IGM Financial Inc.
Outlook

The Financial Services Environment

The financial services industry continues to experience growth and change influenced by:

• Continuing growth of the Canadian economy.
• Shifting demographics as the number of baby-boomers in their prime savings years continue to increase.
• Regulatory environment changes.
• An evolving competitive landscape.
• Changes in investor attitudes and preferences.

Deregulation, competition and technology have fostered a trend towards financial service providers offering a comprehensive range of products and services in-house. Traditional distinctions between bank branches, full service brokerages, financial planning firms and insurance agent forces are blurring as all of these financial service providers strive to offer comprehensive financial advice implemented through access to a broad product shelf.

The preferred method of retirement planning by Canadians continues to be in the context of a relationship with a financial advisor. Over 60% of Canadian discretionary financial assets, including short term deposits, reside within a relationship with a financial advisor. Increased investor awareness and sophistication, driven by these advisory relationships, continues to drive a reconfiguration of household balance sheets from short term financial assets towards longer term financial assets.

Investment funds, which include mutual funds, remain the most popular financial asset class relied upon by Canadians for their long term savings, and they represent over one-third of Canadian long term discretionary financial assets. 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.

At December 31, 2004, mutual fund industry assets in Canada were $497.3 billion, an increase of 13.3% relative to December 31, 2003. The $58.4 billion increase in industry assets from December 31, 2003 reflected an estimated $36.3 billion increase from market action, which represented 8.3% of year-end 2003 industry assets, the inclusion of approximately $7.4 billion of new assets that were not previously categorized as mutual fund assets, and net sales of $14.7 billion.