IGM Financial Annual Report 2022

Plain-text annual report

Bettering the lives of Canadians 2022 Annual Report IGM Financial | TSX: IGM Contents 11 12 3 Our purpose 4 2022 highlights Letter to 6 shareholders Corporate structure Wealth management highlights Asset management highlights Strategic investments highlights 14 Our people 16 13 13 Our commitment to sustainability Management’s discussion and analysis Consolidated financial statements 17 86 Visit igmfinancial.com/en/corporate-sustainability to learn more about our sustainability efforts. Who we are IGM Financial Inc. (TSX: IGM) is a leading wealth and asset management company supporting financial advisors and the clients they serve in Canada, and institutional investors globally. IGM’s family of companies provide a broad range of financial planning and investment management services to help Canadians meet their financial goals. The company creates value for shareholders through three key areas: • Wealth management • Asset management • Strategic investments Reasons to invest • Bold steps taken to transform operating companies resulting in market share gains and operational efficiencies • Experienced leadership team focused on driving innovation, an agile culture and exceptional client outcomes • Exciting growth opportunities through investments in fintech, private alternative markets and China • Ability to benefit from financial strength and scale and strong governance as a member of the Power Corporation group of companies • Long-term view to shareholder value creation and demonstrated commitment to corporate responsibility Readers are referred to the caution regarding Forward-Looking Statements and Non-IFRS Financial Measures and Other Financial Measures on pages 18 and 19 of this report. Unless otherwise noted, all figures mentioned in this report are in Canadian dollars and are as of, or for the year ending, December 31, 2022. Our purpose IGM Financial’s family of companies are committed to bettering the lives of Canadians, by better planning and managing their money. We strive to do this through the pursuit of: Better experiences Better solutions We bring together the best of both worlds for our people – the accountability and agility of a smaller organization with the scale and impact of a bigger firm – while offering more room to grow, in a diverse and inclusive work environment. We believe in improving the financial well-being of Canadians by making comprehensive investment and wealth planning solutions more accessible; built on lasting relationships, not transactions. Better communities Better ownership We leverage our local connectivity coast-to-coast and our global voice to better our communities, the environment, and the world around us, creating a collective impact that goes well beyond our company walls. As part of the Power Corporation group of companies, we balance short-term needs with a long-term perspective that is focused on creating enduring value and a sustainable future for generations to come. Our values guide how we engage with our people, our clients, our shareholders and our communities. We are: progressive entrepreneurial responsible inclusive We think beyond today and challenge conventional thinking to seek new and improved ways of working. We celebrate initiative and encourage everyone to own their actions. We hold ourselves to the highest standards and do what’s right for today and sustainable for our future. We embrace and nurture our unique perspectives as an asset to be cultivated. 3 2022 IGM Financial Annual Report2022 highlights Our clients Our people Our community c GLOBAL100 c THE WORLD'S MOST SUSTAINABLE CORPORATIONS GLOBAL100 c THE WORLD'S MOST SUSTAINABLE CORPORATIONS GLOBAL100 c THE WORLD'S MOST SUSTAINABLE CORPORATIONS GLOBAL100 c THE WORLD'S MOST SUSTAINABLE CORPORATIONS GLOBAL 100 THE WORLD'S MOST SUSTAINABLE CORPORATIONS c GLOBAL100 c THE WORLD'S MOST SUSTAINABLE CORPORATIONS GLOBAL100 c THE WORLD'S MOST SUSTAINABLE CORPORATIONS GLOBAL100 THE WORLD'S MOST SUSTAINABLE CORPORATIONS c T H E W O R L D ' S MO S T S U S T A I N A B L E C O R P O R A T I O N S GLOBAL100 IGM recognized as one of the Top 100 GLOBAL100 Employers in Canada THE WORLD'S MOST SUSTAINABLE CORPORATIONS c 4,010 employees across the IGM family of companies ~4,000 IG and IPC advisors across Canada helping Canadians meet their financial goals 33% of IGM senior leadership roles (Vice-President level and higher) held by women 550 IGM employees and field members completed the 4 Seasons of Reconciliation training 7 employee-led Business Resource Groups across IGM focused on promoting an inclusive work environment Recognized as one of Corporate Knights’ 2023 Global 100 Most Sustainable Corporations IGM ranked 25th in Corporate Knights’ 2022 Best 50 Corporate Citizens in Canada $1.8 million raised through IGM Caring Company Campaign, with increased participation over 2021 Partnership has helped over 150 First Nations community members gain financial literacy through 19 workshops and 110+ one-on-one learning sessions IG and Mackenzie are part of the Climate Action 100+, an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take action on climate change 1 million+ IG Wealth Management clients 198,000 Investment Planning Counsel clients 30,000+ external advisors serving more than one million Mackenzie clients $4.81 billion assets under management in Sustainable Solutions, up from $4.32B in 2021 IG and Mackenzie are committed to the PRI and require all sub-advisors to be signatories IGM has ranked at the leadership level for the past five years for its climate change disclosure We are proud of our commitments and achievements in working towards a sustainable future 4 From our IGM family to yoursShareholder highlights Net earnings $867.2 million $3.63 per share available to common shareholders EPS 2nd highest in company history Assets under management & advisement $249.4 billion Net Inflows $1.2 billion Dividends declared $536.1 million $2.25 per share per common share IGM Financial earnings per share $4.08 $3.63 $3.18 $3.12 $3.21 2018 2019 2020 2021 2022 Total assets under management and advisement ($B) IG Wealth Management Investment Planning Counsel Mackenzie Investments IGM Financial consolidated2 Opening Net flows Investment returns & other 119.6 33.1 129.1 277.1 2.7 0.3 (1.9) 1.2 (11.5) (3.9) (14.1)1 (28.9) Ending 110.8 29.5 113.1 249.4 1 Investment returns and other includes the change in sub-advised Canada Life assets under management. 2 Consolidated results eliminate double counting where business is reflected within multiple segments. 5 2022 IGM Financial Annual ReportLetter to shareholders In 2022 people moved forward by reconnecting and adapting to new ways of working together. IGM responded as we continued our focus on bettering the lives of Canadians, by better planning and managing their money. These positive developments, however, were also accompanied by new challenges, including rising inflation and interest rates, market volatility and geo-political uncertainty. We are proud of the way our team and our clients rose to the occasion together. It truly represented the best of IGM. The environment we faced demonstrated the importance of a sound strategy and determined execution. It also demonstrated the value that thoughtful, well-considered planning plays in helping deliver the best results for our clients, while moving our business forward. As our clients navigated the year, we provided them with the guidance and support they required. Thanks to the exceptional work and commitment of our employees and advisors, our clients – and our shareholders – are well-positioned to benefit as market volatility begins to subside in 2023. Support for our employees continued as we emerged from the pandemic. By providing individual team hybrid work flexibility, special days off, and ensuring a living wage, we’ve maintained our ongoing focus on people’s emotional, financial, physical, and social well- being. This focus contributed to IGM being named a Top 100 Employer in Canada by MediaCorp Canada Inc. in its annual ranking of leading workplaces. A key priority for us in 2022 was to keep a prudent eye on expenses. We are a market-sensitive business. As markets drove revenues down sharply, we revised our full-year expense guidance, which includes operations and business development expenses, down from approximately 5% to no more than 3% growth on a year-over-year basis. In fact, we ended the year lower still. These efforts are not only responding to the current environment, but also helping lay the foundation for building an even stronger organization. During the year, we were pleased to welcome new people to new roles. Luke Gould, formerly IGM’s Chief Financial Officer, assumed the role of President and CEO of Mackenzie Investments. Keith Potter succeeded Luke as Executive Vice-President and Chief Financial Officer, having most recently served as Head of Mortgage, Insurance and Banking for IG Wealth Management. Finally, Kelly Hepher joined IGM Financial as Chief Risk Officer in April. We are fortunate to have these individuals on our team. We ended 2022 with assets under management and advisement (AUM&A) of $249 billion, compared to A Strong Foundation – Our focus on the value of advice, and delivering strong services and products, became increasingly relevant as we worked to help Canadians through these times to preserve and build wealth over the long term. 6 From our IGM family to yours mortgage lending platform. Starting in the first half of 2023, by integrating nesto’s Mortgage Cloud solution in our mortgage solutions business, IG advisors will begin providing clients with an easier, faster and best- in-class digital mortgage experience. We also launched a new online Tax Centre for clients and expanded the range of digital forms and tools for advisors to manage client accounts. Our overall commitment to improving the advisor experience over the last few years helped IG become the top-rated, full-service mutual fund dealer in the 2022 Investment Executive Dealer Report Card, an annual study that is based on feedback from advisors about their firms and the overall wealth management industry. $277 billion last year. Net inflows for the year were $1.2 billion compared to inflows of $8.7 billion in 2021. Annual net earnings were $867 million or $3.63 per share, which is the second highest in company history. Wealth management Against a more challenging economic background, IG Wealth Management and Investment Planning Counsel provided their clients with the guidance they required by remaining focused on the value of financial planning and being responsive to market opportunities. IG Wealth Management Led by President and CEO Damon Murchison, IG Wealth Management continued to demonstrate strength and adaptability. Client AUM&A were a robust $110.8 billion, and net inflows remained strong at $2.7 billion. We maintained our momentum in attracting and serving clients from the high net worth (HNW) and mass affluent market segments. Further, inflows of IG-managed investments to new affluent clients with investments of more than $500,000 has grown by 59% since 2019. During 2022, we benefited from IG clients’ inclination to stay committed to their tailored financial plans even during periods of significant market volatility. As we continued to drive advisor productivity (as measured by gross new assets per advisor), we also kept a strong focus on enhancing our client service and engagement. These efforts helped IG score at or ahead of the industry average across all measures in the J.D. Power Canada 2022 Full-Service Investor Satisfaction Study. IG continues to leverage technology on behalf of clients and advisors. In December, IG announced a partnership with nesto, Canada’s leading digital James O’Sullivan President and Chief Executive Officer IGM Financial 7 2022 IGM Financial Annual ReportInvestment Planning Counsel In 2022, Investment Planning Counsel (IPC) continued to provide support and services to more than 650 advisors who manage close to $30 billion in investments for over 200,000 Canadians. IPC, guided by President and CEO Blaine Shewchuk, achieved solid financial results in 2022, with net earnings of $11 million. IPC delivered positive net flows on assets under administration (AUA) despite market volatility. In addition, to provide savings to our clients, we lowered management fees across 30 Counsel investment solutions. These changes, coupled with asset allocation changes by our portfolio management team, have enhanced the overall attractiveness of our investment portfolio. Further, we continued to evolve IPC One, our discretionary wealth management platform for Portfolio Managers. The platform, which was launched in 2021, ended the year with $2.2 billion in assets. Asset management On July 1, 2022, Luke Gould took on the role of President and CEO of Mackenzie Investments, succeeding Barry McInerney who announced his retirement. We thank Barry for his contributions. Drawing upon more than 25 years of experience in executive roles across IGM, Luke is well-positioned to guide the firm into the future. Despite significant market turbulence and an environment in which the industry experienced investment fund net outflows of $50.2 billion, Mackenzie delivered solid results, relative to other firms. Total AUM stood at $186.6 billion, compared to $210.3 billion at the end of 2021. Mackenzie saw investment fund net redemptions of $1.0 billion and total net redemptions (including institutional) of $1.9 billion in 2022. Challenging market conditions are nothing new for Mackenzie. We are confident in our strategy and look forward to continuing to capitalize on key opportunities, such as our exciting new partnership with Primerica. Together we launched the Mackenzie FuturePath product suite: 25 exclusive funds designed to meet the needs of Primerica’s network of 7,000 advisors and 250,000 clients. Retail and institutional investors continued to look for sustainable investment options that deliver dependable risk-adjusted returns and support positive social and environmental change. During the year, Mackenzie’s Greenchip boutique, which focuses on environmental thematic investing, continued to be among our top-performing and best-selling capabilities. Alternative investments, which are expected to account for approximately 50% of the global asset management pool by 2024, are an important asset class that retail investors in Canada have only recently been able to access. Through our partnership with Northleaf Capital, we are democratizing alternative investments, including private equity, private credit and infrastructure, by making these types of opportunities more available to retail investors. This included the launch of the Mackenzie Northleaf Private Credit Interval Fund (a first-of-its-kind retail offering in Canada), and the Mackenzie Northleaf Global Private Equity Fund, which further expanded retail investor access to private market investment solutions. Strategic investments Strategic investments are an effective way for IGM and our businesses to enter new sectors, expand our core operations, and create rewarding investment opportunities across our various businesses. On January 12, 2023, we completed the acquisition of an additional 13.9% equity interest in ChinaAMC, increasing our holdings to 27.8%. Among other things, this further enhances our participation in the rapidly growing Chinese asset management industry, through a meaningful ownership position in one of the country’s leading asset managers. In addition to our ownership stake in ChinaAMC, we are the largest shareholder in Wealthsimple, which grew its number of clients by 16% to almost two million (excluding Weathsimple Tax users). As part of our new agreement with nesto, we also made a minority equity investment in the company. Further, we are a key investor in Portag3 Ventures, a global venture capital 8 From our IGM family to yoursinvestor targeting the fintech sector, which enables IGM to participate in the growth of these companies and leverage expertise and learnings in our core business. Digitizing to deliver a better client and employee experience Over the last several years, IGM has pursued a strategic digital transformation to modernize and enhance the experience we provide to employees, advisors, and clients. We built on this foundation during the year by partnering with recognized leaders in innovation and service, including Google Cloud and Salesforce. In July, we announced a strategic agreement with CGI to deliver the next generation of mutual fund transfer agency platforms in Canada. Later in August, we announced a collaboration with Microsoft Canada, choosing the company’s Azure cloud computing platform to support our ongoing modernization of key infrastructure and practices. In October, we transitioned the IG Contact Centre to a digital platform, Salesforce Service Cloud Voice, a foundational step in our modernization story. While technological, social and environmental changes were already reshaping the way the world lives and works, the pandemic has accelerated many of these trends. One of the defining workplace changes to come out of the pandemic is the shift to new ways of working. In partnership with our employees, IGM adopted a hybrid work model based on flexibility for our leaders and the needs of their teams. This has allowed our people to balance their professional and personal lives while still providing external advisors and clients with exceptional levels of support and service. Additionally, special days off and wellness programs that accommodate both virtual and in-person activities contributed to impressive employee engagement results in 2022. Driving change for the better Working to build a just, equitable and inclusive society is a priority for IGM, our employees and advisors. We recognize that we have a role to play and are committed to doing so. Across our operations and communities, IGM continued to foster diversity, equity and inclusion (DEI) through performance targets, hiring initiatives, training and community investments. We have set targets for increasing the number of employees from underrepresented groups across IGM within the next three years, including women executives, Black executives and Indigenous employees. To help build a more diverse and inclusive culture, we support seven Business Resource Groups – 2SLGBTQIA+, Black Advisory Council, DiverseAbility, Green, Indigenous, Pan-Asian and Women – aligning their programs and initiatives with IGM’s DEI strategy and business priorities. As part of our ongoing reconciliation journey, in 2022 IGM provided 4 Seasons of Reconciliation training to all employees and field members. This included time to reflect and honour Canada’s National Day for Truth and Reconciliation in the workplace and in the community. We continue to partner with Prosper Canada in helping to ensure First Nations have access to services that help build their financial confidence. A common thread that runs through IGM is helping people prepare for the future. A similar focus guides our effort to help address the global issue of climate change, which we recognize as a defining challenge of our time. In 2022, we continued implementing the Task Force on Climate-related Financial Disclosure recommendations, including enhancing reporting on investment-related carbon emissions. Additionally, we set interim climate targets at Mackenzie to engage companies in which we invest and encourage wider adoption of science-based targets. Further, IGM engages with portfolio companies across a range of sustainability-related issues, including climate. We are proudly Canadian and strive to advance the decarbonization and resilience of the Canadian economy. 9 2022 IGM Financial Annual ReportOur efforts are being recognized. We were once again named by Corporate Knights as one of the Best 50 Corporate Citizens in Canada, as one of the Global 100 Most Sustainable Global Corporations, and also as a leader in climate action and disclosure by CDP. These awards reflect our sustainability focus and performance and our commitment to engage our business in serving the interests of people and our planet. In an ever-changing world, IGM continues to be guided by our values and our purpose. Looking forward In an ever-changing world, IGM continues to be guided by our values and our purpose. Throughout the year, we worked to ensure the financial well-being of our clients, to help our employees and advisors build their careers, to support the communities where we live and work, and to use our influence and capacity to fight climate change and drive positive social impact. Looking ahead, we will remain focused on driving growth by working to attract and support great employees, advisors and clients and continuing to build a high- performing, engaged and diverse workforce. We will also advance our modernization initiatives and continue to look for opportunities to strengthen our ability to compete with global asset managers and grow our wealth management business with HNW and ultra-HNW clients. Thoughtfully, prudently, and strategically, we will keep moving forward. and macroeconomic factors impacted results, we are pleased with the underlying performance of our businesses and are well positioned to come out even stronger as markets recover. Equally, we are delighted by the ongoing commitment and determination of our leaders, employees, and advisors to navigate these times. Heading into 2023, we are confident in our strategy, people and culture, and sure in the belief that we will continue to better the lives of Canadians and deliver lasting value for our shareholders. On behalf of the Board of Directors, James O’Sullivan R. Jeffrey Orr President and Chief Executive Officer Chair of the Board IGM Financial The world is adopting new ways of working and collaborating to move past the pandemic. While market IGM Financial We are confident in our strategy, people and culture, and will continue to better the lives of Canadians and deliver lasting value for our shareholders. R. Jeffrey Orr Chair of the Board IGM Financial 10 From our IGM family to yoursCorporate structure IGM maintains the unique strategies of our individual businesses while maximizing the value of shared knowledge and resources. Strength and scale as part of the Power Corporation group of companies. Power Corporation is an international management and holding company that focuses on financial services in North America, Europe and Asia. Wealth management Asset management Strategic investments We’ve seen first-hand the power of better planned and managed money and how it can change lives. It’s what motivates us to drive our business forward. 11 2022 IGM Financial Annual ReportWealth management IGM Financial is committed to improving the financial well-being of Canadians. IG Wealth Management and Investment Planning Counsel continued to focus on delivering holistic financial planning and promoting a culture that places the financial well-being of Canadians at the centre of everything we do. $110.8 billion Total assets under advisement $12.9 billion Gross client inflows $2.7 billion Net client inflows Damon Murchison President and Chief Executive Officer IG Wealth Management 84% mutual fund assets rated 3 stars or better by Morningstar† 5 FundGrade® A+ Awards for Performance Continued support for The Alzheimer Society of Canada with $5.7 million raised nationally by more than 2,547 walkers and 5,050 donors Ranked 6th in client engagement in the 2022 J.D. Power Canada Full-Service through the IG Wealth Management Investor Satisfaction Study Walk for Alzheimer’s Top-ranked in 2022 Investment Executive Dealer Report card, tying for first among Full-Service and Mutual Fund Dealers Blaine Shewchuk President and Chief Executive Officer Investment Planning Counsel $29.5 billion Total assets under advisement $4.6 billion Total assets under management $4.4 billion Gross client inflows Corporate office model, IPC Pinnacle reached $5.3 billion Discretionary Portfolio Management platform launched for PM Advisors reached $1.9 billion Welcomed over 30 new independent advisors Employee engagement score of 81 reflects highly engaged head office support team 12 From our IGM family to yours Asset management IGM Financial is committed to providing innovative, high-quality investments. Mackenzie Investments continue to help advisors and investors build strong portfolios that meet today’s needs while anticipating future economic and capital market conditions. Luke Gould President and Chief Executive Officer Mackenzie Investments $186.6 billion Total assets under management* $1.9 billion Total net redemptions $7.5 billion Mutual fund gross sales Investment management team earned 7 Refinitiv Lipper Awards Ontario’s Adanac Ski Hill and BC’s Kimberley Alpine Resort crowned 2022 Mackenzie Top Peak winners 86% of Mackenzie mutual fund assets reside in funds rated 3 stars or better by Morningstar† Launched suite of 25 funds designed to address the specific needs of Primerica’s network of 7,000 advisors and 250,000 clients Established Mackenzie Together Futures Initiatives, a new female-driven educational partnership with Ivey Business School to help the investment industry better engage and inspire women 8 FundGrade® A+ Awards for outstanding investment performance * Includes $73.5 billion in advisory fee mandates to wealth management. Strategic investments IGM Financial’s portfolio of strategic investments had another strong year, deriving value from previous investments and integrating them in ways that generate new benefits to investors and clients. ChinaAMC is one of the leading asset managers in China Global private markets solutions provider and other Fintech investments provide innovative capabilities and access to markets with significant growth potential 27.8% ownership interest1 56% economic interest $603M fair value 1 As at transaction close on January 12, 2023. Publicly traded, international financial services holding company 2.4% ownership interest1 2022 IGM Financial Annual Report 13 CROWNING CANADA’S MOST INVESTED SKI COMMUNITYOur people We are building a strong, inclusive and progressive culture, where people want to grow their careers and do their best for clients, communities and one another. During 2022, IGM Financial was proud to be recognized as one of Canada’s Top 100 employers. One of our differentiating achievements was the move to a new hybrid work model that supports working remotely and in the office. We asked our employees how they wanted to work, and we aligned our hybrid model to their answer. We also gave our leaders the freedom to learn, adapt and be flexible instead of driving them to a set of structured rules. Survey results Highlights from our annual employee engagement survey: 86% see their people leader as effective 85% are proud to work for IGM 83% feel they get the training needed to do their job 83% would gladly recommend IGM as a place to work 79% overall engagement score, higher than global benchmarks Throughout the year, we held activities and events to bring IGM employees together. These results are consistent with our advisor and client surveys which remained stable or were up during the past year, showing the link between engaged employees and the people we support. 14 From our IGM family to yoursWellness at work With the shift to hybrid work, our wellness programs now offer virtual and in-person activities focusing on emotional, financial, physical and social wellness. Over 1,800 employees participated in wellness workshops, virtual fitness classes, mental health training, financial literacy education and “Wellness 101” information sessions about various benefits available to employees. Diversity, equity, inclusion We are committed to advancing DEI across our industry, and our strategy is focused on three pillars: In 2022 we made significant progress by: • Establishing targets for CEOs and leaders that focus on underrepresented employees • Holding events and training sessions to foster learning and engagement • Supporting seven business resource groups to help advance the DEI strategy • Furthering our reconciliation journey through participation in the 4 Seasons of Reconciliation training and taking time to reflect and honour the National Day for Truth and Reconciliation Inclusive workplace Nurture a culture of allyship and inclusive leadership Diverse talent Attract, develop, retain and accelerate Clients & brand Leverage DEI in the marketplace Employees took part in the Earth Day Shoreline and Park Cleanup events across Canada. 1,900 employees and IG Consultants participated in the IG Wealth Management Walk for Alzheimer’s. 15 2022 IGM Financial Annual ReportOur commitment to sustainability Bettering lives for tomorrow IGM’s sustainability strategy helps us prioritize the topics that matter most to our business and our stakeholders. It provides direction on addressing these issues and holds us accountable for our progress and outcomes. Our strategy focuses on three areas where we – as wealth and asset managers – can have the most significant impact. Underpinning everything we do is a commitment to responsible business practices. Our self-identification initiative Count Me In! is helping us better direct our DEI goals, resources and programs. • Focus areas Highlights IGM supports the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Here are some 2022 highlights as we continue to progress our implementation: Governance • Management and Board had three meetings on sustainability and climate • Participated in consultations about standardized climate reporting (International Sustainability Standards Board, Canadian Securities Administrators, U.S. Securities Exchange Commission) Risk management • Integrated IGM’s sustainability and risk functions under one division Strategy • Enhanced capacity for climate-related investment risk measurement and scenario analysis Metrics targets • Mackenzie set interim targets for the Net Zero Asset Managers initiative (NZAM) Building financial wellness Advancing sustainable investing Accelerating DEI in finance Responsible business practices • Governance • Talent and culture • Ethics and compliance • Community support • Risk management • Climate change • Information security • Environmental footprint and privacy 16 From our IGM family to yoursFinancial Section Management’s Discussion and Analysis IGM Financial Inc. Summary of Consolidated Operating Results Wealth Management Review of the Business Review of Segment Operating Results Asset Management Review of the Business Review of Segment Operating Results Strategic Investments and Other Review of Segment Operating Results IGM Financial Inc. Consolidated Financial Position Consolidated Liquidity and Capital Resources Risk Management The Financial Services Environment Critical Accounting Estimates and Policies Disclosure Controls and Procedures Internal Control Over Financial Reporting Other Information Financial Review Consolidated Financial Statements Management’s Responsibility for Financial Reporting Independent Auditor’s Report Consolidated Financial Statements Notes to Consolidated Financial Statements Supplementary Information Quarterly Review Ten Year Review 20 31 40 46 53 56 58 61 66 80 82 84 84 85 87 88 91 96 128 130 17 2022 IGM Financial Inc. Annual ReportManagement’s Discussion and Analysis The Management’s Discussion and Analysis (MD&A) presents management’s view of the results of operations and the financial condition of IGM Financial Inc. (IGM Financial or the Company) as at and for the years ended December 31, 2022 and 2021 and should be read in conjunction with the audited Consolidated Financial Statements. Commentary in the MD&A as at and for the year ended December 31, 2022 is as of February 9, 2023. Basis of Presentation and Summary of Accounting Policies The Consolidated 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 Financial Reporting Standards (IFRS) and are presented in Canadian dollars (Note 2 of the Consolidated Financial Statements). Principal Holders of Voting Shares As at December 31, 2022, Power Corporation of Canada (Power) and Great-West Lifeco Inc. (Lifeco), a subsidiary of Power, held directly or indirectly 62.2% and 3.9%, respectively, of the outstanding common shares of IGM Financial. Forward-looking Statements Certain statements in this report, 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, outbreaks of disease or pandemics (such as COVID-19), 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. 18 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisRefer to the appropriate reconciliations of non-IFRS financial measures, including as components of non-IFRS ratios, to reported results in accordance with IFRS in Tables 1 to 4. This report also contains other financial measures which include: • Assets Under Management and Advisement (AUM&A) represents the consolidated AUM and AUA of IGM Financial. In the Wealth Management segment, AUM is a component part of AUA. All instances where the asset management segment is providing investment management services or distributing its products through the Wealth Management segment are eliminated in our reporting such that there is no double-counting of the same client savings held at IGM Financial’s operating companies. • Assets Under Advisement (AUA) are the key driver of the Wealth Management segment. AUA are savings and investment products held within client accounts of our Wealth Management segment operating companies. • Assets Under Management (AUM) are the key driver of the Asset Management segment. AUM are a secondary driver of revenues and expenses within the Wealth Management segment in relation to its investment management activities. AUM are client assets where we provide investment management services, and include investment funds where we are the fund manager, investment advisory mandates to institutions, and other client accounts where we have discretionary portfolio management responsibilities. • Working Capital which consists of current assets less current liabilities. Non-IFRS Financial Measures and Other Financial Measures This report contains Non-IFRS financial measures and non-IFRS ratios that do not have standard meanings prescribed by IFRS and may not be directly comparable to similar measures used by other companies. These measures and ratios are used to provide management, investors and investment analysts with additional measures to assess earnings performance. Non-IFRS financial measures include, but are not limited to, “adjusted net earnings available to common shareholders”, “adjusted net earnings”, “adjusted earnings before income taxes”, “adjusted earnings before interest and taxes” (Adjusted EBIT), “earnings before interest, taxes, depreciation and amortization before sales commissions” (EBITDA before sales commissions), and “earnings before interest, taxes, depreciation and amortization after sales commissions” (EBITDA after sales commissions). These measures exclude other items which are items of a non-recurring nature, or that could make the period-over-period comparison of results from operations less meaningful. EBITDA before sales commissions excludes all sales commissions. EBITDA after sales commissions includes all sales commissions and highlights aggregate cash flows. Non-IFRS ratios include the following: Ratio Numerator Denominator Adjusted net earnings available to common shareholders Net earnings (Adjusted net earnings) available to common shareholders Net earnings (Adjusted net earnings) available to common shareholders Adjusted earnings per share (Adjusted EPS) Return (Adjusted return) on equity (ROE, Adjusted ROE) ROE (Adjusted ROE) excluding the impact of fair value through other comprehensive income investments Average number of outstanding common shares on a diluted basis Average shareholders’ equity excluding non-controlling interest Average shareholders’ equity excluding non-controlling interest and the impact of fair value through other comprehensive income investments net of tax 19 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportIGM Financial Inc. Summary of Consolidated Operating Results IGM Financial Inc. (TSX:IGM) is a leading wealth and asset Annual net earnings per share in 2022 represented a decrease management company supporting advisors and the clients of 10.4% over annual adjusted net earnings per share in 2021. they serve in Canada, and institutional investors throughout Net earnings per share for the fourth quarter of 2022 North America, Europe and Asia. The Company operates represented a decrease of 13.0% over adjusted net earnings through a number of operating subsidiaries and also holds per share (a non-IFRS ratio – see Non-IFRS Financial Measures a number of strategic investments that provide benefits to and Other Financial Measures) for the fourth quarter of 2021. In these subsidiaries while furthering the Company’s growth 2021, adjusted net earnings available to common shareholders, prospects. The Company’s principle operating subsidiaries are excluding other items outlined below, were $971.2 million wealth manager IG Wealth Management (IG) and asset manager or $4.05 per share for the twelve month period and were Mackenzie Investments (Mackenzie). The Company also $260.8 million or $1.08 per share for the fourth quarter of 2021. operates through wealth manager Investment Planning Counsel (IPC) and has strategic investments in Great-West Lifeco Inc. (Lifeco), China Asset Management Co., Ltd. (ChinaAMC), Northleaf Capital Group Ltd. (Northleaf), and Wealthsimple Financial Corp. (Wealthsimple) as described more fully later in this MD&A. IGM Financial’s assets under management and advisement were $249.4 billion as at December 31, 2022, compared with $277.1 billion at December 31, 2021, as detailed in Table 6. Average total assets under management and advisement for the year ended December 31, 2022 were $255.2 billion compared to $259.7 billion in 2021. Average total assets under management and advisement for the fourth quarter of 2022 were $247.8 billion compared to $272.0 billion in the fourth quarter of 2021. Total assets under management were $217.0 billion at December 31, 2022, compared with $245.3 billion at December 31, 2021. Average total assets under management for the year ended December 31, 2022 were $224.6 billion compared to $231.4 billion in 2021. Average total assets under management for the fourth quarter of 2022 were $216.5 billion Adjusted Net Earnings Available to Common Shareholders(1) and Adjusted Earnings per Share(1) For the financial year ($ millions, except per share amounts) 971 4.05 867 3.63 792 3.29 764 763 3.19 3.20 2018 2019 2020 2021 2022 Adjusted Net Earnings Available to Common Shareholders Adjusted Earnings per Share Adjusted net earnings available to common shareholders and adjusted compared to $241.9 billion in the fourth quarter of 2021. net earnings per share excluded the following after-tax amounts: Net earnings available to common shareholders for the year ended December 31, 2022 were $867.2 million or $3.63 per share compared to net earnings available to common shareholders of $978.9 million or $4.08 per share in 2021, representing a decrease of 11.0% in earnings per share. Net earnings available to common shareholders for the three months ended December 31, 2022 were $224.7 million or $0.94 per share compared to net earnings available to common shareholders of $268.5 million or $1.11 per share for the comparative period in 2021, a decrease of 15.3% in earnings per share. 2018 – charges related to restructuring and other and the premium paid on the early redemption of debentures. 2019 – the Company’s proportionate share in Great-West Lifeco Inc.’s one-time charges. 2020 – the gain on sale of Personal Capital, gain on sale of Quadrus Group of Funds net of acqusition costs, the Company’s proportionate share of associate’s adjustments and restructuring and other. 2021 – additional consideration receivable related to the sale of Personal Capital in 2020. (1) A Non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. 20 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisOther items for the three and twelve months ended interest in ChinaAMC from 13.9% to 27.8%. To partially fund the December 31, 2021 consisted of additional consideration transaction, IGM Financial sold 15,200,662 common shares of receivable of $10.6 million ($7.7 million after-tax) related to Lifeco to Power for cash consideration of $553 million which the sale of the Company’s equity interest in Personal Capital reduced the Company’s equity interest in Lifeco from 4% to Corporation (Personal Capital) in 2020. 2.4%. The remaining $597 million of consideration was funded Shareholders’ equity was $6.3 billion at December 31, 2022, compared to $6.5 billion at December 31, 2021. Adjusted ROE (a non-IFRS ratio – see Non-IFRS Financial Measures and from the Company’s existing financial resources including $22 million in dividends received after March 31, 2022 with respect to the Lifeco shares that were sold. Other Financial Measures) for the year ended December 31, Benefits of the ChinaAMC acquisition include: 2022 was 14.0% compared with 16.4% for the comparative period in 2021. Adjusted ROE excluding the impact of fair value through other comprehensive income investments (a non-IFRS ratio – see Non-IFRS Financial Measures and Other Financial Measures) for the year ended December 31, 2022 was 15.2% compared with 19.0% in 2021. The quarterly dividend per common share was 56.25 cents in 2022, unchanged from the end of 2021. China Asset Management Co., Ltd. (ChinaAMC) On January 12, 2023, the Company closed the previously announced transaction to acquire Power Corporation of Canada’s (Power) 13.9% interest in ChinaAMC for cash consideration of $1.15 billion, increasing the Company’s equity • Enhancing participation in the rapidly growing Chinese asset management industry, through a meaningful ownership position in one of the leading asset managers in China. • Reinforcing relationships and business opportunities between Mackenzie and ChinaAMC as Mackenzie builds global, fully diversified and differentiated solutions for its clients and strengthens distribution opportunities in China. • Simplifying the IGM Financial and Power organization structure by consolidating the ChinaAMC ownership position at Mackenzie. Market Overview Following an extended period of strong financial market returns that began during the second quarter of 2020, negative Table 1: Reconciliation of Non-IFRS Financial Measures ($ millions except EPS) Adjusted net earnings available to common shareholders(1) Gain on sale of Personal Capital, net of tax Net earnings available to common shareholders Adjusted earnings per share(1) Gain on sale of Personal Capital, net of tax Earnings per share(2) Three months ended Twelve months ended 2022 Dec. 31 2022 Sep. 30 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 $ $ $ $ 224.7 – 224.7 0.94 – 0.94 $ $ $ $ 216.1 – 216.1 0.91 – 0.91 $ $ $ $ 260.8 7.7 268.5 1.08 0.03 1.11 $ $ $ $ 867.2 – 867.2 3.63 – 3.63 $ $ $ $ 971.2 7.7 978.9 4.05 0.03 4.08 Average outstanding shares – Diluted (thousands) 237,958 237,808 241,443 238,996 240,019 EBITDA before sales commissions(1) Sales–based commissions paid EBITDA after sales commissions(1) Sales–based commissions paid subject to amortization Amortization of capitalized sales commissions Amortization of capital, intangible and other assets Adjusted earnings before interest and income taxes(1) Interest expense(3) Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) Gain on sale of Personal Capital, net of tax Net earnings $ 366.1 $ 356.0 $ 411.8 $ 1,425.6 $ 1,547.0 (22.2) 343.9 22.2 (20.9) (26.2) 319.0 28.7 290.3 63.3 227.0 – (25.6) 330.4 25.6 (20.1) (26.4) 309.5 28.6 280.9 63.9 217.0 – (42.9) 368.9 39.3 (16.2) (25.4) 366.6 28.6 338.0 76.5 261.5 7.7 (130.8) (170.5) 1,294.8 1,376.5 123.5 (77.6) (104.0) 1,236.7 113.8 1,122.9 250.4 872.5 – 151.0 (56.7) (99.8) 1,371.0 113.9 1,257.1 283.9 973.2 7.7 $ 227.0 $ 217.0 $ 269.2 $ 872.5 $ 980.9 (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. (2) Diluted earnings per share. (3) Interest expense includes interest on long-term debt and leases. 21 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual Reportreturns during 2022 were reflective of the current volatility in services are provided to a suite of investment funds global markets: • The S&P TSX Composite total return index increased by 6.0% in the fourth quarter of 2022 and decreased by 5.8% for the year. that are distributed through third party dealers and financial advisors, and through institutional advisory mandates to financial institutions, pensions and other institutional investors. • U.S. equity markets, as measured by the S&P 500 total return index, increased by 7.6% in the fourth quarter of 2022 and • Strategic Investments and Other – primarily represents the key strategic investments made by the Company, including decreased by 18.1% for the year. • European equity markets, as measured by the MSCI Europe net total return index, increased by 9.6% in the fourth quarter of 2022 and decreased by 9.5% for the year. • Asian equity markets, as measured by the MSCI AC Asia Pacific net total return index, increased by 12.5% in the fourth quarter of 2022 and decreased by 17.2% for the year. • The FTSE TMX Canada Universe Bond total return index increased by 0.1% in the fourth quarter of 2022 and decreased by 11.7% for the year. • Our clients experienced an average investment return of 5.4% in the fourth quarter of 2022 and -9.9% for the year. IGM Financial’s assets under management and advisement decreased by 10.0% from $277.1 billion at December 31, 2021 to $249.4 billion at December 31, 2022. See Table 6 for the breakdown of IGM Financial’s assets under management and advisement. Reportable Segments China Asset Management Co., Ltd., Great-West Lifeco Inc., Northleaf Capital Group Ltd., Wealthsimple Financial Corp., and Portage Ventures LPs, as well as unallocated capital. Investments are classified in this segment (as opposed to the Wealth Management or Asset Management segment) when warranted due to different market segments, growth profiles or other unique characteristics. Assets Under Management and Advisement (AUM&A) represents the consolidated AUM and AUA of IGM Financial. In the Wealth Management segment, AUM is a component part of AUA. All instances where the asset management segment is providing investment management services or distributing its products through the Wealth Management segment are eliminated in our reporting such that there is no double- counting of the same client savings held at IGM Financial’s operating companies. Assets Under Advisement (AUA) are the key driver of the Wealth Management segment. AUA are savings and investment products held within client accounts of our Wealth Management segment operating companies. The Company’s reportable segments are Wealth Management, Asset Management and Strategic Investments & Other and reflect the Company’s internal financial reporting and performance measurement (Tables 2, 3 and 4): Assets Under Management (AUM) are the key driver of the Asset Management segment. AUM are a secondary driver of revenues and expenses within the Wealth Management segment in relation to its investment management activities. • Wealth Management – reflects the activities of operating AUM are client assets where we provide investment companies that are principally focused on providing financial management services, and include investment funds where planning and related services to Canadian households. This segment includes the activities of IG Wealth Management and Investment Planning Counsel. These firms are retail distribution organizations that serve Canadian households through their securities dealers, mutual fund dealers and other subsidiaries licensed to distribute financial products and services. A majority of the revenues of this segment are derived from providing financial advice and distributing financial products and services to Canadian households. This segment also includes the investment management activities of these organizations, including mutual fund management and discretionary portfolio management services. • Asset Management – reflects the activities of operating companies primarily focused on providing investment management services, and represents the operations of Mackenzie Investments. Investment management we are the fund manager, investment advisory mandates to institutions, and other client accounts where we have discretionary portfolio management responsibilities. Financial Presentation The financial presentation includes revenues and expenses to align with the key drivers of business activity and to reflect our emphasis on business growth and operational efficiency. The categories are as follows: • Wealth management revenue – revenues earned by the Wealth Management segment for providing financial planning, investment advisory and related financial services. Revenues include financial advisory fees, investment management and related administration fees, distribution revenue associated with insurance and banking products and services, and revenue relating to mortgage lending activities. 