) (32) (50)Reported net earnings (loss) (US$) (6) (2) (8) (6) (64)

Pre-tax operating margin (US$)(2) 5.2% 6.6% 5.9% 6.9% 1.9%

(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) include the impact of dealer commissions and software amortization, and exclude 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.

SalesSales in the third quarter of 2015 decreased by US$0.4 billion to US$7.8 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$0.8 billion.

For the nine months ended September 30, 2015, sales decreased by US$1.7 billion to US$23.0 billion compared to the same period last year, due to a decrease in mutual fund sales of US$3.1 billion, partially offset by higher institutional sales of US$1.4 billion.

Sales in the third quarter of 2015 increased by US$0.9 billion compared to the previous quarter, due to an increase in institutional sales of US$1.2 billion, partially offset by a decrease in mutual fund sales of US$0.3 billion.



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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 third quarter of 2015 decreased by US$19 million to US$217 million compared to the same quarter last year. Fee income for the third 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 decreased by US$11 million, primarily due to decreased investment management fees, driven by lower average AUM.

For the nine months ended September 30, 2015, fee income decreased by US$6 million to US$669 million compared to the same period last year. Fee income for the nine months ended September 30, 2014 included US$23 million related to the transferred defined contribution business. Excluding the impact of the transferred defined contribution business, fee income increased by US$17 million, primarily due to increased investment management fees driven by growth in average AUM and an increased number of accounts.

Fee income for the third quarter of 2015 decreased by US$11 million compared to the previous quarter, primarily due to decreased investment management fees and performance fees on both mutual funds and institutional portfolios, driven by lower average AUM during the third quarter.

Net earningsCore net earnings (a non-IFRS financial measure) for the third quarter of 2015 were US$6 million compared to a net loss of US$5 million in the same quarter last year. Core net earnings for the third quarter of 2014 included a net loss of US$4 million attributable to the transferred defined contribution business. Excluding the impact of the transferred defined contribution business, core net earnings increased US$7 million, primarily due to lower operating expenses, which were offset by lower fee income and lower net investment income. In the third quarter of 2015, the reported net loss, including financing and other expenses, was US$6 million compared to a net loss of US$8 million for the same quarter last year. Financing and other expenses for the third quarter of 2015 increased by US$9 million to US$12 million compared to the same quarter last year. Included in these expenses for the third quarter of 2014 was a release of certain income tax reserves related to the completion of prior year tax audits, which did not recur.

For the nine months ended September 30, 2015, core net earnings were US$26 million compared to a net loss of US$14 million in the same period last year. Core net earnings for the nine months ended September 30, 2014 included a net loss of US$15 million attributable to the transferred defined contribution business. Excluding the impact of the transferred defined contribution business, core net earnings increased US$25 million, primarily due to higher fee income and lower operating expenses, partially offset by lower net investment income. The reported net loss, including financing and other expenses, for the nine months ended September 30, 2015 was US$6 million compared to a net loss of US$64 million for the same period last year. Financing and other expenses for the nine month period ended September 30, 2015 decreased by US$18 million to US$32 million compared to the same period last year. On a year-to-date basis, the 2014 financing and other expenses included the impact of share-based liability compensation expenses of US$22 million and proxy expenses for the Putnam Funds of US$4 million, which did not recur in 2015. The third quarter 2014 also included a release of certain income tax reserves discussed for the in-quarter results.

Core net earnings for the third quarter of 2015 decreased by US$2 million compared to the previous quarter, primarily due to lower fee income and lower net investment income, partially offset by lower operating expenses. The reported net loss, including financing and other expenses, for the third quarter of 2015 was US$6 million compared to a net loss of US$2 million in the previous quarter. Financing and other expenses for the third quarter of 2015 increased by US$2 million to US$12 million compared to the previous quarter, driven by an increase in financing costs.



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ASSETS UNDER MANAGEMENT

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

Sept. 302015

June 302015

Sept. 302014

Sept. 302015

Sept. 302014

Beginning assets $ 156,348 $ 159,208 $ 158,571 $ 157,572 $ 149,556

Sales - Mutual funds 4,233 4,500 5,396 14,341 17,449Redemptions - Mutual funds (5,518) (5,508) (4,315) (16,192) (12,230)Net asset flows - Mutual funds (1,285) (1,008) 1,081 (1,851) 5,219

Sales - Institutional 3,585 2,416 2,822 8,645 7,211Redemptions - Institutional (2,164) (3,222) (2,622) (8,449) (9,890)Net asset flows - Institutional 1,421 (806) 200 196 (2,679)

Net asset flows - Total 136 (1,814) 1,281 (1,655) 2,540

Impact of market/performance (9,846) (1,046) (2,805) (9,279) 4,951

Ending assets $ 146,638 $ 156,348 $ 157,047 $ 146,638 $ 157,047

Average assets under managementMutual funds 83,584 87,896 84,842 86,225 81,806Institutional assets 69,757 72,459 73,244 71,107 72,608Total average assets under management $ 153,341 $ 160,355 $ 158,086 $ 157,332 $ 154,414

Average AUM for the three months ended September 30, 2015 were US$153.3 billion. Average AUM decreased by US$4.7 billion compared to the same quarter last year, primarily due to the impact of negative markets over the twelve month period. Net asset inflows for the third quarter of 2015 were US$0.1 billion compared to net asset inflows of US$1.3 billion in the same quarter last year. In-quarter mutual fund net asset outflows were US$1.3 billion and institutional net asset inflows were US$1.4 billion.

Average AUM for the nine months ended September 30, 2015 increased by US$2.9 billion to US$157.3 billion compared to the same period last year, primarily due to the impact of overall positive market and investment performance. Net asset outflows for the nine months ended September 30, 2015 were US$1.7 billion compared to net asset inflows of US$2.5 billion for the same period last year. Year-to-date mutual fund net asset outflows were US$1.9 billion and institutional net asset inflows were US$0.2 billion.

Average AUM decreased by US$7.0 billion compared to the previous quarter, primarily due to negative 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 third quarter of 2015, United States Corporate net loss of US$2 million was comparable to the same quarter last year.

For the nine months ended September 30, 2015, United States Corporate net loss increased by US$2 million to US$4 million compared to the same period in 2014, due to higher RPS acquisition related restructuring costs in 2015.

The net loss for the three months ended September 30, 2015 of US$2 million was comparable to the previous quarter.



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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


2015June 30

2015Sept. 30

2014Sept. 30

2015Sept. 30

2014Premiums and deposits $ 9,841 $ 5,193 $ 3,986 $ 21,707 $ 14,019Fee and other income 284 283 289 894 903Net earnings - common shareholders 296 289 259 871 764

Total assets $ 162,402 $ 152,025 $ 139,521Proprietary mutual funds and institutional net


2015 DEVELOPMENTS• Net earnings for the third quarter of 2015 were $296 million, an increase of $37 million from the same quarter last

year, primarily due to higher contributions from insurance contract liability basis changes and the impact of currency movement, partially offset by lower contributions from investment experience.

• Premiums and deposits for the three months ended September 30, 2015 were $9.8 billion, an increase of $5.9 billion from the same quarter last year, primarily due to higher fund management sales, including $3.5 billion related to Ark Life (part of the U.K. based Guardian group).

• Fee and other income for the three months ended September 30, 2015 of $284 million was comparable to the same quarter last year.

• In the third quarter of 2015, Canada Life's Reinsurance business unit entered into a long-term reinsurance agreement with a Dutch-based insurance company to cover the longevity risk on a €6 billion portfolio of annuities.



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• On July 1, 2015, the Company, through its wholly owned subsidiary Canada Life Group, 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 $5.5 billion (as at September 30, 2015). LGII now operates as Canada Life International Assurance (Ireland) (CLIAI). This business is being integrated with current operations and contributed to sales for the quarter. Prior to the acquisition, these assets were included in other assets under administration, as a subsidiary of Irish Life provided recordkeeping and administrative functions for the LGII portfolio; these assets are now included in segregated funds.

• In August 2015, Irish Life Investment Managers added $3.5 billion in asset management, asset servicing and unit pricing obligations of Ark Life. Prior to the appointment in the second quarter of 2015, these assets were included in the assets under administration, as 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 International Adviser International Life Awards 2015, Canada Life International, a subsidiary of Canada Life, received the “Readers Choice Award” for “Best International Life Company” for U.K. Offshore international life insurers.

• The Investments Life and Pensions Moneyfacts 2015 awards in the U.K. named Canada Life “Best Tax and Estate Planning Solutions Provider” for the fifth year in a row and awarded Canada Life the “Service Beyond the Call of Duty" award.

• Canada Life U.K. Group division won the “Best Group Provider” category at the 2015 Health Insurance Awards, for the third year in a row.

BUSINESS UNITS – EUROPE

INSURANCE & ANNUITIES

OPERATING RESULTS


2015June 30

2015Sept. 30

2014Sept. 30

2015Sept. 30

2014Premiums and deposits $ 8,354 $ 4,116 $ 3,446 $ 17,630 $ 11,056Sales 7,716 3,396 2,913 15,568 9,233Fee and other income 278 277 278 877 871Net earnings 229 207 208 652 592

Premiums and depositsPremiums and deposits for the third quarter of 2015 increased by $4.9 billion to $8.4 billion compared to the same quarter last year. The increase is due to higher sales across most product lines in Ireland and Germany, including $3.5 billion related to Ark Life, as well as the impact of currency movement.

For the nine months ended September 30, 2015, premiums and deposits increased by $6.6 billion to $17.6 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, including Ark Life, 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 in the first half of 2015, compared to the same period in 2014.

Premiums and deposits for the third quarter of 2015 increased by $4.2 billion compared to the previous quarter, primarily due to higher fund management sales in Ireland, including Ark Life, and the impact of currency movement.



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SalesSales for the third quarter of 2015 increased by $4.8 billion to $7.7 billion compared to the same quarter last year. For the nine months ended September 30, 2015, sales increased to $15.6 billion from $9.2 billion in the same period last year. The increases in both the three month and nine month periods were due to the same reasons discussed for premiums and deposits for the respective periods.

Sales for the third quarter of 2015 increased by $4.3 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 third quarter of 2015 of $278 million was comparable with the same quarter last year, as the impact of currency movement and higher asset management fees were offset by 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 nine months ended September 30, 2015, fee and other income increased by $6 million to $877 million compared to the same period last year. The increase was 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 a weakening of the euro in the first half of 2015, compared to the same period in 2014.

Fee and other income for third quarter of 2015 of $278 million was comparable to the previous quarter.

Net earnings Net earnings for the third quarter of 2015 increased by $21 million to $229 million compared to the same quarter last year. The increase was primarily due to higher contributions from insurance contract liability basis changes, which include refinements to annuitant longevity assumptions, favourable mortality and morbidity experience and the impact of currency movement. The increase was partially offset by lower contributions from investment experience. Net earnings include $40 million in Ireland, down $43 million from the same quarter in 2014, due to lower contributions from investment experience and insurance contract liability basis changes, partially offset by improved mortality experience and an increase in benefits from integration synergies.

Net earnings for the nine months ended September 30, 2015 increased by $60 million to $652 million compared to the same period last year. The increase was primarily due to higher contributions from insurance contract liability basis changes, higher asset management fees and improved morbidity experience. 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. as well as changes to certain income tax estimates. Net earnings include $180 million in Ireland, down $13 million from the same period in 2014. This was due to lower contributions from investment experience and insurance contract liability basis changes as well as the impact of currency movement, driven by the weakening of the euro in the first half of 2015, compared to the same period in 2014. These decreases were partly offset by higher net fee income and an increase in benefits from integration synergies.

Net earnings for the third quarter of 2015 increased by $22 million compared to the previous quarter. The increase was primarily due to higher contributions from insurance contract liability basis changes in the U.K. and improved morbidity experience in Ireland, partially offset by lower contributions from investment experience.



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REINSURANCEOPERATING RESULTS


2015June 30

2015Sept. 30

2014Sept. 30

2015Sept. 30

2014Premiums and deposits $ 1,487 $ 1,077 $ 540 $ 4,077 $ 2,963Fee and other income 6 6 11 17 32Net earnings 71 92 59 240 194

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 third quarter of 2015 increased by $0.9 billion to $1.5 billion compared to the same quarter last year. The increase was primarily due to new and restructured reinsurance agreements and the impact of currency movement.

For the nine months ended September 30, 2015, premiums and deposits increased by $1.1 billion to $4.1 billion compared to the same period last year. The increase was primarily due to new and restructured reinsurance agreements as well as the 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 third quarter of 2015 increased by $0.4 billion compared to the previous quarter, primarily due to higher business volumes and the impact of currency movement.

Fee and other incomeFee and other income for the third 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 nine months ended September 30, 2015, fee and other income decreased by $15 million to $17 million compared to the same period last year, for the same reasons discussed for the in-quarter results.

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

Net earningsNet earnings for the third quarter of 2015 increased by $12 million to $71 million compared to the same quarter last year. The increase was primarily due to higher contributions from insurance contract liability basis changes, favourable claims experience and the impact of currency movement.

For the nine months ended September 30, 2015, net earnings increased by $46 million to $240 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 impact of currency movement as well as changes to certain income tax estimates. These increases were partially offset by higher new business strain in the traditional life business.



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Net earnings for the third quarter of 2015 decreased by $21 million compared to the previous quarter. The decrease was primarily due to higher income taxes and lower contributions from insurance contract liability basis changes, partially offset by favourable claims experience. Net earnings in the second quarter of 2015 were positively impacted by changes to certain income tax estimates, which did not recur in the third quarter of 2015.

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 third quarter of 2015, Europe Corporate had a net loss of $4 million compared to a net loss of $8 million for the same quarter last year. Third quarter 2015 results include restructuring and acquisition costs of $3 million relating to the acquisition of LGII, compared to $6 million relating to the acquisition of Irish Life for the same quarter last year.

For the nine months ended September 30, 2015, Europe Corporate had a net loss of $21 million compared to a net loss of $22 million for the same period last year. Included in the year-to-date net loss was $18 million of Irish Life and LGII related restructuring and acquisition costs in 2015, compared to $19 million of Irish Life restructuring costs for the same period in 2014. The net loss for the three months ended September 30, 2015, decreased from $10 million to $4 million in the current quarter. The decrease is primarily due to a decrease in Irish Life restructuring costs, partially offset by an increase in LGII restructuring costs discussed for the in-quarter results.

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.

Net earnings for the three months ended September 30, 2015 of $2 million increased from a net loss of $9 million in the third quarter of 2014. The increase was primarily due to higher investment income and a decrease in preferred share dividends related to preferred shares issued in the second quarter of 2014. In 2015, preferred share dividends related to preferred shares issued in the second quarter of 2014 were allocated to the Canada segment.

For the nine months ended September 30, 2015, Lifeco Corporate had a net loss of $9 million, a decrease from a net loss of $20 million for the same period last year for the same reasons discussed for the in-quarter results.

Net earnings for the three months ended September 30, 2015 of $2 million increased from a net loss of $5 million for the previous quarter, primarily due to higher investment income. In addition, net earnings for the third quarter of 2015 were positively impacted by changes to certain income tax estimates, which did not occur in 2014.



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OTHER INFORMATIONQUARTERLY FINANCIAL INFORMATION

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

2015 2014 2013Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4

Total revenue(1)(2) $ 8,596 $ 4,224 $12,679 $10,723 $ 8,451 $10,070 $ 9,937 $ 8,056

Common shareholdersNet earnings

Total 720 659 700 657 687 615 587 717Basic - per share 0.724 0.661 0.702 0.658 0.687 0.616 0.587 0.717Diluted - per share 0.722 0.659 0.700 0.657 0.686 0.615 0.587 0.716

Operating earnings(3)

Total 720 659 700 657 687 615 587 491Basic - per share 0.724 0.661 0.702 0.658 0.687 0.616 0.587 0.491Diluted - per share 0.722 0.659 0.700 0.657 0.686 0.615 0.587 0.490

(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 $720 million for the third quarter of 2015 compared to $687 million reported a year ago. On a per share basis, this represents $0.724 per common share ($0.722 diluted) for the third quarter of 2015 compared to $0.687 per common share ($0.686 diluted) a year ago.

