IGM Financial Inc.
Outlook

The Regulatory Environment

IGM Financial is subject to complex and changing legal, taxation and regulatory requirements with the Company's principal regulators including agencies of the provincial and territorial governments in Canada. The Company's activities are also regulated by the members of the Canadian Securities Administrators (CSA) and various self-regulatory organizations. Changes in the regulatory framework or failure to comply with any of these laws, rules and regulations could have an adverse effect on the company.

IGM Financial's core distribution business is regulated by the Mutual Fund Dealers Association (MFDA) of Canada in which the Company's mutual fund dealer subsidiaries are members.

The Company supports all regulatory efforts that will protect the interests of clients and preserve the integrity and reputation of the industry and its members.

Investors Group Financial Services Inc., M.R.S. Inc. and IPC Investment Corporation, the Company's mutual fund dealer subsidiaries, are members of the MFDA. This is the self regulatory organization for the mutual fund dealer industry in every jurisdiction in Canada except Quebec. The MFDA continues to work towards the establishment of a contingency fund to protect investors in the event of an insolvency of any of its dealer members.

The CSA continues to work towards enhancing public confidence in capital markets and streamlining the securities regulatory process. In the past year recent enactments relating to audit committee responsibilities, certification of financial reports by the Chief Executive Officer and the Chief Financial Officer and continuous disclosure guidelines and requirements are in the course of being implemented. Further requirements on corporate governance disclosure, fund governance and continuous disclosure for mutual funds are expected during 2005. Continued harmonization efforts have been centered around the CSA secretariat to coordinate the efforts of the members of the CSA with respect to projects such as uniform securities legislation and national registration requirements. There have been continuing efforts to improve the national electronic information systems such as SEDI, SEDAR and NRD.

On December 16, 2004 the Ontario Securities Commission (OSC) and the Manitoba Securities Commission (MSC) approved a settlement agreement between I.G. Investment Management, Ltd. (IGIM) and the OSC regarding trading by an institutional client of Investors Group Inc. (IG) in mutual funds managed by IGIM. IG agreed to provide compensation of $19.2 million, plus interest at 5% per annum from the settlement date to the approval of the plan of distribution, to affected unitholders. Also on December 16, 2004 a hearing panel of the MFDA approved a settlement agreement between Investors Group Financial Services Inc. and the MFDA regarding the same matter, providing for compensation of $2.65 million, plus interest on the foregoing basis, to be paid to affected unitholders and the payment of a fine of $2.65 million to the MFDA. The compensations are to be made pursuant to a distribution plan to be developed by IG together with an independent consultant and approved by the OSC and the MSC. The Company recorded a $19.2 million after-tax charge to income in the fourth quarter to reflect these settlements and related costs.

These settlements arose following a review of "late trading" and "market timing" activities in the mutual fund industry which started in November 2003 by the OSC, the MFDA and the Investment Dealers Association of Canada. The OSC noted at the time of the settlements that no ongoing market timing activity in the Canadian mutual fund industry has been found since the beginning of the review. OSC staff had also noted earlier that their review revealed no evidence of "late trading" and that they had found no evidence of any "market timing" by any insiders of IGIM.