22 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisTable 2: Consolidated Operating Results by Segment – Q4 2022 vs. Q4 2021 Three months ended ($ millions) Revenues Wealth Management Asset Management Strategic Investments & Other Intersegment Eliminations 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 Total 2021 Dec. 31 Wealth management $ 610.8 $ 672.5 $ – $ – $ – – – 2.6 – – – – 1.4 – 260.5 296.8 (76.9) 183.6 (91.7) 205.1 5.6 – 1.3 – 613.4 673.9 189.2 206.4 276.9 121.3 44.6 442.8 170.6 22.8 147.8 39.7 108.1 0.2 284.8 115.9 49.5 450.2 223.7 22.7 201.0 53.8 147.2 – 21.3 90.9 1.0 24.1 88.3 1.6 113.2 114.0 76.0 5.9 70.1 18.8 51.3 – 92.4 5.9 86.5 21.2 65.3 – Asset management Dealer compensation expense Net asset management Net investment income and other Proportionate share of associates’ earnings Expenses Advisory and business development Operations and support Sub-advisory Adjusted earnings before interest and taxes(1) Interest expense(2) Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) Non-controlling interest Adjusted net earnings available to common shareholders(1) Other items(1), net of tax Gain on sale of Personal Capital Net earnings available to common shareholders $ – – – – 7.4 65.4 72.8 – 0.4 – 0.4 72.4 – 72.4 4.8 67.6 2.1 – – – – 1.1 50.7 51.8 – 1.3 – 1.3 50.5 – 50.5 1.5 49.0 0.7 $ (4.6) $ (5.0) $ 606.2 $ 667.5 (27.3) (30.0) 233.2 266.8 4.5 (22.8) 5.0 (25.0) (72.4) 160.8 (86.7) 180.1 – – – – (27.4) (30.0) – (0.1) (27.3) (27.4) – – (30.0) (30.0) – – – – – – – $ – – – – – – – 15.6 3.8 65.4 848.0 298.2 212.5 18.3 529.0 319.0 28.7 290.3 63.3 227.0 2.3 50.7 902.1 308.9 205.5 21.1 535.5 366.6 28.6 338.0 76.5 261.5 0.7 224.7 260.8 – 7.7 $ 224.7 $ 268.5 $ 107.9 $ 147.2 $ 51.3 $ 65.3 $ 65.5 $ 48.3 $ (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. (2) Interest expense includes interest on long-term debt and leases. • Asset management revenue – revenues earned by the Asset Management segment related to investment management planning specialists; expenses associated with facilities, technology and training relating to our advisors and advisory and administrative services. • Dealer compensation – asset-based and sales-based compensation paid to dealers by the Asset Management segment. • Advisory and business development expenses – expenses incurred on activities directly associated with providing financial planning services to clients of the Wealth Management segment and wholesale distribution activities performed by the Asset Management segment. Expenses include compensation, recognition and other support provided to our advisors, field management, product & specialists; other business development activities including direct marketing and advertising. A significant component of these expenses varies directly with levels of assets under management or advisement, business development measures including sales and client acquisition, and the number of advisor and client relationships. • Operations and support expenses – expenses associated with business operations, including technology and business processes; in-house investment management and product shelf management; corporate management and support 23 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 3: Consolidated Operating Results by Segment – Twelve Months Ended Wealth Management Asset Management Strategic Investments & Other Intersegment Eliminations Twelve months ended ($ millions) 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 Total 2021 Dec. 31 Revenues Wealth management $ 2,484.0 $ 2,572.9 $ – $ – $ – – – 4.1 – – – – 3.6 – 1,077.7 1,126.1 (327.6) (355.3) 750.1 770.8 5.7 – 5.8 – 2,488.1 2,576.5 755.8 776.6 1,126.1 1,089.3 476.9 181.9 466.1 189.7 1,784.9 1,745.1 703.2 90.3 612.9 164.2 448.7 0.2 831.4 90.3 741.1 198.0 543.1 – 79.4 358.4 4.9 442.7 313.1 23.5 289.6 76.4 213.2 – 88.7 335.6 6.9 431.2 345.4 23.6 321.8 81.0 240.8 – Asset management Dealer compensation expense Net asset management Net investment income and other Proportionate share of associates’ earnings Expenses Advisory and business development Operations and support Sub-advisory Adjusted earnings before interest and taxes(1) Interest expense(2) Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) Non-controlling interest Adjusted net earnings available to common shareholders(1) Other items(1), net of tax Gain on sale of Personal Capital Net earnings available to common shareholders $ – – – – – – – – $ (18.7) $ (19.3) $ 2,465.3 $ 2,553.6 (111.7) (114.6) 966.0 1,011.5 18.7 (93.0) 19.3 (95.3) (308.9) (336.0) 657.1 675.5 14.6 2.7 (0.3) (0.2) 24.1 11.9 210.7 225.3 196.4 199.1 – – 210.7 196.4 (112.0) (114.8) 3,357.2 3,437.4 – 4.9 – 4.9 – 4.9 – 4.9 – (0.3) (111.7) (112.0) – (0.2) (114.6) 1,205.5 1,178.0 839.9 75.1 806.4 82.0 (114.8) 2,120.5 2,066.4 220.4 194.2 – – 220.4 9.6 210.8 5.1 194.2 4.9 189.3 2.0 – – – 0.2 (0.2) – – – – – – – – 1,236.7 113.8 1,371.0 113.9 1,122.9 1,257.1 250.4 872.5 5.3 283.9 973.2 2.0 867.2 971.2 – 7.7 $ 867.2 $ 978.9 $ 448.5 $ 543.1 $ 213.2 $ 240.8 $ 205.7 $ 187.3 $ (0.2) $ (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. (2) Interest expense includes interest on long-term debt and leases. functions. These expenses primarily reflect compensation, Income taxes are reported in each segment. IGM Financial technology and other service provider expenses. consolidated changes in the effective tax rates are detailed • Sub-advisory expenses – reflects fees relating to investment management services provided by third party or related party investment management organizations. These fees typically are variable with the level of assets under management. These fees include investment advisory services performed for the Wealth Management segment by the Asset Management segment. Interest expense represents interest expense on long-term debt and leases. Interest expense is allocated to each segment based on management’s assessment of: i) capacity to service the debt, and ii) where the debt is being serviced. 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 adjusted net earnings is reflected in Other, which also includes, but is not limited to, the effect of lower effective income tax rates on foreign operations. 24 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisTable 4: Consolidated Operating Results by Segment – Q4 2022 vs. Q3 2022 Three months ended ($ millions) Revenues Wealth Management Asset Management Strategic Investments & Other Intersegment Eliminations 2022 Dec. 31 2022 Sep. 30 2022 Dec. 31 2022 Sep. 30 2022 Dec. 31 2022 Sep. 30 2022 Dec. 31 2022 Sep. 30 2022 Dec. 31 Total 2022 Sep. 30 Wealth management $ 610.8 $ 611.3 $ – $ – $ – – – 2.6 – – – – 2.8 – 260.5 262.7 (76.9) 183.6 (77.5) 185.2 5.6 – 3.8 – 613.4 614.1 189.2 189.0 276.9 121.3 44.6 442.8 170.6 22.8 147.8 39.7 108.1 0.2 278.0 118.5 44.0 440.5 173.6 22.7 150.9 40.5 110.4 – 21.3 90.9 1.0 16.4 86.0 1.2 113.2 103.6 76.0 5.9 70.1 18.8 51.3 – 85.4 5.9 79.5 21.0 58.5 – Asset management Dealer compensation expense Net asset management Net investment income and other Proportionate share of associates’ earnings Expenses Advisory and business development Operations and support Sub-advisory Adjusted earnings before interest and taxes(1) Interest expense(2) Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) Non-controlling interest Adjusted net earnings available to common shareholders(1) Other items(1), net of tax Net earnings available to common shareholders – – – – 7.4 65.4 72.8 – 0.4 – 0.4 72.4 – 72.4 4.8 67.6 2.1 $ – – – – 4.7 46.9 51.6 – 1.1 – 1.1 50.5 – 50.5 2.4 48.1 0.9 $ (4.6) $ (4.5) $ 606.2 $ 606.8 (27.3) (27.3) 233.2 235.4 4.5 (22.8) 4.6 (22.7) (72.4) 160.8 (72.9) 162.5 (0.2) 15.6 11.1 – – – (27.4) (27.4) – (0.1) (27.3) (27.4) – (0.1) (27.3) (27.4) – – – – – – – $ – – – – – – – 65.4 848.0 298.2 212.5 18.3 529.0 319.0 28.7 290.3 63.3 227.0 2.3 46.9 827.3 294.4 205.5 17.9 517.8 309.5 28.6 280.9 63.9 217.0 0.9 224.7 216.1 – – $ 224.7 $ 216.1 $ 107.9 $ 110.4 $ 51.3 $ 58.5 $ 65.5 $ 47.2 $ (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. (2) Interest expense includes interest on long-term debt and leases. Table 5: Effective Income Tax Rate Income taxes at Canadian federal and provincial statutory rates Effect of: Three months ended Twelve months ended 2022 Dec. 31 2022 Sep. 30 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 26.61 % 26.62 % 26.64 % 26.62 % 26.63 % Proportionate share of associates’ earnings Other (5.51) 0.70 (3.93) 0.05 (3.39) (0.48) (4.50) 0.18 (3.65) (0.36) Effective income tax rate – net earnings 21.80 % 22.74 % 22.77 % 22.30 % 22.62 % 25 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportOther items, as reflected in Tables 2 and 3, include the after- quarter of 2021 included a gain on sale of Personal Capital of tax impact of any item that management considers to be of $10.6 million ($7.7 million after-tax) resulting from additional a non-recurring nature or that could make the period-over- consideration receivable related to the sale of the Company’s period comparison of results from operations less meaningful equity interest in Personal Capital in 2020. There were no Other and are not allocated to segments. Other items in the fourth items in the periods under review as reflected in Tables 2, 3 and 4. Table 6: Assets Under Management and Advisement ($ millions) Three months ended Gross flows Mutual fund gross sales(3) Dealer gross inflows Net flows Mutual fund net sales(3) ETF net creations Investment fund net sales Institutional SMA net sales(4) Mackenzie net sales through Wealth Management IGM product net sales Other dealer net flows Total net flows Twelve months ended Gross flows Mutual fund gross sales(3) Dealer gross inflows Net flows Mutual fund net sales(3)(5) ETF net creations(6) Investment fund net sales Institutional SMA net sales(4) Mackenzie net sales through Wealth Management IGM product net sales Other dealer net flows Total net flows Wealth Management Asset Management(1) IG Wealth Management Investment Planning Counsel Mackenzie Investments Intercompany Eliminations(2) Consolidated 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 $ 2,125 $ 2,959 $ 138 $ 174 $ 1,559 $ 2,592 $ – $ – $ 3,822 $ 5,725 3,031 3,437 1,157 1,509 – – (718) – (718) – (18) (736) 1,165 429 457 – 457 – 36 493 492 985 (148) – (148) – (33) (181) 226 45 (129) – (129) – 20 (109) 232 123 (966) 134 (832) (135) – (967) – (967) 512 245 757 (576) – 181 – 181 – – – – – 51 51 2 53 – – – – – (56) (56) 1 (55) 4,188 4,946 (1,832) 134 (1,698) (135) – (1,833) 1,393 (440) 840 245 1,085 (576) – 509 725 1,234 $ 10,587 $ 11,845 $ 621 $ 774 $ 7,496 $ 12,022 $ – $ – $ 18,704 $ 24,641 12,872 13,434 4,424 5,366 – – 43 – 43 – 1,813 (322) (288) (1,736) – – – 705 1,813 (322) (288) (1,031) 3,908 1,532 5,440 – – – (834) (306) (32) 11 2,679 2,690 431 2,244 1,440 3,684 (39) (361) 616 255 180 – – (108) (1,865) 5,134 596 488 – – (1,865) 5,134 – – – – – 71 71 6 77 – – – – – (611) (611) 6 (605) 17,296 18,800 (2,015) 705 (1,310) (834) – (2,144) 3,301 1,157 5,433 1,532 6,965 (306) – 6,659 2,042 8,701 (1) Asset Management flows activity excludes sub-advisory to Canada Life and the Wealth Management segment. (2) Consolidated results eliminate double counting where business is reflected within multiple segments. (3) IG Wealth Management and Investment Planning Counsel AUM and net sales include separately managed accounts. (4) Sub-advisory, institutional and other accounts: 2022 Q1 – an institutional investor redeemed $291 million within products Mackenzie sub-advises. 2021 Q2 – Mackenzie was awarded $680 million of sub-advisory wins. 2021 Q4 – An institutional client re-assigned sub-advisory responsibilities on mandate advised by Mackenzie totalling $667 million. (5) During the twelve month period in 2021, institutional clients, which include Mackenzie mutual funds within their investment offerings, made fund allocation changes which resulted in redemptions and net redemptions of $361 million. (6) ETFs – During the twelve month period of 2022, Wealthsimple made allocation changes which resulted in $675 million in purchases in Mackenzie ETFs. 26 2022 IGM Financial Inc. Annual Report | Management's Discussion and Analysis Total Assets Under Management and Advisement Assets under management and advisement were $249.4 billion at December 31, 2022 compared to $277.1 billion at December 31, 2021, a decrease of 10.0%, as detailed in Table 6. Total assets under management were $217.0 billion at December 31, 2022 compared to $245.3 billion at December 31, 2021, a decrease of 11.5%. $7.0 billion in 2021. Net outflows in the fourth quarter of 2022 were $440 million compared to net inflows of $1.2 billion in the fourth quarter of 2021, as detailed in Table 6. Fourth quarter investment fund net redemptions were $1.7 billion compared to net sales of $1.1 billion in 2021. Net flows and net sales are based on assets under management and advisement excluding sub-advisory assets to Canada Life and to the Wealth Management segment. The Company also benefits from the underlying assets under Net inflows for the twelve months ended December 31, 2022 management of the Company’s investments in associates, were $1.2 billion compared to $8.7 billion in 2021, as detailed in including ChinaAMC and Northleaf. This AUM is not currently Table 6. Investment fund net redemptions for the twelve month reported as the Company’s AUM&A. period were $1.3 billion in 2022 compared to net sales of Table 6: Assets Under Management and Advisement (continued) Wealth Management Asset Management IG Wealth Management Investment Planning Counsel Mackenzie Investments Intercompany Eliminations(1) Consolidated 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 ($ millions) Assets under Management and Advisement Wealth Management(2) AUM $ 99,275 $ 110,541 $ 4,622 $ 5,629 $ – $ – $103,897 $ 116,170 Mackenzie assets sold through Wealth Management Other AUA AUA Asset Management Mutual funds ETFs Investment funds Institutional SMA Sub-advisory to Canada Life Total Institutional SMA Total ex sub-advisory to Wealth Management Sub-advisory to Wealth Management Total AUM ETFs Distributed to third parties Held within IGM managed products Total ETFs Consolidated AUM Mackenzie assets sold through Wealth Management Other AUA AUM&A 850 957 3,195 3,640 10,691 8,059 21,730 23,808 110,816 119,557 29,547 33,077 – (7) (7) – (11) (11) 4,045 4,597 32,414 31,856 140,356 152,623 $ 54,434 $ 62,969 5,219 5,393 59,653 68,362 6,422 7,948 47,023 52,805 53,445 60,753 113,098 129,115 73,514 81,228 186,612 210,343 54,434 62,969 5,219 5,393 59,653 68,362 6,422 7,948 47,023 52,805 53,445 60,753 113,098 129,115 73,514 81,228 186,612 210,343 5,219 7,176 5,393 7,281 (7,176) (7,281) – – 5,219 5,393 12,395 12,674 (7,176) (7,281) 5,219 5,393 99,275 110,541 4,622 5,629 186,612 210,343 (73,514) (81,228) 216,995 245,285 850 957 3,195 3,640 10,691 8,059 21,730 23,808 – – – – (4,045) (4,597) – – (7) (11) 32,414 31,856 110,816 119,557 29,547 33,077 186,612 210,343 (77,566) (85,836) 249,409 277,141 (1) Consolidated results eliminate double counting where business is reflected within multiple segments. (2) IG Wealth Management and Investment Planning Counsel AUM include separately managed accounts. 27 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual Report At December 31, 2022, ChinaAMC’s AUM was RMB¥ $277.1 billion in 2021 and decreased to $249.4 billion in 2022. 1,721.6 billion ($337.6 billion) compared to RMB¥ 1,661.6 billion Changes were driven largely by changes in financial markets ($330.5 billion) at December 31, 2021, an increase of 3.6% during the periods. Average total assets under management (CAD$ 2.2%). IGM Financial held a 13.9% interest in ChinaAMC and advisement for the year ended December 31, 2022 were on December 31, 2022, which was increased to 27.8% on $255.2 billion compared to $259.7 billion in 2021. The impact on January 12, 2023. At December 31, 2022, Northleaf’s AUM was $24.1 billion compared to $19.5 billion at December 31, 2021, an increase of 23.6%. IGM Financial holds a 56% economic interest in Northleaf. Changes in assets under management for the Wealth Management and Asset Management segments are discussed further in each of their respective Review of the Business sections in the MD&A. earnings and revenues of changes in average total assets under management and advisement and other pertinent items are discussed in the Review of Segment Operating Results sections of the MD&A for both IG Wealth Management and Mackenzie. Net earnings in future periods will largely be determined by the level of assets under management and advisement which will continue to be influenced by global market conditions. Dividends per Common Share – Annual dividends per common share were $2.25 in 2022, unchanged from 2021 and 2020. Selected Annual Information Summary of Quarterly results Financial information for the three most recently completed The Summary of Quarterly Results in Table 8 includes the years is included in Table 7. Net Earnings and Earnings per Share – Except as noted in the reconciliation in Table 7, variations in net earnings and total eight most recent quarters and the reconciliation of non-IFRS financial measures to net earnings in accordance with IFRS. Changes in average daily investment fund assets under revenues result primarily from changes in average assets under management over the eight most recent quarters, as shown in management and advisement. Assets under management Table 8, largely reflect the impact of changes in domestic and and advisement were $240.0 billion in 2020, increased to foreign markets and net sales of the Company. 28 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisTable 7: Selected Annual Information Consolidated statements of earnings ($ millions) Revenues Wealth management Net asset management Net investment income and other Proportionate share of associates’ earnings Expenses Gain on sale of Personal Capital Gain on sale of Quadrus Group of Funds net of acquisition costs Proportionate share of associate’s adjustments Restructuring and other Earnings before income taxes Income taxes Net earnings Non-controlling interest Net earnings available to common shareholders Reconciliation of Non-IFRS financial measures ($ millions) Adjusted net earnings available to common shareholders(1) Other items: Gain on sale of Personal Capital, net of tax Gain on sale of Quadrus Group of Funds net of acquisition costs, net of tax Proportionate share of associate’s adjustments Restructuring and other, net of tax Net earnings available to common shareholders Earnings per share ($) Adjusted earnings per share(1) – Basic – Diluted Earnings per share – Basic – Diluted Dividends per share ($) Common Average assets under management and advisement ($ billions) Investment fund assets under management Total assets under management Total assets under management and advisement Ending assets under management and advisement ($ billions) Investment fund assets under management Total assets under management Total assets under management and advisement Total corporate assets ($ millions) Total long-term debt ($ millions) Outstanding common shares (thousands) Average outstanding shares – Diluted (thousands) 2022 2021 2020 $ 2,465.3 $ 2,553.6 $ 2,259.6 657.1 24.1 210.7 3,357.2 2,234.3 1,122.9 – – – – 675.5 11.9 196.4 3,437.4 2,180.3 1,257.1 10.6 – – – 1,122.9 1,267.7 $ $ 250.4 872.5 (5.3) 867.2 867.2 – – – – $ $ 286.8 980.9 (2.0) 978.9 971.2 7.7 – – – 867.2 $ 978.9 $ $ $ $ $ $ $ 3.64 3.63 3.64 3.63 2.25 168.9 224.6 255.2 163.6 217.0 249.4 18,873 2,100 237,668 238,996 $ $ $ $ $ $ 4.07 4.05 4.10 4.08 2.25 173.4 231.4 259.7 184.5 245.3 277.1 17,661 2,100 239,679 240,019 529.8 11.0 147.0 2,947.4 1,973.4 974.0 37.2 25.2 3.4 (74.5) 965.3 200.7 764.6 (0.2) 764.4 762.9 31.4 21.4 3.4 (54.7) 764.4 3.20 3.20 3.21 3.21 2.25 161.7 168.5 191.2 159.5 214.0 240.0 16,062 2,100 238,308 238,307 $ $ $ $ $ $ $ $ $ (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. 29 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 8: Summary of Quarterly Results Consolidated statements of earnings ($ millions) Revenues Wealth management Asset management Dealer compensation expense Net asset management Net investment income and other Proportionate share of associates’ earnings Expenses Advisory and business development Operations and support Sub-advisory Interest(1) Earnings before undernoted Gain on sale of Personal Capital Earnings before income taxes Income taxes Net earnings Non-controlling interest 2022 Q4 2022 Q3 2022 Q2 2022 Q1 2021 Q4 2021 Q3 2021 Q2 2021 Q1 $ 606.2 $ 606.8 $ 611.1 $ 641.2 $ 667.5 $ 655.0 $ 627.6 $ 603.5 233.2 (72.4) 160.8 15.6 65.4 235.4 (72.9) 162.5 11.1 46.9 241.6 (77.4) 164.2 (0.6) 50.0 255.8 (86.2) 169.6 (2.0) 48.4 266.8 (86.7) 180.1 3.8 50.7 263.4 (85.9) 177.5 2.5 55.9 248.3 (82.7) 165.6 2.5 48.2 233.0 (80.7) 152.3 3.1 41.6 848.0 827.3 824.7 857.2 902.1 890.9 843.9 800.5 298.2 212.5 18.3 28.7 557.7 290.3 – 290.3 63.3 227.0 2.3 294.4 205.5 17.9 28.6 546.4 280.9 – 280.9 63.9 217.0 0.9 303.8 206.4 18.3 28.4 556.9 267.8 – 267.8 59.4 208.4 1.3 309.1 215.5 20.6 28.1 573.3 283.9 – 283.9 63.8 220.1 0.8 308.9 205.5 21.1 28.6 564.1 338.0 10.6 348.6 79.4 269.2 0.7 294.0 197.6 20.7 28.7 541.0 349.9 – 349.9 78.4 271.5 0.7 291.1 196.8 20.4 28.5 536.8 307.1 – 307.1 69.3 237.8 0.4 284.0 206.5 19.8 28.1 538.4 262.1 – 262.1 59.7 202.4 0.2 Net earnings available to common shareholders $ 224.7 $ 216.1 $ 207.1 $ 219.3 $ 268.5 $ 270.8 $ 237.4 $ 202.2 Reconciliation of Non-IFRS financial measures ($ millions) Adjusted net earnings available to common shareholders(2) Other items: $ 224.7 $ 216.1 $ 207.1 $ 219.3 $ 260.8 $ 270.8 $ 237.4 $ 202.2 Gain on sale of Personal Capital, net of tax ($2.9 million) – – – – 7.7 – – – Net earnings available to common shareholders $ 224.7 $ 216.1 $ 207.1 $ 219.3 $ 268.5 $ 270.8 $ 237.4 $ 202.2 Earnings per Share ($) Adjusted earnings per share(2) – Basic – Diluted Earnings per share – Basic – Diluted $ 0.95 $ 0.91 $ 0.87 $ 0.91 $ 1.09 $ 1.13 $ 0.99 $ 0.85 0.94 0.91 0.87 0.91 1.08 1.13 0.99 0.85 0.95 0.94 0.91 0.91 0.87 0.87 0.91 0.91 1.12 1.11 1.13 1.13 0.99 0.99 0.85 0.85 Average outstanding shares – Diluted (thousands) 237,958 237,808 239,242 241,251 241,443 240,575 239,821 238,474 Average assets under management and advisement ($ billions) Investment fund assets under management $ 163.3 $ 164.3 $ 169.3 $ 179.0 $ 181.9 $ 178.6 $ 170.2 $ 162.7 Total assets under management Assets under management and advisement 216.5 247.8 217.3 247.2 225.2 255.3 238.4 269.5 241.9 272.0 238.3 267.4 227.8 255.4 217.6 243.9 Ending assets under management and advisement ($ billions) Investment fund assets under management $ 163.6 $ 157.6 $ 160.2 $ 178.5 $ 184.5 $ 176.8 $ 174.4 $ 165.5 Total assets under management Assets under management and advisement 217.0 249.4 208.7 238.1 213.1 242.1 237.1 268.3 245.3 277.1 236.2 265.2 233.6 262.0 221.6 248.5 (1) Interest expense includes interest on long-term debt and leases. (2) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. 30 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisWealth Management The Wealth Management segment consists of both IG Wealth • Other financial planning revenues are fees related Management (IG) and Investment Planning Counsel, Inc. (IPC). to providing clients other financial products including Wealth Management revenue consists of: • Advisory fees are related to providing financial advice to clients including fees related to the distribution of products and depend largely on the level and composition of assets under advisement. • Product and program fees are related to the management of investment products and include management, administration and other related fees and depend largely on the level and composition of assets under management. mortgages, insurance and banking products. Sub-advisory fees are paid between segments and to third parties for investment management services provided to our investment products. Wealth Management is considered a client of the Asset Management segment and transfer pricing is based on values for similar sized asset management mandates. Debt and interest expense is allocated to each IGM Financial segment based on management’s assessment of: i) capacity to service the debt, and ii) where the debt is being serviced. Income taxes are also reported in each segment. Review of the Business IG Wealth Management, founded in 1926, is a leading wealth process that is typically complicated and costly. IG Wealth management company in Canada that focuses on providing Management has collaborated with industry leading investment comprehensive personal financial planning to Canadians. managers at Mackenzie and BlackRock Asset Management to Investment Planning Counsel, founded in 1996, is an independent distributor of financial products, services and advice in Canada, with 653 advisors. The Wealth Management segment provides a comprehensive planning approach, through IG Wealth Management and IPC advisors, by offering a broad range of financial products and services. deliver these suites of diversified investment solutions that will offer Canadians new and innovative ways to meet their financial goals. IG Wealth Management and Nesto Inc. (nesto) have entered into a strategic agreement to have nesto provide next generation white label mortgage services to IG Wealth Management clients across Canada through its Mortgage Cloud solution. The initiative is part of IG Wealth Management’s ongoing strategy to The review of the business in the Wealth Management section transform its business and follows the firm’s modernization of primarily relates to IG Wealth Management as it represents 98% its investment management and financial planning platforms. of adjusted net earnings available to common shareholders of the total segment. 2022 Developments nesto’s Mortgage Cloud solution will be integrated into IG Wealth Management’s mortgage solutions business. It will allow IG Wealth Management advisors to provide clients with an enhanced mortgage experience through: In April 2022, IG Wealth Management launched two new • an online application process suites of products, consisting of a total of eight funds. • quick turnaround times IG U.S. Taxpayer Portfolios (Portfolios) offer investors a comprehensive investment solution that help simplify tax reporting for Canadian residents who pay taxes in the U.S. The second suite, IG Mackenzie U.S. Dollar Funds (Funds), is designed for investors who are seeking to invest in U.S. dollar investments. The new Funds will provide clients with comprehensive diversification for their U.S. dollars and the new Portfolios have been designed to help simplify a tax reporting • live tracking and regular status updates • dynamic tools such as the ability to upload mortgage documents using a mobile device. IG Wealth Management and nesto will begin offering the newly integrated mortgage services on nesto Mortgage Cloud solution in 2023. 31 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportIG Wealth Management Financial Advice IG Wealth Management is one of the largest independent financial planning firms in Canada, with advisors in every community from coast to coast. We are driven by our mission to inspire financial confidence that can transform the lives of Our advisors focus on providing financial advice which is the value of all efforts that sit outside the investment portfolio construction. This includes the value that an advisor adds to a client relationship and comes from the creation and follow our clients and their families and we are deeply committed to through of a well-constructed financial plan. improving financial literacy in the communities where we work and live. Advisors Our exclusive network is comprised of 3,235 advisors. IG Wealth Management clients are more than one million individuals, families and business owners. Canadians hold $6.5 trillion in discretionary financial assets with financial institutions at December 31, 2021, based on the most recent report from Investor Economics, and we view these savings as IG Wealth Management’s addressable market. 77% of these savings are held by households with over $1 million, which are referred to as high net worth, and another 20% reside with households with between $100,000 and $1 million, which are referred to as mass affluent. These segments tend to have more complicated financial needs, and IG Wealth Management’s focus on providing comprehensive financial planning solutions positions it well to compete and grow in these segments. Strategy IG Wealth Management’s promise is to inspire financial confidence. IG Wealth has a client-centric strategy with a focus on high net worth (HNW) and mass affluent client segments, which we define as households with over $1 million and between $100 thousand and $1 million, respectively. IG Wealth Management has a national distribution network of more than 3,000 advisors in communities throughout Canada. Our advisory services are most suited to individuals with complicated financial needs. IG Wealth provides advice through two primary channels: • IG Wealth Management entrepreneurial advisors are focused on the high net worth and mass affluent segments of the market, which we define as households with over $1 million and between $100 thousand and $1 million, respectively. • IG Wealth Management has a National Service Centre focused on supporting approximately 240,000 clients with less complex requirements, while allowing our entrepreneurial advisor practices to focus on those clients with more complex needs. Our entrepreneurial advisor network creates a competitive advantage and drives client engagement with a focus on comprehensive financial planning and product solutions. Our advantage is further enabled by hiring top quality advisors, increasing proficiency, improving technology, implementing a client segmentation approach and enhancing a strong brand. Assets under advisement consists of the following: • Clients with household assets greater than $1 million (defined as “high net worth”) which totalled $37.7 billion at December 31, 2022, a decrease of 13.3% from one year ago, IG Wealth Management is committed to increasing the financial and represented 34% of total assets under advisement. confidence of all Canadians by leveraging our people, expertise • Clients with household assets between $100 thousand and resources because we believe it will help create stronger and $1 million (defined as “mass affluent”) which totalled communities and a better future for all. We believe that Canadians deserve a high standard of advice that takes into consideration all dimensions of their financial lives with financial plans tailored to meet and adapt to their needs. Our strategic mandate is to be Canada’s financial partner of choice. We achieve our strategic mandate by focusing on providing comprehensive financial advice and well-constructed investment solutions designed to deliver returns and risks that take into account each client’s needs and requirements. $63.6 billion at December 31, 2022, a decrease of 4.4% from one year ago, and represented 57% of total assets under advisement. • Clients with household assets less than $100 thousand (defined as “mass market”) which totalled $9.5 billion at December 31, 2022, a decrease of 0.6% from one year ago, and represented 9% of total assets under advisement. IG Wealth Management advisor practices are industry leaders in holding a credentialed financial planning designation. These designations are nationally recognized financial planning qualifications that require an individual to demonstrate financial planning competence through education, standardized examinations, continuing education requirements, and accountability to ethical standards. 32 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisThe following provides a breakdown of the IG Wealth of a client’s financial life. Clients are served by our mutual fund Management advisor network into its significant components licensed and securities licensed advisors and specialists. at December 31, 2022: • 1,741 advisor practices (1,761 at December 31, 2021), which Client Experiences reflect advisors with more than four years of experience. These practices may include associates as described below. The level and productivity of advisor practices is a key measurement of our business as they serve clientele representing approximately 96% of AUM. • 333 new advisors (380 at December 31, 2021), which are those advisors with less than four years of experience. IG Wealth Management distinguishes itself from our competition by offering comprehensive planning to our clients that synchronize every aspect of their financial life. IG Wealth Management serves approximately one million clients located in communities throughout Canada. A primary focus is on advising and attracting high net worth and mass affluent clients. • 1,161 associates and regional vice-presidents (1,137 at For the distinct needs of the high net worth market, we offer December 31, 2021). Associates are licensed team members IG Private Wealth Management which includes investment of advisor practices who provide financial planning services management, retirement, tax and estate planning services. and advice to the clientele served by the team. • IG Wealth Management had a total advisor network of 3,235 (3,278 at December 31, 2021). IG Wealth uses advisor productivity as a key performance measure in evaluating its advisor network. The productivity is measured based on gross inflows per advisor and is monitored for both advisor recruits with less than 4 years experience and advisor practices with greater than 4 years experience. • The advisor recruit’s gross inflows were $0.66 million per advisor in Q4 2022 compared to $0.60 million per advisor in the comparative period of 2021. • The advisory practice gross inflows were $1.49 million per practice compared to $1.69 million in the comparative period of 2021. Key initiatives that impact advisor productivity are: • Elimination of DSC in 2017 which removed competitive impediment. IG Living Plan™ allows clients to collaborate with an IG advisor through an enhanced digital experience to develop and track a financial plan which is unique to each client’s goals. IG Wealth Management has a full range of products that allow us to provide a tailored IG Living Plan that evolves over time. These products include: • Powerful financial solutions that include investment vehicles that match risk and investment performance to each client’s needs and requirements. • Insurance products that include a variety of policy types from the leading insurers in Canada. • Mortgage and banking solutions that are offered as part of a comprehensive financial plan. The Charitable Giving Program is a donor-advised giving program which enables Canadians to make donations and build an enduring charitable giving legacy with considerably less expense and complexity than setting up and administering • Tightened recruiting standards that increased the likelihood their own private foundation. of success while also enhancing our culture and brand. • National Service Centre that provides consistent service levels to clients with less complex needs and creates capacity for advisors. • Product and pricing enhancements with a focus on the high net worth and mass affluent segments. The IG Advisory Account is a fee-based account that improves client experience by offering the ability to simplify and consolidate selected investments into a single account while providing all our clients with a transparent advisory fee. IGAA accounts increase fee transparency and can hold most securities and investment products available in the marketplace • Continued technology enhancements such as the Advisor to individual investors. Desktop powered by Salesforce. • IG Living PlanTM and other client experience enhancements. Financial Solutions • Digital application to deliver tailored client investment proposals (powered by CapIntel). IG Wealth Management strives to achieve expected investment returns for the lowest possible risk through well-constructed We also support advisors and clients through our network of investment portfolios, and to create value for clients through product and planning specialists, who assist in the areas of active management. To do this, we select and engage advanced financial planning, mortgages and banking, insurance, high-quality sub-advisors so our clients have access to a diverse and securities. These specialists help to ensure that we are range of investment products and solutions. Each asset manager providing comprehensive financial planning across all elements is selected through a proven and rigorous process. We oversee all sub-advisors to ensure that their activities are consistent 33 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual Reportwith their investment philosophies and with the investment iProfile Active Allocation Private Pools, iProfile Alternatives objectives and strategies of the products they advise. Private Pool with mandates including long-short, global Our investment solutions leverage top global asset manager relationships including Mackenzie Investments and other world class investment firms such as Fidelity Investments Canada, T. Rowe Price, Sagard, Beutel Goodman Investment Counsel, PanAgora, PIMCO, Northleaf, BristolGate Capital Partners, Aristotle Capital Boston, Putnam Investments, Franklin Templeton Investments, Wellington Management, Rockefeller Asset Management, JP Morgan Asset Management, BlackRock, ClearBridge Investments, 1832 Asset Management, and ChinaAMC. We provide clients with an extensive suite of well-constructed and competitively priced financial solutions that incorporate public and private market investments as well as alternative investment strategies. We regularly enhance the scope and diversity of our investment offering with new funds and product changes that enable clients to achieve their goals. We believe that well-constructed managed solutions provide advisors with the best opportunity to focus on providing financial advice to their clients. We provide portfolio construction with investment solutions that include public markets, private markets and alternative strategies. Our investment solutions include: • A deep and broad selection of mutual funds, diversified by manager, asset category, investment style, geography, market capitalization and sector. macro and global equity hedge strategies, iProfile ETF Private Pool providing exposure through exchange traded funds (ETF) and iProfile Low Volatility Private Pool with Canadian, U.S., International and Emerging Market geographic coverage. • Segregated funds that provide for long-term investment growth potential combined with risk management, benefit guarantee features and estate planning efficiencies. • Separately managed accounts (discretionary dealer- managed accounts). We have incorporated investments in private assets with the introduction of a Private Credit Mandate in the iProfile Fixed Income Private Pool. The pool has committed to three Northleaf Capital Partners’ private credit investments that focus on loans to middle market companies in North America and Europe, as well as to investments managed by BlackRock, PIMCO and Sagard. We have also introduced Private Investment Mandates into both the iProfile Canadian Equity Private Pool and the iProfile U.S. Equity Private Pool. Both of these mandates intend to provide investors with enhanced diversification and long-term capital appreciation through exposure to investments in privately held companies. The iProfile Canadian Equity Private Pool has currently made a commitment to the Northleaf Growth Fund and the iProfile U.S. Equity Private Pool has made a commitment to the Northleaf Capital Opportunities Fund. In support of the global goal to reach net zero by 2050, IG Wealth Management is a founding Signatory to Responsible • Managed solutions that rebalance investments to ensure Investment Association’s Canadian Investor Statement that a chosen mix of investments and risk and return is on Climate Change. To support this initiative, IG Wealth maintained. These solutions include IG Core Portfolios, Management clients can invest in the IG Climate Action IG Managed Payout Portfolios, Investors Portfolios, Portfolios which is a suite of four diversified managed solutions. IG Climate Action Portfolios, IG U.S. Taxpayer Portfolios and IG Managed Risk Portfolios. • iProfile™ Portfolios – iProfile Portfolios are a suite of four managed solutions that provide comprehensive diversification and are designed to suit personal preferences for risk tolerance and investment goals. These portfolios provide exposure similar to the investments of the iProfile Private Pools. • iProfile™ Private Portfolios – iProfile Private Portfolios are model portfolios comprised of iProfile Private Pools, available for households with investments held at IG Wealth Management in excess of $250,000. iProfile Private Portfolios have been designed to deliver strong risk-adjusted returns by diversifying across asset classes, management styles and geographic regions. Recent enhancements include the launch of new discretionary model portfolios and six new iProfile Private Pools to support the new models: three IG Wealth Management monitors its investment performance by comparing to certain benchmarks. Morningstar† fund ranking service is one of the rankings monitored when determining fund performance. At December 31, 2022, 84.0% of IG Wealth Management mutual fund assets had a rating of three stars or better from Morningstar† fund ranking service and 55.4% had a rating of four or five stars. This compared to the Morningstar† universe of 84.0% for three stars or better and 53.3% for four and five star funds at December 31, 2022. Morningstar Ratings† are an objective, quantitative measure of a fund’s three, five and ten year risk-adjusted performance relative to comparable funds. 34 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisWealth Management Assets Under Management and Advisement IG Wealth Management Assets Under Management and Advisement Assets under management and advisement are key Assets under advisement (AUA) are a key performance performance indicators for the Wealth Management segment. indicator for IG Wealth Management. AUA represents savings Wealth Management’s assets under advisement were $140.4 billion at December 31, 2022, a decrease of 8.0% from December 31, 2021. The level of assets under advisement are influenced by three factors: client inflows, client outflows and investment returns. and investment products, including assets under management where we provide investment management services, that are held within our clients’ accounts. Advisory fees are charged based on an annual percentage of substantially all AUA, through the IG Advisory Account fee, and represent the majority of the fees earned from our clients. Our advisors’ Wealth Management’s assets under management were compensation is also based on AUA and net assets contributed $103.9 billion, a decrease of 10.6% from December 31, 2021. by our clients. The level of assets under management are influenced by sales, redemptions and investment returns. Assets under advisement were $110.8 billion at December 31, 2022, a decrease of 7.3% from December 31, 2021, and mutual Changes in Wealth Management assets under advisement and fund assets under management were $99.3 billion, a decrease assets under management for the periods under review are of 10.2%. reflected in Tables 9 and 10. Changes in IG Wealth Management assets under advisement and management for the periods under review are reflected in Tables 11 and 12. Table 9: Change in Assets Under Advisement – Wealth Management Three months ended ($ millions) Gross client inflows Gross client outflows Net flows Investment returns Net change in assets Beginning assets Ending assets under advisement IG Wealth Management Investment Planning Counsel Average assets under advisement IG Wealth Management Investment Planning Counsel Twelve months ended ($ millions) Gross client inflows Gross client outflows Net flows Investment returns Net change in assets Beginning assets Ending assets under advisement IG Wealth Management Investment Planning Counsel Average assets under advisement IG Wealth Management Investment Planning Counsel 2021 Dec. 31 2022 Sep. 30 Change 2021 Dec. 31 $ 2022 Dec. 31 4,188 3,712 476 6,571 7,047 $ 2022 Sep. 30 3,655 3,209 446 (1,296) (850) $ 4,946 3,837 1,109 6,052 7,161 133,309 134,159 145,462 14.6 % (15.3)% 15.7 6.7 N/M N/M (0.6) (3.3) (57.1) 8.6 (1.6) (8.4) $ 140,356 $ 133,309 $ 152,623 5.3 % (8.0)% 110,816 29,547 105,029 28,286 119,557 33,077 $ 139,155 $ 137,793 $ 149,702 109,638 29,524 108,549 29,251 117,379 32,334 2022 Dec. 31 5.5 4.5 1.0 % 1.0 0.9 2021 Dec. 31 $ 17,296 $ 18,800 14,345 2,951 (15,218) (12,267) 152,623 14,622 4,178 15,862 20,040 132,583 $ 140,356 $ 152,623 110,816 29,547 119,557 33,077 $ 141,530 $ 142,867 111,271 30,268 111,880 30,997 (7.3) (10.7) (7.0)% (6.6) (8.7) Change (8.0)% (1.9) (29.4) N/M N/M 15.1 (8.0)% (7.3) (10.7) (0.9)% (0.5) (2.4) 35 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 10: Change in Assets Under Management – Wealth Management Three months ended ($ millions) Sales Redemptions Net sales (redemptions) Investment returns Net change in assets Beginning assets Ending assets under management IG Wealth Management Investment Planning Counsel Daily average mutual fund assets IG Wealth Management Investment Planning Counsel Twelve months ended ($ millions) Sales Redemptions Net sales (redemptions) Investment returns Net change in assets Beginning assets Ending assets under management IG Wealth Management Investment Planning Counsel Daily average mutual fund assets IG Wealth Management Investment Planning Counsel 2021 Dec. 31 2022 Sep. 30 Change 2021 Dec. 31 $ 2022 Dec. 31 2,263 3,129 (866) 4,728 3,862 $ 2022 Sep. 30 2,097 2,541 (444) (759) (1,203) $ 3,133 2,805 328 3,788 4,116 100,035 101,238 112,054 7.9 % (27.8)% 23.1 (95.0) N/M N/M (1.2) 11.6 N/M 24.8 (6.2) (10.7) $ 103,897 $ 100,035 $ 116,170 3.9 % (10.6)% 99,275 4,622 95,460 4,575 110,541 5,629 4.0 1.0 (10.2) (17.9) $ 103,867 $ 103,874 $ 115,115 – % (9.8)% 99,208 4,659 99,128 4,746 109,521 5,594 2022 Dec. 31 0.1 (1.8) 2021 Dec. 31 (9.4) (16.7) Change $ 11,208 $ 12,619 (11.2)% 11,487 (279) (11,994) (12,273) 116,170 11,094 1,525 11,612 13,137 103,033 $ 103,897 $ 116,170 99,275 4,622 110,541 5,629 $ 106,768 $ 110,445 101,859 104,962 4,909 5,483 3.5 N/M N/M N/M 12.8 (10.6)% (10.2) (17.9) (3.3)% (3.0) (10.5) For the quarter ended December 31, 2022, gross client resulted in a decrease of $11.4 billion in assets under inflows of IG Wealth Management assets under advisement advisement compared to an increase of $12.6 billion in 2021. were $3.0 billion, a decrease of 11.8% from $3.4 billion in the comparable period in 2021. Gross client inflows in 2022 were the second highest fourth quarter results in IG Wealth Changes in mutual fund assets under management for the periods under review are reflected in Table 12. Management’s history. Net client inflows were $429 million, At December 31, 2022, $76.7 billion, or 77% of IG Wealth a decrease of 56.4% from net client inflows of $985 million Management’s mutual fund assets under management, were in the comparable period in 2021. During the fourth quarter, in products with unbundled fee structures, down 1.4% from investment returns resulted in an increase of $5.4 billion $77.8 billion at December 31, 2021 which represented 70% in assets under advisement compared to an increase of of assets under management. $4.6 billion in the fourth quarter of 2021. Gross client inflows of IG Wealth Management assets under advisement were $12.9 billion for the twelve months ended December 31, 2022, and represented a decrease of 4.2% from $13.4 billion in the comparable period in 2021. Gross client inflows in 2022 were the second highest annual results in IG Wealth Management’s history. Net client inflows were $2.7 billion in the twelve month period, a decrease of $1.0 billion from net client inflows of $3.7 billion in the comparable period in 2021. During 2022, investment returns Change in Assets Under Management and Advisement – 2022 vs. 2021 IG Wealth Management’s assets under advisement were $110.8 billion at December 31, 2022, a decrease of 7.3% from $119.6 billion at December 31, 2021. IG Wealth Management’s mutual fund assets under management were $99.3 billion at December 31, 2022, representing a decrease of 10.2% from $110.5 billion at December 31, 2021. Average daily mutual fund assets were $99.2 billion in the fourth quarter of 2022, 36 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisTable 11: Change in Assets Under Advisement – IG Wealth Management Three months ended ($ millions) Gross client inflows Gross client outflows Net flows Investment returns Net change in assets Beginning assets Ending assets Daily average assets under advisement Twelve months ended ($ millions) Gross client inflows Gross client outflows Net flows Investment returns Net change in assets Beginning assets Ending assets Average assets under advisement Table 12: Change in Assets Under Management – IG Wealth Management $ $ $ $ $ Three months ended ($ millions) Sales Redemptions Net sales (redemptions) Investment returns Net change in assets Beginning assets Ending assets Daily average assets under management Managed asset net sales Investment fund net sales Mackenzie net sales through Wealth Management Twelve months ended ($ millions) Sales Redemptions Net sales (redemptions) Investment returns Net change in assets Beginning assets Ending assets Daily average assets under management Managed asset net sales Investment fund net sales Mackenzie net sales through Wealth Management 2021 Dec. 31 2022 Sep. 30 Change 2021 Dec. 31 9.3 % (11.8)% $ 2022 Dec. 31 3,031 2,602 429 5,358 5,787 $ 2022 Sep. 30 2,773 2,367 406 (851) (445) $ 3,437 2,452 985 4,614 5,599 105,029 105,474 113,958 $ 110,816 $ 105,029 $ 119,557 $ 109,638 $ 108,549 $ 117,379 9.9 5.7 N/M N/M (0.4) 5.5 % 1.0 % 6.1 (56.4) 16.1 3.4 (7.8) (7.3)% (6.6)% Change (4.2)% 4.4 (27.0) N/M N/M 15.8 (7.3)% (0.5)% Change 2021 Dec. 31 2022 Dec. 31 2021 Dec. 31 $ 12,872 $ 13,434 10,182 2,690 (11,431) (8,741) 9,750 3,684 12,600 16,284 119,557 103,273 $ 110,816 $ 119,557 $ 111,271 $ 111,880 2021 Dec. 31 2022 Sep. 30 2022 Dec. 31 2,125 2,843 (718) 4,533 3,815 95,460 $ 2022 Sep. 30 1,970 2,374 (404) (739) (1,143) 96,603 $ 2,959 2,502 457 3,533 3,990 106,551 99,275 $ 95,460 $ 110,541 99,208 $ 99,128 $ 109,521 (718) (18) (736) $ $ (404) (13) (417) $ $ 457 36 493 7.9 % (28.2)% 19.8 (77.7) N/M N/M (1.2) 4.0 % 0.1 % (77.7)% (38.5) (76.5)% 13.6 N/M 28.3 (4.4) (10.4) (10.2)% (9.4)% N/M N/M N/M 2022 Dec. 31 2021 Dec. 31 Change $ 10,587 $ 11,845 (10.6)% 10,544 43 (11,309) (11,266) 110,541 10,032 1,813 11,015 12,828 97,713 $ 99,275 $ 110,541 $ 101,859 $ 104,962 $ $ 43 (32) 11 $ $ 1,813 431 2,244 5.1 (97.6) N/M N/M 13.1 (10.2)% (3.0)% (97.6)% N/M (99.5)% 37 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual Reportdown 9.4% from $109.5 billion in the fourth quarter of 2021. Mutual fund redemptions, which totalled $2.8 billion for the Average daily mutual fund assets were $101.9 billion for the fourth quarter, increased 19.8% from the previous quarter, twelve months ended December 31, 2022, down 3.0% from and the annualized quarterly redemption rate was 11.0% in $105.0 billion in 2021. For the quarter ended December 31, 2022, sales of IG Wealth Management mutual funds through its advisor network were $2.1 billion, a decrease of 28.2% from the comparable period in 2021. Mutual fund redemptions totalled $2.8 billion, an increase of 13.6% from 2021. IG Wealth Management mutual fund net redemptions for the fourth quarter of 2022 were $718 million compared with net sales of $457 million in 2021. During the fourth quarter, investment returns resulted in an increase of $4.5 billion in mutual fund assets compared to an increase of $3.5 billion in the fourth quarter of 2021. IG Wealth Management’s annualized quarterly redemption rate for long-term funds was 11.0% in the fourth quarter of 2022, compared to 8.8% in the fourth quarter of 2021. IG Wealth Management’s twelve month trailing redemption rate for long-term funds was 10.0% at December 31, 2022, compared to 9.2% at December 31, 2021, and remains well below the corresponding average redemption rate for all the fourth quarter compared to 9.3% in the third quarter of 2022. IG Wealth Management mutual fund net redemptions were $718 million for the current quarter compared to net redemptions of $404 million in the previous quarter. IG Wealth Management Other Products and Services Segregated Funds IG Wealth Management offers segregated funds which include the IG Series of Guaranteed Investment Funds (GIFs). 