Total revenue for the third quarter of 2015 was $8,596 million and comprises premium income of $5,891 million, regular net investment income of $1,546 million, a negative change in fair value through profit or loss on investment assets of $82 million and fee and other income of $1,241 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 nine month period ended September 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 Sept. 30

2015June 30

2015Mar. 31

2015Dec. 31

2014Sept. 30

2014June 30

2014Mar. 31

2014United States dollarBalance sheet $ 1.34 $ 1.25 $ 1.27 $ 1.16 $ 1.12 $ 1.07 $ 1.11Income and expenses $ 1.31 $ 1.23 $ 1.24 $ 1.14 $ 1.09 $ 1.09 $ 1.10

British poundBalance sheet $ 2.02 $ 1.96 $ 1.88 $ 1.81 $ 1.82 $ 1.83 $ 1.84Income and expenses $ 2.03 $ 1.89 $ 1.88 $ 1.80 $ 1.82 $ 1.84 $ 1.83

EuroBalance sheet $ 1.50 $ 1.39 $ 1.36 $ 1.40 $ 1.42 $ 1.46 $ 1.52Income and expenses $ 1.46 $ 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 nine months endedSeptember 30 June 30 September 30 September 30 September 30

2015 2015 2014 2015 2014

IncomePremium income

Gross premiums written $ 6,796 $ 6,410 $ 5,527 $ 21,012 $ 18,284Ceded premiums (905) (894) (837) (2,673) (2,563)

Total net premiums 5,891 5,516 4,690 18,339 15,721Net investment income (note 4)

Regular net investment income 1,546 1,519 1,479 4,601 4,494Changes in fair value through profit or

loss (82) (4,037) 1,190 (1,166) 4,982Total net investment income 1,464 (2,518) 2,669 3,435 9,476Fee and other income 1,241 1,226 1,092 3,725 3,261

8,596 4,224 8,451 25,499 28,458Benefits and expenses

Policyholder benefitsInsurance and investment contracts

Gross 5,726 5,127 4,635 16,493 14,028Ceded (481) (490) (464) (1,454) (1,415)

Total net policyholder benefits 5,245 4,637 4,171 15,039 12,613Policyholder dividends and experience

refunds 401 374 381 1,156 1,127Changes in insurance and investment

contract liabilities 187 (3,423) 1,414 1,115 7,295Total paid or credited to policyholders 5,833 1,588 5,966 17,310 21,035

Commissions 565 554 519 1,634 1,570Operating and administrative expenses 1,132 1,081 888 3,291 2,736Premium taxes 83 80 85 247 253Financing charges (note 9) 78 75 75 230 227Amortization of finite life intangible assets 36 37 33 109 98Restructuring and acquisition expenses 7 14 10 28 25

Earnings before income taxes 862 795 875 2,650 2,514Income taxes (note 14) 84 86 135 394 464Net earnings before non-controlling

interests 778 709 740 2,256 2,050Attributable to non-controlling interests 26 19 20 82 70Net earnings 752 690 720 2,174 1,980Preferred share dividends 32 31 33 95 91Net earnings - common shareholders $ 720 $ 659 $ 687 $ 2,079 $ 1,889

Earnings per common share (note 11)Basic $ 0.724 $ 0.661 $ 0.687 $ 2.086 $ 1.891

Diluted $ 0.722 $ 0.659 $ 0.686 $ 2.081 $ 1.889



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

For the three months ended For the nine months endedSeptember 30 June 30 September 30 September 30 September 30

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

Net earnings $ 752 $ 690 $ 720 $ 2,174 $ 1,980Other comprehensive income (loss)Items that may be reclassified

subsequently to ConsolidatedStatements of Earnings

Unrealized foreign exchange gains ontranslation of foreign operations 888 146 180 1,767 365

Unrealized foreign exchange gains(losses) on euro debt designated ashedge of the net investment in foreignoperations (55) (15) 20 (50) 25

Income tax benefit 8 1 — 9 —Unrealized gains (losses) on available-for-sale assets 35 (141) 39 24 191

Income tax (expense) benefit (5) 30 (5) (3) (39)Realized gains on available-for-saleassets (8) (20) (12) (101) (34)

Income tax expense 2 3 1 17 8Unrealized gains (losses) on cash flowhedges (118) 29 (63) (224) (56)

Income tax (expense) benefit 45 (11) 25 85 22Realized losses on cash flow hedges 1 — — 2 1

Income tax benefit (1) — — (1) —Non-controlling interests 2 35 — (5) (46)

Income tax (expense) benefit (1) (10) — — 12Total items that may be reclassified 793 47 185 1,520 449

Items that will not be reclassified toConsolidated Statements of Earnings

Re-measurements on defined benefitpension and other post-employmentbenefit plans (note 13) (51) 325 (128) 51 (367)

Income tax (expense) benefit 16 (77) 30 (13) 87Non-controlling interests 2 (19) 10 (10) 27

Income tax (expense) benefit (1) 5 (3) 3 (7)Total items that will not be reclassified (34) 234 (91) 31 (260)

Total other comprehensive income 759 281 94 1,551 189Comprehensive income $ 1,511 $ 971 $ 814 $ 3,725 $ 2,169



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

September 30 December 312015 2014

AssetsCash and cash equivalents $ 3,713 $ 2,498Bonds (note 4) 112,259 103,168Mortgage loans (note 4) 21,704 20,546Stocks (note 4) 7,919 7,820Investment properties (note 4) 5,224 4,613Loans to policyholders 8,574 7,711

159,393 146,356Funds held by ceding insurers 14,366 12,154Goodwill 5,908 5,855Intangible assets 3,953 3,625Derivative financial instruments 494 652Owner occupied properties 646 619Fixed assets 279 228Reinsurance assets (note 8) 5,572 5,151Premiums in course of collection, accounts and interest receivable 3,663 3,056Other assets 2,636 2,368Current income taxes 114 48Deferred tax assets 1,888 1,631Investments on account of segregated fund policyholders (note 7) 191,023 174,966Total assets $ 389,935 $ 356,709

LiabilitiesInsurance contract liabilities (note 8) $ 157,451 $ 145,198Investment contract liabilities (note 8) 875 857Debentures and other debt instruments 5,283 5,355Funds held under reinsurance contracts 346 313Derivative financial instruments 2,485 1,195Accounts payable 2,188 1,480Other liabilities 3,357 3,099Current income taxes 559 737Deferred tax liabilities 1,672 1,450Capital trust debentures 162 162Investment and insurance contracts on account of segregated fund policyholders (note 7) 191,023 174,966Total liabilities 365,401 334,812

EquityNon-controlling interests Participating account surplus in subsidiaries 2,569 2,480 Non-controlling interests in subsidiaries 187 163Shareholders' equity Share capital (note 10) Preferred shares 2,514 2,514 Common shares 7,143 7,102 Accumulated surplus 10,069 9,134 Accumulated other comprehensive income 1,929 378 Contributed surplus 123 126Total equity 24,534 21,897Total liabilities and equity $ 389,935 $ 356,709



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

September 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 — — 2,174 — 82 2,256Other comprehensive income — — — 1,551 12 1,563

9,616 126 11,308 1,929 2,737 25,716Dividends to shareholders

Preferred shareholders (note 11) — — (95) — — (95)Common shareholders — — (974) — — (974)

Shares exercised and issued under share-basedpayment plans (note 10) 83 (47) — — 39 75

Share-based payment plans expense — 44 — — — 44Equity settlement of Putnam share-based plans — — — — (23) (23)Shares purchased and cancelled under Normal

Course Issuer Bid (note 10) (209) — — — — (209)Excess of redemption proceeds over stated capital

per Normal Course Issuer Bid (note 10) 167 — (167) — — —Dilution loss on non-controlling interests — — (3) — 3 —Balance, end of period $ 9,657 $ 123 $ 10,069 $ 1,929 $ 2,756 $ 24,534

September 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 — — 1,980 — 70 2,050Other comprehensive income — — — 189 14 203

9,426 57 9,879 275 2,446 22,083Dividends to shareholders

Preferred shareholders (note 11) — — (91) — — (91)Common shareholders — — (921) — — (921)

Shares exercised and issued under share-basedpayment plans (note 10) 9 (2) — — — 7

Share-based payment plans expense — 26 — — — 26Modification to share-based plans — 34 — — 211 245Equity settlement of Putnam share-based plans — — — — (62) (62)Shares purchased and cancelled under Normal

Course Issuer Bid (note 10) (35) — — — — (35)Excess of redemption proceeds over stated capital

per Normal Course Issuer Bid (note 10) 27 — (27) — — —Issuance of preferred shares 200 — — — — 200Share issue costs — — (4) — — (4)Reallocation from shareholder account to

participating account in London Life — — (4) — 4 —Balance, end of period $ 9,627 $ 115 $ 8,832 $ 275 $ 2,599 $ 21,448



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

For the nine monthsended September 30

2015 2014Operations

Earnings before income taxes $ 2,650 $ 2,514Income taxes paid, net of refunds received (295) (411)Adjustments:

Change in insurance and investment contract liabilities (550) 6,738Change in funds held by ceding insurers 789 536Change in funds held under reinsurance contracts (163) (13)Change in deferred acquisition costs 30 37Change in reinsurance assets 73 (91)Changes in fair value through profit or loss 1,166 (4,982)Other 360 403

4,060 4,731Financing Activities

Issue of common shares (note 10) 83 9Issue of preferred shares — 200Share issue costs — (4)Purchased and cancelled common shares (note 10) (209) (35)Decrease in line of credit of subsidiary (291) (235)Increase (decrease) in debentures and other debt instruments (3) 1Dividends paid on common shares (974) (921)Dividends paid on preferred shares (95) (91)

(1,489) (1,076)Investment Activities

Bond sales and maturities 22,397 20,324Mortgage loan repayments 1,979 1,669Stock sales 1,423 2,514Investment property sales 199 98Change in loans to policyholders (48) 16Business acquisitions, net of cash and cash equivalents acquired (note 3) (4) (42)Investment in bonds (23,559) (23,719)Investment in mortgage loans (1,969) (2,595)Investment in stocks (1,776) (1,189)Investment in investment properties (264) (151)

(1,622) (3,075)

Effect of changes in exchange rates on cash and cash equivalents 266 55

Increase in cash and cash equivalents 1,215 635

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

Cash and cash equivalents, end of period $ 3,713 $ 3,426

Supplementary cash flow informationInterest income received $ 3,749 $ 3,602Interest paid $ 197 $ 197Dividend income received $ 175 $ 185



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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 nine months ended September 30, 2015 were approved by the Board of Directors on November 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 September 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 nine months ended September 30, 2014 this adjustment resulted in decreases of $8 and $10, 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 September 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)

48

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

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

At the date of acquisition, the Company recognized $5,465 of unit-linked funds within investments on account of segregated fund policyholders and investment and insurance contracts on account of segregated fund policyholder liabilities (note 7) on the Company’s balance sheet.

The revenue and net earnings from LGII, along with the goodwill from the acquisition, was not significant.



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4. Portfolio Investments

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

September 30, 2015 December 31, 2014Carrying

valueFair

valueCarrying

valueFair

valueBonds

Designated fair value through profit or loss (1) $ 80,483 $ 80,483 $ 77,833 $ 77,833Classified fair value through profit or loss (1) 1,919 1,919 2,167 2,167Available-for-sale 13,331 13,331 9,990 9,990Loans and receivables 16,526 18,006 13,178 14,659

112,259 113,739 103,168 104,649Mortgage loans

Residential 7,751 8,174 7,238 7,653Non-residential 13,953 15,183 13,308 14,514

21,704 23,357 20,546 22,167Stocks

Designated fair value through profit or loss (1) 6,708 6,708 6,617 6,617Available-for-sale 54 54 50 50Available-for-sale, at cost (2) 559 N/A 560 N/AEquity method 598 552 593 664

7,919 7,314 7,820 7,331Investment properties 5,224 5,224 4,613 4,613Total $ 147,106 $ 149,634 $ 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 $ 363 $ 355Available-for-sale 16 14Loans and receivables 25 15

Total $ 404 $ 384

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



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4. Portfolio Investments (cont'd)

50

(c) Net investment income comprises the following:

For the three monthsBonds

Mortgageloans Stocks

Investmentproperties Other Totalended September 30, 2015

Regular net investment income:Investment income earned $ 1,095 $ 242 $ 58 $ 89 $ 95 $ 1,579Net realized gains

Available-for-sale 8 — — — — 8Other classifications 3 8 — — — 11

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

Other income and expenses — — — (24) (28) (52)1,106 250 58 65 67 1,546

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

Classified fair value throughprofit or loss (4) — — — — (4)

Designated fair value throughprofit or loss 238 — (375) 66 (7) (78)

234 — (375) 66 (7) (82)Total $ 1,340 $ 250 $ (317) $ 131 $ 60 $ 1,464

For the three monthsBonds



Regular net investment income:Investment income earned $ 1,025 $ 238 $ 55 $ 76 $ 118 $ 1,512Net realized gains (losses)

Available-for-sale 12 — (1) — — 11Other classifications 1 6 — — — 7

Net allowances for creditlosses on loans andreceivables (8) (1) — — — (9)



Classified fair value throughprofit or loss (1) — — — — (1)

Designated fair value throughprofit or loss 1,135 — — 73 (17) 1,191

1,134 — — 73 (17) 1,190Total $ 2,164 $ 243 $ 54 $ 130 $ 78 $ 2,669



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4. Portfolio Investments (cont'd)

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For the nine monthsBonds




Available-for-sale 101 — 1 — — 102Other classifications 10 23 — — — 33

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



Classified fair value throughprofit or loss 15 — — — — 15

Designated fair value throughprofit or loss (1,151) — (347) 202 115 (1,181)

(1,136) — (347) 202 115 (1,166)Total $ 2,122 $ 747 $ (166) $ 391 $ 341 $ 3,435

For the nine monthsBonds




Available-for-sale 28 — 7 — — 35Other classifications 13 10 — — — 23

Net allowances for creditlosses on loans andreceivables (8) (1) — — — (9)



Classified fair value throughprofit or loss 49 — — — — 49

Designated fair value throughprofit or loss 4,078 — 502 210 143 4,933

4,127 — 502 210 143 4,982Total $ 7,229 $ 719 $ 698 $ 391 $ 439 $ 9,476

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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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 $127 causing an increase in net earnings of approximately $77.

• 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 $598 causing a decrease in net earnings of approximately $408.

(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 $237 causing a decrease in net earnings of approximately $188.

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 $520 causing an increase in net earnings of approximately $420. A 1% decrease in the best estimate assumption would be expected to increase non-participating insurance contract liabilities by approximately $546 causing a decrease in net earnings of approximately $435.



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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:

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

Cash and cash equivalents $ 3,713 $ — $ — $ 3,713Financial assets at fair value through profit or loss

Bonds — 82,392 10 82,402Stocks 6,655 7 46 6,708

Total financial assets at fair value through profit or loss 6,655 82,399 56 89,110Available-for-sale financial assets

Bonds — 13,330 1 13,331Stocks 53 — 1 54

Total available-for-sale financial assets 53 13,330 2 13,385

Investment properties — — 5,224 5,224Derivatives (1) 3 491 — 494Other assets:

Trading account assets in Putnam 282 193 6 481Other trading assets 85 — — 85Other (2) 61 — — 61

Total assets measured at fair value $ 10,852 $ 96,413 $ 5,288 $ 112,553

Liabilities measured at fair valueDerivatives (3) $ 7 $ 2,478 $ — $ 2,485Investment contract liabilities — 847 28 875Other liabilities 61 — — 61Total liabilities measured at fair value $ 68 $ 3,325 $ 28 $ 3,421

(1) Excludes collateral received of $101. (2) Includes cash collateral under securities lending agreements. (3) Excludes collateral pledged of $547.

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 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:

September 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 — 202 — 210 —

Included in other comprehensive income (1) — — — — 344 — 344 —

Purchases — — 34 — 264 6 304 —Sales — — (4) — (199) — (203) —Repayments (47) — — — — — (47) —Other — — — — — — — —Transfers into Level 3 (2) — — — — — — — —Transfers out of Level 3 (2) (34) — (4) — — — (38) —

Balance, end of period $ 10 $ 1 $ 46 $ 1 $ 5,224 $ 6 $ 5,288 $ 28

Total gains for theperiod included innet investmentincome $ 5 $ — $ 3 $ — $ 202 $ — $ 210 $ —

Change in unrealized gains for the period

included in earnings for assets held at September 30, 2015 $ 5 $ — $ 3 $ — $ 181 $ — $ 189 $ —

(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 3.3% - 10.0% 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 3.8% 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 $ 11,477 $ 11,052Bonds 42,199 37,912Mortgage loans 2,586 2,508Stocks and units in unit trusts 77,192 68,911Mutual funds 47,831 46,707Investment properties 10,650 9,533

191,935 176,623Accrued income 393 364Other liabilities (2,561) (3,033)Non-controlling mutual funds interest 1,256 1,012Total $ 191,023 $ 174,966



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

For the nine monthsended September 302015 2014

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

Policyholder deposits 15,777 15,769Net investment income 1,242 1,133Net realized capital gains on investments 4,362 4,371Net unrealized capital gains (losses) on investments (6,027) 4,843Unrealized gains due to changes in foreign exchange rates 11,495 610Policyholder withdrawals (16,579) (15,950)Business acquisitions (note 3) 5,465 —Segregated Fund investment in General Fund 41 (380)General Fund investment in Segregated Fund (9) —Net transfer from General Fund 46 55Non-controlling mutual funds interest 244 204

Total 16,057 10,655Balance, end of period $ 191,023 $ 171,434

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

September 30, 2015Level 1 Level 2 Level 3 Total

Investments on account of segregated fund policyholders (1) $ 114,918 $ 66,403 $ 11,548 $ 192,869

(1) Excludes other liabilities, net of other assets, of $1,846.

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 nine months of 2015 certain foreign stock holdings valued at $200 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 817 782Purchases 701 919Sales (359) (603)Transfers into Level 3 — 4Transfers out of Level 3 (1) (10)Balance, end of period $ 11,548 $ 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 September 30, 2015 and the "Risk Management and Control Practices" section of the Company's December 31, 2014 Management's Discussion and Analysis.

8. Insurance and Investment Contract Liabilities

September 30, 2015Grossliability

Reinsuranceassets Net

Insurance contract liabilities $ 157,451 $ 5,572 $ 151,879Investment contract liabilities 875 — 875Total $ 158,326 $ 5,572 $ 152,754

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 nine monthsended September 30 ended September 302015 2014 2015 2014

Operating charges:Interest on operating lines and short-term debtinstruments $ 1 $ — $ 4 $ 3

Financial charges:Interest on long-term debentures and otherdebt instruments 67 65 198 196

Interest on capital trust debentures 3 3 8 8Other 7 7 20 20

77 75 226 224Total $ 78 $ 75 $ 230 $ 227

10. Share Capital

Common Shares

For the nine months ended September 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 (5,936,420) (209) (1,137,757) (35)Excess of redemption proceeds over stated

capital per Normal Course Issuer Bid — 167 — 27Exercised and issued under stock option plan 2,437,176 83 286,862 9Balance, end of period 993,200,127 $ 7,143 998,551,184 $ 7,113

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 nine months ended September 30, 2015, the Company repurchased and subsequently cancelled 5,936,420 common shares at a cost of $209 (1,137,757 during the nine months ended September 30, 2014 under the previous normal course issuer bid at a cost of $35). 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 $167 and was recognized as a reduction to equity ($27 during the nine months ended September 30, 2014 under the previous normal course issuer bid).

During the nine months ended September 30, 2015, 2,437,176 common shares were exercised under the Company’s stock plan with a carrying value of $83 (286,862 with a carrying value of $9 during the nine months ended September 30, 2014).



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11. Earnings per Common Share


EarningsNet earnings $ 752 $ 720 $ 2,174 $ 1,980Preferred share dividends (32) (33) (95) (91)Net earnings - common shareholders $ 720 $ 687 $ 2,079 $ 1,889

Number of common sharesAverage number of common shares

outstanding 995,016,404 998,741,064 996,406,683 999,003,335Add: Potential exercise of outstanding

stock options 2,021,404 1,440,056 2,344,201 1,189,072Average number of common shares

outstanding - diluted basis 997,037,808 1,000,181,120 998,750,884 1,000,192,407

Basic earnings per common share $ 0.724 $ 0.687 $ 2.086 $ 1.891

Diluted earnings per common share $ 0.722 $ 0.686 $ 2.081 $ 1.889

Dividends per common share $ 0.3260 $ 0.3075 $ 0.9780 $ 0.9225



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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 $ 12,802 $ 11,132Net Tier 2 Capital 2,581 2,530Total Capital Available $ 15,383 $ 13,662Total Capital Required $ 6,582 $ 6,092

Tier 1 Ratio 194% 183%Total Ratio 234% 224%

Other foreign operations and foreign subsidiaries of the Company are required to comply with local capital or solvency requirements in their respective jurisdictions.



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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:


Pension plansService costs $ 51 $ 39 $ 153 $ 118Net interest cost 6 1 19 2

57 40 172 120Other post-employment benefits

Service costs 1 — 2 1Net interest cost 3 5 11 14

4 5 13 15Pension plans and other post-employment

benefits expense - Consolidated Statements ofEarnings 61 45 185 135

Pension plans - re-measurementsActuarial (gain) loss (118) 170 (152) 632Return on assets less (greater) than assumed 212 (46) 28 (300)Administrative expenses greater (less) than

assumed — — 1 (1)Change in the asset ceiling (49) (5) 63 (12)Actuarial loss - investment in associate (1) 7 4 13 16Pension plans re-measurement (income) loss 52 123 (47) 335

Other post-employment benefits -re-measurementsActuarial (gain) loss (1) 5 (4) 32

Pension plans and other post-employmentbenefits expense - other comprehensive(income) loss 51 128 (51) 367

Total pension plans and other post-employment benefits expense $ 112 $ 173 $ 134 $ 502

(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

September 30, 2015 (September 30, 2014) 3.8% (3.8%)

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

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:


Current income taxes $ 61 $ 107 $ 241 $ 295Deferred income taxes 23 28 153 169Total income tax expense $ 84 $ 135 $ 394 $ 464

(b) Effective Income Tax Rate

The overall effective income tax rate for Lifeco for the three months ended September 30, 2015 was 10% compared to 15% for the three months ended September 30, 2014. The overall effective income tax rate for Lifeco for the nine months ended September 30, 2015 was 15% compared to 19% for the full year 2014 and 18% for the nine months ended September 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 September 30, 2015 is lower than the effective income tax rate for the same period last year primarily due to a higher percentage of non-taxable investment income and income subject to lower rates of income tax in foreign jurisdictions. Partially offsetting these decreases to the effective income tax rate were changes to certain tax estimates.

The effective income tax rate for the nine months ended September 30, 2015 is lower than the nine months ended September 30, 2014 and the full year 2014 effective income tax rates primarily due to a higher percentage of non-taxable investment income and income subject to lower rates of income tax in foreign jurisdictions.

(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 $1,347 at September 30, 2015 ($1,216 at December 31, 2014).



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68

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 September 30, 2015

CanadaUnitedStates Europe

LifecoCorporate Total

IncomeTotal net premiums $ 2,774 $ 1,076 $ 2,041 $ — $ 5,891Net investment income

Regular net investment income 599 420 523 4 1,546Changes in fair value through profit or loss (546) 122 342 — (82)

Total net investment income 53 542 865 4 1,464Fee and other income 366 591 284 — 1,241

3,193 2,209 3,190 4 8,596

Benefits and expensesPaid or credited to policyholders 1,967 1,390 2,476 — 5,833Other (1) 786 641 349 4 1,780Financing charges 29 36 13 — 78Amortization of finite life intangible assets 14 17 5 — 36Restructuring and acquisition expenses — 4 3 — 7

Earnings before income taxes 397 121 344 — 862Income taxes (recovery) 45 19 24 (4) 84Net earnings before non-controllinginterests 352 102 320 4 778

Non-controlling interests 22 4 — — 26Net earnings 330 98 320 4 752Preferred share dividends 26 — 6 — 32Net earnings before capital allocation 304 98 314 4 720Impact of capital allocation 22 (2) (18) (2) —Net earnings - common shareholders $ 326 $ 96 $ 296 $ 2 $ 720

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



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16. Segmented Information (cont'd)

69

For the three months ended September 30, 2014




Regular net investment income 629 340 511 (1) 1,479Changes in fair value through profit or loss 166 (58) 1,082 — 1,190

Total net investment income 795 282 1,593 (1) 2,669Fee and other income 360 443 289 — 1,092

3,810 1,753 2,889 (1) 8,451

Benefits and expensesPaid or credited to policyholders 2,617 1,079 2,270 — 5,966Other (1) 726 466 297 3 1,492Financing charges 29 35 11 — 75Amortization of finite life intangible assets 15 13 5 — 33Restructuring and acquisition expenses — 3 7 — 10

Earnings (loss) before income taxes 423 157 299 (4) 875Income taxes 77 45 13 — 135Net earnings (loss) before non-controlling interests 346 112 286 (4) 740

Non-controlling interests 18 1 1 — 20Net earnings (loss) 328 111 285 (4) 720Preferred share dividends 23 — 6 4 33Net earnings (loss) before capital allocation 305 111 279 (8) 687Impact of capital allocation 25 (4) (20) (1) —Net earnings (loss) - common shareholders $ 330 $ 107 $ 259 $ (9) $ 687




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For the nine months ended September 30, 2015




Regular net investment income 1,858 1,205 1,534 4 4,601Changes in fair value through profit or loss (351) (212) (603) — (1,166)

Total net investment income 1,507 993 931 4 3,435Fee and other income 1,090 1,741 894 — 3,725

10,877 5,444 9,174 4 25,499

Benefits and expensesPaid or credited to policyholders 7,192 3,054 7,064 — 17,310Other (1) 2,324 1,841 995 12 5,172Financing charges 87 107 35 1 230Amortization of finite life intangible assets 43 52 14 — 109Restructuring and acquisition expenses — 8 20 — 28

Earnings (loss) before income taxes 1,231 382 1,046 (9) 2,650Income taxes (recovery) 215 85 100 (6) 394Net earnings (loss) before non-controllinginterests 1,016 297 946 (3) 2,256

Non-controlling interests 71 8 3 — 82Net earnings (loss) 945 289 943 (3) 2,174Preferred share dividends 78 — 17 — 95Net earnings (loss) before capital allocation 867 289 926 (3) 2,079Impact of capital allocation 66 (5) (55) (6) —Net earnings (loss) - common shareholders $ 933 $ 284 $ 871 $ (9) $ 2,079




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Regular net investment income 1,910 1,049 1,538 (3) 4,494Changes in fair value through profit or loss 1,893 567 2,522 — 4,982

Total net investment income 3,803 1,616 4,060 (3) 9,476Fee and other income 1,060 1,298 903 — 3,261

12,907 5,586 9,968 (3) 28,458

Benefits and expensesPaid or credited to policyholders 9,349 3,672 8,014 — 21,035Other (1) 2,169 1,438 939 13 4,559Financing charges 87 105 35 — 227Amortization of finite life intangible assets 41 42 15 — 98Restructuring and acquisition expenses — 3 22 — 25

Earnings (loss) before income taxes 1,261 326 943 (16) 2,514Income taxes (recovery) 272 93 102 (3) 464Net earnings (loss) before non-controlling interests 989 233 841 (13) 2,050

Non-controlling interests 64 4 2 — 70Net earnings (loss) 925 229 839 (13) 1,980Preferred share dividends 70 — 17 4 91Net earnings (loss) before capital allocation 855 229 822 (17) 1,889Impact of capital allocation 73 (12) (58) (3) —

Net earnings (loss) - common shareholders $ 928 $ 217 $ 764 $ (20) $ 1,889(1) Includes commissions, operating and administrative expenses and premium taxes.



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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 — T H I R 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 nine months ended September 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 and Second Quarter Reports to Shareholders filed on www.sedar.com. Commentary in the MD&A as at and for the three and nine months ended September 30, 2015 is as of November 5, 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. third 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 $124.9 billion at September 30, 2015 compared with $125.2 billion at September 30, 2014. Average mutual fund assets under management for the third quarter of 2015 were $128.6 billion compared to $126.2 billion in the third quarter of 2014. Average mutual fund assets under management for the nine months ended September 30, 2015 were $130.0 billion

compared to $123.2 billion for the nine months ended September 30, 2014. Total assets under management were $130.9 billion at September 30, 2015 compared with $140.6 billion at September 30, 2014, as detailed in Tables 6 and 7. Average total assets under management for the third quarter of 2015 were $134.8 billion compared to $142.3 billion in the third quarter of 2014. Average total assets under management for the nine months ended September 30, 2015 were $142.4 billion compared to $138.4 billion for the nine months ended September 30, 2014. Operating earnings and net earnings available to common shareholders for the three months ended

TABLE 1: RECONCILIATION OF NON-IFRS FINANCIAL MEASURES

three months ended nine months ended

2015 2015 2014 2015 2014($ millions) sep. 30 jun. 30 sep. 30 sep. 30 sep. 30

Operating earnings available to common shareholders – Non-IFRS measure $ 199.0 $ 198.5 $ 219.7 $ 597.8 $ 618.0 Restructuring and other charges, net of tax – – – – (13.6)

Net earnings available to common shareholders – IFRS $ 199.0 $ 198.5 $ 219.7 $ 597.8 $ 604.4

Operating earnings per share(1) available to common shareholders – Non-IFRS measure $ 0.81 $ 0.80 $ 0.87 $ 2.40 $ 2.44 Restructuring and other charges, net of tax – – – – (0.05)

Net earnings per share(1) available to common shareholders – IFRS $ 0.81 $ 0.80 $ 0.87 $ 2.40 $ 2.39

Adjusted EBITDA – Non-IFRS measure $ 347.9 $ 349.4 $ 375.8 $ 1,046.2 $ 1,070.2 Restructuring and other charges – – – – (18.3)

EBITDA – Non-IFRS measure 347.9 349.4 375.8 1,046.2 1,051.9 Commission amortization (57.7) (57.9) (57.2) (174.3) (176.0) Amortization of capital assets and intangible assets and other (10.1) (11.9) (9.0) (31.8) (27.1) Interest expense on long-term debt (23.2) (22.9) (23.2) (68.9) (68.9)

Earnings before income taxes 256.9 256.7 286.4 771.2 779.9 Income taxes (55.7) (56.0) (64.5) (166.8) (168.9) Perpetual preferred share dividends (2.2) (2.2) (2.2) (6.6) (6.6)

Net earnings available to common shareholders – IFRS $ 199.0 $ 198.5 $ 219.7 $ 597.8 $ 604.4

(1) Diluted earnings per share

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



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September 30, 2015 were $199.0 million or 81 cents per share compared to operating earnings and net earnings available to common shareholders of $219.7 million or 87 cents per share for the comparative period in 2014. Operating earnings available to common shareholders for the nine months ended September 30, 2015 were $597.8 million or $2.40 per share compared to operating earnings available to common shareholders, excluding other items outlined below, of $618.0 million or $2.44 per share for the comparative period in 2014. Net earnings available to common shareholders for the nine months ended September 30, 2015 were $597.8 million or $2.40 per share compared to net earnings available to common shareholders of $604.4 million or $2.39 per share for the comparative period in 2014. Other items for the nine months ended September 30, 2014 consisted of an after-tax charge of $13.6 million recorded in the second quarter related to restructuring and other charges.