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 IG Wealth Management. At December 31, 2022, total segregated fund assets were $1.3 billion, compared to $1.5 billion at December 31, 2021. other members of the Investment Funds Institute of Canada (IFIC) of approximately 16.6% at December 31, 2022. IG Wealth Insurance Management’s redemption rate has been very stable compared IG Wealth Management continues to be a leader in the to the overall mutual fund industry, reflecting our focus on distribution of life insurance in Canada. Through its financial planning. For the twelve months ended December 31, 2022, sales of IG Wealth Management mutual funds through its advisor network were $10.6 billion, a decrease of 10.6% from 2021. arrangements with leading insurance companies, IG Wealth Management offers a broad range of term, universal life, whole life, disability, critical illness, long-term care, personal health care coverage and group insurance. Mutual fund redemptions totalled $10.5 billion, an increase of At December 31, 2022, total in-force policies were 5.1% from 2021. Net sales of IG Wealth Management mutual funds were $43 million compared with net sales of $1.8 billion approximately 377 thousand with an insured value of $103 billion, compared to approximately 379 thousand in 2021. During 2022, investment returns resulted in a decrease with an insured value of $102 billion at December 31, 2021. of $11.3 billion in mutual fund assets compared to an increase of $11.0 billion in 2021. Change in Assets Under Management and Advisement – Q4 2022 vs. Q3 2022 IG Wealth Management’s assets under advisement were Distribution of insurance products is enhanced through IG Wealth Management’s Insurance Planning Specialists, located throughout Canada, who assist advisors with advanced estate planning solutions for high net worth clients. Securities Operations $110.8 billion at December 31, 2022, an increase of 5.5% from Investors Group Securities Inc. is an investment dealer $105.0 billion at September 30, 2022. IG Wealth Management’s mutual fund assets under management were $99.3 billion at December 31, 2022, an increase of 4.0% from $95.5 billion at September 30, 2022. Average daily mutual fund assets registered in all Canadian provinces and territories providing clients with securities services to complement their financial and investment planning. IG Wealth Management advisors can refer clients to one of our Wealth Planning Specialists available were $99.2 billion in the fourth quarter of 2022 compared to through Investors Group Securities Inc. $99.1 billion in the third quarter of 2022, an increase of 0.1%. For the quarter ended December 31, 2022, sales of IG Wealth Mortgage and Banking Operations Management mutual funds through its advisor network were IG Wealth Management Mortgage Planning Specialists are $2.1 billion, an increase of 7.9% from the third quarter of 2022. located throughout each province in Canada, and work with 38 2022 IGM Financial Inc. Annual Report | Management's Discussion and Analysisour clients and their advisors to develop mortgage and other ended December 31, 2022 were $74 million and $749 million, lending strategies that meet the individual needs and goals of respectively, compared to $276 million and $1.3 billion, in 2021. each client as part of their comprehensive financial plan. Mortgages are offered to clients by IG Wealth Management, a national mortgage lender, and through IG Wealth Management’s Solutions Banking†. An All-in-One product, a comprehensive cash management solution that integrates the features of a mortgage, term loan, revolving line of credit and deposit account, is also offered through Solutions Banking†. Mortgage fundings offered through IG Wealth Management and through Solutions Banking† for the three and twelve months ended December 31, 2022 were $122 million and $732 million compared to $221 million and $1.08 billion in 2021, a decrease of 44.7% and 32.5%, respectively. At December 31, 2022, mortgages offered through both sources totalled $7.7 billion, compared to $8.4 billion at December 31, 2021, a decrease of 7.8%. Available credit associated with Solutions Banking† All-in-One accounts originated for the three and twelve month periods At December 31, 2022, the balance outstanding of Solutions Banking† All-in-One products was $4.2 billion, compared to $3.9 billion one year ago, and represented approximately 52% of total available credit associated with these accounts. Other products and services offered through IG Wealth Management’s Solutions Banking† include investment loans, lines of credit, personal loans, creditor insurance, deposit accounts, and credit cards. Through Solutions Banking†, clients have access to a network of banking machines, as well as a private labelled client website and client service centre. The Solutions Banking† offering supports IG Wealth Management’s approach to delivering total financial solutions for our clients through a broad financial planning platform. Total outstanding lending products of IG Wealth Management clients in the Solutions Banking† offering, including Solutions Banking† mortgages totalled $5.8 billion at December 31, 2022, compared to $5.7 billion at December 31, 2021. 39 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportReview of Segment Operating Results The Wealth Management segment’s adjusted net earnings are prior quarter. Adjusted earnings before interest and taxes presented in Table 13 and include the operations of IG Wealth for the year ended December 31, 2022 were $686.9 million, Management and Investment Planning Counsel. a decrease of 14.4% from 2021. IG Wealth Management 2022 vs. 2021 IG Wealth Management adjusted net earnings are presented Fee Income in Table 14. Adjusted net earnings for the fourth quarter of 2022 were $104.6 million, a decrease of 25.9% from the fourth quarter in 2021 and a decrease of 4.5% from the prior quarter. Adjusted net earnings for the year ended December 31, 2022 were $437.4 million, a decrease of 16.4% from 2021. Adjusted earnings before interest and taxes for the fourth quarter of 2022 were $165.4 million, a decrease of 23.1% from the fourth quarter in 2021 and a decrease of 3.9% from the Advisory fees include fees for providing financial advice to clients including fees related to the distribution of products, and depend largely on the level and composition of assets under advisement. Advisory fees were $283.1 million in the fourth quarter of 2022, a decrease of $18.0 million or 6.0% from $301.1 million in 2021. For the twelve months ended December 31, 2022, advisory fees were $1,140.4 million, a decrease of $13.9 million or 1.2% from $1,154.3 million in 2021. Table 13: Operating Results – Wealth Management Three months ended ($ millions) Revenues Wealth Management Advisory fees Product and program fees Redemption fees Other financial planning revenues Total Wealth Management Net investment income and other Expenses Advisory and business development Asset-based compensation Sales-based compensation Other Other product commissions Business development Total advisory and business development Operations and support Sub-advisory Adjusted earnings before interest and taxes(1) Interest expense Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) Non-controlling interest 2022 Dec. 31 2022 Sep. 30 2021 Dec. 31 2022 Sep. 30 Change 2021 Dec. 31 $ 344.8 $ 341.8 $ 370.6 0.9 % (7.0)% 225.8 570.6 0.7 39.5 610.8 2.6 613.4 187.5 20.4 19.7 49.3 69.0 276.9 121.3 44.6 442.8 170.6 22.8 147.8 39.7 108.1 0.2 225.5 567.3 0.8 43.2 611.3 2.8 614.1 184.5 19.7 19.5 54.3 73.8 278.0 118.5 44.0 440.5 173.6 22.7 150.9 40.5 110.4 – 252.8 623.4 1.7 47.4 672.5 1.4 673.9 195.2 15.9 21.3 52.4 73.7 284.8 115.9 49.5 450.2 223.7 22.7 201.0 53.8 147.2 0.1 0.6 (12.5) (8.6) (0.1) (7.1) (0.1) 1.6 3.6 1.0 (9.2) (6.5) (0.4) 2.4 1.4 0.5 (1.7) 0.4 (2.1) (2.0) (2.1) – N/M (10.7) (8.5) (58.8) (16.7) (9.2) 85.7 (9.0) (3.9) 28.3 (7.5) (5.9) (6.4) (2.8) 4.7 (9.9) (1.6) (23.7) 0.4 (26.5) (26.2) (26.6) N/M Adjusted net earnings available to common shareholders(1) $ 107.9 $ 110.4 $ 147.2 (2.3)% (26.7)% (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. 40 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisTable 13: Operating Results – Wealth Management (continued) Twelve months ended ($ millions) Revenues Wealth Management Advisory fees Product and program fees Redemption fees Other financial planning revenues Total Wealth Management Net investment income and other Expenses Advisory and business development Asset-based compensation Sales-based compensation Other Other product commissions Business development Total advisory and business development Operations and support Sub-advisory Adjusted earnings before interest and taxes(1) Interest expense Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) Non-controlling interest 2022 Dec. 31 2021 Dec. 31 Change $ 1,391.5 $ 1,417.2 (1.8)% 923.9 961.1 2,315.4 2,378.3 4.0 164.6 10.0 184.6 2,484.0 2,572.9 4.1 3.6 2,488.1 2,576.5 754.0 76.1 76.8 219.2 296.0 740.1 56.1 75.5 217.6 293.1 1,126.1 1,089.3 476.9 181.9 466.1 189.7 1,784.9 1,745.1 703.2 90.3 612.9 164.2 448.7 0.2 831.4 90.3 741.1 198.0 543.1 – (3.9) (2.6) (60.0) (10.8) (3.5) 13.9 (3.4) 1.9 35.7 1.7 0.7 1.0 3.4 2.3 (4.1) 2.3 (15.4) – (17.3) (17.1) (17.4) N/M Adjusted net earnings available to common shareholders(1) $ 448.5 $ 543.1 (17.4)% (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. The decrease in advisory fees in the three months ending quarter, down 9.8% from $238.1 million a year ago primarily December 31, 2022 was primarily due to the decrease in due to the decrease in average assets under management average assets under advisement of 6.6%, as shown in of 9.4%, as shown in Table 12. Product and program fees Table 11, partially offset by an increase in the advisory fee were $875.1 million for the twelve month period ended rate. The decrease in advisory fees in the twelve months December 31, 2022 compared to $903.5 million in 2021, a ending December 31, 2022 was primarily due to the decrease decrease of 3.1% primarily due to the decrease in average in average assets under advisement of 0.5%, as shown in assets under management of 3.0%, as shown in Table 12. The Table 11, and a decrease in the advisory fee rate. The average average product and program fee rate for the fourth quarter advisory fee rate for the fourth quarter was 102.4 basis points was 85.9 basis points of assets under management compared of average assets under advisement compared to 101.8 basis to 86.3 basis points in 2021, and the rate for the twelve month points in 2021, and for the twelve month period, the rate was period of 2022 was 85.9 basis points of average assets under 102.5 basis points compared to 103.2 basis points in 2021. management compared to 86.0 basis points in 2021, reflecting The change in the average advisory fee rate for the three and price reductions in certain funds and changes in product mix. twelve month periods primarily reflects changes in client and product mix. Product and program fees depend largely on the level and composition of mutual fund assets under management. Product and program fees totalled $214.7 million in the current Other financial planning revenues are primarily earned from: • Mortgage banking operations • Distribution of insurance products through I.G. Insurance Services Inc. 41 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 14: Operating Results – IG Wealth Management Three months ended ($ millions) Revenues Wealth Management Advisory fees Product and program fees Redemption fees Other financial planning revenues Total Wealth Management Net investment income and other Expenses Advisory and business development Asset-based compensation Sales-based compensation Other Other product commissions Business development Total advisory and business development Operations and support Sub-advisory Adjusted earnings before interest and taxes(1) Interest expense Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) 2022 Dec. 31 2022 Sep. 30 2021 Dec. 31 2022 Sep. 30 Change 2021 Dec. 31 $ $ 283.1 214.7 497.8 0.6 32.4 530.8 2.1 532.9 140.3 20.4 16.8 39.7 56.5 217.2 108.8 41.5 367.5 165.4 22.6 142.8 38.2 $ 280.4 214.1 494.5 0.8 37.3 532.6 2.2 534.8 136.6 19.7 16.9 45.5 62.4 218.7 102.9 41.0 362.6 172.2 22.6 149.6 40.1 301.1 238.1 539.2 1.7 41.7 582.6 1.3 583.9 142.0 15.9 18.0 43.8 61.8 219.7 103.6 45.6 368.9 215.0 22.5 192.5 51.4 1.0 % (6.0)% 0.3 0.7 (25.0) (13.1) (0.3) (4.5) (0.4) 2.7 3.6 (0.6) (12.7) (9.5) (0.7) 5.7 1.2 1.4 (3.9) – (4.5) (4.7) (9.8) (7.7) (64.7) (22.3) (8.9) 61.5 (8.7) (1.2) 28.3 (6.7) (9.4) (8.6) (1.1) 5.0 (9.0) (0.4) (23.1) 0.4 (25.8) (25.7) $ 104.6 $ 109.5 $ 141.1 (4.5)% (25.9)% (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. • Securities trading services provided through Investors Group and other income not related to our core business. It also Securities Inc. includes a charge from the Strategic Investments and Other • Banking services provided through Solutions Banking† segment for the use of unallocated capital. Other financial planning revenues of $32.4 million for the fourth Expenses quarter of 2022 decreased by $9.3 million from $41.7 million in 2021. For the twelve month period, other financial planning revenues of $140.5 million decreased by $22.9 million from $163.4 million in 2021. The decrease in both the three and twelve month periods were primarily due to lower earnings from mortgage banking operations. A summary of mortgage banking operations for the three and twelve month periods under review is presented in Table 15. Net Investment Income and Other Net investment income and other consists of unrealized gains or losses on investments in proprietary funds in the three and twelve months ended December 31, 2022, and investment income earned on our cash and cash equivalents and securities IG Wealth Management incurs advisory and business development expenses that include compensation paid to our advisors. The majority of these costs vary directly with asset or sales levels. Also included are other distribution and business development activities which do not vary directly with asset or sales levels, such as direct marketing and advertising, financial planning specialist support and other costs incurred to support our advisor networks. These expenses tend to be discretionary or vary based upon the number of advisors or clients. Asset-based compensation fluctuates with the value of assets under advisement. Asset-based compensation decreased by $1.7 million for the three months ended December 31, 2022 to $140.3 million compared to 2021, primarily due to rate 42 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisTable 14: Operating Results – IG Wealth Management (continued) Twelve months ended ($ millions) Revenues Wealth Management Advisory fees Product and program fees Redemption fees Other financial planning revenues Total Wealth Management Net investment income and other Expenses Advisory and business development Asset-based compensation Sales-based compensation Other Other product commissions Business development Total advisory and business development Operations and support Sub-advisory Adjusted earnings before interest and taxes(1) Interest expense Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) 2022 Dec.31 2021 Dec. 31 Change $ 1,140.4 $ 1,154.3 (1.2)% 875.1 903.5 2,015.5 2,057.8 3.9 140.5 9.9 163.4 2,159.9 2,231.1 2.4 2.6 2,162.3 2,233.7 558.9 76.1 65.5 182.2 247.7 882.7 423.6 169.1 536.0 56.1 62.8 184.6 247.4 839.5 416.9 174.5 1,475.4 1,430.9 686.9 89.7 597.2 159.8 802.8 89.6 713.2 190.3 (3.1) (2.1) (60.6) (14.0) (3.2) (7.7) (3.2) 4.3 35.7 4.3 (1.3) 0.1 5.1 1.6 (3.1) 3.1 (14.4) 0.1 (16.3) (16.0) $ 437.4 $ 522.9 (16.4)% (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. increases and decreased average assets under advisement. Other advisory and business development expenses For the twelve months ended December 31, 2022, asset-based were $56.5 million in the fourth quarter of 2022, compared compensation increased by $22.9 million to $558.9 million to $61.8 million in 2021, a decrease of $5.3 million due compared to 2021, primarily due to rate increases due to to decreases in other advisor program expenses and changes in advisor productivity. IG Wealth Management sales-based compensation is based upon the level of new assets contributed to client accounts at IG Wealth Management (subject to eligibility requirements). distribution of insurance products. Other advisory and business development expenses were $247.7 million in the twelve months ended December 31, 2022, compared to $247.4 million in 2021. All sales-based compensation payments are capitalized and Operations and support includes costs that support our wealth amortized as they reflect incremental costs to obtain a client management and other general and administrative functions contract. Sales-based compensation was $20.4 million for such as product management, technology and operations, as the fourth quarter of 2022, an increase of $4.5 million from well as other functional business units and corporate expenses. $15.9 million in 2021. For the twelve month period, sales- Operations and support expenses were $108.8 million for the based compensation expense was $76.1 million, an increase of $20.0 million from $56.1 million in 2021. The increase in fourth quarter of 2022 compared to $103.6 million in 2021, an increase of $5.2 million. For the twelve month period, expense is due to additional sales-based commission being operations and support expenses were $423.6 million in 2022 capitalized and amortized throughout 2021 and 2022. compared to $416.9 million in 2021, an increase of $6.7 million or 1.6%. 43 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 15: Mortgage Banking Operations – IG Wealth Management Three months ended ($ millions) Total mortgage banking income Net interest income on securitized loans Interest income Interest expense Net interest income Gains on sales(1) Fair value adjustments Other Average mortgages serviced Securitizations Other Mortgage sales to:(2) Securitizations Other(1) Twelve months ended ($ millions) Total mortgage banking income Net interest income on securitized loans Interest income Interest expense Net interest income (Losses) gains on sales(1) Fair value adjustments Other Average mortgages serviced Securitizations Other Mortgage sales to:(2) Securitizations Other(1) $ $ $ $ $ $ 34.1 29.5 4.6 – (5.7) 4.0 2.9 4,567 2,357 6,924 359 – 359 $ $ $ $ $ $ 2022 Dec. 31 2022 Sep. 30 2021 Dec. 31 2022 Sep. 30 $ 32.2 25.7 33.1 25.5 Change 2021 Dec. 31 3.0 % 15.7 (39.5) (100.0) N/M N/M 5.9 % 14.8 (29.2) – N/M 42.9 (65.1)% (67.0)% (1.5)% (2.6) (1.9)% (10.6)% (2.2) (8.0)% (32.9)% 20.9 % – (100.0) (32.9)% (24.1)% 7.6 0.5 – 0.7 8.8 5,111 2,411 7,522 297 176 473 2022 Dec. 31 2021 Dec. 31 Change $ 127.2 102.8 24.4 (3.5) (3.1) 8.2 26.0 4,708 2,404 7,112 1,281 355 1,636 $ $ $ $ $ 147.0 111.4 35.6 3.9 1.4 3.5 44.4 5,431 2,503 7,934 1,506 872 2,378 (13.5)% (7.7) (31.5) N/M N/M 134.3 (41.4)% (13.3)% (4.0) (10.4)% (14.9)% (59.3) (31.2)% 6.5 – (1.0) 2.8 8.3 4,638 2,419 7,057 535 – 535 $ $ $ $ $ $ $ $ $ $ $ (1) Represents sales to institutional investors through private placements and to IG Mackenzie Mortgage and Short Term Income Fund, as well as gains (losses) realized on those sales. (2) Represents principal amounts sold. 44 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisSub-advisory expenses were $41.5 million for the fourth Other financial planning revenues of $32.4 million in the fourth quarter of 2022 compared to $45.6 million in 2021, a quarter of 2022 decreased by $4.9 million from $37.3 million decrease of $4.1 million or 9.0%. For the twelve month period, in the third quarter due to a decrease in earnings from the sub-advisory expenses were $169.1 million in 2022 compared mortgage banking operations. to $174.5 million in 2021, a decrease of $5.4 million or 3.1%. The decreases in both the three and twelve month periods Expenses are primarily due to lower assets under management. Advisory and business development expenses in the current Interest Expense Interest expense, which includes allocated interest expense on long-term debt and interest expense on leases, totalled $22.6 million and $89.7 million in the three and twelve months ended December 31, 2022, respectively, comparable to 2021. Long-term debt interest expense is calculated based on a long- term debt allocation of $1.7 billion to IG Wealth Management. Q4 2022 vs. Q3 2022 Fee Income Advisory fee income increased by $2.7 million or 1.0% to $283.1 million in the fourth quarter of 2022 compared with the third quarter. The increase in advisory fees in the fourth quarter was primarily due to the increase in average assets quarter were $217.2 million, a decrease of $1.5 million from $218.7 million in the previous quarter. Operations and support expenses were $108.8 million for the fourth quarter of 2022 compared to $102.9 million in the previous quarter, an increase of $5.9 million or 5.7%. Investment Planning Counsel 2022 vs. 2021 Adjusted net earnings available to common shareholders related to Investment Planning Counsel were $2.8 million and $9.1 million lower in the three and twelve month periods ended December 31, 2022 than the comparable periods in 2021. under advisement of 1.0% for the quarter, as shown in Table 11. Q4 2022 vs. Q3 2022 The average advisory fee rate for the fourth quarter was 102.4 basis points of average assets under management, compared to 102.5 basis points in the third quarter. Product and program fees were $214.7 million in the fourth quarter of 2022, an increase of $0.6 million from $214.1 million in the third quarter of 2022. The average product and program fee rate was 85.9 basis points in the current quarter, compared to 85.7 basis points in the third quarter. Adjusted net earnings available to common shareholders related to Investment Planning Counsel were $2.4 million higher in the fourth quarter of 2022 compared to the prior quarter. 45 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportAsset Management The Asset Management segment includes Mackenzie Management is considered a client of the Asset Management Investments (Mackenzie). Asset Management revenue reflects: • Net asset management fees – third party includes fees received from our mutual funds and fees from third parties for investment management services. Compensation paid to dealers offsets the fees earned. • Asset management fees – Wealth Management includes segment and transfer pricing is based on values for similar sized asset management mandates. Assets managed for IG Wealth Management are included in the Asset Management segment’s assets under management. Debt and interest expense is allocated to each IGM Financial segment based on management’s assessment of: i) capacity to service the debt, and ii) where the debt is being serviced. fees received from the Wealth Management segment. Wealth Income taxes are also reported in each segment. Review of the Business Mackenzie Investments is a diversified asset management Mackenzie’s focus is based on five key strategies: solutions provider founded in 1967. We provide investment management and related services with a wide range of investment mandates through a boutique structure and using multiple distribution channels. We are committed to delivering strong investment performance for our clients by drawing on more than 50 years of investment management experience. Mackenzie earns asset management fees primarily from: • Management fees earned from its investment funds, sub-advised accounts and institutional clients. • Fees earned from its mutual funds for administrative services. • Redemption fees on deferred sales charge and low load units. The 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. Equity based mandates have higher management fee rates than fixed income mandates and retail mutual fund accounts have higher management fee rates than exchange traded funds, sub-advised accounts and institutional accounts. Asset Management Strategy • Win in retail in a segmented way • Build a global institutional business with a targeted approach • Deliver innovative investment solutions and performance • Business processes that are simple, easy and digitized • Continue to foster a high performance and diverse culture These strategies impact our strategic priorities and drive future business growth. We aim to achieve this by attracting and fostering the best minds in the investment industry, responding to changing needs of financial advisors and investors with distinctive and innovative solutions, and continuing to deliver institutional quality in everything we do. Mackenzie seeks to maximize returns on business investment by focusing our resources in areas that directly impact the success of our strategic focus: investment management, distribution and client experience. Our investment management capabilities are delivered through a boutique structure, with separate in-house teams having distinct focuses and diverse styles. Our research and portfolio management teams are located in Toronto, Winnipeg, Vancouver, Boston, Dublin and Hong Kong. In addition, our ownership interest in Northleaf enhances our investment capabilities by offering global private equity, private credit and infrastructure investment solutions to our clients and our ownership interest in ChinaAMC offers our clients access to Mackenzie’s mission is to create a more invested Chinese capital markets. We also supplement our investment world, together. Mackenzie’s objective is to become Canada’s preferred global asset management solutions provider and business partner. capabilities with strategic partners (third party sub-advisors) in selected areas. The development of a broad range of 46 2022 IGM Financial Inc. Annual Report | Management's Discussion and Analysisinvestment capabilities and products is a key strength in broad product shelf, competitively priced products and our supporting the evolving financial needs of investors. focus on client experience and investment excellence. Our business focuses on three key distribution channels: retail, strategic alliances and institutional. Assets Under Management Mackenzie primarily distributes its retail investment products The changes in total assets under management are through third-party financial advisors. Our sales teams work summarized in Table 16 and the changes in investment fund with many of the more than 30,000 independent financial advisors and their firms across Canada. Our innovative, assets under management are summarized in Table 17. Assets managed for the Wealth Management segment are included in comprehensive lineup of investment solutions covers all asset total assets under management. classes and parts of the globe. We offer a range of relevant products and investment solutions designed to help advisors meet the evolving needs of their clients. We regularly introduce new funds and we may merge or streamline our fund offerings to provide enhanced investment solutions. In addition to our retail distribution team, Mackenzie also has specialty teams focused on strategic alliances and the At December 31, 2022, Mackenzie’s total assets under management were $186.6 billion, a decrease of 11.3% from $210.3 billion last year. Mackenzie’s total assets under management (excluding sub-advisory to Wealth Management) were $113.1 billion, a decrease of 12.4% from $129.1 billion last year. The change in Mackenzie’s assets under management is determined by investment returns and net contributions from institutional marketplace. our clients. Within the strategic alliance channel, Mackenzie offers certain series of our mutual funds and provides sub-advisory services to third-party and related party investment programs Change in Assets Under Management – 2022 vs. 2021 offered by banks, insurance companies and other investment Mackenzie’s total assets under management at December 31, companies. Strategic alliances with related parties include 2022 were $186.6 billion, a decrease of 11.3% from providing advisory services to IG Wealth Management, $210.3 billion at December 31, 2021. Assets under management Investment Planning Counsel and Great-West Lifeco Inc. excluding sub-advisory to the Wealth Management segment (Lifeco) subsidiaries. Mackenzie partners with Wealthsimple to were $113.1 billion, a decrease of 12.4% from $129.1 billion at distribute ETFs through their product shelf. In 2022, Mackenzie December 31, 2021. entered into a new multi-year product and services distribution agreement with PFSL Investment Canada Ltd. (Primerica) where Mackenzie serves as one of two exclusive investment solutions providers and, on June 30, 2022, Mackenzie launched a suite of 25 funds designed to address the specific needs of Primerica advisors and their clients. Within the strategic alliance channel, Mackenzie’s primary distribution relationship is with the head office of the respective bank, insurance company or investment company. Investment fund assets under management were $59.7 billion at December 31, 2022, compared to $68.4 billion at December 31, 2021, a decrease of 12.7%. Mackenzie’s mutual fund assets under management of $54.4 billion decreased by 13.6% from $63.0 billion at December 31, 2021. Mackenzie’s ETF assets excluding ETFs held within IGM Financial’s managed products were $5.2 billion at December 31, 2022, a decrease of 3.2% from $5.4 billion at December 31, 2021. ETF assets inclusive of IGM Financial’s managed products were In the institutional channel, Mackenzie provides investment $12.4 billion at December 31, 2022 compared to $12.7 billion management services to pension plans, foundations and other at December 31, 2021. institutions. We attract new institutional business through our relationships with pension and management consultants. In the three months ended December 31, 2022, Mackenzie’s mutual fund gross sales were $1.6 billion, a decrease of 39.9% Gross sales and redemption activity in strategic alliance and from $2.6 billion in 2021. Mutual fund redemptions in the institutional accounts can be more pronounced than in the current quarter were $2.5 billion, an increase of 21.4% from last retail channel, given the relative size and the nature of the year. Mutual fund net redemptions for the three months ended distribution relationships of these accounts. These accounts December 31, 2022 were $966 million, compared to net sales of are also subject to ongoing reviews and rebalance activities $512 million last year. In the three months ended December 31, which may result in a significant change in the level of assets under management. 2022, ETF net creations were $134 million compared to $245 million last year. Investment fund net redemptions in the Mackenzie continues to be positioned to build and enhance our distribution relationships given our team of experienced investment professionals, strength of our distribution network, current quarter were $832 million compared to net sales of $757 million last year. During the current quarter, investment returns resulted in investment fund assets increasing by $2.9 billion compared to an increase of $2.8 billion last year. 47 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 16: Change in Total Assets Under Management – Asset Management Three months ended ($ millions) Assets under management excluding sub-advisory to Canada Life and the Wealth Management Segment Net sales (redemptions) Mutual funds ETF net creations Investment funds(1) Sub-advisory, institutional and other accounts(2) Total net sales (redemptions) Investment returns Net change in assets Beginning assets Ending assets Consolidated assets under management Mutual funds ETFs Investment funds(1) Sub-advisory, institutional and other accounts Sub-advisory to Canada Life Total excluding sub-advisory to Wealth Management Sub-advisory to Wealth Management Consolidated assets under management Average total assets under management(3) Excluding sub-advisory to Wealth Management Consolidated Twelve months ended ($ millions) 2022 Dec. 31 2022 Sep. 30 2021 Dec. 31 2022 Sep. 30 $ (966) $ (594) $ 134 (832) (135) (967) 3,385 2,418 63,657 (86) (680) (139) (819) (812) (1,631) 65,288 512 245 757 (576) 181 3,162 3,343 72,967 (62.6)% N/M (22.4) 2.9 (18.1) N/M N/M (2.5) Change 2021 Dec. 31 N/M % (45.3) N/M 76.6 N/M 7.1 (27.7) (12.8) $ 66,075 $ 63,657 $ 76,310 3.8 % (13.4)% $ 54,434 $ 52,541 $ 62,969 3.6 % (13.6)% 5,219 59,653 6,422 66,075 47,023 113,098 73,514 5,010 57,551 6,106 63,657 45,015 108,672 71,834 5,393 68,362 7,948 76,310 52,805 129,115 81,228 4.2 3.7 5.2 3.8 4.5 4.1 2.3 (3.2) (12.7) (19.2) (13.4) (10.9) (12.4) (9.5) $ 186,612 $ 180,506 $ 210,343 3.4 % (11.3)% $ 112,651 $ 113,448 $ 126,759 186,260 187,323 207,143 (0.7)% (0.6) (11.1)% (10.1) 2022 Dec. 31 2021 Dec. 31 Change Assets under management excluding sub-advisory to Canada Life and the Wealth Management Segment Net sales (redemptions) Mutual funds(4) ETF net creations(5) Investment funds(1) Sub-advisory, institutional and other accounts(2) Total net sales (redemptions) Investment returns Net change in assets Beginning assets Ending assets Average total assets under management(3) Excluding sub-advisory to Wealth Management Consolidated $ (1,736) $ 705 (1,031) (834) (1,865) (8,370) (10,235) 76,310 3,908 1,532 5,440 (306) 5,134 7,413 12,547 63,763 N/M % (54.0) N/M (172.5) N/M N/M N/M 19.7 $ 66,075 $ 76,310 (13.4)% $ 117,801 $ 120,988 194,040 198,946 (2.6)% (2.5) (1) Investment fund assets under management and net sales exclude investments into Mackenzie mutual funds and ETFs by IGM Financial’s investment funds. (2) Sub-advisory, institutional and other accounts: 2022 Q1 – an institutional investor redeemed $291 million within products Mackenzie sub-advises. 2021 Q2 – Mackenzie was awarded $680 million of sub-advisory wins. Q4 – An institutional client re-assigned sub-advisory responsibilities on mandates advised by Mackenzie totalling $667 million. (3) Based on daily average investment fund assets and month-end average sub-advisory, institutional and other assets. (4) Mutual funds – Institutional clients, which include Mackenzie mutual funds within their investment offerings, made fund allocation changes: 2021 YTD – resulted in redemptions and net redemptions of $361 million. (5) ETFs – During the first quarter of 2022, Wealthsimple made allocation changes which resulted in $675 million in purchases in Mackenzie ETFs. 48 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisTable 17: Change in Investment Fund Assets Under Management – Asset Management(1) Three months ended ($ millions) Sales Redemptions Mutual fund net sales (redemptions) ETF net creations Investment fund net sales (redemptions)(2) Investment returns Net change in assets Beginning assets Ending assets Consists of: Mutual funds ETFs Investment funds Daily average investment fund assets Twelve months ended ($ millions) Sales Redemptions Mutual fund net sales (redemptions)(3) ETF net creations(4) Investment fund net sales (redemptions)(2) Investment returns Net change in assets Beginning assets Ending assets Daily average investment fund assets $ 2022 Dec. 31 1,559 2,525 (966) 134 (832) 2,934 2,102 57,551 $ 2022 Sep. 30 1,281 1,875 (594) (86) (680) (713) (1,393) 58,944 $ 2021 Dec. 31 2,592 2,080 512 245 757 2,816 3,573 64,789 2022 Sep. 30 Change 2021 Dec. 31 21.7 % (39.9)% 34.7 (62.6) N/M (22.4) N/M N/M (2.4) 21.4 N/M (45.3) N/M 4.2 (41.2) (11.2) $ 59,653 $ 57,551 $ 68,362 3.7 % (12.7)% $ 54,434 $ 52,541 $ 62,969 5,219 5,010 5,393 $ $ 59,653 $ 57,551 $ 68,362 59,421 $ 60,405 $ 66,833 3.6 % 4.2 3.7 % (1.6)% (13.6)% (3.2) (12.7)% (11.1)% 2022 Dec. 31 7,496 9,232 (1,736) 705 (1,031) (7,678) (8,709) 68,362 $ $ $ 2021 Dec. 31 Change $ 12,022 (37.6)% 8,114 3,908 1,532 5,440 6,452 11,892 56,470 13.8 N/M (54.0) N/M N/M N/M 21.1 (12.7)% (1.4)% 59,653 $ 68,362 62,114 $ 63,003 (1) Investment fund assets under management and net sales excludes investments into Mackenzie mutual funds and ETFs by IGM Financial’s investment funds. (2) Total investment fund net sales and assets under management exclude Mackenzie mutual fund investments in ETFs. (3) Mutual funds – Institutional clients, which include Mackenzie mutual funds within their investment offerings, made fund allocation changes: 2021 YTD – resulted in redemptions and net redemptions of $361 million. (4) ETFs – During the first quarter of 2022, Wealthsimple made allocation changes which resulted in $675 million in purchases in Mackenzie ETFs. Total net redemptions excluding sub-advisory to Canada Life December 31, 2022 were $1.7 billion, compared to net sales of and to the Wealth Management segment for the three months $3.9 billion in 2021. In the year ended December 31, 2022, ETF ended December 31, 2022 were $967 million compared to net creations were $705 million compared to $1.5 billion last net sales of $181 million last year. During the fourth quarter year. Investment fund net redemptions in the current period of 2021, an institutional client re-assigned sub-advisory were $1.0 billion compared to net sales of $5.4 billion last year. responsibilities on mandates advised by Mackenzie totalling During the current period, investment returns resulted in $667 million. Excluding this transaction, net sales were investment fund assets decreasing by $7.7 billion compared to $848 million for the three months ended December 31, 2021. an increase of $6.5 billion last year. During the current quarter, investment returns resulted in assets increasing by $3.4 billion compared to an increase of $3.2 billion last year. During the twelve months ended December 31, 2021, certain third party programs, which include Mackenzie mutual funds, made fund allocation changes resulting in redemptions and net In the twelve months ended December 31, 2022, Mackenzie’s mutual fund gross sales were $7.5 billion, a decrease of 37.6% redemptions of $361 million. Excluding this transaction in 2021, mutual fund redemptions increased by 19.1% in the twelve from $12.0 billion in 2021. Mutual fund redemptions in the months ended December 31, 2022 compared to 2021, and current period were $9.2 billion, an increase of 13.8% from mutual fund net redemptions of $1.7 billion in 2022 compared last year. Mutual fund net redemptions for the year ended to mutual fund net sales of $4.3 billion in 2021. 49 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportRedemptions of long-term mutual funds in the three and total Wealth Management assets under management compared twelve months ended December 31, 2022, were $2.5 billion to $81.2 billion or 69.9% of total Wealth Management assets and $9.1 billion, respectively, compared to $2.0 billion and under management at December 31, 2021. $8.0 billion last year. Redemptions of long-term mutual funds excluding mutual fund allocation changes made by third party programs were $7.6 billion in the twelve months ended December 31, 2021. Mackenzie’s annualized quarterly redemption rate for long-term mutual funds was 18.2% in the fourth quarter of 2022, compared to 13.3% in the fourth quarter of 2021. Mackenzie’s twelve-month trailing redemption rate for long-term mutual funds was 16.0% at December 31, 2022, compared to 13.6% last year. Mackenzie’s twelve month trailing redemption rate for long-term funds, excluding rebalance transactions, was 12.9% at December 31, 2021. Change in Assets under Management – Q4 2022 vs. Q3 2022 Mackenzie’s total assets under management at December 31, 2022 were $186.6 billion, an increase of 3.4% from $180.5 billion at September 30, 2022. Assets under management excluding sub-advisory to the Wealth Management segment were $113.1 billion, an increase of 4.1% from $108.7 billion at September 30, 2022. Investment fund assets under management were $59.7 billion The corresponding average twelve-month trailing redemption at December 31, 2022, an increase of 3.7% from $57.6 billion rate for long-term mutual funds for all other members of IFIC was approximately 16.2% at December 31, 2022. 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. at September 30, 2022. Mackenzie’s mutual fund assets under management were $54.4 billion at December 31, 2022, an increase of 3.6% from $52.5 billion at September 30, 2022. Mackenzie’s ETF assets were $5.2 billion at December 31, 2022 compared to $5.0 billion at September 30, 2022. ETF assets inclusive of IGM Financial’s managed products were $12.4 billion at December 31, 2022 compared to $11.5 billion at September 30, 2022. For the quarter ended December 31, 2022, Mackenzie mutual fund gross sales were $1.6 billion, an increase of 21.7% from Total net redemptions excluding sub-advisory to Canada Life the third quarter of 2022. Mutual fund redemptions were and to the Wealth Management segment for the twelve months $2.5 billion, an increase of 34.7% from the third quarter ended December 31, 2022 were $1.9 billion compared to net sales of $5.1 billion last year. During the twelve month period, of 2022. Net redemptions of Mackenzie mutual funds for the current quarter were $966 million compared with net investment returns resulted in assets decreasing by $8.4 billion redemptions of $594 million in the previous quarter. compared to an increase of $7.4 billion last year. During 2021, Mackenzie was awarded $680 million of sub- advisory mandates through our strategic partnership with China Asset Management Co., Ltd. (ChinaAMC). During the twelve months ended December 31, 2022, an Redemptions of long-term mutual fund assets in the current quarter were $2.5 billion, compared to $1.8 billion in the third quarter. Mackenzie’s annualized quarterly redemption rate for long-term mutual funds for the current quarter was 18.2% compared to 13.4% in the third quarter. institutional investor redeemed $291 million within products For the quarter ended December 31, 2022, Mackenzie ETF net that Mackenzie sub-advises and Wealthsimple made allocation creations were $134 million compared to ($86) million in the changes which resulted in $675 million in purchases in third quarter. Mackenzie ETFs. Excluding these two transactions and the 2021 ChinaAMC award and transactions previously mentioned, total net redemptions excluding sub-advisory to Canada Life and to the Wealth Management segment for the twelve months ended December 31, 2022 were $2.3 billion compared to net sales of $5.5 billion last year. As at December 31, 2022, Mackenzie’s sub-advisory to Canada Life were $47.0 billion compared to $52.8 billion at December 31, 2021. As at December 31, 2022, Mackenzie’s sub-advisory to the Wealth Management segment were $73.5 billion or 70.8% of Investment fund net redemptions in the current quarter were $832 million compared to net redemptions of $680 million in the third quarter. As at December 31, 2022, Mackenzie’s sub-advisory to Canada Life were $47.0 billion compared to $45.0 billion at September 30, 2022. As at December 31, 2022, Mackenzie’s sub-advisory to the Wealth Management segment were $73.5 billion or 70.8% of total Wealth Management assets under management compared to $71.8 billion or 71.8% of total Wealth Management assets under management at September 30, 2022. 50 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisInvestment Management Mackenzie has $186.6 billion in assets under management at December 31, 2022, including $73.5 billion of sub-advisory mandates to the Wealth Management segment. It has teams located in Toronto, Winnipeg, Vancouver, Boston, Dublin and Hong Kong. We continue to deliver our investment offerings through a boutique structure, with separate in-house investment teams which each have a distinct focus and investment approach. Our investment team currently consists of 17 boutiques. This boutique approach promotes diversification of styles and ideas and provides Mackenzie with a breadth of capabilities. Oversight is conducted through a common process intended to promote superior risk-adjusted returns over time. This oversight process focuses on i) identifying and encouraging each team’s performance edge, ii) promoting best practices in portfolio construction, and iii) emphasizing risk management. by Morningstar† had a rating of three stars or better and 57.1% had a rating of four or five stars. This compared to the Morningstar† universe of 84.0% for three stars or better and 53.3% for four and five star funds at December 31, 2022. Mackenzie was once again recognized for industry leading performance during 2022 by winning the following awards: • Refinitiv Lipper awards – seven awards in respect of six mutual funds and one exchange traded fund. This award is presented annually and honours funds that lead in delivering strong, risk-adjusted performance relative to their peers. • Fundata FundGrade A+ – eight awards in respect of four mutual funds and four exchange traded funds. This award is presented annually and honours funds that achieve consistently high FundGrade scores throughout the calendar year. Products Mackenzie’s 56% economic interest in Northleaf enhances its Mackenzie continues to evolve its product shelf by providing investment capabilities by offering global private equity, private enhanced investment solutions for financial advisors to offer credit and infrastructure investment solutions to our clients. their clients. During 2022, Mackenzie launched thirty mutual In addition to our own investment teams, Mackenzie supplements investment capabilities through the use of third party sub-advisors and strategic beta index providers in selected areas. These include Putnam Investments, TOBAM, ChinaAMC, and Impax Asset Management. During 2022, 1832 Asset Management, Addenda, Brandywine, Blackrock, and T. Rowe Price were added as sub-advisors for the launch of the suite of Mackenzie FuturePath Funds designed to address the specific needs of Primerica advisors and their clients. During 2022, Mackenzie undertook a number of initiatives on climate change in support of the global goal to reach net zero by 2050. This builds upon Mackenzie’s sustainability strategy, and these items included the following: • Released net zero 2030 interim targets. • Commenced engagements with the 100 companies responsible for the majority of the financed emissions funds which included a suite of twenty-five FuturePath Funds through its new partnership with Primerica Financial Services Canada (PFSL), two alternative funds in collaboration with Northleaf Capital Partners (Northleaf), and two ETFs, including one in collaboration with Wealthsimple. In January 2023, Mackenzie filed the preliminary prospectus for the upcoming launch of an additional mutual fund and ETF in partnership with Corporate Knights. Mutual Funds Mackenzie manages its product shelf through new fund launches and fund mergers to streamline fund offerings for advisors and investors. During the first three quarters of 2022, Mackenzie launched 29 mutual funds: • Mackenzie North American Equity Fund • Mackenzie North American Balanced Fund produced by companies Mackenzie invests in for its clients. • Mackenzie Inflation-Focused Fund • Continued to attract talent and enhance data and capabilities • Mackenzie USD US Mid Cap Opportunities Fund to address risks associated with climate change. • 25 Mackenzie FuturePath funds supporting a new Long-term investment performance is a key measure of Mackenzie’s ongoing success. At December 31, 2022, 55.8% of Mackenzie mutual fund assets were rated in the top two performance quartiles for the one year time frame, 58.2% partnership with Primerica. This new family of funds will harness a wide selection of Mackenzie’s competitive investment strategies and covers all major CIFSC categories and investment styles. for the three year time frame and 64.6% for the five year During the fourth quarter of 2022, the Mackenzie Bluewater time frame. Mackenzie also monitors its fund performance Next Gen Growth Fund was launched. This global equity fund relative to the ratings it receives on its mutual funds from the Morningstar† fund ranking service. At December 31, 2022, 85.9% of Mackenzie mutual fund assets measured invests in innovation leaders across geographies, sectors, and market capitalizations who have a significant competitive advantage, strong growth opportunities and a unique value proposition. 51 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportAlternative Funds Mackenzie currently has ten funds in the alternatives space including four products in collaboration with Northleaf Capital Partners (Northleaf). During 2022, Mackenzie launched two products in collaboration with Northleaf as part of its ongoing commitment to expand retail investor access to private market investment solutions. • Mackenzie Northleaf Private Credit Interval Fund During 2022, Mackenzie launched two new ETFs. These ETFs further broadened our diverse offerings of ETFs: • Wealthsimple North American Green Bond Index ETF • Mackenzie Emerging Markets Equity Index ETF Mackenzie’s current line-up consists of 45 ETFs: 24 active and strategic beta ETFs and 21 traditional index ETFs. ETF assets under management ended the quarter at $12.4 billion, inclusive of $7.2 billion in investments from IGM managed products. This • Mackenzie Northleaf Global Private Equity Fund ranks Mackenzie in sixth place in the Canadian ETF industry for Exchange Traded Funds The addition of Exchange Traded Funds (ETF) has assets under management. 2023 Launch complemented Mackenzie’s broad and innovative fund In January 2023, the launch of the Mackenzie Corporate line-up and reflects its investor-focused vision to provide advisors and investors with new solutions to drive investor Knights Global 100 Index Mutual Fund and Mackenzie Corporate Knights Global Index ETF was confirmed. These outcomes and achieve their personal goals. These ETFs offer funds will invest in equity securities in a manner that tracks investors another investment option when building long-term the Corporate Knights Global 100 index. diversified portfolios. 52 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisReview of Segment Operating Results The Asset Management segment includes revenue earned on advisory mandates to the Wealth Management segment and 2022 vs. 2021 investments into Mackenzie mutual funds and ETFs by the Revenues Wealth Management segment. Asset management fees are classified as either Asset The Asset Management segment adjusted net earnings are management fees – third party or Asset management fees – presented in Table 18. Adjusted net earnings for the fourth Wealth Management. quarter of 2022 were $51.3 million, a decrease of 21.4% from • Net asset management fees – third party is comprised the fourth quarter in 2021 and a decrease of 12.3% from of the following: the prior quarter. Adjusted net earnings for the year ended December 31, 2022 were $213.2 million, a decrease of 11.5% from 2021. Adjusted earnings before interest and taxes for the fourth quarter of 2022 were $76.0 million, a decrease of 17.7% from the fourth quarter in 2021 and a decrease of 11.0% from the prior quarter. Adjusted earnings before interest and taxes for the year ended December 31, 2022 were $313.1 million, a decrease of 9.4% from 2021. Table 18: Operating Results – Asset Management Three months ended ($ millions) Revenues Asset management Asset management fees – third party Redemption fees Dealer compensation expenses Asset-based compensation Sales-based compensation Net asset management fees – third party Asset management fees – Wealth Management Net asset management Net investment income and other Expenses Advisory and business development Operations and support Sub-advisory Adjusted earnings before interest and taxes(1) Interest expense Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) - Asset management fees – third party consists of management and administration fees earned from our investment funds and management fees from our third party sub-advisory, institutional and other accounts. The largest component is management fees from our investment funds. 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 2022 Dec. 31 2022 Sep. 30 2021 Dec. 31 2022 Sep. 30 Change 2021 Dec. 31 $ 232.5 $ 234.7 $ 265.4 (0.9)% (12.4)% 0.7 233.2 (76.9) – (76.9) 156.3 27.3 183.6 5.6 189.2 21.3 90.9 1.0 0.7 235.4 (77.5) – (77.5) 157.9 27.3 185.2 3.8 189.0 16.4 86.0 1.2 113.2 103.6 76.0 5.9 70.1 18.8 51.3 $ 85.4 5.9 79.5 21.0 $ 58.5 $ 1.4 266.8 (88.1) (3.6) (91.7) 175.1 30.0 205.1 1.3 206.4 24.1 88.3 1.6 114.0 92.4 5.9 86.5 21.2 65.3 – (0.9) (0.8) – (0.8) (1.0) – (0.9) 47.4 0.1 29.9 5.7 (16.7) 9.3 (11.0) – (11.8) (10.5) (50.0) (12.6) (12.7) (100.0) (16.1) (10.7) (9.0) (10.5) N/M (8.3) (11.6) 2.9 (37.5) (0.7) (17.7) – (19.0) (11.3) (12.3) % (21.4)% (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. 53 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 18: Operating Results – Asset Management (continued) Twelve months ended ($ millions) Revenues Asset management Asset management fees – third party Redemption fees Dealer compensation expenses Asset-based compensation Sales-based compensation Net asset management fees – third party Asset management fees – Wealth Management Net asset management Net investment income and other Expenses Advisory and business development Operations and support Sub-advisory Adjusted earnings before interest and taxes(1) Interest expense Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) 2022 Dec. 31 2021 Dec. 31 Change $ 962.9 $ 1,007.0 3.1 966.0 (320.3) (7.3) (327.6) 638.4 111.7 750.1 5.7 755.8 79.4 358.4 4.9 442.7 313.1 23.5 289.6 76.4 4.5 1,011.5 (335.8) (19.5) (355.3) 656.2 114.6 770.8 5.8 776.6 88.7 335.6 6.9 431.2 345.4 23.6 321.8 81.0 (4.4)% (31.1) (4.5) (4.6) (62.6) (7.8) (2.7) (2.5) (2.7) (1.7) (2.7) (10.5) 6.8 (29.0) 2.7 (9.4) (0.4) (10.0) (5.7) $ 213.2 $ 240.8 (11.5)% (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. rates than exchange traded funds, fixed income mandates and on a low load purchase option. Mackenzie stopped and retail mutual fund accounts have higher management selling deferred sales charge purchase options and low fee rates than sub-advised and institutional accounts. The load purchase options as of June 1, 2022, in accordance majority of Mackenzie’s mutual fund assets are retail and with regulatory changes. sold through third party financial advisors. • Asset management fees – Wealth Management - Redemption fees – consists of fees earned from the consists of sub-advisory fees earned from the Wealth redemptions of mutual fund assets sold on a deferred Management segment. 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. - Dealer compensation expenses – consists of asset- based and sales-based compensation. Asset-based compensation represents trailing commissions paid to dealers 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. Sales-based compensation are paid to dealers on the sale of mutual funds under the deferred sales charge purchase option Net asset management fees – third party were $156.3 million for the three months ended December 31, 2022, a decrease of $18.8 million or 10.7% from $175.1 million last year. The decrease in net asset management fees – third party was due to an 11.1% decrease in average assets under management, as shown in Table 16, offset by an increase in the net asset management fee rate. Mackenzie’s net asset management fee rate was 55.1 basis points for the three months ended December 31, 2022, compared to 54.8 basis points in the comparative period in 2021. The increase in rate was mostly driven by lower selling commissions. Net asset management fees – third party were $638.4 million for the twelve months ended December 31, 2022, a decrease of $17.8 million or 2.7% from $656.2 million last year. The decrease in net asset management fees – third party was primarily due to a 2.6% decrease in average assets under management, 54 2022 IGM Financial Inc. Annual Report | Management's Discussion and Analysisas shown in Table 16. Mackenzie’s net asset management Sub-advisory expenses were $1.0 million for the three months fee rate was 54.2 basis points for the twelve months ended ended December 31, 2022, compared to $1.6 million in 2021. December 31, 2022, consistent with 2021. Expenses for the twelve months ended December 31, 2022 Management fees – Wealth Management were $27.3 million for the three months ended December 31, 2022, a decrease of $2.7 million or 9.0% from $30.0 million last year. The decrease in management fees was primarily due to an 8.4% decrease in average assets under management. Mackenzie’s management fee rate was 14.7 basis points for the three months ended December 31, 2022 compared to 14.8 basis points in the comparative period in 2021. Management fees – Wealth Management were $111.7 million for the twelve months ended December 31, 2022, a decrease of $2.9 million or 2.5% from $114.6 million last year. The decrease in management fees was due to a 2.2% decrease in average assets under management. Mackenzie’s management fee rate was 14.7 basis points for the twelve months ended December 31, 2022, consistent with 2021. Net investment income and other primarily 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 $5.6 million for the three months ended December 31, 2022 compared to $1.3 million last year, and was $5.7 million for the twelve months ended December 31, 2022 compared to $5.8 million last year. Expenses Mackenzie incurs advisory and business development expenses that primarily include wholesale distribution activities and these costs vary directly with assets or sales levels. Advisory and business development expenses were $21.3 million for the three months ended December 31, 2022, a decrease of $2.8 million or 11.6% from $24.1 million in 2021. Expenses for the twelve months ended December 31, 2022 were $4.9 million, compared to $6.9 million last year, due to lower sub-advisory assets. Interest Expense Interest expense, which includes allocated interest expense on long-term debt and interest expense on leases, totalled $5.9 million in the fourth quarter of 2022, unchanged from the comparative period in 2021. Interest expense for the twelve month period was $23.5 million compared to $23.6 million in 2021. Long-term debt interest expense is calculated based on a long-term debt allocation of $0.4 billion to Mackenzie. Q4 2022 vs. Q3 2022 Revenues Net asset management fees – third party were $156.3 million for the current quarter, a decrease of $1.6 million or 1.0% from $157.9 million in the third quarter. Factors contributing to the net decrease are as follows: • Average assets under management were $112.7 billion in the current quarter, a decrease of 0.7% from the prior quarter. • Net asset management fee rate was 55.1 basis points for the current quarter compared to 55.2 basis points in the third quarter. Management fees – Wealth Management were $27.3 million in the current quarter, unchanged from the prior quarter. The decline in average assets under management was offset by an increase in the management fee rate. Average assets under management were $73.6 billion in the current quarter, a decrease of 0.4% from the prior quarter. The management fee rate was 14.7 basis points in the current quarter, compared to 14.6 basis points in the third quarter. were $79.4 million, a decrease of $9.3 million or 10.5% from Net investment income and other was $5.6 million for the $88.7 million last year. The decline in the three and twelve current quarter, compared to $3.8 million in the third quarter. month periods was attributed to lower wholesaler commissions consistent with the decline in net investment fund net sales. Expenses Operations and support includes costs associated with business operations, including technology and business processes, in-house investment management and product shelf management, corporate management and support functions. These expenses primarily reflect compensation, technology and other service provider expenses. Operations and support expenses were $90.9 million for the three months ended December 31, 2022, an increase of $2.6 million or 2.9% from $88.3 million in 2021. Expenses for the twelve months ended December 31, 2022 were $358.4 million, an increase of $22.8 million or 6.8% from $335.6 million last year. Advisory and business development expenses were $21.3 million for the current quarter, an increase of $4.9 million or 29.9% from $16.4 million in the third quarter. The increase in the current quarter is due to higher wholesaler commissions and the timing of certain expenses. Operations and support expenses were $90.9 million for the current quarter, an increase of $4.9 million or 5.7% from $86.0 million compared to the third quarter. Sub-advisory expenses were $1.0 million for the current quarter, compared to $1.2 million in the third quarter. 55 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportStrategic Investments and Other Review of Segment Operating Results The Strategic Investments and Other segment includes investments in Great-West Lifeco Inc. (Lifeco), China Asset Management Co., Ltd. (ChinaAMC), Northleaf Capital Group Ltd. (Northleaf), Wealthsimple Financial Corp. (Wealthsimple), Portage Ventures LPs. (Portage), and unallocated capital. Earnings from the Strategic Investments and Other segment include the Company’s proportionate share of earnings of its associates, Lifeco, ChinaAMC and Northleaf as well as net investment income on unallocated capital. On January 12, 2023, the Company closed the previously announced transaction to acquire Power’s 13.9% interest in ChinaAMC as discussed in the Consolidated Financial Position section of this MD&A. To partially fund the transaction, IGM Financial sold 1.6% of its 4% interest in Lifeco. Assets held by the Strategic Investments and Other segment 2022 vs. 2021 The proportionate share of associates’ earnings increased by $14.7 million in the fourth quarter of 2022 compared to the fourth quarter of 2021 and increased by $14.3 million in the twelve months ended December 31, 2022 compared to 2021. These earnings reflect equity earnings from Lifeco, ChinaAMC and Northleaf, as discussed in the Consolidated Financial Position section of this MD&A. The increase in the three month period was due to increases in the proportionate share of Lifeco’s earnings of $10.5 million and Northleaf’s earnings of $7.4 million, offset in part by a decrease in the proportionate share of ChinaAMC’s earnings of $2.8 million. The increase in the twelve month period was due to increases in the proportionate share of Lifeco’s earnings of $3.1 million and Northleaf’s earnings of $16.0 million, offset in part by a decrease in the proportionate share of ChinaAMC’s earnings are included in Table 19. of $4.4 million. Unallocated capital represents capital not allocated to any of the operating companies and which would be available for investment, debt repayment, distribution to shareholders or other corporate purposes. This capital is invested in highly liquid, high quality financial instruments in accordance with the Company’s Investment Policy. Strategic Investments and Other segment adjusted net earnings are presented in Table 20. Net investment income and other was $7.4 million in the fourth quarter of 2022, an increase of $6.3 million from $1.1 million in 2021. Net investment income and other was $14.6 million for the twelve month period in 2022, an increase of $11.9 million from $2.7 million in 2021. The increase in both the three and twelve month periods from 2021 was primarily related to interest rate increases earned on the Company’s unallocated capital. Table 19: Total Assets – Strategic Investments and Other ($ millions) Investments in associates Lifeco ChinaAMC Northleaf Other FVTOCI investments Wealthsimple (direct investment only) Portage and other investments Unallocated capital and other Total assets Lifeco fair value 56 December 31, 2022 December 31, 2021 $ 1,075.2 $ 1,020.8 787.2 284.5 40.1 2,187.0 484.1 118.5 602.6 782.3 $ $ 3,571.9 1,168.3 $ $ 768.7 258.8 – 2,048.3 1,133.5 157.9 1,291.4 767.5 4,107.2 1,415.5 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisTable 20: Operating Results – Strategic Investments and Other Three months ended ($ millions) Revenues Net investment income and other Proportionate share of associates’ earnings Investment in Lifeco Investment in ChinaAMC Investment in Northleaf Other Expenses Operations and support Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) Non-controlling interest Adjusted net earnings available to common shareholders(1) $ Twelve months ended ($ millions) Revenues Net investment income and other Proportionate share of associates’ earnings Investment in Lifeco Investment in ChinaAMC Investment in Northleaf Other Expenses Operations and support Adjusted earnings before income taxes(1) Income taxes Adjusted net earnings(1) Non-controlling interest 2022 Dec. 31 2022 Sep. 30 2021 Dec. 31 2022 Sep. 30 Change 2021 Dec. 31 $ 7.4 $ 4.7 $ 1.1 57.4 % N/M % 40.9 14.2 10.7 (0.4) 65.4 72.8 0.4 72.4 4.8 67.6 2.1 65.5 $ 27.6 14.7 4.6 – 46.9 51.6 1.1 50.5 2.4 48.1 0.9 47.2 $ 30.4 17.0 3.3 – 50.7 51.8 1.3 50.5 1.5 49.0 0.7 48.3 48.2 (3.4) 132.6 N/M 39.4 41.1 34.5 (16.5) 224.2 N/M 29.0 40.5 (63.6) (69.2) 43.4 100.0 40.5 133.3 43.4 220.0 38.0 200.0 38.8 % 35.6 % 2022 Dec. 31 2021 Dec. 31 Change $ 14.6 $ 2.7 N/M % 128.2 57.2 25.7 (0.4) 210.7 225.3 4.9 220.4 9.6 210.8 5.1 125.1 61.6 9.7 – 196.4 199.1 4.9 194.2 4.9 189.3 2.0 2.5 (7.1) 164.9 N/M 7.3 13.2 – 13.5 95.9 11.4 155.0 Adjusted net earnings available to common shareholders(1) $ 205.7 $ 187.3 9.8 % (1) A non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. Q4 2022 vs. Q3 2022 The proportionate share of associates’ earnings was $65.4 million in the fourth quarter of 2022, an increase of $18.5 million from the third quarter of 2022, primarily due to increases in the proportionate share of Lifeco earnings and Northleaf earnings. Net investment income and other was $7.4 million in the fourth quarter of 2022, an increase of $2.7 million from $4.7 million in the third quarter. The increase in Net investment income and other for the fourth quarter of 2022 compared to the prior quarter primarily related to interest rate increases earned on the Company’s unallocated capital. 57 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportIGM Financial Inc. Consolidated Financial Position IGM Financial’s total assets were $18.9 billion at December 31, Portage consists of early-stage investment funds dedicated 2022, compared to $17.7 billion at December 31, 2021. to backing innovating financial services companies and are Other Investments The composition of the Company’s securities holdings is detailed in Table 21. Fair Value Through Other Comprehensive Income (FVTOCI) Gains and losses on FVTOCI investments are recorded in Other comprehensive income. Corporate Investments controlled by Power Corporation of Canada. The total fair value of Corporate investments of $603 million at December 31, 2022 is presented net of certain costs incurred within the limited partnership structures holding the underlying investments. Fair Value Through Profit or Loss (FVTPL) Securities classified as FVTPL include equity securities and proprietary investment funds. Gains and losses are recorded in Net investment income and other in the Consolidated Statements of Earnings. Corporate investments is primarily comprised of the Company’s Certain proprietary investment funds are consolidated where investments in Wealthsimple Financial Corp. (Wealthsimple), the Company has made the assessment that it controls the and Portag3 Ventures LP, Portag3 Ventures II LP and Portage investment fund. The underlying securities of these funds are Ventures III LP (Portage) and are recorded at FVTOCI. classified as FVTPL. Wealthsimple is a financial company that provides simple digital tools for growing and managing your money. Loans The Company is the largest shareholder in Wealthsimple with The composition of the Company’s loans is detailed in Table 22. a combined direct and indirect interest of 24% and fair value of $492 million at December 31, 2022, unchanged from the prior quarter and a decline of $661 million from $1,153 million at December 31, 2021. Fair value is determined by using Loans consisted of residential mortgages and represented 26.6% of total assets at December 31, 2022, compared to 30.3% at December 31, 2021. observable transactions in the investments’ securities, Loans measured at amortized cost are primarily comprised where available, discounted cash flows, and other valuation of residential mortgages sold to securitization programs metrics, including revenue multiples, used in the valuation sponsored by third parties that in turn issue securities to of comparable public companies. This change in fair value is investors. An offsetting liability, Obligations to securitization consistent with changes in stock market valuations and public entities, has been recorded and totalled $4.6 billion market peer multiples, as well as company revenue and other at December 31, 2022, compared to $5.1 billion at financial forecasts. December 31, 2021. Table 21: Other Investments ($ millions) Fair value through other comprehensive income Corporate investments Fair value through profit or loss Equity securities Proprietary investment funds 58 December 31, 2022 December 31, 2021 Cost Fair Value Cost Fair Value $ 242.7 $ 602.6 $ 226.2 $ 1,291.4 12.7 156.7 169.4 12.9 159.0 171.9 1.2 101.3 102.5 1.6 105.0 106.6 $ 412.1 $ 774.5 $ 328.7 $ 1,398.0 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisTable 22: Loans ($ millions) Amortized cost Less: Allowance for expected credit losses Fair value through profit or loss December 31, 2022 December 31, 2021 $ 5,022.3 $ 5,297.0 0.8 5,021.5 – 0.6 5,296.4 57.4 $ 5,021.5 $ 5,353.8 The Company holds loans pending sale or securitization. Loans term of the mortgages, ii) the component of swaps entered into measured at fair value through profit or loss are residential under the CMB Program whereby the Company pays coupons mortgages held temporarily by the Company pending on Canada Mortgage Bonds and receives investment returns sale. Loans held for securitization are carried at amortized on the reinvestment of repaid mortgage principal, are recorded cost. Total loans being held pending sale or securitization at fair value, and iii) cash reserves held under the ABCP are $371.9 million at December 31, 2022, compared to $315.8 million at December 31, 2021. program are carried at amortized cost. In the fourth quarter of 2022, the Company securitized loans Residential mortgages originated by IG Wealth Management through its mortgage banking operations with cash proceeds are funded primarily through sales to third parties on a fully of $351.4 million compared to $283.7 million in 2021. Additional serviced basis, including Canada Mortgage and Housing information related to the Company’s securitization activities, Corporation (CMHC) or Canadian bank sponsored securitization including the Company’s hedges of related reinvestment programs. At December 31, 2022, IG Wealth Management and interest rate risk, can be found in the Financial Risk serviced $9.0 billion of residential mortgages, including section of this MD&A and in Note 7 to the Consolidated $2.2 billion originated by subsidiaries of Lifeco. Financial Statements. Securitization Arrangements Through the Company’s mortgage banking operations, residential mortgages originated by IG Wealth Management mortgage planning specialists are sold to securitization trusts sponsored by third parties that in turn issue securities to investors. The Company securitizes residential mortgages through the CMHC sponsored National Housing Act Mortgage- Backed Securities (NHA MBS) and the Canada Mortgage Bond Program (CMB Program) and through Canadian bank- Investment in Associates Great-West Lifeco Inc. (Lifeco) At December 31, 2022, the Company held a 4.0% equity interest in Lifeco. IGM Financial and Lifeco are controlled by Power Corporation of Canada. The equity method is used to account for IGM Financial’s investment in Lifeco, as it exercises significant influence. Changes in the carrying value for the three and twelve months sponsored asset-backed commercial paper (ABCP) programs. ended December 31, 2022 compared with 2021 are shown in The Company retains servicing responsibilities and certain Table 23. elements of credit risk and prepayment risk associated with the transferred assets. The Company’s credit risk on its securitized mortgages is partially 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 On January 12, 2023, to partially fund the acquisition of an additional 13.9% interest in ChinaAMC, the Company sold 15,200,662 common shares of Lifeco to Power for cash consideration of $553 million, which reduced the Company’s equity interest in Lifeco from 4.0% to 2.4%. The Company will continue to equity account for its 2.4% interest in Lifeco. IGM Financial’s accounting gain on sale of the Lifeco Shares is approximately $124 million before tax. Lifeco will be implementing IFRS 17 effective January 1, 2023, which will impact the accounting gain ultimately recognized on the sale of Lifeco shares. 59 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 23: Investment in Associates ($ millions) Three months ended Lifeco ChinaAMC Northleaf Other Total Lifeco ChinaAMC Northleaf Total December 31, 2022 December 31, 2021 Carrying value, October 1 $ 1,038.9 $ 764.8 $ 273.8 $ – $ 2,077.5 $ 1,001.5 $ 742.6 $ 255.3 $ 1,999.4 Investment Dividends Proportionate share of: Earnings(1) Other comprehensive income (loss) and other adjustments – (18.3) 40.9 13.7 – – 14.2 8.2 – – 40.5 – 10.7 (2) (0.4) – – 40.5 (18.3) 65.4 21.9 – (18.3) 30.4 7.2 – – 17.0 9.1 0.2 – 0.2 (18.3) 3.3 (2) 50.7 – 16.3 Carrying value, December 31 $ 1,075.2 $ 787.2 $ 284.5 Twelve months ended Carrying value, January 1 $ 1,020.8 $ 768.7 $ 258.8 $ $ 40.1 $ 2,187.0 $ 1,020.8 $ 768.7 $ 258.8 $ 2,048.3 – $ 2,048.3 $ 962.4 $ 720.3 $ 248.5 $ 1,931.2 Investment Dividends Proportionate share of: Earnings(1) – – (73.2) (31.3) – – 40.5 – 40.5 (104.5) – (67.4) 128.2 57.2 25.7 (2) (0.4) 210.7 125.1 Other comprehensive income (loss) and other adjustments (0.6) (7.4) – – (8.0) 0.7 – (26.8) 61.6 13.6 0.6 – 0.6 (94.2) 9.7 (2) 196.4 – 14.3 Carrying value, December 31 $ 1,075.2 $ 787.2 $ 284.5 $ 40.1 $ 2,187.0 $ 1,020.8 $ 768.7 $ 258.8 $ 2,048.3 (1) The proportionate share of earnings from the Company’s investment in associates is recorded in the Strategic Investments and Other segment. (2) The Company’s proportionate share of Northleaf’s earnings, net of Non-controlling interest, was $8.6 million and $20.6 million, respectively, for the three and twelve month periods in 2022 compared to $2.6 million and $7.7 million, respectively, in 2021. China Asset Management Co., Ltd. (ChinaAMC) Northleaf Capital Group Ltd. (Northleaf) Founded in 1998 as one of the first fund management The Company, through an acquisition vehicle held by the companies in China, ChinaAMC has developed and maintained Company’s subsidiary, Mackenzie, holds a 49.9% voting a position among the market leaders in China’s asset interest and a 70% economic interest in Northleaf. The management industry. ChinaAMC’s total assets under management, excluding subsidiary assets under management, were RMB¥ acquisition vehicle is owned 80% by Mackenzie and 20% by Lifeco. Northleaf is a global private equity, private credit and infrastructure fund manager headquartered in Toronto. 1,721.6 billion ($337.6 billion) at December 31, 2022, Mackenzie and Lifeco have an obligation and right to purchase representing an increase of 3.6% (CAD$ 2.2%) from RMB¥ the remaining equity and voting interest in Northleaf 1,661.6 billion ($330.5 billion) at December 31, 2021. commencing in approximately five years from the acquisition The equity method is used to account for the Company’s 13.9% equity interest in ChinaAMC, as it exercises significant influence. Changes in the carrying value for the three and twelve months ended December 31, 2022 are shown in Table 23. The increase in Other comprehensive income of date and extending into future periods. The equity method is used to account for the acquisition vehicle’s 70% economic interest as it exercises significant influence. Significant influence arises from board representation, participating in the policy making process and shared strategic initiatives. $8.1 million in the three months ended December 31, 2022, The Company controls the acquisition vehicle therefore it was due to a 1.0% appreciation of the Chinese yuan relative recognizes the full 70% economic interest in Northleaf and to the Canadian dollar. recognizes Non-controlling interest (NCI) related to Lifeco’s On January 12, 2023, the Company acquired an additional net interest in Northleaf of 14%. 13.9% interest in ChinaAMC for cash consideration of Northleaf’s assets under management, including invested $1.15 billion from Power which increased the Company’s capital and uninvested commitments, were $24.1 billion as at equity interest in ChinaAMC from 13.9% to 27.8%. The December 31, 2022, representing an increase of $4.6 billion or Company will continue to equity account for its 27.8% interest 23.6% from $19.5 billion at December 31, 2021. The increase in ChinaAMC. 60 during the twelve month period was driven by $3.8 billion in new commitments and an increase of $1.2 billion related to foreign exchange on USD denominated assets, offset in part by a decrease of $0.4 billion related to return of capital and other. 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisConsolidated Liquidity and Capital Resources Liquidity Cash and cash equivalents totalled $1,072.9 million at December 31, 2022 compared with $1,292.4 million at compared to $1,547.0 million for 2021. EBITDA before sales commissions excludes the impact of both commissions paid December 31, 2021. Cash and cash equivalents related and commission amortization (refer to Table 1). to the Company’s deposit operations were $0.8 million at December 31, 2022, compared to $1.3 million at December 31, 2021, as shown in Table 24. Client funds on deposit represents cash balances held by clients within their investment accounts and with the offset included in deposit liabilities. Working capital, which consists of current assets less current liabilities, totalled $846.8 million at December 31, 2022 compared with $908.0 million at December 31, 2021 (Table 25). Working capital, which includes unallocated capital, is utilized to: • Finance ongoing operations, including the funding of sales commissions. • Temporarily finance mortgages in its mortgage banking operations. • Pay interest related to long-term debt. • Maintain liquidity requirements for regulated entities. • Pay quarterly dividends on its outstanding common shares. • Finance common share repurchases and retirement of long-term debt. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)(1) For the financial year ($ millions) 1,333 1,294 1,226 1,547 1,426 EBITDA before sales commissions 1,145 1,129 1,087 1,377 1,295 EBITDA after sales commissions 2018 2019 2020 2021 2022 EBITDA before and after sales commissions excluded the following: 2018 – charges related to restructuring and other and the premium paid on the early redemption of debentures. 2019 – the Company’s proportionate share of associate’s one-time charges. • Capital investment in the business and business acquisitions. 2020 – the gain on sale of Personal Capital, gain on sale of Quadrus IGM Financial continues to generate significant cash flows from its operations. Earnings before interest, taxes, depreciation and amortization before sales commissions (EBITDA before sales commissions), a non-IFRS measure (see Non-IFRS Financial Measures and Other Financial Measures), totalled $1,425.6 million for the year ended December 31, 2022, Group of Funds net of acqusition costs, the Company’s proportionate share of associate’s adjustments and restructuring and other. 2021 – additional consideration receivable related to the sale of Personal Capital in 2020. (1) A Non-IFRS financial measure – see Non-IFRS Financial Measures and Other Financial Measures section of this document. Table 24: Deposit Operations – Financial Position As at December 31 ($ millions) Assets Cash and cash equivalents Client funds on deposit Accounts and other receivables Loans Total assets Liabilities and shareholders’ equity Deposit liabilities Other liabilities Shareholders’ equity Total liabilities and shareholders’ equity 2022 2021 $ 0.8 $ 1.3 4,347.4 2,238.6 0.6 9.4 0.6 10.8 $ 4,358.2 $ 2,251.3 $ 4,334.0 $ 2,220.3 15.2 9.0 20.4 10.6 $ 4,358.2 $ 2,251.3 61 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 25: Working Capital As at December 31 ($ millions) Current assets Cash and cash equivalents Client funds on deposit Accounts receivable and other assets Current portion of securitized mortgages and other Current liabilities Accounts and other payables Deposits and certificates Current portion of obligations to securitization entities and other Working capital 2022 2021 $ 1,072.9 $ 1,292.4 4,347.4 462.6 992.2 6,875.1 726.4 4,332.8 969.1 6,028.3 2,238.6 405.0 1,234.5 5,170.5 879.1 2,219.0 1,164.4 4,262.5 $ 846.8 $ 908.0 Earnings before interest, taxes, depreciation and amortization after sales commissions (EBITDA after sales commissions), a non-IFRS measure (see Non-IFRS Financial Measures and Other Financial Measures), totalled $1,294.8 million for the year ended December 31, 2022, compared to $1,376.5 million for 2021. EBITDA after sales commissions excludes the impact of commission amortization (refer to Table 1). 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 Cash and cash equivalents decreased by $219.5 million in 2022 compared to an increase of $520.8 million in 2021. Adjustments to determine net cash from operating activities during the year ended 2022 compared to 2021 consist of non-cash operating activities offset by cash operating activities: • The add-back of amortization of capitalized sales commissions offset by the deduction of capitalized sales commissions paid. • The add-back of amortization of capital, intangible and other assets. • The deduction of investment in associates’ equity earnings offset by dividends received. • The add-back of pension and other post-employment Table 26 – Cash Flows is a summary of the Consolidated benefits offset by cash contributions. Statements of Cash Flows which forms part of the Consolidated Financial Statements for the year ended December 31, 2022. • Changes in operating assets and liabilities and other. • The deduction of restructuring provision cash payments. Table 26: Cash Flows Twelve months ended ($ millions) Operating activities Earnings before income taxes Income taxes paid Adjustments to determine net cash from operating activities Financing activities Investing activities Change in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 62 2022 Dec. 31 2021 Dec. 31 Change $ 1,122.9 $ 1,267.7 (330.9) (54.3) 737.7 (1,091.9) 134.7 (219.5) 1,292.4 (153.5) (170.6) 943.6 (1,521.9) 1,099.1 520.8 771.6 (11.4)% (115.6) 68.2 (21.8) 28.3 (87.7) N/M 67.5 $ 1,072.9 $ 1,292.4 (17.0)% 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisFinancing activities during the year ended December 31, 2022 compared to 2021 related to: • An increase in obligations to securitization entities of $1,171.0 million and repayments of obligations to securitization entities of $1,626.9 million in 2022 compared to an increase in obligations to securitization entities of $1,428.9 million and repayments of obligations to securitization entities of $2,442.7 million in 2021. Accumulated Other Comprehensive Income Accumulated other comprehensive income totalled $362.8 million at December 31, 2022, compared to $883.1 million at December 31, 2021, as detailed in Table 27. The gain/loss related to Employee benefits is primarily driven by changes in discount rates. During the year ended • The purchase of 2,890,000 common shares in 2022 under December 31, 2022, discount rates have increased by IGM Financial’s normal course issuer bid at a cost of approximately 1.95%, resulting in a gain through Other $115.7 million. There were no purchases in 2021. comprehensive income of $137.0 million ($100.0 million • The payment of regular common share dividends which after tax). totalled $537.2 million in 2022 compared to $537.0 million in 2021. The loss related to Other investments in 2022 relates primarily to changes in fair value of Wealthsimple which is consistent with Investing activities during the year ended December 31, 2022 the decline in stock markets and public market peer valuations, compared to 2021 primarily related to: and Wealthsimple focusing on its core business lines and • The purchases of other investments totalling $150.5 million revising revenue expectations. and sales of other investments with proceeds of $120.1 million in 2022 compared to $131.8 million and $348.2 million, respectively, in 2021. The loss for Investments in associates in 2022 relates to the Company’s portion of the associates’ Other comprehensive income which consists primarily of employee benefits, foreign • An increase in loans of $1,274.4 million with repayments of exchange translation and available for sale securities. loans and other of $1,584.4 million in 2022 compared to $1,776.1 million and $2,744.7 million, respectively, in 2021, primarily related to residential mortgages in the Company’s mortgage banking operations. • Net cash used in additions to intangible assets and acquisitions and other was $107.1 million in 2022 compared to $75.3 million in 2021. In 2022, realized gains of $27.8 million ($24.0 million after- tax) related to other investments were transferred from Accumulated other comprehensive income to Other retained earnings. In 2021, IGM Financial Inc. disposed of a portion of its investment in Wealthsimple and a realized gain of $241 million ($209 million after-tax) was transferred from Accumulated other comprehensive income to Other retained earnings. Table 27: Accumulated Other Comprehensive Income (Loss) ($ millions) 2022 Balance, January 1 Other comprehensive income (loss) Transfer out of fair value through other comprehensive income Balance, December 31 2021 Balance, January 1 Other comprehensive income (loss) Transfer out of fair value through other comprehensive income Balance, December 31 Employee Benefits Other Investments Investment in Associates and Other $ (95.7) $ 919.2 $ $ 100.0 – 4.3 (197.0) 101.3 – $ $ (585.5) (24.0) 309.7 293.5 834.5 (208.8) $ (95.7) $ 919.2 $ $ $ $ 59.6 (10.8) – 48.8 39.9 19.7 – 59.6 Total $ 883.1 $ $ (496.3) (24.0) 362.8 136.4 955.5 (208.8) $ 883.1 63 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportCapital 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 capital 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 and common shareholders’ equity which totalled $8.3 billion at December 31, 2022, compared to $8.6 billion at December 31, 2021. 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 $2.1 billion at December 31, 2022, unchanged from December 31, 2021. Long-term debt is comprised of debentures which are senior Other activities in 2022 included the declaration of common share dividends of $536.1 million or $2.25 per share. Changes in common share capital are reflected in the Consolidated Statements of Changes in Shareholders’ Equity. Standard & Poor’s (S&P) current rating on the Company’s senior unsecured debentures is “A” with a stable outlook. DBRS Morningstar’s current rating on the Company’s senior unsecured debentures is “A (High)” with a stable rating trend. Credit ratings are intended to provide investors with an independent measure of the credit quality of the securities of a company and are indicators of the likelihood of payment and the capacity of a company to meet its obligations in accordance with the terms of each obligation. Descriptions of the rating categories for each of the agencies set forth below have been obtained from the respective rating agencies’ websites. These ratings are not a recommendation to buy, sell or hold the securities of the Company and do not address market price or other factors that might determine suitability of a specific security for a particular investor. The ratings also may not reflect the potential impact of all risks on the value of securities and are subject to revision or withdrawal at any time by the rating organization. The A rating assigned to IGM Financial’s senior unsecured debentures by S&P is the sixth highest of the 22 ratings used for long-term debt. This rating indicates S&P’s view that the Company’s capacity to meet its financial commitment on the obligation is strong, but the obligation is somewhat more unsecured debt obligations of the Company subject to standard covenants, including negative pledges, but which do not include Capital any specified financial or operational covenants. As at December 31 ($ millions) The Company purchased 2,890,000 common shares during the year ended December 31, 2022 at a cost of $115.7 million under its normal course issuer bid (refer to Note 18 to the Consolidated Financial Statements). The Company commenced 6,452 6,599 a normal course issuer bid on March 1, 2022 to purchase for cancellation up to 6 million of its common shares to mitigate 1,850 2,100 the dilutive effect of stock options issued under the Company’s stock option plan and for other capital management purposes. 150 8,601 51 7,143 2,100 49 2,100 8,363 67 2,100 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. 4,452 4,499 4,994 6,450 6,196 2018 2019 2020 2021 2022 Non-controlling Interest Long-term Debt Perpetual Preferred Shares Common Shareholders’ Equity 64 2022 IGM Financial Inc. Annual Report | Management's Discussion and Analysissusceptible to the adverse effects of changes in circumstances • Loans classified as held for trading are valued using market and economic conditions than obligations in higher interest rates for loans with similar credit risk and maturity, rated categories. specifically lending rates offered to retail borrowers by The A (High) rating assigned to IGM Financial’s senior unsecured debentures by DBRS Morningstar is the fifth highest of the 26 ratings used for long-term debt. Under the DBRS Morningstar 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, but of lesser financial institutions. • Loans classified as amortized cost are valued by discounting the expected future cash flows at prevailing market yields. • Valuation methods used for Other investments classified as FVOCI include comparison to market transactions with arm’s length third parties, use of market multiples, and discounted credit quality than AA. While this is a favourable rating, entities cash flow analysis. in the A (High) category may be vulnerable to future events, • Obligations to securitization entities are valued by but qualifying negative factors are considered manageable. discounting the expected future cash flows at prevailing Financial Instruments Table 28 presents the carrying amounts and fair values of financial assets and financial liabilities. The table excludes fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. These items include cash and cash equivalents, accounts and other receivables, certain other financial assets, accounts payable and accrued liabilities and certain other financial liabilities. Fair value is determined using the following methods and assumptions: • Other investments and other financial assets and financial liabilities are valued using quoted prices from active markets, 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 24 of the Annual Financial Statements which provides additional discussion on the determination of fair value of financial instruments. when available. When a quoted market price is not readily Although there were changes to both the carrying values and available, valuation techniques are used that require fair values of financial instruments, these changes did not have assumptions related to discount rates and the timing and a material impact on the financial condition of the Company for amount of future cash flows. Wherever possible, observable the twelve months ended December 31, 2022. market inputs are used in the valuation techniques. Table 28: Financial Instruments ($ millions) Financial assets recorded at fair value Other investments December 31, 2022 December 31, 2021 Carrying Value Fair Value Carrying Value Fair Value – Fair value through other comprehensive income – Fair value through profit or loss $ 602.6 171.9 $ 602.6 171.9 $ 1,291.4 $ 1,291.4 106.6 106.6 Loans – Fair value through profit or loss Derivative financial instruments Financial assets recorded at amortized cost Loans – Amortized cost Financial liabilities recorded at fair value Derivative financial instruments Financial liabilities recorded at amortized cost Deposits and certificates Obligations to securitization entities Long-term debt – 63.7 – 63.7 57.4 41.2 57.4 41.2 5,021.5 4,905.5 5,296.4 5,354.2 51.6 51.6 17.8 17.8 4,334.0 4,610.4 2,100.0 4,334.0 4,544.6 2,013.9 2,220.3 5,057.9 2,100.0 2,220.5 5,146.4 2,544.4 65 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportRisk Management IGM Financial is exposed to a variety of risks that are inherent • The Governance and Nominating Committee oversees in our business activities. Our ability to manage these risks corporate governance practices. is key to our ongoing success. The Company emphasizes a strong risk management culture and the implementation of an effective risk management approach. Our 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. Fundamental to our enterprise risk management program is protecting and enhancing our reputation. Risk Management Framework The Company’s risk management approach is undertaken through our comprehensive Enterprise Risk Management (ERM) Framework which is composed of five core elements: risk governance, risk appetite, risk principles, a defined risk management process, and risk management culture. The ERM Framework is established under our ERM Policy, which is approved by the Executive Risk Management Committee. Risk Governance Our risk governance structure emphasizes ownership of risk management in each business unit and oversight by an Executive Risk Management Committee accountable to the Risk Committee of the Board (Risk Committee) and ultimately to the Board of Directors. Additional oversight is provided by the ERM, Compliance and Internal Audit Departments. The Risk Committee provides primary oversight and carries out its risk management mandate. The Risk Committee is responsible for assisting the Board in reviewing and overseeing the risk governance structure and risk management program of the Company 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. Other specific risks are managed with the support of the following Board committees: • The Audit Committee has specific risk oversight responsibilities in relation to financial disclosure, internal controls and the control environment as well as our compliance activities, including administration of the Code of Conduct. • The Human Resource Committee oversees compensation policies and practices. • The Related Party and Conduct Review Committee oversees conflicts of interest. Management oversight for risk management resides with the Executive Risk Management Committee which is comprised of the Chief Executive Officers of IGM Financial, IG Wealth Management, Mackenzie Investments and Investment Planning Counsel, the Chief Financial Officer, the General Counsel, the Chief Operating Officer, and the Chief Human Resources Officer. In April 2022, the Company appointed its first Chief Risk Officer who chairs the Executive Risk Management Committee. The committee is responsible for oversight of IGM Financial’s risk management process by: i) establishing and maintaining the risk framework and policy; ii) defining the risk appetite; iii) ensuring our 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 operating companies have overall responsibility for overseeing risk management of their respective companies. The Company has assigned responsibility for risk management using the Three Lines of Defence model, with the First Line reflecting the business units having primary responsibility for risk management, supported by Second Line risk management functions and a Third Line (the Internal Audit function) providing assurance and validation of the design and effectiveness of the ERM Framework. First Line of Defence 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. Second Line of Defence The Enterprise Risk Management (ERM) Department provides oversight, analysis and reporting to the Risk Management Committee on the level of risks relative to the established risk appetite for all activities of the Company. Other responsibilities include: i) developing and maintaining the enterprise risk 66 2022 IGM Financial Inc. Annual Report | Management's Discussion and Analysismanagement program and framework, ii) managing the Significant risks that may adversely affect the Company’s ability enterprise risk management process, and iii) providing guidance to achieve its strategic and business objectives are identified and training to business unit and support function leaders. through the Company’s ongoing risk management process. The Company has a number of committees of senior business We use a consistent methodology across our organizations leaders which provide oversight of specific business risks, and business units for identification and assessment of risks. including the Financial Risk Management and Operational Risks are assessed by evaluating the impact and likelihood of Risk Management committees. These committees perform the potential risk event after consideration of controls and any critical reviews of risk assessments, risk management practices risk transfer activities. The results of these assessments are and risk response plans developed by business units and considered relative to risk appetite and tolerances and may support functions. result in action plans to adjust the risk profile. Other oversight accountabilities reside with the Company’s Risk assessments are monitored and reviewed on an Legal and Compliance Departments which are responsible ongoing basis by business units and by oversight areas for ensuring compliance with policies, laws and regulations. including the ERM Department. The ERM Department Third Line of Defence promotes and coordinates communication and consultation to support effective risk management and escalation. The The Internal Audit Department is the third line of defence and ERM Department regularly reports on the results of risk provides independent assurance to senior management and assessments and on the assessment process to the Risk the Board of Directors on the effectiveness of the Company’s Management Committee and to the Board Risk Committee. risk management policies, processes and practices. Risk Appetite and Risk Principles Risk Management Culture Risk management is intended to be everyone’s responsibility The Risk Management Committee establishes the Company’s within the organization. The ERM Department engages appetite for different types of risk through the Risk Appetite all business units in risk workshops and surveys to foster Framework. Under the Risk Appetite Framework, one of four awareness and facilitate incorporation of our risk framework appetite levels is established for each risk type and business into our business activities. activity of the Company. These appetite levels range from those where the Company has no appetite for risk and seeks to minimize any losses, to those where the Company readily accepts exposure while seeking to ensure that risks are well understood and managed. These appetite levels guide our business units as they engage in business activities, and We have an established business planning process which reinforces our risk management culture. Our compensation programs are typically objectives-based, and do not encourage or reward excessive or inappropriate risk taking, and often are aligned specifically with risk management objectives. inform them in establishing policies, limits, controls and risk Our risk management program emphasizes integrity, ethical transfer activities. A Risk Appetite Statement and Risk Principles provide further guidance to business leaders and employees as they conduct risk management activities. The Risk Appetite Statement’s emphasis is to maintain the Company’s reputation and brand, ensure financial flexibility, and focus on mitigating operational risk. Risk Management Process The Company’s risk management process is designed to foster: • Ongoing assessment of risks and tolerance in a changing operating environment. • Appropriate identification and understanding of existing and emerging risks and risk response. • Timely monitoring and escalation of risks based upon changing circumstances. practices, responsible management and measured risk-taking with a long-term view. Our standards of integrity and ethics are reflected within our Code of Conduct which applies to directors, officers and employees. Key Risks of the Business Significant risks that may adversely affect our ability to achieve strategic and business objectives are identified through our ongoing risk management process. We use a consistent methodology across our organizations and business units to identify and assess risks, considering factors both internal and external to the organization. These risks are broadly grouped into five categories: financial, operational, strategic, business, and environmental and social. 