Shareholders’ equity was $4.8 billion as at September 30, 2015, unchanged from December 31, 2014. Return on average common equity based on operating earnings for the nine months ended September 30, 2015 was 17.0% compared with 17.7% for the comparative period in 2014. The quarterly dividend per common share declared in the third quarter of 2015 was 56.25 cents, unchanged from the second 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 – Q3 2015 VS. Q3 2014

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

Revenues Fee income $ 442.4 $ 434.6 $ 200.6 $ 210.7 $ 62.8 $ 58.7 $ 705.8 $ 704.0 Net investment income and other 16.8 16.5 0.7 1.4 28.4 28.3 45.9 46.2

459.2 451.1 201.3 212.1 91.2 87.0 751.7 750.2

Expenses Commission 144.9 134.1 75.3 75.4 43.0 40.3 263.2 249.8 Non-Commission 123.7 109.9 71.5 67.5 13.2 13.4 208.4 190.8

268.6 244.0 146.8 142.9 56.2 53.7 471.6 440.6

Earnings before interest and taxes $ 190.6 $ 207.1 $ 54.5 $ 69.2 $ 35.0 $ 33.3 280.1 309.6

Interest expense (23.2) (23.2)

Earnings before income taxes 256.9 286.4 Income taxes 55.7 64.5

Net earnings 201.2 221.9 Perpetual preferred share dividends 2.2 2.2

Net earnings available to common shareholders $ 199.0 $ 219.7

Operating earnings available to common shareholders(1) $ 199.0 $ 219.7

(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 totalNine months ended 2015 2014 2015 2014 2015 2014 2015 2014 ($ millions) sep. 30 sep. 30 sep. 30 sep. 30 sep. 30 sep. 30 sep. 30 sep. 30

Revenues Fee income $ 1,328.1 $ 1,275.4 $ 613.3 $ 618.8 $ 188.9 $ 172.5 $ 2,130.3 $ 2,066.7 Net investment income and other 52.5 35.6 4.9 3.1 88.1 81.4 145.5 120.1

1,380.6 1,311.0 618.2 621.9 277.0 253.9 2,275.8 2,186.8

Expenses Commission 437.3 397.4 230.6 224.0 129.9 117.3 797.8 738.7 Non-Commission 372.1 333.4 222.2 205.1 43.6 42.5 637.9 581.0

809.4 730.8 452.8 429.1 173.5 159.8 1,435.7 1,319.7


Interest expense (68.9) (68.9)Restructuring and other charges – (18.3)









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TABLE 4: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q3 2015 VS. Q2 2015

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

Revenues Fee income $ 442.4 $ 450.2 $ 200.6 $ 206.0 $ 62.8 $ 62.4 $ 705.8 $ 718.6 Net investment income and other 16.8 14.2 0.7 – 28.4 30.4 45.9 44.6

459.2 464.4 201.3 206.0 91.2 92.8 751.7 763.2 Expenses Commission 144.9 147.4 75.3 77.5 43.0 42.8 263.2 267.7 Non-Commission 123.7 127.1 71.5 74.5 13.2 14.3 208.4 215.9

268.6 274.5 146.8 152.0 56.2 57.1 471.6 483.6


Interest expense (23.2) (22.9)






TABLE 5: EFFECTIVE INCOME TAX RATE

three months ended nine months ended

2015 2015 2014 2015 2014 sep. 30 jun. 30 sep. 30 sep. 30 sep. 30

Income taxes at Canadian federal and provincial statutory rates 26.72 % 26.83 % 26.62 % 26.72 % 26.61 % Effect of: Proportionate share of affiliate’s earnings (2.76) (3.09) (2.33) (2.85) (2.35) Loss consolidation(1) (2.38) (2.36) (1.78) (2.34) (1.89) Other items 0.09 0.45 – 0.09 (0.71)

Effective income tax rate – net earnings 21.67 % 21.83 % 22.51 % 21.62 % 21.66 %

(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 $130.9 billion at September 30, 2015 compared to $140.6 billion at September 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 – Q3 2015 VS. Q3 2014

investment planning investors group mackenzie counsel consolidated(1)

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

Mutual funds Gross sales – money market $ 274 $ 201 $ 84 $ 85 $ 15 $ 14 $ 373 $ 300 Gross sales – long term 1,536 1,522 1,401 1,332 170 148 3,099 2,998

Total mutual fund gross sales $ 1,810 $ 1,723 $ 1,485 $ 1,417 $ 185 $ 162 $ 3,472 $ 3,298

Net sales – money market $ 113 $ 54 $ 15 $ 17 $ 11 $ 12 $ 139 $ 83 Net sales – long term 26 32 (195) (224) 43 41 (130) (153)

Total mutual fund net sales $ 139 $ 86 $ (180) $ (207) $ 54 $ 53 $ 9 $ (70)

Sub-advisory, institutional and other accounts Gross sales $ – $ – $ 1,138 $ 1,011 $ – $ – $ 319 $ 564 Net sales(2) – – 54 (894) – – (101) (916)

Combined Gross sales $ 1,810 $ 1,723 $ 2,623 $ 2,428 $ 185 $ 162 $ 3,791 $ 3,862 Net sales(2) 139 86 (126) (1,101) 54 53 (92) (986)

Change in total assets under management Net sales(2) $ 139 $ 86 $ (126) $ (1,101) $ 54 $ 53 $ (92) $ (986) Market and income (2,451) 200 (2,608) (26) (102) (14) (4,956) 169

Net change in assets (2,312) 286 (2,734) (1,127) (48) 39 (5,048) (817) Beginning assets 75,844 72,400 63,025 71,081 4,053 3,730 135,971 141,434

Ending assets $ 73,532 $ 72,686 $ 60,291 $ 69,954 $ 4,005 $ 3,769 $ 130,923 $ 140,617

(1) Total Gross Sales and Net Sales excluded $827 million and $159 million, respectively, in accounts sub-advised by Mackenzie on behalf of Investors Group and Investment Planning Counsel ($451 million and $24 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 September 30, 2014).

(2) During the third quarter of 2014, there were tactical rebalances by an institutional client that resulted in net redemptions of $905 million out of 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 shown a general increase

over the eight most recent quarters consistent with the movement in domestic and foreign markets. These average assets increased in each of the quarters with the exception of a decrease of 2.1% in the third quarter of 2015 and a decrease of 1.3% in the fourth quarter of 2014.

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

investment planning investors group mackenzie counsel consolidated(1)

Nine months ended 2015 2014 2015 2014 2015 2014 2015 2014 ($ millions) sep. 30 sep. 30 sep. 30 sep. 30 sep. 30 sep. 30 sep. 30 sep. 30

Mutual funds Gross sales – money market $ 808 $ 584 $ 297 $ 299 $ 49 $ 50 $ 1,154 $ 933 Gross sales – long term 5,261 5,037 5,016 5,216 489 450 10,747 10,689

Total mutual fund gross sales $ 6,069 $ 5,621 $ 5,313 $ 5,515 $ 538 $ 500 $ 11,901 $ 11,622

Net sales – money market $ 281 $ 114 $ 66 $ 55 $ 38 $ 38 $ 385 $ 207 Net sales – long term(2) 473 343 (897) 207 97 119 (336) 659

Total mutual fund net sales $ 754 $ 457 $ (831) $ 262 $ 135 $ 157 $ 49 $ 866

Sub-advisory, institutional and other accounts Gross sales $ – $ – $ 4,032 $ 5,132 $ – $ – $ 1,837 $ 3,427 Net sales(2) – – (9,398) 833 – – (9,979) 543

Combined Gross sales $ 6,069 $ 5,621 $ 9,345 $ 10,647 $ 538 $ 500 $ 13,738 $ 15,049 Net sales(2) 754 457 (10,229) 1,095 135 157 (9,930) 1,409

Change in total assets under management Net sales(2) $ 754 $ 457 $ (10,229) $ 1,095 $ 135 $ 157 $ (9,930) $ 1,409 Market and income (681) 3,974 (356) 3,544 20 206 (1,066) 7,432

Net change in assets 73 4,431 (10,585) 4,639 155 363 (10,996) 8,841 Beginning assets 73,459 68,255 70,876 65,315 3,850 3,406 141,919 131,776

Ending assets $ 73,532 $ 72,686 $ 60,291 $ 69,954 $ 4,005 $ 3,769 $ 130,923 $ 140,617

(1) Total Gross Sales and Net Sales excluded $2.2 billion and $590 million, respectively, in accounts sub-advised by Mackenzie on behalf of Investors Group and Investment Planning Counsel ($1.7 billion and $300 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 September 30, 2014).

(2) During the nine months ended September 30, 2015, MD Financial Management re-assigned sub-advisory responsibilities on four fixed income mandates (totalling $10.3 billion) advised by Mackenzie. In addition, during the nine month period, 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. During the nine months ended September 30, 2014, there were tactical rebalances by an institutional client that resulted in gross sales of $1.2 billion, redemptions of $1.2 billion and net sales of $35 million into separately managed account investment mandates advised by Mackenzie.




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TABLE 8: SUMMARY OF QUARTERLY RESULTS

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

Consolidated statements of earnings ($ millions)

Revenues Management fees $ 508.5 $ 517.3 $ 509.1 $ 507.4 $ 517.0 $ 503.9 $ 485.8 $ 475.6 Administration fees 104.6 106.0 102.3 100.7 102.0 99.3 95.2 93.7 Distribution fees 92.7 95.3 94.5 87.7 85.0 86.1 92.4 85.6 Net investment income and other 45.9 44.6 55.0 46.2 46.2 32.5 41.4 36.7

751.7 763.2 760.9 742.0 750.2 721.8 714.8 691.6

Expenses Commission 263.2 267.7 266.9 253.9 249.8 245.7 243.2 229.3 Non-commission 208.4 215.9 213.6 198.8 190.8 194.5 195.7 179.9 Interest 23.2 22.9 22.8 23.3 23.2 22.9 22.8 23.3

494.8 506.5 503.3 476.0 463.8 463.1 461.7 432.5

Earnings before undernoted 256.9 256.7 257.6 266.0 286.4 258.7 253.1 259.1 Client 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 256.9 256.7 257.6 185.0 286.4 240.4 253.1 253.5 Income taxes 55.7 56.0 55.1 33.9 64.5 47.9 56.5 54.2

Net earnings 201.2 200.7 202.5 151.1 221.9 192.5 196.6 199.3 Perpetual 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 $ 199.0 $ 198.5 $ 200.3 $ 148.9 $ 219.7 $ 190.3 $ 194.4 $ 197.1

Reconciliation of Non-IFRS financial measures(1) ($ millions)

Operating earnings available to common shareholders – non-IFRS measure $ 199.0 $ 198.5 $ 200.3 $ 208.1 $ 219.7 $ 203.9 $ 194.4 $ 198.7 Other 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 $ 199.0 $ 198.5 $ 200.3 $ 148.9 $ 219.7 $ 190.3 $ 194.4 $ 197.1

Earnings per Share(¢)

Operating earnings available to common shareholders(1)

– Basic 81 80 80 83 87 81 77 79 – Diluted 81 80 80 83 87 81 77 79 Net earnings available to common shareholders – Basic 81 80 80 59 87 75 77 78 – Diluted 81 80 80 59 87 75 77 78

Average daily mutual fund assets ($ billions) $ 128.6 $ 131.4 $ 129.9 $ 124.6 $ 126.2 $ 123.6 $ 119.7 $ 114.6

Total mutual fund assets under management ($ billions) $ 124.9 $ 129.7 $ 131.5 $ 126.0 $ 125.2 $ 125.2 $ 122.5 $ 117.6

Total assets under management ($ billions) $ 130.9 $ 136.0 $ 148.4 $ 141.9 $ 140.6 $ 141.4 $ 137.3 $ 131.8

(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 directly benefit clients and Consultants and result in increased efficiency and improved control over expenditures.

Recent advertising developments – Investors Group launched a new brand positioning that places value on personal experiences. The new campaign positions these personal experiences in the context of the services Investors Group provides. The message is that our Consultants develop a comprehensive financial plan that helps clients get more out of their money, so that they can get more out of life. The new campaign includes digital and print ads, a refreshed interactive website, and a number of approaches designed to maximize Consultant and consumer engagement.

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 September 30, 2015, Investors Group had a Consultant network of 5,221, up from 5,011 at

September 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 2,828 at September 30, 2015 compared to 2,791 a year earlier. At September 30, 2015, 1,540 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 September 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.


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 — T H I R D Q UA RT E R R E P O RT 2 0 1 5


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For the three months ended September 30, 2015, the client account median rate of return was approximately (3.1)% and 5% of clients experienced positive returns. For the nine months ended September 30, 2015, the client account median rate of return was approximately (0.9)% and 38% 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. We added multiple-period account rate of return reporting to most Investors Group’s client statements beginning with 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.

TABLE 9: CLIENT EXPERIENCE SURVEY – INVESTORS GROUP

Surveys completed for the four quarters ending September 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 92 % Have a financial plan 85 Satisfied with level of contact 93 Willing to refer 88

Client Account Rate of Return (ROR) Experience

-8

-2

-4

-6

0

2

4

6

8

10

RO

R %

3.0 (0.9)

Q1 15

(0.9)

Q2 15

(3.1)

Q3 15 YTD 15

90% ofclients rate of returnrange

MedianReturns - %


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


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TABLE 10: CHANGE IN MUTUAL FUND ASSETS UNDER MANAGEMENT – INVESTORS GROUP

% change

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

Sales $ 1,810 $ 1,894 $ 1,723 (4.4) % 5.0 %Redemptions 1,671 1,867 1,637 (10.5) 2.1

Net sales (redemptions) 139 27 86 n/m 61.6 Market and income (2,451) (680) 200 (260.4) n/m

Net change in assets (2,312) (653) 286 (254.1) n/mBeginning assets 75,844 76,497 72,400 (0.9) 4.8

Ending assets $ 73,532 $ 75,844 $ 72,686 (3.0) % 1.2 %

Average daily assets $ 75,361 $ 76,783 $ 73,150 (1.9) % 3.0 %

Nine months ended 2015 2014 ($ millions) sep. 30 sep. 30 % change

Sales $ 6,069 $ 5,621 8.0 %Redemptions 5,315 5,164 2.9

Net sales (redemptions) 754 457 65.0 Market and income (681) 3,974 n/m

Net change in assets 73 4,431 (98.4)Beginning assets 73,459 68,255 7.6

Ending assets $ 73,532 $ 72,686 1.2 %

Average daily assets $ 75,866 $ 71,336 6.4 %

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 September 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 management for the periods under review are reflected in Table 10.

Fund PerformanceAt September 30, 2015, 53.9% of Investors Group mutual funds had a rating of three stars or better from

the Morningstar† fund ranking service and 18.5% had a rating of four or five stars. This compared to the Morningstar† universe of 64.2% for three stars or better and 27.7% for four and five star funds at September 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




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– 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. At September 30, 2015, the Maestro Portfolios’ assets under management totalled $225 million.

• Two new low volatility mandates, available in both unit trust and Corporate Class offerings, which are designed for investors who want exposure to equity 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 is 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 is 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 $22.4 billion at September 30, 2015, an increase of 104.4% from $11.0 billion at September 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 September 30, 2015, Series U assets under management had increased to $3.3 billion, compared to $1.2 billion at September 30, 2014, an increase of 169.4%.

In September 2015, Investors Group provided distributions to clients who had not transferred to these lower priced solutions when they were eligible, up to the earlier of when they transferred or to April 30, 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 September 30, 2015, the iProfile program assets under management were $1.4 billion, an increase of 52.6% from $920 million at September 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 September 30, 2015, $4.7 billion, or 6.4% of Investors Group’s mutual fund assets under management, were in products with unbundled fee structures, up 119% from $2.1 billion at September 30, 2014.

Change in Mutual Fund Assets Under Management – 2015 vs. 2014Investors Group’s mutual fund assets under management were $73.5 billion at September 30, 2015, representing an increase of 1.2% from $72.7 billion at September 30, 2014. Average daily mutual fund assets were $75.4 billion in the third quarter of 2015, up 3.0% from $73.1 billion in the third quarter of 2014. For the quarter ended September 30, 2015, sales of Investors Group mutual funds through its Consultant network were $1.8 billion, an increase of 5.0% from the comparative period in 2014. Mutual fund redemptions totalled $1.7 billion, an increase of 2.1% from 2014. Net sales of Investors Group mutual funds for the third quarter of 2015 were $139 million compared with net sales of $86 million in 2014, an improvement of $53 million. During the third quarter, market and income resulted in a decrease of $2.5 billion in mutual fund assets compared to an increase of $200 million in the third quarter of 2014. Sales of long-term funds were $1.5 billion for the third quarter of 2015, an increase of 0.9% from the previous year. Net sales of long-term funds for the third quarter of 2015 were $26 million compared to net sales of $32 million in 2014.




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Investors Group’s annualized quarterly redemption rate for long-term funds was 8.1% in the third quarter of 2015 compared to 8.3% in the third quarter of 2014. Investors Group’s twelve month trailing redemption rate for long-term funds was 8.4% at September 30, 2015 compared to 8.9% at September 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 September 30, 2015. 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 0.2% of our long-term redemption rate at September 30, 2015. Excluding such items, the twelve month trailing redemption rate for long-term funds would have been 8.2%. For the nine months ended September 30, 2015, sales of Investors Group mutual funds through its Consultant network were $6.1 billion, an increase of 8.0% from 2014. Mutual fund redemptions totalled $5.3 billion, an increase of 2.9% from 2014. Net sales of Investors Group mutual funds were $754 million compared with net sales of $457 million in 2014. Sales of long-term funds for the nine month period in 2015 were $5.3 billion, compared with $5.0 billion in 2014, an increase of 4.4%. Net sales of long-term funds were $473 million compared to net sales of $343 million in 2014. During 2015, market and income resulted in a decrease of $681 million in mutual fund assets compared to an increase of $4.0 billion in 2014.

Change in Mutual Fund Assets Under Management – Q3 2015 vs. Q2 2015Investors Group’s mutual fund assets under management were $73.5 billion at September 30, 2015, a decrease of 3.0% from $75.8 billion at June 30, 2015. Average daily mutual fund assets were $75.4 billion in the third quarter of 2015 compared to $76.8 billion in the second quarter of 2015, a decrease of 1.9%.

For the quarter ended September 30, 2015, sales of Investors Group mutual funds through its Consultant network were $1.8 billion, a decrease of 4.4% from the second quarter of 2015. Mutual fund redemptions, which totalled $1.7 billion for the third quarter, decreased 10.5% from the previous quarter and the annualized quarterly redemption rate was 8.1% in the third quarter compared to 8.9% in the second quarter of 2015. Net sales of Investors Group mutual funds for the current quarter were $139 million compared with net sales of $27 million in the previous quarter. Sales of long-term funds were $1.5 billion for the current quarter, compared to $1.6 billion in the previous quarter, a decrease of 5.2%. Net sales of long-term funds for the current quarter were $26 million compared to net redemptions of $50 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 September 30, 2015, total segregated fund assets were $1.6 billion, unchanged from September 30, 2014.

InsuranceInvestors Group distributes insurance products through I.G. Insurance Services Inc. For the quarter ended September 30, 2015, sales of insurance products as measured by new annualized premiums were $16 million, an increase of 6.7% from $15 million in 2014. For the nine months ended September 30, 2015, sales of insurance products as measured by new annualized premiums were $52 million, an increase of 10.2% from $47 million in 2014.




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Securities OperationsInvestors Group provides securities services to clients through Investors Group Securities Inc., an investment dealer registered in all Canadian provinces and territories.

Mortgage Operations Investors 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 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 nine months ended September 30, 2015, were $547 million and $1.5 billion, compared to $966 million and $2.0 billion in 2014, a decrease of 43.4% and 25.2%, respectively. At September 30, 2015, mortgages serviced by Investors Group related to its mortgage banking operations totalled $12.6 billion, compared to $11.9 billion at September 30, 2014, an increase of 5.6%.

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 Services Investors 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 $319.3 million in the third quarter of 2015, a decrease of $1.9 million or 0.6% from $321.2 million in 2014. For the nine months

TABLE 11: OPERATING RESULTS – INVESTORS GROUP

% change


Revenues Management fees $ 319.3 $ 323.5 $ 321.2 (1.3) % (0.6) % Administration fees 76.1 77.3 71.9 (1.6) 5.8 Distribution fees 47.0 49.4 41.5 (4.9) 13.3

442.4 450.2 434.6 (1.7) 1.8 Net investment income and other 16.8 14.2 16.5 18.3 1.8

459.2 464.4 451.1 (1.1) 1.8

Expenses Commission 76.6 77.5 71.1 (1.2) 7.7 Asset retention bonus and premium 68.3 69.9 63.0 (2.3) 8.4 Non-commission 123.7 127.1 109.9 (2.7) 12.6

268.6 274.5 244.0 (2.1) 10.1

Earnings before interest and taxes $ 190.6 $ 189.9 $ 207.1 0.4 % (8.0) %


Revenues Management fees $ 959.0 $ 933.9 2.7 % Administration fees 226.4 207.3 9.2 Distribution fees 142.7 134.2 6.3

1,328.1 1,275.4 4.1 Net investment income and other 52.5 35.6 47.5

1,380.6 1,311.0 5.3

Expenses Commission 230.8 212.1 8.8 Asset retention bonus and premium 206.5 185.3 11.4 Non-commission 372.1 333.4 11.6

809.4 730.8 10.8

Earnings before interest and taxes $ 571.2 $ 580.2 (1.6) %




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ended September 30, 2015, management fees were $959.0 million, an increase of $25.1 million or 2.7% from $933.9 million in 2014. The net decrease in management fees in the third quarter was due to the decline in the management fee rate offset by the increase in average daily mutual fund assets of 3.0%, as shown in Table 10. The average management fee rate in the third quarter of 2015 was 168.6 basis points of daily mutual fund assets compared to 174.2 basis points in 2014. This decline in basis points resulted primarily from transfers of eligible clients into lower fee investment solutions as disclosed in the MD&A included in the 2014 IGM Financial Inc. Annual Report. The net increase in management fees in the nine months ended September 30, 2015 was due to the increase in average daily mutual fund assets of 6.4%, as shown in Table 10. The average management fee rate for the nine month period ended September 30, 2015 was 169.3 basis points compared to 175.0 basis points in 2014. This decline in basis points resulted primarily from transfers of eligible clients into lower fee investment solutions. 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 nine month periods in 2015, these waivers totalled $1.1 million and $2.7 million, respectively, compared to $0.8 million and $2.3 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 $76.1 million in the current quarter compared to $71.9 million a year ago, an increase of 5.8%. Administration fees were $226.4 million for the nine month period ended September 30, 2015 compared to $207.3 million in 2014, an increase of 9.2%. 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 $47.0 million for the third quarter of 2015 increased by $5.5 million from $41.5 million in 2014, due primarily to increases in distribution fee income from insurance products. For the nine month period, distribution fee income of $142.7 million increased by $8.5 million from $134.2 million in 2014. The net increase in the nine 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 $16.8 million in the third quarter of 2015, an increase of $0.3 million from $16.5 million in 2014. For the nine months ended September 30, 2015, net investment income and other totalled $52.5 million, an increase of $16.9 million from $35.6 million in 2014. Net investment income related to Investors Group’s mortgage banking operations totalled $17.9 million for the third quarter of 2015 compared to $16.1 million in 2014, an increase of $1.8 million. For the nine months ended September 30, 2015, net investment income related to Investors Group’s mortgage banking operations totalled $53.6 million compared to $34.4 million in 2014, an increase of $19.2 million. A summary of mortgage banking operations for the three and nine 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 $1.4 million and $4.7 million for the three and nine month periods ended September 30, 2015 to $14.4 million and $39.5 million, respectively, compared to 2014. The increase resulted from higher average securitized loans.

• Gains realized on the sale of residential mortgages – increased by $0.9 million and $7.9 million for the three and nine month periods ended September 30, 2015 to $4.7 million and $16.9 million, respectively,




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TABLE 12: MORTGAGE BANKING OPERATIONS – INVESTORS GROUP

% change


Total mortgage banking income Net interest income on securitized loans Interest income $ 46.8 $ 47.1 $ 45.7 (0.6) % 2.4 % Interest expense 32.4 33.7 32.7 (3.9) (0.9)

Net interest income 14.4 13.4 13.0 7.5 10.8 Gains on sales(1) 4.7 5.1 3.8 (7.8) 23.7 Fair value adjustments (1.3) (1.7) 4.5 23.5 (128.9) Other(2) 0.1 (2.2) (5.2) 104.5 101.9

$ 17.9 $ 14.6 $ 16.1 22.6 % 11.2 %

Average mortgages serviced Securitizations $ 6,573 $ 6,557 $ 5,950 0.2 % 10.5 % Other 3,682 3,534 3,463 4.2 6.3

$ 10,255 $ 10,091 $ 9,413 1.6 % 8.9 %

Mortgage sales to:(3)

Securitizations $ 800 $ 607 $ 999 31.8 % (19.9) % Other(1) 282 309 290 (8.7) (2.8)

$ 1,082 $ 916 $ 1,289 18.1 % (16.1) %


Total mortgage banking income Net interest income on securitized loans Interest income $ 141.0 $ 130.2 8.3 % Interest expense 101.5 95.4 6.4

Net interest income 39.5 34.8 13.5 Gains on sales(1) 16.9 9.0 87.8 Fair value adjustments 1.0 1.7 (41.2) Other(2) (3.8) (11.1) 65.8

$ 53.6 $ 34.4 55.8 %

Average mortgages serviced Securitizations $ 6,552 $ 5,670 15.6 % Other 3,540 3,218 10.0

$ 10,092 $ 8,888 13.5 %

Mortgage sales to:(3)

Securitizations $ 1,785 $ 1,995 (10.5) % Other(1) 924 739 25.0

$ 2,709 $ 2,734 (0.9) %

(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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compared to 2014. The increase in gains in the nine month period resulted from a higher level of sale activity.

• Fair value adjustments – decreased by $5.8 million and $0.7 million for the three and nine month periods ended September 30, 2015 to ($1.3) million and $1.0 million, respectively, compared to 2014. The decrease during the three month period was primarily due to favourable fair value adjustments in the third quarter of 2014 on certain securitization related financial instruments and interest rate swaps used to hedge interest rate risk on loans held temporarily pending sale or securitization to third parties.

• Other – increased by $5.3 million and $7.3 million for the three and nine month periods ended September 30, 2015 to $0.1 million and ($3.8) million, respectively, compared to 2014. The increase was due to lower mortgage issuance and portfolio insurance costs.

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 $76.6 million for the third quarter of 2015, an increase of $5.5 million from $71.1 million in 2014. The increase resulted primarily from higher mutual fund commission amortization and compensation related to the distribution of other financial services and products. For the nine month period, commission expense increased by $18.7 million to $230.8 million compared with $212.1 million in 2014. The increase was largely 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 $4.1 million and $17.6 million for the three and nine month periods ended September 30, 2015 to $57.1 million and $172.9 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 $3.6 million for the three and nine month periods ended September 30, 2015 to $11.2 million and $33.6 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 $123.7 million for the third quarter of 2015 compared to $109.9 million in 2014, an increase of $13.8 million or 12.6%. For the nine month period, non-commission expenses were $372.1 million compared to $333.4 million in 2014, an increase of $38.7 million or 11.6%. Pension expense increased in the three and nine 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 $7.1 million in the three and nine month periods, the increase in non-commission expenses was 10.4% and 9.5%, respectively. These increases included additional expenses related to Consultant network expansion and other business development efforts.




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Q3 2015 VS. Q2 2015

Fee IncomeManagement fee income decreased by $4.2 million or 1.3% to $319.3 million in the third quarter of 2015 compared with the second quarter of 2015. The net decrease in management fees in the third quarter was primarily due to:• The decrease in average daily mutual fund assets of

1.9% for the quarter as shown in Table 10.• The decrease in the average management fee rate

in the third quarter of 2015 to 168.6 basis points of daily mutual fund assets from 169.5 basis points in the prior quarter.

The decrease was offset in part by an increase of $3.4 million due to one additional calendar day in the third quarter compared to the second quarter of 2015. Money market fund waivers totalled $1.1 million in the third quarter of 2015 compared with $0.9 million in the second quarter of 2015. Administration fees decreased to $76.1 million in the third quarter of 2015 from $77.3 million in the second quarter of 2015. The net decrease resulted from the decrease in average daily mutual fund assets compared with the second quarter of 2015. Distribution fee income of $47.0 million in the third quarter of 2015 decreased by $2.4 million from $49.4 million in the second quarter primarily due to a decrease in distribution fee income from insurance product sales and a decrease in redemption fees, offset by an increase in distribution fee income from banking products.

Net Investment Income and OtherNet investment income and other was $16.8 million in the third quarter of 2015 compared to $14.2 million in the previous quarter, an increase of $2.6 million

primarily related to Investors Group’s mortgage banking operations. Net investment income related to Investors Group’s mortgage banking operations totalled $17.9 million in the third quarter of 2015, an increase of $3.3 million from $14.6 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 $1.0 million in the third quarter of 2015 to $14.4 million, compared to $13.4 million in the previous quarter primarily due to higher margins.

• Gains realized on the sale of residential mortgages – decreased by $0.4 million in the third quarter of 2015 to $4.7 million, compared to $5.1 million in the previous quarter.

• Fair value adjustments – increased by $0.4 million in the third quarter of 2015 to ($1.3) million, compared to ($1.7) million in the previous quarter.

• Other – increased by $2.3 million in the third quarter of 2015 to $0.1 million, compared to the second quarter largely due to lower mortgage issuance and portfolio insurance costs.

ExpensesCommission expense in the current quarter was $76.6 million compared with $77.5 million in the previous quarter. The asset retention bonus and premium expense decreased by $1.6 million to $68.3 million in the third quarter of 2015 largely due to decreases in average assets under management. Non-commission expenses were $123.7 million in the current quarter, a decrease of $3.4 million or 2.7% from $127.1 million in the second quarter of 2015. This decrease 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. Recent advertising developments – On October 26, Mackenzie launched a new brand identity, with the tagline Confidence in a Changing World, that reflects the company’s values, goals and strengths, including its unique heritage as a firm committed to innovation and thought leadership. Mackenzie’s brand identity highlights its history of strength and stability combined with a renewed commitment to innovation, thought leadership and being the best partner to advisors, with an unrelenting focus on providing successful outcomes for investors.


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 September 30, 2015, Mackenzie’s mutual fund and total assets under management were $47.4 billion and $60.3 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.

Fund PerformanceLong-term investment performance is a key measure of Mackenzie’s ongoing success. At September 30, 2015,

Mackenzie InvestmentsReview of the Business




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29.3% of Mackenzie mutual funds were rated in the top two performance quartiles for the one year time frame, 26.2% for the three year time frame and 42.1% 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 September 30, 2015, 61.2% of Mackenzie mutual funds measured by Morningstar† had a rating of three stars or better and 18.0% had a rating of four or five stars. This compared to the Morningstar† universe of 64.2% for three stars or better and 27.7% for four and five star funds at September 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. Recent initiatives include the following: • October 26 – Mackenzie launched the Mackenzie

Diversified Alternatives Fund. This Fund will be managed by the Mackenzie Systematic Strategies Team and will provide broad exposure to alternative asset classes such as real estate, infrastructure, emerging market debt, microcap equities, high yield, foreign currencies, preferred shares and commodities. In addition, it provides access to an absolute return strategy by investing in Mackenzie Unconstrained Fixed Income Fund. This Fund is designed to complement a traditional balanced portfolio of large cap developed market equities and

TABLE 13: CHANGE IN MUTUAL FUND ASSETS UNDER MANAGEMENT – MACKENZIE

% change


Sales $ 1,485 $ 1,855 $ 1,417 (19.9) % 4.8 %Redemptions 1,665 2,400 1,624 (30.6) 2.5

Net sales (redemptions)(1) (180) (545) (207) 67.0 13.0 Market and income (2,253) (546) (125) n/m n/m

Net change in assets (2,433) (1,091) (332) (123.0) n/mBeginning assets 49,853 50,944 49,106 (2.1) 1.5

Ending assets $ 47,420 $ 49,853 $ 48,774 (4.9) % (2.8) %

Daily average mutual fund assets $ 49,197 $ 50,578 $ 49,303 (2.7) % (0.2) %


Sales $ 5,313 $ 5,515 (3.7) %Redemptions 6,144 5,253 17.0

Net sales (redemptions)(1) (831) 262 n/mMarket and income (531) 2,488 n/m

Net change in assets (1,362) 2,750 n/mBeginning assets 48,782 46,024 6.0

Ending assets $ 47,420 $ 48,774 (2.8) %

Daily average mutual fund assets $ 50,084 $ 48,254 3.8 %

(1) 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.




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investment grade bonds by increasing diversification and enhancing risk-adjusted returns.