67 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual Report1) Financial Risk Liquidity and Funding Risk This is the risk of an 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. Our liquidity management practices include: • Maintaining liquid assets and lines of credit to satisfy near term liquidity needs. • Ensuring effective controls over liquidity management processes. sales under the CMB Program consists of participation in new CMB issues and reinvestment of principal repayments held in the Principal Reinvestment Accounts. The Company’s continued ability to fund residential mortgages through Canadian bank- sponsored securitization trusts and NHA MBS is dependent on securitization market conditions and government regulations 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 and is subject to change. • Performing regular cash forecasts and stress testing. The Company’s contractual obligations are reflected in • Regular assessment of capital market conditions and the Company’s ability to access bank and capital market funding. Table 29. The maturity schedule for long-term debt of $2.1 billion • Ongoing efforts to diversify and expand long-term mortgage is reflected in the accompanying chart (Long-Term Debt funding sources. Maturity Schedule). • Oversight of liquidity management by the Financial Risk Management Committee, a committee of finance and other business leaders. 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 A key funding requirement is the funding of advisor network Schedule I Canadian chartered banks totalled $825 million at compensation paid for the distribution of financial products December 31, 2022, unchanged from December 31, 2021. The and services. This compensation continues to be paid from lines of credit at December 31, 2022 consisted of committed operating cash flows. The Company also maintains sufficient liquidity to fund and temporarily hold mortgages pending sale or securitization to long-term funding sources and to manage any derivative collateral requirements. Through its mortgage banking operations, residential mortgages are sold to third parties lines of $650 million and uncommitted lines of $175 million, unchanged from December 31, 2021. Any advances made by a bank under the uncommitted lines of credit are at the bank’s sole discretion. As at December 31, 2022 and December 31, 2021, the Company was not utilizing its committed lines of credit or its uncommitted lines of credit. including certain mutual funds, institutional investors through The actuarial valuation for funding purposes related to the private placements, Canadian bank-sponsored securitization Company’s registered defined benefit pension plan, based trusts, and by issuance and sale of National Housing Act on a measurement date of December 31, 2021, was completed. Mortgage-Backed Securities (NHA MBS) securities including The valuation determines the plan surplus or deficit on sales to Canada Housing Trust under the CMB Program. both a solvency and going concern basis. The solvency basis The Company maintains committed capacity within certain determines the relationship between the plan assets and its Canadian bank-sponsored securitization trusts. Capacity for liabilities assuming that the plan is wound up and settled on Table 29: Contractual Obligations As at December 31, 2022 ($ millions) Derivative financial instruments Deposits and certificates(1) Obligations to securitization entities Leases(2) Long-term debt Pension funding(3) Demand $ – $ 4,332.5 – – – – Less than 1 Year 21.3 0.3 947.8 31.5 – 2.0 $ 1–5 Years 30.3 0.5 3,651.3 95.5 525.0 – After 5 Years $ – $ 0.7 11.3 118.8 1,575.0 – Total 51.6 4,334.0 4,610.4 245.8 2,100.0 2.0 Total contractual obligations $ 4,332.5 $ 1,002.9 $ 4,302.6 $ 1,705.8 $ 11,343.8 (1) Deposits and certificates due on demand are primarily offset by client funds held on deposit. (2) Includes remaining lease payments related to office space and equipment used in the normal course of business. (3) Pension funding requirements beyond 2023 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. 68 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisLong-Term Debt Maturity Schedule ($ millions) 525 175 150 150 200 450 250 200 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 Year the valuation date. A going concern valuation compares the liquidity position and its management of liquidity and funding relationship between the plan assets and the present value of risk have not changed materially since December 31, 2021. the expected future benefit cash flows, assuming the plan will be maintained indefinitely. Based on the actuarial valuation, the Credit Risk registered pension plan had a solvency surplus of $14.4 million This is the risk of financial loss to the Company if a counterparty compared to a solvency deficit of $61.3 million in the previous to a transaction fails to meet its obligations. actuarial valuation, which was based on a measurement date of December 31, 2021. The improvement in the funded status resulted largely from interest rate increases, as well as the return on plan assets. The registered pension plan had a going concern surplus of $95.0 million compared to $79.2 million in the previous valuation. The next actuarial valuation will be based on a measurement date of December 31, 2022. During the year, the Company has made cash contributions of $11.5 million (2021 – $14.3 million). IGM Financial expects annual contributions of approximately $2.0 million in 2023. 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. Management believes cash flows from operations, available The Company’s cash and cash equivalents, other investment 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. Cash and Cash Equivalents and Client Funds on Deposit At December 31, 2022, cash and cash equivalents of $1,072.9 million (2021 – $1,292.4 million) consisted of cash balances of $346.3 million (2021 – $326.2 million) on deposit with Canadian chartered banks and cash equivalents of $726.6 million (2021 – $966.2 million). Cash equivalents are comprised of Government of Canada treasury bills totalling $81.6 million (2021 – $358.7 million), provincial government treasury bills and promissory notes of $306.8 million (2021 – $350.6 million), bankers’ acceptances of $293.2 million (2021 cash balances and other sources of liquidity described above – $198.3 million) and other corporate commercial paper of are sufficient to meet the Company’s liquidity needs. The $45.0 million (2021 – $58.6 million). 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 Client funds on deposit of $4,347.4 million (2021 – $2,238.6 million) represent cash balances held in client accounts deposited at Canadian financial institutions. 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. The Company are significantly influenced by the impact that debt and equity market performance has on the Company’s fee income and regularly reviews the credit ratings of its counterparties. The maximum exposure to credit risk on these financial commission and certain other expenses. The Company’s instruments is their carrying value. 69 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportThe Company’s exposure to and management of credit Term Income Fund through an agreement to repurchase risk related to cash and cash equivalents and fixed mortgages in certain circumstances benefiting the funds. income securities have not changed materially since These loans are not recorded on the Company’s balance sheet December 31, 2021. Mortgage Portfolio At December 31, 2022, residential mortgages, recorded on the Company’s balance sheet, of $5.0 billion (2021 – $5.4 billion) consisted of $4.6 billion sold to securitization programs (2021 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 allowance for expected credit losses. – $5.0 billion), $371.9 million held pending sale or securitization The Company’s allowance for expected credit losses was (2021 – $315.8 million) and $12.7 million related to the $0.8 million at December 31, 2022, an increase of $0.2 million Company’s intermediary operations (2021 – $13.7 million). from December 31, 2021, and is considered adequate by The Company manages credit risk related to residential mortgages through: • Adhering to its lending policy and underwriting standards; • Its loan servicing capabilities; management to absorb all credit-related losses in the mortgage portfolios based on: i) historical credit performance experience, ii) recent trends including increasing interest rates, iii) current portfolio credit metrics and other relevant characteristics, iv) our strong financial planning relationship with our clients, • Use of client-insured mortgage default insurance and v) stress testing of losses under adverse real estate and mortgage portfolio default insurance held by the market conditions. Company; and • Its practice of originating its mortgages exclusively through a network of Mortgage Planning Specialists and IG Wealth Management advisors as part of a client’s IG Living 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 $2.5 billion (2021 – $2.6 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. The Company’s exposure to and management of credit risk related to mortgage portfolios have not changed materially since December 31, 2021. Derivatives 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 • Credit risk for mortgages securitized by transfer to bank- a gain position, the Company is exposed to credit risk sponsored securitization trusts totalling $2.1 billion that its counterparties fail to fulfil their obligations under (2021 – $2.4 billion) is limited to amounts held in cash these arrangements. reserve accounts and future net interest income, the fair values of which were $55.2 million (2021 – $67.6 million) and $21.3 million (2021 – $34.1 million), respectively, at December 31, 2022. 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. The Company’s derivative activities are managed in accordance with its Investment Policy which includes counterparty limits and other parameters to manage counterparty risk. The aggregate credit risk exposure related to derivatives that are in a gain position of $71.2 million (2021 – $39.5 million) does not give effect to any netting agreements or collateral arrangements. The exposure to credit risk, considering netting At December 31, 2022, residential mortgages recorded agreements and collateral arrangements and including rights to on balance sheet were 53.3% insured (2021 – 53.1%). At future net interest income, was $10.5 million at December 31, December 31, 2022, impaired mortgages on these portfolios 2022 (2021 – $0.7 million). Counterparties are all Canadian were $2.2 million, compared to $2.8 million at December 31, Schedule I chartered banks and, as a result, management 2021. Uninsured non-performing mortgages over 90 days has determined that the Company’s overall credit risk related on these portfolios were $1.7 million at December 31, 2022, to derivatives was not significant at December 31, 2022. compared to $1.5 million at December 31, 2021. Management of credit risk related to derivatives has not The Company also retains certain elements of credit risk on mortgage loans sold to the IG Mackenzie Mortgage and Short changed materially since December 31, 2021. 70 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisAdditional information related to the Company’s securitization Obligations to securitization entities. The fair value of these activities and utilization of derivative contracts can be found in swaps was $4.7 million (December 31, 2021 – $0.6 million) Notes 2, 7 and 23 to the Annual Financial Statements. on an outstanding notional amount of $191.6 million at Market Risk This is the risk of loss arising from changes in the values of the Company’s financial instruments due to changes in interest rates, equity prices or foreign exchange rates. Interest Rate Risk IGM Financial is exposed to interest rate risk on its mortgage portfolio and on certain of the derivative financial instruments used in our mortgage banking operations. December 31, 2022 (December 31, 2021 – $128.6 million). As at December 31, 2022, the impact to annual net earnings of a 100 basis point increase in interest rates would have been a decrease of approximately $1.7 million (December 31, 2021 – decrease of $3.0 million). The Company’s exposure to and management of interest rate risk have not changed materially since December 31, 2021. Equity Price Risk IGM Financial is exposed to equity price risk on our equity The Company manages interest rate risk associated with its investments which are classified as either fair value through mortgage banking operations by entering into interest rate swaps with Canadian Schedule I chartered banks as follows: other comprehensive income or fair value through profit or loss, and on our investments in associates, which are • The Company has in certain instances funded floating rate accounted for using the equity method. The fair value of the mortgages with fixed rate Canada Mortgage Bonds as part other investments was $0.8 billion at December 31, 2022 of the securitization transactions under the CMB Program. (December 31, 2021 – $1.4 billion), as shown in Table 21, As previously discussed, as part of the CMB Program, the and the carrying value of the investment in associates was Company is party to a swap whereby it is entitled to receive $2.2 billion at December 31, 2022 (December 31, 2021 – investment returns on reinvested mortgage principal $2.0 billion), as shown in Table 23. and is obligated to pay Canada Mortgage Bond coupons. This swap had a fair value of $20.5 million (December 31, 2021 – $1.0 million) and an outstanding notional amount of $0.2 billion at December 31, 2022 (December 31, 2021 – $0.3 billion). 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 negative $19.6 million (December 31, 2021 – $3.5 million), on an outstanding notional amount of $1.3 billion at December 31, 2022 (December 31, 2021 – $1.3 billion). The net fair value of these swaps of $0.9 million at December 31, 2022 (December 31, 2021 – $4.5 million) is recorded on the balance sheet and has an outstanding notional amount of $1.5 billion (December 31, 2021 – $1.6 billion). • The Company is exposed to the impact that changes in interest rates may have on the value of mortgages committed to or held pending sale or securitization to long-term funding sources. 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. Hedge accounting is applied to the cost of funds on certain securitization activities. The effective portion of fair value changes of the associated interest rate swaps are initially recognized in Other comprehensive income and subsequently recognized in Wealth Management revenue over the term of the related The Company sponsors a number of deferred compensation arrangements for employees where payments to participants are deferred and linked to the performance of the common shares of IGM Financial Inc. The Company hedges its exposure to this risk through the use of forward agreements and total return swaps. Foreign Exchange Risk IGM Financial is exposed to foreign exchange risk on its investment in ChinaAMC. Changes to the carrying value due to changes in foreign exchange rates are recognized in Other comprehensive income. As at December 31, 2022, a 5% appreciation (depreciation) in Canadian currency relative to foreign currencies would decrease (increase) the aggregate carrying value of foreign investments by approximately $37.2 million ($41.1 million). The Company’s proportionate share of ChinaAMC’s earnings, recorded in Proportionate share of associates’ earnings in the Consolidated Statements of Earnings, is also affected by changes in foreign exchange rates. For the year ended December 31, 2022, the impact to net earnings of a 5% appreciation (depreciation) in Canadian currency relative to foreign currencies would decrease (increase) the Company’s proportionate share of associates’ earnings (losses) by approximately $2.7 million ($3.0 million). 71 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 30: IGM Financial Assets Under Management – Asset and Currency Mix As at December 31, 2022 Cash Short-term fixed income and mortgages Other fixed income Domestic equity Foreign equity Real Property CAD USD Other Investment Funds Total 1.5 % 1.3 % 3.3 22.8 20.5 49.0 2.9 3.5 22.8 25.4 44.7 2.3 100.0 % 100.0 % 54.0 % 58.5 % 32.4 13.6 29.5 12.0 100.0 % 100.0 % Risks Related to Assets Under Management and Advisement At December 31, 2022, IGM Financial’s total assets under management and advisement were $249.4 billion compared to $277.1 billion at December 31, 2021. 2) Operational Risk This is the risk of financial loss, reputational damage or regulatory actions resulting from inadequate or failed internal processes or systems, human interaction or external events. This excludes business risk, which is a separate category in our The Company’s primary sources of revenues are advisory fees ERM framework. and asset management fees which are applied as an annual percentage of the level of assets under management and advisement. As a result, the level of the Company’s revenues and earnings are indirectly exposed to a number of financial risks that affect the value of assets under management and advisement on an ongoing basis. These include market risks, We are exposed to a broad range of operational risks, including information technology security and system failures, errors relating to transaction processing, financial models and valuations, fraud and misappropriation of assets, and inadequate application of internal control processes. such as changes in equity prices, interest rates and foreign Operational risks relating to people and processes are exchange rates, as well as credit risk on debt securities, loans mitigated through policies and process controls. Oversight of and credit exposures from other counterparties within our risks and ongoing evaluation of the effectiveness of controls client portfolios. Changing financial market conditions may also lead to a change is provided by the Company’s Compliance Department, ERM Department and Internal Audit Department. in the composition of the Company’s assets under management The Company has an insurance review process where it between equity and fixed income instruments, which could assesses and determines the nature and extent of insurance result in lower revenues depending upon the management fee that is appropriate to provide adequate protection against rates associated with different asset classes and mandates. unexpected losses, and where it is required by law, regulators The Company believes that over the long term, exposure or contractual agreements. to investment returns on its client portfolios is beneficial Operational risk affects all business activities, including to the Company’s results and consistent with stakeholder the processes in place to manage other risks. As a result, expectations, and generally it does not engage in risk transfer operational risk can be difficult to measure, given that it forms activities such as hedging in relation to these exposures. part of other risks of the Company and may not always be The Company’s exposure to the value of assets under separately identified. management and advisement aligns it with the experience of The Company’s risk management framework emphasizes its clients. Assets under management are broadly diversified by asset class, geographic region, industry sector, investment team and style. The Company regularly reviews the sensitivity of its assets under management, revenues, earnings and cash flow to changes in financial markets. operational risk management and internal control. The Company has a very low appetite for risk in this area. The business unit leaders are responsible for management of the day to day operational risks of their respective business units. Specific programs, policies, training, standards and 72 2022 IGM Financial Inc. Annual Report | Management's Discussion and Analysisgovernance processes have been developed to help manage continues to grow, we continue to enhance resources and operational risk. processes to support third party risk management. The Company has a crisis response plan which outlines crisis response coordination policies and procedures in the event of a crisis that could significantly impact the organization’s reputation, brands or business operations. The Company executes simulation exercises on a regular basis. The Company has a crisis assessment team comprised of senior leadership who are responsible for crisis confirmation and management. In addition, this team is responsible for setting strategy, overseeing response and ensuring appropriate subject matter experts are engaged in the scenario-dependent crisis response team. The Company also has a business continuity management program to enable critical operations and processes to function in the event of a business disruption. The Company’s business continuity plan has been effective at ensuring the Company is able to continue operations and provide client service with minimal disruptions. Technology and Cyber Risk Model Risk We use 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 and reputation. Legal and Regulatory Compliance Risk This is the risk of not complying with laws, contractual agreements or regulatory requirements. These risks relate to regulation governing product distribution, investment management, accounting, reporting and communications. IGM Financial is subject to complex and changing legal, taxation and regulatory requirements, including the requirements of We use systems and technology to support business agencies of the federal, provincial and territorial governments operations and the client and advisor experience. As a result, in Canada which regulate the Company and its activities. we are exposed to risks relating to technology and cyber The Company and its subsidiaries are also subject to the security such as data breaches, identity theft and hacking, requirements of self-regulatory organizations to which they including the risk of denial of service or malicious software belong. These and other regulatory bodies regularly adopt new attacks. The volume of these activities in our society has laws, rules, regulations and policies that apply to the Company increased since the onset of COVID-19. Such attacks could and its subsidiaries. These requirements include those that compromise confidential information of the Company and apply to IGM Financial as a publicly traded company and those that of clients or other stakeholders, and could result in that apply to the Company’s subsidiaries based on the nature negative consequences including lost revenue, litigation, of their activities. They include regulations related to the regulatory scrutiny or reputational damage. To remain resilient management and provision of financial products and services, to such threats, we have established enterprise-wide cyber including securities, insurance and mortgages, and other security programs, benchmarked capabilities to sound activities carried on by the Company in the markets in which industry practices, and implemented threat and vulnerability it operates. Regulatory standards affecting the Company and assessment and response capabilities. Extended duration the financial services industry are significant and continually of work from home programs introduces increased need to evolve. The Company and its subsidiaries are subject to reviews mitigate risk of potential data loss. as part of the normal ongoing process of oversight by the Third Party Risk We regularly engage third parties to provide expertise and efficiencies that support our operational activities. Our exposure to third party service provider risk could include reputational, regulatory and other operational risks. Policies, standard operating procedures and dedicated resources, including a supplier code of conduct and outsourcing policy, have been developed and implemented to specifically address third party service provider risk. We perform due diligence and monitoring activities before entering into contractual relationships with third-party service providers and on an ongoing basis. As our reliance on external service providers 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 legal and regulatory compliance risk through its efforts to promote a strong culture of compliance. The monitoring of regulatory developments and their impact on the Company is overseen by the Regulatory Initiatives Committee chaired by the Executive Vice-President, General Counsel. The Company also continues to develop and maintain compliance policies, processes and oversight, including specific communications on compliance and legal matters, training, 73 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual Reporttesting, monitoring and reporting. The Audit Committee of and how to prevent, handle and report privacy breaches, the Board receives regular reporting on compliance initiatives complaints and access to information requests. and issues. IGM Financial promotes a strong culture of ethics and integrity through its Code of Conduct approved by the Board of Directors, which outlines standards of conduct that apply to all IGM Financial directors, officers and employees. The Code of Conduct references many policies relating to the conduct of directors, officers and employees. Other corporate policies cover anti-money laundering and privacy. Training is provided on these policies on an annual basis. Individuals subject to the Code of Conduct attest annually that they understand the requirements and have complied with its provisions. Contingencies The Company is subject to legal actions arising in the normal course of its business. In December 2018, a proposed class action was filed in the Ontario Superior Court against Mackenzie Financial Corporation which alleges that the company should not have paid mutual fund trailing commissions to order execution only dealers. In August 2022, a second proposed class action concerning the same subject matter was filed against Mackenzie Financial Corporation. Although it is difficult to predict the outcome of any such legal actions, based on current knowledge and consultation with Business units are responsible for management of legal and legal counsel, management does not expect the outcome regulatory compliance risk, and implementing appropriate of any of these matters, individually or in aggregate, to have policies, procedures and controls. The Compliance Department a material adverse effect on the Company’s consolidated is responsible for providing oversight of all regulated financial position. compliance activities. The Internal Audit Department also provides oversight concerning regulatory compliance matters. 3) Strategic Risk Privacy Risk Privacy risk is the potential for access to, collection, use, transfer, disclosure and retention of personal information in contravention of applicable laws, regulations and/or This is the risk of potential adverse impacts resulting from inadequate or inappropriate governance, oversight, management of incentives and conflicts, regulatory developments and strategy. ethical standards. Our clients entrust us with their personal IGM Financial believes in the importance of good corporate information, and we have a regulatory and ethical responsibility governance and the central role played by directors in to protect it. We collect only the personal information that is necessary to provide our products and services to clients, and the governance process. We believe that sound corporate governance is essential to the well-being of the Company where we have consent to do so. We do not disclose or share and our shareholders. personal information about clients unless required by law, when necessary to provide products or services to them, or as otherwise authorized by them. If we need to share clients’ personal information with third-party service providers, we remain responsible for that information and protect it through contractual and other Oversight of IGM Financial is performed by the Board of Directors directly and through its five committees. The Company’s President and Chief Executive Officer has overall responsibility for management of the Company. The Company’s activities are carried out principally by three operating companies – Investors Group Inc., Mackenzie Financial measures that commit the service providers to maintain levels Corporation and Investment Planning Counsel Inc. – each of of protection comparable to ours. IGM Financial has established an enterprise Privacy Risk Management Framework to manage privacy risk. Our Chief Privacy Officer (CPO) leads and oversees our privacy program, partnering with cross-functional teams to develop and implement enterprise-wide policies, standards and controls regarding the handling and safeguarding of personal information. Ultimately reporting to the CPO, enterprise and operating company privacy delegates work with front-line business units to address privacy matters. Employees and advisors are required to complete mandatory privacy training at onboarding, and annually thereafter. The training includes our privacy obligations, privacy best practices, which are managed by a President and Chief Executive Officer. The Company also has a strategy execution oversight function and committee that reviews and approves strategic initiative business cases and oversees progress against our strategic priorities and objectives. The President and Chief Executive Officer of the Company, in collaboration with the Board of Directors, is responsible each year to develop, review and update the Company’s strategic plan. The strategic plan sets out both the annual and longer-term objectives for the Company in light of emerging opportunities and risks and with a view to the Company’s sustained profitable growth and long-term value creation. The Board is responsible for approving the Company’s overall 74 2022 IGM Financial Inc. Annual Report | Management's Discussion and Analysisbusiness strategy. In carrying out this responsibility, the Board 4) Business Risk reviews the short-, medium- and long-term risks associated with the strategic plan, considers the strengths and potential weaknesses of trends and opportunities, and approves the Company’s annual business, financial and capital management plans. A portion of each Board meeting is dedicated to General Business Conditions This risk refers to the potential for unfavourable impacts on IGM Financial resulting from competitive or other external factors relating to the marketplace. discussion of strategic matters including receiving updates Global economic conditions, changes in equity markets, on the progress and implementation of the strategic plan. inflation and demographics can affect investor confidence, Regulatory Development Risk This is the potential for changes to regulatory, legal, or tax requirements that may have an adverse impact on the Company’s business activities or financial results. We are exposed to the risk of changes in laws, taxation and regulation that could have an adverse impact on the Company. 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 income levels and savings. In addition, geopolitical risk, government instability and other factors can influence inflation, interest rates, global economic growth, and business conditions in markets in which the Company operates. These environments could result in reduced sales of IGM Financial’s products and services and/or result in investors redeeming their investments. These factors may also affect the level and volatility of financial markets and the value of the Company’s assets under management, as described more fully under the Risks Related to Assets Under Management section of this MD&A. To manage this risk, the Company, across its operating subsidiaries, communicates with clients and underscores treatment, disclosure requirements, transaction processes or the importance of financial planning across economic cycles. other differences that may be as a result of differing regulation The Company and the industry continue to take steps to or application of regulation. Regulatory developments may educate Canadian investors on the merits of financial planning, also impact product structures, pricing, and dealer and advisor diversification and long-term investing. In periods of volatility, compensation. While the Company and its subsidiaries actively Wealth Management advisors and independent financial monitor such initiatives, and where feasible comment upon or advisors play a key role in assisting investors in maintaining discuss them with regulators, the ability of the Company and its perspective and focus on their long-term objectives. subsidiaries to mitigate the imposition of differential regulatory treatment of financial products or services is limited. Redemption rates for long-term funds are summarized in Table 31 and are discussed in the Wealth Management and The Company continuously monitors regulatory developments, the Asset Management Segment Operating Results sections guidance and communications. of this MD&A. Acquisition Risk Catastrophic Events or Loss The Company is exposed to risks related to its acquisitions Catastrophic events or loss refers to the risk that events such and strategic investments. The Company undertakes thorough as earthquakes, floods, fire, tornadoes, pandemics, or terrorism 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 and of the Company’s strategic investments is dependent on retaining assets under management, clients, and key employees of an acquired company. could adversely affect the Company’s financial performance. Catastrophic events can cause economic uncertainty, affect investor confidence, income levels and financial planning decisions. This could affect the level and volatility of financial markets and the level of the Company’s assets under management and advisement. Product / Service Offering This risk refers to the potential for unfavourable impacts on IGM Financial resulting from inadequate product or service performance, quality or breadth. IGM Financial and its subsidiaries operate in a highly competitive environment, competing with other financial service providers, investment managers and product and 75 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTable 31: Twelve Month Trailing Redemption Rate for Long-term Funds IGM Financial Inc. IG Wealth Management Mackenzie Counsel 2022 Dec. 31 2021 Dec. 31 10.0 % 16.0 % 20.4 % 9.2 % 13.6 % 22.3 % service types. Client development and retention can be loss of client accounts which could have an adverse effect on influenced by a number of factors, including investment IG Wealth Management’s results of operations and business performance, products and services offered by competitors, prospects. IG Wealth Management is focused on strengthening relative service levels, relative pricing, product attributes, its distribution network of advisors and on responding to the reputation and actions taken by competitors. This competition complex financial needs of its clients by delivering a diverse could have an adverse impact upon the Company’s financial position and operating results. Please refer to The Competitive range of products and services in the context of personalized financial advice, as discussed in the Wealth Management Landscape section of this MD&A for further discussion. Review of the Business section of this MD&A. We provide Wealth Management advisors, independent financial advisors, as well as retail and institutional clients Asset Management – Mackenzie derives the majority of its mutual fund sales through third party financial advisors. Financial with a high level of service and support and a broad range advisors generally offer their clients investment products in of investment products, with a focus on building enduring addition to, and in competition with Mackenzie. Mackenzie also relationships. The Company’s subsidiaries also continually derives sales of its investment products and services from its review their respective product and service offering and strategic alliance and institutional clients. Due to the nature pricing to ensure competitiveness in the marketplace. of the distribution relationship in these relationships and the We strive to deliver strong investment performance on our products relative to benchmarks and peers. Poor investment performance relative to benchmarks or peers could reduce the level of assets under management and sales and asset retention, as well as adversely impact our brands and reputation. Meaningful and/or sustained underperformance could affect the Company’s results. Our objective is to cultivate investment processes and disciplines that give us a competitive advantage, and we do this by diversifying our assets under management and product shelf by investment team, brand, asset class, mandate, style and geographic region. Business / Client Relationships This risk refers to the potential for unfavourable impacts on IGM Financial resulting from changes to key business or client relationships. These relationships primarily include IG Wealth Management clients and advisors, Mackenzie retail distribution, strategic and significant business partners, clients of Mackenzie funds, and sub-advisors and other product suppliers. IG Wealth Management advisor network – IG Wealth Management derives all of its mutual fund sales through its advisor network. IG Wealth Management advisors 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 advisor. The market for advisors is extremely competitive. The loss of a significant number of key advisors could lead to 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. Lack of 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 Asset Management Review of the Business section of this MD&A. People Risk This risk refers to the potential inability to attract or retain employees or Wealth Management advisors, develop them to an appropriate level of proficiency, or manage engagement and personnel succession or transition. Management, investment and distribution personnel play an important role in developing, implementing, managing and distributing products and services offered by IGM Financial. The loss of these individuals or an inability to attract, retain and engage sufficient numbers of qualified personnel could negatively affect IGM Financial’s business and financial performance. 76 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisWe have a Diversity, Equity and Inclusion Strategy with the The Company’s Executive Risk Management Committee is purpose of driving an inclusive, equitable and consistent responsible for oversight of the risk management process, experience for employees and clients that supports our including E&S and climate change risks. Other management business objectives now and into the future. To achieve the committees provide oversight of specific risks including the desired outcomes, we focus on three pillars of action: raising Sustainability Committee and the Diversity and Inclusion awareness; improving inclusive leadership behaviours; and Executive Council. The Sustainability Committee is composed building external partnerships and community engagement. of senior executives who are responsible for ensuring We also have a Wellness Strategy to support our employees’ wellbeing with a goal to ensure our employees are physically thriving, emotionally balanced, socially connected and implementation of policy and strategy, establishing goals and initiatives, measuring progress, and approving annual reporting for environmental, social and governance (ESG) matters. financially secure. Our commitment to responsible management is demonstrated COVID-19 has caused significant disruption in peoples’ lives both professionally and personally. The Company’s actions have included: • Implementing a work at home strategy to maintain the health and safety of our employees and advisors through social distancing. • Providing tools and processes to enable our employees and advisors to continue to operate effectively from home. • Providing various wellness programs including Employee Assistance Programs, e-Health and other programs to support the mental and physical well-being of our employees, advisors, and their families. • Developing a return to office strategy including the introduction of a hybrid working model to enhance work life flexibility and to safely allow employees and advisors to return to the office when appropriate. 5) Environmental and Social Risk (Including Climate Change) This is the potential for financial loss or other unfavourable impacts resulting from environmental or social (E&S) issues connected to our business operations, investment activities, meeting our sustainability commitments, and increasingly for regulatory compliance. We recognize that E&S risks can be within our operations or impact stakeholders along our supply chain, including clients, investee companies and suppliers. Environmental risks include issues such as climate change, biodiversity and land use, pollution, waste, and the unsustainable use of energy, water and other resources. Social risks include issues such as human rights; labour standards; diversity, equity and inclusion; Indigenous reconciliation; and community impacts. IGM Financial has a long-standing commitment to responsible management, as articulated in our Corporate Sustainability Statement approved by the Board of Directors. Through its Risk Committee, the Board is responsible for ensuring that material E&S risks are appropriately identified, managed and monitored. through various mechanisms. These include our Code of Conduct for employees, contractors, and directors; our Supplier Code of Conduct; our Workplace Harassment and Discrimination Prevention Policy; our Diversity Policy; our Environmental Policy; and other related policies. IG Wealth Management and Mackenzie Investments, and their investment sub-advisors, are signatories to the Principles for Responsible Investment (PRI). Under the PRI, investors formally commit to incorporate ESG issues into their investment decision making and active ownership processes. In addition, IG Wealth Management, Mackenzie Investments and Investment Planning Counsel have implemented Sustainable Investment Policies outlining the practices at each company. IGM Financial reports annually on ESG management and performance in its Sustainability Report available on our website. The Company has been recognized for demonstrating strong ESG performance through positions earned on the FTSE4Good Index Series, Jantzi Social Index, Corporate Knights’ 2023 Global 100 and 2022 Best 50 Corporate Citizens. IGM Financial is a long-standing participant in the CDP (formerly Carbon Disclosure Project), which promotes corporate disclosures on greenhouse gas emissions and climate change management including setting and monitoring emission reduction targets. IGM Financial has been recognized by CDP at the leadership level for the past five years for its climate disclosures. Global practices are continually evolving relating to the identification, analysis, and management of climate risks and opportunities. The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) was established in response to investor demand for enhanced information on climate-related risks and opportunities. IGM Financial and its operating companies support the TCFD recommendations which include a framework for consistent, voluntary climate-related financial disclosures that provide decision-useful information to investors, analysts, rating agencies and other stakeholders. 77 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportTCFD Disclosure to manage climate risks and create innovative solutions to The TCFD recommends that organizations disclose information about climate-related risks and opportunities in four areas: governance, strategy, risk management, and metrics and targets. Full implementation of TCFD will be a multi-year journey. Governance our ongoing climate issues. 2. Collaborating and engaging to help shape the global transition – We play a role in bringing climate-smart investment advice and solutions to clients, helping companies adapt, and participating in industry and policy advancements. 