• October 26 – Mackenzie announced the addition of two new series, Series FB and FB5. These new series are offered across its retail mutual fund product shelf of 73 mutual funds and are designed to provide advisors who currently lack operational

infrastructure with the ability to offer fee-based products. This allows the advisor an opportunity to negotiate an Advisor Service Fee with their clients for a minimum account investment of $10,000. Mackenzie also announced an optional, negotiated reduction in embedded trailing commissions. This solution, like Advisor Service Fees, allows advisors

TABLE 14: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – MACKENZIE

% change


Sales $ 2,623 $ 3,033 $ 2,428 (13.5) % 8.0 %Redemptions 2,749 13,705 3,529 (79.9) (22.1)

Net sales (redemptions)(1) (126) (10,672) (1,101) 98.8 88.6 Market and income (2,608) (907) (26) (187.5) n/m

Net change in assets (2,734) (11,579) (1,127) 76.4 (142.6)Beginning assets 63,025 74,604 71,081 (15.5) (11.3)

Ending assets $ 60,291 $ 63,025 $ 69,954 (4.3) % (13.8) %

Consists of: Mutual funds $ 47,420 $ 49,853 $ 48,774 (4.9) % (2.8) % Sub-advisory, institutional and other accounts 12,871 13,172 21,180 (2.3) (39.2)

$ 60,291 $ 63,025 $ 69,954 (4.3) % (13.8) %

Monthly average total assets(2) $ 62,230 $ 71,701 $ 71,166 (13.2) % (12.6) %


Sales $ 9,345 $ 10,647 (12.2) %Redemptions 19,574 9,552 104.9

Net sales (redemptions)(1) (10,229) 1,095 n/mMarket and income (356) 3,544 n/m

Net change in assets (10,585) 4,639 n/mBeginning assets 70,876 65,315 8.5

Ending assets $ 60,291 $ 69,954 (13.8) %

Monthly average total assets(2) $ 69,303 $ 69,039 0.4 %

(1) Included in the second quarter of 2015 and the nine months ended September, 2015 are the following transactions: – MD Financial Management which re-assigned sub-advisory responsibilities on four fixed income mandates (totalling $10.3 billion) advised by Mackenzie. – 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. During the third quarter of 2014, there were tactical rebalances by an institutional client that resulted in net redemptions of $905 million out of separately managed

account investment mandates advised by Mackenzie. During the nine months ended September 30, 2014, there were tactical rebalances by an institutional client that resulted in gross sales of $1.2 billion, redemptions of

$1.2 billion and net sales of $35 million 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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to tailor the level of trailing commissions associated with a client account.

Change in Assets under Management – 2015 vs. 2014 Mackenzie’s mutual fund assets under management were $47.4 billion at September 30, 2015, a decrease of 2.8% from $48.8 billion at September 30, 2014. Mackenzie’s sub-advisory, institutional and other accounts at September 30, 2015 were $12.9 billion, a decrease of 39.2% from $21.2 billion last year. Mackenzie’s total assets under management at September 30, 2015 were $60.3 billion, a decrease of 13.8% from $70.0 billion at September 30, 2014. On June 5, 2015, MD Financial Management Inc. (“MD”) reassigned sub-advisory responsibilities on four fixed income mandates advised by Mackenzie. The 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 the nine month period ended September 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 September 30, 2015, Mackenzie’s mutual fund gross sales were $1.5 billion, an increase of 4.8% from $1.4 billion in the comparative period last year. Mutual fund redemptions in the current period were $1.7 billion, an increase of 2.5% from last year. Mutual fund net redemptions for the three months ended September 30, 2015 were $180 million, as compared to net redemptions of $207 million last year. During the current quarter, market and income resulted in assets decreasing by $2.3 billion as compared to a decrease of $125 million last year. In the three months ended September 30, 2015, Mackenzie’s gross sales for total assets under management were $2.6 billion, an increase of 8.0% from $2.4 billion in the comparative period last year. Redemptions in the current period were $2.7 billion compared to $3.5 billion last year. Net redemptions for the three months ended September 30, 2015 were $126 million, as compared to net redemptions of $1.1 billion last year. During the third quarter of 2014, there were tactical rebalances by an institutional client that resulted in net redemptions of $905 million. Excluding this item, net redemptions were $196 million in the third quarter of 2014. During the current quarter, market and income resulted in assets decreasing

by $2.6 billion as compared to a decrease of $26 million last year. In the nine months ended September 30, 2015, Mackenzie’s mutual fund gross sales were $5.3 billion, a decrease of 3.7% from $5.5 billion in the comparative period last year. Mutual fund redemptions in the current period were $6.1 billion, an increase of 17.0% from the previous year. Mutual fund net redemptions for the nine months ended September 30, 2015, were $831 million, as compared to net sales of $262 million last year. During the nine months ended September 30, 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 6.2% and redemptions increased 5.6% in the nine months ended September 30, 2015 compared to last year and net redemptions were $375 million compared to net sales of $262 million last year. During the period, market and income resulted in assets decreasing by $531 million as compared to an increase of $2.5 billion last year. Redemptions of long-term mutual funds in the three and nine month periods ended September 30, 2015, were $1.6 billion and $5.9 billion, respectively, as compared to $1.6 billion and $5.0 billion last year. Mackenzie’s annualized quarterly redemption rate for long-term mutual funds was 13.0% in the third quarter of 2015, relatively unchanged from 12.7% in the third quarter of 2014. Mackenzie’s twelve-month trailing redemption rate for long-term mutual funds was 16.0% at September 30, 2015, as compared to 14.8% 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 14.2% at September 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 September 30, 2015. Mackenzie’s twelve-month trailing redemption rate is comprised of the weighted average redemption rate for front-end load assets, deferred sales 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.




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In the nine months ended September 30, 2015, Mackenzie’s gross sales for total assets under management were $9.3 billion, a decrease of 12.2% from $10.6 billion in the comparative period last year. Redemptions in the current period were $19.6 billion compared to $9.6 billion last year. Net redemptions for the nine months ended September 30, 2015, were $10.2 billion, as compared to net sales of $1.1 billion last year. Excluding the MD transaction in the second quarter of 2015, the mutual fund allocation changes made by third party programs during the second quarter of 2015, and the tactical rebalances by an institutional client during 2014 discussed previously, net sales were $527 million in the nine months ended September 30, 2015, as compared to net sales of $1.1 billion last year. During the period, market and income resulted in assets decreasing by $356 million as compared to an increase of $3.5 billion last year.

Change in Assets under Management – Q3 2015 vs. Q2 2015Mackenzie’s mutual fund assets under management were $47.4 billion at September 30, 2015, a decrease of 4.9% from $49.9 billion at June 30, 2015. Mackenzie’s sub-advisory, institutional and other accounts decreased 2.3% from $13.2 billion to $12.9 billion at September 30, 2015. Mackenzie’s total assets under management at September 30, 2015, were $60.3 billion, a decrease of 4.3% from $63.0 billion at June 30, 2015, as summarized in Table 14.

For the quarter ended September 30, 2015, Mackenzie mutual fund gross sales were $1.5 billion, a decrease of 19.9% from the second quarter of 2015. Mutual fund redemptions, which totalled $1.7 billion for the third quarter, decreased 30.6% from the previous quarter. Net redemptions of Mackenzie mutual funds for the current quarter were $180 million compared with net redemptions of $545 million in the previous quarter. Excluding the other mutual fund transactions in the second quarter of 2015 discussed previously, gross sales declined 13.4% and redemptions declined 7.7% in the third quarter of 2015 compared to the second quarter, and net redemptions were $180 million compared to net redemptions of $89 million in the second quarter. Redemptions of long-term mutual fund assets in the current quarter were $1.6 billion, compared to $2.3 billion in the second quarter of 2015. Mackenzie’s annualized quarterly redemption rate for long-term mutual funds for the current quarter was 13.0%, compared to 18.7% for the second quarter. Mackenzie’s annualized quarterly redemption rate for long-term funds, excluding rebalance transactions, was 13.9% in the second quarter of 2015. There were no rebalance transactions for the third quarter of 2015. Net redemptions of long-term funds for the current quarter were $195 million compared to net redemptions of $581 million in the previous quarter. Excluding rebalance transactions during the second quarter of 2015, net redemptions of long-term funds 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 $ 173.8 $ 178.6 $ 181.3 (2.7) % (4.1) % Administration fees 24.3 24.9 26.7 (2.4) (9.0) Distribution fees 2.5 2.5 2.7 – (7.4)

200.6 206.0 210.7 (2.6) (4.8) Net investment income and other 0.7 – 1.4 n/m (50.0)

201.3 206.0 212.1 (2.3) (5.1)

Expenses Commission 14.1 14.5 15.4 (2.8) (8.4) Trailing commission 61.2 63.0 60.0 (2.9) 2.0 Non-commission 71.5 74.5 67.5 (4.0) 5.9

146.8 152.0 142.9 (3.4) 2.7

Earnings before interest and taxes $ 54.5 $ 54.0 $ 69.2 0.9 % (21.2) %


Revenues Management fees $ 530.4 $ 530.8 (0.1) % Administration fees 74.7 79.3 (5.8) Distribution fees 8.2 8.7 (5.7)

613.3 618.8 (0.9) Net investment income and other 4.9 3.1 58.1

618.2 621.9 (0.6)

Expenses Commission 44.3 48.1 (7.9) Trailing commission 186.3 175.9 5.9 Non-commission 222.2 205.1 8.3

452.8 429.1 5.5

Earnings before interest and taxes $ 165.4 $ 192.8 (14.2) %




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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 September 30, 2015, these series had $3.3 billion in assets, an increase of 26.2% from the prior year. Management fees were $173.8 million for the three months ended September 30, 2015, a decrease of $7.5 million or 4.1% from $181.3 million last year. The net decrease in management fees was due to the decline in average assets under management of 12.6% in the three months ended September 30, 2015, offset by an increase in average management fee rate. Mackenzie’s average management fee rate in the third quarter of 2015 was 111.1 basis points compared to 101.1 basis points in 2014. The increase in average management fee rate was 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 sub-advisory mandates to MD Financial Management Inc. as previously discussed. Management fees were $530.4 million for the nine months ended September 30, 2015, a decrease of $0.4 million or 0.1% from $530.8 million last year. The net decrease in management fees was due to a decline in average management fee rate offset by a 0.4% increase in average assets under management. Mackenzie’s average management fee rate in the nine months ended September 30, 2015 was 102.5 basis points compared to 102.8 basis points in 2014. The net decline in the average management fee rate was due to pricing changes made to retail mutual funds which became effective on September 29, 2014, offset by having a greater share in retail-priced products as discussed previously. The impact of the pricing changes was a decline in management fees of $5.8 million for the nine months ended September 30, 2015. Mackenzie earns administration fees primarily from providing services to its mutual funds. Administration fees were $24.3 million for the three months ended September 30, 2015, as compared to $26.7 million in 2014. Administration fees were $74.7 million for the nine months ended September 30, 2015, compared to $79.3 million in 2014. The impact of eliminating the fund operating expense adjustment was a decline in administration fees of $1.1 million and $3.3 million

for the three and nine months ended September 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. 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 September 30, 2015 was $2.5 million, a decrease of $0.2 million from $2.7 million last year. Distribution fee income in the nine months ended September 30, 2015 was $8.2 million, a decrease of $0.5 million from $8.7 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 $0.7 million for the three months ended September 30, 2015 compared to $1.4 million last year and $4.9 million for the nine months ended September 30, 2015, an increase of $1.8 million from $3.1 million last year.

ExpensesMackenzie’s expenses were $146.8 million for the three months ended September 30, 2015, an increase of $3.9 million or 2.7% from $142.9 million in 2014. Expenses for the nine months ended September 30, 2015 were $452.8 million, an increase of $23.7 million or 5.5% from $429.1 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




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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 $14.1 million in the three months ended September 30, 2015, as compared to $15.4 million last year. Commission expense in the nine months ended September 30, 2015 was $44.3 million compared to $48.1 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 $61.2 million in the three months ended September 30, 2015, an increase of $1.2 million or 2.0% from $60.0 million last year. Trailing commissions in the nine months ended September 30, 2015 were $186.3 million, an increase of $10.4 million or 5.9% from $175.9 million last year. The change in trailing commissions resulted both from the period over period change 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 the impact of having a higher weighting of no load series of funds, which are subject to higher trailer rates. Trailing commissions as a percentage of average mutual fund assets under management were 49.7 basis points in the three months ended September 30, 2015 and 49.6 basis points in the nine months ended September 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 $71.5 million in the three months ended September 30, 2015, an increase of $4.0 million or 5.9% from $67.5 million in 2014. Non-commission expenses in the nine months ended September 30, 2015 were $222.2 million, an increase of $17.1 million or 8.3% from $205.1 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.

Q3 2015 VS. Q2 2015

RevenuesMackenzie’s revenues were $201.3 million for the current quarter, a decrease of $4.7 million or 2.3% from $206.0 million in the second quarter of 2015. Management fees were $173.8 million for the current quarter, a decrease of $4.8 million or 2.7% from $178.6 million in the second quarter of 2015. Factors contributing to the net decrease in management fees are as follows:• Average total assets under management were

$62.2 billion in the current quarter compared to $71.7 billion in the prior quarter, a decrease of 13.2%.

• Mackenzie’s average management fee rate was 111.1 basis points in the current quarter as compared to 100.2 basis points in the second 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 sub-advisory mandates to MD Financial Management Inc. as discussed previously.

• There was one additional calendar day in the third quarter of 2015 than in the second quarter, which had an impact of $1.9 million.

Administration fees were $24.3 million in the current quarter, a decrease of $0.6 million or 2.4% from $24.9 million in the prior quarter. The decrease in the quarter was due to a decline in average assets under management. 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 $0.7 million for the current quarter compared to nil in the second quarter of 2015.

ExpensesMackenzie’s expenses were $146.8 million for the current quarter, a decrease of $5.2 million or 3.4% from $152.0 million in the second quarter of 2015.




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Commission expense related to the amortization of selling commissions was $14.1 million in the quarter ended September 30, 2015, a decrease of 2.8% from the second quarter of 2015. Trailing commissions were $61.2 million in the current quarter, a decrease of $1.8 million or 2.9% from $63.0 million in the second quarter of 2015. The change in trailing commissions reflects the 2.7% period

over period decrease in average mutual fund assets under management. The effective trailing commission rate for the third quarter was 49.7 basis points as compared to 49.8 basis points in the second quarter of 2015. Non-commission expenses were $71.5 million in the current quarter compared to $74.5 million in the second 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 $28.4 million in the third quarter of 2015 compared to $28.3 million in 2014. Net investment income and other increased to $88.1 million for the nine months ended September 30, 2015 compared to $81.4 million in 2014. The increase in the three and nine 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 $1.0 million higher in the third quarter of 2015 compared to the same period in 2014 and $2.1 million higher in the nine months ended September 30, 2015 compared with 2014.

Q3 2015 VS. Q2 2015

Net investment income and other totalled $28.4 million in the third quarter of 2015 compared to $30.4 million in the second quarter of 2015 primarily due to a decrease 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 $1.1 million higher in the third quarter of 2015 compared with the previous quarter.

TABLE 16: OPERATING RESULTS – CORPORATE AND OTHER

% change


Revenues Fee income $ 62.8 $ 62.4 $ 58.7 0.6 % 7.0 % Net investment income and other 28.4 30.4 28.3 (6.6) 0.4

91.2 92.8 87.0 (1.7) 4.8

Expenses Commission 43.0 42.8 40.3 0.5 6.7 Non-commission 13.2 14.3 13.4 (7.7) (1.5)

56.2 57.1 53.7 (1.6) 4.7

Earnings before interest and taxes $ 35.0 $ 35.7 $ 33.3 (2.0) % 5.1 %


Revenues Fee income $ 188.9 $ 172.5 9.5 % Net investment income and other 88.1 81.4 8.2

277.0 253.9 9.1

Expenses Commission 129.9 117.3 10.7 Non-commission 43.6 42.5 2.6

173.5 159.8 8.6

Earnings before interest and taxes $ 103.5 $ 94.1 10.0 %




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IGM Financial’s total assets were $14.6 billion at September 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 Securities Securities 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 49.9% of total assets at September 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 $6.9 billion at September 30, 2015, compared to $6.8 billion at 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 $12.6 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

IGM Financial Inc.Consolidated Financial Position

TABLE 17: SECURITIES

september 30, 2015 december 31, 2014 ($ millions) cost fair value cost fair value

Available for sale Proprietary investment funds $ 6.1 $ 6.2 $ 9.6 $ 10.2

Fair value through profit or loss Equity securities 12.2 10.5 11.0 10.2 Proprietary investment funds 54.3 59.4 66.4 69.1

66.5 69.9 77.4 79.3

$ 72.6 $ 76.1 $ 87.0 $ 89.5




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In the third quarter of 2015, the Company securitized loans through its mortgage banking operations with cash proceeds of $783.2 million compared to $985.1 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 nine months ended September 30, 2015 compared with 2014 are shown in Table 19.