3. Demonstrating alignment through our corporate actions – We Our Board is responsible for providing oversight on risk and will hold ourselves to a similar standard that we expect from strategy, which includes sustainability and climate-related the companies we invest in and empower our employees to matters. The Board meets with management at least annually stand behind our commitments. to discuss plans and emerging ESG issues. Through its Risk Committee, the Board is responsible for ensuring that material ESG risks are appropriately identified, managed and monitored. The senior-most leaders at each of our operating companies have primary ownership and accountability for the ongoing Our operating companies are active participants in collaborative industry groups that support our climate commitments by engaging companies on improving climate change governance, reducing emissions and strengthening climate-related financial disclosures. IGM Financial also climate risk and opportunity management associated with joined the Partnership for Carbon Accounting Financials their respective activities. IGM Financial’s Risk Management and (PCAF) to support our journey to measure and disclose the Sustainability Committees perform oversight functions, and our greenhouse gas emissions associated with our mortgage Chief Risk Officer oversees implementation of the Corporate loans and investments. Sustainability and Enterprise Risk Management programs. Climate-related risks and opportunities are identified and We have established a cross-functional, enterprise wide assessed within IGM Financial through our business planning TCFD Working Group of senior leaders to lead the planning processes which define our strategic priorities, initiatives and and implementation of the TCFD recommendations. This budgets. Our climate-related risks and opportunities can be working group is focused on enhancing our knowledge and grouped into the physical impacts of climate change and the tools to quantify climate risks in tandem with our industry, impacts related to the transition to a low-carbon economy. further integrating climate into our business strategy, operations and product offering, evolving our engagement approach with investee companies, and addressing increased disclosure expectations. The Mackenzie Sustainability Steering Committee is responsible for approving and governing corporate and sustainability related policies; approval and oversight for investment stewardship priorities including climate; approval and monitoring for targets related to climate change; and evaluation of progress relative to key performance indicators, strategy roadmap, and the market. The IG Wealth Management Sustainable Investing Committee is responsible for reviewing and approving sustainable investing and ESG matters including but not limited to evaluating and considering climate-related risks and opportunities. Strategy Through IGM Financial’s wealth and asset management businesses, the company plays a role in the global transition to a low-carbon economy. In November 2021, IGM Financial detailed its climate commitments in a position statement on our website, with a focus on three key areas: Risks Our climate risks relate primarily to the potential for physical or transition risks to: negatively affect the performance of our clients’ investments, resulting in reduced fee revenue; harm our reputation; create market risks through shifts in product demand; or lead to new regulatory, legal or disclosure requirements that could affect our business. Diversification within and across our investment portfolios aids in managing exposure to any one company, sector or geographic region that might be exposed to climate-related risks. We are also exposed to the impact of extreme weather events on our corporate properties which could lead to business disruption, and on the valuations of investment properties and client mortgages, which if not addressed proactively, could affect financial performance and the ability to use the assets long-term. Our operating companies are committed to sustainable investing programs and policies that include a focus on climate risk. We provide data and tools for our investment teams to carry out current and forward-looking climate analysis and we integrate material climate risks into our investment and oversight processes for investment management sub-advisors. As part of the hiring process and ongoing assessment of 1. Investing in a greener, climate resilient economy – Our sub-advisors, our teams request information about how ESG, investment processes and products give us the opportunity including climate risks and opportunities, is resourced, what 78 2022 IGM Financial Inc. Annual Report | Management's Discussion and Analysisprocesses and tools are used, metrics and targets, and how focused on defining the relationship of climate risk to other strategy and governance are influenced. As we continue to material risks. implement the TCFD recommendations, we are devoting increased resources to areas such as training, analysis, metrics, target-setting, strategy planning and working with collaborative organizations. Opportunities We are focused on meeting growing demand for sustainable investing and the opportunity to invest in the transition to a net-zero economy. We are also increasing our focus on educating and communicating with clients and advisors on sustainable investing and climate change. At Mackenzie Investments, each boutique investment team is responsible for determining when and how climate transition and physical risks are material, and for incorporating these risks into their investment process. At IG Wealth Management and IPC, management evaluates the sustainable investing practices of investment manager sub-advisors, including the integration of climate risks into their investment and active ownership practice. Engagement To maximize stewardship efforts, engagement at Mackenzie is At Mackenzie Investments, sustainable investing is an area of undertaken both internally and by a third-party engagement strategic emphasis, and we have established a dedicated team within Mackenzie who bring focus to ESG and climate across specialist where climate change is a priority engagement topic. At IPC, a pooled engagement service provider is used the organization. Mackenzie has two investment boutiques with to work with companies to enhance corporate behaviour and this focus; Greenchip and Betterworld. The Greenchip boutique strategy related to topics including climate change. At IG Wealth focuses on thematic investing to combat climate change and Management, investment management sub-advisors including the Betterworld boutique focuses on solutions centered on Mackenzie are responsible for engagement activities and sustainable objectives that incorporate environmental, social IG Wealth Management monitors their practices as part of and governance factors. regular due diligence and oversight. At IG Wealth Management, we have integrated environmental Mackenzie Investments is a founding participant in Climate and climate issues into our sub-advisory selection and Engagement Canada and participates in CERES’ Investor oversight processes, and product development strategy. In Network on Climate Risk. Both Mackenzie and IG joined Climate October 2021, IG Wealth Management launched its Climate Action 100+ and became founding signatories to the Canadian Action Portfolios, a suite of four diversified managed solutions Investor Statement on Climate Change. which aim to provide clients with the opportunity to support and benefit from the global transition to net zero emissions. Metrics and Targets Scenarios We set, monitor and report on climate change-related metrics and targets annually in our CDP response and our Sustainability We have implemented a tool for our investment funds to Report which are available on our website. enhance our quantitative assessment of climate risks by analyzing emissions and other climate-related information at the investee company and portfolio levels. This system enables us to model potential transition pathways and track our portfolios against the goal of limiting global warming to 2°C above pre-industrial levels and examine the adequacy of emissions reductions over time in meeting the goals of the We currently report Scope 1, 2 and 3 GHG emissions, where possible, including Scope 3 investment emissions related to our real assets in the IG Real Property Fund. We are continuing to expand and enhance our measurement and reporting of emissions related to our investment portfolios as tools and information improves. Paris Agreement. We are exploring scenario analysis tools with During the year, IGM Financial achieved its 2022 target of external data providers to support us in our efforts to run being climate neutral in its corporate offices and travel. climate-related scenario analysis across our business. This was achieved by reducing emissions over time, using Risk Management renewable energy sources and purchasing carbon offsets. Mackenzie Investments also set interim targets for investment Assessment and management of climate-related risks is portfolios as part of its commitment to the Net Zero Asset integrated into our ERM framework. We use a consistent Managers Initiative. The long-term nature of these targets methodology across our organizations and business units for identification and assessment of risks, considering factors both require significant judgement and the Company will provide updates on its progress through the Sustainability Report internal and external to the organization. Risks are broadly and CDP disclosure. grouped into five categories: financial, operational, strategic, business, and environmental and social. We are increasingly 79 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportThe Financial Services Environment Canadians held $6.5 trillion in discretionary financial assets Canadian banks distribute financial products and services with financial institutions at December 31, 2021 based on through their traditional bank branches, as well as through the most recent report from Investor Economics. The nature their full service and discount brokerage subsidiaries. Bank of holdings was diverse, ranging from demand deposits held branches continue to place increased emphasis on both for short-term cash management purposes to longer-term financial planning and mutual funds. In addition, each of the investments held for retirement purposes. Approximately “big six” banks has one or more mutual fund management 64% ($4.1 trillion) of these financial assets are held within subsidiaries. Collectively, mutual fund assets of the “big six” the context of a relationship with a financial advisor, and bank-owned mutual fund managers and affiliated firms this is the primary channel serving the longer-term savings represented 46% of total industry long-term mutual fund needs of Canadians. Of the $2.3 trillion held outside of a assets at December 31, 2022. financial advisory relationship, approximately 53% consisted of bank deposits. The Canadian mutual fund industry continues to be very concentrated, with the 10 largest firms and their subsidiaries Financial advisors represent the primary distribution channel representing 71% of industry long-term mutual fund assets for IGM Financial’s products and services, and the core and 71% of total mutual fund assets under management at emphasis of our business model is to support these financial December 31, 2022. We anticipate continuing consolidation advisors as they work with clients to plan for and achieve their in this segment of the industry as smaller participants are financial goals. Multiple sources of emerging research show acquired by larger organizations. significantly better financial outcomes for Canadians who use financial advisors compared to those who do not. We actively promote 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 41% of Canadian discretionary financial assets or $2.6 trillion resided in investment funds at December 31, 2021, making it the largest financial asset class held by Canadians. Other asset types include deposit products and We believe 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 continues 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. direct securities such as stocks and bonds. Approximately 75% • A highly competitive landscape. 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 $164 billion in investment fund assets under • Advancing and changing technology. The Competitive Landscape management at December 31, 2022, IGM Financial is among Our subsidiaries, IG Wealth Management and Investment the country’s largest investment fund managers. We believe Planning Counsel, compete directly with other retail financial that investment funds are likely to remain the preferred savings service providers in the advice segment, including other vehicle of Canadians. They offer the benefits of diversification, financial planning firms, as well as full service brokerages, professional management, flexibility and convenience, and are banks and insurance companies. Our asset management available in a broad range of mandates and structures to meet subsidiary, Mackenzie Investments, competes directly with most investor requirements and preferences. other investment managers for assets under management, Traditional distinctions between bank branches, full-service brokerages, financial planning firms and insurance agent sales and our products compete with stocks, bonds and other asset classes for a share of Canadians’ investment assets. forces have become obscured as many of these financial Competition from other financial service providers, alternative service providers strive to offer comprehensive financial product types or delivery channels, and changes in regulations advice implemented through access to a broad product or public preferences could impact the characteristics of shelf. Accordingly, the Canadian financial services industry is characterized by a number of large, diversified, vertically- our product and service offerings, including pricing, product structures, dealer and advisor compensation and disclosure. integrated participants, similar to IGM Financial, that offer We monitor developments on an ongoing basis, and engage in both financial planning and investment management services. policy discussions and develop product and service responses as appropriate. 80 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisIGM Financial continues to focus on our commitment to provide Broad and Diversified Distribution quality investment advice and financial products, service innovations, effective and responsible management of the Company and long-term value for our clients and shareholders. This includes efforts to modernize our digital platforms and technology infrastructure to enhance operations, achieve efficiencies and improve the service experience for our clients. We believe that IGM Financial is well-positioned to meet competitive challenges and capitalize on future growth opportunities. Our competitive strength includes: • Broad and diversified distribution through more than 35,000 financial advisors, with an emphasis on comprehensive financial planning. In addition to owning two of Canada’s largest financial planning organizations, IG Wealth Management 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 global manufacturing and distribution entities to provide investment management services. Broad Product Capabilities Our subsidiaries continue to develop and launch innovative products and strategic investment planning tools to assist advisors in building optimized portfolios for clients. • Broad product capabilities, leading brands and quality Enduring Client Relationships sub-advisory relationships. • Enduring client relationships and the long-standing heritages and cultures of its subsidiaries. • Benefits of being part of the Power Corporation group of companies. IGM Financial enjoys significant advantages as a result of the enduring relationships that advisors have developed with clients. In addition, our subsidiaries have strong heritages and cultures which are challenging for competitors to replicate. Part of the Power Corporation Group of Companies As part of the Power Corporation group of companies, IGM Financial benefits through expense savings from shared service arrangements, as well as through access to distribution, products and capital. 81 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportCritical Accounting Estimates and Policies Summary of Critical Accounting Estimates The preparation of financial statements in accordance with IFRS requires management to exercise judgment in the process of applying accounting policies and requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying notes. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies are common in the financial services industry; others are specific to IGM Financial’s businesses and operations. IGM Financial’s significant accounting policies are described in detail in Note 2 of the Consolidated Financial Statements. Critical accounting estimates relate to the fair value of financial instruments, goodwill and intangibles, income taxes, capitalized sales commissions, provisions and employee benefits. The major critical accounting estimates are summarized below: • Fair value of financial instruments – The Company’s financial instruments are carried at fair value, except for loans, deposits and certificates, obligations to securitization entities, and long-term debt which are all carried at amortized cost. The fair value of publicly traded financial instruments is determined using published market prices. The fair value of financial instruments where published market prices are not available, including Corporate investments and derivatives related to the Company’s securitized loans, are determined using various valuation models which maximize the use of observable market inputs where available. Valuation methodologies and assumptions used in valuation models are reviewed on an ongoing basis. Changes in these assumptions or valuation methodologies could result in significant changes in net earnings. • Goodwill and intangible assets – Goodwill, indefinite life intangible assets, and definite life intangible assets are reflected in Note 12 of the Consolidated Financial Statements. The Company tests the fair value of goodwill and indefinite life intangible assets for impairment at least once a year and more frequently if an event or circumstance indicates the asset may be impaired. An impairment loss is recognized if the amount of the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash generating units). Finite life intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. These tests involve the use of estimates and assumptions appropriate in the circumstances. In assessing the recoverable amounts, valuation approaches are used that include discounted cash flow analysis and application of capitalization multiples to financial and operating metrics based upon precedent acquisition transactions and trading comparables. Assumptions and estimates employed include future changes in assets under management resulting from net sales and investment returns, pricing and profit margin changes, discount rates, and capitalization multiples. The Company completed its annual impairment tests of goodwill and indefinite life intangible assets as at April 1, 2022, and determined there was no impairment in the value of those assets. • Income taxes – The provision for income taxes is determined on the basis of the anticipated tax treatment of transactions recorded in the Consolidated Statements of Earnings. The determination of the provision for income taxes requires interpretation of tax legislation in a number of jurisdictions. Tax planning may allow the Company to record lower income taxes in the current year and income taxes recorded in prior years may be adjusted in the current year to reflect management’s best estimates of the overall adequacy of its provisions. Any related tax benefits or changes in management’s best estimates are reflected in the provision for income taxes. The recognition of deferred tax assets depends on management’s assumption that future earnings will be sufficient to realize the future benefit. The amount of the deferred tax asset or liability recorded is based on management’s best estimate of the timing of the realization of the assets or liabilities. If our interpretation of tax legislation differs from that of the tax authorities or if timing of reversals is not as anticipated, the provision for income taxes could increase or decrease in future periods. Additional information related to income taxes is included in the Summary of Consolidated Operating Results in this MD&A and in Note 16 to the Consolidated Financial Statements. • Capitalized sales commissions – Commissions paid directly by the client on the sale of certain mutual fund products are deferred and amortized over a maximum period of seven years. The Company regularly reviews the carrying value of capitalized sales commissions with respect to any events or circumstances that indicate impairment. Among the tests performed by the Company to assess recoverability is the comparison of the future economic benefits derived from the capitalized sales commission asset in relation to 82 2022 IGM Financial Inc. Annual Report | Management's Discussion and Analysisits carrying value. At December 31, 2022, there were no plan obligation decreased to $423.9 million at December 31, indications of impairment to capitalized sales commissions. 2022 from $588.4 million at December 31, 2021, primarily • Provisions – A provision is recognized when there is a present obligation as a result of a past transaction or event, it is “probable” that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the obligation. In determining the best estimate for a provision, a single estimate, a weighted average of all possible outcomes, or the midpoint where there is a range of equally possible outcomes are all considered. A significant change in assessment of the likelihood or the best estimate may result in additional adjustments to net earnings. • Employee benefits – The Company maintains a number of employee benefit plans. These plans include a funded registered defined benefit pension plan for all eligible employees, unfunded supplementary executive retirement plans for certain executive officers (SERPs) and an unfunded post-employment health care and life insurance plan for eligible retirees. The funded registered defined benefit pension plan provides pensions based on length of service and final average earnings. The measurement date for the due to the increase in the discount rate. The defined benefit pension plan had an accrued benefit asset of $86.8 million at December 31, 2022 compared to an accrued benefit liability of $21.7 million at December 31, 2021. Actuarial gains or losses recorded in Other comprehensive income, including the defined benefit pension plan, the SERPs and post-employment benefit plans, were gains of $137.0 million ($100.0 million after tax) for the twelve months ended December 31, 2022. A decrease of 0.25% in the discount rate utilized in 2022 would result in a change of $17.9 million in the accrued pension obligation, $16.0 million in other comprehensive income, and $1.9 million in pension expense. Additional information regarding the Company’s accounting and sensitivities related to pensions and other post-retirement benefits is included in Notes 2 and 15 of the Consolidated Financial Statements. Changes in Accounting Policies Company’s defined benefit pension plan assets and for the IGM Financial has not adopted any changes in accounting accrued benefit obligations on all defined benefit plans is policies in 2022. December 31. Due to the long-term nature of these plans, the calculation of the accrued benefit asset or liability depends on various assumptions including discount rates, rates of return on assets, the level and types of benefits provided, healthcare cost trend rates, projected salary increases, retirement age, mortality and termination rates. The discount rate assumption is determined using a yield curve of AA corporate debt securities. All other assumptions are determined by management and reviewed by independent actuaries who calculate the pension and other future benefits expenses and accrued benefit obligations. Actual experience that differs from the actuarial assumptions will result in actuarial gains or losses as well as changes in benefits expense. The Company records actuarial gains and losses on all of its defined benefit plans in Other comprehensive income. Discount rates have increased significantly since December 31, 2021. The discount rate on the Company’s RPP at December 31, 2022 was 5.25% compared to 3.30% at December 31, 2021. The pension plan assets decreased to $510.7 million at December 31, 2022 from $566.7 million at December 31, 2021 due to declines in the markets partly offset by contributions. The total defined benefit pension Future Accounting Changes 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. 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. IFRS 17 Insurance Contracts The IASB issued IFRS 17 which requires insurance contracts to be measured using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to insurance contracts and is effective for periods beginning on or after January 1, 2023. Adoption of this standard is expected to affect the accounting for the carrying value of the Company’s investment in Great-West Lifeco Inc. (Lifeco) and the amount that the Company records for its proportionate share of associate’s earnings. Additional information of the impact on Lifeco is available in its public disclosures. 83 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportDisclosure Controls and Procedures The Company’s disclosure controls and procedures are The Company’s management, under the supervision of the designed to provide reasonable assurance that (a) material President and Chief Executive Officer and the Chief Financial information relating to the Company is made known to the Officer, has evaluated the effectiveness of the Company’s President and Chief Executive Officer and the Chief Financial disclosure controls and procedures. Based on their evaluations Officer by others, particularly during the period in which the as of December 31, 2022, the President and Chief Executive annual filings are being prepared, and (b) information required Officer and the Chief Financial Officer have concluded that the to be disclosed by the Company in its annual filings, interim Company’s disclosure controls and procedures are effective. filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. Internal Control Over Financial Reporting The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the Control – Integrated Framework (COSO 2013 Framework) published by The Committee of Sponsoring Organizations of reliability of financial reporting and the preparation of financial the Treadway Commission. The Company transitioned to the statements for external purposes in accordance with IFRS. The COSO 2013 Framework during 2014. Based on their evaluations Company’s management is responsible for establishing and as of December 31, 2022, the President and Chief Executive maintaining adequate internal control over financial reporting. Officer and the Chief Financial Officer have concluded that the All internal control systems have inherent limitations and may become inadequate 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. The Company’s management, under the supervision of the President and Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s internal control over financial reporting based on the Internal Company’s internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Notwithstanding the above, during the fourth quarter of 2022, 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. 84 2022 IGM Financial Inc. Annual Report | Management's Discussion and AnalysisOther Information Transactions with Related Parties Outstanding Share Data IGM Financial enters into transactions with The Canada Life Outstanding common shares of IGM Financial as at Assurance Company (Canada Life), which is a subsidiary of its December 31, 2022 totalled 237,668,062. Outstanding affiliate, Lifeco, which is a subsidiary of Power Corporation stock options as at December 31, 2022 totalled 11,725,342 of Canada. These transactions are in the normal course of of which 6,596,299 were exercisable. As at February 3, operations and have been recorded at fair value: 2022, outstanding common shares totalled 237,780,120 and outstanding stock options totalled 11,575,766 of which 6,461,906 were exercisable. 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. • During 2022 and 2021, the Company provided to and received from Canada Life certain administrative services enabling each organization to take advantage of economies of scale and areas of expertise. • The Company distributes insurance products under a distribution agreement with Canada Life and received $48.7 million in distribution fees (2021 – $52.7 million). The Company received $61.4 million (2021 – $63.3 million) and paid $19.5 million (2021 – $22.6 million) to Canada Life and related subsidiary companies for the provision of sub- advisory services for certain investment funds. The Company paid $0.6 million (2021 – $15.5 million) to Canada Life related to the distribution of certain mutual funds of the Company. • In order to manage its overall liquidity position, the Company’s mortgage banking operation is active in the securitization market and also sells residential mortgage loans to third parties, on a fully serviced basis. During 2022, no residential mortgage loans were sold by the Company to Canada Life, compared to $11.9 million in 2021. On January 12, 2023, the Company acquired an additional interest in ChinaAMC from Power and sold a portion of its investment in Lifeco to Power. For further information on transactions involving related parties, see Notes 9, 27 and 29 to the Company’s Consolidated Financial Statements. 85 Management's Discussion and Analysis | 2022 IGM Financial Inc. Annual ReportConsolidated Financial Statements Management’s Responsibility for Financial Reporting Independent Auditor’s Report Consolidated Statements of Earnings Consolidated Statements of Comprehensive Income Consolidated Balance Sheets Consolidated Statements of Changes in Shareholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Note 1 Corporate information Note 2 Summary of significant accounting policies Note 3 Revenues from contracts with customers Note 4 Expenses Note 5 Other investments Note 6 Loans Note 7 Securitizations Note 8 Other assets Note 9 Investment in associates Note 10 Capital assets Note 11 Capitalized sales commissions Note 12 Goodwill and intangible assets Note 13 Deposits and certificates Note 14 Other liabilities Note 15 Employee benefits Note 16 Income taxes Note 17 Long-term debt Note 18 Share capital Note 19 Capital management Note 20 Share-based payments Note 21 Accumulated other comprehensive income (loss) Note 22 Risk management Note 23 Derivative financial instruments Note 24 Fair value of financial instruments Note 25 Earnings per common share Note 26 Contingent liabilities and guarantees Note 27 Related party transactions Note 28 Segmented information Note 29 Subsequent event 87 88 91 92 93 94 95 96 96 101 102 102 103 104 104 105 107 107 108 109 109 109 112 113 114 114 115 116 117 120 121 124 124 124 125 127 86 2022 IGM Financial Inc. Annual ReportManagement’s Responsibility for Financial Reporting The Consolidated Financial Statements of IGM Financial Inc. have been prepared by Management, which is responsible for the integrity, objectivity and reliability of the information presented, including selecting appropriate accounting principles and making judgments and estimates. These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards. Financial information presented elsewhere in this Annual Report is consistent with that in the Consolidated Financial Statements for comparable periods. Systems of internal control and supporting procedures are maintained to provide reasonable assurance of the reliability of financial information and the safeguarding of all assets controlled by the Company. These controls and supporting procedures include quality standards in hiring and training employees, the establishment of organizational structures providing a well-defined division of responsibilities and accountability for performance, and the communication of policies and guidelines through the organization. Internal controls are reviewed and evaluated extensively by the internal auditor and are subject to scrutiny by the external auditors. Ultimate responsibility for the Consolidated Financial Statements rests with the Board of Directors. The Board is assisted in discharging this responsibility by an Audit Committee, consisting entirely of independent directors. This Committee reviews the Consolidated Financial Statements and recommends them for approval by the Board. In addition, the Audit Committee reviews the recommendations of the internal auditor and the external auditors for improvements in internal control and the action of Management to implement such recommendations. In carrying out its duties and responsibilities, the Committee meets regularly with Management and with both the internal auditor and the external auditors to review the scope and timing of their respective audits, to review their findings and to satisfy itself that their responsibilities have been properly discharged. Deloitte LLP, independent auditors appointed by the shareholders, have examined the Consolidated Financial Statements of the Company in accordance with Canadian generally accepted auditing standards, and have expressed their opinion upon the completion of their examination in their Report to the Shareholders. The external auditors have full and free access to the Audit Committee to discuss their audit and related findings. James O’Sullivan President and Chief Executive Officer Keith Potter Executive Vice-President and Chief Financial Officer 87 Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportIndependent Auditor’s Report To the Shareholders of IGM Financial Inc. Opinion We have audited the consolidated financial statements of IGM Financial Inc. (the “Company”), which comprise the consolidated balance sheets as at December 31, 2022 and 2021, and the consolidated statements of earnings, comprehensive income, changes in shareholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements for the year ended December 31, 2022. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Other investments – Wealthsimple Financial Corp. (“Wealthsimple”) – Refer to Notes 2, 5 and 24 to the financial statements Key Audit Matter Description The Company’s Other investments balance includes an equity investment in Wealthsimple, which is recognized at fair value through other comprehensive income. Given that Wealthsimple is a private company, significant management judgment is required in the determination of the fair value of the investment. In determining fair value, a market approach using observable valuation metrics, including revenue multiples, and a discounted cash flow analysis were considered by management. Significant management judgment was required in determining the most appropriate valuation approaches and inputs used in each, including revenue multiples applied in the market approach. Auditing the fair value of Wealthsimple required a high degree of auditor judgment which resulted in an increased extent of audit effort, including the use of fair value specialists. 88 2022 IGM Financial Inc. Annual Report | Consolidated Financial StatementsHow the Key Audit Matter Was Addressed in the Audit With the assistance of fair value specialists, our audit procedures related to the fair value of Wealthsimple included the following, among others: • We evaluated the appropriateness of fair value approaches and developed independent fair value estimates using an independent market approach by analyzing comparable public company revenue multiples and using revenue and financial forecasts provided to the Company by Wealthsimple. • We evaluated relevant internal and external information, including industry information, and assessed the reasonability of unobservable inputs in instances where these inputs were more subjective. • We compared the independent fair value estimate to management’s fair value estimate. • We independently performed a retrospective evaluation and analyzed Wealthsimple’s financial performance using revenue and financial forecasts provided to the Company by Wealthsimple in order to determine the impact on the fair value determination. • We evaluated other available information and considered whether this information corroborated or contradicted the Company’s conclusions. Other Information Management is responsible for the other information. The other information comprises: • Management’s Discussion and Analysis • The information, other than the financial statements and our auditor’s report thereon, in the Annual Report. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard. The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. 89 Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportAuditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is David Dalziel. Chartered Professional Accountants Winnipeg, Manitoba February 9, 2023 90 2022 IGM Financial Inc. Annual Report | Consolidated Financial StatementsConsolidated Statements of Earnings (in thousands of Canadian dollars, except per share amounts) For the years ended December 31 Revenues Wealth management (Note 3) Asset management Dealer compensation expense Net asset management (Note 3) Net investment income and other Proportionate share of associates’ earnings (Note 9) Expenses (Note 4) Advisory and business development Operations and support Sub-advisory Interest (Note 17) Earnings before income taxes Income taxes (Note 16) Net earnings Non-controlling interest (Note 9) Net earnings available to common shareholders Earnings per share (in dollars) (Note 25) – Basic – Diluted (See accompanying notes to consolidated financial statements) 2022 2021 $ 2,465,306 $ 2,553,600 965,984 (308,871) 1,011,456 (335,970) 657,113 675,486 24,068 210,762 22,542 196,367 3,357,249 3,447,995 1,205,472 1,178,009 839,941 75,125 113,768 806,380 82,020 113,936 2,234,306 2,180,345 1,122,943 1,267,650 250,365 872,578 (5,334) 867,244 3.64 3.63 $ $ $ 286,763 980,887 (1,938) 978,949 4.10 4.08 $ $ $ 91 Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportConsolidated Statements of Comprehensive Income (in thousands of Canadian dollars) For the years ended December 31 Net earnings Other comprehensive income (loss), net of tax Items that will not be reclassified to Net earnings Fair value through other comprehensive income investments 2022 2021 $ 872,578 $ 980,887 Other comprehensive income (loss) (Note 5), net of tax of $92,009 and $(130,242) (585,515) 834,519 Employee benefits Net actuarial gains (losses), net of tax of $(36,950) and $(37,466) Investment in associates – employee benefits and other Other comprehensive income (loss), net of tax of nil Items that may be reclassified subsequently to Net earnings Investment in associates and other Other comprehensive income (loss), net of tax of $2,541 and $(4,284) Total comprehensive income (See accompanying notes to consolidated financial statements) 100,049 101,283 12,689 23,519 (23,508) (3,787) (496,285) 955,534 $ 376,293 $ 1,936,421 92 2022 IGM Financial Inc. Annual Report | Consolidated Financial StatementsConsolidated Balance Sheets (in thousands of Canadian dollars) As at December 31 Assets Cash and cash equivalents Other investments (Note 5) Client funds on deposit Accounts and other receivables Income taxes recoverable Loans (Note 6) Derivative financial instruments (Note 23) Other assets (Note 8) Investment in associates (Note 9) Capital assets (Note 10) Capitalized sales commissions (Note 11) Deferred income taxes (Note 16) Intangible assets (Note 12) Goodwill (Note 12) Liabilities Accounts payable and accrued liabilities Income taxes payable Derivative financial instruments (Note 23) Deposits and certificates (Note 13) Other liabilities (Note 14) Obligations to securitization entities (Note 7) Lease obligations Deferred income taxes (Note 16) Long-term debt (Note 17) Shareholders’ Equity Share capital (Note 18) Common shares Contributed surplus Retained earnings Accumulated other comprehensive income (loss) (Note 21) Non-controlling interest (Note 9) These financial statements were approved and authorized for issuance by the Board of Directors on February 9, 2023. James O’Sullivan Director John McCallum Director (See accompanying notes to consolidated financial statements) 2022 2021 $ 1,072,892 $ 1,292,446 774,536 4,347,354 368,806 15,544 1,398,023 2,238,624 387,157 17,344 5,021,483 5,353,842 63,665 156,240 41,172 54,298 2,186,961 2,048,255 326,288 372,173 1,419 1,363,642 2,802,173 315,964 325,424 29,269 1,356,704 2,802,066 $ 18,873,176 $ 17,660,588 $ 507,573 $ 553,429 7,122 51,581 4,333,997 355,577 4,610,438 192,793 451,005 104,113 17,773 2,220,274 382,466 5,057,917 197,969 525,476 2,100,000 2,100,000 12,610,086 11,159,417 1,672,799 1,658,680 54,134 51,069 4,106,714 3,856,996 362,766 66,677 883,083 51,343 6,263,090 6,501,171 $ 18,873,176 $ 17,660,588 93 Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportConsolidated Statements of Changes in Shareholders’ Equity (in thousands of Canadian dollars) Share capital – Common shares (Note 18) Contributed surplus Retained earnings Accumulated other comprehensive income (loss) (Note 21) Non- controlling interest Total shareholders’ equity 2022 Balance, beginning of year $ 1,658,680 $ 51,069 $ 3,856,996 $ 883,083 $ 51,343 $ 6,501,171 Net earnings Other comprehensive income (loss), net of tax Total comprehensive income Common shares Issued under stock option plan Purchased for cancellation Stock options Current period expense Exercised Common share dividends Non-controlling interest Transfer out of fair value through other comprehensive income (Note 5) Common share cancellation excess and other – – – 34,429 (20,310) – – – – – – – – – – – 4,941 (1,876) – – – – 872,578 – – (496,285) 872,578 (496,285) – – – – (536,069) (5,334) 24,032 (105,489) – – – – – – (24,032) – – – – – – – – – 15,334 – – 872,578 (496,285) 376,293 34,429 (20,310) 4,941 (1,876) (536,069) 10,000 – (105,489) Balance, end of year $ 1,672,799 $ 54,134 $ 4,106,714 $ 362,766 $ 66,677 $ 6,263,090 2021 Balance, beginning of year $ 1,598,381 $ 51,663 $ 3,207,469 $ 136,364 $ 48,913 $ 5,042,790 Net earnings Other comprehensive income (loss), net of tax Total comprehensive income Common shares – – – Issued under stock option plan 60,299 – – – – 3,802 (4,396) – – – – 980,887 – 980,887 – 955,534 955,534 – – – (537,795) (1,938) – – – – – 208,815 (208,815) (442) – – – – – – – – 2,430 – – 980,887 955,534 1,936,421 60,299 3,802 (4,396) (537,795) 492 – (442) – – – – – – $ 1,658,680 $ 51,069 $ 3,856,996 $ 883,083 $ 51,343 $ 6,501,171 Stock options Current period expense Exercised Common share dividends Non-controlling interest Transfer out of fair value through other comprehensive income (Note 5) Other Balance, end of year (See accompanying notes to consolidated financial statements) 94 2022 IGM Financial Inc. Annual Report | Consolidated Financial StatementsConsolidated Statements of Cash Flows (in thousands of Canadian dollars) For the years ended December 31 Operating activities Earnings before income taxes Income taxes paid Adjustments to determine net cash from operating activities Capitalized sales commission amortization Capitalized sales commissions paid Amortization of capital, intangible and other assets Proportionate share of associates’ earnings, net of dividends received Pension and other post-employment benefits Changes in operating assets and liabilities and other Cash from operating activities before restructuring provision payments Restructuring provision cash payments Financing activities Net decrease in deposits and certificates Increase in obligations to securitization entities Repayments of obligations to securitization entities and other Repayment of lease obligations Issue of common shares Common shares purchased for cancellation Common share dividends paid Investing activities Purchase of other investments Proceeds from the sale of other investments Increase in loans Repayment of loans and other Net additions to capital assets Net cash used in additions to intangible assets and other (Decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Cash Cash equivalents Supplemental disclosure of cash flow information related to operating activities Interest and dividends received Interest paid (See accompanying notes to consolidated financial statements) 2022 2021 $ 1,122,943 $ 1,267,650 (330,869) (153,501) 77,587 (123,513) 103,994 (106,262) 5,855 (3,680) 746,055 (8,385) 737,670 56,683 (151,022) 99,818 (102,134) 14,403 (38,342) 993,555 (49,965) 943,590 (160) (3,861) 1,171,025 1,428,861 (1,626,896) (2,442,698) (25,592) 42,553 (115,667) (537,197) (23,023) 55,904 – (537,027) (1,091,934) (1,521,844) (150,508) 120,070 (131,778) 348,206 (1,274,427) (1,776,070) 1,584,354 2,744,676 (37,672) (107,107) (10,643) (75,276) 134,710 1,099,115 (219,554) 1,292,446 520,861 771,585 $ 1,072,892 $ 1,292,446 $ 346,257 $ 326,225 726,635 966,221 $ 1,072,892 $ 1,292,446 $ $ 253,558 201,741 $ $ 247,377 221,129 95 Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportNotes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands of Canadian dollars, except shares and per share amounts) Note 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 Corporation of Canada. IGM Financial Inc. is a wealth and asset management 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 (Mackenzie). Note 2. Summary of significant accounting policies The Consolidated Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). The policies set out below were consistently applied to all the periods presented unless otherwise noted. Use of judgment, estimates and assumptions The preparation of financial statements in conformity with IFRS requires management to exercise judgment in the process of applying accounting policies and requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements. The key areas where judgment has been applied include: the determination of which financial assets should be derecognized; the assessment of the appropriate classification of financial instruments, including those classified as fair value through profit or loss; and the assessment that significant influence exists for its investment in associates. Key components of the financial statements requiring management to make estimates include: the fair value of financial instruments, goodwill, intangible assets, income taxes, capitalized sales commissions, provisions and employee benefits. Actual results may differ from such estimates. Further detail of judgments and estimates are found in the remainder of Note 2 and in Notes 5, 7, 9, 11, 12, 14, 15, 16 and 24. Basis of consolidation The Consolidated Financial Statements include the accounts of the Company and all subsidiaries on a consolidated basis after elimination of intercompany transactions and balances. Subsidiaries are entities the Company controls when it is exposed, or has rights, to variable returns from its involvement and has the ability to affect those returns through its power to direct the relevant activities of the entity. The Company’s investments in Great-West Lifeco Inc. (Lifeco), China Asset Management Co., Ltd. (ChinaAMC) and Northleaf Capital Group Ltd. (Northleaf) are accounted for using the equity method. The investments were initially recorded at cost and the carrying amounts are increased or decreased to recognize the Company’s share of the investments’ comprehensive income (loss) and the dividends received since the date of acquisition. Revenue recognition Wealth management revenue is earned for providing financial planning, investment advisory and related financial services. Revenues from financial advisory fees and investment management and related administration fees are based on the net asset value of investment funds or other assets under advisement and are accrued as services are performed. Distribution revenue associated with insurance and banking products and services are also recognized on an accrual basis while distribution fees derived from investment fund and securities transactions are recognized on a trade date basis. Asset management revenue related to investment management advisory and administrative services is based on the net asset value of investment funds and other assets under management and is accrued as services are performed. 96 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsFinancial instruments All financial assets are initially recognized at fair value in the Consolidated Balance Sheets and are subsequently classified as measured at fair value through profit or loss (FVTPL), fair value through other comprehensive income (FVTOCI) or amortized cost based on the Company’s assessment of the business model within which the financial asset is managed and the financial asset’s contractual cash flow characteristics. A financial asset is measured at amortized cost if it is held within a business model of holding financial assets and collecting contractual cash flows and those cash flows are comprised solely of payments of principal and interest. A financial asset is measured at FVTOCI if the financial asset is held within a business model of both collecting contractual cash flows and selling the financial assets or through an irrevocable election for equity instruments that are not held for trading. All other financial assets are measured at FVTPL. A financial asset that would otherwise be measured at amortized cost or FVTOCI can be designated as FVTPL through an irrevocable election if doing so eliminates or significantly reduces an accounting mismatch. Financial assets can only be reclassified when there is a change to the business model within which they are managed. Such reclassifications are applied on a prospective basis. Financial liabilities are classified either as measured at amortized cost using the effective interest method or as FVTPL, which are recorded at fair value. Unrealized gains and losses on financial assets classified as FVTOCI as well as other comprehensive income amounts, including unrealized foreign currency translation gains and losses related to the Company’s investment in its associates, are recorded in the Consolidated Statements of Comprehensive Income on a net of tax basis. Accumulated other comprehensive income forms part of Shareholders’ equity. Cash and cash equivalents Cash and cash equivalents comprise cash and temporary investments consisting of highly liquid investments with short-term maturities. Interest income is recorded on an accrual basis in Net investment income and other in the Consolidated Statements of Earnings. Other investments Other investments, which are recorded on a trade date basis, are classified as either FVTOCI or FVTPL. The Company has elected to classify certain equity investments that are not held for trading as FVTOCI. Unrealized gains and losses on these FVTOCI investments are recorded in Other comprehensive income and transferred directly to retained earnings when realized without being recorded through profit or loss. Dividends declared are recorded in Net investment income and other in the Consolidated Statements of Earnings. FVTPL investments are held for trading and are comprised of fixed income and equity investments and investments in proprietary investment funds. Unrealized and realized gains and losses, dividends declared, and interest income on these investments are recorded in Net investment income and other in the Consolidated Statements of Earnings. Loans Loans are classified as either FVTPL or amortized cost, based on the Company’s assessment of the business model within which the loan is managed. Revenues from mortgage activities are included in Wealth management revenues in the Consolidated Statement of Earnings. Changes in fair value of loans measured at FVTPL are recorded in Wealth management revenue in the Consolidated Statements of Earnings. Loans measured at amortized cost are recorded net of an allowance for expected credit losses. Interest income is accounted for on the accrual basis using the effective interest method for all loans and is recorded in Wealth management revenue in the Consolidated Statements of Earnings. The Company applies a three-stage impairment approach to measure expected credit losses on loans: 1) On origination, an allowance for 12-month expected credit losses is established, 2) Lifetime expected credit losses are recognized where there is a significant deterioration of credit quality, and 3) A loan is considered credit impaired when there is no longer reasonable assurance of collection. 