(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 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.

TABLE 18: LOANS

2015 2014 ($ millions) september 30 december 31

Loans and receivables $ 6,825.5 $ 6,653.5 Less: Collective allowance 0.7 0.8

6,824.8 6,652.7 Held for trading 457.4 366.2

$ 7,282.2 $ 7,018.9

TABLE 19: INVESTMENT IN AFFILIATE

Nine months ended 2015 2014 ($ millions) sep. 30 sep. 30

Carrying value, beginning of period $ 794.4 $ 717.8 Proportionate share of earnings 81.8 68.3 Dividends received (38.9) (36.7) Proportionate share of other comprehensive income (loss) and other adjustments 23.9 24.4

Carrying value, end of period $ 861.2 $ 773.8

Fair value, end of period $ 1,270.4 $ 1,277.2




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LIQUIDITY

Cash and cash equivalents totalled $933.7 million at September 30, 2015 compared with $1.22 billion at December 31, 2014 and $1.02 billion at September 30, 2014. Cash and cash equivalents related to the Company’s deposit operations were $4.1 million at September 30, 2015, compared to $4.5 million at December 31, 2014, and compared with $7.0 million at September 30, 2014, as shown in Table 20. Working capital totalled $978.6 million at September 30, 2015 compared with $1,196.4 million at December 31, 2014 and $1,273.5 million at September 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 $347.9 million in the third quarter of 2015 compared to $375.8 million in the third quarter of 2014 and $349.4 million in the second quarter of 2015. Adjusted EBITDA totalled $1,046.2 million for the nine months ended September 30, 2015 compared to $1,070.2 million in 2014. Adjusted EBITDA for each period under review excludes the impact of amortization of deferred selling commissions which totalled $57.7 million in the third quarter of 2015 compared to $57.2 million in the third quarter of 2014 and $57.9 million in the second 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 Flows Table 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 nine months ended September 30, 2015. Cash and cash equivalents increased by $29.9 million in the quarter compared to an increase of $106.3 million in 2014. For the nine month period, cash and cash equivalents decreased by $282.3 million in 2015 compared to a decrease of $58.2 million in 2014.

Consolidated Liquidity and Capital Resources

TABLE 20: DEPOSIT OPERATIONS – FINANCIAL POSITION

2015 2014 2014 ($ millions) sep. 30 dec. 31 sep. 30

Assets Cash and cash equivalents $ 4.1 $ 4.5 $ 7.0 Accounts and other receivables 252.0 204.4 185.0 Loans 24.6 25.0 26.2

Total assets $ 280.7 $ 233.9 $ 218.2

Liabilities and shareholders’ equity Deposit liabilities $ 269.1 $ 223.3 $ 205.0 Other liabilities 0.6 0.7 0.7 Shareholders’ equity 11.0 9.9 12.5

Total liabilities and shareholders’ equity $ 280.7 $ 233.9 $ 218.2




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Operating activities, before payment of commissions, generated $221.7 million and $653.6 million during the three and nine month periods ended September 30, 2015, as compared to $364.5 million and $775.0 million in 2014. Cash commissions paid were $52.8 million and $197.3 million for the three and nine month periods in 2015 compared to $57.3 million and $198.3 million in 2014. Cash flows from operating activities, net of commissions paid, were $168.9 million and $456.3 million for the three and nine month periods in 2015 as compared to $307.2 million and $576.7 million in 2014. Financing activities during the third quarter of 2015 compared to 2014 related to:• A net increase of $2.8 million in deposits and

certificates in 2015 compared to a net increase of $3.1 million in 2014.

• A net increase of $139.2 million in 2015 arising from obligations to securitization entities compared to a net increase of $528.3 million in 2014.

• Proceeds received on the issuance of common shares of $1.2 million in 2015 compared with $9.2 million in 2014.

• The purchase of 1,423,800 common shares in 2015 under IGM Financial’s normal course issuer bid at a cost of $52.3 million compared with the purchase of 416,300 common shares at a cost of $21.3 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 $139.2 million in 2015 compared to $135.5 million in 2014.

Financing activities during the nine months ended September 30, 2015 compared to 2014 related to:• A net increase of $45.8 million in deposits and

certificates in 2015 compared to a net increase of $18.5 million in 2014.

• A net increase of $183.1 million in 2015 arising from obligations to securitization entities compared to a net increase of $874.1 million in 2014.

• Proceeds received on the issuance of common shares of $13.5 million in 2015 compared with $31.1 million in 2014.

• The purchase of 5,744,300 common shares in 2015 under IGM Financial’s normal course issuer bid at a cost of $242.2 million compared with the purchase of 1,041,300 common shares at a cost of $54.5 million in 2014.

• The payment of perpetual preferred share dividends which totalled $6.6 million in 2015, unchanged from 2014.

• The payment of regular common share dividends which totalled $421.6 million in 2015 compared to $406.8 million in 2014.

TABLE 21: CASH FLOWS

three months ended september 30 nine months ended september 30

($ millions) 2015 2014 % change 2015 2014 % change

Operating activities Before payment of commissions $ 221.7 $ 364.5 (39.2) % $ 653.6 $ 775.0 (15.7) % Commissions paid (52.8) (57.3) 7.9 (197.3) (198.3) 0.5

Net of commissions paid 168.9 307.2 (45.0) 456.3 576.7 (20.9)Financing activities (50.6) 381.6 (113.3) (428.0) 455.8 (193.9)Investing activities (88.4) (582.5) 84.8 (310.6) (1,090.7) 71.5

Increase (decrease) in cash and cash equivalents 29.9 106.3 (71.9) (282.3) (58.2) n/mCash and cash equivalents, beginning of period 903.8 917.9 (1.5) 1,216.0 1,082.4 12.3

Cash and cash equivalents, end of period $ 933.7 $ 1,024.2 (8.8) % $ 933.7 $ 1,024.2 (8.8) %




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Investing activities during the third quarter of 2015 compared to 2014 primarily related to:• The purchases of securities totalling $27.7 million

and sales of securities with proceeds of $47.0 million in 2015 compared to $21.2 million and $22.6 million, respectively, in 2014.

• A net increase in loans of $83.1 million in 2015 compared to a net increase of $569.6 million in 2014 primarily related to residential mortgages in the Company’s mortgage banking operations.

• Net cash used in additions to intangible assets and acquisitions were $18.7 million in 2015 compared to $10.0 million in 2014.

Investing activities during the nine months ended September 30, 2015 compared to 2014 primarily related to:• The purchases of securities totalling $97.9 million

and sales of securities with proceeds of $110.6 million in 2015 compared to $53.8 million and $48.5 million, respectively, in 2014.

• A net increase in loans of $252.3 million in 2015 compared to a net increase of $1,048.9 million in 2014 primarily related to residential mortgages in the Company’s mortgage banking operations.

• Net cash used in additions to intangible assets and acquisitions were $55.0 million in 2015 compared to $26.1 million in 2014.

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 $6.2 billion at September 30, 2015, unchanged from 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 September 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 September 30, 2015 remain unchanged from December 31, 2014. The Company purchased 5,744,300 common shares during the nine months ended September 30, 2015 at a cost of $242.2 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 nine months of 2015 included the declaration of perpetual preferred share dividends of $6.6 million or $1.10625 per share and common share dividends of $419.1 million or $1.6875 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




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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. 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

TABLE 22: FINANCIAL INSTRUMENTS

september 30, 2015 december 31, 2014 ($ millions) carrying value fair value carrying value fair value

Financial assets recorded at fair value Securities – Available for sale $ 6.2 $ 6.2 $ 10.2 $ 10.2 – Held for trading 69.9 69.9 79.3 79.3 Loans – Held for trading 457.4 457.4 366.2 366.2 Derivative financial instruments 64.1 64.1 39.4 39.4 Other financial assets 9.3 9.3 – – Financial assets recorded at amortized cost Loans – Loans and receivables 6,824.8 7,076.5 6,652.7 6,849.3 Financial liabilities recorded at fair value Derivative financial instruments 64.5 64.5 29.8 29.8 Other financial liabilities 6.2 6.2 6.6 6.6 Financial liabilities recorded at amortized cost Deposits and certificates 269.1 270.5 223.3 225.3 Obligations to securitization entities 6,939.6 7,164.1 6,754.0 6,858.9 Long-term debt 1,325.0 1,667.8 1,325.0 1,682.0




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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 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 nine months ended September 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 distribution 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

Risk Management




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and support functions. Other oversight accountabilities reside with the Company’s: a) corporate and sales 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 September 30, 2015, unchanged from December 31, 2014. The lines of credit as at September 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 September 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 $13.1 million in 2015 (2014 – $13.0 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




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next required actuarial valuation will be based on a measurement date of December 31, 2016. 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 Risk Credit 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 September 30, 2015, cash and cash equivalents of $933.7 million (December 31, 2014 – $1,216.0 million) consisted of cash balances of

$70.4 million (December 31, 2014 – $106.8 million) on deposit with Canadian chartered banks and cash equivalents of $863.3 million (December 31, 2014 – $1,109.2 million). Cash equivalents are comprised of Government of Canada treasury bills totalling $167.5 million (December 31, 2014 – $190.8 million), provincial government and government guaranteed commercial paper of $472.1 million (December 31, 2014 – $665.8 million) and bankers’ acceptances issued by Canadian chartered banks of $223.7 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 September 30, 2015, residential mortgages, recorded on the Company’s balance sheet, of $7.3 billion (December 31, 2014 – $7.0 billion) consisted of $6.8 billion sold to securitization programs (December 31, 2014 – $6.6 billion), $457.4 million held pending sale or securitization (December 31, 2014 – $366.2 million) and $26.6 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;

TABLE 23: CONTRACTUAL OBLIGATIONS

As at September 30, 2015 less than 1 – 5 after ($ millions) demand 1 year years 5 years total

Derivative financial instruments $ – $ 19.9 $ 44.4 $ 0.2 $ 64.5 Deposits and certificates 251.5 6.1 8.2 3.3 269.1 Obligations to securitization entities – 1,375.2 5,488.2 76.2 6,939.6 Long-term debt – – 525.0 800.0 1,325.0 Operating leases(1) – 53.0 149.9 57.9 260.8 Pension funding(2) – 6.6 19.7 – 26.3

Total contractual obligations $ 251.5 $ 1,460.8 $ 6,235.4 $ 937.6 $ 8,885.3

(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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• 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 Mortgage Planning Specialists and Investors Group Consultants 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 $4.5 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 $2.3 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 $44.7 million (December 31, 2014 – $35.1 million) and $38.3 million (December 31, 2014 – $30.0 million), respectively, at September 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 39.1% of mortgages held in ABCP Trusts insured at September 30, 2015 (December 31, 2014 – 51.0%).

At September 30, 2015, residential mortgages recorded on balance sheet totalling $7.3 billion (December 31, 2014 – $7.0 billion) were 77.7% insured (December 31, 2014 – 83.7%). As at September 30, 2015, impaired mortgages on these portfolios were $2.1 million, unchanged from December 31, 2014. Uninsured non-performing mortgages over 90 days on these portfolios were $0.8 million at September 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 $0.7 million at September 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 $63.9 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 $2.2 million at September 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 September 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.




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Market Risk Market 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 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 $50.5 million (December 31, 2014 – negative $26.3 million) and an outstanding notional value of $825 million at September 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 $59.2 million (December 31, 2014 – $35.2 million), on an outstanding notional amount of $1.9 billion at September 30, 2015 (December 31, 2014 – $2.0 billion). The net fair value of these swaps of $8.7 million at September 30, 2015 (December 31, 2014 – $8.9 million) are recorded on balance sheet and have an outstanding notional amount of $2.8 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 fair value of these swaps totalled $0.1 million (December 31, 2014 – negative $0.5 million) on an outstanding notional amount of $82 million at September 30, 2015 (December 31, 2014 – $101 million).

As at September 30, 2015, the impact to annual net earnings of a 100 basis point increase in interest rates would have been a decrease of approximately $0.7 million (2014 – a decrease of $1.6 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 September 30, 2015, IGM Financial’s total assets under management were $130.9 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




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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 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

TABLE 24: ASSETS UNDER MANAGEMENT – ASSET AND CURRENCY MIX

consolidated As at September 30, 2015 mutual funds total

Cash 3.0 % 3.2 %Short-term fixed income and mortgages 6.1 6.1 Other fixed income 23.9 24.8 Domestic equity 30.1 29.7 Foreign equity 33.6 33.1 Real Property 3.3 3.1

100.0 % 100.0 %

CAD 64.2 % 64.8 %USD 23.4 23.1 Other 12.4 12.1

100.0 % 100.0 %

TABLE 25: TWELVE MONTH TRAILING REDEMPTION RATE FOR LONG-TERM FUNDS

2015 2014 sep. 30 sep. 30

IGM Financial Inc. Investors Group 8.4 % 8.9 % Mackenzie 16.0 % 14.8 % Counsel 13.1 % 12.6 %




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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 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, overseen by the Regulatory Initiatives Committee chaired by the Vice-President, Regulatory Affairs. 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




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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 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 and commissioned two research projects. The Brondesbury Group was retained 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. On October 22, 2015, the CSA published the report of the second research project which is an analysis of historical mutual fund data to assess whether fee structures influence mutual fund sales. There are no recommendations contained in the report which, along with the Brondesbury report,




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will be among the various inputs to be considered by the CSA as part of its review. The CSA has stated that it aims to communicate a policy direction sometime in the first half of 2016. 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 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. On August 25, 2015, a revised consultation draft of the Provincial Capital Markets Act (PCMA) along with accompanying commentary was published, along with certain proposed initial draft regulations (Regulations). The PCMA and Regulations would together constitute the single set of provincial/territorial laws under the proposed cooperative capital markets regulatory system in the six jurisdictions (Ontario, British Columbia, Saskatchewan, New Brunswick, Prince Edward Island and Yukon) which have currently agreed to participate. Consistent with earlier announcements, the Regulations substantially maintain the harmonization achieved so far under the current system of securities laws by adopting the national and multilateral instruments, largely, in their current form. The comment period for the revised PCMA and Regulations is open until December 23, 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 $125 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 42% of total industry long-term mutual fund assets at September 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 68% of industry long-term mutual fund assets and 68% of total mutual fund assets under management at September 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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During the third 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

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.


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.

Other The IASB is currently undertaking a number of projects which will result in changes to existing IFRS standards that may affect the Company. Updates will be provided as the projects develop.

Critical Accounting Estimates and Policies




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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 September 30, 2015 totalled 246,054,566. Outstanding stock options as at September 30, 2015 totalled 7,542,160, of which 3,553,737 were exercisable. As at November 2, 2015, outstanding common shares totalled 245,836,166 and outstanding stock options totalled 7,524,368 of which 3,548,547 were exercisable. Perpetual preferred shares of $150 million were outstanding as at September 30, 2015, unchanged at November 2, 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. third quarter report 2015 / interim condensed consolidated financial statements

Consolidated Statements of Earnings

three months ended nine months ended (unaudited) september 30 september 30(in thousands of Canadian dollars, except shares and per share amounts) 2015 2014 2015 2014

Revenues Management fees $ 508,531 $ 517,063 $ 1,534,921 $ 1,506,716 Administration fees 104,595 101,997 312,826 296,529 Distribution fees 92,695 84,968 282,514 263,492 Net investment income and other 19,545 21,257 63,787 50,180 Proportionate share of affiliate’s earnings 26,362 24,877 81,772 68,316

751,728 750,162 2,275,820 2,185,233

Expenses Commission 263,158 249,833 797,712 738,701 Non-commission 208,471 190,802 637,946 597,741 Interest 23,200 23,200 68,914 68,913

494,829 463,835 1,504,572 1,405,355

Earnings before income taxes 256,899 286,327 771,248 779,878 Income taxes 55,660 64,456 166,776 168,883

Net earnings 201,239 221,871 604,472 610,995 Perpetual preferred share dividends 2,213 2,213 6,638 6,638

Net earnings available to common shareholders $ 199,026 $ 219,658 $ 597,834 $ 604,357

Average number of common shares (in thousands) (Note 11)

– Basic 246,953 252,089 249,025 252,247 – Diluted 247,059 252,788 249,169 253,079

Earnings per share (in dollars) (Note 11)

– Basic $ 0.81 $ 0.87 $ 2.40 $ 2.40 – Diluted $ 0.81 $ 0.87 $ 2.40 $ 2.39

(See accompanying notes to interim condensed consolidated financial statements.)