97 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportDerecognition The Company enters into transactions where it transfers financial assets recognized on its balance sheet. The determination of whether the financial assets are derecognized is based on the extent to which the risks and rewards of ownership are transferred. The gains or losses and the servicing fee revenue for financial assets that are derecognized are reported in Wealth management revenue in the Consolidated Statements of Earnings. The transactions for financial assets that are not derecognized are accounted for as secured financing transactions. Sales commissions Commissions are paid on investment product sales where the Company either receives a fee directly from the client or where it receives a fee directly from the investment fund. Commissions paid on investment product sales where the Company earns fees from a client are capitalized and amortized over their estimated useful lives, not exceeding a period of seven years. The Company regularly reviews the carrying value of capitalized selling commissions with respect to any events or circumstances that indicate impairment. Among the tests performed by the Company to assess recoverability is the comparison of the future economic benefits derived from the capitalized selling commission asset in relation to its carrying value. All other commissions paid on investment product sales are expensed as incurred. Capital assets Capital assets are comprised of Property and equipment and Right-of-use assets. Property and equipment Buildings, furnishings and equipment are amortized on a straight-line basis over their estimated useful lives, which range from 3 to 17 years for equipment and furnishings and 10 to 50 years for the building and its components. Capital assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Right-of-use assets A right-of-use asset representing the Company’s property leases is depreciated using the straight-line method from the commencement date to the end of the lease term and is recorded in Advisory and business development and Operations and support expenses. Leases For contracts that contain a lease, the Company recognizes a right-of-use asset and a lease liability. Imputed interest on the lease liability is recorded in Interest expense. Lease payments included in the measurement of the lease liability comprises fixed payments less any lease incentives receivable, variable payments that depend on an index or a rate, and payments or penalties for terminating the lease, if any. The lease payments are discounted using the Company’s incremental borrowing rate, which is applied to portfolios of leases with reasonably similar characteristics. The Company does not recognize a right-of-use asset or lease liability for leases that, at commencement date, have a lease term of 12 months or less, and leases for which the underlying asset is of low value. The Company recognizes the payments associated with these leases as an expense on a straight-line basis over the term of the lease. 98 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsGoodwill and intangible assets The Company tests the carrying value of goodwill and indefinite life intangible assets for impairment at least once a year and more frequently if an event or circumstance indicates the asset may be impaired. An impairment loss is recognized if the amount of the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal or its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash generating units). Investment fund management contracts have been assessed to have an indefinite useful life as the contractual right to manage the assets has no fixed term. Trade names have been assessed to have an indefinite useful life as they contribute to the revenues of the Company’s integrated asset management business as a whole and the Company intends to utilize them for the foreseeable future. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Software assets are amortized over a period not exceeding 7 years and distribution and other management contracts are amortized over a period not exceeding 20 years. Finite life intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Employee benefits The Company maintains a number of employee benefit plans including defined benefit plans and defined contribution pension plans for eligible employees. These plans are related parties in accordance with IFRS. The Company’s defined benefit plans include a funded defined benefit pension plan for eligible employees, unfunded supplementary executive retirement plans (SERP) for certain executive officers, and an unfunded post-employment health care, dental and life insurance plan for eligible retirees. The defined benefit pension plan provides pensions based on length of service and final average earnings. The cost of the defined benefit plans is actuarially determined using the projected unit credit method prorated on service based upon management’s assumptions about discount rates, compensation increases, retirement ages of employees, mortality and expected health care costs. Any changes in these assumptions will impact the carrying amount of the pension asset. The Company’s accrued benefit asset or liability in respect of defined benefit plans is calculated separately for each plan by discounting the amount of the benefit that employees have earned in return for their service in current and prior periods and deducting the fair value of any plan assets. The Company determines the net interest component of the pension expense for the period by applying the discount rate used to measure the accrued benefit asset or liability at the beginning of the annual period to the net accrued benefit asset or liability. The discount rate used to value assets or liabilities is determined using a yield curve of AA corporate debt securities. If the plan benefits are changed, or a plan is curtailed, any past service costs or curtailment gains or losses are recognized immediately in net earnings. Current service costs, past service costs and curtailment gains or losses are included in Operations and support expenses. Remeasurements arising from defined benefit plans represent actuarial gains and losses and the actual return on plan assets, less interest calculated at the discount rate. Remeasurements are recognized immediately through Other comprehensive income (OCI) and are not reclassified to net earnings. The accrued benefit asset represents the surplus related to defined benefit pension plan and is included in Other assets. The accrued benefit liability represents the deficit of the SERPs and post-employment health care plan and is included in Other liabilities. Payments to the defined contribution pension plans are expensed as incurred. 99 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportShare-based payments The Company uses the fair value based method to account for stock options granted to employees. The fair value of stock options is determined on each grant date. Compensation expense is recognized over the period that the stock options vest, with a corresponding increase in Contributed surplus. When stock options are exercised, the proceeds together with the amount recorded in Contributed surplus are added to Share capital. The Company recognizes a liability for cash settled awards including those granted under the Performance Share Unit, Restricted Share Unit and Deferred Share Unit plans. Compensation expense is recognized over the vesting period, net of related hedges. The liability is remeasured at fair value at each reporting period. Provisions A provision is recognized if, as a result of a past event, the Company has a present obligation where a reliable estimate can be made, and it is probable that an outflow of resources will be required to settle the obligation. Income taxes The Company uses the liability method in accounting for income taxes whereby deferred income tax assets and liabilities reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases and tax loss carryforwards. Deferred income tax assets and liabilities are measured based on the enacted or substantively enacted tax rates which are anticipated to be in effect when the temporary differences are expected to reverse. Earnings per share Basic earnings per share is determined by dividing Net earnings available to common shareholders by the weighted average number of common shares outstanding for the year. Diluted earnings per share is determined using the same method as basic earnings per share except that the average number of common shares outstanding includes the potential dilutive effect of outstanding stock options granted by the Company as determined by the treasury stock method. Derivative financial instruments Derivative financial instruments are utilized by the Company in the management of equity price and interest rate risks. The Company does not utilize derivative financial instruments for speculative purposes. The Company formally documents all hedging relationships, as well as its risk management objective and strategy for undertaking various hedging transactions. This process includes linking all derivatives to specific assets and liabilities on the Consolidated Balance Sheets or to anticipated future transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Derivative financial instruments are recorded at fair value in the Consolidated Balance Sheets. Derivative financial instruments specifically designated as a hedge and meeting the criteria for hedge effectiveness offset the changes in fair values or cash flows of hedged items. A hedge is designated either as a cash flow hedge or a fair value hedge. A cash flow hedge requires the change in fair value of the derivative, to the extent effective, to be recorded in Other comprehensive income, which is reclassified to the Consolidated Statements of Earnings when the hedged item affects earnings. The change in fair value of the ineffective portion of the derivative in a cash flow hedge is recorded in the Consolidated Statements of Earnings. A fair value hedge requires the change in fair value of the hedging derivative and the change in fair value of the hedged item relating to the hedged risk to both be recorded in the Consolidated Statements of Earnings. The Company enters into interest rate swaps as part of its mortgage banking and intermediary operations. These swap agreements require the periodic exchange of net interest payments without the exchange of the notional principal amount on which the payments are based. Swaps entered into to hedge the costs of funds on certain securitization activities are designated as hedging instruments (Note 23). The effective portion of changes in fair value are initially recorded in Other comprehensive income and subsequently recorded in Wealth management revenue in the Consolidated Statements of Earnings over the term of the associated Obligations to securitization entities. Remaining mortgage related swaps are not designated as hedging instruments and changes in fair value are recorded directly in Wealth management revenue in the Consolidated Statements of Earnings. 100 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsThe Company also enters into total return swaps and forward agreements to manage its exposure to fluctuations in the total return of its common shares related to deferred compensation arrangements. Total return swap and forward agreements require the exchange of net contractual payments periodically or at maturity without the exchange of the notional principal amounts on which the payments are based. Certain of these derivatives are not designated as hedging instruments and changes in fair value are recorded in Operations and support expenses in the Consolidated Statements of Earnings. Derivatives continue to be utilized on a basis consistent with the risk management policies of the Company and are monitored by the Company for effectiveness as economic hedges even if specific hedge accounting requirements are not met. Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount is presented on the Consolidated Balance Sheets when the Company has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize the assets and settle the liabilities simultaneously. Future accounting changes The Company continuously monitors 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 17 Insurance Contracts The IASB issued IFRS 17 which requires insurance contracts to be measured using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to insurance contracts and is effective for periods beginning on or after January 1, 2023. Adoption of this standard is expected to affect the accounting for the carrying value of the Company’s investment in Great-West Lifeco Inc. (Lifeco) and the amount that the Company records for its proportionate share of associate’s earnings. Additional information of the impact on Lifeco is available in its public disclosures. Note 3. Revenues from contracts with customers Advisory fees Product and program fees Redemption fees Other financial planning revenues Wealth management Asset management Dealer compensation expense Net asset management Net revenues from contracts with customers 2022 2021 $ 1,372,815 $ 1,397,859 923,856 961,122 2,296,671 2,358,981 4,005 164,630 10,029 184,590 2,465,306 2,553,600 965,984 (308,871) 1,011,456 (335,970) 657,113 675,486 $ 3,122,419 $ 3,229,086 Wealth management revenue is earned by providing financial planning, investment advisory and related financial services. Advisory fees, related to financial planning, are associated with assets under management and advisement. Product and program fees, related to investment management and administration services, are associated with assets under management. Other financial planning revenues include insurance, banking products and services, and mortgage lending activities. Asset management revenue, related to investment management advisory and administrative services, depends on the level and composition of assets under management. 101 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportNote 4. Expenses Commissions Salaries and employee benefits Occupancy Amortization of capital, intangible and other assets Other Sub-advisory Interest Note 5. Other investments Fair value through other comprehensive income (FVTOCI) Corporate investments Fair value through profit or loss (FVTPL) Equity securities Proprietary investment funds 2022 2021 $ 932,018 $ 918,793 609,341 25,949 103,994 374,111 590,388 27,117 99,818 348,273 2,045,413 1,984,389 75,125 113,768 82,020 113,936 $ 2,234,306 $ 2,180,345 2022 2021 Cost Fair value Cost Fair value $ 242,704 $ 602,612 $ 226,220 $ 1,291,434 12,689 156,663 169,352 12,933 158,991 171,924 1,173 101,327 102,500 1,552 105,037 106,589 $ 412,056 $ 774,536 $ 328,720 $ 1,398,023 Fair value through other comprehensive income Corporate investments is primarily comprised of the Company’s investments in Wealthsimple Financial Corp. (Wealthsimple), and Portag3 Ventures LP, Portag3 Ventures II LP and Portage Ventures III LP (Portage). Portage is an early-stage investment fund dedicated to backing innovating financial services companies. Portage is controlled by Power Corporation of Canada. The total fair value of Corporate investments of $602.6 million is presented net of certain costs incurred within the limited partnership structures holding the underlying investments. Investment in Wealthsimple Wealthsimple Financial Corp. (Wealthsimple) is a financial company that provides simple digital tools for growing and managing your money. The Company’s investment in Wealthsimple is held through a limited partnership controlled by Power Corporation of Canada. The investment is classified at Fair Value Through Other Comprehensive Income. IGM Financial Inc. holds directly and indirectly a 24% interest in Wealthsimple (2021 – 23%) valued at $492 million at December 31, 2022 (2021 – $1,153 million). The investment in Wealthsimple decreased $661 million for the twelve months ending December 31, 2022. Fair value is determined by using observable transactions in the investments’ securities where available, discounted cash flows, and other valuation metrics, including revenue multiples used in the valuation of comparable public companies. This change in fair value is consistent with changes in stock market valuations and public market peer multiples, as well as company revenue and other financial forecasts. In 2022, realized gains of $27.8 million ($24.0 million after-tax) related to Other investments were transferred from Accumulated other comprehensive income to Other retained earnings. In 2021, IGM Financial Inc. disposed of a portion of its investment in Wealthsimple and a realized gain of $241 million ($209 million after-tax) was transferred from Accumulated other comprehensive income to Other retained earnings. 102 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsFair value through profit or loss Proprietary investment funds The Company manages and provides services and earns management and administration fees, in respect of investment funds that are not recognized in the Consolidated Balance Sheets. As at December 31, 2022, there were $163.6 billion in investment fund assets under management (2021 – $184.5 billion). The Company’s investments in proprietary investment funds are classified on the Company’s Consolidated Balance Sheets as fair value through profit or loss. These investments are generally made in the process of launching a new fund and are sold as third-party investors subscribe. The Company’s maximum exposure to loss is limited to its direct investment in the proprietary investment funds. Certain investment funds are consolidated where the Company has made the assessment that it controls the investment fund. As at December 31, 2022, the underlying investments related to these consolidated investment funds primarily consisted of cash and short-term investments of $14.6 million (2021 – $25.1 million), equity securities of $97.5 million (2021 – $50.9 million) and fixed income securities of $22.3 million (2021 – $13.0 million). The underlying securities of these funds are classified as FVTPL and recognized at fair value. Note 6. Loans Amortized cost Residential mortgages Less: Allowance for expected credit losses Fair value through profit or loss The change in the allowance for expected credit losses is as follows: Balance, beginning of year Write-offs, net of recoveries Expected credit losses Balance, end of year 1 year or less Contractual maturity 1 – 5 years Over 5 years 2022 Total 2021 Total $ 963,837 $ 4,056,068 $ 2,393 $ 5,022,298 $ 5,297,054 815 648 5,021,483 5,296,406 – 57,436 $ 5,021,483 $ 5,353,842 $ $ 648 $ (689) 856 815 $ 778 (407) 277 648 Total credit impaired loans as at December 31, 2022 were $2,159 (2021 – $2,822). Total interest income on loans was $138.8 million (2021 – $154.7 million). Total interest expense on obligations to securitization entities, related to securitized loans, was $102.8 million (2021 – $111.4 million). Losses realized on the sale of residential mortgages totalled $3.5 million (2021 – gains of $3.9 million). Fair value adjustments related to mortgage banking operations totalled negative $3.1 million (2021 – positive $1.4 million). These amounts were included in Wealth management revenue. Wealth management revenue also includes other mortgage banking related items including portfolio insurance, issue costs, and other items. 103 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportNote 7. 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 offsetting liabilities for the net proceeds received as Obligations to securitization entities which are recorded 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, and the hedging swap used to manage exposure to changes in variable rate investment returns, are recorded as derivatives with a fair value of $0.9 million at December 31, 2022 (2021 – $4.5 million). 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 recorded 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. 2022 Carrying value NHA MBS and CMB Program Bank sponsored ABCP Total Fair value 2021 Carrying value NHA MBS and CMB Program Bank sponsored ABCP Total Fair value Securitized mortgages Obligations to securitization entities $ 2,494,400 $ 2,459,828 2,143,241 2,150,610 $ 4,637,641 $ 4,610,438 $ 4,532,493 $ 4,544,609 $ 2,653,682 $ 2,651,293 2,371,320 2,406,624 $ 5,025,002 $ 5,057,917 $ 5,083,991 $ 5,146,420 Net 34,572 (7,369) 27,203 (12,116) 2,389 (35,304) (32,915) (62,429) $ $ $ $ $ $ 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. Note 8. Other assets Accrued benefit asset (Note 15) Deferred and prepaid expenses Other 2022 $ 86,779 $ 56,412 13,049 2021 – 52,225 2,073 $ 156,240 $ 54,298 Total other assets of $33.1 million as at December 31, 2022 (2021 – $29.6 million) are expected to be realized within one year. 104 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsNote 9. Investment in associates 2022 Balance, beginning of year Additions Dividends Proportionate share of: Earnings Other comprehensive income (loss) and other adjustments Balance, end of year 2021 Balance, beginning of year Additions Dividends Proportionate share of: Earnings Other comprehensive income (loss) and other adjustments Lifeco ChinaAMC Northleaf Other Total $ 1,020,700 $ 768,724 $ 258,831 $ – $ 2,048,255 – – (73,181) (31,319) – – 40,430 – 40,430 (104,500) 128,227 (521) 57,231 (7,465) 25,668 (1) – (364) – 210,762 (7,986) $ 1,075,225 $ 787,171 $ 284,499 $ 40,066 $ 2,186,961 $ 962,388 $ 720,282 $ 248,498 $ – – (67,356) (26,877) 125,103 565 61,574 13,745 643 – 9,690 (1) – – – – – – – $ 1,931,168 643 (94,233) 196,367 14,310 $ 2,048,255 Balance, end of year $ 1,020,700 $ 768,724 $ 258,831 $ (1) The Company’s proportionate share of Northleaf’s earnings, net of Non-controlling interest, was $20,534 in 2022 (2021 – $7,752). The Company uses the equity method to account for its investments in associates, which include Great-West Lifeco Inc. (Lifeco), China Asset Management Co., Ltd. (ChinaAMC) and Northleaf Capital Group Ltd. (Northleaf), as it exercises significant influence. On January 12, 2023, the Company acquired an additional 13.9% interest in ChinaAMC from Power Corporation of Canada (Power) and sold a portion of its investment in Lifeco to Power (Note 29). Great-West Lifeco Inc. (Lifeco) Lifeco is a publicly listed company that is incorporated and domiciled in Canada and is controlled by Power Corporation of Canada. Lifeco is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment management and reinsurance businesses, primarily in Canada, the United States, Europe and Asia. At December 31, 2022, the Company held 37,337,133 (2021 – 37,337,133) shares of Lifeco, which represented an equity interest of 4.0% (2021 – 4.0%). Significant influence arises from several factors, including but not limited to the following: common control of Lifeco by Power Corporation of Canada, directors common to the boards of the Company and Lifeco, certain shared strategic alliances and significant intercompany transactions that influence the financial and operating policies of both companies. The Company’s proportionate share of Lifeco’s earnings is recorded in the Consolidated Statements of Earnings. The fair value of the Company’s investment in Lifeco totalled $1,168.3 million at December 31, 2022 (2021 – $1,415.5 million). The Company has elected to apply the exemption in IFRS 4 Insurance Contracts to retain Lifeco’s relevant accounting policies related to Lifeco’s deferral of the adoption of IFRS 9 Financial Instruments. Lifeco directly owned 9,200,000 shares of the Company at December 31, 2022 (2021 – 9,200,000). Lifeco’s financial information as at December 31, 2022 can be obtained in its publicly available information. 105 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportChina Asset Management Co., Ltd. (ChinaAMC) ChinaAMC is an asset management company established in Beijing, China and is controlled by CITIC Securities Company Limited. As at December 31, 2022, the Company held a 13.9% ownership interest in ChinaAMC (2021 – 13.9%). Significant influence arises from board representation, participating in the policy making process, shared strategic initiatives including joint product launches and collaboration between management and investment teams. The following table sets forth certain summary financial information from ChinaAMC: (millions) As at December 31 Total assets Total liabilities For the year ended December 31 Revenue Net earnings available to common shareholders Total comprehensive income Northleaf Capital Group Ltd. (Northleaf) Canadian Dollars 3,461 1,032 1,446 418 434 2022 Chinese Yuan 17,650 5,261 7,475 2,163 2,248 Canadian Dollars 3,241 996 1,560 449 444 2021 Chinese Yuan 16,295 5,007 8,015 2,312 2,287 The Company, through an acquisition vehicle held by the Company’s subsidiary, Mackenzie, holds a 49.9% voting interest and a 70% economic interest in Northleaf. The acquisition vehicle is owned 80% by Mackenzie and 20% by Lifeco. Northleaf is a global private equity, private credit and infrastructure fund manager headquartered in Toronto. Mackenzie and Lifeco have an obligation and right to purchase the remaining economic and voting interest in Northleaf commencing in approximately five years from the acquisition date and extending into future periods. The equity method is used to account for the acquisition vehicle’s 70% economic interest as it exercises significant influence. Significant influence arises from board representation, participation in the policy making process and shared strategic initiatives. The Company controls the acquisition vehicle and therefore recognizes the full 70% economic interest in Northleaf and recognizes Non-controlling interest (NCI) related to Lifeco’s net interest in Northleaf of 14%. The following table sets forth certain summary financial information from Northleaf: (millions) As at December 31 Total assets Total liabilities For the year ended December 31 Revenue Net earnings available to common shareholders Total comprehensive income $ $ 2022 2021 160.3 $ 113.2 119.6 106.0 137.0 $ 40.7 40.7 99.8 17.9 17.9 106 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsNote 10. Capital assets 2022 Cost Less: accumulated amortization Changes in capital assets: Balance, beginning of year Additions Disposals Amortization Balance, end of year 2021 Cost Less: accumulated amortization Changes in capital assets: Balance, beginning of year Additions Disposals Amortization Balance, end of year Note 11. Capitalized sales commissions Cost Less: accumulated amortization Changes in capitalized sales commissions Balance, beginning of year Changes due to: Sales of investment funds Amortization Balance, end of year Furniture and equipment Building and components Right-of-use assets Total $ $ $ 353,374 (252,558) 100,816 $ $ 69,592 (19,915) 49,677 81,423 $ 51,105 37,325 (1,163) (16,769) 243 – $ $ $ $ $ $ 280,946 (105,151) 175,795 183,436 20,416 – 703,912 (377,624) 326,288 315,964 57,984 (1,163) (46,497) (1,671) (28,057) $ 100,816 $ 49,677 $ 175,795 $ 326,288 $ $ $ $ $ $ 336,025 (254,602) 81,423 99,036 9,296 (9,166) (17,743) $ $ $ 69,349 (18,244) 51,105 51,411 1,339 – $ $ $ 260,530 (77,094) 183,436 179,243 32,658 – (1,645) (28,465) 665,904 (349,940) 315,964 329,690 43,293 (9,166) (47,853) $ 81,423 $ 51,105 $ 183,436 $ 315,964 $ $ $ 2022 2021 $ $ $ 585,363 (213,190) 372,173 325,424 124,336 (77,587) 46,749 461,149 (135,725) 325,424 231,085 151,022 (56,683) 94,339 $ 372,173 $ 325,424 107 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportNote 12. Goodwill and intangible assets 2022 Cost Less: accumulated amortization Changes in goodwill and intangible assets: Balance, beginning of year Additions Disposals Amortization Finite life Distribution and other management contracts Investment fund management contracts Indefinite life Trade names Total intangible assets Goodwill $ $ $ 289,286 (113,219) 176,067 170,632 20,082 (223) (14,424) $ $ $ 740,559 – 740,559 740,559 $ $ $ – – – 285,177 $ 1,680,340 $ 2,802,173 – (316,698) – 285,177 $ 1,363,642 $ 2,802,173 285,177 $ 1,356,704 $ 2,802,066 – – – 60,346 (225) (53,183) 107 – – $ $ $ Software 365,318 (203,479) 161,839 160,336 40,264 (2) (38,759) Balance, end of year $ 161,839 $ 176,067 $ 740,559 $ 285,177 $ 1,363,642 $ 2,802,173 2021 Cost Less: accumulated amortization Changes in goodwill and intangible assets: Balance, beginning of year Additions Disposals Amortization $ $ $ $ $ $ 325,123 (164,787) 160,336 155,923 38,865 (19) (34,433) 270,327 (99,695) 170,632 139,931 44,072 (867) (12,504) $ $ $ 740,559 – 740,559 740,559 $ $ $ – – – 285,177 $ 1,621,186 $ 2,802,066 – (264,482) – 285,177 $ 1,356,704 $ 2,802,066 285,177 $ 1,321,590 $ 2,803,075 – – – 82,937 (886) (46,937) (1,009) – – Balance, end of year $ 160,336 $ 170,632 $ 740,559 $ 285,177 $ 1,356,704 $ 2,802,066 The goodwill and indefinite life intangible assets consisting of investment fund management contracts and trade names are allocated to each cash generating unit (CGU) as summarized in the following table: Wealth Management Asset Management Total 2022 Indefinite life intangible assets Goodwill 2021 Indefinite life intangible assets Goodwill $ 1,491,687 $ 23,055 $ 1,491,687 $ 23,055 1,310,486 1,002,681 1,310,379 1,002,681 $ 2,802,173 $ 1,025,736 $ 2,802,066 $ 1,025,736 The Company tests whether goodwill and indefinite life intangible assets are impaired by assessing the carrying amounts with the recoverable amounts. The recoverable amount of the Company’s CGUs is based on the best available evidence of fair value less costs of disposal. In assessing the recoverable amounts, valuation approaches are used that may include discounted cash flow analysis and application of capitalization multiples to financial and operating metrics based upon precedent acquisition transactions and trading comparables. Assumptions and estimates employed in discounted cash flows include future changes in assets under management resulting from net sales and investment returns, pricing and profit margin changes and discount rates, which represent level 3 fair value inputs. Valuation multiples may include price-to-earnings or other conventionally used measures for investment managers or other financial service providers (multiples of value to assets under management, revenues, or other measures of profitability). This assessment may give regard to a variety of relevant considerations, including expected growth, risk and capital market conditions, among other factors. The valuation multiples used in assessing fair value represent Level 2 fair value inputs. The fair value less costs of disposal of the Company’s CGUs was compared with the carrying amount and it was determined there was no impairment. Changes in assumptions and estimates used in determining the recoverable amounts of CGUs can result in significant adjustments to the valuation of the CGUs. 108 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsNote 13. Deposits and certificates Deposits and certificates are classified as other financial liabilities measured at amortized cost. Included in the assets of the Consolidated Balance Sheets are cash and cash equivalents, client funds on deposit and loans amounting to $4,334.0 million (2021 – $2,220.3 million) related to deposits and certificates. Deposits Certificates Note 14. Other liabilities Dividends payable Interest payable Accrued benefit liabilities (Note 15) Provisions Other Term to maturity Demand 1 year or less 1–5 years Over 5 years 2022 Total 2021 Total $ 4,332,493 – $ 4,332,493 $ $ – 350 350 $ $ – 487 487 $ $ – $ 4,332,493 $ 2,218,611 667 1,504 1,663 667 $ 4,333,997 $ 2,220,274 2022 2021 $ 133,688 $ 134,816 36,659 81,367 18,356 85,507 26,775 125,732 26,674 68,469 $ 355,577 $ 382,466 The Company establishes restructuring provisions related to business acquisitions, divestitures and other items, as well as other provisions in the normal course of its operations. Changes in provisions during 2022 consisted of additional estimates of $3.2 million (2021 – $7.3 million), provision reversals of $1.5 million (2021 – $4.0 million) and payments of $10.0 million (2021 – $54.1 million). Total other liabilities of $235.6 million as at December 31, 2022 (2021 – $244.9 million) are expected to be settled within one year. Note 15. Employee benefits Defined benefit plans The Company maintains a number of employee pension and post-employment benefit plans. These plans include a funded registered defined benefit pension plan for all eligible employees, unfunded supplementary executive retirement plans (SERPs) for certain executive officers, and an unfunded post-employment health care, dental and life insurance plan for eligible retirees. Effective July 1, 2012, the defined benefit pension plan was closed to new members. For all eligible employees hired after July 1, 2012, the Company has a registered defined contribution pension plan. The defined benefit pension plan is a separate trust that is legally separated from the Company. The defined benefit pension plan is registered under the Pension Benefits Act of Manitoba (Act) and the Income Tax Act (ITA). As required by the Act, the defined benefit pension plan is governed by a pension committee which includes current and retired employees. The Pension Committee has certain responsibilities as described in the Act but may delegate certain activities to the Company. The ITA governs the employer’s ability to make contributions and also has parameters that the plan must meet with respect to investments in foreign property. The defined benefit pension plan provides lifetime pension benefits to all eligible employees based on length of service and final average earnings subject to limits established by the ITA. Death benefits are available on the death of an active member or a retired member. Employees who are not senior officers are required to make annual contributions based on a percentage of salaries which are subject to a maximum amount. 109 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportThe actuarial valuation for funding purposes related to the Company’s registered defined benefit pension plan, based on a measurement date of December 31, 2021, was completed. The valuation determines the plan surplus or deficit on both a solvency and going concern basis. The solvency basis determines the relationship between the plan assets and its liabilities assuming that the plan is wound up and settled on the valuation date. A going concern valuation compares the relationship between the plan assets and the present value of the expected future benefit cash flows, assuming the plan will be maintained indefinitely. Based on the actuarial valuation, the registered pension plan had a solvency surplus of $14.4 million compared to a solvency deficit of $61.3 million in the previous actuarial valuation, which was based on a measurement date of December 31, 2021. The improvement in the funded status resulted largely from interest rate increases, as well as the return on plan assets. The registered pension plan had a going concern surplus of $95.0 million compared to $79.2 million in the previous valuation. The next actuarial valuation will be based on a measurement date of December 31, 2022. During the year, the Company has made contributions of $11.4 million (2021 – $13.6 million). The Company expects annual contributions of approximately $2.0 million in 2023. 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 SERPs are non-registered, non-contributory defined benefit plans which provide supplementary benefits to certain retired executives. The other post-employment benefit plan is a non-contributory plan and provides eligible employees a reimbursement of medical costs or a fixed amount per year to cover medical costs during retirement. The SERPs and other post-employment benefit plans are managed by the Company with oversight from the Board of Directors. The defined benefit plans expose the Company to actuarial risks such as mortality risk which represents life expectancy and impacts the calculation of the obligations; interest rate risk which impacts the discount rate used to calculate the obligations and the actual return on plan assets; salary risk as estimated salary increases are used in the calculation of the obligations; and investment risk as the nature of the investments impact the actual return on the plan assets. The risks are managed by regular monitoring of the plans, applicable regulations and other factors that could impact the Company’s expenses and cash flows. Plan assets, benefit obligations and funded status: Fair value of plan assets Balance, beginning of year Employee contributions Employer contributions Benefits paid Interest income Additions Remeasurements: Return on plan assets Balance, end of year Accrued benefit obligation Balance, beginning of year Benefits paid Current service cost Employee contributions Interest expense Additions Remeasurements: Actuarial losses (gains) Experience adjustments Financial assumptions Balance, end of year 2022 Other post- employment benefits SERPs Defined benefit pension plan SERPs 2021 Other post- employment benefits Defined benefit pension plan $ 566,727 $ 1,810 11,438 (30,590) 18,613 998 (58,266) 510,730 588,351 (30,590) 21,027 1,810 19,094 998 $ – – – – – – – – 71,557 (5,808) 1,971 – 2,069 – (2,506) (174,233) 423,951 (1,048) (12,657) 56,084 – – – – – – – – 32,551 (3,722) 344 – 931 – 708 (5,529) 25,283 $ 516,945 $ 1,964 13,598 (27,748) 13,774 – 48,194 566,727 650,064 (27,748) 25,707 1,964 17,177 – (3,348) (75,465) 588,351 $ – – – – – – – – 74,825 (3,853) 2,107 – 1,668 – 1,861 (5,051) 71,557 – – – – – – – – 42,135 (2,671) 679 – 960 – (6,402) (2,150) 32,551 Accrued benefit asset (liability) $ 86,779 $ (56,084) $ (25,283) $ (21,624) $ (71,557) $ (32,551) 110 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsSignificant actuarial assumptions used to calculate the defined benefit obligation: Discount rate Rate of compensation increase Health care cost trend rate(1) Defined benefit pension plan 5.25% 3.75% N/A SERPs 5.25%-5.30% 3.75% N/A 2022 Other post- employment benefits 5.25% N/A 5.40% Defined benefit pension plan 3.30% 3.75% N/A SERPs 2.65%-3.10% 3.75% N/A 2021 Other post- employment benefits 3.00% N/A 5.50% Mortality rates at age 65 for current pensioners 23.1 years 23.1 years 23.1 years 23.1 years 23.1 years 23.1 years (1) Trending to 4.00% in 2040 and remaining at that rate thereafter. The weighted average duration of the pension plan’s defined benefit obligation at the end of the reporting period is 15.7 years (2021 – 20.7 years). Benefit expense: Current service cost Net interest cost Sensitivity analysis: Defined benefit pension plan $ $ 21,027 481 21,508 $ $ 2022 Other post- employment benefits Defined benefit pension plan 344 931 1,275 $ $ 25,707 3,403 29,110 $ $ SERPs 1,971 2,069 4,040 $ $ 2021 Other post- employment benefits 679 960 1,639 SERPs 2,107 1,668 3,775 $ $ The calculation of the accrued benefit liability and the related benefit expense are sensitive to the significant actuarial assumptions. The following table presents the sensitivity analysis: Defined benefit pension plan Discount rate (+ / - 0.25%) Increase Decrease Rate of compensation (+ / - 0.25%) Increase Decrease Mortality Increase 1 year SERPs Discount rate (+ / - 0.25%) Increase Decrease Rate of compensation (+ / - 0.25%) Increase Decrease Mortality Increase 1 year Other post-employment benefits Discount rate (+ / - 0.25%) Increase Decrease Health care cost trend rates (+ / - 1.00%) Increase Decrease Mortality Increase 1 year Increase (decrease) in liability 2022 Increase (decrease) in expense Increase (decrease) in liability 2021 Increase (decrease) in expense $ (16,828) $ (1,866) $ (28,634) $ 17,877 1,886 30,242 4,755 (4,718) 585 (581) 7,805 (7,674) 6,334 477 11,214 (1,138) 1,181 46 (41) 923 (501) 521 498 (441) 571 44 (47) 14 (12) 51 27 (28) 27 (23) 33 (1,683) 1,755 30 (26) 1,415 (763) 797 659 (574) 807 (2,391) 2,389 838 (822) 721 82 (87) 12 (13) 48 42 (44) 20 (17) 30 111 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportThe sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur as changes in certain assumptions may be correlated. Asset allocation of defined benefit pension plan by asset category: Equity securities Fixed income securities Alternative strategies Cash and cash equivalents 2022 58.4 % 28.7 11.1 1.8 2021 61.5 % 30.2 7.3 1.0 100.0 % 100.0 % The defined benefit pension plan adheres to its Statement of Investment Policies and Procedures which includes investment objectives, asset allocation guidelines and investment limits by asset class. The defined benefit pension plan assets are invested in investment funds with the exception of cash on deposit with Schedule I Canadian chartered banks. Defined contribution pension plans The Company maintains a number of defined contribution pension plans for eligible employees. The total expense recorded in Advisory and business development and Operations and support expenses was $8.7 million (2021 – $6.9 million). Group Retirement Savings Plan (RSP) The Company maintains a group RSP for eligible employees. The Company’s contributions are recorded in Advisory and business development and Operations and support expenses as paid and totalled $9.5 million (2021 – $8.6 million). Note 16. Income taxes Income tax expense: Income taxes recognized in net earnings Current taxes Tax on current year’s earnings Adjustments in respect of prior years Deferred taxes Effective income tax rate: Income taxes at Canadian federal and provincial statutory rates Effect of: Proportionate share of associates’ earnings (Note 9) Other items Effective income tax rate 112 2022 2021 $ 233,550 $ 230,651 1,537 235,087 15,278 (676) 229,975 56,788 $ 250,365 $ 286,763 2022 2021 26.62 % 26.63 % (4.50) 0.18 (3.65) (0.36) 22.30 % 22.62 % 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsDeferred income taxes Composition and changes in net deferred taxes are as follows: Accrued benefit liabilities Loss carry- forwards Capitalized sales commissions Intangible assets Other investments Other Total 2022 Balance, beginning of year $ 33,886 $ 6,459 $ (86,616) $ (289,835) $ (142,751) $ (17,350) $ (496,207) Recognized in statements of: Earnings Comprehensive income Equity Foreign exchange rate charges and other Balance, end of year 2021 Balance, beginning of year Recognized in statements of: Earnings Comprehensive income Equity Foreign exchange rate charges and other $ $ 1,569 (36,950) – – (46) – – 274 (12,260) (654) – – – – – – 619 95,552 485 – (4,506) 2,541 – (3) (15,278) 61,143 485 271 (1,495) $ 6,687 $ (98,876) $ (290,489) $ (46,095) $ (19,318) $ (449,586) 67,467 $ 27,604 $ (61,579) $ (288,229) $ (45,961) $ (2,757) $ (303,455) 3,885 (37,466) – – (21,145) (25,037) (1,605) – – – – – – – – (1) (1,371) (97,653) 3,438 (11,515) (4,284) – (56,788) (139,403) 3,438 (1,204) 1,206 1 Balance, end of year $ 33,886 $ 6,459 $ (86,616) $ (289,835) $ (142,751) $ (17,350) $ (496,207) Deferred income tax assets and liabilities are presented on the Consolidated Balance Sheets as follows: Deferred income tax assets Deferred income tax liabilities Note 17. Long-term debt Maturity January 26, 2027 December 13, 2027 May 9, 2031 December 31, 2032 March 7, 2033 December 10, 2040 January 25, 2047 December 9, 2047 July 13, 2048 March 21, 2050 2022 2021 $ 1,419 $ 29,269 (451,005) (525,476) $ (449,586) $ (496,207) Rate 2022 2021 3.44 % $ 400,000 $ 400,000 6.65 % 7.45 % 7.00 % 7.11 % 6.00 % 4.56 % 4.115 % 4.174 % 4.206 % 125,000 150,000 175,000 150,000 200,000 200,000 250,000 200,000 250,000 125,000 150,000 175,000 150,000 200,000 200,000 250,000 200,000 250,000 $ 2,100,000 $ 2,100,000 Long-term debt consists of unsecured debentures which are redeemable by the Company, in whole or in part, at any time, at the greater of par and a formula price based upon yields at the time of redemption. Long-term debt is classified as other financial liabilities and is recorded at amortized cost. Interest expense relating to long-term debt was $106.6 million (2021 – $106.6 million). 113 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportNote 18. Share capital Authorized Unlimited 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 Common shares: Balance, beginning of year Issued under Stock Option Plan (Note 20) Purchased for cancellation Balance, end of year Normal course issuer bid 2022 2021 Shares Stated value Shares Stated value 239,679,043 $ 1,658,680 238,308,284 $ 1,598,381 879,019 (2,890,000) 34,429 (20,310) 1,370,759 60,299 – – 237,668,062 $ 1,672,799 239,679,043 $ 1,658,680 The Company commenced a normal course issuer bid on March 1, 2022 which is effective until the earlier of February 28, 2023 and the date on which the Company has purchased the maximum number of common shares permitted under the normal course issuer bid. Pursuant to this bid, the Company may purchase up to 6.0 million or approximately 2.5% of its common shares outstanding as at February 15, 2022. In 2022, there were 2,890,000 shares (2021 – nil) purchased at a cost of $115.7 million. The premium paid to purchase the shares in excess of the stated value was charged to Retained earnings. 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. Note 19. Capital management 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 capital 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 and common shareholders’ equity. 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 $2,100.0 million at December 31, 2022, unchanged from December 31, 2021. 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. The Company purchased 2,890,000 common shares during the year ended December 31, 2022, at a cost of $115.7 million under its normal course issuer bid (Note 18). Other activities in 2022 included the declaration of common share dividends of $536.1 million or $2.25 per share. Changes in common share capital are reflected in the Consolidated Statements of Changes in Shareholders’ Equity. 114 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial Statements Note 20. Share-based payments Stock option plan Under the terms of the Company’s Stock Option Plan (Plan), options to purchase common shares are periodically granted to employees at prices not less than the weighted average trading price per common share on the Toronto Stock Exchange for the five trading days preceding the date of the grant. The options are subject to time vesting conditions set out at the grant date. 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. At December 31, 2022, 18,151,379 (2021 – 19,030,398) common shares were reserved for issuance under the Plan. During 2022, the Company granted 1,546,295 options to employees (2021 – 1,648,345). The weighted-average fair value of options granted during the year ended December 31, 2022 has been estimated at $4.91 per option (2021 – $2.73) using the Black-Scholes option pricing model. The weighted-average closing share price at the grant dates was $44.02 (2021 – $35.19). Other assumptions used in these valuation models include: Exercise price Risk-free interest rate Expected option life Expected volatility Expected dividend yield 2022 2021 $ 44.59 $ 35.29 2.04% 7 years 23.00% 5.12% 1.29% 7 years 23.00% 6.41% Expected volatility has been estimated based on the historic volatility of the Company’s share price over seven years which is reflective of the expected option life. The average share price in 2022 was $39.50 (2021 – $43.18). The Company recorded compensation expense related to its stock option program of $4.9 million (2021 – $3.8 million). Balance, beginning of year Granted Exercised Forfeited Balance, end of year Exercisable, end of year Options outstanding at December 31, 2022 2022 Weighted- average exercise price 39.36 44.59 37.03 43.77 39.98 41.01 Number of options 11,712,164 $ 1,546,295 (879,019) (654,098) 11,725,342 6,596,299 $ $ 2021 Weighted- average exercise price 40.37 35.29 40.78 46.08 39.36 41.83 Number of options 11,930,224 $ 1,648,345 (1,370,759) (495,646) 11,712,164 6,179,244 $ $ Expiry date Exercise price $ Options outstanding Options exercisable 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 44.73 – 47.26 53.81 43.28 – 43.97 34.88 – 38.17 39.71 – 41.74 37.58 – 40.10 34.29 – 36.91 31.85 – 38.65 35.01 – 46.02 36.57 – 45.56 792,305 655,609 811,009 996,944 1,008,498 1,206,782 1,213,371 2,017,199 1,516,710 1,506,915 792,305 655,609 811,009 789,852 887,028 953,538 654,968 796,028 255,962 – 11,725,342 6,596,299 115 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportShare unit plans The Company has share unit plans for eligible employees to assist in retaining and further aligning the interests of senior management with those of the shareholders. These plans include Performance Share Unit (PSU), Deferred Share Unit (DSU) and Restricted Share Unit (RSU) plans. Under the terms of the plans, share units are awarded annually and are subject to time vesting conditions. In addition, the PSU and DSU plans are subject to performance vesting conditions. The value of each share unit is based on the share price of the Company’s common shares. The PSUs and RSUs are cash settled and vest over a three year period. Certain employees can elect at the time of grant to receive a portion of their PSUs in the form of deferred share units which vest over a three year period. Deferred share units are redeemable when a participant is no longer an employee of the Company or any of its affiliates by a lump sum payment based on the value of the deferred share unit at that time. Additional share units are issued in respect of dividends payable on common shares based on a value of the share unit at the dividend payment date. The Company recorded compensation expense, excluding the impact of hedging, of $21.1 million in 2022 (2021 – $31.5 million) and a liability of $40.1 million at December 31, 2022 (2021 – $45.8 million). Share purchase plans Under the Company’s share purchase plans, eligible employees can elect each year to have a percentage of their annual earnings withheld, subject to a maximum, to purchase the Company’s common shares. The Company matches 50% of the contribution amounts. All contributions are used by the plan trustee to purchase common shares in the open market. Shares purchased with Company contributions vest after a maximum period of two years following the date of purchase. The Company’s contributions are recorded in Advisory and business development and Operations and support expenses as paid and totalled $4.7 million (2021 – $4.4 million). Directors’ deferred share unit plan The Company has a Deferred Share Unit (DSU) plan for the directors of the Company to promote a greater alignment of interests between directors and shareholders of the Company. Under the terms of the plan, directors are required to receive 50% of their annual board retainer in the form of DSUs and may elect to receive the balance of their annual board retainer in cash or DSUs. Directors may elect to receive certain fees in a combination of DSUs and cash. The number of DSUs granted is determined by dividing the amount of remuneration payable by the average closing price on the Toronto Stock Exchange of the common shares of the Company on the last five days of the fiscal quarter (value of DSU). A director who has elected to receive DSUs will receive additional DSUs in respect of dividends payable on common shares, based on the value of a DSU at the dividend payment date. DSUs are redeemable when a participant is no longer a director, officer or employee of the Company or any of its affiliates by cash payments, based on the value of the DSUs at that time. At December 31, 2022, the fair value of the DSUs outstanding was $29.8 million (2021 – $31.8 million). Any difference between the change in fair value of the DSUs and the change in fair value of the total return swap, which is an economic hedge for the DSU plan, is recognized in Operations and support expense in the period in which the change occurs. Note 21. Accumulated other comprehensive income (loss) 2022 Balance, beginning of year Other comprehensive income (loss) Transfer out of FVTOCI Balance, end of year 2021 Balance, beginning of year Other comprehensive income (loss) Transfer out of FVTOCI Balance, end of year Amounts are recorded net of tax. 116 Employee benefits Other investments Investment in associates and other Total $ (95,666) $ 919,152 $ 59,597 $ 883,083 100,049 – (585,515) (24,032) (10,819) – (496,285) (24,032) $ 4,383 $ 309,605 $ 48,778 $ 362,766 $ (196,949) $ 293,448 $ 39,865 $ 136,364 101,283 – 834,519 (208,815) 19,732 – 955,534 (208,815) $ (95,666) $ 919,152 $ 59,597 $ 883,083 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsIn 2022, the Company recorded after-tax losses in Other Comprehensive Income of $585.5 million due to fair value changes in the Company’s investments, primarily related to a $561.8 million fair value adjustment on Wealthsimple. In 2021, the Company recorded after-tax gains in Other Comprehensive Income of $834.5 million due to fair value changes in the Company’s investments, primarily related to a $776.3 million fair value adjustment in the first quarter related to Wealthsimple. Note 22. Risk management The Company actively manages its liquidity, credit and market risks. Liquidity and funding risk related to financial instruments Liquidity and funding risk is the risk of an 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: • Maintaining liquid assets and lines of credit to satisfy near term liquidity needs. • Ensuring effective controls over liquidity management processes. • Performing regular cash forecasts and stress testing. • Regular assessment of capital market conditions and the Company’s ability to access bank and capital market funding. • Ongoing efforts to diversify and expand long-term mortgage funding sources. • Oversight of liquidity management by the Financial Risk Management Committee, a committee of finance and other business leaders. A key funding requirement is the funding of advisor network compensation paid for the distribution of financial products and services. This compensation continues to be paid from operating cash flows. The Company also maintains sufficient liquidity to fund and temporarily hold mortgages pending sale or securitization to long-term funding sources and to manage any derivative collateral requirements. 