Interim Condensed Consolidated Financial Statements



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igm financial inc. third quarter report 2015 / interim condensed consolidated financial statements 55

Consolidated Statements of Comprehensive Income

three months ended nine months ended (unaudited) september 30 september 30(in thousands of Canadian dollars) 2015 2014 2015 2014

Net earnings $ 201,239 $ 221,871 $ 604,472 $ 610,995

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 $971, $2,856, $(3,803) and $12,674 (2,625) (7,724) 10,283 (34,276)

Investment in affiliate – employee benefits and other Other comprehensive income (loss), net of tax of nil 9,306 (3,384) (3,140) (971)

Items that may be reclassified subsequently to Net earnings Available for sale securities Net unrealized gains (losses), net of tax of $(147), $54, $(1,436) and nil 405 (151) 3,903 (3) Reclassification of realized (gains) losses to net earnings, net of tax of $200, $2, $532 and $36 (548) (5) (1,460) (96)

(143) (156) 2,443 (99) Investment in affiliate and other Other comprehensive income (loss), net of tax of $349, $232, $710 and $758 1,001 (10,279) 36,529 24,620

7,539 (21,543) 46,115 (10,726)

Comprehensive income $ 208,778 $ 200,328 $ 650,587 $ 600,269




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Consolidated Balance Sheets

(unaudited) SEPTEMBER 30 december 31(in thousands of Canadian dollars) 2015 2014

Assets Cash and cash equivalents $ 933,716 $ 1,215,980 Securities 76,094 89,545 Accounts and other receivables 523,762 470,708 Income taxes recoverable 8,082 22,710 Loans (Note 3) 7,282,227 7,018,893 Derivative financial instruments 64,053 39,449 Other assets 56,502 45,757 Investment in affiliate 861,161 794,381 Capital assets 124,887 121,854 Deferred selling commissions 733,517 710,447 Deferred income taxes 65,832 69,405 Intangible assets 1,202,091 1,161,513 Goodwill 2,659,856 2,656,539

$ 14,591,780 $ 14,417,181

Liabilities Accounts payable and accrued liabilities $ 368,989 $ 374,369 Income taxes payable 33,837 30,916 Derivative financial instruments 64,526 29,788 Deposits and certificates 269,148 223,328 Other liabilities 439,812 528,289 Obligations to securitization entities (Note 4) 6,939,571 6,754,048 Deferred income taxes 322,628 310,564 Long-term debt 1,325,000 1,325,000

9,763,511 9,576,302

Shareholders’ Equity Share capital Perpetual preferred shares 150,000 150,000 Common shares 1,632,181 1,655,581 Contributed surplus 34,516 33,504 Retained earnings 3,076,175 3,112,512 Accumulated other comprehensive income (loss) (64,603) (110,718)

4,828,269 4,840,879

$ 14,591,780 $ 14,417,181

These interim condensed consolidated financial statements were approved and authorized for issuance by the Board of Directors on November 5, 2015.




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igm financial inc. third quarter report 2015 / interim condensed consolidated financial statements 57

Consolidated Statements of Changes in Shareholders’ Equity

nine months ended september 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 – – – 604,472 – 604,472 Other comprehensive income (loss), net of tax – – – – 46,115 46,115

Total comprehensive income (loss) – – – 604,472 46,115 650,587

Common shares Issued under stock option plan – 14,688 – – – 14,688 Purchased for cancellation – (38,088) – – – (38,088)Stock options Current period expense – – 3,387 – – 3,387 Exercised – – (2,375) – – (2,375)Perpetual preferred share dividends – – – (6,638) – (6,638)Common share dividends – – – (418,698) – (418,698)Common share cancellation excess and other (Note 5) – – – (215,473) – (215,473)

Balance, end of period $ 150,000 $ 1,632,181 $ 34,516 $ 3,076,175 $ (64,603) $ 4,828,269

2014Balance, beginning of period $ 150,000 $ 1,630,844 $ 32,627 $ 2,977,083 $ (82,959) $ 4,707,595

Net earnings – – – 610,995 – 610,995 Other comprehensive income (loss), net of tax – – – – (10,726) (10,726)

Total comprehensive income (loss) – – – 610,995 (10,726) 600,269

Common shares Issued under stock option plan – 32,384 – – – 32,384 Purchased for cancellation – (6,805) – – – (6,805)Stock options Current period expense – – 4,492 – – 4,492 Exercised – – (4,512) – – (4,512)Perpetual preferred share dividends – – – (6,638) – (6,638)Common share dividends – – – (406,638) – (406,638)Common share cancellation excess and other (Note 5) – – – (48,902) – (48,902)

Balance, end of period $ 150,000 $ 1,656,423 $ 32,607 $ 3,125,900 $ (93,685) $ 4,871,245




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Consolidated Statements of Cash Flows

nine months ended (unaudited) september 30(in thousands of Canadian dollars) 2015 2014

Operating activities Earnings before income taxes $ 771,248 $ 779,878 Income taxes paid (141,043) (116,599) Adjustments to determine net cash from operating activities Deferred selling commission amortization 174,261 176,038 Amortization of capital and intangible assets 29,109 25,339 Changes in operating assets and liabilities and other (179,896) (89,625)

653,679 775,031 Deferred selling commissions paid (197,331) (198,291)

456,348 576,740

Financing activities Net increase in deposits and certificates 45,820 18,536 Net increase in obligations to securitization entities 183,125 874,105 Issue of common shares 13,482 31,103 Common shares purchased for cancellation (242,175) (54,515) Perpetual preferred share dividends paid (6,638) (6,638) Common share dividends paid (421,636) (406,817)

(428,022) 455,774

Investing activities Purchase of securities (97,867) (53,849) Proceeds from the sale of securities 110,638 48,534 Net increase in loans (252,280) (1,048,881) Net additions to capital assets (16,120) (10,441) Net cash used in additions to intangible assets and acquisitions (54,961) (26,068)

(310,590) (1,090,705)

Decrease in cash and cash equivalents (282,264) (58,191)Cash and cash equivalents, beginning of period 1,215,980 1,082,437

Cash and cash equivalents, end of period $ 933,716 $ 1,024,246

Cash $ 70,414 $ 79,583 Cash equivalents 863,302 944,663

$ 933,716 $ 1,024,246

Supplemental disclosure of cash flow information related to operating activities Interest and dividends received $ 188,378 $ 174,794 Interest paid $ 155,893 $ 149,252




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igm financial inc. third quarter report 2015 / notes to the interim condensed consolidated financial statements 59

Notes to the Interim Condensed Consolidated Financial Statementsseptember 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. third quarter report 2015 / notes to the interim condensed consolidated financial statements

3. LOANS

CONTRACTUAL MATURITY

SEPTEMBER 30 december 31 1 YEAR 1 – 5 OVER 2015 2014 OR LESS YEARS 5 YEARS TOTAL total

Loans and receivables Residential mortgages $ 1,210,528 $ 5,610,803 $ 4,210 $ 6,825,541 $ 6,653,428

Less: Collective allowance 673 762

6,824,868 6,652,666Held for trading 457,359 366,227

$ 7,282,227 $ 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 (71) (236)Provision for credit losses (18) 270

Balance, end of period $ 673 $ 762

Total impaired loans as at September 30, 2015 were $2,143 (December 31, 2014 – $2,056). Total interest income on loans classified as loans and receivables was $141.8 million (2014 – $131.1 million). Total interest expense on obligations to securitization entities, related to securitized loans, was $101.5 million (2014 – $95.4 million). Gains realized on the sale of residential mortgages totalled $16.9 million (2014 – $9.0 million). Fair value adjustments related to mortgage banking operations totalled $1.0 million (2014 – $1.7 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 $50.5 million at September 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 SEPTEMBER 30, 2015 mortgages entities net

Carrying value NHA MBS and CMB Program $ 4,495,423 $ 4,583,483 $ (88,060) Bank sponsored ABCP 2,303,532 2,356,088 (52,556)

Total $ 6,798,955 $ 6,939,571 $ (140,616)

Fair value $ 7,049,692 $ 7,164,092 $ (114,400)

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 SEPTEMBER 30, 2015 september 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 14,688 684,471 32,384 Purchased for cancellation (5,744,300) (38,088) (1,041,300) (6,805)

Balance, end of period 246,054,566 $ 1,632,181 251,952,938 $ 1,656,423

4. SECURITIZATIONS (continued)



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Normal course issuer bidIn the third quarter of 2015, 1,423,800 shares (2014 – 416,300) were purchased at a cost of $52.3 million (2014 – $21.3 million). In the nine months ended September 30, 2015, 5,744,300 shares (2014 – 1,041,300) were purchased at a cost of $242.2 million (2014 – $54.5 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 Third 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 SEPTEMBER 30 december 31 2015 2014

Common share options – Outstanding 7,542,160 6,940,248 – Exercisable 3,553,737 3,124,226

In the third quarter of 2015, the Company did not grant options to employees (2014 – nil). In the nine months ended September 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 nine months ended September 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: nine months ended september 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 SEPTEMBER 30, 2015 benefits securities and other total

Balance, beginning of period $ (123,510) $ 194 $ 12,598 $ (110,718)Other comprehensive income (loss) 10,283 2,443 33,389 46,115

Balance, end of period $ (113,227) $ 2,637 $ 45,987 $ (64,603)

september 30, 2014

Balance, beginning of period $ (68,593) $ 420 $ (14,786) $ (82,959)Other comprehensive income (loss) (34,276) (99) 23,649 (10,726)

Balance, end of period $ (102,869) $ 321 $ 8,863 $ (93,685)

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 Third 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

SEPTEMBER 30, 2015 Financial assets recorded at fair value Securities – Available for sale $ 6,244 $ 6,244 $ – $ – $ 6,244 – Held for trading 69,850 67,056 1,483 1,311 69,850 Loans – Held for trading 457,359 – 457,359 – 457,359 Derivative financial instruments 64,053 – 63,853 200 64,053 Other financial assets 9,273 – – 9,273 9,273Financial assets recorded at amortized cost Loans – Loans and receivables 6,824,868 – 26,818 7,049,692 7,076,510Financial liabilities recorded at fair value Derivative financial instruments 64,526 – 13,849 50,677 64,526 Other financial liabilities 6,227 6,227 – – 6,227Financial liabilities recorded at amortized cost Deposits and certificates 269,148 – 270,531 – 270,531 Obligations to securitization entities 6,939,571 – – 7,164,092 7,164,092 Long-term debt 1,325,000 – 1,667,822 – 1,667,822

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 september 30

SEPTEMBER 30, 2015 Assets Securities – Held for trading $ 1,603 $ 44 $ – $ 69 $ – $ (405) $ 1,311 Other financial assets(3) – – 3,562 – – 5,711 9,273 Liabilities Derivative financial instruments, net 26,327 (32,843) – (741) 7,952 – 50,477

september 30, 2014Assets Securities – Held for trading $ 1,446 $ 1,036 $ – $ 138 $ 48 $ – $ 2,572Liabilities Derivative financial instruments, net 16,163 (16,508) – (1,932) 11,781 – 18,958

(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 nine months ended september 30 september 30 2015 2014 2015 2014

Earnings Net earnings $ 201,239 $ 221,871 $ 604,472 $ 610,995 Perpetual preferred share dividends 2,213 2,213 6,638 6,638

Net earnings available to common shareholders $ 199,026 $ 219,658 $ 597,834 $ 604,357

Number of common shares (in thousands)

Average number of common shares outstanding 246,953 252,089 249,025 252,247 Add: Potential exercise of outstanding stock options 106 699 144 832

Average number of common shares outstanding – diluted basis 247,059 252,788 249,169 253,079

Earnings per common share (in dollars)

– Basic $ 0.81 $ 0.87 $ 2.40 $ 2.40 – Diluted $ 0.81 $ 0.87 $ 2.40 $ 2.39




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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 September 30 group mackenzie and other total

Revenues Management fees $ 319,313 $ 173,755 $ 15,463 $ 508,531 Administration fees 76,140 24,307 4,148 104,595 Distribution fees 46,970 2,490 43,235 92,695 Net investment income and other 16,800 682 28,425 45,907

459,223 201,234 91,271 751,728

Expenses Commission 144,932 75,231 42,995 263,158 Non-commission 123,660 71,522 13,289 208,471

268,592 146,753 56,284 471,629

Earnings before undernoted $ 190,631 $ 54,481 $ 34,987 280,099

Interest expense (23,200)

Earnings before income taxes 256,899Income taxes 55,660

Net earnings 201,239Perpetual preferred share dividends 2,213

Net earnings available to common shareholders $ 199,026



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2014

investors corporate Three months ended September 30 group mackenzie and other total

Revenues Management fees $ 321,169 $ 181,275 $ 14,619 $ 517,063 Administration fees 71,943 26,703 3,351 101,997 Distribution fees 41,516 2,658 40,794 84,968 Net investment income and other 16,463 1,456 28,215 46,134

451,091 212,092 86,979 750,162


243,985 142,857 53,793 440,635






12. SEGMENTED INFORMATION (continued)



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2015

investors corporate Nine months ended September 30 group mackenzie and other total

Revenues Management fees $ 959,050 $ 530,357 $ 45,514 $ 1,534,921 Administration fees 226,395 74,694 11,737 312,826 Distribution fees 142,668 8,241 131,605 282,514 Net investment income and other 52,549 4,902 88,108 145,559

1,380,662 618,194 276,964 2,275,820


809,451 452,786 173,421 1,435,658






Identifiable assets $ 8,590,870 $ 1,322,106 $ 2,018,948 $ 11,931,924Goodwill 1,347,781 1,168,580 143,495 2,659,856

Total assets $ 9,938,651 $ 2,490,686 $ 2,162,443 $ 14,591,780




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2014

investors corporate Nine months ended September 30 group mackenzie and other total

Revenues Management fees $ 933,872 $ 530,831 $ 42,013 $ 1,506,716 Administration fees 207,311 79,328 9,890 296,529 Distribution fees 134,225 8,632 120,635 263,492 Net investment income and other 35,619 3,165 81,274 120,058

1,311,027 621,956 253,812 2,186,795


730,759 429,108 159,821 1,319,688


Interest expense (68,913)Restructuring and other charges (18,316)




Identifiable assets $ 8,046,334 $ 1,336,781 $ 1,960,674 $ 11,343,789Goodwill 1,347,781 1,168,580 140,178 2,656,539

Total assets $ 9,394,115 $ 2,505,361 $ 2,100,852 $ 14,000,328




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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 — T H I R D Q UA RT E R R E P O RT 2 0 1 5 E 1

PCC_QUAT3_ENG05_PAR_2015-11-11_v1.indd E1PCC_QUAT3_ENG05_PAR_2015-11-11_v1.indd E1 15-11-12 9:11 PM15-11-12 9:11 PM

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HIGHLIGHTS

Non Current Assets Held for Sale and Discontinued Operations Investmentsin Associates and Joint Ventures

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


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ECONOMIC PRESENTATION OF PARGESA’S FINANCIAL RESULTS

SEPTEMBER 30,2015

Operating contribution of the main shareholdingsConsolidated

77.0

Equity method

12.5

Non consolidated:63.037.325.58.90.3

Operating contribution of the main shareholdings 224.5per share [SF] 2.65 3.48

14.678.210.4(20.2)

Economic operating income 307.6per share [SF] 3.63 3.47

(80.2)286.9

Net income 514.3per share [SF] 6.07 6.20

84,659

1.062



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CONSOLIDATED AND EQUITY ACCOUNTED HOLDINGS

Imerys

Lafarge

NON CONSOLIDATED HOLDINGS

Total

SGS

Engie

Pernod Ricard



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CONTRIBUTION FROM PRIVATE EQUITY ACTIVITIES AND OTHER 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

SEPTEMBER 30,2015

3,595.5(3,258.5)610.4

Operating profit 947.4280.174.1

(106.5)(83.3)

Consolidated net profit 1,111.8597.5

Attributable to Pargesa shareholders 514.3

84,659

Basic earnings per share attributable to Pargesa shareholders [SF] 6.07 6.20

1.062



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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 57.2 SF 85.3



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

POWER CORPORATION OF CANADA

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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