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 National Housing Act Mortgage Backed Securities (NHA MBS) securities including sales to Canada Housing Trust under the Canada Mortgage Bond Program (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 the Principal Reinvestment Accounts. The Company maintains committed capacity within certain Canadian bank-sponsored securitization trusts. The Company’s contractual maturities of certain financial liabilities were as follows: As at December 31, 2022 ($ millions) Derivative financial instruments Deposits and Certificates(1) Obligations to securitization entities Leases(2) Long-term debt Pension funding(3) Total contractual maturities Demand Less than 1 year 1-5 years Over 5 years $ – $ 21.3 $ 30.3 $ – $ 4,332.5 – – – – 0.3 947.8 31.5 – 2.0 0.5 3,651.3 95.5 525.0 – 0.7 11.3 118.8 1,575.0 – Total 51.6 4,334.0 4,610.4 245.8 2,100.0 2.0 $ 4,332.5 $ 1,002.9 $ 4,302.6 $ 1,705.8 $ 11,343.8 (1) Deposits and certificates due on demand are primarily offset by client funds held on deposit. (2) Includes remaining lease payments related to office space and equipment used in the normal course of business. (3) Pension funding requirements beyond 2023 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. 117 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportIn addition to the Company’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 $825 million at December 31, 2022, unchanged from December 31, 2021. The lines of credit at December 31, 2022 consisted of committed lines of $650 million and uncommitted lines of $175 million, unchanged from December 31, 2021. Any advances made by a bank under the uncommitted lines of credit are at the bank’s sole discretion. As at December 31, 2022 and December 31, 2021, the Company was not utilizing its committed lines of credit or its uncommitted lines of credit. The Company’s liquidity position and its management of liquidity and funding risk have not changed materially since December 31, 2021. Credit risk related to financial instruments This is the risk of financial loss to the Company if a counterparty to a transaction fails to meet its obligations. The Company’s cash and cash equivalents, other investment 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 December 31, 2022, cash and cash equivalents of $1,072.9 million (2021 – $1,292.4 million) consisted of cash balances of $346.3 million (2021 – $326.2 million) on deposit with Canadian chartered banks and cash equivalents of $726.6 million (2021 – $966.2 million). Cash equivalents are comprised of Government of Canada treasury bills totalling $81.6 million (2021 – $358.7 million), provincial government treasury bills and promissory notes of $306.8 million (2021 – $350.6 million), bankers’ acceptances of $293.2 million (2021 – $198.3 million) and other corporate commercial paper of $45.0 million (2021 – $58.6 million). Client funds on deposit of $4,347.4 million (2021 – $2,238.6 million) represent cash balances held in client accounts deposited at Canadian financial institutions. 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. The Company regularly reviews the credit ratings of its counterparties. The maximum exposure to credit risk on these financial instruments is their carrying value. As at December 31, 2022, residential mortgages, recorded on the Company’s balance sheet, of $5.0 billion (2021 – $5.4 billion) consisted of $4.6 billion sold to securitization programs (2021 – $5.0 billion), $371.9 million held pending sale or securitization (2021 – $315.8 million) and $12.7 million related to the Company’s intermediary operations (2021 – $13.7 million). The Company manages credit risk related to residential mortgages through: • Adhering to its lending policy and underwriting standards; • Its loan servicing capabilities; • Use of client-insured mortgage default insurance and mortgage portfolio default insurance held by the Company; and • Its practice of originating its mortgages exclusively through its own network of Mortgage Planning Specialists and IG Wealth Management advisors as part of a client’s IG Living 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 $2.5 billion (2021 – $2.6 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 $2.1 billion (2021 – $2.4 billion) is limited to amounts held in cash reserve accounts and future net interest income, the fair values of which were $55.2 million (2021 – $67.6 million) and $21.3 million (2021 – $34.1 million), respectively, at December 31, 2022. 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. At December 31, 2022, residential mortgages recorded on balance sheet were 53.3% insured (2021 – 53.1%). As at December 31, 2022, impaired mortgages on these portfolios were $2.2 million, compared to $2.8 million at December 31, 2021. Uninsured non-performing mortgages over 90 days on these portfolios were $1.7 million at December 31, 2022, compared to $1.5 million at December 31, 2021. 118 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial StatementsThe Company also retains certain elements of credit risk on mortgage loans sold to the IG Mackenzie Mortgage and Short-Term Income 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 allowance for expected credit losses. The Company’s allowance for expected credit losses was $0.8 million at December 31, 2022, compared to $0.6 million at December 31, 2021, and is considered adequate by management to absorb all credit-related losses in the mortgage portfolios based on: i) historical credit performance experience, ii) recent trends including increasing interest rates, iii) current portfolio credit metrics and other relevant characteristics, iv) our strong financial planning relationship with our clients, and v) 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, 2021. 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. 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 fulfil their obligations under these arrangements. The Company’s derivative activities are managed in accordance with its Investment Policy which includes counterparty limits and other parameters to manage counterparty risk. The aggregate credit risk exposure related to derivatives that are in a gain position of $71.2 million (2021 – $39.5 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 $10.5 million at December 31, 2022 (2021 – $0.7 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 December 31, 2022. Management of credit risk related to derivatives has not changed materially since December 31, 2021. Market risk related to financial instruments This is the risk of loss arising from changes in the values of the Company’s financial instruments due to changes in interest rates, equity prices or foreign exchange rates. Interest rate risk The 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 manages interest rate risk associated with its mortgage banking operations by entering into interest rate swaps with Canadian Schedule I chartered banks 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 fair value of $20.5 million (2021 – $1.0 million) and an outstanding notional amount of $0.2 billion at December 31, 2022 (2021 – $0.3 billion). 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 negative $19.6 million (2021 – $3.5 million), on an outstanding notional amount of $1.3 billion at December 31, 2022 (2021 – $1.3 billion). The net fair value of these swaps of $0.9 million at December 31, 2022 (2021 – $4.5 million) is recorded on the balance sheet and has an outstanding notional amount of $1.5 billion (2021 – $1.6 billion). 119 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual Report• The Company is exposed to the impact that changes in interest rates may have on the value of mortgages committed to or held pending sale or securitization to long-term funding sources. 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. Hedge accounting is applied to the cost of funds on certain securitization activities. The effective portion of fair value changes of the associated interest rate swaps are initially recognized in Other comprehensive income and subsequently recognized in Wealth Management revenue over the term of the related Obligations to securitization entities. The fair value of these swaps was $4.7 million (2021 – $0.6 million) on an outstanding notional amount of $191.6 million at December 31, 2022 (2021 – $128.6 million). As at December 31, 2022, the impact to annual net earnings of a 100 basis point increase in interest rates would have been a decrease of approximately $1.7 million (2021 – decrease of $3.0 million). The Company’s exposure to and management of interest rate risk have not changed materially since December 31, 2021. Equity price risk The Company is exposed to equity price risk on its equity investments (Note 5) which are classified as either fair value through other comprehensive income or fair value through profit or loss, and on our investments in associates (Note 9), which are accounted for using the equity method. The fair value of the equity investments was $0.8 billion at December 31, 2022 (2021 – $1.4 billion) and the carrying value of the Investment in associates was $2.2 billion at December 31, 2022 (2021 – $2.0 billion). The Company sponsors a number of deferred compensation arrangements for employees where payments to participants are deferred and linked to the performance of the common shares of IGM Financial Inc. The Company hedges its exposure to this risk through the use of forward agreements and total return swaps. Foreign exchange risk The Company is exposed to foreign exchange risk on its investment in ChinaAMC. Changes to the carrying value due to changes in foreign exchange rates are recognized in Other comprehensive income. As at December 31, 2022, a 5% appreciation (depreciation) in Canadian currency relative to foreign currencies would decrease (increase) the aggregate carrying value of foreign investments by approximately $37.2 million ($41.1 million). The Company’s proportionate share of ChinaAMC’s earnings, recorded in Proportionate share of associates’ earnings in the Consolidated Statements of Earnings, is also affected by changes in foreign exchange rates. For the year ended December 31, 2022, the impact to net earnings of a 5% appreciation (depreciation) in Canadian currency relative to foreign currencies would decrease (increase) the Company’s proportionate share of associates’ earnings (losses) by approximately $2.7 million ($3.0 million). Risks related to assets under management and advisement Risks related to the performance of the equity markets, changes in interest rates and changes in foreign currencies relative to the Canadian dollar can have a significant impact on the level and mix of assets under management and advisement. These changes in assets under management and advisement directly impact earnings. Note 23. Derivative financial instruments The Company enters into derivative contracts which are either exchange-traded or negotiated in the over-the-counter market on a diversified basis with Schedule I chartered banks or Canadian bank-sponsored securitization trusts that are counterparties to the Company’s securitization transactions. In all cases, the derivative contracts are used for non-trading purposes. Interest rate swaps are contractual agreements between two parties to exchange the related interest payments based on a specified notional amount and reference rate for a specified period. Total return swaps are contractual agreements to exchange payments based on a specified notional amount and the underlying security for a specific period. Options are contractual agreements which convey the right, but not the obligation, to buy or sell specific financial instruments at a fixed price at a future date. Forward contracts are contractual agreements to buy or sell a financial instrument on a future date at a specified price. Certain of the Company’s derivative financial instruments are subject to master netting arrangements and are presented on a gross basis. The amount subject to credit risk is limited to the current fair value of the instruments which are in a gain position and 120 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial Statementsrecorded as assets on the Consolidated Balance Sheets. The total estimated fair value represents the total amount that the Company would receive or pay to terminate all agreements at each year end. However, this would not result in a gain or loss to the Company as the derivative instruments which correlate to certain assets and liabilities provide offsetting gains or losses. The following table summarizes the Company’s derivative financial instruments: 1 year or less 1 – 5 years Over 5 years Total Credit risk Asset Liability Notional amount Fair value 2022 Swaps Hedge accounting No hedge accounting Forward contracts Hedge accounting 2021 Swaps Hedge accounting No hedge accounting Forward contracts Hedge accounting $ – $ 71,634 $ 52,290 $ 123,924 $ 899 $ 899 $ 555,248 973,750 34,636 1,563,634 55,789 55,789 26 49,604 18,150 45,319 – 63,469 6,977 6,977 1,951 $ 573,398 $ 1,090,703 $ 86,926 $ 1,751,027 $ 63,665 $ 63,665 $ 51,581 $ – $ 42,227 $ – $ 42,227 $ – $ – $ 769,567 972,623 771 1,742,961 20,401 20,401 90 17,683 16,167 38,341 – 54,508 20,771 20,771 – $ 785,734 $ 1,053,191 $ 771 $ 1,839,696 $ 41,172 $ 41,172 $ 17,773 The credit risk related to the Company’s derivative financial instruments after giving effect to any netting agreements was $8.9 million (2021 – $5.8 million). The credit risk related to the Company’s derivative financial instruments after giving effect to netting agreements and including rights to future net interest income, was $10.5 million (2021 – $0.7 million). Rights to future net interest income are related to the Company’s securitization activities and are not reflected on the Consolidated Balance Sheets. Note 24. Fair value of financial instruments Fair values are management’s estimates and are 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, 121 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual Reportrecent 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. Fair value is determined using the following methods and assumptions: Other investments 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. Valuation methods used for Other investments classified as Level 3 include comparison to market transactions with arm’s length third parties, use of market multiples, and discounted cash flow analysis. 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 investments 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 investments 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. Level 3 Other investments of $603 million, are predominantly comprised of early-stage financial technology companies, including Wealthsimple with a fair value of $492 million. Fair value is determined by using observable transactions in the investments’ securities, where available, forecasted cash flows, and other valuation metrics, including revenue multiples, used in the valuation of comparable public companies. A 5% increase (decrease) to each of these variables, individually, would result in an increase (decrease) in fair value of the Company’s investment in Wealthsimple of approximately $25 million. 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. 122 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial Statements2022 Financial assets recorded at fair value Other investments – FVTOCI – FVTPL Derivative financial instruments Financial assets recorded at amortized cost Loans – Amortized cost Financial liabilities recorded at fair value Derivative financial instruments Financial liabilities recorded at amortized cost Deposits and certificates Obligations to securitization entities Long-term debt 2021 Financial assets recorded at fair value Other investments – FVTOCI – FVTPL Loans – FVTPL Derivative financial instruments Financial assets recorded at amortized cost Loans – Amortized cost Financial liabilities recorded at fair value Derivative financial instruments Financial liabilities recorded at amortized cost Deposits and certificates Obligations to securitization entities Long-term debt Carrying value Level 1 Level 2 Level 3 Total Fair value $ 602,612 $ – $ 171,924 63,665 5,021,483 51,581 4,333,997 4,610,438 2,100,000 160,495 – – – – – – – – 37,900 $ 602,612 $ 602,612 11,429 25,765 171,924 63,665 372,983 4,532,493 4,905,476 46,332 5,249 51,581 4,334,010 – – 4,544,609 2,013,917 – 4,334,010 4,544,609 2,013,917 $ 1,291,434 $ – $ – $ 1,291,434 $ 1,291,434 106,589 104,658 1,931 – – 7,098 106,589 57,436 41,172 57,436 34,074 57,436 41,172 5,296,406 17,773 2,220,274 5,057,917 2,100,000 – – – – – – – 270,156 5,083,991 5,354,147 11,635 6,138 17,773 2,220,530 – 2,220,530 – 5,146,420 5,146,420 2,544,380 – 2,544,380 There were no significant transfers between Level 1 and Level 2 in 2022 and 2021. The following table provides a summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis. There were no transfers in or out of Level 3 in 2022 and 2021. Balance January 1 Gains (losses) included in Net earnings(1) Gains (losses) included in Other comprehensive income Purchases and issuances Settlements Balance December 31 2022 Other investments – FVTOCI – FVTPL Derivative financial instruments, net 2021 Other investments – FVTOCI – FVTPL Derivative financial instruments, net $ 1,291,434 $ – 960 – – 28,010 $ (677,525) $ 36,140 $ 47,437 $ 602,612 – – 11,429 (5,605) – 2,849 11,429 20,516 $ 593,273 $ – $ 964,761 $ 15,868 $ 282,468 (2) $ 1,291,434 279 (21,103) (181) 12,852 – – – 1,974 98 (7,237) – 960 (1) Included in Wealth management revenue or Net investment income and other in the Consolidated Statements of Earnings. (2) Related to disposition of a portion of IGM Financial Inc.’s investment in Wealthsimple (Note 5). 123 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual ReportNote 25. Earnings per common share Earnings Net earnings Non-controlling interest Net earnings available to common shareholders Number of common shares (in thousands) Weighted average number of common shares outstanding Add: Potential exercise of outstanding stock options(1) Average number of common shares outstanding – diluted basis Earnings per common share (in dollars) – Basic – Diluted 2022 2021 872,578 (5,334) 867,244 $ $ 980,887 (1,938) 978,949 238,470 238,841 526 1,178 238,996 240,019 3.64 3.63 $ $ 4.10 4.08 $ $ $ $ (1) Excludes 837 thousand shares in 2022 related to outstanding stock options that were anti-dilutive (2021 – 272 thousand). Note 26. Contingent liabilities and guarantees Contingent liabilities The Company is subject to legal actions arising in the normal course of its business. In December 2018, a proposed class action was filed in the Ontario Superior Court against Mackenzie Financial Corporation which alleges that the company should not have paid mutual fund trailing commissions to order execution only dealers. In August 2022, a second proposed class action concerning the same subject matter was filed against Mackenzie Financial Corporation. 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. Guarantees In the normal course of operations, the Company executes agreements that provide for indemnifications to third parties in transactions such as business dispositions, business acquisitions, loans and securitization transactions. The Company has also agreed to indemnify its directors and officers. The nature of these agreements precludes the possibility of making a reasonable estimate of the maximum potential amount the Company could be required to pay third parties as the agreements often do not specify a maximum amount and the amounts are dependent on the outcome of future contingent events, the nature and likelihood of which cannot be determined. Historically, the Company has not made any payments under such indemnification agreements. No provisions have been recognized related to these agreements. Note 27. Related party transactions Transactions and balances with related entities The Company enters into transactions with The Canada Life Assurance Company (Canada Life), which is a subsidiary of its affiliate, Lifeco, which is a subsidiary of Power Corporation of Canada. These transactions are in the normal course of operations and have been recorded at fair value: • During 2022 and 2021, the Company provided to and received from Canada Life certain administrative services. The Company distributes insurance products under a distribution agreement with Canada Life and received $48.7 million in distribution fees (2021 – $52.7 million). The Company received $61.4 million (2021 – $63.3 million) and paid $19.5 million (2021 – $22.6 million) to Canada Life and related subsidiary companies for the provision of sub-advisory services for certain investment funds. The Company paid $0.6 million (2021 – $15.5 million) to Canada Life related to the distribution of certain investment funds of the Company. • During 2022, no residential mortgage loans were sold by the Company to Canada Life (2021 – $11.9 million). 124 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial Statements On January 12, 2023, the Company acquired an additional interest in ChinaAMC from Power and sold a portion of its investment in Lifeco to Power (Note 29). Key management compensation The total compensation and other benefits to directors and employees classified as key management, being individuals having authority and responsibility for planning, directing and controlling the activities of the Company, are as follows: Compensation and employee benefits Post-employment benefits Share-based payments 2022 4,084 $ 4,042 1,756 2021 3,981 3,793 1,066 9,882 $ 8,840 $ $ Share-based payments exclude the fair value remeasurement of the deferred share units associated with changes in the Company’s share price (Note 20). Note 28. Segmented information The Company’s reportable segments are: • Wealth Management • Asset Management • Strategic Investments and Other These segments reflect the Company’s internal financial reporting and performance measurement. • Wealth Management – reflects the activities of operating companies that are principally focused on providing financial planning and related services to Canadian households. This segment includes the activities of IG Wealth Management and Investment Planning Counsel. These firms are retail distribution organizations who serve Canadian households through their securities dealers, mutual fund dealers and other subsidiaries licensed to distribute financial products and services. A majority of the revenues of this segment are derived from providing financial advice and distributing financial products and services to Canadian households. This segment also includes the investment management activities of these organizations, including mutual fund management and discretionary portfolio management services. • Asset Management – reflects the activities of operating companies primarily focused on providing investment management services, and represents the operations of Mackenzie Investments. Investment management services are provided to a suite of investment funds that are distributed through third party dealers and financial advisors, and also through institutional advisory mandates to financial institutions, pensions and other institutional investors. • Strategic Investments and Other – primarily represents the key strategic investments made by the Company, including China Asset Management Co., Ltd., Great-West Lifeco Inc., Northleaf Capital Group Ltd., Wealthsimple Financial Corp., and Portage Ventures LPs. Unallocated capital is also included within this segment. 125 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual Report2022 Revenues Wealth management Asset management Dealer compensation Net asset management Net investment income and other Proportionate share of associates’ earnings Expenses Advisory and business development Operations and support Sub-advisory Interest expense(1) Earnings before income taxes Income taxes Non-controlling interest Wealth Management Asset Management Strategic Investments and Other Intersegment Total $ 2,483,960 $ – $ – $ (18,654) $ 2,465,306 – – – 1,077,678 (327,521) 750,157 – – – (111,694) 18,650 965,984 (308,871) (93,044) 657,113 4,094 – 5,690 – 14,575 210,762 (291) – 24,068 210,762 2,488,054 755,847 225,337 (111,989) 3,357,249 1,126,124 476,912 181,872 1,784,908 703,146 90,247 612,899 164,162 448,737 (200) 79,353 358,403 4,946 442,702 313,145 23,521 289,624 76,435 213,189 – – 4,917 (5) (291) – (111,693) 1,205,472 839,941 75,125 4,917 (111,989) 2,120,538 220,420 – 220,420 9,596 210,824 (5,134) – – – 172 (172) – 1,236,711 113,768 1,122,943 250,365 872,578 (5,334) Net earnings available to common shareholders $ 448,537 $ 213,189 $ 205,690 $ (172) $ 867,244 Identifiable assets Goodwill Total assets $ 11,255,665 $ 1,243,428 $ 3,571,910 $ 1,491,687 1,310,486 – $ 12,747,352 $ 2,553,914 $ 3,571,910 $ – – – $ 16,071,003 2,802,173 $ 18,873,176 (1) Interest expense includes interest on long-term debt and interest on leases 126 2022 IGM Financial Inc. Annual Report | Notes to the Consolidated Financial Statements2021 Revenues Wealth Management Asset Management Strategic Investments and Other Intersegment Total Segment Adjustments(1) Total Wealth management $ 2,572,891 $ – $ – $ (19,291) $ 2,553,600 $ – $ 2,553,600 Asset management Dealer compensation Net asset management – – – 1,126,007 (355,242) 770,765 – – – (114,551) 19,272 (95,279) 1,011,456 (335,970) 675,486 – – – 1,011,456 (335,970) 675,486 Net investment income and other 3,619 5,850 2,722 (249) 11,942 10,600 22,542 – – 2,576,510 776,615 196,367 199,089 – 196,367 – 196,367 (114,819) 3,437,395 10,600 3,447,995 Proportionate share of associates’ earnings Expenses Advisory and business development Operations and support Sub-advisory Interest expense(2) Earnings before income taxes Income taxes Non-controlling interest Gain on sale of Personal Capital, net of tax Net earnings available to common shareholders – 4,916 (19) (250) – (114,550) 1,178,009 806,380 82,020 4,916 (114,819) 2,066,409 1,089,282 466,170 189,678 1,745,130 831,380 90,284 741,096 197,959 543,137 – 88,746 335,544 6,892 431,182 345,433 23,652 321,781 81,026 240,755 – 194,173 – 194,173 4,916 189,257 (1,938) $ 543,137 $ 240,755 $ 187,319 $ – – – – 1,178,009 806,380 82,020 2,066,409 10,600 1,381,586 – 113,936 10,600 2,862 7,738 – 7,738 1,267,650 286,763 980,887 (1,938) 978,949 1,370,986 113,936 1,257,050 283,901 973,149 (1,938) 971,211 7,738 (7,738) – $ 978,949 $ 14,858,522 2,802,066 $ $ – – – $ 978,949 $ 14,858,522 2,802,066 $ 17,660,588 $ – $ 17,660,588 – – – – – – – – – – Identifiable assets $ 9,237,235 $ 1,514,124 $ 4,107,163 $ Goodwill Total assets 1,491,687 1,310,379 – $ 10,728,922 $ 2,824,503 $ 4,107,163 $ (1) Gain on sale of Personal Capital is not related to a specific segment and therefore excluded from segment results. This item has been added back to Net investment income and other and Income taxes to reconcile Total Segment results to the Company’s Consolidated Statements of Earnings. (2) Interest expense includes interest on long-term debt and interest on leases. Note 29. Subsequent event On January 12, 2023, the Company closed the previously announced transaction to acquire Power Corporation of Canada’s (Power) 13.9% interest in ChinaAMC for cash consideration of $1.15 billion, increasing the Company’s equity interest in ChinaAMC from 13.9% to 27.8%. To partially fund the transaction, IGM Financial sold 15,200,662 common shares of Lifeco to Power for cash consideration of $553 million which reduced the Company’s equity interest in Lifeco from 4% to 2.4%. The remaining $597 million of consideration was funded from the Company’s existing financial resources including $22 million in dividends received after March 31, 2022 with respect to the Lifeco shares that were sold. The Company will continue to equity account for its 27.8% interest in ChinaAMC and 2.4% interest in Lifeco. 127 Notes to the Consolidated Financial Statements | 2022 IGM Financial Inc. Annual Report Quarterly Review Consolidated Statements of Earnings For the years ended December 31 ($ millions, except per share amounts) Revenues Wealth management Asset management Dealer compensation expense Net asset management Net investment income and other Proportionate share of associates’ earnings Expenses Advisory and business development Operations and support Sub-advisory Interest Earnings before income taxes Income taxes Net earnings Non-controlling interest Q4 Q3 Q2 2022 Q1 Q4 Q3 Q2 2021 Q1 $ 606.2 $ 606.8 $ 611.1 $ 641.2 $ 667.5 $ 655.0 $ 627.6 $ 603.5 233.2 (72.4) 160.8 15.6 65.4 235.4 (72.9) 162.5 11.1 46.9 241.6 (77.4) 164.2 (0.6) 50.0 255.8 (86.2) 169.6 (2.0) 48.4 266.8 (86.7) 180.1 14.4 50.7 263.4 (85.9) 177.5 2.5 55.9 248.3 (82.7) 165.6 2.5 48.2 233.0 (80.7) 152.3 3.1 41.6 848.0 827.3 824.7 857.2 912.7 890.9 843.9 800.5 298.2 212.5 18.3 28.7 557.7 290.3 63.3 227.0 (2.3) 294.4 205.5 17.9 28.6 546.4 280.9 63.9 217.0 (0.9) 303.8 206.4 18.3 28.4 556.9 267.8 59.4 208.4 (1.3) 309.1 215.5 20.6 28.1 573.3 283.9 63.8 220.1 (0.8) 308.9 205.5 21.1 28.6 564.1 348.6 79.4 269.2 (0.7) 294.0 197.6 20.7 28.7 541.0 349.9 78.4 271.5 (0.7) 291.1 196.8 20.4 28.5 284.0 206.5 19.8 28.1 536.8 538.4 307.1 69.3 237.8 (0.4) 262.1 59.7 202.4 (0.2) Net earnings available to common shareholders $ 224.7 $ 216.1 $ 207.1 $ 219.3 $ 268.5 $ 270.8 $ 237.4 $ 202.2 Reconciliation of Non-IFRS financial measures ($ millions) Adjusted net earnings available to common shareholders(1) Other items: $ 224.7 $ 216.1 $ 207.1 $ 219.3 $ 260.8 $ 270.8 $ 237.4 $ 202.2 Gain on sale of Personal Capital, net of tax – – – – 7.7 – – – Net earnings available to common shareholders $ 224.7 $ 216.1 $ 207.1 $ 219.3 $ 268.5 $ 270.8 $ 237.4 $ 202.2 Diluted Earnings per Share ($) Adjusted earnings per share(1) Earnings per share 0.94 0.94 0.91 0.91 0.87 0.87 0.91 0.91 1.08 1.11 1.13 1.13 0.99 0.99 0.85 0.85 Dividends per Share ($) 0.5625 0.5625 0.5625 0.5625 0.5625 0.5625 0.5625 0.5625 (1) A non-IFRS financial measure – refer to page 19 of this report for an explanation of the Company’s Non-IFRS Financial Measures and Other Financial Measures. 128 2022 IGM Financial Inc. Annual Report | Quarterly ReviewQuarterly Review Statistical Information For the years ended December 31 ($ millions) Mutual fund gross sales Wealth management(1) IG Wealth Management IPC Asset management Mackenzie Investments IGM Consolidated Dealer gross inflows IG Wealth Management IPC IGM Wealth management(1) Net flows – by segment IG Wealth Management net flows IPC net flows Wealth management net flows(1) Asset Management net sales(2) Eliminations(3) IGM Consolidated Net flows – by product Mutual fund gross sales Mutual fund redemptions Mutual fund net sales ETFs(4) Investment funds Institutional SMA Consolidated AUM Other AUA IGM Consolidated Redemption rate – long-term funds (%) IG Wealth Management IPC Mackenzie Investments Assets under management and advisement – by segment IG Wealth AUA IPC AUA Wealth Management AUA(1) Asset Management AUM (ex sub-advisory to Wealth Management) Sub-advisory to Wealth Management Asset Management AUM Asset Management through Wealth Management Consolidated assets under management & advisement Assets under management and advisement – by product Mutual fund AUM ETF AUM(4) Investment Fund AUM Institutional SMA Sub-advisory to Canada Life Total Institutional SMA Consolidated AUM Other AUA Consolidated assets under management & advisement Consolidated AUM, excluding Asset Management segment AUM Corporate assets Q4 Q3 Q2 2,125 138 2,263 1,559 3,822 3,031 1,157 4,188 429 45 476 (967) 51 (440) 3,822 5,654 (1,832) 134 (1,698) (135) (1,833) 1,393 (440) 10.0 20.4 16.0 1,970 127 2,097 1,281 3,378 2,773 882 3,655 406 39 446 (819) 31 (342) 3,378 4,416 (1,038) (86) (1,124) (139) (1,263) 921 (342) 9.5 19.1 14.9 2,590 153 2,743 1,735 4,478 3,068 1,043 4,111 389 11 402 (952) 23 (527) 4,478 5,407 (929) (61) (990) (133) (1,123) 596 (527) 9.1 19.0 14.3 2022 Q1 3,902 203 4,105 2,921 7,026 4,000 1,342 5,342 1,466 160 1,627 873 (34) 2,466 7,026 5,242 1,784 718 2,502 (427) 2,075 391 2,466 8.9 19.5 13.1 Q4 Q3 Q2 2,959 174 3,133 2,592 5,725 3,437 1,509 4,946 985 123 1,109 181 (56) 1,234 5,725 4,885 840 245 1,085 (576) 509 725 1,234 9.2 22.3 13.6 2,741 188 2,929 2,476 5,405 3,141 1,137 4,278 1,014 258 1,275 1,092 (119) 2,248 5,405 4,020 1,385 320 1,705 (27) 1,678 570 2,248 9.6 23.0 15.0 2,794 182 2,976 2,923 5,899 3,220 1,121 4,341 670 116 787 2,286 (156) 2,917 5,899 4,573 1,326 562 1,888 617 2,505 412 2,917 10.0 23.4 15.4 2021 Q1 3,351 230 3,581 4,031 7,612 3,636 1,599 5,235 1,015 (9) 1,007 1,575 (280) 2,302 7,612 5,730 1,882 405 2,287 (320) 1,967 335 2,302 9.7 22.3 15.8 110,816 29,547 105,029 28,286 105,474 28,692 116,281 31,734 119,557 33,077 113,958 31,515 112,185 31,171 106,995 29,891 140,356 133,309 134,159 148,005 152,623 145,462 143,345 136,876 113,098 73,514 186,612 (77,559) 108,672 71,834 180,506 (75,710) 111,863 72,855 184,718 (76,794) 124,731 80,814 205,545 (85,222) 129,115 81,228 210,343 (85,825) 124,098 79,242 203,340 (83,588) 122,913 78,788 201,701 (83,040) 115,524 76,041 191,565 (79,967) 249,409 238,105 242,083 268,328 277,141 265,214 262,006 248,474 158,331 5,219 152,576 5,010 154,814 5,368 172,679 5,848 179,139 5,393 171,775 5,068 169,468 4,889 161,363 4,174 163,550 157,586 160,182 178,527 184,532 176,843 174,357 165,537 6,422 47,023 53,445 216,995 32,414 6,106 45,015 51,121 208,707 29,398 6,344 46,575 52,919 213,101 28,982 7,090 51,502 58,592 237,119 31,209 7,948 52,805 60,753 245,285 31,856 8,178 51,131 59,309 236,152 29,062 8,167 51,092 59,259 233,616 28,390 7,272 48,768 56,040 221,577 26,897 249,409 238,105 242,083 268,328 277,141 265,214 262,006 248,474 30,383 18,873 28,201 17,595 28,383 17,084 31,574 17,569 34,942 17,661 32,812 16,995 31,915 16,897 30,012 16,866 (1) Assets under management recorded within both operating companies’ results are eliminated on consolidation. (2) Asset Management flows activity excludes sub-advisory to Canada Life and the Wealth Management segment. (3) Mackenzie investment funds distributed through Wealth Management. (4) Excludes IGM investment fund investments in ETFs. 129 Quarterly Review | 2022 IGM Financial Inc. Annual ReportTen Year Review Condensed Consolidated Statements of Earnings for the years ended December 31 ($ millions, except per share amounts) 2022 2021 2020 2019 2018 CAGR(1) 5 Year % 2017 2016 2015 2014 2013 Revenues(2) Wealth and Asset Management revenues 3,122.4 3,229.1 2,789.4 2,814.3 2,792.1 2.6 2,749.1 2,642.9 2,607.2 2,520.1 2,307.4 Net investment income and other 24.1 22.5 78.2 24.8 20.0 11.8 13.8 11.8 11.0 16.5 21.6 CAGR(1) 10 Year % 3.4 2.6 Proportionate share of associate’s earnings 210.7 196.4 150.4 105.2 150.0 17.1 95.6 104.2 111.0 96.5 93.8 11.3 Expenses(2) 2,234.3 2,180.3 2,052.7 1,975.7 1,976.0 1.5 2,073.9 1,812.0 1,738.4 1,668.2 1,441.4 3,357.2 3,448.0 3,018.0 2,944.3 2,962.1 3.3 2,858.5 2,758.9 2,729.2 2,633.1 2,422.8 Earnings before undernoted 1,122.9 1,267.7 965.3 968.6 986.1 Income taxes Net earnings 250.4 286.8 200.7 219.7 210.0 872.5 980.9 764.6 748.9 776.1 7.4 7.6 7.4 784.6 946.9 990.8 964.9 981.4 173.9 167.6 210.3 202.8 210.7 610.7 779.3 780.5 762.1 770.7 Non-controlling interest (5.3) (2.0) (0.2) – – – – – – – Perpetual preferred share dividends – – – (2.2) (8.8) (8.8) (8.8) (8.8) (8.8) (8.8) 3.8 5.1 1.6 2.8 1.3 Net earnings available to common shareholders Adjusted net earnings available to common shareholders(3) Diluted earnings per share ($) Earnings per share Adjusted earnings per share(3) Dividends per share ($) Return on average common equity (ROE) (%) Net earnings Adjusted net earnings(3) Average shares outstanding (thousands) – Basic – Diluted 867.2 978.9 764.4 746.7 767.3 7.6 601.9 770.5 771.7 753.3 761.9 1.3 867.2 971.2 762.9 763.9 791.8 3.6 727.8 736.5 796.0 826.1 763.5 1.5 3.63 3.63 2.25 4.08 4.05 2.25 3.21 3.20 2.25 3.12 3.19 2.25 3.18 3.29 2.25 7.7 3.7 – 2.50 3.02 2.25 3.19 3.05 2.25 3.11 3.21 2.25 2.98 3.27 2.18 3.02 3.02 2.15 2.0 2.2 0.5 14.0 14.0 16.5 16.4 16.1 16.1 16.9 17.2 17.7 18.2 12.9 15.6 17.1 16.3 16.9 17.4 16.2 17.8 17.3 17.3 238,470 238,841 238,307 239,105 240,815 240,585 241,300 248,173 252,108 252,013 238,996 240,019 238,307 239,181 240,940 240,921 241,402 248,299 252,778 252,474 Share price (closing $) 37.80 45.62 34.51 37.28 31.03 (3.1) 44.15 38.20 35.34 46.31 56.09 (1.0) (1) Compound annual growth rate. (2) Revenues and expense have been restated to retroactively reflect the disclosure enhancements introduced in 2020, as disclosed in Note 2 to the 2020 Consolidated Financial Statements. (3) A non-IFRS financial measure – refer to page 19 of this report for an explanation of the Company’s Non-IFRS Financial Measures and Other Financial Measures. These non–IFRS Financial Measures exclude other items as follows: 2021 – Additional consideration receivable of $7.7 million after–tax related to the sale in 2020 of the Company’s equity interest in Personal Capital Corporation. 2020 – After–tax gain of $31.4 million on sale of Personal Capital Corporation, after–tax gain on sale of Quadrus Group of Funds net of acquisition costs of $21.4 million, the Company’s proportionate share in Great–West Lifeco Inc.’s (Lifeco) after–tax adjustments of $3.4 million, and restructuring and other charges of $54.7 million after–tax. 2019 – After–tax charge of $17.2 million representing the Company’s proportionate share in Lifeco’s one–time charges. 2018 – After–tax charge of $16.7 million related to restructuring and other and an after–tax charge of $7.8 million representing a premium paid on the early redemption of the $375 million debentures. 2017 – After–tax charges of $126.8 million and $16.8 million related to restructuring and other charges, an after–tax reduction of $36.8 million in expenses related to the Company’s pension plan, after–tax charges of $14.0 million and $5.1 million related to the proportionate share in Lifeco’s one–time charges and restructuring provision, respectively. 2016 – A favourable change in income tax provision estimates of $34.0 million related to certain tax filings. 2015 – An after–tax charge of $24.3 million related to restructuring and other charges. 2014 – An after–tax charge of $59.2 million related to distributions to clients, as well as other costs and an after–tax charge of $13.6 million related to restructuring and other charges. 2013 – An after–tax charge of $10.6 million related to restructuring and other charges and an after–tax benefit of $9.0 million representing the Company’s proportionate share of net changes in Lifeco’s litigation provision. 130 2022 IGM Financial Inc. Annual Report | Ten Year Review Ten Year Review Statistical Information for the years ended December 31 ($ millions) 2022 2021 2020 2019 2018 CAGR(1) 5 Year % 2017 2016 2015 2014 2013 CAGR(1) 10 Year % Wealth Management IG Wealth Management(2) Assets under management Mutual fund gross sales 10,587 11,845 8,987 8,723 9,075 1.8 9,693 7,760 7,890 7,461 6,668 6.2 Mutual fund redemption rate – long-term funds (%) 10.0 9.2 9.8 10.3 Net sales (redemptions) 43 1,813 (451) (1,089) 9.2 485 8.4 (53.3) 1,944 8.8 366 8.7 754 8.7 651 9.4 159 Ending assets 99,275 110,541 97,713 93,161 83,137 2.4 88,008 81,242 74,897 73,459 68,255 N/M 5.1 Assets under advisement(3) Net flows Ending assets 2,690 3,684 795 (780) 739 110,816 119,557 103,273 97,100 86,422 Investment Planning Counsel(2) Assets under management Mutual fund gross sales 621 774 577 694 960 (6.9) 889 955 741 682 485 4.5 Mutual fund redemption rate – long-term funds (%) Net sales (redemptions) 20.4 (322) 22.3 (288) 20.1 (307) 19.3 (272) 19.2 (18) N/M 16.7 79 15.7 293 13.6 177 12.6 207 13.2 52 Assets under management 4,622 5,629 5,320 5,391 5,125 (3.0) 5,377 4,908 4,452 3,850 3,406 (29.6) 4.6 Assets under advisement(3) Net flows Ending assets Asset Management (Mackenzie Investments) Mutual fund gross sales Mutual fund redemption rate – long-term funds (%) Investment fund net sales (redemptions) Assets under management Mutual fund ETF ETFs excluding those held by IGM investment funds Investment fund(4) Total assets under management excluding sub-advisory to Wealth Management(3) Total assets under management(3) Consolidated assets under management(5) Investment fund assets under management 255 488 373 (589) (148) 29,547 33,077 29,318 27,728 25,706 7,496 12,022 13,565 9,886 9,951 (3.9) 9,124 6,939 6,965 7,070 6,700 3.2 16.0 13.6 16.6 15.6 17.1 14.8 15.0 16.2 14.6 16.0 (1,031) 5,440 4,188 1,219 973 N/M 1,780 (555) (1,258) (209) (487) 6.3 54,434 62,969 52,682 60,839 53,407 (0.4) 55,615 51,314 48,445 48,782 46,024 3.0 12,395 12,674 8,451 4,748 2,949 1,296 113 5,219 5,393 3,788 2,372 1,613 928 113 59,653 68,362 56,470 63,211 55,020 1.1 56,543 51,427 48,445 48,782 46,024 4.0 113,098 129,115 110,938 68,257 60,804 186,612 210,343 185,148 140,984 129,863 163,550 184,532 159,503 161,763 143,282 1.8 149,818 137,575 127,791 126,039 117,649 Assets under management 216,995 245,285 213,971 166,809 149,066 6.8 156,513 142,688 134,398 141,919 131,777 Assets under management and advisement 249,409 277,141 239,950 190,035 170,216 4.6 6.0 Corporate assets 18,873 17,661 16,062 15,391 15,609 2.7 16,499 15,625 14,831 14,417 12,880 4.7 (1) Compound annual growth rate. (2) IG Wealth Management and Investment Planning Counsel total assets under management and net sales include separately managed accounts. (3) As a result of revised segment reporting introduced in 2020, as discussed in the MD&A included in the 2020 Annual Report, these metrics were not available on this basis prior to 2018. (4) Excludes IGM investment fund investments in ETFs. (5) Adjusted for inter-segment assets. 131 Ten Year Review | 2022 IGM Financial Inc. Annual Report Board of Directors and Executive Leadership Board of Directors Marc A. Bibeau (1,3,4) President and Chief Executive Officer Beauward Real Estate Inc. Marcel R. Coutu (3) Corporate Director André Desmarais, O.C., O.Q. (2,3) Deputy Chairman Power Corporation of Canada Paul Desmarais, Jr., O.C., O.Q. (2) Chairman Power Corporation of Canada Gary Doer (2) Senior Business Advisor Dentons Canada LLP Susan Doniz (1,4,5) Chief Information Officer The Boeing Company Claude Généreux (3,5) Executive Vice-President Power Corporation of Canada Sharon L. Hodgson (1,4,5) Dean Ivey Business School Sharon MacLeod (1,3) Corporate Director Susan J. McArthur (2,3,5) Co-Founder and Executive Chair Lockdocs Inc. John McCallum (1,2,4) Corporate Director R. Jeffrey Orr (2,3,5) Chair of the Board IGM Financial Inc. President and Chief Executive Officer Power Corporation of Canada James O’Sullivan President and Chief Executive Officer IGM Financial Inc. Gregory D. Tretiak, FCPA, FCA (5) Executive Vice-President and Chief Financial Officer Power Corporation of Canada Beth Wilson (1,5) Corporate Director R. Jeffrey Orr Chair of the Board IGM Financial Inc. (1) Audit Committee Chair: John McCallum (2) Governance and Nominating Committee Chair: R. Jeffrey Orr (3) Human Resources Committee Chair: Claude Généreux (4) Related Party and Conduct Review Committee Chair: John McCallum (5) Risk Committee Chair: Gregory D. Tretiak Executive Leadership James O’Sullivan President and Chief Executive Officer IGM Financial Luke Gould President and Chief Executive Officer Mackenzie Investments Damon Murchison President and Chief Executive Officer IG Wealth Management Blaine Shewchuk President and Chief Executive Officer Investment Planning Counsel Keith Potter Executive Vice-President, Chief Financial Officer IGM Financial Cynthia Currie Executive Vice-President, Chief Human Resources Officer IGM Financial Michael Dibden Chief Operating Officer IGM Financial Rhonda Goldberg Executive Vice-President, General Counsel IGM Financial Kelly Hepher Executive Vice-President, Chief Risk Officer IGM Financial Douglas Milne Executive Vice-President, Chief Marketing Officer IGM Financial 132 2022 IGM Financial Inc. Annual Report | Board of Directors and Executive LeadershipShareholder Information Stock Exchange Listing Toronto Stock Exchange Shares of IGM Financial Inc. are listed on the Toronto Stock Exchange under the following listings: Common Shares: IGM Shareholder Information For additional financial information about the Company, please contact: Investor Relations investor.relations@igmfinancial.com For copies of the annual or quarterly reports, please contact the Corporate Secretary’s office at 204 956 8259 or visit our website at igmfinancial.com Annual Meeting The Annual Meeting of IGM Financial Inc. will be held at The Shangri-La Toronto, 188 University Avenue, Toronto, Ontario, Canada on Thursday, May 4, 2023 at 11:00 a.m., Eastern Time. Websites Visit our websites at igmfinancial.com ig.ca mackenzieinvestments.com ipcc.ca Head Office 447 Portage Avenue Winnipeg, Manitoba R3B 3H5 Telephone: 204 943 0361 Fax: 204 947 1659 Auditor Deloitte llp Transfer Agent and Registrar Computershare Investor Services Inc. Telephone: 1 800 564 6253 service@computershare.com 800, 324 – 8th Avenue S.W. Calgary, Alberta T2P 2Z2 1500 Robert-Bourassa Boulevard, 7th Floor Montreal, Quebec H3A 3S8 100 University Avenue, 8th Floor Toronto, Ontario M5J 2Y1 510 Burrard Street, 2nd Floor Vancouver, British Columbia V6C 3B9 ™ Trademarks, including IG Wealth Management, are owned by IGM Financial Inc. and licensed to its subsidiary corporations, except as noted below. Investment Planning Counsel’s trademark is owned by Investment Planning Counsel Inc. and used with permission. Mackenzie Investments’ trademark is owned by Mackenzie Financial Corporation and used with permission. † Banking products and services are distributed through Solutions Banking™. Solutions Banking products and services are provided by National Bank of Canada. Solutions Banking is a trademark of Power Financial Corporation. National Bank of Canada is a licensed user of these trademarks. Morningstar and the Morningstar Ratings are trademarks of Morningstar Inc. Quadrus Group of Funds is a trademark of Quadrus Investment Services Ltd. CFP® and Certified Financial Planner® are certification trademarks owned outside the U.S. by Financial Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing authority for the CFP marks in Canada, through agreement with FPSB. “2022 IGM Financial Inc. Annual Report” © Copyright IGM Financial Inc. 2023 A MEMBER OF THE POWER CORPORATION GROUP OF COMPANIES 133 Shareholder Information | 2022 IGM Financial Inc. 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